UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 20-F

¨ REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934

OR

x ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2014

OR

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

OR

¨ SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission file number 001-35401

CEMENTOS PACASMAYO S.A.A.

(Exact name of Registrant as specified in its charter)

PACASMAYO CEMENT CORPORATION

(Translation of Registrant’s name into English)

Republic of Peru

(Jurisdiction of incorporation or organization)

Calle La Colonia 150, Urbanización El Vivero

Surco, Lima

Peru

(Address of principal executive offices)

Javier Durand, Esq., General Counsel

Tel. +51-1-317-6000

Calle La Colonia 150

Urb. El Vivero - Lima, Peru

(Name, telephone, email and/or facsimile number and address of company contact person)

Securities registered pursuant to Section 12(b) of the Act.

Title of each class	Name of each exchange on which registered
Common Shares, par value S/.1.00 per share, in the form of American Depositary Shares, each representing five Common Shares	New York Stock Exchange

Securities registered pursuant to Section 12(g) of the Act:

None

Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act:

None

Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of the close of the period covered by the annual report:

At December 31, 2014 531,461,479 common shares
50,503,124 investment shares

Note: At April 30, 2015, 531,461,479 common shares and 50,503,124 investment shares were outstanding.

Indicate by check mark if the Registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.     Yes   ¨    No  x

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  ¨    No   x

Note- Checking the box above will not relieve any registrant required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 from their obligations under those Sections.

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  ¨    No  x     Note: Registrant not subject to such filing requirements for the past 90 days.

Indicate by check mark whether the Registrant has submitted electronically and posted on its corporate website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 203.405 of this chapter) during the preceding 12 months (or for such other period that the registrant was required to submit and post such files)     Yes  ¨    No  ¨ Note: Not required for Registrant.

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer x                  Accelerated filer ¨                 Non-accelerated filer ¨

Indicate by check mark which basis of accounting the Registrant has used to prepare the financial statements included in this filing:

U.S. GAAP  ¨ International Financial Reporting Standards as issued by the International Accounting Standards Board  x Other  ¨

If “Other” has been checked in response to the previous question, indicate by check mark which financial statement item the Registrant has elected to follow.

Item 17  ¨    Item 18  ¨.

If this is an annual report, indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

    Yes  ¨    No  x

Table of Contents

		Page
PART I INTRODUCTION			1
ITEM 1.	IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS		3
ITEM 2.	OFFER STATISTICS AND EXPECTED TIMETABLE		3
ITEM 3.	KEY INFORMATION		3
ITEM 4.	INFORMATION ON THE COMPANY		22
ITEM 4A.	UNRESOLVED STAFF COMMENTS		56
ITEM 5.	OPERATING AND FINANCIAL REVIEW AND PROSPECTS		56
ITEM 6.	DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES		81
ITEM 7.	MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS		91
ITEM 8.	FINANCIAL INFORMATION		93
ITEM 9.	THE OFFER AND LISTING		95
ITEM 10.	ADDITIONAL INFORMATION		98
ITEM 11.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK		110
ITEM 12.	DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES		110
PART II			112
ITEM 13.	DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES		112
ITEM 14.	MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS		112
ITEM 15.	CONTROLS AND PROCEDURES		112
ITEM 16.	[RESERVED]		114
ITEM 16A.	AUDIT COMMITTEE FINANCIAL EXPERT		114
ITEM 16B.	CODE OF ETHICS		114
ITEM 16C.	PRINCIPAL ACCOUNTANT FEES AND SERVICES		114
ITEM 16D.	EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES		115
ITEM 16E.	PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS		115
ITEM 16F.	CHANGE IN REGISTRANT’S CERTIFYING ACCOUNTANT		115
ITEM 16G.	CORPORATE GOVERNANCE		115
ITEM 16H.	MINE SAFETY DISCLOSURE		116
PART III			116
ITEM 17.	FINANCIAL STATEMENTS		116
ITEM 18.	FINANCIAL STATEMENTS		116
ITEM 19.	EXHIBITS		116

PART I

INTRODUCTION

Certain Definitions

All references to “we,” “us,” “our,” “our company” and “Cementos Pacasmayo” in this annual report are to Cementos Pacasmayo S.A.A., a publicly-held corporation (sociedad anónima abierta) organized under the laws of Peru, and, unless the context requires otherwise, its consolidated subsidiaries. The term “U.S. dollar” and the symbol “US$” refer to the legal currency of the United States; and the term “nuevo sol” and the symbol “S/.” refer to the legal currency of Peru.

Financial Information

Our consolidated financial statements included in this annual report have been prepared in nuevos soles and in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”) and audited in accordance with the standards of the Public Company Accountings Oversight Board (United States).

In this annual report, we present EBITDA and Adjusted EBITDA, which are financial measures that are not recognized under IFRS. We refer to such financial measures as “non-IFRS” financial measures. A non-IFRS financial measure is generally defined as one that purports to measure financial performance, financial position or cash flows of the subject reporting company but excludes or includes amounts that would not be so adjusted in the most comparable IFRS measure. We present EBITDA and Adjusted EBITDA because we believe these measures provide the reader with a supplemental measure of the financial performance of our core operations that facilitates period-to-period comparisons on a consistent basis. Our management also uses Adjusted EBITDA from time to time, among other measures, for internal planning and performance measurement purposes. Neither EBITDA nor Adjusted EBITDA should be construed as an alternative to profit or operating profit, as an indicator of operating performance, as an alternative to cash flow provided by operating activities or as a measure of liquidity (in each case, as determined in accordance with IFRS). EBITDA and Adjusted EBITDA, as calculated by us, may not be comparable to similarly titled measures reported by other companies, including those in the cement industry. For a calculation of EBITDA and Adjusted EBITDA and a reconciliation of EBITDA and Adjusted EBITDA to the most directly comparable IFRS financial measure, see “Item 3. Key Information—A. Selected Financial Data.”

We have translated some of the nuevos soles amounts appearing in this annual report into U.S. dollars for convenience purposes only. Unless the context otherwise requires, the rate used to translate nuevos soles amounts to U.S. dollars was S/.2.986 to US$1.00, which was the accounting exchange rate (tipo de cambio contable) reported on December 31, 2014, by the Peruvian Superintendence of Banks, Insurance and Private Pension Fund Administrators (Superintendencia de Banca, Seguros y AFPs, or “SBS”). The Federal Reserve Bank of New York does not report a noon buying rate for nuevos soles. The U.S. dollar equivalent information presented in this annual report is provided solely for convenience of the reader and should not be construed as implying that the nuevos soles amounts represent, or could have been or could be converted into, U.S. dollars at such rates or at any other rate. See “Item 3. Key Information—A. Selected Financial Data—Exchange Rates” for information regarding historical exchange rates of nuevos soles to U.S. dollars.

Certain figures included in this annual report have been subject to rounding adjustments. Accordingly, figures shown as totals in certain tables may not be arithmetic aggregations of the figures that precede them.

Market Information

We make estimates in this annual report regarding our competitive position and market share, as well as the market size and expected growth of the construction sector and cement industry in Peru. We have made these estimates on the basis of our management’s knowledge and statistics and other information available from the following sources:

• the Central Bank of Peru (Banco Central de Reserva del Perú);

• the National Statistical Institute of Peru (Instituto Nacional de Estadística e Informática, or “INEI”);

1

• the Association of Cement Producers in Peru (Asociación de Productores de Cemento, or “ASOCEM”);

• the Ministry of Housing, Construction and Sanitation;

• ADUANET, a website administered by the Peruvian Tax Superintendence (Superintendencia Nacional de Administración Tributaria, or “SUNAT”);

• the Peruvian Chamber of Construction (Cámara Peruana de la Construcción);

• the Global Competitiveness Index prepared by the World Economic Forum; and

• the U.S. Geological Survey, a U.S. government science organization.

We believe these estimates to be accurate as of the date of this annual report.

Forward-Looking Statements

This annual report contains forward-looking statements. Forward-looking statements convey our current expectations or forecasts of future events. These statements involve known and unknown risks, uncertainties and other factors, including those listed under “Item 3. Key Information – D. Risk Factors,” which may cause our actual results, performance or achievements to differ materially from the forward-looking statements that we make.

Forward-looking statements typically are identified by words or phrases such as “may,” “will,” “expect,” “anticipate,” “aim,” “estimate,” “intend,” “project,” “plan,” “believe,” “potential,” “continue,” “is/are likely to,” or other similar expressions. Any or all of our forward- looking statements in this annual report may turn out to be inaccurate. Our actual results could differ materially from those contained in forward-looking statements due to a number of factors, including:

• general economic, political and social risks inherent to conducting business in Peru;

• exchange rates, inflation and interest rates;

• the entry of new competitors into the market we serve;

• construction activity levels, particularly in the northern region of Peru;

• private investment and public spending in construction projects;

• unpredictable natural disasters, such as floods and earthquakes affecting the northern region of Peru;

• availability and prices of energy, admixtures and raw materials;

• changes in the regulatory framework, including tax, environmental and other laws;

• the successful expansion of our production capacity;

• our ability to compete with potential substitutes of cement products that may be introduced in the Peruvian construction industry;

• our ability to maintain and expand our distribution network;

• our ability to retain and attract skilled employees;

2

• our ability to develop successfully the phosphate rock and brine deposits in our fields;

• our ability to obtain financing for our phosphate and brine projects; and

• other factors discussed under “Item 3. Key Information––D. Risk Factors.”

The forward-looking statements in this annual report represent our expectations and forecasts as of the date of this annual report. Except as required by law, we undertake no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise, after the date of this annual report.

ITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS

Not applicable.

ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE

Not applicable.

ITEM 3. KEY INFORMATION

A. Selected Financial Data

The following selected consolidated financial data should be read together with “Item 5. Operating and Financial Review and Prospects” and our consolidated financial statements and the related notes included in this annual report.

The following selected financial data as of and for the years ended December 31, 2014, 2013, 2012, 2011 and 2010 have been derived from our annual audited consolidated financial statements included in this annual report, which have been prepared in accordance with IFRS as issued by the IASB.

	Year ended December 31,
	2014			2014			2013			2012			2011			2010
Income Statement Data:	(in millions of US$, except share and per share data)(1)			(in millions of S/., except share and per share data)(1)
Sales of goods	US$	416.1			S/.1,242.6			S/.1,239.7			S/.1,169.8			S/.995.0			S/.898.0
Cost of sales		(242.5	)		(724.1	)		(716.2	)		(713.0	)		(569.5	)		(479.1	)
Gross profit		173.6			518.4			523.4			456.8			425.5			419.1
Operating income (expenses):
Administrative expenses		(65.3	)		(194.9	)		(208.9	)		(203.1	)		(196.2	)		(158.7	)
Selling and distribution expenses		(10.2	)		(30.5	)		(29.8	)		(30.9	)		(23.7	)		(16.5	)
Net gain on sale of land and mining concession(2)		—			—			—			—			—			75.9
Net gain on sale of available-for-sale financial investment		3.5			10.5			—			—			—			—
Other operating income, net		(1.0	)		(3.0	)		8.3			7.7			9.3			16.6
Impairment of zinc mining assets(3)		—			—			—			—			(96.0	)		—
Total operating expenses, net		(73.0	)		(217.9	)		(230.5	)		(226.3	)		(306.6	)		(82.7	)
Operating profit		100.6			300.5			293.0			230.5			118.9			336.4
Other income (expenses):
Finance income		3.9			11.7			27.2			23.3			2.7			3.3
Finance costs		(10.4	)		(31.2	)		(37.1	)		(23.8	)		(19.2	)		(15.0	)
(Loss) Gain from exchange difference, net		(5.0	)		(14.8	)		(48.4	)		(0.7	)		1.5			2.6
Total other expenses, net		(11.5	)		(34.3	)		(58.3	)		(1.2	)		(15.0	)		(9.2	)
Profit before income tax		89.1			266.3			234.7			229.3			103.9			327.2

3

	Year ended December 31,
	2014			2014			2013			2012			2011			2010
Income Statement Data:	(in millions of US$, except share and per share data)(1)			(in millions of S/., except share and per share data)(1)
Income tax expense		(26.0	)		(77.5	)		(82.4	)		(73.7	)		(38.4	)		(104.1	)
Profit for the year	US$	63.2		S/.	188.8		S/.	152.3		S/.	155.6		S/.	65.5		S/.	223.1
Share and Per Share Data:
Attributable to:
Equity holders of the parent		64.6			192.8			155.6			159.0			67.7			223.2
Non-controlling interests		(1.3	)		(4.0	)		(3.4	)		(3.4	)		(2.2	)		(0.1	)
	US$	63.2		S/.	188.8		S/.	152.3		S/.	155.6		S/.	65.5		S/.	223.1
Profit per share	US$	0.11		S/.	0.33		S/.	0.27		S/.	0.28		S/.	0.14		S/.	0.48
Number of shares outstanding(4)		581,964,603			581,964,603			581,964,603			581,964,603			468,352,820			468,352,820
Dividends per share	US$	0.067		S/.	0.20		S/.	0.10		S/.	0.089		S/.	0.194		S/.	0.155
	As of December 31,
	2014			2014			2013			2012			2011			2010
Balance Sheet Data:	(in millions of US$)(1)			(in millions of S/.)
Current assets
Cash and term deposits	US$	194.4		S/.	580.5		S/.	977.0		S/.	473.8		S/.	363.3		S/.	154.5
Trade and other receivables		37.1			110.8			68.5			69.4			78.4			36.4
Income tax prepayments		5.0			15.0			27.7			21.5			0.7			0.5
Inventories		108.5			324.1			334.5			278.1			206.1			160.3
Prepayments		1.5			4.4			11.7			10.6			11.6			11.0
Total current assets		346.6			1,034.8			1,419.4			853.4			660.1			362.7
Non-current assets
Other receivables		18.1			53.9			46.3			36.1			29.1			50.9
Prepayments		0.8			2.3			—			—			—			—
Available-for-sale financial investments		0.2			0.7			36.1			34.9			22.1			30.8
Other financial instruments		4.1			12.3			—			—			—			—
Property, plant and equipment		690.2			2,061.0			1,537.1			1,394.8			1,197.4			1,102.0
Exploration and evaluation assets		19.3			57.7			59.3			49.5			29.9			29.3
Deferred income tax assets		5.8			17.2			15.2			13.4			7.8			7.6
Other assets		0.3			1.0			1.2			1.2			1.4			3.7
Total non-current assets		738.8			2,206.1			1,695.2			1,529.9			1,287.7			1,224.3
Total assets		1,085.4			3,240.9			3,114.5			2,383.3			1,947.8			1,587.0
Current liabilities
Trade and other payables		46.1			137.6			126.9			132.8			128.5			95.6
Interest-bearing loans and borrowings		—			—			—			22.9			139.0			121.6
Income tax payable		2.9			8.7			2.8			0.1			12.9			16.6
Provisions		18.0			53.8			28.0			24.0			28.7			26.0
Total current liabilities		67.0			200.1			157.7			179.8			309.1			259.8
Non-current liabilities
Interest-bearing loans and borrowings		295.9			883.6			824.0			192.5			451.5			185.7
Other non-current provisions		0.2			0.7			20.5			16.6			10.9			4.8
Deferred income tax liabilities		28.8			85.9			102.9			100.3			102.7			143.4

4

	As of December 31,
	2014		2014		2013		2012		2011		2010
Balance Sheet Data:	(in millions of US$)(1)		(in millions of S/.)
Total non-current liabilities		324.9		970.1		947.4		309.4		565.1		333.9
Total liabilities		391.9		1,170.2		1,105.1		489.2		874.2		593.7
Equity:
Capital stock		178.0		531.4		531.4		531.4		418.8		418.8
Investment shares		16.9		50.5		50.5		50.5		49.6		49.6
Additional paid-in capital		185.5		553.8		556.3		558.5		—		—
Legal reserve		51.9		154.9		119.8		105.2		90.5		74.1
Other reserves		1.7		5.1		19.0		16.7		8.0		14.4
Retained earnings		233.3		696.7		653.7		570.9		473.7		435.7
Non-controlling interests		26.1		78.1		78.6		60.9		33.0		0.7
Total equity		693.5		2,070.7		2,009.5		1,894.1		1,073.6		993.3
Total liabilities and equity	US$	1,085.4	S/.	3,240.9	S/.	3,114.5	S/.	2,383.3	S/.	1,947.8	S/.	1,587.0

5

	As of and for the year ended December 31,
	2014			2014			2013			2012			2011			2010
Other Financial Information:	(in millions of US$)(1)			(in millions of S/., except percentage and operating data)
Net working capital(5)		279.5		S/.	834.7		S/.	1,261.7		S/.	673.6		S/.	351.0		S/.	102.9
Capital expenditures(6)		196.5			586.6			200.6			248.2			240.6			98.0
Depreciation and amortization		21.7			64.8			55.9			48.0			47.5			36.3
Net cash flows from operating activities		80.5			240.4			191.8			99.7			132.3			179.6
Net cash flows from (used in) investing activities		(185.4	)		(553.5	)		194.5			(667.4	)		(239.2	)		(19.3	)
Net cash flows from (used in) financing activities		(38.4	)		(114.8	)		507.4			273.7			316.0			(115.4	)
Adjusted EBITDA(7)		122.4			365.3			348.9			278.5			267.2			296.7
Adjusted EBITDA margin(8)		29.40	%		29.40	%		28.1	%		23.8	%		26.9	%		33.0	%
Operating Data:
Installed capacity (thousand metric tons per year):
Cement:
Pacasmayo					2,900			2,900			2,900			2,900			2,900
Rioja					440			440			200			200			200
Total					3,340			3,340			3,100			3,100			3,100
Clinker:
Pacasmayo					1,500			1,500			1,500			1,300			1,300
Rioja					280			280			200			200			200
Total					1,780			1,780			1,700			1,500			1,500
Quicklime
Pacasmayo					240			240			240			240			240
Production (thousand metric tons):
Cement:
Pacasmayo					2,054			2,101			2,053			1,751			1,615
Rioja					296			240			200			195			196
Total					2,350			2,341			2,253			1,946			1,811
Clinker:
Pacasmayo					1,014			1,189			1,209			1,160			1,118
Rioja					228			196			159			155			160
Total					1,242			1,385			1,368			1,315			1,278
Quicklime
Pacasmayo					101			67			101			90			127

(1) Calculated based on an exchange rate of S/.2.986 to US$1.00 as of December 31, 2014.

(2) Relates to our sale in March 2010 of the Raul copper mine concessions in the central region of Peru that we previously leased to the buyer.

(3) Due to a sudden and sharp decline in the international price of zinc in September 2011 and based on our expectation of future zinc prices, we recorded an impairment with respect to our zinc mining assets in 2011.

(4) Data for 2010 and 2011 does not include 1,200,000 common shares held by one of our wholly-owned subsidiaries and sold in 2012.

(5) Represents current assets minus current liabilities.

(6) Represents expenditures for the purchase of property, plant and equipment.

(7) Adjusted EBITDA for 2010 excludes a net gain of S/.75.9 million from the sale in March 2010 of the Raul copper mine concessions referred to in note 2 above. Adjusted EBITDA for 2011 excludes a S/.96.0 million non-cash impairment with respect to our zinc mining assets referred to in note 3 above, and also excludes mandatory workers’ profit sharing expenses of S/.4.8 million related to the sale of a minority equity interest in our subsidiary Fosfatos del Pacífico S.A. (“Fosfatos”) to an affiliate of Mitsubishi Corporation & Co. Ltd. (“Mitsubishi”). For a calculation of Adjusted EBITDA and a reconciliation of Adjusted EBITDA to profit, see “Non-IFRS Financial Measure and Reconciliation” below.

(8) Adjusted EBITDA margin is calculated by dividing Adjusted EBITDA by sales.

6

Non-IFRS Financial Measure and Reconciliation

We define EBITDA as profit plus finance costs, income tax expenses, and depreciation and amortization, and minus finance income and plus or minus gain from exchange difference, net. Adjusted EBITDA for 2010 excludes a gain from the sale in March 2010 of the Raul copper mine concessions in the central region of Peru that we previously leased to the buyer. Adjusted EBITDA for 2011 excludes a non-cash loss due to an impairment with respect to our zinc mining assets that we undertook due to a sudden and sharp decline in the international price of zinc in September 2011 and based on our expectation of future zinc prices, as well as mandatory workers’ profit sharing expenses related to the sale of a minority equity interest in our subsidiary Fosfatos to an affiliate of Mitsubishi, because, in accordance with IFRS, the gain from our sale of an interest in Fosfatos has been recorded as equity on our balance sheet as of December 31, 2011. We present Adjusted EBITDA because we believe it provides the reader with a supplemental measure of the financial performance of our core operations that facilitates period-to-period comparisons on a consistent basis. Our management uses Adjusted EBITDA from time to time, among other measures, for internal planning and performance measurement purposes.

Neither EBITDA nor Adjusted EBITDA should be construed as an alternative to profit or operating profit, as an indicator of operating performance, as an alternative to cash flow provided by operating activities or as a measure of liquidity (in each case, as determined in accordance with IFRS). EBITDA and Adjusted EBITDA, as calculated by us, may not be comparable to similarly titled measures reported by other companies, including those in the cement industry.

The following table sets forth the reconciliation of our profit to EBITDA and Adjusted EBITDA:

	Year ended December 31,
	2014			2014			2013			2012			2011			2010
	(in millions of US$)(1)			(in millions of S/.)
Profit	US$	63.2		S/.	188.8		S/.	152.3		S/.	155.6		S/.	65.5		S/.	223.1
Finance income		(3.9	)		(11.7	)		(27.2	)		(23.3	)		(2.7	)		(3.3	)
Finance costs		10.4			31.2			37.1			23.8			19.2			15.0
(Gain) loss from exchange difference, net		5.0			14.8			48.4			0.7			(1.5	)		(2.6	)
Income tax expense		26.0			77.5			82.4			73.7			38.4			104.1
Depreciation and amortization		21.7			64.8			55.9			48.0			47.5			36.3
EBITDA		122.4			365.3			348.9			278.5			166.5			372.6
Net gain on sale of land and mining concessions		—			—			—			—			—			(75.9	)
Impairment of zinc mining assets		—			—			—			—			96.0			—
Workers’ profit sharing expenses related to the sale of an interest in Fosfatos		—			—			—			—			4.8			—
Adjusted EBITDA	US$	122.4		S/.	365.3		S/.	348.9		S/.	278.5		S/.	267.2		S/.	296.7

(1) Calculated based on an exchange rate of S/.2.986 to US$1.00 as of December 31, 2014.

Exchange Rates

The Peruvian nuevo sol is freely traded in the currency exchange market. Current Peruvian regulations on foreign investment allow foreign equity holders of Peruvian companies to receive and repatriate 100% of the cash dividends distributed by these companies. Non-Peruvian equity holders are allowed to purchase foreign currency at free market currency rates through any member of the Peruvian banking system and transfer such foreign currency outside Peru without restriction. Peruvian law in the past, however, has imposed restrictions on the conversion of Peruvian currency and the transfer of funds abroad, and we cannot assure you that Peruvian law will continue to permit such payments, transfers, conversions or remittances without restrictions.

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The following table sets forth, for the periods indicated, certain information regarding the exchange rates for nuevos soles per U.S. dollar, as published by the SBS. The Federal Reserve Bank of New York does not report a noon buying rate for nuevos soles.

	High		Low		Average(1)		Period end
2010		2.883		2.787		2.826		2.809
2011		2.833		2.694		2.755		2.696
2012		2.709		2.550		2.639		2.550
2013		2.820		2.540		2.702		2.795
2014		2.988		2.761		2.839		2.986
October 2014		2.921		2.891		2.906		2.921
November 2014		2.934		2.911		2.925		2.919
December 2014		2.988		2.927		2.962		2.986
January 2015		3.057		2.982		3.006		3.057
February 2015		3.095		3.058		3.079		3.093
March 2015		3.101		3.065		3.092		3.096
April 2015 (through April 27)		3.134		3.091		3.120		3.134

Source: SBS

(1) Averages are based on daily exchange rates.

On April 27 2015, the exchange rate was S/.3.134 per US$1.00.

B. Capitalization and Indebtedness

Not applicable.

C. Reasons for the Offer and Use of Proceeds

Not applicable.

D. Risk Factors

Risks Relating to Peru

Economic, social and political developments in Peru could adversely affect our business, financial condition and results of operations.

All of our operations are conducted in Peru and depend on economic and political developments in the country. As a result, our business may be materially and adversely affected by economic downturns, currency depreciation, inflation, interest rate fluctuation, government policies, regulation, taxation, social instability, political unrest, terrorism and other developments in or affecting the country, over which we have no control.

The cement industry in Peru is highly dependent on construction activity in the country, which, in turn, depends on the purchasing power of consumers and, to a lesser extent, commercial and infrastructure investment. Adverse economic conditions could adversely affect construction activity and result in a decrease in demand for cement products.

In the past, Peru has experienced periods of severe economic recession, large currency devaluation and high inflation. In addition, Peru has experienced periods of political instability, which have led to adverse economic consequences. We cannot assure you that Peru will not experience similar adverse developments in the future.

While Peru has experienced economic growth in the recent past, political tensions, high levels of poverty and unemployment, and social conflicts with local communities continue to be pervasive problems in Peru. In the past, certain areas in the south and the northern highlands of Peru with significant mining developments have experienced strikes and protests related mainly to the

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environmental impact of metallic mining activities, which have resulted in political tensions, commercial disruptions and a climate of uncertainty with respect to future mining projects. Future government policies in response to social unrest could include, among other things, increased taxation, as well as expropriation of assets. These policies could materially and adversely affect the Peruvian economy and, as a result, our business, financial condition and results of operations.

Political developments in Peru could adversely affect our operations.

Our financial condition and results of operations may be adversely affected by changes in Peru’s political situation to the extent that such changes affect the nation’s economic policies, growth, stability, outlook or regulatory environment.

Peru has, from time to time, experienced social and political turmoil, including riots, nationwide protests, strikes and street demonstrations. Despite Peru’s ongoing economic growth and stabilization, social and political tensions and high levels of poverty and unemployment continue. Future government policies to preempt or respond to social unrest could include, among other things, expropriation or nationalization of private assets and property, suspension of the enforcement of creditors’ rights or new taxation policies. These policies could adversely and materially affect the economy and our business.

Peru’s current president, Ollanta Humala of the Gana Perú political coalition, has been in office since July 28, 2011. The election of President Humala initially generated a climate of political and economic uncertainty. However, President Humala’s administration ratified Julio Velarde to continue in his role as president of the Central Reserve Bank of Peru and appointed Luis Castilla, the Vice-Minister of Treasury under the previous administration, as Minister of Economy and Finance (who has recently been replaced by Alonso Segura, who was previously Chief of Staff at the same Ministry). In his four years in office, President Humala has substantially maintained the moderate economic policies of former president Alan García, whose administration was characterized by business-friendly and open-market economic policies that sustained and fostered economic growth, while maintaining the inflation rate at historically low levels. However, we cannot assure you that the current or any future administration will maintain business-friendly and open-market economic policies or policies that stimulate economic growth and social stability. Any changes in the Peruvian economy or the Peruvian government’s economic policies may have a negative effect on our business, financial condition and results of operations.

In addition, because in the last election for congress no single party obtained a clear majority, government gridlock and political uncertainty may occur. We cannot provide any assurances that political or social developments in Peru, over which we have no control, will not have an adverse effect on Peru’s economic situation and on our business, results of operations, financial condition and ability to repay the notes.

Fluctuations in the value of the nuevo sol relative to the U.S. dollar could adversely affect our business, financial condition and results of operations.

Fluctuations in the value of the nuevo sol relative to the U.S. dollar could adversely affect Peru’s economy. In addition, a depreciation of the nuevo sol could increase, in terms of nuevos soles, certain of our production costs. Substantially all of our revenues are denominated in nuevos soles. However, certain of our expenses, such as the purchase of some coal and electricity, and currently the imported clinker, are denominated in U.S. dollars. In 2014, approximately 43% of our cost of sales was denominated in U.S. dollars. In addition, we have issued U.S. dollar denominated debt in the amount of US$300.0 million of our 4.50% Senior Notes due 2023, on which we must make interest payments in U.S. dollars. As of December 31, 2014, we had hedged US$120.0 million of the principal amount outstanding of these Senior Notes. In January 2015, an additional US$30.0 million were hedged. As of December 31, 2014, the nuevo sol had depreciated 6.8% with respect to the U.S. dollar as compared to December 31, 2013. In the past the exchange rate between the nuevo sol and the U.S. dollar has fluctuated significantly. We cannot assure you that the value of nuevo sol against other currencies (including the U.S. dollar) will not fluctuate significantly in the future, which could adversely affect the Peruvian economy and our business, financial condition and results of operations.

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In addition, although Peruvian law currently imposes no restrictions on the ability to convert nuevos soles to foreign currency and transfer foreign currency outside of the country, in the 1980s and early 1990s Peru imposed exchange controls, including controls affecting the remittance of dividends to foreign investors. We cannot assure you that exchange controls in Peru will not be implemented in the future. The imposition of exchange controls could have an adverse effect on the economy and on the ability of holders of our American Depositary Shares (“ADSs”), each representing five of our common shares, to receive dividends in U.S. dollars.

Inflation could adversely affect our business, financial condition and results of operations.

Peru, like some other countries in Latin America, experienced periods of hyperinflation in the 1980s and high rates of inflation in the early 1990s. In recent years, inflation has been relatively low, with an average annual inflation rate between 2010 and 2014 of 3.1% as measured by the Peruvian Consumer Price Index (Índice de Precios al Consumidor del Perú) that is calculated and published by the INEI. During 2014, the rate of inflation was 3.2%. If Peru experiences significant rates of inflation in the future, the economy could be adversely affected. In addition, high rates of inflation could increase our operating costs and adversely impact our operating margins if we are not able to pass the increased costs to consumers.

Changes in tax laws may increase our tax burden and, as a result, could adversely affect our business, financial condition and results of operations.

The Peruvian government from time to time implements changes to tax regulations. Any such changes may result in increases to our overall tax burden, which would negatively affect our profitability.

Earthquakes, flooding and other natural disasters could affect our business, financial condition and results of operations.

Peru is located in an area that experiences seismic activity and occasionally is affected by earthquakes. In 2007, an earthquake with a magnitude of 7.9 on the Richter scale struck the central coast of Peru, severely damaging the Ica region, located south of Lima. In addition, Peru, including the northern region where substantially all of our assets and our operations are located, experiences from time to time severe rainfall and flooding, largely as a result of the climate pattern known as El Niño, which typically occurs every two to seven years. Although we have insurance covering damages caused by natural disasters, the occurrence of a severe natural disaster in the north of Peru could affect our facilities and temporarily disrupt our operations or the distribution of our products and, consequently, our business, financial condition and results of operations.

A resurgence of terrorism in Peru could adversely affect the Peruvian economy and, as a result, our business and results of operations.

In the past, Peru experienced significant levels of terrorist activity that reached its peak of violence against the government and private sector in the late 1980s and early 1990s. In the mid-1990s, terrorist groups suffered significant defeats, including the arrest of key leaders, resulting in considerable limitations in their activities. Although terrorism no longer poses a significant threat in Peru, a small group of terrorists primarily related to drug traffickers continues to operate in remote mountainous and jungle areas in the central and southern regions of the country. A resurgence of terrorism could materially and adversely affect the Peruvian economy and, as a result, our business, financial condition and results of operations.

The Peruvian economy could be affected by adverse economic developments in regional or global markets.

Financial and securities markets in Peru are influenced, to varying degrees, by economic and market conditions in regional or global markets. Although economic conditions vary from country to country, investors’ perceptions of the events occurring in one country may adversely affect capital flows into and securities from issuers in other countries, including Peru. The Peruvian economy was adversely affected by the political and economic events that occurred in several emerging economies in the 1990s, including in Mexico in 1994 and the Asian crisis in 1997, which affected the market value of securities issued by companies from markets throughout Latin America. Similar adverse consequences resulted from the economic crisis in Russia in 1998, the Brazilian currency devaluation in 1999 and the Argentine crisis in 2001.

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In addition, Peru’s economy continues to be affected by events in the economies of its major regional partners and in developed economies that are trading partners or that affect the global economy. During the global economic and financial crisis that commenced in 2008, global conditions led to a slowdown in economic growth in Peru, slowing gross domestic product (“GDP”) growth in 2009 to 0.9%. In particular, the Peruvian economy suffered the effects of lower commodity prices in the international markets, a decrease in export volumes, a decrease in foreign direct investment inflows and, as a result, a decline in foreign reserves. During 2014, the Peruvian economy continued to suffer the effects of global economic changes. Emerging markets have suffered from the fall in terms of trade and currency depreciation. This caused a general slowdown in Peru, decreasing levels of private investment, exports and internal demand. Adverse developments in regional or global markets in the future could adversely affect the Peruvian economy and, as a result, adversely affect our business, financial condition and results of operations.

Risks Relating to our Business and Industry

We are subject to the possible entry of domestic or international competitors into our market, which could decrease our market share and profitability.

The cement market in Peru is competitive and is currently served mainly by three principal groups which together supply most of the cement consumed in the country. In the cement industry, the location of a production plant tends to limit the market a plant can serve because transportation costs are high, reducing profit margins. Historically, we have supplied the northern region of Peru while two other groups have supplied the central (which includes the Lima metropolitan area) and southern regions of Peru, driven principally by the location of production facilities and distribution focus. However, competition could intensify if other manufacturers decide to enter our market.

We may face increased competition if the other Peruvian cement manufacturers, despite incremental freight costs, expand their distribution of cement to the northern region of Peru, or if they develop a cement plant in the north, particularly if the cement markets in Lima or other areas of Peru become saturated. Some large foreign cement manufacturers have announced plans to build cement plants in the central region of the country. If competition intensifies in the central region of Peru due to the presence of foreign cement manufacturers or otherwise, it may have price repercussions in our market.

We also face the possibility of competition from the entry into our market of imported clinker, cement or other materials or products from foreign manufacturers, which may have significantly greater financial resources than us, particularly as production capacity continues to exceed depressed demand in other parts of the world and transportation costs decrease.

We may not be able to maintain our market share if we cannot match our competitors’ prices or keep pace with the development of new products. If any of these events were to occur, our business, financial condition and results of operations could be adversely affected.

Demand for our cement products is highly related to housing construction in northern Peru, which, in turn, is affected by economic conditions in the region.

Cement consumption is highly related to construction levels. Demand for our cement products depends, in large part, on residential construction in the north of Peru, which consists mostly of low-income families gradually building or improving their own homes without technical assistance, which we refer to as auto-construcción. We estimate that in 2014, auto-construcción accounted for approximately 55% of our cement sales. Residential construction, in turn, is highly correlated to prevailing economic conditions in Peru. A decline in economic conditions would reduce household disposable income and cause a significant reduction in residential construction, leading to a decrease in demand for cement. As a result, a deterioration of economic conditions in the northern region of Peru would have a material adverse effect on our financial performance. We cannot assure you that growth in Peru’s GDP, or the contribution to GDP growth attributable to the northern region of the country, will continue at the recent pace or at all.

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A reduction in private or public construction projects in the northern region of Peru would have a material adverse effect on our business, financial condition and results of operations.

We estimate that in 2014, approximately 22% of our cement sales were derived from private construction (other than auto-construcción) and 23% from public construction in the north of Peru. Significant interruptions or delays in, or the termination of, private or public construction projects may adversely affect our business, financial condition and results of operations. Private and public construction levels in our market depend on investments in the region which, in turn, are affected by economic conditions.

The level of public infrastructure construction also depends, to a great extent, on the priorities and financial resources of the national, regional and local governmental authorities. The Peruvian government has recently promoted significant public spending in infrastructure projects in the north in response to an infrastructure shortage and to stimulate the economy in response to the negative effects of recent global economic and financial crisis. We cannot assure you that the Peruvian government will continue promoting recent levels of public infrastructure spending in our market. A reduction in public infrastructure spending in our market would adversely affect our business, financial condition and results of operations.

Our business, financial condition and results of operations may be adversely affected by increases in energy prices or shortages in the supply of energy.

Energy accounts for a significant percentage of our production costs. Our principal energy sources are coal and electricity. In 2014, the cost of energy represented approximately 27.6% of our cement production costs, compared to 32.0% in 2013. We use a substantial amount of coal as a source of fuel in our production process. Most of the coal we use is anthracite coal which we purchase from domestic suppliers and import a small amount of bituminous coal from suppliers primarily in Colombia and Venezuela, in each case at market prices. We do not have long-term coal supply agreements, and we do not engage in hedging transactions in connection with the price of coal. Any shortage or interruption in the supply of coal could also disrupt our operations. In addition, the price of coal is largely driven by the price of oil, and, as a result, increases in international oil prices are likely to affect the price of coal and adversely affect our results of operations.

We have a long-term electricity supply agreement with Electroperú S.A. (“Electroperú”), a government-owned company, to serve the electricity requirements of our Pacasmayo facility through December 2020. We have also entered into a supply agreement with Electro Oriente S.A. (“ELOR”) to supply the Rioja facility until November 2017. Our business, financial condition and results of operations could be materially and adversely affected by higher costs, interruptions, and unavailability or shortage of electricity. We have no back-up power system at our plants and cannot assure you that, in case of interruption or failure in Electroperú’s or ELOR’s operations, we will have access to other energy sources at the same prices and conditions, which could adversely affect our business, financial condition and results of operations. Moreover, electricity to our plants is transmitted through the Peruvian Electricity Interconnection System (Sistema Eléctrico Interconectado Nacional del Perú, or “SEIN”). Any interruptions or failures in SEIN’s system would also have a material adverse effect on our business, financial condition and results of operations.

In the recent past, we have experienced electricity rationing, limiting our use of electricity to certain times of the day. In such cases, we were forced to readjust our production schedules in order to ensure that our production process was not interrupted. In the event of any future rationing of electricity, we may not be able to readjust quickly enough and our production process may be interrupted. Future shortages or efforts to respond to or prevent shortages, such as rationing, may adversely impact the cost or supply of electricity for our operations.

A significant increase in the prices of coal or electricity would increase our costs of production. We may not be able to increase the prices of our cement products in the future if the prices of coal or electricity rises, which would adversely affect our business, financial condition and results of operations.

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Changes in the cost or availability of admixtures and raw materials supplied by third parties may adversely affect our business, financial condition and results of operations.

We use certain admixtures and raw materials in the production of cement, such as gypsum, blast furnace slag and iron that we obtain from third parties. In 2014, our cost of admixtures and raw materials supplied by third parties as a percentage of our cement production costs was approximately 9.9% compared to 8.6% in 2013. In 2012, due to an increase in demand for cement and the corrective maintenance of our principal kiln, we began using imported clinker, which represented approximately 22.0% of our cement production cost in 2014. We do not have long-term contracts for the supply of admixtures, raw materials and imported clinker that we use and if existing suppliers cease operations or reduce or eliminate production of these products, our costs to procure these materials may increase significantly or we may be obligated to procure alternatives to replace these products.

We may make future acquisitions that may not achieve expected benefits.

Our strategic initiatives include pursuing acquisitions that tend to diversify our existing portfolio of products and services and expand our geographic footprint. In the future, we may decide to expand by acquiring other companies in Peru or abroad. Any future acquisitions will depend on our ability to identify suitable candidates, negotiate acceptable terms, and obtain financing for the acquisitions. If future acquisitions are significant, they could change the scale of our business and expose us to new geographic, political, operating and financial risks. In addition, each acquisition involves a number of risks, such as the diversion of our management’s attention from our existing business to integrating the operations and personnel of the acquired business, possible adverse effects on our results of operations during the integration process, our inability to achieve the intended objectives of the combination and potential unknown liabilities associated with the acquired assets.

We may not be able to obtain the funding required to implement future strategies.

Our strategies to continue to expand our cement production capacity and distribution network and to develop our brine and phosphate projects require significant capital expenditures. We cannot assure you that we will generate sufficient cash flow from operations, or that we will have access to external financing sources, to adequately fund such capital expenditures. Our access to external sources of financing will depend on many factors, including factors beyond our control, such as conditions in the global capital markets and investors’ risk perception of investing in Peru and in emerging markets generally. Any equity or debt financing, if available, may not be on terms that are favorable to us. If our access to external financing is limited, we may not be able to execute our strategy, which could adversely affect our business, financial condition and results of operations.

In addition, the indenture pursuant to which we issued our 4.50% Senior Notes due 2023 contains covenants that limit our ability and that of our restricted subsidiaries to incur additional indebtedness if we do not meet certain financial ratios. If we are unable to incur additional debt to fund our future strategies, our business could be adversely affected.

We are subject to risks related to litigation and administrative proceedings that could adversely affect our business and financial performance in the event of an unfavorable ruling.

The nature of our business exposes us to litigation relating to product liability claims, labor, health and safety matters, environmental matters, regulatory, tax and administrative proceedings, governmental investigations, tort claims and contract disputes, among other matters. In the past, we have been subject to antitrust and tax proceedings or investigations. While we contest these matters vigorously and make insurance claims when appropriate, litigation is inherently costly and unpredictable, making it difficult to accurately estimate the outcome of actual or potential litigation. Although we establish provisions as we deem necessary, the amounts that we reserve could vary significantly from any amounts we actually pay due to the inherent uncertainties in the estimation process. We cannot assure you that these or other legal proceedings will not materially affect our ability to conduct our business, financial condition and results of operations in the event of an unfavorable ruling.

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Our business is subject to a number of operational risks, which may adversely affect our business, financial condition and results of operations.

Our business is subject to several industry-specific operational risks, including accidents, natural disasters, labor disputes and equipment failures. Such occurrences could result in damage to our production facilities and equipment, and/or the injury or death of our employees and others involved in our production process. Moreover, such accidents or failures could lead to environmental damage, loss of resources or intermediate goods, delays or the interruption of production activities and monetary losses, as well as damage to our reputation. Our insurance may not be sufficient to cover losses from these events, which could adversely affect our business, financial condition and results of operations.

In addition, key equipment at our facilities, such as our mills and kilns, may deteriorate sooner than we currently estimate. Such deterioration of our assets may result in additional maintenance or capital expenditures, and could cause delays or the interruption of our production activities. If these assets do not generate the cash flows we expect, and we are not able to procure replacement assets in an economically feasible manner, our business, financial condition and results of operations may be materially and adversely affected.

Our business depends on the continued operation of our flagship Pacasmayo plant.

Our flagship production facility in Pacasmayo is essential to our business. In 2014, approximately 87% of our total cement and all of our quicklime was produced at this facility. The Pacasmayo plant is subject to normal hazards of operating any cement production facility, including accidents and natural disasters. Any interruption in our operation of the Pacasmayo facility or a decrease in the effective capacity of this facility would adversely affect our results of operations, and any prolonged disruption in the operation of this facility would have a material adverse effect on our business, financial condition and results of operations.

The introduction of cement substitutes into the market and the development of new construction techniques could have a material adverse effect on our business, financial condition and results of operations.

Materials such as plastic, aluminum, ceramics, glass, wood and steel can be used in construction as a substitute for cement. In addition, other construction techniques, such as the use of dry wall, could decrease the demand for cement and concrete. In Peru, dry wall has only been introduced into the housing construction market in recent years and it is not widely used. However, the use of dry wall for housing construction could increase significantly in the future as it becomes more popular. In addition, research aimed at developing new construction techniques and modern materials may introduce new products in the future. The use of substitutes for cement could cause a significant reduction in the demand and prices for our cement products.

Our success depends on key members of our management.

Our success depends largely on the efforts and strategic vision of our executive management team and board of directors. The loss of the services of some or all of our executive management and members of our board of directors could have a material adverse effect on our business, financial condition and results of operations.

The execution of our business plan also depends on our ongoing ability to attract and retain additional other qualified employees capable of operating our plants. Due to the limited pool of skilled workers in the north of Peru or workers from other regions willing to relocate to the north of Peru, we may not be successful in attracting and retaining the personnel we require. If we are unable to hire, train and retain qualified employees at a reasonable cost, we may be unable to successfully operate our business or reach full planned production levels in a timely manner and, as a result, our business, financial condition and results of operations could be adversely affected.

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Our operations and sales are highly concentrated in the northern region of Peru.

All of our operations are located in the northern region of Peru, including our production facilities and the quarries from where we obtain limestone to produce cement. In addition, substantially all of our cement products are sold to consumers in this market. As a result, any adverse economic, political or social conditions affecting the northern region of Peru, as well as natural disasters and weather conditions, such as the El Niño climate pattern, among other factors that may affect this region, could have a material adverse effect on our business, financial condition and results of operations.

We are subject to environmental regulations and may be exposed to liability and political cost as a result of our handling of hazardous materials and potential costs for environmental compliance.

We are subject to various environmental protection and health and safety laws and regulations that regulate, among other things, the generation, storage, handling, use and transportation of hazardous materials; emissions and discharge of hazardous materials; and the health and safety of our employees. Pursuant to Peruvian law, in order to conduct mining and industrial activities, we are required, among other things, to (i) submit an environmental impact assessment to the Ministry of Production (Ministerio de la Producción) and a mining closure plan to the Ministry of Energy and Mines (Ministerio de Energía y Minas) prior to initiating mining activities, (ii) comply with certain air emission and wastewater discharge standards, (iii) obtain approval from the water management authority to discharge wastewater into natural water sources or soil, (iv) dispose solid waste generated by us in special landfills exclusively through companies registered with the environmental agency, and (v) store fuel in compliance with environmental and safety standards. In addition, we are required to have a health and safety committee and develop an internal health and safety code. Although we believe we are in compliance with all these regulations in all material respects, we cannot assure you that we have been or will be at all times in full compliance with these laws and regulations. Any violation of such laws or regulations could result in substantial fines, criminal sanctions, revocations of operating permits and shutdowns of our facilities. In addition, current or future governments may also impose stricter regulations which may require us to incur higher compliance costs.

Pursuant to certain applicable environmental laws, we could be found liable for all or substantially all of the damages caused by pollution at our current or former facilities or those of our predecessors or at disposal sites. We could also be found liable for all incidental damages due to the exposure of individuals to hazardous substances or other environmental damage.

We cannot assure you that our costs of complying with current and future environmental and health and safety laws and regulations, and any liabilities arising from past or future releases of, or exposure to, hazardous substances will not adversely affect our business, financial condition and results of operations.

International agreements related to climate change may result in an increase in our costs.

There are ongoing international efforts to address greenhouse emissions. The United Nations and certain international organizations have taken action against activities that may increase the atmospheric concentration of greenhouse gases. Regulatory measures, such as the Kyoto Protocol, aimed at addressing greenhouse gas emissions and climate changes, are in various stages of negotiation and implementation. Such measures may result in increased costs to us for installation of new controls aimed at reducing greenhouse gas emissions, purchase of credits or licenses for atmospheric emissions, and monitoring and registration of greenhouse gas emissions from our operations. These measures, if adopted in Peru, could adversely affect our business, financial condition and results of operations.

Changes in regulations or in the interpretation of regulations may adversely affect our business, financial condition and results of operations.

Our business is subject to extensive regulation in Peru, including, among others, relating to tax, environmental, labor, health and safety, and mining matters. We believe that our facilities are currently operating in all material respects in accordance with all applicable concessions, laws and regulations. Future regulatory changes, changes in the interpretation of such regulations or stricter enforcement of such regulations, including changes to our concession agreements, may increase our compliance costs and could potentially require us to alter our operations. We cannot assure you that regulatory changes in the future will not adversely affect our business, financial condition and results of operations.

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A dispute with the labor unions that represent our employees could have an adverse effect on our business, financial condition and results of operations.

As of December 31, 2014, approximately 18% of our employees were members of employee unions. Our practice is to extend some of the benefits we offer our unionized employees to other employees. Although we consider our relations with our employees are currently positive, we cannot assure you that we will not experience work slowdowns, work stoppages, strikes or other labor disputes in the future, which could adversely affect our business, financial condition and results of operations.

New projects may require the prior approval of local indigenous communities.

On September 7, 2011, Peru enacted Law No. 29785, regarding the Prior Consultation Right of Local Indigenous Communities, in accordance with the International Labor Organization Convention No. 169 (Ley del Derecho a la Consulta Previa a los Pueblos Indígenas y Originarios, Reconocido en el Convenio 169 de la Organización Internacional del Trabajo). This law, which became effective on December 6, 2011, establishes a prior consultation procedure (procedimiento de consulta previa) that the Peruvian government must carry out with local indigenous communities whose rights may be directly affected by new legislative or administrative measures, including the granting of new mining concessions. Local indigenous communities do not have a veto right; upon completion of this prior consultation procedure, the Peruvian government retains the discretion to approve or reject the applicable legislative or administrative measure. However, to the extent that in the future our new projects may require legislative or administrative measures that impact local indigenous communities, we may not be able to undertake such projects, unless the Peruvian government first conducts the foregoing consultation procedure. We cannot assure you that this law will not adversely affect our new projects and have an adverse effect on our business, financial condition and results of operations.

Our Piura plant development project is subject to multiple risks, any one of which may adversely affect our operations.

We may face several risks related to the on-going development of our cement production facility in Piura. The realization of any of the following risks may impair our ability to execute this project in the timeframe we estimate:

• delays in obtaining regulatory approvals, licenses or permits from different governmental or regulatory authorities;

• increases in the cost of energy, equipment, materials or labor, could impact the profitability of this project;

• adverse weather conditions, natural disasters, accidents or other unforeseen events;

• unforeseen engineering, design, environmental or geological problems;

• opposition from local communities;

• strikes or labor disputes; and

• adverse changes in Peru’s regulatory framework.

Any of these factors may delay our project and may increase our projected capital costs. If we are unable to complete this plant, any costs incurred in connection with it may not be recoverable. If we experience delays, cost overruns, or changes in market circumstances, we may not be able to achieve the intended economic benefits, which would materially and adversely affect our business, financial condition and results of operations.

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The actual amount of capital required to develop our new plant in Piura may vary from our current estimates.

Although we have an established budget for the development of our new Piura plant, this still remains only an estimate. If any of our assumptions change, the actual timing and amount of capital required may vary from what we anticipate. Additional funds may be required in the event of departures from current estimates, unforeseen delays, cost overruns, engineering design changes or other unanticipated expenses. We cannot assure you that additional financing will be available to us, or, if available, that it can be obtained on a timely basis and on commercially acceptable terms.

The indenture pursuant to which we issued our 4.50% Senior Notes due 2023 contains financial covenants, and any default under the indenture may have a material adverse effect on our financial condition and cash flows.

The indenture pursuant to which we issued our 4.50% Senior Notes due 2023 contains restrictions and covenants, including restrictions on our and our guarantor subsidiaries’ ability to incur further indebtedness or issue disqualified stock and preferred stock, unless certain conditions are met. Failure to meet or satisfy any of these covenants could result in an event of default under the indenture.

Additional Risks Relating to our Non-cement Projects

We have not established reserves with respect to our phosphate or brine projects.

We have not established reserves with respect to our phosphate or brine projects. We have only verified mineralized material in our phosphate deposits, and both projects are undergoing basic engineering studies. Such mineralized material will not qualify as reserves until a comprehensive evaluation, based upon unit costs, grades, recoveries and other factors, concludes economic and legal feasibility. The cost, timing and complexities of upgrading mineralized material to reserves may be greater than we anticipate. Mineral exploration and development involves a high degree of risk that even a combination of careful evaluation, experience and knowledge cannot eliminate, and few properties that are explored are ultimately developed into producing mines. Once mineralization is discovered, it may take a number of years from the initial phases of drilling before production is possible, during which time the economic feasibility of production may change. Substantial expenditures typically are required to establish reserves through drilling, to determine metallurgical processes to extract the minerals from the ore and to construct mining and processing facilities.

We cannot assure you that we will be able to establish the presence of any reserves for phosphate or brine. The failure to establish reserves would materially affect our ability to develop our phosphate and brine projects and could significantly reduce their estimated value.

Mineralized material calculations are only estimates which if they do not materialize may adversely affect our business, financial condition and results of operations.

Our calculation of the mineralized material at our Bayóvar field is only an estimate and depends on geological interpretation and statistical inferences or assumptions drawn from drilling and sampling analysis, which may prove to be materially inaccurate. There is a significant degree of uncertainty attributable to the calculation of mineralized material. Until mineralized material is actually mined and processed, the quantity of mineralized material and grades must be considered as estimates only and we cannot assure you that indicated levels will actually be produced.

The estimate of mineralized material is partially dependent upon the judgment of the person preparing the estimates. The process relies on the quantity and quality of available data and is based on knowledge, mining experience, statistical analysis of drilling results and industry practices. Valid estimates at a given time may significantly change when new information becomes available.

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Estimating mineralized material may have to be recalculated based on further exploration or development activity or actual production experience, which could materially and adversely affect estimates of the quantity or grade of mineralized material. Any material changes in quantity and grades of mineralized material will affect the economic viability of placing a property into production and a property’s return on capital. We cannot assure you that mineralized material can be mined or processed profitably.

Our phosphate and brine projects are not part of our core cement business and we cannot assure you that we will be able to profitably extract and commercialize these products.

We are undertaking two non-metallic mining projects to develop phosphate and brine deposits. However, we are developing basic engineering studies and we cannot assure you that these projects will be successful or profitable. Mining is highly speculative in nature, involves many risks and can be unsuccessful. In addition, our core competency is the production and distribution of cement products. We have no prior experience in planning, developing and managing large-scale mining projects, and we have no operating experience or track record in extracting, processing or commercializing phosphate or brine minerals to assess our potential performance. The development of these two projects may result in unforeseen operating difficulties and may require significant financial and managerial resources that would otherwise be available for the ongoing development of our existing cement operations.

We may face several factors that may impair our ability to execute these projects successfully including, among others, the following:

• delays in obtaining regulatory approvals, licenses or permits from different governmental or regulatory authorities, including environmental permits;

• increases in the cost of energy, equipment, materials or labor, making the project economically unfeasible;

• adverse weather conditions, natural disasters, accidents or other unforeseen events;

• unforeseen engineering, design, environmental or geological problems;

• insufficient access to adequate means of transportation for our minerals, including delays in the construction of a port nearby;

• opposition from local communities;

• strikes or labor disputes;

• changes in the level of demand and prices for products derived from these materials; and

• adverse changes in Peru’s regulatory framework.

Any of these factors may delay our projects and may increase our projected capital costs. If we are unable to complete these projects, any costs incurred in connection with these projects may not be recoverable. If we experience delays, cost overruns, or changes in market circumstances, we may not be able to demonstrate the commercial viability of these projects or achieve the intended economic benefits, which would materially and adversely affect our business, financial condition and results of operations.

In the case of our Brine Project, we may face difficulties in marketing and distributing the products derived from these fields. Even if we successfully extract these minerals, we may not be able to market them successfully or find suitable buyers, which may have an adverse effect on our business, financial condition and results of operations.

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The actual amount of capital required for our phosphate and brine projects may vary significantly from our current estimates.

Our phosphate and brine initiatives are complex projects that require significant capital investment. Our estimated capital amounts for these projects are based on preliminary estimates and assumptions we have made about the mineral deposits, equipment, labor, permits and other factors required to complete the projects. If any of these estimates or assumptions change, the actual timing and amount of capital required may vary significantly from what we anticipate. Additional funds may be required in the event of departures from current estimates, unforeseen delays, cost overruns, engineering design changes or other unanticipated expenses, or if we are unable to find a suitable strategic partner to assist in financing our phosphate project. We cannot assure you that additional financing will be available to us, or, if available, that it can be obtained on a timely basis and on commercially acceptable terms.

If we have difficulties working with Mitsubishi to develop our phosphate project or with Quimpac to develop our brine project, we may face difficulties in carrying out these projects.

We are unfamiliar with the commercial market for phosphate and brine products and are seeking to develop these projects with partners that have expertise in commercializing these products. We sold a minority equity interest in our subsidiary Fosfatos to an affiliate of Mitsubishi, which will assist us to develop our phosphate deposits. In addition, Mitsubishi entered into a 20-year off-take agreement with Fosfatos. We have formed Salmueras Sudamericanas S.A. (“Salmueras”) with Quimpac S.A. (“Quimpac”) as a minority partner to assist in financing our brine project and provide its expertise in the commercialization of chemical components. If we encounter difficulties working with Mitsubishi or Quimpac, we may not be able to execute these projects as currently contemplated.

Risks Relating to our Common Shares and ADSs

The market price of our ADSs may fluctuate significantly, and you could lose all or part of your investment.

Volatility in the market price of our ADSs may prevent you from being able to sell your ADSs at or above the price you paid for them. The market price and liquidity of the market for our ADSs may be significantly affected by numerous factors, some of which are beyond our control and may not be directly related to our operating performance. These factors include, among others:

• actual or anticipated changes in our results of operations, or failure to meet expectations of financial market analysts and investors;

• investor perceptions of our prospects or our industry;

• operating performance of companies comparable to us and increased competition in our industry;

• new laws or regulations or new interpretations of laws and regulations applicable to our business;

• general economic trends in Peru;

• catastrophic events, such as earthquakes and other natural disasters; and

• developments and perceptions of risks in Peru and in other countries.

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Our controlling shareholder has significant influence over us and his interests could conflict with the interests of other shareholders.

As of March 31, 2015, our controlling shareholder beneficially owned 52.63% of our outstanding common shares. As a result, our controlling shareholder has the ability to determine the outcome of substantially all matters submitted for a vote to our shareholders and thus exercise control over our business policies and affairs, including, among others, the following:

• the composition of our board of directors and, consequently, any determinations of our board with respect to our business direction and policy, including the appointment and removal of our executive officers;

• determinations with respect to mergers, other business combinations and other transactions, including those that may result in a change of control;

• whether dividends are paid or other distributions are made and the amount of any such dividends or distributions;

• whether we offer preemptive and accretion rights to holders of our common shares in the event of a capital increase;

• sales and dispositions of our assets; and

• the amount of debt financing we incur.

Our controlling shareholder may direct us to take actions that could be contrary to the interests of our other shareholders and may be able to prevent other shareholders from blocking these actions or from causing different actions to be taken. Also, our controlling shareholder may prevent change of control transactions that might otherwise provide the shareholders with an opportunity to dispose of or realize a premium on their investment in our common shares and ADSs. We cannot assure you that our controlling shareholder will act in a manner consistent with our other shareholders’ best interests.

Holders of ADSs may be unable to exercise voting rights with respect to our common shares underlying the ADSs at our shareholders’ meetings.

Holders of ADSs may exercise voting rights with respect to the common shares represented by the ADSs only in accordance with the deposit agreement relating to the ADSs. Holders of our common shares will receive notice of shareholders’ meetings through publication of a notice 25 days in advance, pursuant to Peruvian law, in the official gazette in Peru, a Peruvian newspaper of general circulation, the bulletin of the Lima Stock Exchange and the website of the Peruvian Securities Commission, and will be able to exercise their voting rights by either attending the meeting in person or voting by proxy. ADS holders will not receive notice directly from us. Instead, pursuant to the deposit agreement, we will notify the depositary, who will mail to holders of ADSs the notice of the meeting and a statement as to the manner in which voting instructions may be given. To exercise their voting rights, ADS holders must instruct the depositary how to exercise the voting rights for the common shares which underlie their ADSs. Due to these additional procedural steps involving the depositary, the process for exercising voting rights may take longer for ADS holders than for holders of our common shares.

Holders of ADSs also may not receive voting materials in time to instruct the depositary to vote the common shares underlying their ADSs. In addition, the depositary and its agents are not responsible for failing to carry out voting instructions of the holders of ADS or for the manner of carrying out such instructions, unless such failure can be attribute to gross negligence, bad faith or willful misconduct on the part of the depositary or its agents. Accordingly, holders of ADSs may not be able to exercise voting rights, and they will have little, if any, recourse if the underlying common shares are not voted as requested.

Our shareholders’ ability to receive cash dividends may be limited.

Our shareholders’ ability to receive cash dividends may be limited by the ability of the depositary to convert cash dividends paid in nuevos soles into U.S. dollars. Under the terms of our deposit agreement with the depositary for the ADSs, the depositary will convert any cash dividend or other cash distribution we pay on the common shares underlying the ADSs into U.S. dollars, if it can do so on a reasonable basis and can transfer the

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U.S. dollars to the United States. If this conversion is not possible or if any government approval is needed and cannot be obtained, the deposit agreement allows the depositary to distribute the foreign currency only to those ADS holders to whom it is possible to do so. If the exchange rate fluctuates significantly during a time when the depositary cannot convert the foreign currency, holders of ADSs may lose some or all of the value of the dividend distribution.

Holders of ADSs may be unable to exercise pre-emptive or accretion rights with respect to the common shares underlying their ADSs.

Under Peruvian corporate law, if we issue new common shares as part of a capital increase, unless otherwise agreed to by holders of 40% of our outstanding common shares, our shareholders will generally have the right to subscribe to a proportional number of common shares of the class held by them to maintain their existing ownership percentage, which is known as preemptive rights. In addition, shareholders are entitled to the right to subscribe for the unsubscribed common shares of either the class held by them or other classes which remain unsubscribed at the end of a preemptive rights offering, on a pro rata basis, which is known as accretion rights. Holders of ADSs may not be able to exercise the preemptive or accretion rights relating to common shares underlying the ADSs unless a registration statement under the U.S. Securities Act of 1933, as amended (the “Securities Act”), is effective with respect to those rights or an exemption from the registration requirements of the Securities Act is available. We are not obligated to file a registration statement with respect to the common shares relating to these preemptive and accretion rights and we cannot assure you that we will file any such registration statement. Unless we file a registration statement or an exemption from registration is available, holders of ADSs may receive only the net proceeds from the sale of their preemptive and accretion rights by the depositary or, if the preemptive and accretion rights cannot be sold, they will be allowed to lapse. As a result, U.S. holders of our ADSs may suffer dilution of their interest in our company upon future capital increases.

We are entitled to amend the deposit agreement under which our ADSs were issued, and to change the rights of ADS holders under the terms of such agreement, without the prior consent of the ADS holders.

We are entitled to amend the deposit agreement and to change the rights of the ADS holders under the terms of such agreement, without the prior consent of the ADS holders. Any change related to an increase in deposits or charges for book-entry securities services or any modification that might hinder the rights of the ADS holders will be effective within 30 days after the ADS holders have received notice of such change or modification and such holders will have no right to any compensation whatsoever.

Our status as a foreign private issuer allows us to follow alternate standards to the corporate governance standards of the New York Stock Exchange, which may limit the protections afforded to investors.

We are a “foreign private issuer” within the meaning of the New York Stock Exchange corporate governance standards. Under New York Stock Exchange rules, a foreign private issuer may elect to comply with the practices of its home country and not to comply with certain corporate governance requirements applicable to U.S. companies with securities listed on the exchange. We currently follow certain Peruvian practices concerning corporate governance and intend to continue to do so. Accordingly, holders of our ADSs will not have the same protections afforded to shareholders of companies that are subject to all New York Stock Exchange corporate governance requirements.

For example, the New York Stock Exchange listing standards provide that the board of directors of a U.S. listed company must have a majority of independent directors at the time the company ceases to be a “controlled company”. Under Peruvian corporate governance practices, a Peruvian company is not required to have a majority of independent members on its board of directors.

The listing standards for the New York Stock Exchange also require that U.S. listed companies; at the time they cease to be “controlled companies”, have a nominating/corporate governance committee and a compensation committee (in addition to an audit committee). Each of these committees must consist solely of independent directors and must have a written charter that addresses certain matters specified in the listing standards. Under Peruvian law, a Peruvian company may, but is not required to, form special governance committees, which may be composed partially or entirely of non-independent directors.

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In addition, New York Stock Exchange rules require the independent non-executive directors of U.S. listed companies to meet on a regular basis without management being present. There is no similar requirement under Peruvian law.

The New York Stock Exchange’s listing standards also require U.S. listed companies to adopt and disclose corporate governance guidelines. In November 2013, the Peruvian Securities Commission and a committee comprised of regulatory agencies and associations prepared and published a list of suggested non-mandatory corporate governance guidelines called the “Good Corporate Governance Code for Peruvian Companies.” Although we have implemented a number of these measures, we are not required to comply with the corporate governance guidelines by law or regulation, only to disclose whether or not we are in compliance.

Minority shareholders in Peru are not afforded equivalent protections as minority shareholders in other jurisdictions and investors may face difficulties in commencing judicial and arbitration proceedings against our company or the controlling shareholder.

Our company is organized and existing under the laws of Peru, and our controlling shareholder is resident in Peru. Accordingly, investors may face difficulties in serving process on our company, our officers and directors or the controlling shareholder in other jurisdictions, and in enforcing decisions granted by courts located in other jurisdictions against our company, our officers and directors or the controlling shareholder that are based on securities laws of jurisdictions other than Peru.

In Peru, there are no proceedings to file class action suits or shareholder derivative actions with respect to issues arising between minority shareholders and an issuer, its controlling shareholders or directors and officers. Furthermore, the procedural requirements to file actions by shareholders differ from those of other jurisdictions, such as in the United States. As a result, it may be more difficult for our minority shareholders to enforce their rights against us, our directors, officers or controlling shareholder as compared to the shareholders of a U.S. company. The deposit agreement provides that the depositary has no obligation to commence or become involved in any judicial proceedings and any other legal actions relating to the ADSs or the deposit agreement, either on behalf of the ADS holders or on behalf of any other person.

The ability of investors to enforce civil liabilities under U.S. securities laws may be limited.

Most of our directors or executive officers are not residents of the United States. All or a substantial portion of our assets and those of our directors and executive officers are located outside of the United States. As a result, it may not be possible for investors in our securities to effect service of process within the United States upon such persons or to enforce in U.S. courts or outside of the United States judgments obtained against such persons outside of the United States.

We are a company organized and existing under the laws of Peru, and there is no existing treaty between the United States and Peru for the reciprocal enforcement of foreign judgments. It is not clear whether a Peruvian court would accept jurisdiction and impose civil liability if proceedings were commenced in a foreign jurisdiction predicated solely upon U.S. federal securities laws.

ITEM 4. INFORMATION ON THE COMPANY

A. History and Development of the Company

Our History

Cementos Pacasmayo S.A.A. began its operations in 1957 and is a publicly-held corporation (sociedad anónima abierta) organized under the laws of Peru. Our executive offices are located at Calle La Colonia 150, Urbanización El Vivero, Surco, Lima, Peru. Our telephone number at this location is + (511) 317-6000. Our website address is www.cementospacasmayo.com.pe. Information on or accessible through our website is not a part of, nor incorporated by reference in, this annual report.

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Cementos Pacasmayo S.A.A. and Hochschild Mining plc together constitute the two businesses of the Hochschild Group, which has operated in Latin America for more than 100 years. Hochschild Mining plc is incorporated in the United Kingdom and its shares have been listed on the London Stock Exchange since 2006. Cementos Pacasmayo S.A.A. has been listed on the Lima Stock Exchange since 1995. As of March 31, 2015, Eduardo Hochschild, directly and indirectly, owned and controlled 54.30% of the shares of Hochschild Mining plc. Through Inversiones ASPI S.A. (“ASPI”), Eduardo Hochschild, directly and indirectly, owns and controls 52.6% of the outstanding common shares and 33.2% of the outstanding non-voting investment shares of Cementos Pacasmayo S.A.A.

The Hochschild Group traces its origins to 1911, when Mauricio Hochschild, a German mining engineer, founded a group of companies in South America that came to be known as the Hochschild Group. Following World War I, the Hochschild Group expanded into Bolivia where it developed significant interests in tin. The Hochschild Group commenced operations in Peru in 1925 and in 1945 Luis Hochschild, the nephew of Mauricio Hochschild (and the father of Eduardo Hochschild), joined the Hochschild Group’s Peruvian operations.

During the first decades of its operations, the Hochschild Group focused on the commercialization of minerals, although it later began operating its own mines and other industrial companies. During World War II, the Hochschild Group was a key supplier of tin and other metals to the allied forces.

Cementos Pacasmayo, was incorporated in Lima, Peru in 1949, by a group of private investors that founded the company to serve the cement market in the northern region of Peru. The Hochschild Group acquired its initial ownership interest in us in 1956. Set forth below are key developments in our company’s history.

• In 1957, we began our operations with the installation of our first clinker line with an installed production capacity of approximately 110,000 metric tons per year. In 1966 and 1977, we added a second and third clinker line, respectively, increasing our installed clinker production capacity to approximately 830,000 metric tons per year.

• In November 1984, the South American mining and industrial operations of the Hochschild Group were sold to the Anglo American Corporation of South Africa which, in the same month, sold the Peruvian operations of the Hochschild Group, including its interest in Cementos Pacasmayo and predecessors of Hochschild Mining plc, to a group of companies controlled by Luis Hochschild.

• In 1995, we began our distribution network to commercialize and distribute our products throughout the northern region of Peru. In that same year, we also listed our common shares with the Lima Stock Exchange, currently under the ticker symbol “CPACASC1.”

• In 1998, we acquired from the Peruvian government our Rioja facility, located in the northeast of Peru. At the time, the Rioja facility had one clinker line with an installed cement production capacity of approximately 35,000 metric tons per year.

• In 2003, we acquired Zemex Corporation, a U.S. company engaged in non-metallic mining and industrial activities in the United States and Canada, which we sold in 2007 in a series of transactions.

• In 2009, we created Fosfatos in order to explore phosphate rock deposits from our concession at Bayóvar in the north of Peru.

• In 2010, we reached an aggregate total installed cement production capacity of 3.1 million in our Pacasmayo and Rioja facilities and completed the conversion of our Waelz kiln, retrofitting it to produce quicklime or calcine zinc interchangeably. That same year, we also sold our copper mining concessions in the central region of Peru known as “Mina Raul,” which were previously leased to a third party, for US$28.0 million.

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• In 2011, we created Salmueras jointly with our minority shareholder Quimpac, which is the leading chemical company in Peru, to develop brine deposits in our combined fields in the coastal region of Piura in the north of Peru.

• In December 2011, we sold a minority equity interest in Fosfatos to an affiliate of Mitsubishi to develop our phosphate deposits in the Bayóvar fields, in the northwest of Peru.

• In March 2012, we completed our initial equity offering of 22,296,800 ADSs in the United States and listed our ADSs on the New York Stock Exchange.

• In 2012, we entered into a supply agreement, amended in 2013, with ThyssenKrupp Polysius and Loesche for US$113.4 million for the provision of key equipment for our new plant in Piura, which is expected to have an annual production capacity of 1.6 million metric tons of cement and 1.0 million tons of clinker.

• In February 2013, we issued US$300,000,000 of our 4.50% Senior Notes due 2023, in our inaugural international bond offering. A portion of the proceeds from this offering were used to prepay amounts outstanding on our secured loan agreement with BBVA Banco Continental, and the remaining proceeds will be used to fund a portion of the capital expenditures related to the construction and operation of the new Piura plant and our cement business.

• In 2013, we entered into a contract for the construction and electromechanical assembly services for the Piura plant with the consortium formed by JJC Contratistas Generales S.A., SSK Montajes e Instalaciones S.A.C. and JJC Schrader Camargo S.A.C. The first of these companies will be responsible for executing the civil works, while the other two companies will be in charge of the electromechanical assembly activities, within a 19-month period. We also entered into a contract with Cesel Ingenieros S.A. for the Plant Construction and Engineering Supervision. For purposes of the project, this company has joined forces with the Argentine company Saxum Ingeniería S.A., which has particular experience in the construction of cement plants.

• In 2014, we entered into cross currency swap agreements for US$120 million to manage foreign exchange risks to hedge against our US-dollar denominated debt. The principal amount of these currency swaps was increased to US$150 million in January 2015.

• In 2014, the environmental impact studies for the Phosphate and Brine projects were approved.

Capital Expenditures

We expect to spend over the next five years approximately US$20 million per year on recurring capital expenditures necessary to maintain our plants and equipment.

In February 2013, we issued US$300 million of our 4.50% Senior Notes due 2023. The international rating given by Fitch and S&P to these notes was BBB- and BB+, respectively. The notes were issued pursuant to Rule 144A under the Securities Act and in compliance with Regulation S under the Securities Act, and listed on the Irish Stock Exchange. The funds for this placement were allocated to prepay our outstanding long-term debt with BBVA Banco Continental, which amounted to S/.202.2 million, and the remaining balance was set aside to cover a portion of the construction costs for the new Piura plant and our cement business.

In addition to our cement business, we expect to have substantial capital expenditure requirements to develop our phosphate and brine projects, if the feasibility and other studies conclude that developing these projects will be legally and economically feasible.

We expect to finance our phosphate and brine projects with a combination of new borrowings and financial contributions from us and Mitsubishi and Quimpac, our minority partners. In our phosphate project, we sold a minority equity interest to an affiliate of Mitsubishi for an aggregate purchase price of approximately

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US$46.1 million. In our brine project, we have entered into a strategic partnership with Quimpac, under which we have committed to invest a total of US$100 million and Quimpac is obligated to invest approximately US$14.2 million as a minority partner over the time of the agreement in order to maintain its current equity interest. There is no deadline for this committed investment, and consequently the referred investment will only take place as long as we continue developing the project. Our phosphate and brine projects are not part of our core cement business, and, accordingly, we expect to evaluate strategic options as we continue to develop our projects.

The table below sets forth our total capital expenditures incurred in 2014, 2013 and 2012.

	Year ended December 31,
(in millions of S/.)	2014		2013		2012
Construction of diatomite brick plant		15.8		11.3		10.6
Expansion of Rioja cement plant		5.4		17.6		57.2
Expansion of Pacasmayo cement plant		28.8		24.5		16.8
New cement plant in Piura		506.0		72.9		52.8
Phosphate project		12.1		41.6		23.7
Brine project		0.3		5.8		18.3
Concrete and block business		17.5		21.0		4.5
Other investing activities(1)		1.4		15.9		86.3
Total		587.3		210.6		270.2

(1) Includes overhauls of transmission, cooler system, storage silo, heavy machinery and other.

B. Business Overview

Overview

We are a leading Peruvian cement company, and the only cement manufacturer in the northern region of Peru. With more than 56 years of operating history, we produce, distribute and sell cement and cement-related materials, such as concrete blocks and ready-mix concrete. Our products are primarily used in construction, which has been one of the fastest growing segments of the Peruvian economy in recent years. We also produce and sell quicklime for use in mining operations.

In 2014, our cement shipments were approximately 2.3 million metric tons, representing an estimated 20.4% share of Peru’s total cement shipments, and substantially all the cement consumed in the northern region of Peru. From 2010 to 2014, our cement sales volume grew at a compound annual growth rate (“CAGR”) of 6.6%. Our performance during this period was driven primarily by growth in the construction sector which over the past five years has expanded, on average, at approximately 1.5 times the growth in Peru’s annual GDP. We believe the construction sector will continue to grow with the expected continued expansion of the economy and the continued housing deficit in the country.

We own two cement production facilities, our flagship Pacasmayo facility located in the northwest region of Peru and our smaller Rioja facility located in the northeast. Our facilities have total installed annual cement production capacity of approximately 3.3 million metric tons. We also have installed annual production capacity of 240,000 metric tons of quicklime. We own concession rights to several quarries with reserves of limestone and other raw materials located near our facilities. We estimate that our existing quarries have sufficient reserves to supply our limestone needs for approximately 68 years, based on our 2014 limestone consumption levels.

We completed an expansion of our Rioja plant in April 2013. We more than doubled the cement production capacity of our Rioja facility by installing a new production line that adds 240,000 metric tons of installed annual cement production capacity. We are in the construction stage of our new cement plant in Piura, which is expected to have annual production capacity of 1.6 million metric tons of cement. In 2013, we entered into a supply agreement with ThyessenKrupp Polysius and Loesche for the provision of key equipment for this project, approximately 99% of this equipment is already on sight. We have also signed a contract with the consortium formed by JJC Contratistas Generales S.A., SSK Montajes e Instalaciones S.A.C. and JJC Schrader Camargo S.A.C. for the construction of the plant,. This development will allow us to meet projected increases in demand for cement in the northern region of Peru in coming years.

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We provide consumers with high-quality and value-added cement products and, as a result, we believe we have developed strong brand recognition and loyalty in our market. We have developed one of the largest independent retail distribution networks for construction materials in Peru. Through our network of 215 independent retailers and 343 hardware stores, we distribute our cement products as well as other construction materials manufactured by third parties, such as steel rebar, cables and pipes, in the northern region of Peru. We also sell our cement products directly to other retailers that are not part of our distribution network and to private construction companies and government entities.

In addition to our core cement business, we are undertaking two non-metallic mining projects, which we believe present significant growth opportunities for our company. We have discovered phosphate deposits in one of our fields, which contain an estimated 546.1 million metric tons of mineralized material, according to the last technical report by Golder Associates Inc. from April 2014. We are dedicating significant efforts and resources to develop our phosphate project in an effort to capitalize on the potential of its mineral assets.

We also have concessions for fields with identified brine deposits. We are in the process of analyzing the basic engineering study.

The following table sets forth certain macroeconomic data for Peru and operating and financial data for our company for the periods indicated.

	As of and for the year ended December 31,
	2014			2013			2012
Economic data(1):
GDP growth in Peru		2.4	%		5.0	%		6.3	%
Construction sector growth in Peru		1.7	%		8.5	%		15.1	%
Operating data:
Capacity (thousands metric tons per year):
Installed cement capacity		3,340			3,340			3,100
Installed clinker capacity		1,780			1,780			1,700
Production (thousands metric tons):
Cement production		2,350			2,341			2,253
Clinker production		1,242			1,385			1,368
Utilization rate at Pacasmayo plant(2):
Cement		70.8	%		72.4	%		70.8	%
Clinker		67.6	%		79.3	%		80.6	%
Utilization rate at Rioja plant(2):
Cement		67.4	%		54.6	%		100.0	%
Clinker		81.3	%		70.1	%		79.5	%
Selected financial data (amounts in millions of S/.):
Net sales		1,242.6			1,239.7			1,169.8
Growth in net sales (versus prior period)		0.2	%		6.0	%		17.6	%
Gross profit		518.4			523.4			456.8
Gross profit margin		41.7	%		42.2	%		39.0	%
EBITDA (3)		365.3			348.9			278.5
EBITDA margin		29.4	%		28.1	%		23.8	%
Profit		188.8			152.3			155.6
Profit margin		15.2	%		12.3	%		13.3	%

(1) Source: Central Bank of Peru. In 2014, the methodology for GDP calculations was changed, changing base year and the weight of certain sectors.

(2) Utilization rate is calculated by dividing production for the specified period by installed capacity.

(3) For a calculation of EBITDA and Adjusted EBITDA and a reconciliation of EBITDA and Adjusted EBITDA to the most directly comparable IFRS financial measure, see “Item 3. Key Information—A. Selected Financial Data.”

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Peruvian Cement Market

Peru has experienced sustained economic growth over the past decade. From 2010 to 2014, GDP grew at a CAGR of 5.1%. Despite the global economic recession, which slowed GDP growth in Peru to 0.9% during 2009, the economy rebounded in 2010 and recorded GDP growth of 8.8%. Growth during the 2010 to 2014 period was accompanied by low inflation, which averaged 3.1% per year. In addition, at December 31, 2014, the government had accumulated foreign exchange reserves of approximately US$62.3 billion, and the sovereign debt achieved an investment grade rating from each of the three major international credit rating agencies. This economic growth has resulted, among other key trends, in significant poverty reduction, with a decrease in the percentage of the country’s population living below the poverty line from approximately 48.6% in 2004 to approximately 22.7% in 2014. According to the Central Bank of Peru, the Peruvian economy is estimated to have grown at a rate of 2.4% in 2014 and is projected to grow at a rate of 4.8% in 2015.

We sell substantially all our cement in the northern region of Peru, which in 2014 accounted for approximately 23.0% of the country’s population and 14.0% of national GDP. Two other groups sold substantially all the cement consumed in each of the central and southern regions of Peru, with less than 5% of all the cement consumed in the country coming from imports, and around 3% coming from a small player. From 2010 to 2014, total cement consumption in Peru grew at a CAGR of 7.8%, according to the INEI, driven by the country’s overall economic growth and, to a lesser extent, by infrastructure spending. In the northern region, cement consumption grew at a CAGR of 6.6% over the same period. Despite this recent growth, Peru continues to have a significant housing deficit, estimated by the INEI at 1.9 million homes nationwide as of December 31, 2014.

In Peru, cement is mainly sold to a highly fragmented consumer base, consisting primarily of households that buy cement in bags to gradually build or improve their own homes without professional technical assistance, a segment known in our industry as auto-construcción. We estimate that in 2014 sales to the auto-construcción segment accounted for approximately 55% of our total sales of cement, private construction projects accounted for 22% and public construction projects accounted for the remaining 23%. Approximately 88% of our total cement sales in 2014 were in the form of bagged cement, substantially all of which was sold through retailers.

Even though 2014 was a slow year for our sales of ready-mix concrete (down 19.3% from 2013), we expect that in the coming years sales of ready-mix concrete in our region will grow at a faster pace than cement as ready-mix concrete consumption is directly related to GDP per capita growth and its attendant effect on economic development and the formalization of the economy.

Our Phosphate and Brine Projects

In the process of securing quarries of raw materials for our cement operations, in 2007 we acquired a diatomite concession in a field located in Bayóvar in the northwest of Peru where our geologists have discovered significant deposits of phosphate rock. According to an independent study prepared by Golder Associates Peru S.A. in April 2014, this field contains an estimated 546.1 million metric tons of mineralized material based on wet density, with an average grade of 18.2% of P2O5 (phosphorus pentoxide). Phosphate concentrates are primarily sold as a fertilizer nutrient in agriculture, which we believe will continue to benefit from rising global food consumption driven by the growing per capita income in emerging countries.

In December 2011, we sold a 30.0% equity interest in our subsidiary Fosfatos, which focuses on our phosphate operations, to an affiliate of Mitsubishi, a global integrated business enterprise whose shares are listed on the Tokyo Stock Exchange that develops and operates businesses across multiple industries, for an aggregate purchase price of approximately US$46.1 million. Mitsubishi is a world leading marketer of phosphate-derived products. In connection with the sale, Mitsubishi has entered into an off-take agreement to purchase Fosfatos’s production of phosphate ore. Under the off-take agreement, Mitsubishi agreed to purchase, once we begin production, 2.0 million metric tons of phosphate ore annually, and has the option to purchase an additional 0.5 million metric tons annually, to the extent we choose not to sell it to the Peruvian market, at a price to be determined pursuant to an agreed upon formula based on prevailing market prices. The off-take agreement has a term of 20 years, with an option for Mitsubishi to extend the term for an additional 5 years upon expiration. We believe this is one of the most significant foreign investments by a major international company in Peru’s phosphate sector.

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We believe our phosphate project provides significant opportunities to expand our sources of revenue, diversify our portfolio of products and improve our profitability, and we intend to dedicate substantial efforts to developing this project. Pacasmayo hired companies to begin a basic engineering study for the project’s various sections. Those selected were: Golder Associates to study the mine, a FL Smidth Minerals-Jacobs-Golder Associates consortium to study the plant, Berenguer Ingenieros to study the port, and Pepsa Tecsult and Aecom to study the electrical transmission and water. During the second half of 2014, a value study engineering was developed to identify opportunities to improve design, construction, and project operations. Pacasmayo hired the main engineering companies (Hatch, Ausenco and WorleyParsons) according to experience and knowledge of various areas. Within the main scope of this value engineering are the change in the methodology of mining, from a conventional mining to a continuous mining system, thereby making the mining process more efficient; compaction of the plant while maintaining the production capacity; and reducing the size of the port according to requirements.

Currently, the project is in the process of incorporating value engineering findings, from a conceptual level to a basic engineering level, which will allow for a more accurate analysis of the project. In order to integrate the engineering efforts of the different components of the project, through a bidding process, Pacasmayo hired WorleyParsons to act as “Project Management Consultant”, a position it will hold throughout the engineering process, as well as during the procurement, construction, and start of operations.

In March 2014, we obtained the approval of our Environmental Impact Study for the Phosphate Project. This represents a very important step for the project’s development.

We also own concession rights to fields in the coastal region in the northwest of Peru, which, according to our internal geologists, contain brine deposits. We entered into an agreement with Quimpac, a leading chemical company in Peru, pursuant to which we formed Salmueras, a project company in which we own a 74.9% equity interest and Quimpac owns the remaining 25.1%. Under the agreement, we contributed our brine concessions located in the fields of Ñamuc and El Tablazo and committed to invest US$100 million to the project, while Quimpac contributed its brine concessions located in the Cañacmac field and may contribute approximately US$14.2 million to the project to maintain its current equity interest. There is no deadline for this committed investment, and consequently the referred investment will only take place as long as we continue developing the project. Our combined brine concessions cover 136,245 hectares of land. Brine is used to produce chemical components, which have a wide variety of agricultural and industrial uses, such as in fertilizers, animal feed and construction.

The basic engineering study was conducted by the German company, K-Utec AG Salt Technologies and is currently being evaluated by both partners in order to determine how to move forward according to their investment priorities. The environmental impact study associated with this project was approved in December 2014.

These projects require significant capital investments and as we have not yet completed feasibility studies, we cannot assure that we will be able to produce and sell these products profitably or at all.

Competitive Strengths

Our principal competitive strengths include the following:

Track record of cash flow generation and strong results through multiple business cycles

We have historically generated strong cash flow and high profit margins mainly due to the following key factors:

• our leadership position in the northern region of Peru; and

• our extensive distribution network, operational flexibility and efficiency, and focus on innovation.

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In 2014, we generated cash flow from operating activities of S/.240.4 million (US$80.5 million) and EBITDA of S/.365.3 million (US$122.3 million), recorded profit for the year of S/.188.8 million (US$63.2 million), and our operating and EBITDA margins were 24.2% and 29.4%, respectively. EBITDA for 2014 increased by 4.7% (S/.16.4 million) compared to 2013, mainly due to operational efficiencies that allowed us to reduce expenses, even when revenues were flat compared to 2013. In addition, our net profit was S/.188.8 million (US$63.2 million), and our net profit margin was 15.2%. Net profit for 2014 increased 23.9% (S/.36.5 million) compared to 2013, mainly due to an extraordinary income and a lower impact of differences in exchange rate due to a better financial management of our obligations. As of December 31, 2014 our leverage ratio was 0.57, principally as a result of the high levels of cash on our balance sheet.

Leader in attractive and expanding market with solid macroeconomic fundamentals

We are currently the only cement manufacturer in the northern region of Peru and we produce and sell substantially all of the cement consumed in the region. In 2014, the northern region accounted for approximately 23.0% of the country’s population and 14.0% of its GDP. From 2010 to 2014, GDP in the northern region grew at a CAGR of 4.4%. During the same period, our cement production and sales volume grew at a CAGR of 6.6%. Despite this recent growth, the northern region continues to experience significant housing and infrastructure deficits which we expect will continue to drive demand for cement in coming years.

Best-in-class operating efficiencies with vertical integration and strong brand recognition

Our quarries are located in close proximity to our plants, enabling us to minimize transportation costs. We strive to enhance our operational efficiency by focusing on lowering costs and improving profitability. We also benefit from our vertically integrated operations, participating in the entire chain of production from the quarries which we own directly, to the related products such as quicklime, ready – mix, precast and our large distribution network. We have developed one of the largest independent retail distribution networks for construction materials in Peru, known as “DINO,” consisting of 215 independent retailers with 343 hardware stores, primarily small, local stores in the northern region, through which we distribute our cement products as well as construction materials manufactured by third parties. We use our distribution network, together with our strategically located commercial offices, to promote our products and stay abreast of market developments. We have developed this network through years of fostering relationships with retailers in the region, which we believe would be difficult for a competitor to replicate. Our distribution network has enabled us to build strong recognition for our Pacasmayo brand among retailers and end-consumers in our market, which we believe is important to our business, particularly because our cement is principally sold in bags to retail consumers.

Disciplined capital expenditure plan with attractive risk / return profile

We seek to minimize risk while securing an adequate return on our development projects. We are currently developing a new plant in Piura to increase our cement production capacity and projects to explore phosphate and brine. We are in the construction stage of our new cement plant in Piura, the third largest city in northern Peru, which is expected to have annual production capacity of 1.6 million metric tons of cement. In 2013, we entered into a supply agreement with ThyessenKrupp Polysius and Loesche for the provision of key equipment for this project, approximately 99% of this equipment is already on sight. We have also signed a contract with the consortium formed by JJC Contratistas Generales S.A., SSK Montajes e Instalaciones S.A.C. and JJC Schrader Camargo S.A.C. for the construction of the plant. This development will allow us to meet projected increases in demand for cement in the northern region of Peru in coming years.

In 2011, we sold 30% of our interest in our subsidiary Fosfatos to an affiliate of Mitsubishi and entered into an off-take agreement with the same company to sell our production of Phosphate ore. Currently, the project is in the process of incorporating value engineering findings, from a conceptual level to a basic engineering level, which will allow for a more accurate analysis of the project. In order to integrate the engineering efforts of the different components of the project, through a bidding process, Pacasmayo hired WorleyParsons to act as “Project Management Consultant”, a position it will hold throughout the engineering process, as well as during the procurement, construction, and start of operations

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In 2010, we also entered into an agreement with Quimpac, a leading chemical company in Peru, pursuant to which we jointly formed Salmueras, a vehicle to jointly exploit a project relating to our brine concessions. In our Brine project the basic engineering study was conducted by the German company, K-Utec AG Salt Technologies and is currently being evaluated by both partners to determine how to move forward according to their investment priorities. The environmental impact study for the Salmueras project was approved in December 2014.

Emphasis on innovation

We place significant emphasis on research and development to ensure our products meet the needs of consumers in our market and to improve the efficiency of our operations. For example, we have developed cement products suitable to coastal construction that tend to be more exposed to erosion from sulfate. We believe that, by educating retailers and end consumers of these attributes of our products, we have been successful in building demand and realizing higher margins for our differentiated product offering.

Know-how to develop our phosphate and brine projects

We are highly experienced and knowledgeable in open-pit mining and industrial processes as a result of our core cement business, and we believe this know-how will enable us to develop our brine and phosphate project, as we seek to capitalize on their value for our company. Moreover, because of our close and long-standing relations with local communities, we believe we have the credibility to obtain local support for our projects, which is essential to their success. Due to our long operating history, market position and reputation, we have been able to team up with high quality strategic partners with expertise in areas that complement our core competencies to develop our projects. For our phosphate project, we have partnered with a world leading marketer of phosphate-derived products, and for our brine project we have partnered with a leading chemical company in Peru.

Strong relationship with local communities

Since we began operations 57 years ago, we have had a strong commitment to improving the quality of life of the local communities surrounding our plants, whose members we regularly employ. As a result, we have developed close and cooperative relationships with the local communities, which are supported by several social responsibility initiatives we have undertaken. For example, the family of our controlling shareholder founded, and we and Hochschild Mining plc continue to fund, Asociación Tecsup, a leading non-profit institute in Peru that provides technical education to high-school students. We provide scholarships and financial aid to local qualified students interested in studying at Tecsup. Through its three campuses in Peru, Tecsup has graduated over 8,200 students in various technical fields, some of whom now work for us and our affiliates.

Highly experienced and professional management and board of directors

Our management team, with an average of 14 years of experience in the cement industry in Peru, has extensive technical and local market expertise and has led our company through our recent growth. We have developed a strong professional business culture and a team of highly qualified executives. We also have a well-regarded and experienced board of directors that includes some of Peru’s business leaders and former senior government officials. For the fifth consecutive year, we have been selected to form part of the Best Corporate Governance Practices Index of the Lima Stock Exchange, which is currently comprised of nine listed companies. Additionally, in 2014 we were awarded with a special recognition for obtaining the highest sustained growth in Corporate Governance the past five years.

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Strong corporate governance standards and international recognition

Our common shares are listed on the Lima Stock Exchange and our ADSs are listed on the New York Stock Exchange. We are subject to the disclosure requirements of the U.S. Securities and Exchange Commission (“SEC”) and the Superintendencia del Mercado de Valores and we must comply with and adopt internal compliance standards to increase transparency and improve corporate governance standards including an audit committee and appointment of independent directors. For the fourth consecutive year, we have been selected to form part of the Best Corporate Governance Practices Index of the Lima Stock Exchange, which is currently comprised of nine listed companies. Additionally, in 2014, we received the Top Social Responsibility Award (Distintivo de Empresa Socialmente Responsable) for third consecutive year, in recognition of our having achieved our corporate goals in a socially responsible manner, the principle that is ingrained in our corporate culture and business strategy. Additionally, our main limestone and clay quarries have been awarded the OEFA Best Environmental Practices Record (http://www.oefa.gob.pe/en/buenas-practicas).

Our Strategies

Our objective is to maximize shareholder value, while honoring our commitment to the environment and abiding by our social responsibility goals. We intend to achieve our objective through the following principal strategies:

Continue to focus on our core business of supplying the rising demand for cement

We plan to continue to meet the increasing demand for cement in our market, while controlling production costs. We intend to increase our production capacity through the expansion of our installed cement and clinker capacity. In line with this strategy, we are on target to complete the planned expansion of our new cement plant in Piura. Our principal goal is to maintain our market share in the northern region of Peru without reducing the profitability of our business.

Maintain operational efficiencies to control production costs

We intend to sustain operational efficiencies in an effort to control costs and maintain our operating margins. One of our principal initiatives to maintain energy costs is to secure our own source of coal. In 2011, we exercised certain of our options to purchase coal mining concessions in the north region of Peru, and we have also replaced a high proportion of imported bituminous coal consumption, which generally is more expensive, with anthracite coal produced locally.

Deepen our commercial relationship with retailers and end-consumers

We plan to enhance our commercial relationships with retailers and end-consumers in our market, both to maintain brand loyalty and to foster demand for our cement products. We will continue to support retailers in our DINO distribution network by providing product education, training sessions, rewards programs, and assistance in financing purchases of our products. In addition, we continue with our door-to-door commercial strategy for cement sales. We believe that these initiatives have been successful in strengthening our relationship with retailers and end-consumers.

Continue to focus on being the preferred provider of building solutions

We strive to be the supplier of choice for cement consumers in the northern region of Peru, whether households building their homes or private construction companies or governmental entities undertaking projects of any size. We continue to focus on providing consumers with efficient and customized building solutions for their construction needs. Over the past several years, we have evolved from being a single type cement manufacturer to offering five different types of cement products and other building solutions. For example, we offer cement that contains special properties that protect against sulfate erosion, as well as other products designed to meet the needs of consumers in the northern region of Peru. We dedicate significant resources to developing new products that meet evolving market demands through product research and development.

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Develop our non-core mineral assets

In addition to our core cement business, we are undertaking two non-metallic mining projects, which we believe present significant growth opportunities for our company. We have discovered phosphate deposits in one of our fields, which contain an estimated 546.1 million metric tons of mineralized material. We are dedicating significant efforts and resources to develop this project in an effort to capitalize on the potential of these mineral assets. We also have concessions for fields with identified brine deposits. We believe that, if we are able to extract these minerals in a profitable manner, these projects could provide us an alternate source of revenue, diversify our portfolio of products and improve our profitability.

Selectively pursue acquisitions

We will continue to evaluate and may selectively pursue strategic acquisitions of cement and complementary businesses that expand our geographic footprint and diversify our portfolio of products. Our management team has significant operating experience and industry knowledge in the production and commercialization of cement and cement-related materials, and we believe this experience will enable us to identify and pursue attractive acquisitions that will maximize shareholder value.

Our Products

Our core products are cement and other cement-related materials. We also produce quicklime. In 2014, cement, concrete and blocks accounted for 87.4% of our net sales and quicklime accounted for 4.9%. We also sell and distribute construction materials, such as steel rebar, cables and pipes, manufactured by large third-party manufacturing companies, which in 2014 represented 7.7% of our net sales.

The following table sets forth a breakdown of our shipments by type of product for the periods indicated:

	Year ended December 31,
(in thousands of metric tons)	2014		2013		2012
Cement, concrete and blocks(1)		2,347		2,349		2,258
Quicklime		100		60		101
Total		2,447		2,409		2,359

(1) Cement shipments during 2014 include the cement used for the construction of the new Piura plant.

The following table sets forth a breakdown of our total net sales by product for the periods indicated:

	Year ended December 31,
(in millions of S/.)	2014		2013		2012
Cement, concrete and blocks		1,085.4		1,102.1		972.2
Quicklime		61.0		31.9		52.7
Construction supplies(1)		95.4		103.3		143.2
Others		0.8		2.4		1.7
Total		1,242.6		1,239.7		1,169.8

(1) Refers to construction materials manufactured by third parties that we distribute. Construction supplies include the following products: steel rebar, wires, nails, corrugated iron, electric conductors, plastic tubes and accessories, among others.

Cement

Cement is a powdered mixture of ground minerals that, when mixed with water, adheres to other materials and hardens to form a rock-like substance. Cement is generally mixed with other materials, such as gravel and sand, forming concrete with a high degree of compressive strength that is able to withstand substantial pressure.

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Cement types are generally classified as either Portland cement or blended hydraulic cement. Portland cement is a hydraulic cement produced by pulverizing clinker, consisting essentially of crystalline hydraulic calcium silicates and calcium sulfate. Blended hydraulic cement consists of a mixture of Portland cement clinker and mineral admixtures, such as blast furnace slag, pozzolanic materials and limestone.

We produce both types of cement in a range of cement products suitable for various uses, such as residential and commercial construction and civil engineering. We currently offer the following five types of cement products designed for specific uses:

• Type ICo. This type of cement is used for general purposes and is similar to Portland Type I cement. It is widely used in our market due to its effectiveness and low hydration heat.

• Type MS/MH/R (called Fortimax3). This is the new formula for the type of cement that is used to protect against moderate sulfate action, such as drainage structures, with higher-than-normal, but not unusually severe, sulfate concentrations in ground water. It is designed for sites and structures in humid areas that are exposed to sulfates and sea water. It also prevents thermal contraction cracking due to moderate heat hydration, and is resistant to contact with alkaline reagents.

• Type I. This type of cement is for general purposes and suitable if special properties are not needed. It is generally used for constructing pavements, floors, reinforced concrete buildings, bridges, reservoirs, pipes, masonry units and precast concrete products.

• Type V. Type V cement is used in concrete exposed to severe sulfate action, principally in places where soil or ground water has a high sulfate content. It is generally used in hydraulic construction, such as irrigation canals, tunnels, water conduits and drains.

• Type HS. Type HS cement is used in concrete that is exposed to severe sulfate action, principally where soil or ground water has high sulfate content. It is recommended for port construction, industrial plants and construction of sewage sites. Our Portland Type HS cement has low reactivity with alkali-reactive aggregates, making it more durable than other types of cement.

We believe that our Type V, Fortimax and HS cement products are particularly suitable for construction in the northern coastal region of Peru, where sulfate and chloride concentrations from soil, ground water and sea water affect the durability of construction structures. By educating retailers about the different cement characteristics and conducting marketing campaigns, we believe we have been successful in building demand for our cement products. Our research and development department is also equipped to produce custom-tailored cement products on demand. In addition, through our dedicated team of geologists and scientists, we have significantly reduced the amount of clinker required for cement production minimizing our capital expenditures and significantly reducing our carbon dioxide emissions (CO₂).

We market and distribute our cement primarily in 42.5 kilogram bags. Most of our bagged cement is sold to the retail sector consisting primarily of households who buy bags of cement to build or expand their own homes over time with little or no formal technical assistance (commonly referred to as auto-construcción). The bags are made of Kraft paper to preserve the quality of the cement. Our bags include information relating to the composition of our cement, handling instructions, production dates and storage instructions. Our cement bags have different colors to easily identify the different types of cement. Once bagged at our Pacasmayo and Rioja facilities, our cement is loaded onto trucks operated by third parties. Cement in bulk is sold to large industrial consumers.

Concrete Products

We also produce and sell concrete products principally in the form of ready-mix concrete used in large construction sites, as well as blocks, bricks and pavers.

• Ready-mix concrete. Ready-mix is a blend of cement, aggregates (sand and stone), admixtures and water. It is manufactured and delivered to construction sites in a form that is ready to use. This mixture hardens to form a building material, ranging from sidewalks to skyscrapers. We have 18 fixed and mobile ready-mix plants.

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• Concrete blocks. We produce and sell concrete blocks, such as paving units, or paver stones for pedestrian walkways, as well as other bricks for partition walls and concrete blocks for structural and non-structural uses.

Quicklime

We produce and distribute quicklime, which has several industrial uses. Quicklime serves as a neutralizer, lubricant, drying and absorbing material, disinfectant, and as a raw material. Quicklime has various applications, including in the steel, food, fishing and chemical industries. It is also used in mining operations to treat water and industrial residues, in agriculture as a fertilizer enhancer and, to a lesser extent, in other industries. In Peru, quicklime is mainly used in the mining industry, as an additive to treat water residues. We produce quicklime in finely and coarsely ground varieties and sell it in three forms: (i) 40 kilogram bags, (ii) bags of one metric ton and (iii) in bulk for larger construction projects.

Production Process

Cement Production Process

The diagram below depicts the standard cement production process, which consists of the following main stages:

• extraction and transportation of limestone from the quarry;

• grinding and homogenization to make the raw material of consistent quality;

• clinkerization;

• cement grinding;

• storage in silos; and

• packaging, loading and distribution.

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Extraction of raw materials. To produce cement, limestone is extracted from our quarries. We use explosives to loosen the limestone and deploy bulldozers to remove dirt and the overburden covering the limestone. We crush the limestone in our primary and secondary cone crusher and the resulting limestone is loaded into trucks and hauled to our Pacasmayo or Rioja facilities from the adjacent quarry where it is stored.

Grinding and homogenization. Limestone, clay and sand are mixed with iron that is acquired from third parties. The quality of the resulting raw meal is monitored by examining samples of each batch and processing them through our quality control x-ray software that automatically measures the mix of materials to confirm the blend is in compliance with our quality standards. Subsequently, the raw meal is sent to a blending silo and then to a storage silo from where it is fed into the pre-heater.

Clinkerization. The raw meal is heated at a temperature of approximately 1,450 degrees Celsius in our kilns. The intense heat causes the limestone and other materials in the mixture to react inside the kiln, turning the mixture into clinker. Clinker is then cooled to a temperature of approximately 200 degrees Celsius and stored in a silo or in an outdoor patio.

Cement grinding. After being cooled, clinker, together with gypsum and some admixtures, is fed into a ball mill or into a vertical roller mill where it is ground into a fine powder to produce cement. In this form, cement reacts as a binding agent that, when mixed with water, sand, stone and other aggregates, is transformed into concrete or mortar.

Storage in silos. After passing through the ball mills, the cement is transferred on conveyor belts and stored in concrete silos in order to preserve its quality until distribution.

Packaging, loading and transport. Cement is transferred through another conveyor belt from the silo to be packaged in 42.5 kilogram bags and then loaded into trucks operated by third parties to be transported for distribution. Bulk cement may be transported (unpackaged) on especially designed trucks that deliver large amounts of cement directly to the work site.

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Quicklime Production Process

Quicklime is produced by crushing limestone with a calcium carbonate content of at least 95% by calcinating it in a rotary kiln. The limestone for quicklime comes from our quarries. The crushing of the limestone is done at the quarry and the calcination process takes place only at our Pacasmayo facility. We produce quicklime in finely and coarsely ground varieties and sell both varieties in bags of 40 kilograms and up to one metric ton, as well as in bulk.

Raw Materials and Energy Sources

Limestone

We obtain limestone required to produce clinker and quicklime principally from land where we have concession rights. For our Pacasmayo plant, we extract limestone from our Acumulación Tembladera quarry located approximately 60 kilometers from the plant, and for our Rioja plant, we extract limestone from our Calizas Tioyacu quarry which is adjacent to our Rioja plant.

Acumulación Tembladera. We have a concession with an indefinite term to extract limestone and other minerals from our Acumulación Tembladera quarry, a 3,390 hectare open-pit mine located in the district of Yonan, in the department of Cajamarca. We acquired this concession in November 2002.

Calizas Tioyacu. For our Rioja production, we have a concession with an indefinite term to extract limestone and other minerals from a 400 hectare open-pit mine near our Rioja facility in the district of Elias Soplin Vargas, in the department of San Martín. We acquired this concession in February 1998.

In each of our limestone concessions, the term of the concession is indefinite, provided we pay an annual concession fee and a penalty fee if we fail to meet required minimum annual production levels. Failure to pay such fees in a timely manner for two consecutive years will cause us to forfeit our concession titles. As of the date of this annual report, we have fully paid all applicable fees on our operating concessions.

We extracted from our Acumulación Tembladera quarry approximately 2.2 million metric tons in 2012, 2.7 million metric tons in 2013, and 1.5 million metric tons in 2014, which were used for cement and quicklime production in our Pacasmayo facility. We extracted from our Calizas Tioyacu quarry approximately 353,794 metric tons of limestone in 2012, 285,812 metric tons in 2013, and 573,217 in 2014 which were used for cement production at our Rioja facility.

We estimate that as of December 31, 2014, our Acumulación Tembladera quarry contains approximately 114.0 million metric tons with an average grade of 85.7% of calcium carbonate of proven and probable limestone reserves, and our Calizas Tioyacu quarry contains approximately 9.1 million metric tons of proven limestone reserves with an average grade of 90.3% of calcium carbonate. Based on limestone consumption at 2014 levels, we estimate that our limestone reserves at our Acumulación Tembladera quarry have a remaining life of approximately 72 years and our limestone reserves at our Calizas Tioyacu quarry have a remaining life of approximately 23 years. On a combined basis, we estimate that our two quarries have a remaining life of approximately 68 years. Our estimates were prepared by our internal engineers and geologist and are reviewed periodically.

In addition to our Acumulación Tembladera and Calizas Tioyacu quarries, we also own concession rights to various other calcareous material quarries consisting, in the aggregate, of approximately 56,027 hectares located in the northern region of Peru. None of these quarries are in operation as of the date of this annual report.

Clay, Sand and Other Raw Materials and Admixtures

The other raw materials that we use to produce clinker are clay, sand, iron and diatomite.

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Clay

For cement production in our Pacasmayo facility, we extract clay from our Señor de los Milagros de Pacasmayo quarry, a 400 hectare open-pit concession located in the district and province of Pacasmayo, department of La Libertad. We were granted this concession by the Ministry of Energy and Mines in 1996. The term of the concession is indefinite, provided we pay an annual concession fee and meet minimum annual production requirements. We extracted from our Señor de los Milagros de Pacasmayo quarry approximately 107,468 metric tons of clay in 2012, 107,935 in 2013, and 46,719 in 2014.

For cement production in our Rioja facility, we extract clay from our Pajonal 2 quarry, a 400 hectare open-pit concession located in the district and province of Rioja, department of San Martin. This concession was granted to us by the Ministry of Energy and Mines in 1998. The term of the concession is indefinite, provided we pay an annual concession fee and meet minimum annual production requirements. We extracted from our Pajonal 2 quarry approximately 47,819 metric tons of clay in 2012, 43,669 metric tons in 2013, and 35,103 in 2014.

We have not calculated our clay reserves, as we believe there is an abundant supply of clay in our concessions and more broadly in the northern region where we operate.

Sand

For cement production in our Pacasmayo facility, we use sand extracted from our Señor de los Milagros de Pacasmayo quarry. We extract approximately 100,000 metric tons of sand per year on average for use at our Pacasmayo facility. Our Rioja facility does not utilize sand as a raw material given the type of cement it produces.

We have not calculated our sand reserves, as we believe there is an abundant supply of sand in our concessions and more broadly in the northern region where we operate.

Iron and Diatomite

We use small quantities of iron and diatomite in our cement production, which we purchase from third parties at market prices. We are also in the process of installing a small diatomite plant in our Bayóvar field.

Pozzolanic Materials and Other Admixtures

Our cement production also requires small amounts of other admixtures, such as pozzolanic materials, gypsum and blast furnace slag.

For cement production in our Pacasmayo facility, we use pozzolanic materials obtained from our Cunyac quarry, a 200 hectare open-pit concession located in the district of Sexi, province of Santa Cruz, department of Cajamarca. The concession was granted to us by the Ministry of Energy and Mines in 2008. The term of the concession is indefinite, provided we pay an annual concession fee and meet minimum annual production requirements. We began using pozzolanic material at our Pacasmayo facility in 2010 and although in 2012 we did not use pozzolanic materials to produce cement, in 2013 we used 79,139 metric tons of pozzolanic material from our stock. In 2014, we extracted 127,746 and used 80,073 metric tons.

For cement production in our Rioja facility, we use pozzolanic materials obtained from our Fila Larga quarry, a 1,000 hectare open-pit concession located in the district of El Milagro, province of Utcubamba, department of Amazonas. The concession was granted to us by the Ministry of Energy and Mines in 1998. We did not use pozzolanic materials to produce cement in 2012, 2013 and 2014.

We also own several other concessions containing pozzolanic material which have not been exploited. In addition, our use of pozzolanic materials may be substituted with clinker or other admixtures. Other admixtures, such as gypsum and blast furnace slag, are purchased at market prices from third-party suppliers. If we are unable to acquire raw materials or admixtures from current suppliers, we believe that other sources of raw materials and admixtures would be available without significant interruption to our business.

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Imported Clinker

In 2012, as a result of the strong demand in the cement market in the northern region of Peru, we started using 208,708 metric tons of imported clinker. In 2013, we used approximately 351,501 metric tons of imported clinker and 443,526 in 2014, and we expect to continue using this material until the new cement plant in Piura is completed, which we expect will occur during 2015.

Energy Sources

Our main energy sources are fuel in the form of coal and electricity. Our production processes consume significant amounts of energy, because our kilns must reach extreme temperatures to produce clinker and quicklime. In addition, milling operations, homogenization and transportation of materials consume significant amounts of energy.

Coal

We purchase mostly anthracite coal from local suppliers and import small amounts of bituminous coal from suppliers mainly in Colombia and Venezuela, in each case at spot market prices. Anthracite coal tends to be less expensive than bituminous coal. We store coal at our premises and in our warehouse facility adjacent to the Salaverry port, located approximately 130 kilometers south of our Pacasmayo facility, where we have sufficient stock of coal to maintain our production levels for the next year.

In December 2009 and February 2010, we entered into option agreements to acquire coal mining concessions as a means to secure a steady and reliable source for our coal requirements and to reduce the volatility in costs related to coal. In 2011, we exercised certain options under these agreements to acquire coal mining concessions for 908.5 hectares near our Pacasmayo facility for a total purchase price of US$4.5 million. In 2013, we exercised our remaining options to purchase an additional coal mining concession for 501.2 hectares for US$1.0 million, thereby completing the acquisition of the related coal mining concessions.

Electricity

As of December 31, 2014, all of the electricity requirements for our Pacasmayo facility were supplied by Electroperú and for our Rioja facility by ELOR.

We have a long-term electricity supply contract with Electroperú for an original term of 10 years, ending in December 2020. Electroperú has agreed to provide us with sufficient energy to operate our Pacasmayo facility at pre-determined maximum amounts during the term of the contract. Payments for electricity are based on a formula that takes into consideration our energy consumption and certain market variables, such as the U.S. purchase price index, the global price of oil, the local price of natural gas and the import price of bituminous coal.

In addition, we have a medium-term electricity supply contract with ELOR to supply the Rioja facility for a term that ends in November 2017. ELOR supplies the Rioja facility with 3.4 megawatts of electricity at peak hours and 3.7 megawatts at non-peak hours. Payments for electricity are based on a formula that takes into consideration our energy consumption and certain market variables, such as the U.S. dollar price, the local price of natural gas, the global price of oil and the import price of bituminous coal.

Other Production Materials

We use other materials in the cement production process, including paper bags to package cement, which we purchase principally from local suppliers; plastic bags used to package quicklime, which we purchase from local suppliers; and water to cool the kiln exhaust gases and for our crushing operations at our Acumulación Tembladera quarry, which we obtain principally from a well located at our Pacasmayo facility and from the Jequetepeque river. Water used in our production process is maintained in a closed system at our plants and re-processed for utilization in our production process.

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Consumer Base

The retail cement sector in Peru is characterized by households that purchase single bags of cement to gradually build or improve their homes with little or no professional assistance. This sector is known as auto-construcción. Families in this sector tend to invest a large portion of their savings in building or improving their own homes. Auto-construcción is often conducted with the help of a builder (maestro de obra) who generally has experience in construction. Our retail marketing plans typically target the maestro de obra who is usually the decision maker when buying cement and other related construction materials.

We also sell directly to small, medium and large private construction companies working on a variety of construction projects, from housing complexes to commercial developments. In the public sector, we provide cement for national, regional and local governments carrying out construction projects including housing complexes and public construction, ranging from local schools and hospitals to large infrastructure projects.

Sales and Distribution

Distribution

Our market extends from the Ecuadorian border in the north of Peru to the city of Barranca in the south (approximately 180 kilometers north of Lima), to the Andes mountains in the east and the Pacific Ocean in the west. Our market covers the provinces of Amazonas, Cajamarca, La Libertad, Lambayeque, Piura and Tumbes in the north; and San Martín and Loreto in the northeast.

Our Pacasmayo facility supplies the entire northern region of Peru from Tumbes to Casma and Huarmey. Our Rioja facility supplies the cities of Jaen, Chachapoyas, Pedro Ruiz, Nuevo Cajamarca, Rioja, Moyobamba, Tarapoto and Yurimaguas.

In 2014, approximately 88% of our total cement shipments were in the form of bagged cement, substantially all of which was sold through retailers both within and outside of our distribution network. The remaining 12% of our cement was sold in bulk or in shipments of concrete blocks or ready-mix concrete directly to large construction companies.

We have developed one of the largest independent retail distribution networks for construction materials in Peru, consisting of more than 343 local hardware stores, with whom we have a distribution agreement. In addition, we also distribute to other independent retailers located throughout the northern region of Peru with whom we do not have contractual relationships. We have built our distribution network by investing in strengthening our relationship with retailers.

Even though 2014 was a slow year for our sales of ready-mix concrete (down 19.3% from 2013), we expect that in coming years sales of ready-mix concrete in our region will grow at a faster pace than cement as consumption of ready-mix concrete is directly related to GDP per capita growth and its subsequent effect on economic development and the formalization of the economy.

Additionally, we sell and distribute other construction materials manufactured by third parties that are used alongside cement, such as steel rebar, plastic pipes and electrical wires, among others.

Marketing and Brand Awareness

We use our distribution network, together with our strategically located local commercial offices, to promote our products and brands, as well as to keep us informed of market developments. We believe our distribution network has enabled us to build strong recognition for our Pacasmayo brand among maestros de obra, retailers and end consumers which we believe is important to our business, particularly because our cement is principally sold in bags to retail consumers.

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Our marketing expenses in 2014 were approximately S/.9.7 million, or 0.8% of our sales. Historically, our marketing strategy has been to develop brand loyalty by providing high-quality products, tailored to the needs of our customers, and customer service accompanied by complimentary training for the maestros de obra, who are typically the decision makers in the auto-construcción segment.

To maintain and improve our relationship with retailers, we have developed several loyalty and incentive programs designed for our distribution network. For instance, members of our distribution network can redeem points for various prizes, ranging from computers to trucks. We have also partnered with Edyficar to provide our customers with small loans to help finance the purchase of our products.

Quality Control

In Peru, cement production is subject to standardization (normalización) regulations approved by the National Institute for the Protection of Competition and Intellectual Property (Instituto Nacional de Defensa de la Competencia y de la Protección de la Propiedad Intelectual, or “INDECOPI”). Although the standardization regulations are not mandatory, they are useful in achieving an optimum level of management. As of the date of this annual report, there are 81 standardization regulations approved by INDECOPI in connection with the production of cement and its commercialization. We are currently in compliance with all standardization regulations applicable to our products.

We have established a quality assurance program in accordance with ISO Standard 9001-2008, certified by SGS del Perú S.A.C., a company that provides inspection, verification, testing and certification services. We monitor quality at every stage of the cement production process. In our Pacasmayo and Rioja facilities, we periodically test the quality of our raw materials. These tests include chemical, physical and x-ray tests. We perform similar examinations of the clinker we produce. Additionally, we also perform regular quality tests on our finished products.

We have a quality control area with computerized systems to access real-time information on the quality of our products. As part of our quality control process, we monitor the performance of our different cement products, monitor the performance of additives in our cement and review monthly statistical analysis on the resistance of cement, among other things.

Competitive Position

Peru’s cement production is segmented into three principal geographic regions: the northern region, the central region, including Lima’s metropolitan area, and the southern region. We are the only cement manufacturer in the northern region of Peru. UNACEM (formally known as Cementos Lima and Cemento Andino) principally serves the central region and Cementos Yura and Cementos Sur operate in the southern region. In 2014, our cement shipments were approximately 2.3 million metric tons, representing an estimated 20.4% share of Peru’s total cement shipments, and substantially all the cement consumed in the northern region of Peru.

Regulatory Matters

Overview

Although our core business is the production of cement, we hold a number of mining concessions granted by the Peruvian government for the supply of limestone and other raw materials required for cement production. As a result, we are subject both to the mining and the general industrial legal framework in Peru.

The regulatory framework applicable to our cement production may be divided into rules and regulations relating to (i) the mining and crushing of limestone and clay, and (ii) the production process.

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Mining Regulations

The General Mining Law (Texto Único Ordenado de la Ley General de la Minería) approved by Supreme Decree No. 014-92-EM, published in the Peruvian Official Gazette, El Peruano, on June 3, 1992, is the primary law governing both metallic and non-metallic mining activities in Peru and is supplemented by implementing guidelines and policies regarding mining and the processing of minerals enacted by the Ministry of Energy and Mining. Under the General Mining Law, mining activities (except storage, reconnaissance, prospecting and trade) are carried out exclusively through various forms of concessions. Mining concessions are granted by the Geological, Mining and Metallurgical Institute (Instituto Geológico Minero y Metalúrgico, or “INGEMMET”), and all other concessions, including our mineral processing concessions, are granted by the Directorate General for Mining of the Ministry of Energy and Mines. Any act, transfer, termination or agreement related to these concessions must be registered with the Mining Rights Registry, which is part of the National Public Registry System, to be effective against the Peruvian government and third parties.

Holders of concessions or mining claims must comply with several obligations, including the payment of an annual concession fee (derecho de vigencia) of US$3.00 per applicable hectare. The annual concession fee is due and payable on or prior to June 30 of each year. Failure to pay the annual concession fee for two consecutive years will result in the termination of the mining concession.

Mining activities require holders to obtain title to the surface land from individual landowners, peasant communities or the Peruvian government. Mining concessions are granted for an unlimited period, subject to the achievement of minimum annual production levels. Two different regimes apply depending on the date the concession was granted:

For concessions granted before 2008, the following rules apply:

• the minimum annual production is equivalent to US$100 per year per hectare, in the case of metallic concessions, and US$50 per year per hectare, in the case of non-metallic mining concessions;

• the minimum production level is to be achieved no later than the end of the sixth year from the date of grant;

• if the minimum production level is not achieved within that period, an annual penalty equivalent to US$6.00 per year per hectare must be paid starting with the first semester of the seventh year and until the minimum production level is achieved; and

• if the minimum annual production has not been achieved by the twelfth year, then the annual penalty increases to US$20 per year per hectare.

However, under Supreme Decree No. 054-2008-EM, the rules above will apply only until 2019. As of 2019, if the annual minimum production has not been met, the annual penalty and the causes to terminate a mining concession will be determined by the General Mining Law for concessions granted in 2008 or thereafter, as described below.

For concessions granted in 2008 or thereafter, the following rules apply:

• the minimum annual production target is equivalent to one tax unit (approximately US$1,272) per year per hectare, in case of metallic mining concessions, and 10% of one tax unit (approximately US$127) per year per hectare, in the case of non-metallic mining concessions;

• the minimum production level is to be achieved no later than the end of the tenth year from the date of grant;

• if the minimum production level is not achieved within that period, an annual penalty equivalent to 10% of the minimum annual production level is due until such level is achieved; and

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• if the minimum production level is not achieved by the end of the fifteenth year, the mining concession expires. Exceptionally, the concession can be extended for five additional years, provided that (i) the non-compliance of the minimum production level is caused by force majeure, or (ii) a minimum annual investment of 10 times the annual penalty is devoted to exploration and the annual penalty is paid. If the minimum annual production is not achieved by the end of this additional five-year term, the mining concession will immediately expire.

Any penalty must be paid prior to June 30 of each year. Failure to pay the penalty for two consecutive years results in the termination of the mining concession.

In addition to the payment of the annual concession fee and the penalty, holders of mining concessions must, pursuant to the Mining Royalty Law, pay a royalty for the exploitation of metallic and non-metallic resources. Prior to the amendment of the Mining Royalty Law described below, the amount of the royalty was determined on a monthly basis. For those minerals with an international market price (gold, silver, copper, zinc, lead and tin), the amounts were computed by applying the rates to the value of the concentrate or its equivalent, according to the applicable international market price. The historic rate scales were established in the Mining Royalty Law’s regulations as shown in the following table:

Annual sales (in millions of US$)	Rate
Up to 60	1%
Between 60 and up to 120	2%
More than 120	3%

In case of minerals without an international reference market price (minerals other than gold, silver, copper, zinc, lead and tin), the mining royalty amounted to 1% of the value of the final product obtained from the mineral separation process, net of any costs incurred in the mineral separation process (componente minero).

However, the Mining Royalty Law was amended on September 29, 2011 to increase the tax payable on metallic and non-metallic mineral resources. Effective October 1, 2011, the royalty for the exploitation of metallic and non-metallic resources is payable on a quarterly basis in an amount equal to the greater of (i) an amount determined in accordance with the following statutory scale of tax rates based on a company’s operating profit margin and applied to the company’s operating profit, as adjusted by certain non-deductible expenses, and (ii) 1% of a company’s net sales, in each case during the applicable quarter. The royalty rate applied to the company’s operating profit is based on its operating profit margin according to the following statutory scale of rates:

Operating margin
	Applicable rate
0% - 10%		1.00	%
10% - 15%		1.75	%
15% - 20%		2.50	%
20% - 25%		3.25	%
25% - 30%		4.00	%
30% - 35%		4.75	%
35% - 40%		5.50	%
40% - 45%		6.25	%
45% - 50%		7.00	%
50% - 55%		7.75	%
55% - 60%		8.50	%
60% - 65%		9.25	%
65% - 70%		10.00	%
70% - 75%		10.75	%
75% - 80%		11.50	%
More than 80%		12.00	%

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Mining royalty payments will be deductible for income tax purposes in the fiscal year in which such payments are made.

We believed that certain portions of the regulations of the Royalty Mining Law were unconstitutional, because they impose a mining royalty tax on non-mining activities. For instance, for cement companies, the amended Royalty Mining Law and its regulations established that the mining royalty tax was calculated based on the total operating profit or net sales, as opposed to operating profit or net sales attributable exclusively to mining products, such as limestone, used to produce cement. Accordingly, in December 2011, we filed a claim to declare that the mining royalty tax applicable for the exploitation of non-metallic mining resources be calculated based on the value of the final product obtained from the mineral separation process, net of any costs incurred in the mineral separation process (“componente minero”).

In November 2013, the Peruvian Constitutional Court affirmed the constitutional challenge we filed against the new regulation of the Mining Royalty Law, in a final and unappealable ruling, on the grounds that the new regulation violates the constitutional right of property, as well as the principles of legal reserve and proportionality. Therefore, the new regulation is rendered inapplicable to our operation. As a result, we will continue to use as a basis for the calculation of the mining royalty the value of the concentrate or mining component, and not the value of the product obtained from the industrial or manufacturing process.

Finally, holders of mining concessions are required at the beginning of their operations to submit a mining closure plan that must contain a description of the steps to restore the areas and facilities of each mining operation area to pre-mining condition. Holders of mining concessions are required to secure completion of the restorative measures by means of the following guarantees: (i) banking guarantee or credit insurance; (ii) cash guarantees; (iii) trusts; or (iv) those indicated in the Peruvian Civil Code.

As of the date of this annual report, we primarily owned non-metallic mining concessions and limited metallic mining concessions with respect to iron. Substantially all of our concessions were granted prior to 2008. Our mining rights and concessions are in full force and effect under applicable Peruvian laws. We believe that we are in compliance in all material respects with the terms and requirements applicable to our mining rights and concessions.

Production Process

The cement production process along with other manufacturing activities are governed by General Industry Law (Ley General de Industrias), Law No. 23407, published in El Peruano on May 29, 1982, which establishes basic rules that promote and regulate activities in the manufacturing industry. The Ministry of Production is vested with authority to promote private investments in connection with industrial, processing and manufacturing activities, the surveillance of sustainable exploitation of natural resources (except for those extractive activities involving primary transformation of natural products), the protection of the environment, and the supervision of the quality of manufactured products. All industrial companies are subject to the General Industry Law and its regulations to the extent that the company’s gross income is primarily derived from industrial activities. Pursuant to Supreme Decree No. 009-2011-MINAM, the supervisory and monitoring functions of the Ministry of Production was transferred to the Environmental Evaluation and Supervisory Agency (Organismo de Evaluación y Fiscalización Ambiental, or OEFA) in 2013.

Environmental Regulations

Industrial companies and particularly cement companies are required to comply with several environmental regulations. Pursuant to Article 50 of Legislative Decree No. 757, the competent environmental authority is that corresponding to the activity of the company which generates the higher gross annual income. For that reason, the environmental authority that monitors our operations, considering that cement production represents the highest proportion of our gross profit, is the Ministry of Production.

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The Environmental Regulations for Manufacturing Industries (Reglamento de Protección Ambiental para el Desarrollo de Actividades de la Industria Manufacturera—Supreme Decree No. 019-97-ITINCI, or the “Environmental Regulations”), set forth different environmental obligations depending on the date of commencement of the subject company’s industrial activities. Thus, companies with industrial cement activities operational at the time these regulations entered into force (September 1997) were obliged to submit an Environmental Adaptation Management Plan (Programa de Adecuación y Manejo Ambiental, or “PAMA”) to the Ministry of Production; while companies with industrial activities starting from that date onwards are obliged to submit either an environmental impact assessment or an environmental impact declaration depending on the level of risk and the impact of their activities on the environment. Furthermore, the Environmental Regulations establish that the Ministry of Production may require a mining closure plan (as an independent environmental assessment) with environmental measures that all companies must comply with before closing their operations to prevent any negative effects on the environment.

With regard to air emissions and wastewater discharges, the Ministry of Production has adopted legally binding environmental quality standards (Límites Máximos Permisibles, or “LMPs”) for cement industries (approved by Supreme Decree No. 003-2002-PRODUCE). These standards are legally enforceable and all cement industry operations are required to comply with them.

A violation of the Environmental Regulations is subject to different types of administrative sanctions, as determined in the Environmental Sanctions Regime of the Ministry of Production (Régimen de Sanciones e Incentivos del Reglamento de Protección Ambiental para el Desarrollo de Actividades de la Industria Manufacturera—Supreme Decree No. 025-2001-ITINCI), including warnings notice; fines of up to 600 UIT (US$763,563); restrictions, suspension or cancellation of the authorization or concession; and total or partial closing of the industrial facilities. The type of sanction imposed ultimately depends on the seriousness of the violation. Although the environmental competent authority for industrial activities is the Ministry of Production, other government agencies may impose fines in case of non-compliance with applicable permits.

By Directing Council Resolution No. 023-2013-OEFA/CD, OEFA assumes the functions of monitoring, supervision, control and sanctioning of environmental matters in the Cement Sector of the Manufacturing Industry, of the Industrial Subsector of the Ministry of Production—PRODUCE.

Prior Consultation with Local Indigenous Communities

On September 7, 2011, Peru enacted Law No. 29785, Prior Consultation Right of Local Indigenous Communities. The law was enacted in order to implement Convention No. 169 of the International Labor Organization on Local Indigenous Communities in Independent Countries, previously ratified by Peru through Legislative Decree No. 26253. This law, which became effective on December 6, 2011, establishes a prior consultation procedure to be undertaken by the Peruvian government in favor of local indigenous communities, whose collective rights may be directly affected by new legislative or administrative measures, including the granting of new mining concessions. Regulation implementing this law was approved on April 3, 2012, by Supreme Decree No. 001-2012-MC, which defines the local indigenous communities that are entitled to the prior consultation rights and establishes the different stages that comprise the prior consultation procedure.

Consultation procedures for mining and processing concessions are carried out by the Ministry of Energy and Mines prior to the granting of a new processing concession.

According to the recent practice of the Geologic Institute of Mining and Metallurgy (Instituto Geológico Minero Metalúrgico), the granting of mining concessions does not qualify as an “administrative measure” that potentially affects the rights of indigenous peoples because it does not grant per se a right to explore and exploit mineral deposits. Accordingly, the granting of mining concessions has not been included among measures that require consultation procedures with indigenous peoples. According to Ministerial Resolution No. 003-2013-MEM-DM, the Ministry of Energy and Mines has established that consultation procedures are applicable prior to the commencement of: (i) exploration activities (Autorización de inicio de actividades de exploración); (ii) exploitation activities (Autorización de inicio o reinicio de las actividades de desarrollo, preparación y explotación—incluye plan de minado y botaderos); and (iii) processing concessions (otorgamiento de concesión de beneficio).

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Local indigenous communities do not have a veto right; upon completion of this prior consultation procedure, the Peruvian government can discretionarily approve or reject the applicable legislative or administrative measure. In addition, any sale, lease or other act of disposal of surface land owned by local indigenous communities is subject to the approval of an assembly composed of the members of such communities according to the following rules:

• for local indigenous communities located on the coast, approval of not less than 50% of members attending the assembly is required; and

• for local indigenous communities located in the highlands and the Amazon region, approval of at least 2/3 of all members attending the assembly is required.

Permits and Licenses

Mining Concessions

According to the General Mining Law, a mining concession is required in order to extract mineral resources needed to produce cement. The mining concession grants the right to explore and exploit the mineral resources located in a solid of indefinite depth, limited by the vertical plane corresponding to the sides of square, rectangle or polygon referred to by the Universal Transversal Mercator coordinates. The Geological Mining and Metallurgical Institute (Instituto Geológico Minero y Metalúrgico) is in charge of managing the procedure of granting mining concessions, which includes the receipt of the request, the granting and the termination of mining concessions.

Explosives. Mining concessionaires are required to obtain the following permits to operate and store explosives:

• Certificate of Mining Operation (Certificado de Operación Minera), granted by the Ministry of Energy and Mines;

• Semiannual Authorization for Use of Explosives, granted by the General Bureau of Explosives of the Ministry of Interior (Dirección General de Control de Servicios de Seguridad, Control de Armas, Munición y Explosivos de Uso Civil, or “DICSCAMEC”);

• Manipulation of Explosives License for each individual that intends to handle explosives, granted by the DICSCAMEC; and

• Explosive’s Warehouse Operation License, granted by DICSCAMEC.

Water and Wastewaters

To use water resources in cement industry activities, it is necessary to obtain a water right granted by the Water Management Authority (Autoridad Nacional del Agua, or “ANA”) prior to the use of underground or fresh water sources. If the proposed activities will generate domestic or industrial wastewaters, which will be discharged into natural water sources or soil, authorization from ANA is required, with a favorable opinion of the General Bureau of Environmental Health (Dirección General de Salud Ambiental, or “DIGESA”).

Hazardous Waste

Hazardous waste generated as a consequence of cement production activities must be disposed of in specialized landfills. The transportation of solid waste outside the limits of the industrial complex must be conducted exclusively through specialized companies registered with DIGESA. Industries are free to contract with an EPS-RS (a company that provides solid waste services such as transportation, treatment or disposal) or with an EC-RS (a company that carries out commercialization activities aiming at the reuse of solid waste). Yet in order to limit their liability in case of environmental harm, industries must make sure the EPS-RS and EC-RS they retain count with all necessary permits to collect, transport and dispose hazardous wastes.

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Chemical Feedstock

The commercialization, transportation and use of controlled chemical feedstock (Insumos Químicos y Productos Fiscalizados, or “IQPF”) is restricted, because of their potential use in the production of illegal drugs or controlled substances. Companies that require an IQPF must obtain an IQPF User Certificate (Certificado de Usuario de IQPF) from the General Bureau of Chemical Feedstock of the Ministry of Interior (Unidad Antidrogas de la Policía Nacional del Perú, or “DIRANDRO”). Companies such as ours are also required to register with the Ministry of Production any IQPF activities they plan to carry out (Registro Único para el Control de IQPF).

Fuel Storage

Any company that purchases fuels for its own activities and has facilities to receive and store fuel with a minimum capacity of one meter cubed (264,170 gallons) is required to (i) receive from the Mining and Energy Investment Supervision Body (Organismo Supervisor de la Inversión en Energía y Minería, or “OSINERGMIN”) prior permission to build and operate said installations, and (ii) be registered with the Registry of Direct Fuel Consumers, in order to obtain the SCOP Code (Código del Sistema de Control de Órdenes de Pedido) necessary to purchase fuel.

Cultural Heritage Protection

If the design and development of cement industry activities involves the removal of topsoil, a Certificate of Non-Existence of Archaeological Ruins (Certificado de Inexistencia de Restos Arqueológicos, or “CIRA”) from the Ministry of Culture with respect to the area under construction must be obtained. The CIRA will either certify that on the surface of the evaluated area no archaeological sites or features were discovered, or will identify their exact location and extent in order to implement precautionary measures to protect the archaeological artifact. The CIRA is valid for an unlimited period, but will become void should any archaeological artifacts be accidentally discovered during the construction works or due to any natural cause. In such an instance, the company must stop the construction work immediately and notify the Ministry of Culture. Failure to stop the construction work may generate civil and criminal liabilities. Under certain exceptional circumstances, Peruvian legislation allows the removal of archeological artifacts when the area is required for development of projects that are of national interest.

Labor Regulations

Peruvian legislation allows hiring employees through: (i) a fixed-term contract, (ii) a contract for an indefinite duration; or (iii) a contract for part-time employment.

The minimum wage established in Peru is S/.750.00 per month. Peruvian labor legislation establishes a maximum 8-hour work day or 48 hours per week for employees older than 18 years. For overtime, employers must pay at least an additional 25% and an additional 35% over the regular hourly wage for the first two hours and for any additional hours, respectively. Employees are entitled to a minimum rest of 24 consecutive hours per week.

Regardless of the type of employment contract, pursuant to Peruvian law full-time employees are entitled to receive:

(i) an additional 10% of the minimum wage, provided that they are responsible for (a) one or more children under the age of 18 or (b) persons who are up to 24 years of age if they are pursuing higher education,

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(ii) two additional months’ salary per year, one in July and one in December (pursuant to Law No. 29351, until December 31, 2014, said payments were not subject to any social contribution, except for Income Tax; consequently, until December 2014, employers paid directly to their employees as an Extraordinary Bonus, the amount of the contribution to the Social Health Insurance (ESSALUD) for such payments, equivalent to 9% of the bonus paid),

(iii) thirty calendar days of annual paid vacation per year,

(iv) life insurance, provided they have been employed for at least four years,

(v) a compensation for years of service (CTS) equal to 1.16% of a monthly salary and is deposited each year in May and November, provided they work an average of at least four hours per day for the same employer,

(vi) benefits from the Peruvian Social Health Insurance (ESSALUD) to which employers must contribute a rate equivalent to 9% of their employees’ income, and

(vi) a percentage of the company’s annual income net of taxes (10% in the case of income derived from cement operations, and 8% in the case of income derived from our mining activities), provided the company has twenty or more employees.

Free and Fair Competition Protection

In Peru, businesses are generally not required to receive the prior authorization of the antitrust authority, which in Peru is INDECOPI. However, in order to promote economic efficiency and protect consumers, anti-competitive behavior is subject to sanctions under applicable law. Behavior that is prohibited according to national law includes: (i) the abuse of a dominant market position, (ii) concerted horizontal practices and (iii) concerted vertical practices. Moreover, under the Unfair Competition Law it is illegal to act in a way that may hinder the competitive process. An unfair behavior is one that is objectively contrary to the entrepreneurial good faith, ethical behavior and efficiency in a market economy.

C. Organizational Structure

All of our operating subsidiaries are incorporated in Peru. The following chart sets forth our simplified corporate structure, operating subsidiaries only, as of the date of this annual report.

(1) Quimpac owns the remaining 25.1%.

(2) An affiliate of Mitsubishi owns the remaining 30.0%.

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The following is a brief description of the principal activities of our consolidated subsidiaries:

• Cementos Selva S.A. is engaged in the production and marketing of cement, quicklime and other cement-related materials in the northern region of Peru, near the Peruvian jungle. It holds all of the outstanding shares of Dinoselva Iquitos S.A.C., our cement and construction materials distributor for products processed in our Rioja facility.

• Distribuidora Norte Pacasmayo S.R.L. is primarily engaged in selling and distributing cement products produced at our Pacasmayo facility. It produces and sells cement-related materials, such as concrete blocks and ready mix concrete, and sells other construction materials manufactured by large manufacturers.

• Calizas del Norte S.A.C. was created in 2013 and started operations in 2014. Its main operation is to exploit our limestone quarry Acumulación Tembladera.

• Empresa de Transmisión Guadalupe S.A.C.’s sole operation is to provide electricity transmission services to the Pacasmayo facility.

• Salmueras was created in 2011 with Quimpac as a minority equity holder, in order to develop our combined brine fields in the coastal region of Piura in the north of Peru. We own a 74.9% equity interest in Salmueras and Quimpac owns the remaining 25.1%.

• Fosfatos was formed with the objective of exploring phosphate deposits that were discovered in our diatomite fields in our Bayóvar concession in the northwest of Peru. Our phosphate project is currently in pre-feasibility stages. In December 2011, we sold a minority equity interest in Fosfatos to an affiliate of Mitsubishi to develop our phosphate deposits in the Bayóvar fields, in the northwest of Peru.

D. Property, Plant and Equipment

Properties

We own our office at our headquarters in Lima, Peru, at Calle La Colonia 150, Urbanización El Vivero, Surco. We also own our plants, warehouses, transportation facilities and the office space at our production facilities, including our workers’ facilities occupying approximately 50,000 square meters at our Pacasmayo facility and a warehouse occupying approximately 25,000 square meters at the Salaverry port facility.

Area of Operation

We own and operate our flagship cement and quicklime production facility, located in the city of Pacasmayo, department of La Libertad, approximately 667 kilometers north of Lima. From our Pacasmayo facility, we supply cement principally to the coastal and central regions of northern Peru, including the cities of Piura, Chiclayo, Cajamarca, Trujillo and Chimbote.

In addition to our Pacasmayo facility, we also own and operate a smaller cement facility, located in the city of Rioja, department of San Martín, approximately 468 kilometers east of the Panamericana Norte highway. From our Rioja facility, we supply cement to the northeastern region of Peru, including the cities of Moyobamba and Tarapoto, among others.

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The following map shows the geographical location of our production facilities, as well as the location of our main commercial offices as of December 31, 2014:

Pacasmayo Facility

As of December 31, 2014, our Pacasmayo facility had 10 kilns, which produce clinker (one of which is also equipped to produce quicklime), and an additional Waelz rotary kiln that produces quicklime. Additionally, our facility has a primary and secondary cone crusher located near our Acumulación Tembladera limestone quarry. The main crusher has installed crushing capacity of 800 metric tons per hour and the secondary crusher has installed crushing capacity of 170 metric tons per hour. Our Pacasmayo facility operates with three horizontal rotary kilns with total installed annual clinker production capacity of 1,034,880 metric tons and six vertical shaft kilns with total installed annual clinker production capacity of 465,120 metric tons. The total installed annual clinker production capacity at our Pacasmayo facility is 1.5 million tons. Our Pacasmayo facility also features three cement finishing mills with installed annual cement production capacity of 2.9 million metric. Our Pacasmayo facility is also equipped with silos containing storage capacity for 25,000 metric tons of cement.

As of December 31, 2014, our Pacasmayo facility had installed production capacity of approximately 240,000 metric tons of quicklime per year, including the annual installed capacity of one of our clinker kilns and our Waelz rotary kiln, which are equipped to also produce quicklime.

Rioja Facility

Annual installed production capacity of our Rioja facility is 440,000 metric tons of cement and 280,000 of clinker.

Our Rioja facility now operates with a small cone crusher and four vertical shaft kilns with total annual installed clinker production capacity of 280,000 metric tons and three cement finishing mills with total annual installed production capacity of 440,000 metric tons. Our Rioja facility is also equipped with silos with storage capacity of 1,750 metric tons of cement.

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Ready-Mix Concrete Facilities

We also have eighteen fixed and mobile ready-mix concrete facilities located in the northern cities of Chimbote, Trujillo, Chiclayo, Piura, Cajamarca, Tarapoto, and Chachapoyas, among others. These facilities allow us to supply ready-mix concrete to large construction projects throughout the entire northern region of Peru. As of December 31, 2014, our ready-mix operations had 114 mixer trucks and 25 concrete pumps available to deliver ready-mix concrete.

Capacity and Volumes

The table below sets forth our clinker, cement and quicklime production capacity and volumes in our Pacasmayo and Rioja facilities for the periods indicated.

(in thousands of metric tons, except percentages)	As of and for the year ended December 31,
	2014							2013							2012
	Capacity		Production		Utilization rate(1)			Capacity		Production		Utilization rate(1)			Capacity		Production		Utilization rate(1)
Cement:
Pacasmayo facility		2,900		2,054		70.8	%		2,900		2,101		72.4	%		2,900		2,053		70.8	%
Rioja facility		440		296		67.3	%		440		240		54.5	%		200		200		100.0	%
Total		3,340		2,350		70.4	%		3,340		2,341		70.1	%		3,100		2,253		72.7	%
Clinker:
Pacasmayo facility		1,500		1,014		67.6	%		1,500		1,189		79.3	%		1.500		1,209		80.6	%
Rioja facility		280		228		81.4	%		280		196		70.0	%		200		159		79.5	%
Total		1,780		1,242		69.8	%		1,780		1,385		77.8	%		1,700		1,368		80.5	%
Quicklime(2):
Pacasmayo facility		240		101		42.1	%		240		67		27.9	%		240		101		42.1	%

(1) Utilization rate is calculated by dividing production for the specified period by installed capacity.

(2) Our Rioja facility does not produce quicklime. In addition, one of our clinker kilns and our Waelz rotary kiln are equipped to produce quicklime.

Phosphate Project

Overview

In 2007, we acquired a diatomite concession (Bayóvar No. 9) located in Bayóvar in the northwest of Peru. Diatomite is a raw material that we use in our cement production. In performing drill tests to extract diatomite at the Bayóvar field, our team of geologists discovered phosphate rock deposits, a chemical component used primarily as a fertilizer in the agricultural industry.

In 2011, we sold a 30.0% equity interest in our subsidiary Fosfatos, which focuses on our phosphate operations, to an affiliate of Mitsubishi, a global integrated business enterprise listed on the Tokyo Stock Exchange that develops and operates businesses across multiple industries, for an aggregate purchase price of approximately US$46.1 million. Mitsubishi is a world leading marketer of phosphate-derived products. In connection with the sale, Mitsubishi entered into an off-take agreement to purchase Fosfatos’ production of phosphate ore. Under the off-take agreement, Mitsubishi agreed to purchase, once we begin production, 2.0 million metric tons of phosphate ore annually, and has the option to purchase an additional 0.5 million metric tons annually, to the extent we choose not to sell it to the Peruvian market, at a price to be determined pursuant to an agreed upon formula based on prevailing market prices. The off-take agreement has a term of 20 years, with an option for Mitsubishi to extend the term for an additional five years upon expiration. In connection with the investment, we agreed to provide the Mitsubishi affiliate with certain minority protection rights. We and the Mitsubishi affiliate have also agreed to finance the construction of the first phosphate mine by obtaining third party project financing to the extent possible.

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In mid-2014, the development of value engineering was completed to identify opportunities for improvement in the design, construction and operation of the project. Major internationally recognized engineering companies (Hatch, Ausenco and WorleyParsons), conducted value engineering based on their experience and knowledge in different areas. Among the main achievements of such value engineering is the reduction of the foot-print of the processing plant without reducing capacity and size reduction of the port according to the capacity requirements of the project.

The project is currently in the process of incorporating the findings of the value engineering of a conceptual level to a level of Basic Engineering, allowing a more precise sizing of the project. In December 2014, WorleyParsons Company was retained following an international bidding as Project Management Consultant (PMC), with a mandate to supervise the implementation, engineering and integration of the various components of the project and update of the feasibility study based on the results obtained. This function is to be exercised from the development of the engineering, and through the procurement, construction and commencement of operations.

Property Location, Access, Topography and Climate

Our Bayóvar No. 9 concession is located in Piura province, approximately 950 kilometers north of Lima. The site can be accessed from Piura by vehicle mainly through paved roads. The Bayóvar region is a part of the Peruvian coast in the desert of Sechura. The climate is hot and dry, with temperatures ranging between 22°C and 28°C and average moisture of 78%. The region experiences a cold season between June and September and a warm/rainy season between January and April. Annual rainfall in the region is approximately 100 millimeters. The map below illustrates the location of our Bayóvar concession.

History

The Bayóvar No. 9 concession was originally granted in 1969 by a government decree to Minero Perú S.A. (“Minero Perú”), which was a government-owned corporation created to develop mining activities and related industrial activities. In 1992, Activos Mineros S.A.C., another government-owned corporation (“Activos Mineros”) (formerly Empresa Regional Minera Grau Bayóvar S.A.) acquired the concession from Minero Perú.

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Mining Concession

In August 2007, we entered into a purchase agreement with Activos Mineros to acquire the right to develop the Bayóvar No. 9 concession, which we obtained in a public auction for US$110,000, plus US$1.50 per metric ton of extracted diatomite from the Bayóvar field, as described in further detail below.

The term of the concession is indefinite, provided we pay an annual concession fee and meet minimum annual production requirements. Failure to pay such fees in a timely manner for two consecutive years will cause us to forfeit our concession rights. Under the purchase agreement, we were required to meet a minimum production of 40,000 metric tons of diatomite in 2010, which we satisfied. On the third anniversary of the purchase agreement and thereafter, we are required to produce a minimum of 80,000 metric tons of diatomite per year. The concession also gives us the right to exploit other metallic and non-metallic ores, such as phosphate rock.

Under Peruvian law, a mining concession does not grant us the right to use the surface land, as it belongs to the local community. In 2009, we entered into a 30-year term agreement with the community of San Martín de Sechura and Activos Mineros S.A.C., under which we agreed to make a one-time payment of US$110,000 in consideration for the right to use the surface land (including the right to obtain minerals from the land) and a related easement to access required areas for development. In addition, we have agreed to pay US$1.50 per metric ton of extracted diatomite to the community of San Martín in connection with the concession. Under the agreement, we were required to meet a minimum production of 40,000 metric tons of diatomite in 2010, which we satisfied. On the third anniversary of the agreement and thereafter, we are required to produce a minimum of 80,000 metric tons of diatomite per year. If we extract phosphate deposits in the future, we are also required to pay Activos Mineros and the San Martín local community corresponding payments with respect to phosphate sales based on a pre-determined formula.

Royalties

Under the new Peruvian Royalty Mining Law, once we begin exploiting these mineral resources, we will be required to pay mining royalty taxes to the Peruvian government on a quarterly basis in an amount equal to the greater of (i) an amount determined in accordance with a statutory scale of tax rates based on our operating profit margin that is applied to our operating profit, as adjusted by certain non-deductible expenses, and (ii) 1% of our net sales, in each case during the applicable quarter. See “Item 4. Information on the Company—B. Business Overview—Regulatory Matters—Mining Regulations.”

Description of Rock Formation

The Sechura desert located in the north of Peru is substantially covered with the Zapallal marine formation that dates back to the Tertiary period, and with a relatively thin sand overburden. The western Sechura desert is underlain by a thick series of marine sediments that range in age from Miocene to Pliocene and are deposited in a shallow north-trending basin between the Andes and Illescas Mountains. They are overlain by alluvium and windblown sand of recent age interrupted by Pliocene strata and underlain by older Miocene strata.

The oldest units in the stratigraphic column are rocks dating back to the Pre-Cambrian and Paleozoic periods. The Cenozoic units are composed by carbonatic sandstones, lutites and mudstones, bituminous lutites, conglomeratic sandstones interbedded with impure limestones and phosphate sediments. Coquine and Aeolian deposits remain in the upper portion of the stratigraphic column.

Exploration Activities

From 2008 to 2010, we commissioned an external consultant to conduct diamond drill campaigns. A total of 185 holes ranging in depth from approximately 80 to 90 meters were completed. The first campaign covered an area with a regular grid of approximately 800 × 800 meters and infill drilling of approximately 550 × 550 meters. The second campaign, based on the results of previous drilling samples and analysis, included 29 holes in a grid of 350 × 350 meters with 2,327 meters drilled inside the envelope. Based on drilling samples and analysis obtained from the previous drilling campaign, the second campaign covered the areas where the data suggested had the highest potential value to justify developing a mine.

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Sample analysis and assays based on drilling were conducted by a chemical company based on accepted international industry standards. In addition, we commissioned Golder Associates Peru S.A. to carry out and develop a geological survey and model. To undertake the survey, 13 points of geodesic GPS control were located in the field, spaced in the area according to requirements. Statistical analysis was carried out to compare the correlation between the original data (drill hole logs) and the interpreted data (block model/geological model).

Between 2012 and 2013 we performed 86 drill holes, totaling 5,820.2 meters in depth. Their purpose was hydrogeological, metallurgical and geotechnical, and they were distributed throughout the phosphate deposit and its facilities (waste dump, beneficiation plant and pit envelop). Different tests were carried out by Golder Associates Peru to determine the different features present in the Phosphate deposit.

In the second semester of 2013, the Fosfato’s geology team conducted a re-logging program focused in the pit design area, where 1,109 meters of clambore sandstone drillcores were inspected, reviewed and 80 samples were collected to perform UCS (unconfined compression test) testing. The objective of this work was to improve the geological knowledge about Clambore Rock Unit and its hardness.

At the end of 2014, a new database system was implemented, to improve the management and validation of the project’s geological data. During 2014, a total of 49 exploratory holes were drilled. In the Bayóvar 9 concession, a total of 35 drill holes were completed, totaling 2,961.4 meters, drilled inside the pit envelop, focusing in the 8 first years of mine operation. The drill hole exploration grid was reduced to 200 x 200 meters. The remaining 14 holes were drilled in the Virrila Concession with exploration purposes to define potential resources.

Mineralized Material Estimates

Based on an independent report, dated April 2014, prepared by Golder Associates Peru S.A., the following table summarizes the estimated mineralized material at our Bayóvar concession:

	Million metric tons		P2O5 Average grade
Wet density		546.1		18.2	%
Dry density		392.9		18.2	%

Environmental Impact Study

The Environmental Impact Assessment study (EIA) for the Fospac project was undertaken jointly by Buenaventura Ingenieros S.A. (BISA) and the Fospac internal team and submitted to the Ministry of Energy and Mines (MEM) in May 2013.

In March 2014, the Environmental Impact Assessment study (EIA) Certification was obtained for all project components (plant, mine, port, seawater pipeline, industrial road, power transmission line, etc.). Approval of the EIA was received from all relevant agencies, including the Ministry of Energy and Mines, Ministry of Agriculture and Irrigation, Ministry of Environment, Ministry of Production, Ministry of Transport and Communications, the General Directorate of Captaincy and Coast Guard, National Service of Areas Protected by the State, National Service of Meteorology and Hydrology of Peru, National Water Authority, Regional Government of Piura, among others.

Also, in August 2014, the Project obtained the Certificate of Absence of Archaeological Remains (CIRA), issued by the Ministry of Culture for the areas of influence of the project.

During the fourth quarter of 2014, the Peruvian Institute of Nuclear Energy (IPEN), conducted a study of radiation monitoring in areas affected by the project. The results and conclusions are expected by the second quarter of 2015

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Brine Project

Overview

We are in the process of developing our brine concessions located in the coastal region in the north of Peru, consisting of approximately 136,245 hectares of land. Brine is a highly concentrated water solution of common salt, which can be processed to obtain chemical components. In July 2011, we created Salmueras with our minority partner Quimpac to develop our combined brine concessions consisting of Ñamuc, Cañacmac and El Tablazo. We hold a 74.9% equity ownership interest in Salmueras and Quimpac owns the remaining 25.1%. We have committed total capital investments of US$100 million to this project. There is no deadline for this committed investment, and consequently the referred investment will only take place as long as we continue developing the project. The basic engineering study was conducted by the German company, K-Utec AG Salt Technologies and is currently being evaluated by both partners in order to determine how to move forwards according to their investment priorities. The environmental impact study for the Salmueras brine project was approved in December 2014.

Mining Concessions

Brine concessions held by Salmueras may be divided in the following three areas:

El Tablazo. El Tablazo comprises an aggregate of 70 concessions with a total area of 64,712 hectares, located in the district of Morrope, in the department of Lambayeque.

Ñamuc. Ñamuc comprises a group of 62 concessions with a total area of 50,074 hectares located in the district of Sechura, department of Piura.

Cañacmac. Cañacmac comprises an aggregate of eight concessions with a total area of 21,459 hectares, located between the departments of Piura and Lambayeque.

Each of these concessions gives us the right to explore and exploit minerals for an indefinite term, provided we pay the annual concession fee and meet minimum annual production requirements. Mining concession titles do not give us the right to use the surface land where the concessions are located, which belongs to the local communities. We have obtained permission to explore the fields from the respective local communities and will negotiate surface land rights with the local communities in due course. In December 2014 the Ministry of Production granted approval to the Environmental Impact Study.

Glossary of Technical Terms

You may find the following definitions helpful in your reading of this annual report.

“grade” is the amount of minerals in each ton of ore.

“hectare” is a metric unit of area equal to 10,000 square meters (2.47 acres).

“mineralized material” means a mineralized ore that has been delineated by appropriately spaced drilling or underground sampling to support a sufficient tonnage and average grade of minerals. Such a deposit does not qualify as containing reserves, until a comprehensive evaluation based on unit cost, grade, recoveries, and other material factors establishes legal and economic feasibility.

“probable reserves” are reserves for which quantity and grade and/or quality are computed from information similar to that used for proven reserves, but the sites for inspection, sampling and measurement are farther apart or are otherwise less adequately spaced. The degree of assurance, although lower than that of proven reserves, is high enough to assume continuity between points of observation.

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“proven reserves” are reserves for which (a) quantity is computed from dimensions revealed in outcrops, trenches, workings on drill holes, grade and/or quality are computed from the results of detailed sampling and (b) the sites for inspection, sampling and measurement are spaced so closely and the geologic character is so well defined that size, shape, depth and mineral content of reserves are well-established.

“reserve” is that part of a mineral deposit which could be economically and legally extracted or produced at the time of the reserve determination.

Insurance

We maintain a comprehensive insurance program that protects us from certain types of property and casualty losses. Our plants and equipment are insured against losses. Additionally, our insurance policy provides coverage for business interruption in our cement manufacturing facilities. We also purchase commercial insurance to cover risks associated with workers’ compensation and other general liabilities. We believe our insurance programs and policy limits and deductibles are appropriate for the risks associated with our business and are in line with the insurance policies of similar cement manufactures that operate in Peru.

Environmental Compliance and Social Responsibility Projects

We are in accordance with substantially all applicable environmental laws and regulations and have all the required environmental permits and licenses to conduct our business. We have Environmental, Health and Safety management systems in place to address the environmental, health and safety risks we face.

We are committed to the development and quality of life of communities that surround the area where we operate. We have developed a good relationship with the local communities surrounding our plant facilities since we started operations in Pacasmayo. We have a number of social responsibility programs aimed at improving health and education in the area. Below is a brief description of a few of our social initiatives.

Tecsup. Tecsup is a leading not-for-profit institute in Peru that provides technical education to high-school students. It was founded by the family of our controlling shareholder, and we support it by providing financial aid and scholarships to promising high school students living near our plants to study at the Trujillo campus of Tecsup. Through its three campuses in Peru, Tecsup has graduated over 8,200 students in various technical fields, some of whom now work for us and our affiliated companies.

Center for Technological Training. We have a training center at our facility where we teach students and adults business and technical skills. Our center is staffed with instructors from Tecsup. The goal of the center is to help develop the professional skills of the local population, especially of students and teachers at the educational institutions in the town of Tembladera. In 2014, this program benefited a total of 616 students and teachers.

Abilities Strengthening. This program seeks to provide training to local stakeholders such as grassroots organizations, local entrepreneurs, teachers, journalists, among others. The objective of the program is to strengthen their skills and knowledge by providing courses and seminars especially designed for that purpose. The program is funded by us, in coordination with local governments and social institutions, and in 2014 benefited 312 stakeholders.

Universidad de Ingeniería y Tecnología – UTEC (University of Engineering and Technology) is an educational nonprofit proposal that since 2012 is aimed at the development of people in the engineering field, looking to satisfy the need for these types of professionals in the labor market by implementing a curriculum in line with the trends and demands that globalization poses to modern engineering, with an integrated approach to innovative teaching models. To enhance students’ knowledge, UTEC also has various national and international alliances with top organizations.

Acuícola Los Paiches. Through our social venture, Acuícola Los Paiches S.A.C. we studied the reproductive forms of the “paiche” (arapaima giga), a native fish species that was on the edge of extinction. After years of studies and scientific testing, we have successfully bred this species in captivity, and we have obtained thousands of fingerlings. In 2014 Acuícola Los Paiches S.A.C. received the “Award for Innovative Exports” from the Peruvian Exporters Association – ADEX for its research and for developing “paiche” farming in the Yurimaguas rainforest.

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ITEM 4A. UNRESOLVED STAFF COMMENTS

Not applicable.

ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS

A. Operating and Financial Review and Prospects

Overview

We are a leading Peruvian cement company, and the only cement manufacturer in the northern region of Peru. With more than 57 years of operating history, we produce, distribute and sell cement and cement-related materials, such as concrete blocks and ready-mix concrete. Our products are primarily used in construction, which has been one of the fastest growing segments of the Peruvian economy in recent years. We also produce and sell quicklime for use in mining operations.

In 2014, our cement shipments were approximately 2.3 million metric tons, representing an estimated 20.4% share of Peru’s total cement shipments, and substantially all the cement consumed in the northern region of Peru. That same year, we also sold approximately 0.1 million metric tons of quicklime.

We own two cement production facilities, our flagship Pacasmayo facility located in the northwest of Peru and our Rioja facility located in the northeast. Our facilities have total installed annual cement production capacity of approximately 3.3 million metric tons. We also have installed annual production capacity to produce 240,000 metric tons of quicklime. We own concession rights to several quarries with reserves of limestone and other raw materials located near our facilities. We estimate that our existing quarries have sufficient reserves to supply us with limestone for approximately 68 years, based on our 2014 limestone consumption levels.

We are in the construction phase of our new cement plant in Piura, the third largest city in northern Peru, which is expected to have annual production capacity of 1.6 million metric tons of cement. In 2013, we entered into a supply agreement with ThyessenKrupp Polysius and Loesche for the provision of key equipment for this project, approximately 99% of these equipment is already on sight. We have also signed a contract with the consortium formed by JJC Contratistas Generales S.A., SSK Montajes e Instalaciones S.A.C. and JJC Schrader Camargo S.A.C. for the construction of the plant. This development will allow us to meet projected increases in demand for cement in the northern region of Peru in coming years.

In addition, we are undertaking two non-metallic mining projects, which we believe present significant opportunities for our company. We own concessions where we have discovered deposits of phosphate rock, a principal component for agricultural fertilizers, and brine deposits that have a variety of uses in the agricultural fertilizer, animal feed and construction industries, among others. We are developing and analyzing the basic engineering studies to determine if development of these mineralized materials would be economically feasible. See “Item 4. History and Development of the Company – B. Business Overview – Our Phosphate and Brine Projects”, “– Item D. Property, Plant and Equipment – Phosphate Project” and “ – Item D. Property Plant and Equipment – Brine Project”.

Factors Affecting our Results of Operations

Revenue Drivers

In 2014, approximately 88% of our total cement sales were in the form of bagged cement, substantially all of which was sold through retailers both within and outside of our distribution network. The remaining 12% of our cement was sold in bulk or in shipments of concrete blocks or ready-mix concrete directly to large construction companies. Our retail sales are directed to both the auto-construcción segment and construction

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companies that buy cement for a variety of small construction works, including minor residential, commercial and infrastructure projects. Cement destined for large private and public projects, such as housing complexes, highways, irrigation channels, hospitals, schools and mining and industrial facilities, is typically sold in bulk or in shipments of concrete blocks or ready-mix concrete.

According to our estimates, sales to the auto-construcción segment accounted for approximately 55% of our total cement sales in 2014, 54% in 2013 and 57% in 2012; private construction projects, both large and small, accounted for approximately 22% of our total cement sales in 2014, and 27% in 2013 and in 2012; and public construction projects accounted for the remaining 23% of our total cement sales in 2014, 19% in 2013 and 17% in 2012. While auto-construcción continues to represent the majority of our sales, it is expected that as the country continues to grow and formalize, private construction projects and infrastructure will become increasingly more important to our business.

Our cement sales are largely driven by residential construction (both auto-construcción and small and large housing projects undertaken by construction companies), which is generally affected by economic conditions in the northern region of Peru. Auto-construcción is particularly affected by levels of disposable household income, as low-income families tend to invest most of their savings in developing their homes. Larger residential construction is more susceptible to the economic outlook, the availability of financing and prevailing investment levels in the region. This was affected during 2014, mainly due to loss of consumer and investor confidence. GDP in the northern region of Peru is estimated to have grown 2.0% in 2014, 3.4% in 2013 and 7.1% in 2012. Our cement volumes, which represented substantially all cement sales in the northern region of Peru, contracted by 0.1% in 2014, grew 4.0% in 2013 and grew 15.5% in 2012 in terms of metric tons of cement shipments.

Our cement sales are also driven, to a lesser extent, by commercial developments and infrastructure projects. Commercial and other private construction projects are also affected by investment levels in the region, while public infrastructure projects depend on the priorities and financial resources of the national, regional and local governments. During 2014, investigations related to corruption and embezzlement by local and regional authorities led to a stall in public spending, which negatively affected cement shipments to the public sector. Regional elections took place in November 2014 and as new authorities finalize settling in during 2015 we expect public sector investment to reactivate.

Cost Drivers

Coal is the main source of energy used in our production process, in particular to fuel our kilns. We purchase anthracite coal from nearby coal mines and import a small amount of bituminous coal primarily from Colombia and Venezuela. We do not have long-term coal supply agreements, and we do not engage in hedging transactions in connection with the price of coal. In the past, the price of bituminous coal has been related to the international price of oil, as it is used as a substitute for oil. Coal accounted for an estimated 15.0% of our costs of production in 2014, 19.5% in 2013 and 21.6% in 2012. The decrease in the proportion of coal as a percentage of our costs in 2014 is largely a result of: (i) a decrease in the price of coal in 2014 compared to 2013 and (ii) a change in the mix of coal used in our process, using more anthracite coal, which has a lower price per BTU than bituminous coal. In 2011, we exercised certain of our options to purchase coal mining concessions, which we intend to use to continue to reduce our use of bituminous coal.

Electricity is used in our facilities mainly to power our cement mills. We power our Pacasmayo facility with electricity purchased from Electroperú, with which we have a long-term supply agreement expiring in 2020. Our Rioja facility is powered primarily with electricity from ELOR, with which we have a medium-term supply agreement expiring in 2017. Under these agreements, the price of electricity is based on a formula that takes into consideration our consumption of electricity and certain market variables, including the international price of oil. Electricity accounted for approximately 12.6% of our cost of production in 2014, 12.5% in 2013 and 11.9% in 2012. Electricity costs tend to be lower during the rainy season, from January to March of each year, as our region is served primarily by hydro-electric power plants.

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Since 2012, because of stronger demand for cement and the corrective maintenance of our principal kiln, which reduced our ability to produce our own clinker, we started to import part of the clinker that we use. As a result, we had an increase in our operating costs in 2012, as the cost per metric ton of imported clinker is higher than clinker we produce. In 2014, we used approximately 443,526 metric tons of imported clinker, which represented approximately 22.0% of our cement production cost for 2014, compared to approximately 351,501 metric tons of imported clinker in 2013, which represented 17.3% of our cement production cost for 2013. We expect to continue to import a portion of the clinker that we use until our Piura plant is operational.

In addition, we purchase from third parties admixtures and certain raw materials that we use in our production process, including gypsum, blast furnace slag, iron and other materials. Admixtures and raw materials used in our cement production process do not include construction supplies that we acquire from third-parties for resale through our distribution network along with our cement products. The cost of admixtures and raw materials purchased from third parties accounted for approximately 9.9% of our cost of production in 2014, 8.6% in 2013 and 15.7% in 2012.

Our labor costs have remained stable during the past three years. Personnel expenses represented 19.7% of our total costs and expenses in 2014, 20.2% in 2013 and 18.3% for 2012.

Third-Party Construction Supplies

In addition to selling our own products, we also sell and distribute construction supplies manufactured by third parties, such as steel rebar, wires and pipes, that are typically used in construction along with our cement. Our profit margins from the sale of third party construction supplies are significantly lower than the margins on our cement products and they are affected by fluctuations in product prices. We sell these products primarily as a service to retailers in our distribution network in an effort to support the sale of our cement products.

Suspension of Zinc Calcine Operations

In 2008, we suspended our zinc mining activities due to adverse market conditions. In 2009 and 2010, however, we continued to produce and sell zinc calcine in diminishing quantities, as we used our remaining inventory of zinc oxide ore. In 2011, we did not produce zinc calcine and used our Waelz rotary kiln to produce quicklime instead. We sold small quantities of zinc calcine in 2011 from our remaining inventory of zinc calcine. As a result, our net sales and cost of sales derived from zinc calcine, which is recorded under the caption “Other”, declined. The lower production levels during those periods were not sufficient to fully absorb our fixed production costs and, consequently, our gross profit for “Other” was negative in 2009 and 2010, despite increasing zinc prices during those years.

Due to a sudden and sharp decline in the international price of zinc in 2011 and based on our future expectation of zinc prices, we recorded an impairment of approximately S/.96.0 million during 2011 related to our zinc mining assets, of which S/.75.4 million corresponded to our zinc mine and S/.20.6 million to the portion of the plant used for zinc calcine production.

In 2013, we returned the mining concession to Compañía Pilar de Amazonas S.A., which is the owner of the surface area of the zinc mining unit. The mine’s closing plan is currently being executed.

New Mining Royalty Tax

On September 29, 2011, the Peruvian government amended the Royalty Mining Law to increase taxation on metallic and non-metallic mining activities. For a description of the new tax, see “Item 4. Information on the Company—B. Business Overview—Regulatory Matters—Mining Regulations.” The mining royalty tax for the exploitation of metallic and non-metallic minerals is payable on a quarterly basis in an amount equal to the greater of (i) an amount determined in accordance with a statutory scale of tax rates based on a company’s operating profit margin that is applied to its operating profit, as adjusted by certain non-deductible expenses and (ii) 1% of a company’s net sales, in each case during the applicable quarter. These amounts are determined based on our unconsolidated financial statements and those of our subsidiaries with operations that are under the scope of the Royalty Mining Law. Mining royalty payments are deductible for income tax purposes in the fiscal year in which

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such payments are made. Future mining royalty tax payments would have been dependent on our operating profit, operating profit margin and net sales. In November 2013, the Peruvian Constitutional Court affirmed the constitutional challenge we filed against the new regulation of the Mining Royalty Law, in a final and unappealable ruling, on the grounds that the new regulation violates the constitutional right of property, as well as the principles of legal reserve and proportionality. Therefore, the new regulation is rendered inapplicable to us. As a result, we will continue to use as a basis for the calculation of the mining royalty the value of the concentrate or mining component, and not the value of the product obtained from the industrial or manufacturing process. For additional information, see note 27 to our annual audited consolidated financial statements included in this annual report.

Operating Segments

We have three operating segments: (i) cement, concrete and blocks, (ii) quicklime and (iii) sales of construction supplies. In the past, we also sold zinc calcine in smaller quantities recorded under the caption “Other”. For additional information on our operating segments, see note 31 to our annual audited consolidated financial statements included in this annual report.

New Accounting Pronouncements

For a description of new interpretations and improvements to IFRS issued by the IASB applicable to us for periods beginning on or after January 1, 2014, see note 2.3.19 to our annual audited consolidated financial statements included in this annual report.

Critical Accounting Policies

The following is a discussion of our application of critical accounting policies that require our management to make certain assumptions about matters that are uncertain at the time the accounting estimate is made, where our management could reasonably use different estimates, or where accounting changes may reasonably occur from period to period, and in each case would have a material effect on our financial statements. For additional information, see note 2.3 to our annual audited consolidated financial statements included in this annual report.

Determination of Useful Live of Assets for Depreciation and Amortization Purposes

Depreciation of mining concessions and mine development costs are charged to cost of production on a units-of-production basis using proved reserves. Other assets are depreciated on a straight-line-basis over their estimated useful lives, as follows:

Property, Plant and Equipment	Estimated Years of Useful Life
Buildings and other construction:
Administrative facilities	Between 35 and 48
Main production structures	Between 30 and 49
Minor production structures	Between 20 and 35
Machinery and equipment:
Mills and horizontal furnaces	Between 42 and 49
Vertical furnaces, crushers and grinders	Between 23 and 36
Electricity facilities and other minors	Between 12 and 35
Furniture and fixtures	10
Transportation units:
Heavy units	Between 11 and 21
Light units	Between 8 and 11
Computer equipment	4
Tools	Between 5 and 10

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The assets’ residual value, useful lives and methods of depreciation/amortization are reviewed at each reporting period, and adjusted prospectively, if appropriate.

An item of property, plant and equipment and any significant part initially recognized is derecognized upon disposal or when no future economic benefits are expected from its use or disposal. Any gain or loss arising on derecognition of the asset (calculated as the difference between the net disposal proceeds and the carrying amount of the asset) is included in the consolidated income statement when recognition of the asset is derecognized.

Exploration, Evaluation and Mine Development Costs

Mining Concessions

Mining concessions correspond to the exploration rights in areas of interest acquired. Mining concessions are stated at cost, net of accumulated amortization and/or accumulated impairment losses, if any, and are presented within the property, plant and equipment caption. Those mining concessions are amortized starting from the production phase following the units-of-production method based on proved reserves to which they relate. The unit-of-production rate for the amortization of mining concessions takes into account expenditures incurred to the date of the calculation. If we abandon the concession, the costs associated are written-off in the consolidated statement of profit or loss.

As of December 31, 2014 and 2013, no amortization under units-of-production method was determined since our mining concessions are not yet on production phase.

Mine Development Costs and Stripping Costs

Mine development costs

Mine development costs incurred are stated at cost and are the next step in development of mining projects after the exploration and evaluation stage. Mine development costs are, upon commencement of the production phase, presented net of accumulated amortization and/or accumulated impairment losses, if any, and are presented within the property, plant and equipment caption. Amortization is calculated using the unit of-production method based on proved reserves to which they relate. The unit-of-production rate for the amortization of mine development costs takes into account expenditures incurred to the date of the calculation. Expenditures that increase significantly the economic reserves in the mining unit under exploitation are capitalized.

As of December 31, 2014 and 2013, no amortization under units-of-production method was determined since none of the mining projects were in production phase.

Stripping Costs

Stripping costs incurred in the development of a mine before production commences are capitalized as part of mine development costs and subsequently amortized over the life of the mine on a units-of-production basis, using the proved reserves.

Stripping costs incurred subsequently during the production phase of its operation are recorded as part of cost of production.

As of December 31, 2014 and 2013, no stripping costs were determined since none of the mining projects were in production phase.

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Exploration and Evaluation Assets

Exploration and evaluation activity involves the search for mineral resources, the determination of technical feasibility and the assessment of commercial viability of an identified resource. Exploration and evaluation activity includes:

• Researching and analyzing historical exploration data;

• Gathering exploration data through geophysical studies;

• Exploratory drilling and sampling;

• Determining and examining the volume and grade of the resource;

• Surveying transportation and infrastructure requirements; and

• Conducting market and finance studies.

License costs paid in connection with a right to explore in an existing exploration area are capitalized and amortized over the term of the license. Once the legal right to explore has been acquired, exploration and evaluation costs are charged to the consolidated statement of profit or loss, unless management concludes that a future economic benefit is more likely than not to be realized, in which case such costs are capitalized. These costs include directly attributable employee remuneration, materials and fuel used, surveying costs, drilling costs and payments made to contractors.

In evaluating if costs meet the criteria required for such costs to be capitalized, several different sources of information are used, including the nature of the assets, extension of explored area and results of sampling, among others. The information used to determine the probability of future benefits depends on the extent of exploration and evaluation that has been performed. Exploration and evaluation costs are capitalized when the exploration and evaluation activity is within an area of interest for which it is expected that the costs will be recouped by future exploitation, and active and significant operations in relation to the area are continuing or planned for the future.

The main estimates and assumptions management uses to determine whether it is likely that future exploitation will result in future economic benefits include: expected operational costs, committed capital expenditures, expected mineral prices and mineral resources found. For this purpose, the future economic benefit of the project can reasonably be regarded as assured when mine-site exploration is being conducted to confirm resources, mine-site exploration is being conducted to convert resources to reserves or when we are conducting a feasibility study, based on supporting geological information.

As the capitalized exploration and evaluation costs asset is not available for use, it is not amortized. These exploration costs are transferred to mine development assets once the work completed to date supports the future development of the property and such development receives appropriate approvals. In this phase, the exploration costs are amortized in accordance with the estimated useful life of the mining property from the time the commercial exploitation of the reserves begins. All capitalized exploration and evaluation costs assets are monitored for indications of impairment. Where a potential impairment is indicated, assessment is performed for each area of interest in conjunction with the group of operating assets (representing a cash generating unit) to which the exploration is attributed. Exploration areas where exploitable resources have been identified but require major capital expenditure before production can begin, are continually evaluated to ensure that commercial quantities of resources exist or to ensure that additional exploration work is under way or planned. If capital expenditure is no longer expected to be recovered it is charged to the consolidated statement of profit or loss. Management assesses at each reporting date whether there is an indication that an exploration and evaluation costs asset may be impaired. The following facts and circumstances are considered in this assessment:

(i) the period for which the entity has the right to explore in the specific area has expired during the period or will expire in the near future, and is not expected to renewal;

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(ii) substantive expenditure on further exploration for and evaluation of mineral resources in the specific area is neither budgeted nor planned;

(iii) exploration for and evaluation of mineral resources in the specific area have not led to the discovery of commercially viable quantities of mineral resources and the entity has decided to discontinue such activities in the specific area; and

(iv) sufficient data exist to indicate that, although a development in the specific area is likely to proceed, the carrying amount of the exploration and evaluation asset is unlikely to be recovered in full from successful development or by sale.

If any indication of impairment exists, an impairment of the exploration and evaluation assets is recorded.

Revenue Recognition

Revenue is recognized to the extent it is probable that we will obtain the economic benefits and the revenue can be reliably measured, regardless of when the payment is being made. Revenue is measured at the fair value of the consideration received or receivable, taking into account contractually defined terms of payment and excluding taxes or duty.

The following specific recognition criteria must be also met before revenue is recognized:

Sales of Goods

Revenue from sales of goods is recognized when the significant risks and rewards of ownership have been transferred to the buyer on delivery of the goods.

Operating Lease Income

Income from operating lease of land and office is recognized on a monthly accrual basis during the term of the lease.

Interest Income

For all financial instruments measured at amortized cost and interest-bearing financial assets, interest income is recorded using the effective interest rate (“EIR”). EIR is the rate that discounts the estimated future cash payments or receipts over the expected life of the financial instrument or a shorter period, where appropriate, to the net carrying amount of the financial asset or liability. Interest income is included in finance income in the consolidated statement of profit or loss.

Impairment of Non-Financial Assets

We assess at each reporting date whether there is an indication that an asset may be impaired. If any indication exists, or when annual impairment testing for an asset is required, we estimate the asset’s recoverable value. An asset’s recoverable value is the higher of an asset’s or cash-generating unit’s fair value less costs of disposal and its value in use, and is determined for an individual asset, unless the asset does not generate net cash inflows that are largely independent of those from other assets or groups of assets. Where the carrying amount of an asset’s cash-generating unit exceeds its recoverable amount, the asset is considered impaired and is written down to its recoverable amount. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. In determining fair value less costs of disposal, recent market transactions are taken into account. If no such transactions can be identified, an appropriate valuation model is used. These calculations are corroborated by valuation multiples, quoted share prices for publicly traded subsidiaries or other available fair value indicators.

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We base our impairment calculation on detailed budgets and forecast calculations, which are prepared separately from our cash generation units to which the individual assets are allocated. Impairment losses of continuing operations, including impairment on inventories, are recognized in the consolidated statement of profit and loss in expense categories consistent with the function of the impaired asset.

An assessment is made at each reporting date as to whether there is any indication that previously recognized impairment losses may no longer exist or may have decreased. If such indication exists, we estimate the asset’s or cash-generating unit’s recoverable amount. A previously recognized impairment loss is reversed only if there has been a change in the assumptions used to determine the asset’s recoverable amount since the last impairment loss was recognized. The reversal is limited so that the carrying amount of the asset does not exceed its recoverable amount, nor exceed the carrying amount that would have been determined, net of depreciation, had no impairment loss been recognized for the asset in prior years. Such reversal is recognized in the consolidated statement of profit and loss. Exploration and evaluation assets are tested for impairment annually as of December 31, either individually or at the cash-generating unit level, as appropriate and when circumstances indicate that the carrying value may be impaired.

Deferred Tax

Deferred tax is provisioned using the liability method on temporary differences between the tax base of assets and liabilities and their carrying amounts for financial reporting purposes at the reporting date. Deferred tax liabilities are recognized for all taxable temporary differences.

Deferred tax assets are recognized for all deductible temporary differences, the carry forward of unused tax credits and unused tax losses. Deferred tax assets are recognized to the extent it is probable that taxable profit will be available against which the deductible temporary differences, and the carry forward of unused tax credits and unused tax losses can be utilized, except in respect of deductible temporary differences associated with investments in subsidiaries, where deferred assets are recognized only to the extent that it is probable that the temporary differences will reverse in the foreseeable future and taxable profit will be available against which the temporary differences can be utilized.

The carrying amount of deferred tax assets is reviewed at each reporting date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred tax asset to be utilized. Unrecognized deferred tax assets are re-assessed at each reporting date and are recognized to the extent that it has become probable that future taxable profits will allow the deferred tax asset to be recovered.

Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the year when the asset is realized or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted at the reporting date. Deferred tax related to items recognized outside profit or loss is recognized outside profit or loss. Deferred tax items are recognized in correlation to the underlying transaction either in other comprehensive income or directly in equity.

Deferred tax assets and deferred tax liabilities are offset if a legally enforceable right exists to set off current tax assets against current income tax liabilities and the deferred taxes relate to the same taxable entity and the same taxation authority.

Borrowing costs

Borrowing costs directly attributable to the acquisition, construction or production of an asset that necessarily takes a substantial period of time to get ready for its intended use or sale are capitalized as part of the cost of the respective assets. Borrowing costs consist of interest and other costs that an entity incurs in connection with the borrowing of funds. During 2014 and 2013 the Group capitalized borrowing costs mainly related with the expansion of the cement plant located in Piura. This project is expected to be completed during 2015. After this period all borrowing costs are recognized in the statement of profit or loss in the period in which they are incurred.

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Derivative financial instruments and hedge accounting -

Initial recognition and subsequent measurement:

We use derivative financial instruments, such as cross currency swaps, to hedge our foreign currency risk. Such derivative financial instruments are initially recognized at fair value on the date on which a derivative contract is entered into and are subsequently remeasured at fair value. Derivatives are carried as financial assets when the fair value is positive and as financial liabilities when fair value is negative.

Any gains or losses arising from changes in the fair value of derivatives are taken directly to profit or loss, except for the effective portion of cash flows hedges, which is recognized in OCI and later reclassified to profit or loss when the hedges item affects profit or loss.

For the purpose of hedge accounting, the cross currency swap instrument was classified as cash flow hedge.

At inception of the hedge relationship, we formally designate and document the hedge relationship to which we wish to apply hedge accounting and the risk management objective and strategy for undertaking the hedge. The documentation includes identification of the hedging instrument, the hedged item or transaction, the nature of the risk being hedged and how our management will assess the effectiveness of changes in the hedging instrument’s fair value in offsetting the exposure to changes in the hedged item’s fair value or cash flows attributable to the hedged risk. Such hedges are expected to be highly effective in achieving offsetting changes in fair value or cash flows and are assessed on an ongoing basis to determine that they actually have been highly effective throughout the financial reporting periods for which they were designated.

Hedges that meet the strict criteria for hedge accounting and are between a range of 80 and 125 days of effectiveness, are accounted for as described below:

Cash flow hedges

The effective portion of the gain or loss on the hedging instrument is recognized directly in other comprehensive income in the caption “Cash flow hedges reserve”, while any ineffective portion is recognized immediately in the consolidated statements of profit or loss as finance costs.

Amounts recognized as other comprehensive income are transferred to the consolidated statements of profit or loss when the hedged transaction affects profit or loss, such as when the hedged financial income or financial expense is recognized or when a forecast sale occurs.

If the hedging instrument expires or is sold, terminated or exercised without replacement or rollover, or if its designation as a hedge is revoked, or when the hedge no longer meets the criteria for hedge accounting, any cumulative gain or loss previously recognized in OCI hedge reserve remains separately in equity until the forecast transaction occurs or the foreign currency firm commitment is met.

For more information about fair value of our cross currency swaps see note 30 (c) to our annual audited consolidated financial statements,

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Results of Operations

Comparison of Year Ended December 31, 2014 to Year Ended December 31, 2013

	Year ended December 31,
(amounts in millions of S/.)	2014			2013			Variation %
Sales of goods		1,242.6			1,239.7			0.2	%
Cost of sales		(724.1	)		(716.2	)		1.1	%
Gross profit		518.4			523.4			(1.0	)%
Operating income (expense):
Administrative expenses		(194.9	)		(208.9	)		(6.7	)%
Selling and distribution expenses		(30.5	)		(29.8	)		2.4	%
Net gain on sale of available-for-sale financial investment		10.5			—			N/M
Other operating income, net		(3.0	)		8.3			N/M
Total operating expense, net		(217.9	)		(230.5	)		(5.4	)%
Operating profit		300.5			293.0			2.6	%
Other income (expense):
Finance income		11.7			27.2			(57.0	)%
Finance costs		(31.2	)		(37.1	)		(15.9	)%
Gain from exchange difference, net		(14.8	)		(48.4	)		(69.4	)%
Total other expenses, net		(34.3	)		(58.3	)		(41.2	)%
Profit before income tax		266.3			234.7			13.5	%
Income tax expense		(77.5	)		(82.4	)		(5.9	)%
Profit for the year		188.8			152.3			24.0	%

N/M means not meaningful.

Sales of Goods

The following table sets forth a breakdown of our sales of goods by segment for 2014 and 2013:

	Year ended December 31,
	2014				2013
	(in millions of S/.)		%		(in millions of S/.)		%
Cement, concrete and blocks		1,085.4		87.3		1,102.1		88.9
Quicklime		61.1		4.9		31.9		2.6
Construction supplies		95.4		7.7		103.3		8.3
Other		0.8		0.1		2.4		0.2
Total sales of goods		1,242.6		100.0		1,239.7		100.0

Our total sales of goods increased by 0.2%, or S/.2.9 million, to S/.1,242.6 million in 2014 from S/.1,239.7 million in 2013. This increase was primarily due to the following factors:

• a 1.5%, or S/.16.7 million, decrease in 2014 in sales of cement, concrete and blocks as a result of a slowdown in construction levels due to reduced economic growth;

• offset by a 91.5%, or S/.29.2 million, increase in 2014 in the sales of quicklime, due to stronger demand from the mining industry; and

• a 7.6%, or S/.7.9 million, decrease in 2014 in the sale of construction supplies, due to increased competition in this segment.

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The following table sets forth the composition of our sales of cement, concrete and blocks for 2014 and 2013:

	Year ended December 31,
	2014		2013		Variation
	(in millions of S/.)				%
Cement		929.5		919.9		1.0
Concrete		124.0		153.6		(19.3	)
Blocks		31.9		28.6		11.5
Total		1,085.4		1,102.1		(1.5	)

Our total sales of cement, concrete and blocks decreased by 1.5%, or S/.16.7 million, to S/.1,085.4 million in 2014 from S/.1,102.1 million in 2013. This increase was primarily due to the following factors:

• sales of cement increased by 1.0%, or S/.9.6 million, in 2014, due to an increase in the average price of cement (1.3%), offset by slightly less volume of cement sold (0.3%);

• sales of concrete decreased by 19.3%, or S/.29.6 million, in 2014, due to a decrease in volume (17.9%) and to a lesser extent to a decrease in the average price of concrete (1.4%); and

• sales of blocks increased by 11.5%, or S/.3.3 million, in 2014, due to an increase in volume (5.9%) and to a decrease in the average price of blocks (5.6%).

Cost of Sales

The following table sets forth a breakdown of our cost of sales by segment for 2014 and 2013:

	Year ended December 31,
	2014				2013
	(in millions of S/.)		%		(in millions of S/.)		%
Cement, concrete and blocks		578.9		79.9		587.3		82.0
Quicklime		52.0		7.2		26.8		3.7
Construction supplies		92.5		12.8		99.9		14.0
Other		0.8		0.1		2.2		0.3
Total		724.1		100.0		716.2		100.0

Our total cost of sales increased by 1.1%, or S/.7.9 million, to S/.724.1 million for 2014, from S/.716.2 million for 2013, primarily due to the following factors:

• a 1.4%, or S/.8.4 million, decrease in the cost of sales of cement, concrete and blocks in 2014, due primarily to cost savings that resulted in lower unit cost of production, and to a lesser extent due to lower volume of cement sold;

• offset by a 93.7%, or S/.25.1 million, increase in 2014 in the cost of sales of quicklime, due primarily to an increase in the sales volume of quicklime and to a higher cost because of the quality of the quicklime sold; and

• a 7.4%, or S/.7.4 million, decrease in 2014 in the cost of sales of construction supplies, due to a decrease in sales volume.

The following table sets forth the composition of our cost of sales of cement, concrete and blocks for 2014 and 2013:

	Year ended December 31,
	2014		2013		Variation
	(in millions of S/.)				%
Cement		471.4		474.6		(0.7	)
Concrete		85.1		96.2		(11.4	)
Blocks		22.4		16.5		35.2
Total		578.9		587.3		1.4

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Our cost of sales represented 53.3% of our sales in 2014, the same as the 53.3% in 2013. Our total cost of sales of cement, concrete and blocks decreased by 1.4%, or S/.8.4 million, in 2014, primarily due to the following factors:

• cost of sales of cement decreased by 0.7%, or S/.3.2 million, in 2014, mainly due to a lower volume of cement sold (0.3%) and a decrease in production cost (0.4%);

• cost of sales of concrete decreased by 11.4%, or S/.11.0 million, in 2014, due to a decrease in volume sold (17.9%) offset by an increase in production cost (6.5%); and

• cost of sales of blocks increased by 35.2%, or S/.5.8 million in 2014, due primarily to an increase in volume sold (5.9%) and an increase in production cost (29.3% ).

Gross Profit

The following table sets forth a breakdown of our gross profit and gross profit margin by segment for 2014 and 2013:

	Year ended December 31,
	2014						2013
	Gross profit			Gross profit margin			Gross profit		Gross profit margin
	(in millions of S/.)			%			(in millions of S/.)		%
Cement, concrete and blocks		506.5			46.7			514.8		46.7
Quicklime		9.1			14.9			5.0		15.8
Construction supplies		2.9			3.0			3.4		3.3
Other		(0.1	)		(12.5	)		0.2		8.3
Total gross profit		518.4			41.7	%		523.4		42.2

Total gross profit decreased by 1.0%, or S/.5 million, to S/.518.4 million in 2014, from S/.523.4 million in 2013 mainly as a result of the decreased volume of cement sold despite of the operational efficiencies implemented in the production process during 2014, and to a lesser extent due to a decrease of 14.7% or S/.0.5 million in 2014 in gross profit from the constructions supplies segment due to lower sales because of higher competition. This decrease was offset by an increase of 82.0%, or S/.4.1 million, in quicklime in 2014, due to higher sales volumes. Our gross profit margin (i.e., gross profit as a percentage of net sales) for 2014 was 41.7% compared to 42.2% for 2013.

The following table sets forth a breakdown of our gross profit and gross profit margin for the cement, concrete and blocks segment for 2014 and 2013:

	Year ended December 31,
	2014				2013
	Gross profit		Gross profit margin		Gross profit		Gross profit margin		Variation
	(in millions of S/.)		%		(in millions of S/.)		%		percentage points
Cement		458.1		49.3		445.3		48.4		0.9
Concrete		38.9		31.4		57.4		37.4		(6.0	)
Blocks		9.5		29.8		12.1		42.3		12.5
Total gross profit		506.5		46.7		514.8		46.7		0

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Gross margin profit margin for the cement, concrete and blocks segment remained stable at 46.7% in 2014 compared to 2013. This was due mainly to an increase in cement margin (0.9 percentage points) due to operational efficiencies implemented in the production processes during 2014, offset by a decrease in concrete margin (-6.0 percentage points) as a result of lower sales volume.

Operating Income (Expense)

Our operating expenses primarily reflect administrative and selling and distribution expenses. In 2014, our operating expenses decreased by S/.12.6 million to S/.217.9 million in 2014 from S/.230.5 million in 2013.

Administrative Expenses

The following table sets forth the composition of our administrative expenses for 2014 and 2013:

	Year ended December 31,
(in millions of S/.)	2014		2013
Personnel expenses		100.5		106.4
Third-party services		64.4		72.6
Board of directors compensation		4.9		5.6
Depreciation and amortization		12.6		10.4
Taxes		2.9		3.4
Consumption of supplies		3.0		3.7
Donations		5.9		6.3
Others		0.7		0.5
Total		194.9		208.9

Our administrative expenses decreased by 6.7%, or S/.14.0 million, to S/.194.9 million in 2014 from S/.208.9 million in 2013. Personnel expenses decreased by S/.5.9 million and third-party services decreased by S/.8.2 million mainly due to a decrease in headcount.

Administrative expenses related to the cement, concrete and blocks segment accounted for approximately 86.5% of total administrative expenses for 2014 compared to approximately 88.3% for 2013. Administrative expenses related to the quicklime, construction supplies and other segments accounted for approximately 5.7%, 0.7% and 7.1%, respectively, of total administrative expenses for 2014 compared to approximately 2.9%, 1.0% and 7.9%, respectively, for 2013.

Selling and Distribution Expenses

The following table sets forth the components of our selling and distribution expenses for 2013 and 2012:

	Year ended December 31,
(in millions of S/.)	2014		2013
Personnel expenses		15.4		14.5
Advertising and promotion expenses		9.7		10.5
Other		5.4		4.8
Total		30.5		29.8

Our total selling and distribution expenses increased by 2.3%, or S/.0.7 million, to S/.30.5 million in 2014 from S/.29.8 million in 2013.

Selling and distribution expenses related to the cement, concrete and blocks segment represented approximately 92.2 % of total selling and distribution expenses for 2014, compared to 92.6% for 2013. Selling and distribution expenses related to quicklime, the construction supplies and other segments represented approximately 1.8%, 5.7% and 0.3%, respectively, of total selling and distribution expenses for 2014, compared to 0.8%, 6.3% and 0.3%, respectively, for 2013.

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Other Operating Income, Net

Our other operating income, net decreased S/.11.2 million, to a loss of S/.3.0 million in 2014 from a gain of S/.8.3 million in 2013. This decrease was due mainly to disposal of property, plant and equipment and less cost recovery from previous periods.

Net gain on sale of available-for-sale financial investment

On October 10, 2014, we sold available-for-sale financial investment in SIA for approximately US$6,514,000 (equivalent to S/.18,936,000). As a result of this disposition, in October 2014, we transferred a gain of S/.10,537,000 from Other comprehensive income to the consolidated statement of profit or loss. Sindicato de Inversiones y Administración S.A. (SIA) is the main shareholder of Union Andina de Cementos S.A.A. with a participation of 43.4% in its capital stock as of December 31, 2013.

Operating Profit

As a result of the foregoing, our operating profit increased by 2.6%, or S/.7.5 million, to S/.300.5 million in 2014 from S/.293.0 million in 2013. Our operating profit margin (i.e., operating profit as a percentage of sales) for 2014 was 24.2% compared to 23.6% for 2013.

Other Expenses, Net

Our other expenses, net decreased by S/.24.0 million, to S/.34.3 million in 2014 from S/.58.3 million in 2013, mainly due to reduced exposure to exchange rate fluctuations which represented a loss of S/.48.4 million in 2013, and only S/.14.8 million in 2014, and to a decrease in finance costs which represented S/.31.2 million in 2014, versus S/.37.1 million in 2013. The decrease in exposure was mainly due to the fact that we entered into a cross currency swap agreement for US$120 million of the principal amount of our US-dollar denominated debt to manage the foreign exchange risks associated with this debt. The decrease in finance costs was mainly due to higher interest capitalization because of the increase in expenditures for the construction of the Piura plant.

Income Tax Expense

Our income tax expense decreased by 5.9%, or S/.4.9 million, to S/77.5 million for 2014 from S/.82.4 million for 2013. In December 2014, the Peruvian Government approved the progressive reduction of the income tax rate from 30% to 28% to be effective in 2015 and 2016, to 27% during 2017 and 2018 and 26% from 2019 onwards. This reduction in future tax rates had a net impact of S/.10,497,000 during 2014 as a reduction of our deferred income tax liability, such amount was recognized as a reduction of income tax expense in the consolidated statement of profit or loss in 2014. Our effective tax rate for 2014 was 29.1%, 35.1% for 2013 and 32.2% for 2012.

Profit

As a result of the foregoing, our profit for 2014 increased by 24.0%, or S/.36.5 million, from S/.152.3 million for 2013 to S/.188.8 million for 2014, mainly due to lower administrative expenses, lower difference in exchange rate, and an extraordinary income derived from the sale of available-for-sale financial investment, which represented a net gain of S/.10.5 million.

69

Results of Operations

Comparison of Year Ended December 31, 2013 to Year Ended December 31, 2012

	Year ended December 31,
(amounts in millions of S/.)	2013			2012			Variation %
Sales of goods		1,239.7			1,169.8			6.0
Cost of sales		(716.2	)		(713.0	)		0.4
Gross profit		523.4			456.8			14.6
Operating income (expense):
Administrative expenses		(208.9	)		(203.1	)		2.9
Selling and distribution expenses		(29.8	)		(30.9	)		(3.6	)
Other operating income, net		8.3			7.7			7.8
Total operating expense, net		(230.5	)		(226.3	)		1.9
Operating profit		293.0			230.5			27.1
Other income (expense):
Finance income		27.2			23.3			16.7
Finance costs		(37.1	)		(23.8	)		55.9
Gain from exchange difference, net		(48.4	)		(0.7	)		N/M
Total other expenses, net		(58.3	)		(1.2	)		N/M
Profit before income tax		234.7			229.3			2.4
Income tax expense		(82.4	)		(73.7	)		11.8
Profit for the year		152.3			155.6			(2.1	)

N/M means not meaningful.

Sales of Goods

The following table sets forth a breakdown of our sales of goods by segment for 2013 and 2012:

	Year ended December 31,
	2013				2012
	(in millions of S/.)		%		(in millions of S/.)		%
Cement, concrete and blocks		1,102.1		88.9		972.2		83.1
Quicklime		31.9		2.6		52.7		4.5
Construction supplies		103.3		8.3		143.2		12.2
Other		2.4		0.2		1.7		0.2
Total sales of goods		1,239.7		100.0		1,169.8		100.0

Our total sales of goods increased by 6.0%, or S/.69.9 million, to S/.1,239.7 million in 2013 from S/.1,169.8 million in 2012. This increase was primarily due to the following factors:

• a 13.4%, or S/.129.9 million, increase in 2013 in the sales of cement, concrete and blocks. The volume of cement sold increased 4.0%, to 2,349 thousand metric tons in 2013, from 2,258 thousand metric tons in 2012 as a result of increased construction levels;

• offset by a 39.5%, or S/.20.8 million, decrease in 2013 in the sales of quicklime, due to lower demand from the mining industry, which has decreased its production due to lower international prices; and

• offset by a 27.9%, or S/.39.9 million, decrease in 2013 in the sales of construction supplies, due to increased competition in this segment.

70

The following table sets forth the composition of our sales of cement, concrete and blocks for 2013 and 2012:

	Year ended December 31,
	2013		2012		Variation
	(in millions of S/.)				%
Cement		919.9		828.0		11.1
Concrete		153.6		118.6		29.5
Blocks		28.6		25.6		11.7
Total		1,102.1		972.2		13.4

Our total sales of cement, concrete and blocks increased by 13.4%, or S/.129.9 million, to S/.1,102.1 million in 2013 from S/.972.2 million in 2012. This increase was primarily due to the following factors:

• sales of cement increased by 11.1%, or S/.91.9 million, in 2013, due to greater volume of cement sold (4.1%) and an increase in price (7.0%);

• sales of concrete increased by 29.5%, or S/.35.0 million, in 2013, due to an increase in volume (23.1%) and in price (6.4%); and

• sales of blocks increased by 11.7%, or S/.3 million, in 2013, due to an increase in volume (10.9%) and in price (0.8%).

Cost of Sales

The following table sets forth a breakdown of our cost of sales by segment for 2013 and 2012:

	Year ended December 31,
	2013				2012
	(in millions of S/.)		%		(in millions of S/.)		%
Cement, concrete and blocks		587.3		82.0		531.7		74.6
Quicklime		26.8		3.7		39.8		5.6
Construction supplies		99.9		14.0		138.3		19.4
Other		2.2		0.3		3.2		0.4
Total		716.2		100.0		713.0		100.0

Our total cost of sales increased by 0.4%, or S/.3.2 million, to S/.716.2 million for 2013, from S/.713.0 million for 2012, primarily due to the following factors:

• a 10.5%, or S/.55.6 million, increase in the cost of sales of cement, concrete and blocks in 2013, due primarily to the greater volume of cement sold, and an increase in the cost of clinker due greater use of imported clinker (with higher unit cost);

• offset by a 32.7%, or S/.13.0 million, decrease in 2013 in the cost of sales of quicklime, due to a decrease in the volume sale of quicklime; and

• further offset by a 27.8%, or S/.38.4 million, decrease in 2013 in the cost of sales of construction supplies, due to a decrease in sales volume.

The following table sets forth the composition of our cost of sales of cement, concrete and blocks for 2013 and 2012:

	Year ended December 31,
	2013		2012		Variation
	(in millions of S/.)				%
Cement		474.6		442.1		7.4
Concrete		96.2		75.2		27.9
Blocks		16.5		14.4		14.6
Total		587.3		531.7		10.5

71

Our cost of sales represented 53.3% of our sales in 2013 compared with 54.7% in 2012. Our total cost of sales of cement, concrete and blocks increased by 10.5%, or S/.55.6 million, in 2013, primarily due to the following factors:

• cost of sales of cement increased by 7.4%, or S/.32.5 million, in 2013, mainly due to a greater volume of cement sold (4.0%) and a 3.4% increase in production cost;

• cost of sales of concrete increased by 27.9%, or S/.21.0 million, in 2013, due to an increase in volume sold (22.9%) and a 5.0% increase in production cost; and

• cost of sales of blocks increased by 14.6%, or S/.2.1 million, in 2013, due to an increase in volume sold (11.2%) and a 3.4% increase in production cost.

In addition, our cost of sales denominated in U.S. dollars was negatively affected by the depreciation of the nuevo sol versus the U.S. dollar during 2013 as compared to 2012. See “Item 3. Key Information—A. Selected Financial Data—Exchange Rates.” We estimate that, as a result of this depreciation in the nuevo sol versus the U.S. dollar, our cost of sales increased by approximately S/.35.1 million during 2013 as compared to 2012.

Gross Profit

The following table sets forth a breakdown of our gross profit and gross profit margin by segment for 2013 and 2012:

	Year ended December 31,
	2013				2012
	Gross profit		Gross profit margin		Gross profit			Gross profit margin
	(in millions of S/.)		%		(in millions of S/.)			%
Cement, concrete and blocks		514.8		46.7		440.5			45.3
Quicklime		5.0		15.8		12.9			24.5
Construction supplies		3.4		3.3		4.9			3.4
Other		0.2		8.3		(1.5	)		(88.2	)
Total gross profit		523.4		42.2		456.8			39.0

Total gross profit increased by 14.6%, or S/.66.6 million, to S/.523.4 million in 2013, from S/.456.8 million in 2012 mainly as a result of the increased volume of cement sold and of the operational efficiencies implemented in the production process during 2013. This increase was offset by a decrease of 61.2%, or S/.7.9 million, in sales of quicklime in 2013, due to lower sales volumes, and a decrease of 30.6%, or S/.1.5 million, in 2013 in sales of construction supplies due to higher competition in this segment. Our gross profit margin (i.e., gross profit as a percentage of net sales) for 2013 was 42.2% compared to 39.0% for 2012.

The following table sets forth a breakdown of our gross profit and gross profit margin for the cement, concrete and blocks segment for 2013 and 2012:

	Year ended December 31,
	2013				2012
	Gross profit		Gross profit margin		Gross profit		Gross profit margin		Variation
	(in millions of S/.)		%		(in millions of S/.)		%		percentage points
Cement		445.3		48.4		385.9		46.6		1.8
Concrete		57.4		37.4		43.4		36.6		0.8
Blocks		12.1		42.3		11.2		43.8		(1.5	)
Total gross profit		514.8		46.7		440.5		45.3		1.4

72

Gross margin profit for the cement, concrete and blocks segment increased to 46.7% in 2013 from 45.3% in 2012, or 1.4 percentage points. This increase is mainly explained by the increase in cement margin (1.8 percentage points) due to operational efficiencies implemented in the production processes during 2013 and a 0.8 percentage point increase in the concrete margin, mainly due to greater volume sold.

Operating Income (Expense)

Our operating expenses primarily reflect administrative and selling and distribution expenses. In 2013, our operating expenses increased by S/.4.2 million to S/.230.5 million in 2013 from S/.226.3 million in 2012.

Administrative Expenses

The following table sets forth the composition of our administrative expenses for 2013 and 2012:

	Year ended December 31,
(in millions of S/.)	2013		2012
Personnel expenses		106.4		91.7
Third-party services		72.6		82.0
Board of directors compensation		5.6		5.1
Depreciation and amortization		10.4		10.7
Taxes		3.4		2.8
Consumption of supplies		3.7		3.2
Donations		6.3		6.8
Others		0.5		0.8
Total		208.9		203.1

Our administrative expenses increased by 2.9%, or S/.5.8 million, to S/.208.9 million in 2013 from S/.203.1 million in 2012. Personnel expenses increased by S/.14.7 million due to disengagement of certain personnel and an increase in management expenses. This increase was offset by a decrease in third-party services mainly because of higher expenses in 2012 due to initial compliance with New York Stock Exchange regulations.

Administrative expenses related to the cement, concrete and blocks segment accounted for approximately 88.3% of total administrative expenses for 2013 compared to approximately 83.3% for 2012. Administrative expenses related to the quicklime, construction supplies and other segments accounted for approximately 2.9%, 1.0% and 7.9%, respectively, of total administrative expenses for 2013 compared to approximately 5.0%, 1.3% and 10.4%, respectively, for 2012.

Selling and Distribution Expenses

The following table sets forth the components of our selling and distribution expenses for 2013 and 2012:

	Year ended December 31,
(in millions of S/.)	2013		2012
Personnel expenses		14.5		14.0
Advertising and promotion expenses		10.5		10.8
Other		4.8		6.1
Total		29.8		30.9

73

Our total selling and distribution expenses decreased by 3.6%, or S/.1.1 million, to S/.29.8 million in 2013 from S/.30.9 million in 2012.

Selling and distribution expenses related to the cement, concrete and blocks segment represented approximately 92.6% of total selling and distribution expenses for 2013, compared to 87.9% for 2012. Selling and distribution expenses related to quicklime, to the construction supplies and other segments represented approximately 0.7%, 6.4% and 0.3%, respectively, of total selling and distribution expenses for 2013, compared to 2.7%, 7.8% and 1.6%, respectively, for 2012.

Other Operating Income, Net

Our other operating income, net increased S/.0.6 million, to S/.8.3 million in 2013 from S/.7.7 million in 2012.

Operating Profit

As a result of the foregoing, our operating profit increased by 27.1%, or S/.62.5 million, to S/.293.0 million in 2013 from S/.230.5 million in 2012. Our operating profit margin (i.e., operating profit as a percentage of net sales) for 2013 was 23.6% compared to 19.7% for 2012.

Other Expenses, Net

Our other expenses, net increased by S/.57.1 million, to S/.58.3 million in 2013 from S/.1.2 million in 2012 mainly due to an exchange rate fluctuation which represented a loss of S/.48.4 million explained by the appreciation of the U.S. dollar with respect to the nuevo sol, from S/.2.550 per US$1.00 as of December 31, 2012 to S/.2.795 per US$1.00 as of December 31, 2013 (9.6%). This variation was mainly due to a net exchange rate exposure of US$150 million, explained by the issuance of US$300 million 4.50% Senior Notes due 2023, net of a cash position of approximately US$150 million.

Income Tax Expense

Our income tax expense increased by 11.8%, or S/.8.7 million, to S/.82.4 million for 2013 from S/.73.7 million for 2012. Our effective tax rate for 2013 and 2012 was 35.1% and 32.2%, respectively.

Profit

As a result of the foregoing, our profit for 2013 decreased by 2.1%, or S/.3.3 million, from S/.155.6 million for 2012 to S/.152.3 million for 2013, mainly due to the exchange rate loss explained above.

B. Liquidity and Capital Resources

Our main cash requirements are our operating expenses, capital expenditures relating to the maintenance and expansion of our facilities, the servicing of our debt, the payment of dividends and payment of taxes. Our primary sources of cash have been cash flow from operating activities, and our issuance of Senior Notes and, to a lesser extent, loans and other financings. We believe that these sources of cash will be sufficient to cover our working capital needs in the ordinary course of our business.

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Cash Flows

The table below sets forth certain components of our cash flows for the years ended December 31, 2014, 2013 and 2012.

	Year ended December 31,
(in millions of S/.)	2014			2013		2012
Net cash flows from operating activities		240.4			191.8		99.7
Net cash flows from (used in) investing activities		(553.5	)		194.5		(667.4	)
Net cash flows from (used in) financing activities		(114.8	)		507.4		273.7
Decrease (increase) in cash		(427.9	)		893.7		(294.0	)

Cash Flows used in Operating Activities

Net cash flows from operating activities increased by 25.3 %, or S/.48.6 million, to S/.240.4 million in 2014 from S/.191.8 million in 2013, due primarily to lower inventory purchases, mainly imported clinker and an increase in profit in 2014, net of an increase in trade and other receivables.

Net cash flows from operating activities increased by 92.4%, or S/.92.1 million, to S/.191.8 million in 2013 from S/.99.7 million in 2012, due to an increase in interest accrued from time deposits into which we invested the proceeds from our issuance of US$300 million of Senior Notes due 2023 in 2013, as well as lower taxes resulting from an extraordinary payment in 2012 because of the sale of a minority equity interest in our subsidiary Fosfatos to an affiliate of Mitsubishi, and greater cash flow generation due to an increase in EBITDA mainly the result of operational efficiencies that allowed us to maintain expenses and costs at 2012 levels during 2013 while increasing revenues, and lower interest payments on our debt.

Net cash flows from operating activities decreased by 24.6%, or S/.32.6 million, to S/.99.7 million in 2012 from S/.132.3 million in 2011, due to higher tax expense related to the sale of a 30.0% stake in our subsidiary Fosfatos to an affiliate of Mitsubishi, as well as to the purchase of imported clinker, among others.

Cash Flows used in Investing Activities

Net cash flows used in investing activities was S/.553.5 million for 2014, primarily related to the purchase of property, plant and equipment for the Piura plant net of the disposition of investment available for sale.

Net cash flows from investing activities was S/.194.5 million for 2013, primarily related to the fact that the time deposits into which we invested the proceeds from our issuance of Senior Notes due 2023 in 2013 were made available, as well as purchases of property, plant and equipment for the Piura plant, among others.

Net cash flows used in investing activities was S/.667.4 million for 2012, primarily related to time deposits into which we invested the proceeds from our initial public offering in 2012 and purchases of property, plant and equipment for the Piura and Rioja plants.

Cash Flows from Financing Activities

Net cash flows used in financing activities was S/.114.8 million for 2014, primarily due to dividends paid to our shareholders.

Net cash flows from financing activities was S/.507.4 million for 2013, primarily due to the cash received from our issuance of Senior Notes due 2023, which was partially offset by debt service payment.

Net cash flows from financing activities was S/.273.7 million for 2012, primarily due to the cash received from our initial public offering in 2012, which was partially offset by debt service payment

75

Indebtedness

As of December 31, 2014, we had total outstanding indebtedness of S/.896.7 million (US$300 million) as set forth in the table below.

(amounts in millions of S/.)	As of December 31, 2014		Interest rate			Maturity date
4.50% Senior Notes due 2023		896.7		4.5	%	February 8, 2023

International Bonds. In February 2013, we issued US$300,000,000 of our 4.50% Senior Notes due 2023 in our inaugural international bond offering. A portion of the proceeds from this offering were used to prepay amounts outstanding on our secured loan agreement with BBVA Banco Continental, and the remaining proceeds will be used in capital expenditures incurred in connection with the construction and operation of the new Piura plant and our cement business. The notes were issued pursuant to Rule 144A under the Securities Act and in compliance with Regulation S under the Securities Act, and listed on the Irish Stock Exchange.

The indenture pursuant to which the notes were issued contains certain covenants, including restrictions on our and our restricted subsidiaries’ ability to incur further indebtedness or issue disqualified stock and preferred stock, unless the following conditions are met:

• the fixed charge coverage ratio for our most recently ended four fiscal quarters for which internal financial statements are available immediately preceding the date on which such additional indebtedness is incurred or such disqualified stock or such preferred stock is issued, as the case may be, would have been at least 2.5 to 1.0; and

• the consolidated debt to EBITDA ratio for our most recently ended four fiscal quarters for which internal financial statements are available immediately preceding the date on which such additional indebtedness is incurred or such disqualified stock or such preferred stock is issued, as the case may be, would have been no greater than 3.5 to 1.0,

in each case, determined on a pro forma basis (including a pro forma application of the net proceeds therefrom), as if the additional indebtedness had been incurred or the disqualified stock or the preferred stock had been issued, as the case may be, at the beginning of such four fiscal quarters. The indenture also contains restrictions on our ability and that of our restricted subsidiaries to incur liens and to merge, consolidate or transfer all or substantially all of our assets.

In management’s opinion, we were in compliance with all of applicable covenants as of the date of this annual report.

The subsidiaries that guarantee the notes are those related to our cement business namely, Cementos Selva S.A., Distribuidora Norte Pacasmayo S.R.L., Empresa de Transmisión Guadalupe S.A.C., Dinoselva Iquitos S.A.C. and Calizas del Norte S.A.C.

Derivative Financial Instruments

As of December 31, 2014, we had entered into a cross currency swap hedging agreement in aggregate principal amount of US$120 million to hedge against the foreign exchange risks associated with our US dollar-denominated debt. An additional US$30 million was contracted in January 2015, covering 50% of our total debt denominated in US dollars.

Capital Expenditures

See “Item 4—Information on the Company—A. History and Development of the Company—Capital Expenditures.”

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C. Research and Development, Patents and Licenses

As of December 31, 2014, our research and development group consisted of 25 geologists and 3 scientists. Our research and development team is mainly focused on developing (i) an ideal mix of additives for our cement products in an effort to reduce the amount of clinker material in our cement; (ii) other concrete products with various practical applications, and (iii) products with specific characteristics that meet market demands. We believe our research and development department is an integral part of our strategy to develop innovative cement products by continuously studying the chemical composition of cement and making it adaptable to the requirements and specific needs of our end consumer.

D. Trend Information

Cement Market

The Peruvian Cement Market

Peru’s cement production is segmented into three principal geographic regions: the northern region, the central region, including Lima’s metropolitan area, and the southern region. The table below sets forth selected data with respect to each region in Peru and the corresponding cement manufacturers. Market share data is based on metric tons of cement delivered during 2014.

77

Geographic Breakdown

Northern Region (thousands of metric tons)

Plant	2010		2011		2012		2013		2014		% share
C. Pacasmayo		1,616		1,748		2,045		2,110		2,051		17.8	%
C. Selva		195		196		200		240		296		2.6	%
Imports		39		47		29		34		40		0.3	%
Total		1,850		1,991		2,274		2,384		2,387		20.7	%
Central Region (thousands of metric tons)
Plant	2010		2011		2012		2013		2014		% share
UNACEM		4,712		4,709		5,315		5,612		5,701		49.4	%
Caliza Inca		97		104		157		288		383		3.3	%
Imports		275		351		409		465		461		4.0	%
Total		5,084		5,164		5,881		6,365		6,545		56.8	%
Southern Region (thousands of metric tons)
Plant	2010		2011		2012		2013		2014		% share
C. Yura		1,159		1,260		1,689		2,509		2,600		22.5	%
C. Sur		433		449		514		6		—		—
Total		1,592		1,709		2,203		2,515		2,600		22.5	%
Total Regions		8,526		8,864		10,358		11,264		11,532		100.0	%

Source: ASOCEM, INEI, ADUANET (SUNAT).

The table below sets forth production by type of cement produced by each manufacturer in Peru

Portland Cement

Other Portland Cements

Business

I

II

V

IP

I(PM)

MS

I Co

UNACEM

ü(1)

ü(1)

ü(1)

ü

ü

Pacasmayo plant

ü

ü(2)

ü

ü(3)

ü(2)

ü

Rioja plant

ü(1)

ü(1),(4)

ü(1),(4)

ü

ü

Cementos Sur

ü

ü(2)

ü(2)

ü

ü

Yura

ü

ü(2)

ü(2)

ü

ü

Source: ASOCEM

(1) Low alkaline content.

(2) Our Portland cement II is the same as our MS cement.

(3) We used to offer this type of cement through Selva; it is no longer available.

(4) Manufactured upon request.

Although a large part of housing construction is mainly concentrated in the Lima metropolitan area, located in the central region of Peru, the housing market in the provinces of Peru, including the northern region, has grown significantly in recent years. Despite this trend, Peru continues to have significant shortages in housing, estimated by the INEI at 1.9 million homes nationwide as of December 31, 2014. In addition, it is estimated that approximately 200,000 families have the ability to purchase homes, particularly in the northern and southern regions, according to a report for the year 2011 issued by the Peruvian Chamber of Construction. Economic growth, particularly in the mining and agribusiness sectors, rising employment levels and the implementation of real estate projects, have resulted in the creation of higher paying jobs, which have ultimately resulted in the expansion of the housing market.

Although Peru has improved by 45 places on the Global Competitiveness Index prepared by the World Economic Forum which measures the quality of infrastructure, from 110th place in 2008 to 65th in 2014, it continues to have a significant deficit in infrastructure. In recent years, significant efforts have been made to channel investments into the infrastructure sector through a series of initiatives that range from the creation of financial instruments (such as the infrastructure investment and trust funds) to regulatory changes.

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Distribution and Logistics

Peru’s cement market is divided into three regions circumscribed primarily by the location of established production facilities. Our facilities are located in the northern region of Peru, UNACEM controls the central region, and Yura the southern region. Cement is mainly sold in bags of 42.5 kilograms (approximately 94 pounds). However, cement can also be sold in bulk according to customer requirements.

The transportation and storage of cement requires specialized equipment. A favorable location of the production facilities not only reduces the time required to transport cement products to distributors and third-party merchants but also diminishes the costs of necessary equipment and resources. The location of a cement plant relative to its distribution network provides operational efficiencies and advantages that translate into stronger market share.

Cement can be stored in silos for up to 12 months if the silo is completely humidity proof. The typical vehicles used for the transport of cement are adapted to maintain the necessary environment during shipment. The proximity of production plants and storage centers to distribution centers, third-party vendors and retail outlets, creates a more efficient supply chain and minimizes the time and resources required to transport products from the production line to the construction site. The streamlined nature of this process ensures that cement products in the northern region of Peru, for example, reach customers within approximately one week of production. A cement company’s success is inherently linked to the sophistication of its distribution network and its emphasis on quality assurance throughout the supply chain.

Competitive Dynamics

The Peruvian cement market is comprised basically of three groups and one small plant, which own seven cement producing companies:

• Cementos Pacasmayo and Cementos Selva, which principally serve the northern region.

• UNACEM, which principally serves the central region.

• Cementos Yura and Cementos Sur, which primarily serve the southern region.

• Caliza Cemento Inca, located in Cajamarquilla, which principally serves the central region.

The level of competitiveness of cement companies generally depends on their cost structure, which is a function of the cost of energy, fuel, costs of raw materials and transportation. Cement companies in Peru generally compete within the limits of their distribution market, which is determined principally by their geographic locations.

The following are the main characteristics of the cement sector in Peru:

• highly fragmented consumer base;

• relatively low cost of energy and raw materials;

• operations and distribution primarily determined by geographic location; and

• high correlation to auto-construcción and public and private investments.

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Phosphate Project

Phosphate

Phosphate rock is used to manufacture wet process phosphoric acid and superphosphoric acid. Most of the phosphoric acid is used as a component of granular and liquid ammonium phosphate fertilizers and animal feed supplements. In addition, phosphate is used in human food products, detergents and other industrial applications. Because phosphate derivatives are mainly used in the production of fertilizers, its price is linked to certain commodities, such as corn, soybean and wheat.

According to the United States Geological Survey, world total reserves of phosphate rock are estimated at approximately 67 million tons, with Morocco and the Western Sahara accounting for approximately 75% of the total global reserves. While nearly 30 countries produce phosphate products, China, the United States and Morocco are the largest producers, accounting for two-thirds of world production. The world’s top producing companies include Office Cherifien de Phosphate of Morocco, Mosaic Co. of the United States, PhosAgro of Russia and Yuntianhua Group of China.

The following table sets forth world reserves and production levels for the periods indicated.

	Reserves		Production
(in thousands of metric tons)			2013		2014E
China(1)		3,700,000		108,000		100,000
United States		1,100,000		31,200		27,100
Morocco and Western Sahara		50,000,000		26,400		30,000
Russia		1,300,000		10,000		10,000
Jordan		1,300,000		5,400		6,000
Australia		1,030,000		2,600		2,600
Peru		820,000		2,580		2,600
South Africa		1,500,000		2,300		2,200
Algeria		2,200,000		1,500		1,500
Syria		1,800,000		500		1,000
Other countries		2,250,000		34,630		36,900
World total (rounded)		67,000,000		225,000		220,000

Source: U.S. Geological Survey, Mineral Commodity Summaries, 2015

(1) Production data for China does not include small mines

Peru is one of the leading mining countries in the world with non-metallic potential, including phosphate. The Peruvian government has granted concessions over several phosphate projects located in the northern and central regions. In recent years, several companies have started investing in exploration and in carrying out feasibility studies in order to exploit these resources. These projects include the Bayóvar phosphate project, owned by Miski Mayo (Vale, Mosaic and Mitsui) that started production in July 2011 and our Fosfatos project, also located in Bayóvar area.

E. Off-Balance Sheet Arrangements

There are no off-balance sheet arrangements that have, or are reasonably likely to have, a current or future material effect on our results of operations, financial condition or liquidity.

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F. Tabular Disclosure of Contractual Obligations

The following table sets forth our contractual obligations with definitive payment terms as of December 31, 2014.

	Payments due by period
(in millions of S/.)	Less than 1 Year		1-3 Years		3-5 Years		More than 5 Years		Total
Indebtedness (principal portion)(1)		—		—		—		896.7		896.7
Interest payments		40.4		80.7		80.7		141.2		343.0
Brine project(2)		9.1		18.2		18.2		199.0		244.5
Piura plant (2) (3)		83.8		—		—		—		83.8
Operating lease commitments		0.6		9.6		9.6		105.2		125.0
Total		133.9		108.5		108.5		1,342.1		1,693.0

(1) Does not include issuance costs.

(2) Relates to our contractual commitment for the establishment of Salmueras jointly with Quimpac and invest US$100.0 million to develop our brine project. The exact timing of our investment requirement is undetermined and will depend on pending pre-feasibility studies and other conditions. As of December 31, 2014, we and Quimpac have collectively made contributions of US$18.1 million to Salmueras for the development of our brine project.

(3) Relates to our contractual commitments assumed in connection with the construction and operation of our new cement plant in Piura.

In addition, we have various mining fees and royalties payable to the government and third parties in connection with our concessions and surface land use.

G. Safe Harbor

See “Part I—Introduction—Forward-Looking Statements.”

ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES

A. Directors and Senior Management

General

Our business and affairs are managed by the board of directors in accordance with our by-laws and Peruvian Corporate Law No. 26887 (“Peruvian Corporate Law”). Our by-laws provide for a board of directors of between seven and eleven members. Between three and five alternate directors may be elected by the shareholders to act on behalf of any director who is absent from meetings or who is unable to exercise his or her duties, when and for whatever period fixed by the chairman of the board. Alternate directors have the same responsibilities, duties and powers of directors to the extent they are called to replace them.

Directors are elected at a shareholders’ meeting and hold office for three years. Directors may be elected to multiple terms. Our current board of directors is composed of eight directors and two alternates. If a director resigns or otherwise becomes unable to continue with the duties, a majority of our directors may appoint one of the alternate directors to serve as director for the remaining term of the board. In the first board meeting held after the annual shareholders’ meeting where members of the board are elected, the board of directors must elect among its members a chairman and a vice chairman.

The board of directors typically meets in regularly scheduled bi-monthly meetings and when called by the chairman of the board or a person representing the chairman. Resolutions must be adopted by a majority of the directors present at the meeting and the chairman is entitled to cast the deciding vote in the event of a tie.

Duties and Liabilities of Directors

Pursuant to Article 177 of Peruvian Corporate Law, directors are jointly and severally liable to a corporation, shareholders and third parties for any damages caused by abuse of power, fraud, willful misconduct or gross negligence. In addition, pursuant to Article 3 of Law No. 29720, as of June 26, 2011, directors of companies listed on the Lima Stock Exchange are also strictly liable for any damages caused as a result of any transactions in which they were involved and which resulted in damages or other losses to the corporation. A director cannot be found liable if the director expressed disagreement at the time the vote was cast or upon learning of such transaction and if there is a record expressing such opposition.

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Our by-laws prohibit a director from voting on matters in which such director has an interest. In addition, Article 180 of the Peruvian Corporate Law requires a director with a conflicting interest on a specific matter to disclose such interest and abstain from the deliberation and decision-making process with respect to such matter. A director who violates this requirement is liable for any damages caused to us and may be removed by a majority of the board of directors upon request of any member of the board or by a majority vote of the shareholders.

Our by-laws stipulate that Directors’ compensation is determined by the Mandatory Annual General Shareholders’ Meeting at the time it reviews our annual audited financial statements. The fixed portion of the Chairman’s compensation shall be twice the amount allocated to any other director. If directors are part of one or more Committees, their compensation may include an additional amount for the work performed as members of such Committees. The additional compensation of the directors may not exceed the aggregate fixed portion of the compensation that the directors are entitled to receive. Our by-laws do not restrict Directors from voting upon matters relating to their own compensation.

Our by-laws do not prohibit our directors from borrowing from us. However, Article 179 of the Peruvian Corporate Law provides that directors of a company may enter into an agreement with such company only if the related loan agreement relates to operations the company performs in the regular course of business and in an arms’-length transaction. Further, a company may provide a loan to a director or grant securities in such director’s favor only in connection with operations that the company usually performs with third parties. Agreements, credits, loans or guarantees that do not meet the requirements set forth above require prior approval from at least two thirds of the members of the company’s Board of Directors. Directors are jointly liable to the company and the company’s creditors for contracts, credit, loans or securities executed or granted without complying with Article 179 of the Peruvian Corporate Law.

Neither our by-laws nor Peruvian Corporate Law contain age limit requirements for the retirement or non-retirement of directors.

Board of Directors

The following sets forth our directors and alternate directors and their respective positions as of the date of this annual report. On January 8, 2015, Mr. Juan Inchaustegui Vargas retired and resigned as alternate director. At the Board meeting held February 12, 2015 Mr. Moises Naim presented his resignation.

Name	Position	Year of Birth
Eduardo Hochschild Beeck	Chairman of the Board	1963
Roberto Dañino Zapata	Vice Chairman of the Board	1951
Rolando Arellano Cueva	Director	1952
José Raimundo Morales Dasso	Director	1946
Humberto Nadal Del Carpio	Director, Chief Executive Officer	1964
Hilda Ochoa-Brillembourg	Director	1945
Felipe Ortiz de Zevallos Madueño	Director	1947
Dionisio Romero Paoletti	Director	1965
Robert Patrick Bredthauer	Alternate director	1947
Manuel Bartolome Ferreyros Peña	Alternate director, Chief Financial Officer	1966

The following sets forth selected biographical information for each of the members of our board of directors. The business address of each of our current directors is Calle La Colonia 150, Urb. El Vivero, Surco, Lima, Peru.

Eduardo Hochschild Beeck. Mr. Hochschild has been a Director since April 1991 and is currently Chairman of the Board. He holds a Mechanical Engineering degree from Tufts University, Boston, United States. Mr. Hochschild is also the President of Hochschild Mining plc, Inversiones ASPI S.A. and the Board of Trustees of UTEC and TECSUP, Director of Banco de Crédito del Perú, El Pacífico Peruano-Suiza Compañía de Seguros y

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Reaseguros, Fosfatos, Salmueras, Sociedad de Comercio Exterior del Perú (COMEX Perú), and of the National Society of Mining, Petroleum and Energy (Sociedad Nacional de Minería, Petroléo y Energía). Mr. Hochschild is also an expert consultant of the Economic Counsel of the Episcopal Conference.

Roberto Dañino Zapata. Mr. Dañino has been a Director since 1995. In July 2001 he resigned from the Board of Directors to take office as Prime Minister of the Peruvian Government, before rejoining the Board in June 2008. He is an attorney-at-law graduated from the schools of Law of Harvard University and Pontificia Universidad Católica del Perú. He has served as Ambassador of Peru to the United States and Senior Vice-President and General Counsel of the World Bank. He has also been Partner and Chairman of the Latin American Practice at Wilmer Cutler & Pickering, Washington D.C. (now Wilmer Hale). He is currently Vice-Chairman of the Board of Directors of Hochschild Mining plc, and Chairman of Fosfatos. In Addition, he is Independent Director of Inversiones Centenario, PetroNova, Results for Development, LUMNI, Open Society Foundation, and ACCION International, among others.

Rolando Antonio Arellano Cueva. Mr. Arellano has been a Director since March 2011. He holds a PhD in Business Administration from Grenoble University, France, a Master’s in Business Administration from ESAN and a degree in Psychology from Pontificia Universidad Católica del Perú. He is Chairman of the Board of Arellano Investigación de Marketing S.A., a company with operations in various Latin American countries. He is a professor at Centrum Católica (Universidad Católica del Peru Business School) and has taught at numerous universities in the region. He was Chairman of the Marketing Department and Director of the Master in International Business Program at Laval University, Quebec, Canada, Chairman of the Peruvian Marketing Society and is the author of 17 books on business and marketing in emerging economies. Independent Director.

José Raimundo Morales Dasso. Mr. Morales has been a Director since March 2008. He holds a Bachelor’s degree in Economics and Business Administration from Universidad del Pacífico and a Master’s in Business Administration from Wharton Business School, University of Pennsylvania, Untied States. Mr. Morales was the Chief Executive Officer of Banco de Crédito del Perú from November 1990 through March 2008. Currently, he is Chairman of the Board of Salmueras and Atlantic Security Bank, Vice Chairman of the Board of Credicorp Ltd., Banco de Crédito del Peru and El Pacífico Peruano-Suiza Compañía de Seguros y Reaseguros. He is a member of the Board of Directors of Pacífico Vida Seguros, Alicorp S.A.A., Grupo Romero, Cerámica Lima S.A., Trébol Corporación Cerámica S.A., JJC Contratistas Generales and a Board member of the Peruvian Institute of Economics.

Humberto Reynaldo Nadal Del Carpio. Mr. Nadal joined our company as Corporate Development Manager in June 2007 and has served as our Director since March 2008 and Chief Executive Officer since April 2011. He has a Bachelor’s degree in Economics from Universidad del Pacífico and a Master’s degree in Business Administration from Georgetown University. He is the representative of Cementos Pacasmayo in the General Management of IPSA, Fosfatos. and Salmueras. He has also been Chairman of the Board of Directors of Fondo Mivivienda. In April 2006, he joined Compañía Minera Ares S.A.C. (a subsidiary of Hochschild Mining plc) as Corporate Development Manager. Mr. Nadal has also served as Business, Administration and Finance Manager of the Instituto Libertad y Democracia and Chief Executive Officer at Socosani S.A.

Hilda Ochoa-Brillembourg. Mrs. Ochoa-Brillembourg was appointed as a Director of Cementos Pacasmayo S.A.A. in October 2011. She holds a Bachelor of Science degree in Economics from Universidad Católica Andres Bello of Venezuela, a Master’s degree in Public Administration and is a Business Administration PhD candidate from Harvard Business School. She is the founder, and since 1987, President and Executive Director, of Strategic Investment Group and a group of affiliated investment management firms. In 2014 she was appointed Chairperson of the Board of Directors. From 1976 to 1987, she was Chief Investment Officer of the Pension Investment Division at the World Bank. Mrs. Ochoa- Brillembourg is on the Board of Directors of General Mills, where she is also a member of the audit and public responsibility committees, and McGraw-Hill, where she is also a member of its audit and financial policy committees. Independent Director.

Felipe Ortiz de Zevallos. Mr. Ortiz de Zevallos studied at the Universidad Nacional de Ingeniería in Lima, at the University of Rochester in New York and at Harvard Business School. He is the founder and chairperson of the Grupo de Apoyo since 1977. He has served as Ambassador of Peru to the United States (2006—2009) where he was responsible with the US Congress’ approval of the Free Trade Agreement between both countries. He has been a full professor at Universidad del Pacífico and served as said university’s President from 2004 a 2006. He is

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currently a board member of various companies and non-profit organizations. He has received numerous awards, such as the IPAE Award in 1990, the Journalism Jerusalem Prize in 1998 and the Manuel J. Bustamante de la Fuente Award in 2008. In 2009, the Lima Chamber of Commerce paid tribute to Mr. Ortiz de Zevallos for this contributions to the social and economic development of Peru, and in 2011 the Ministry of Economy and Finance awarded him with the “Hipólito Unanue” award for his contributions to the country’s economic and financial development. Independent Director.

Dionisio Romero Paoletti. Mr. Romero has been a Director since March 2005. He holds a degree in Economics from Brown University and a Master’s degree in Business Administration from Stanford University. He is the Chairman of the Board of Credicorp and Banco de Crédito del Perú-BCP, and the Executive Chairman of Credicorp since 2009, and Board Director of BCP since 2003, and was appointed Vice Chairman in 2008 and Chairman in 2009. He is also the Chairman of the Board of Banco de Crédito de Bolivia, Pacífico Peruano Suiza Cía. de Seguros y Reaseguros S.A., El Pacífico Vida Cía. de Seguros y Reaseguros S.A., Alicorp S.A.A., Ransa Comercial S.A., Industrias del Espino S.A., Palmas del Espino S.A., Agrícola del Chira S.A., among others. Furthermore, he is Vice-Chairman of the Board of Inversiones Centenario S.A. and Director of Banco de Crédito e Inversiones—BCI, and Hermes Transportes Blindados S.A. Independent Director.

Robert Patrick Bredthauer. Mr. Bredthauer has been an alternate director since March 2003. He has a degree in Business Administration from Hochschule St. Gallen and a commerce degree from the École Supérieure de Commerce, La Neuveville, and the École Supérieure de Commerce, Lausanne, both in Switzerland. Since 1976, he acted as Vice-President of Finance and Executive Vice-President of Cemento Nacional C.A. (Guayaquil, Ecuador) and prior to that was the regional Controller for Holderbank Management and Consulting in Nyon, Switzerland. Independent Alternate Director

Manuel Bartolome Ferreyros Peña. Mr. Ferreyros has been an alternate director since March 2008 and our Chief Financial Officer since January 2008. He is an alternate member of the Board of Directors of Fosfatos. Mr. Ferreyros has a Bachelor’s degree in Business Administration from Universidad de Lima, a Multinational MBA at the Adolfo Ibañez School of Management, Miami and a Master’s in Business Administration from The College of Insurance in New York. Mr. Ferreyros has pursued the Advanced Management Program at Instituto Centroamericano de Administración de Empresas—INCAE and the CEO Management Program at Kellogg University, among others. Prior to joining Cementos Pacasmayo, Mr. Ferreyros was Chief Executive Officer of La Positiva Seguros y Reaseguros. Alternate Director.

Executive Officers

Our executive officers oversee our business and are responsible for the execution of the decisions of the board of directors. The following table presents information concerning the current executive officers of the company and their respective positions:

Name	Position	Year of Birth	Year of Appointment
Humberto Nadal Del Carpio	Chief Executive Officer	1964	2011
Carlos Pomarino Pezzia	Vice President, Cement Business	1962	2009
Manuel Bartolome Ferreyros Peña	Chief Financial Officer	1966	2008
Jorge Javier Durand Planas	General Counsel	1966	2008
Rodolfo Ricardo Jordan Musso	Infrastructure and Engineering Manager, Cement Business	1952	2009
Juan Guillermo Teevin Vasquez	Engineering and Projects Manager, Cement Business	1955	2005
Joaquin Larrea Gubbins	Corporate Development Manager	1974	2011
Carlos Paul Cateriano Alzamora	Corporate Social Responsibility Manager	1957	2006
Hugo Villanueva Castillo	Operations Manager, Pacasmayo and Rioja Cement Plant	1962	2012
Alfredo Romero Umlauff	Piura Project Manager	1951	2013
Diego Reyes Pazos	Supply Chain Manager	1977	2013
Tito Alberto Inope Mantero	Industrial Planning Manager	1972	2015
Rosaura Vasquez Arrieta	Quality, Research and Development Manager	1963	2015

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The following sets forth selected biographical information for each of our executive officers:

Humberto Reynaldo Nadal Del Carpio. See “Item 6. Directors, Senior Management and Employees—A. Directors and Senior Management—Board of Directors.”

Carlos Julio Pomarino Pezzia. Mr. Pomarino has been our Vice President, Cement Business since April 2009. He has a degree in Economic Engineering from Universidad Nacional de Ingeniería and a Master’s in Business Administration from Adolfo Ibañez School of Management and ESAN and pursued the Advanced Management Program at the Universidad de Piura. He served as Commercial Officer of our company from 2002 to 2009 and as Chief Executive Officer of Distribuidora Norte Pacasmayo S.R.L. from 1998 to 2009. Prior to joining our company, Mr. Pomarino worked as Administration and Finance Manager at Comercializadora de Alimentos S.A. and as Chief Financial Officer at Fábrica de Tejidos San Jacinto S.A.

Manuel Bartolome Ferreyros Peña. See “Item 6. Directors, Senior Management and Employees—A. Directors and Senior Management—Board of Directors.”

Jorge Javier Durand Planas. Mr. Durand joined the Hochschild Group in 1994 and has been our General Counsel since 2008. Previously, he was General Counsel of Hochschild Mining plc. He holds a Law degree from Universidad de Lima (Peru), and a Master’s in Business Administration from the Universidad del Pacífico (Peru). Among other studies, he has also completed the Management Program for Lawyers and the Corporate Governance and Performance Program at the Yale School of Management (USA). Mr. Durand currently also acts as a board member of Salmueras, Inversiones Aspi S.A. and Cementos Selva S.A. and acts as member of the board committee of UTEC.

Juan Guillermo Teevin Vasquez. Mr. Teevin has been our Engineering and Projects Manager, Cement Business since June 2012. He has a degree in Mechanical Engineering from Universidad Nacional de Ingeniería and has pursued different studies in the Advanced Management Program at the Universidad de Piura, as well as Multinational MBA at the Adolfo Ibañez School of Management, Miami. Mr. Teevin was Operations Manager for our Company from June 2005 to May 2012.

Rodolfo Ricardo Jordan Musso. Mr. Jordan has been our Engineering and Infrastructure Manager since January 2015. Previously he was Industrial Development Manager. He has a degree in Civil Engineering from Universidad Católica del Perú and pursued an Advanced Management Program at the Universidad de Piura. Prior to joining our company he served as Chief Executive Officer of the Mexican affiliate of Graña & Montero Ingenieros Consultores. From 2007 through 2009 he served as Marketing Manager of Distribuidora Norte Pacasmayo S.R.L.

Joaquin Larrea Gubbins. Mr. Larrea has been our Corporate Development Manager since June 2011. He has a degree in Business Administration from Universidad de Lima and a Master’s in Business Administration from the Kellogg School of Management. In the past, Mr. Larrea worked as Corporate Development Director of General Electric for Peru, Ecuador and Bolivia. He served as our Zinc Business Manager for a year and as our Corporate Finance Head for five years.

Carlos Paul Cateriano Alzamora. Mr. Cateriano has been our Corporate Social Responsibility Manager since June 2012. Previously, he was our Human Resources Manager from 2006 to 2012 He studied in Mechanical Engineering at the Pontificia Universidad Católica del Peru and has pursued different studies in the Advanced Management Program at the Universidad de Piura. Prior to joining our company, Mr. Cateriano worked as Human Resources Deputy Manager at Banco Wiese Sudameris S.A. (acquired by Scotiabank Perú S.A.A.) from 1999 to 2006. In addition, he has worked as Head of Training at Banco Santander Perú S.A., and as a consultant at Polimeros y Adhesivos S.A.

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Alfredo Romero Umlauff. Mr. Romero has been Piura Project Manager since May 2013. He has over 36 years of experience in the construction industry as well as in the areas of Project Management, Cost and Planning and Management. He is a Civil Engineer by the Pontificia Universidad Católica del Peru, and has conducted several studies in the Advanced Management Program at the Universidad de Piura. Prior to joining our company, Mr. Romero worked as Deputy CEO at JJC Contratistas General, CEO of Metalúrgica Peruana S.A., CEO of Union de Concreteras S.A., among others. He has been a speaker at various international conferences and co-authored publications related to the treatment of ready-mix concrete. In 2013 Mr. Romero was honored with the Distinguished Graduate award by the Alumni and Graduate Association of the PUCP for his efforts in promoting and developing single-family and multi-family housing projects with integral reinforced concrete.

Hugo Pedro Villanueva Castillo. Mr. Villanueva has been our Operations Manager for the Pacasmayo and Rioja cement plant since January 2012. Previously he was Operations Manager for Cementos Selva S.A. for over 9 years. Furthermore, Mr. Villanueva has worked at our Company for over 20 years, holding different positions. Mr. Villanueva holds a Master’s degree in Business from EGADE and has taken coursework at the General Management Program at PAD, Universidad de Piura and Program for Senior Management at INCAE in Costa Rica.

Diego Reyes Pazos. Mr. Reyes has been our Supply Chain Manager since July 2013. He has solid experience in the supply chain, project development, design and implementation of systems/processes and financial analysis. He graduated with a degree in Business Administration from the University of Lima and received an MBA from the University of Piura. Before joining our company, Mr. Reyes worked as Operations and Finance Manager at Belcorp, as Senior Business Process Expert for Latin America at SAB Miller, Project Manager in the Vice Presidency of Supply Chain at UCP Backus & Johnston, among others.

Tito Alberto Inope Mantero. Mr. Inope has been Industrial Planning Manager since January 2015. He is an economist, graduated from Universidad de Lima and has an MBA from the Universidad Peruana de Ciencias Aplicadas (UPC). Mr. Inope has worked at the Company since 1996 and has held different management positions during these 18 years.

Rosaura Vasquez Arrieta. Mrs. Vásquez is our Quality, Research and Development Manager since March 2015. She is an Industrial Engineer from the Universidad de Piura, holds a Master’s Degree in Chemistry from the Universidad Católica del Peru, and a PhD in Industrial Engineering specialized in Metallurgy and Materials from the Universidad de Oviedo (Spain). Mrs. Vasquez has worked at the Company since 1998, as has held different management positions during these 16 years. Before joining the Company she worked as Professor at the Universidad de Piura. She has been a speaker at various congresses and has published a variety of articles on non- metallic mining, cement and additives.

B. Compensation

In 2014, total compensation paid to members of our board of directors and executive officers amounted to S/.26,169,000 (S/.28,043,000 in 2013). This compensation included payments made in connection with the workers’ profit sharing plan under Peruvian labor laws, which require us to distribute between 8% and 10% of our annual income, net of taxes, to all employees, including our executive officers. See “Item 4. Information on the Company—B. Business Overview—Regulatory Matters” for additional information on the profit sharing regulatory requirements.

In 2011, we decided to pay each of our directors a yearly compensation of US$200,000 (US$400,000 in the case of our Chairman). In addition, compensation paid to certain of our directors for serving on board committees will be, in aggregate per year, not higher than the total amount paid to our directors for serving on our board of directors. Our 2014 director compensation was approved at our annual shareholders’ meeting.

Neither we nor any of our subsidiaries have entered into any agreement that provides for any benefit or compensation to any director or executive officer after expiration of his or her term.

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Executive Compensation Plan

Our business operates in a competitive environment where highly trained professionals and executives are in demand. The recent growth in the Peruvian economy has created new opportunities resulting in additional competition for local talent. As a result, we have recently designed a compensation plan to retain our key executives and attract new executives with the skills and experience required to achieve our strategic objectives and create long-term value for our shareholders. We believe that executive compensation should reward individual performance and the achievement of our strategic objectives.

Our executive compensation plan has been designed to achieve the following primary objectives:

• recruit, retain and incentivize highly talented and dedicated executives with the skills and experience required to manage and operate our business and create long-term value for our shareholders;

• provide our executive officers with compensation opportunities that are fair, reasonable and competitive in the market;

• compensate based on our performance and individual performance;

• promote transparency by using clear and straightforward compensation metrics; and

• align the interests of our executive officers with the interests of our shareholders, both in the short-term and long-term.

Our executive compensation plan is in addition to workers’ profit sharing requirements applicable to all of our employees, including our executive officers, under Peruvian labor laws.

Our compensation plan has been designed to compensate our executives with a base salary, a cash bonus incentive and other benefits that we believe are fair and equitable to us and our shareholders and competitive in the market. We believe that the combination of salary, cash bonus incentive and other benefits will distinguish us from other companies in the cement industry in Peru, and serve as an important retention tool as we compete for executive talent. We also believe that it will provide an appropriate compensation structure to retain our executives, reward them for individual performance, and induce them to contribute to the creation of long-term value.

Components of Executive Compensation

The key components of our executive compensation plan are:

• base salary;

• short-term cash bonus incentives; and

• long-term cash bonus incentives.

We believe that the use of few and straightforward compensation components promotes the effectiveness and transparency of our executive compensation plan and enables us to be competitive. No formula or specific weightings or relationships are used to allocate the various components in our executive compensation plan. Each component has an important role in implementing our executive compensation philosophy and in meeting the executive compensation objectives described above.

Base Salary

We provide our executive officers and other employees with a base salary to compensate them for services rendered on a day-to-day basis during the fiscal year. Base salaries provide stable compensation to executives, allow us to recruit and retain highly talented and dedicated executives and, through periodic merit increases, provide a basis upon which executives may be rewarded for individual performance.

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Short-Term Cash Bonus Incentives

As a key component of our compensation plan, we currently provide our executive officers the opportunity to earn annual cash bonuses based on the achievement of our short-term business objectives. As additional cash compensation that is contingent on achieving our business objectives, cash incentives augment the base salary component while being tied directly to corporate and individual performance objectives.

Long-Term Cash Bonus Incentives

In addition, as a tool to promote retention of our executive officers, we have implemented a deferred cash incentive program that we believe aligns compensation with corporate performance, allows us to recruit and retain competent executive talent, and rewards for superior performance measured over the long-term. Our plan provides for the payment of bonuses in addition to the annual bonuses that are paid to our executive officers.

Our long-term bonus incentive program features the following key components:

• available to senior executives who have been employed by our company for at least four years;

• at the end of each year, the cash bonus will be accrued in a “personal virtual account” for the benefit of the relevant executive;

• on the fifth anniversary of the creation of the bonus plan, the relevant executive will receive the amount accrued during the first four years;

• additional annual bonuses will be accrued for the following four years and a final payout will be made at the end of the eighth year from the creation of the plan; and

• if the employee decides to voluntarily leave the company before a scheduled distribution, he will not receive this compensation.

Our plan provides that the executive must meet the following eligibility criteria:

• must be no older than 58 years at the time his or her participation in the incentive program begins;

• must have at least four years of employment with either our company, or our subsidiaries or affiliates;

• is a professional who is deemed to have characteristics that are attractive to the market; and

• the executive’s departure is deemed by the board of directors or a committee thereof to have an adverse effect on our performance.

C. Board Practices

For information about the date of expiration of the current term of office and the period during which each director has served in such office, see “Item 6. Directors, Senior Management and Employees—A. Directors and Senior Management.”

Benefits upon Termination of Employment

There are no contracts providing for benefits to directors upon termination of employment

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Board Committees

We have four board committees comprised of members of our board of directors, which are described below.

Executive Committee

Our by-laws permit us to delegate an executive committee composed of three to five members of the board of directors. Mr. Eduardo Hochschild Beeck (chair), Mr. Roberto Dañino Zapata, Mr. Raimundo Morales Dasso and Mr. Humberto Nadal del Carpio are currently members of our executive committee. Our executive committee is mainly responsible for (i) supervising and supporting our management in executing the resolutions passed by our board of directors, (ii) executing the strategy approved by our board of directors, (iii) meeting short-term and medium-term goals, as well as designing action plans to meet such goals in accordance with the long-term strategy and goals approved by our board of directors, (iv) approving agreements or transactions involving amounts greater than US$3 million but less than US$20 million, (v) monitoring compliance with the annual budget and approving any significant deviations from approved levels of working capital, (vi) making strategic decisions that do not rise to the level of a full board approval, and (vii) approving and executing new projects in amounts up to US$20 million.

Our executive committee also performs the functions of a compensation committee.

Antitrust Best Practices Committee

The antitrust best practices committee is composed of four members: Mr. Rolando Arellano Cueva (chair), Mr. Raimundo Morales Dasso, Mr. Humberto Nadal del Carpio and Mr. Eduardo Hochschild Beeck. The antitrust best practices committee is responsible for informing our employees about our competition best practices and for monitoring compliance with such practices, including compliance with antitrust regulations.

Audit Committee

Our audit committee is composed of three directors. The current members are Ms. Hilda Ochoa-Brillembourg, who is the chairman of the audit committee, Mr. Felipe Ortiz de Zevallos and Mr. Rolando Arellano Cueva. All of the members of the audit committee qualify as independent in accordance with the SEC rules applicable to foreign private issuers. Ms. Hilda Ochoa-Brillembourg also qualifies as a financial expert under the SEC rules. The audit committee is responsible for reviewing our financial statements; evaluating our internal controls and procedures, and identifying deficiencies; the appointment, compensation, retention and oversight of our external auditors. Additionally, it is responsible for informing our board of directors regarding any issues that arise with respect to the quality or integrity of our financial statements, our compliance with legal or regulatory requirements, the performance and independence of the external auditors, or the performance of the internal audit function; and overseeing measures adopted as a result of any observations made by our shareholders, directors, executive officers, employees or any third parties with respect to accounting, internal controls and internal and external audit, as well as any complaints regarding management irregularities, including anonymous and confidential methods for addressing concerns raised by employees.

Corporate Governance Committee

Our corporate governance committee is composed of four directors. The current members are Mr. Felipe Ortiz de Zevallos (chair), Mr. Humberto Nadal del Carpio, Mr. Roberto Dañino Zapata and Mr. Eduardo Hochschild Beeck. The corporate governance committee is responsible for assisting the board on its oversight of director nomination and committee assignments, as well as the board and CEO successions. Similarly, it is responsible for assisting in the implementation of the committee and board self-assessment surveys and the review of governance principles.

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D. Employees

As of December 31, 2014 we had a total of 1,482 permanent employees. The following table sets forth a breakdown of our employees by category as of the periods indicated.

	As of December 31,
	2014		2013		2012
Management		33		33		29
Administrative personnel		974		1,069		1,050
Plant workers		475		554		655
Total (1)		1,482		1,656		1,734

(1) workers from our social venture Acuícola Los Paiches S.A.C. are excluded from this calculations.

As of December 31, 2014, approximately 18% of our employees were members of labor unions (Sindicato Único de Trabajadores de Cementos Pacasmayo S.A.A. and Sindicato Único de Trabajadores de Calizas del Norte S.A.C.) that represents its members in collective bargaining negotiations. Our management and administrative personnel are not members of a labor union. Labor relations for unionized and non-unionized employees in our production facilities, including compensation and benefits, are governed by a collective bargaining agreement that is renewed annually. In January 2013, three-year Union Agreements were signed with our two unions, Pacasmayo Plant and Tembladera Quarry, which is a clear sign of the level of trust and commitment between the parties.

Under Peruvian law, it is illegal to lay off employees without cause or without following certain formal procedures. In addition, employees who are laid off are entitled to severance payments upon termination of their employment in an amount equal to one and a half month’s salary for each full year of work performed with a maximum payment equal to 12 monthly salaries provided they are indefinite term employees. In case of fixed term employment relationship the severance payment is equal to 1.5 monthly salaries for each month, until the completion of the contract, with a maximum of 12 monthly salaries.

Our employees are enrolled in either the national public pension fund or a privately managed pension fund. In both cases the applicable payment (approximately 13%) is withheld by the employer from the employees’ monthly salary. As of December 31, 2014, approximately 10% of our employees were enrolled with the national public pension fund and 90% with a private social pension plan.

We believe we have a good relationship with our employees. In the past, we have not experienced any material strikes, work stoppages or any other significant disruptions.

E. Share Ownership

As of March 31, 2014, persons who are currently members of our board of directors and our executive officers held as a group 1,223,188 of our common shares and no investment shares (not including common and investment shares held by Mr. Eduardo Hochschild through ASPI and ASPI’s subsidiary Servicios Corporativos Pacasmayo S.A.C.). This amount represented less than one percent of our outstanding share capital as of March 31, 2014. Mr. Eduardo Hochschild through ASPI indirectly controls 279,689,617 common shares and 16,753,544 investment shares.

Mr. Dionisio Romero, Mr. Humberto Nadal, Mr. Raimundo Morales, Mr. Roberto Dañino and Mr. Carlos Pomarino own individually and in the aggregate less than 1% of our common shares.

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ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS

A. Major Shareholders

As of March 31, 2015, our issued and outstanding share capital was composed of 531,461,479 common shares. In addition, as of March 31, 2015, we had 50,503,124 investment shares outstanding.

The following table sets forth the beneficial ownership of our common shares and non-voting investment shares as of March 31, 2015.

	Common shares					Investment shares					Total
Shareholder	Number of shares		Percentage			Number of shares		Percentage			Number of shares		Percentage
ASPI(1)		279,689,617		52.63	%		16,753,544		33.17	%		296,443,161		50.94	%
IN—Fondo 2 (AFP Integra)		—		—			6,136,346		12.15	%		6,136,346		1.05	%
RI—Fondo 2 (AFP Prima)		26,220,665		4.93	%		4,029,701		7.98	%		30,250,366		5.20	%
RI—Fondo 3 (AFP Prima)		21,054,360		3.96	%		3,904,644		7.73	%		24,959,004		4.29	%
PR—Fondo 2 (AFP Profuturo)		—		—			5,029,589		9.96	%		5,029,589		0.86	%
IN—Fondo 3 (AFP Integra)		—		—			4,539,453		8.99	%		4,539,453		0.78	%
PR—Fondo 3 (AFP Profuturo)		—		—			2,892,847		5.73	%		2,892,847		0.50	%
Directors and officers(2)		1,223,188		0.23	%		—		—			1,223,188		0.21	%
American Depositary Receipt Program		100,911,255		18.99	%		—		—			100,911,255		17.34	%
Other shareholders		102,362,394		19.26	%		7,217,000		14.29	%		109,579,394		18.83	%
Total		531,461,479		100.00	%		50,503,124		100.00	%		581,964,603		100.00	%

(1) ASPI is indirectly controlled by Mr. Eduardo Hochschild through Farragut Holdings, Inc. (Cayman Islands). Mr. Eduardo Hochschild is a member of the board of directors of our company. The shares expressed here include those held through ASPI , excluding those from its subsidiary Servicios Corporativos Pacasmayo S.A.C.

(2) See “Item 6. Directors, Senior Management and Employees—Share Ownership” for information regarding shares of our common stock owned by members of our board of directors and executive officers. The number of common shares held by directors and executive officers excludes any shares that may be deemed to be beneficially owned by Mr. Eduardo Hochschild through ASPI.

Changes in Ownership

The following sets forth the composition of ownership from December 31, 2010 to December 31, 2014.

Shareholder	2014			2013			2012			2011			2010
ASPI		50.94	%		50.94	%		50.94	%		63.92	%		63.92	%
IN—Fondo 2 (AFP Integra)		1.05	%		1.05	%		0.74	%		0.92	%		0.92	%
RI—Fondo 2 (AFP Prima)		4.66	%		4.71	%		4.37	%		5.43	%		5.51	%
RI—Fondo 3 (AFP Prima)		4.29	%		4.78	%		4.54	%		5.99	%		5.80	%
HO—Fondo 3 (AFP Horizonte)		—			—			0.65	%		0.69	%		—
HO—Fondo 2 (AFP Horizonte)		—			—			0.56	%		—			—
IN—Fondo 3 (AFP Integra)		0.78	%		0.78	%		0.46	%		0.57	%		0.57	%
PR—Fondo 2 (AFP Profuturo)		0.86	%		0.86	%		0.55	%		0.54	%		0.54	%
PR—Fondo 3 (AFP Profuturo)		0.50	%		0.50	%		—			—			—
American Depositary Receipt Program		18.13	%		18.38	%		17.83	%		—			—
Other shareholders		18.79	%		17.78	%		19.36	%		21.94	%		22.74	%
Total		100.00	%		100.00	%		100.00	%		100.00	%		100.00	%

On February 7, 2012, we issued 100,000,000 common shares, or 18.82% of the outstanding common shares, in the form of ADSs, which ADSs were listed on the New York Stock Exchange. On March 2, 2012, we issued an additional 11,484,000 common shares, or 2.16% of the outstanding common shares, in the form of ADSs when the underwriters exercised their over-allotment option.

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On March 30, 2012, we issued 927,783 investment shares, or 1.84% of the outstanding investment shares, pursuant to a preemptive right offer in connection with our issuance of ADSs.

On March 24, 2014, Mr. Eduardo Hochschild sold 1,310 of our common shares.

Differences in Voting Rights

Our major shareholders do not have different voting rights.

Securities Held in the Host Country

On February 7, 2012, we completed our initial public offering of 20,000,000 ADSs, each representing five common shares, in the United States. On March 2, 2012, we sold an additional 2,296,800 ADSs pursuant to an over-allotment option granted to the underwriters in that offering. Our ADSs are listed on the New York Stock Exchange. As of March 31, 2015, we estimate that there were 20,182,251 ADSs, which represented 18.99% of our common shares outstanding. As of December 31, 2014, the number of record holders of our common shares (or ADSs representing our common shares) that file Form 13-Fs in the United States was 41.

Arrangements for Change in Control

We are not aware of any arrangements that may, when in force, result in a change in control.

B. Related Party Transactions

Peruvian Law Concerning Related Party Transactions

Under Peruvian law, board members and executive officers of a publicly-held company may not (i) engage in transactions with the company or any related party of the company, except for transactions entered into in the ordinary course of business and on an arm’s length basis, (ii) appropriate for their own benefit a business opportunity that belongs to the company, or (iii) participate in any transaction or decision that presents a conflict of interest with the company.

Peruvian law sets forth certain restrictions and limitations on transactions with certain related parties.

For instance, from a tax standpoint, the value of those transactions must be equal to the fair market value assessed under transfer pricing rules (i.e., the value agreed to by non-related parties under the same or similar circumstances). Similarly, companies with securities registered in the Peruvian Public Registry of Securities (Registro Público del Mercado de Valores), such as us, are required to comply with the following rules:

• The directors and managers of the company cannot, without the prior authorization of the board of directors, (i) receive in the form of a loan money or assets of the company; or (ii) use, for their own benefit or for the benefit of related parties, assets, services or credits of the company.

• The execution of agreements that involve at least 5% of the assets of the company with persons or entities related to directors, managers or shareholders that own, directly or indirectly, 10% of the share capital, requires the prior authorization of the board of directors (with no participation of the director involved in the transaction, if any).

• The execution of agreements with a party controlled by the company’s controlling shareholder requires the prior authorization of the board of directors and an evaluation of the terms of the transaction by an external independent company (audit companies or other to be determined by the Peruvian Securities Commission).

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The external independent company that reviews the transaction should not be related to the parties involved therein, nor to directors, managers or shareholders that own at least 10% of the share capital of the company.

Related Party Transactions

As a general policy, we do not enter into transactions with related parties, including our board members and officers, on terms more favorable than what we would offer third parties. Any related party transaction we have entered into in the past has been in the ordinary course of business and on an arm’s length basis.

As of December 31, 2014, we had an accounts receivable balance with ASPI, our controlling shareholder, in the amount of S/.187,000 (US$62,626).

The following transactions have been entered into by us with related parties:

• We lease a plot of land adjacent to our headquarters to our affiliate, Compañía Minera Ares S.A.C., a subsidiary of Hochschild Mining plc. We received rental payments of S/.273,000 in 2012, S/.278,000 in 2013, and S/.293,000 in 2014.

• We lease part of our headquarters as office space to ASPI and its affiliates. We received rental payments of S/.176,000 in 2012, S/.183,000 in 2013; and S/.254,000 in 2014.

• We provide back office management and administrative services to ASPI and its affiliates, for which we received S/.376,000 in 2012, S/.397,000 in 2013; and S/.498,000 in 2014.

• We receive security services from our affiliate Compañía Minera Ares S.A.C., a subsidiary of Hochschild Mining plc. We paid a total of S/.1,160,000 in 2012, S/.1,372,000 in 2013; and S/.1,350,000 in 2014 for these services.

ASPI and Hochschild Mining plc are majority-owned and controlled, directly and indirectly, by Mr. Eduardo Hochschild.

For more information about our related-party transactions please see note 25 to our annual consolidated financial statements included elsewhere in this annual report.

C. Interests of Experts and Counsel

Not applicable.

ITEM 8. FINANCIAL INFORMATION

A. Consolidated Statements and Other Financial Information.

See Exhibits.

Legal and Administrative Proceedings

From time to time, we may become subject to various legal and administrative proceedings that are incidental to the ordinary conduct of our business. We are currently not party to any material legal or administrative proceedings.

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Dividends and Dividend Policy

Our ability to pay dividends is subject to our results of operations for each year. Holders of our common shares and investment shares are entitled to receive dividends on a pro rata basis in accordance with their respective number of shares held.

Under our dividend policy, shareholders must take the following factors into consideration prior to declaring dividends: our financial and economic condition, including committed and budgeted expenses and obligations, and previously approved investments. In addition, our dividend policy states that (a) our board of directors may declare advanced dividends based on either the net income resulting from financial statements prepared for such purpose or the cumulative net income corresponding to previous years, provided that shareholders delegated such authority to the board of directors, and (b) holders of common shares representing no less than 20% of our total share capital may request the distribution of dividends up to 50% of the net income corresponding to the previous year, net of any legal reserve requirements. Our board of directors makes a recommendation at the annual shareholders’ meeting with respect to the amount and timing of dividend payments, if any, to be made on our common shares and investment shares.

Under Peruvian law, companies may distribute up to 100% of their profit (after payment of income tax) subject to a 10% legal reserve until the legal reserve equals 20% of shareholders’ equity. According to Article 40 of the Peruvian Corporate Law, in order to distribute dividends, profits must be determined in accordance with the individual financial statements of the company.

Payment of Dividends

Dividends are paid to holders of our common shares and investment shares, as of a record date determined by us. In order to allow for the settlement of securities, under the rules of the Peruvian Securities Commission, investors who purchase shares of a publicly-held company three business days prior to a dividend payment date do not have the right to receive such dividend payment. Dividends on issued and outstanding common shares and investment shares are distributed pro rata.

Holders of common shares and investment shares are not entitled to interest on accrued dividends. In addition, under Article 232 of the Peruvian Corporate Law, the right to collect accrued dividends declared by a publicly-held company expires 10 years from the original dividend payment date.

Previous Dividend Payments

The following table sets forth the amounts of cash dividends declared and paid from 2010 through the date hereof for our common shares and our investment shares.

Year ended December 31,	Dividends paid		Per share (in S/.)
2014(2)		116,393,000		0.20000
2013		58,196,000		0.10000
2012		52,000,000		0.08935
2011		91,000,000		0.19380
2010(1)		73,000,000		0.15547

(1) In March 2010, we sold our Raul copper mine concessions. In April 2010, we declared an extraordinary dividend payment.

(2) In October 2014 the Company sold its available-for-sale financial investment in SIA. In November 2014, we declared an extraordinary dividend payment

At the annual shareholders’ meeting held on March 27, 2015, the shareholders unanimously approved the financial statements for fiscal year 2014 including the net income for such year and delegated to the Board of Directors the authority to decide the distribution of dividends on account of fiscal year 2014 earnings.

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B. Significant Changes

We are not aware of any changes bearing upon our financial condition since the date of the financial statements included in this annual report.

ITEM 9. THE OFFER AND LISTING

A. Offer and Listing Details

Market Price of Our Common Shares and ADSs

Our ADSs

On February 7, 2012, we completed our initial public offering of 20,000,000 ADSs, each representing five common shares, in the United States. On March 2, 2012, we sold an additional 2,296,800 ADSs pursuant to an over-allotment option granted to the underwriters in that offering.

Our ADSs are listed on the New York Stock Exchange under the symbol “CPAC”. On April 27, 2014, the closing price on the New York Stock Exchange was US$7.36 per ADS.

The following table sets forth for each of the most recent three months and for the current month the high and low closing prices in U.S. dollars of our ADSs on the New York Stock Exchange as reported by the New York Stock Exchange.

	ADSs
(in US$)	High		Low
2014:
January		11.84		9.51
February		9.64		9.12
March		9.46		8.76
April		9.50		9.02
May		9.10		8.70
June		9.25		8.25
July		9.34		8.31
August		9.56		9.02
September		9.55		8.96
October		9.13		8.21
November		9.04		8.48
December		8.92		8.38
2015:
January		8.69		8.10
February		8.81		8.26
March		8.48		7.30
April (through April 27)		7.68		6.96

Our Shares

Our common shares and our investment shares are registered in the Public Registry of Securities held with the Peruvian Securities Commission and are listed on the Lima Stock Exchange under the symbols “CPACASC1” and “CPACASCI1,” respectively. On April 27, 2015, the closing price on the Lima Stock Exchange was S/. 4.53 per common share and S/.2.51 per investment share. Historically, trading volumes of our common shares and investment shares on the Lima Stock Exchange have been limited.

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The following table sets forth for the five most recent full years the high and low closing prices in nuevos soles of our common shares and investment shares on the Lima Stock Exchange as reported by the Lima Stock Exchange.

	Common shares				Investment shares
(in S/.)	High		Low		High		Low
2009		3.60		1.77		3.20		1.60
2010		7.92		3.08		7.21		3.00
2011		8.45		4.25		7.48		4.05
2012		6.90		4.75		6.00		4.45
2013		7.85		5.45		6.50		3.75
2014		6.50		4.70		4.00		2.50

The following table sets forth for each quarter of the three most recent financial years the high and low closing prices in nuevos soles of our common shares and investment shares and the Lima Stock Exchange as reported by the Lima Stock Exchange.

	Common Shares				Investment Shares
(in S/.)	High		Low		High		Low
2012:
First quarter		6.90		5.65		6.00		4.45
Second quarter		6.80		5.45		5.90		5.80
Third quarter		5.95		4.75		5.00		4.99
Fourth quarter		6.85		5.80		5.95		4.50
2013:
First quarter		7.65		6.70		6.30		6.10
Second quarter		7.85		6.66		6.50		6.33
Third quarter		7.40		6.50		5.00		4.50
Fourth quarter		6.68		5,45		4.30		3.75
2014:
First quarter		6.50		4.88		4.00		3.40
Second quarter		5.32		4.70		3.10		2.80
Third quarter		5.50		4.76		2.81		2.75
Fourth quarter		5.39		4.70		2.50		2.50

The following table sets forth for each of the most recent six months and for the current month the high and low closing prices in nuevos soles of our common shares and investment shares on the Lima Stock Exchange as reported by the Lima Stock Exchange.

	Common Shares				Investment Shares
(in S/.)	High		Low		High		Low
2014:
October		5.35		4.70		—		—
November		5.21		4.90		2.50		2.50
December		5.39		5.04		2.50		2.50
2015:
January		5.20		4.80		2.50		2.45
February		5.45		5.10		—		—
March		5.10		4.64		2.48		2.46
April (through April 27)		4.84		4.40		2.51		2.51

B. Plan of Distribution

Not applicable.

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C. Markets

Trading in the Peruvian securities market

The Lima Stock Exchange

As of December 31, 2014, there were 275 companies listed on the Lima Stock Exchange. Established in 1970, the Lima Stock Exchange is Peru’s only securities exchange. On November 19, 2003, the members of the Lima Stock Exchange approved to convert its corporate status to a publicly held corporation as of January 1, 2003. As of December 31, 2014, The Lima Stock Exchange had a share capital of S/.59,715,840, divided into 56,405,407 class “A” shares and 3,310,433 class “B” shares of par value S/.1.00 each. Class “A” shares are entitled to one vote per share while class “B” shares do not have voting rights. As of December 31, 2014, the Lima Stock Exchange had 123 class “A” shareholders and 69 class “B” shareholders.

Trading on the Lima Stock Exchange is primarily done on an electronic trading system that became operational in August 1995. From the first Monday of November through the second Sunday of March of each year, trading hours are Monday through Friday (except holidays) as follows: 8:20 a.m.-8:30 a.m. (pre-market ordering); 8:30 a.m.-2:55 p.m. (trading); 2:55 p.m.-3:00 p.m. (after-market sales); and 3:00 p.m.-3:10 p.m. (after-market trading). At all other times, trading hours are from Monday to Friday (except holidays) as follows: 9:00 a.m.-9:30 a.m. (pre-market ordering); 9:30 a.m.-3:55 p.m. (trading); 3:55 p.m.-4:00 p.m. (after-market sales); and 4:00 p.m.-4:10 p.m. (after-market trading).

Substantially all of the transactions on the Lima Stock Exchange are traded on the electronic system. Transactions during the electronic sessions are executed through brokerage firms and stock brokers on behalf of their clients. Brokers submit orders in the order in which they are received. The orders must specify the type of security as well as the amount and price of the proposed sale or purchase. In order to control price volatility, the Lima Stock Exchange imposes a 15 minute suspension on trading when the price of a security varies on a single day by more than 15% for Peruvian companies and 30% for non-Peruvian companies.

Regulation of the Peruvian Securities Market

The Securities Market Law regulates certain securities matters, such as transparency and disclosure, corporate takeovers, capital market instruments and operations, the securities markets and broker-dealers, and credit-rating agencies. In 1996, the Peruvian Securities Commission, formerly known as the National Supervisory Commission for Securities and Companies (Comisión Nacional Supervisora de Empresas y Valores, or “CONASEV”), was given additional responsibilities relating to the supervision, regulation and development of the securities market, while the Lima Stock Exchange was granted the status of a self-regulatory organization. Additionally, a unified system of guarantees and capital requirements was established for the Lima Stock Exchange.

Pursuant to Law No. 29,782, published in the Peruvian Official Gazette, El Peruano, on July 28, 2011, the Peruvian Securities Commission is a governmental entity reporting to Peru’s Ministry of Economy and Finance with functional, administrative, economic, technical and budgetary autonomy.

The Peruvian Securities Commission is governed by the Superintendent and a five board-members confirmed by the Superintendent (who acts as President of the board) and four members appointed by the Peruvian Executive Power (one suggested by the Ministry of Economy and Finance, one suggested by the Peruvian Central Reserve Bank, one suggested by the Peruvian Superintendency of Banking, Insurance and Private Pension Funds and one independent member). The Peruvian Securities Commission has broad regulatory powers, including reviewing, promoting, and making rules regarding the securities market, supervising its participants, and approving the registration of public offerings of securities.

The Peruvian Securities Commission supervises the securities markets and the dissemination of information to investors. It also (i) governs the operations of the Public Registry of Securities, (ii) regulates mutual funds, publicly placed investment funds and their respective management companies and broker-dealers,

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(iii) monitors compliance with accounting regulations by companies under its supervision as well as the accuracy of financial statements and (iv) registers and supervises auditors who provide accounting services to those companies registered with the Peruvian Securities Commission.

Pursuant to the Securities Market Law, broker-dealers must maintain a guarantee fund. This guarantee fund must be managed by an entity supervised by the Peruvian Securities Commission. Contributions to the guarantee fund must be made by the 25 broker-dealers that are members of the Lima Stock Exchange and are based on the volume traded over the exchange. In addition to the guarantee fund managed, each broker-dealer is required to maintain a guarantee in favor of the Peruvian Securities Commission to guarantee any liability that broker-dealers may have with respect to their clients. Such guarantees are generally established through letters of credit issued by local banks.

Disclosure Obligations

Issuers of securities registered with the Peruvian Securities Commission are required to disclose material information relating to the issuer. Pursuant to the Securities Market Law and relevant regulations enacted thereunder, all material information in connection with the issuer of registered securities (such as our common shares and investment shares), its activities or securities issued or secured by such issuer which may influence the liquidity or price of such securities must be disclosed. Accordingly, issuers must file with the Peruvian Securities Commission mainly two types of information: (a) financial information, including interim unaudited financial statements on a quarterly basis (which are not required to be subject to limited review), and annual audited consolidated financial statements on an annual basis, and (b) material information relating to the issuer and its activities that may significantly affect the price, offering or negotiation of the issued securities, and in general, all the information that may be relevant for investors to be able to make investment decisions.

In order to comply with the foregoing disclosure obligations, issuers must disclose reaffirmation to the Peruvian Securities Commission and, if the securities are listed, with the Lima Stock Exchange as soon as practicable but not later than one business day after having become aware of such information.

D. Selling Shareholders

Not applicable.

E. Dilution

Not applicable.

F. Expenses of the Issue

Not applicable.

ITEM 10. ADDITIONAL INFORMATION

A. Share Capital

Not applicable.

B. Memorandum and Articles of Association

Set forth below is certain information relating to our share capital, including brief summaries of the material provisions of our by-laws, Peruvian corporate law and certain related laws and regulations of Peru, all as in effect as of the date hereof.

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General

We are a publicly-held corporation under Peruvian Corporate law and registered with the Public Registry of Corporations in Lima. We are currently listed on the Lima Stock Exchange.

The second article of our by-laws provides that our principal corporate purpose is mining and the production and sale of cement, quicklime and other construction materials in Peru and internationally.

We have common shares and investment shares.

See “Item 6. Directors, Senior Management and Employees—A. Directors and Senior Management” for information regarding our Board of Directors.

Common Shares

Common shares represent 100% of our voting shares. As of March 31, 2015, we had 531,461,479 common shares outstanding. As of March 31, 2015, there were 7,248 owners of record of our common shares (considering the ADSs listed in the New York Stock Exchange are held by one owner). Our common shares have a par value of S/.1.00 per share and have been fully subscribed and are fully paid. Our common shares are registered in the Securities Public Registry of the Peruvian Securities Commission and are listed on the Lima Stock Exchange.

Investment Shares

As of March 31, 2015, we had 50,503,124 investment shares. Investment shares have no voting rights and are not, under Peruvian law and accounting regulations, characterized as share capital. However, investment shares are still considered part of the company’s equity. As of March 31, 2015, there were 452 owners of record of our investment shares. Our investment shares have a par value of S/.1.00 per share and have been fully subscribed and are fully paid. Our investment shares are registered in the Securities Public Registry of the Peruvian Securities Commission and are listed on the Lima Stock Exchange.

Shareholders’ Liability

Under Peruvian Corporate Law, holders of our common shares cannot vote on matters with respect to which they have a conflict of interest.

Under Article 133 of the Peruvian Corporate Law, a shareholder must abstain from voting if such shareholder has a conflict of interest. A resolution approved in disregard of this provision may be challenged under Article 139 of the Peruvian Corporate Law and any shareholder that participated in the determination in breach of this provision, if such shareholder’s vote was key in attaining the required majority, may be held liable individually, or jointly with any other shareholder voting in breach of the provision.

Redemption and Rights of Withdrawal

Under Article 200 of the Peruvian Corporate Law, holders of our common shares have redemption rights if: (i) we change our corporate purpose; (ii) a change occurs in the place of organization to a foreign country; or (iii) any transformation, merger or significant spin-off occurs with respect to our company.

Preemptive and Accretion Rights

If we increase our share capital, holders of our common shares and investment shares have the right to subscribe to new common shares and investment shares, respectively, on a pro rata basis. Holders of common shares have preemptive rights in order to maintain their share interest in our share capital, unless the capital increase (i) results from a conversion of debt to common shares, (ii) is approved by shareholders representing at least 40% of the subscribed voting shares provided that the capital increase does not favor, directly or indirectly, certain shareholders to the detriment of others, and (iii) results from a corporate reorganization. Holders of investment shares have preemptive rights to maintain their proportional ownership in our share capital.

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Shareholders who are in default of any payments relating to a capital call may not exercise their preemptive rights.

Preemptive rights are exercised in two rounds. During the first round, shareholders may subscribe to the new shares on a pro rata basis. During the second round, shareholders who participated in the first round may subscribe to any remaining shares on a pro rata basis up to the amount of shares such shareholders subscribed for in the first round. The first round must remain open for at least 15 business days. The second round must remain open for at least three business days.

Voting Rights and Dividends

Common Shares

Holders of common shares are entitled to one vote per share, with the exception of the election of the board of directors, where each holder is entitled to one vote per share per nominee. Each holder’s votes may be cast for a single nominee or distributed among the nominees at the holder’s discretion. To that effect, each of our common shares gives the holder the right to as many votes as there are directors to be elected. Shareholders may pool votes in favor of one person or distribute them among various persons. Those candidates for the board who receive the most votes are elected directors. Holders of common shares may attend and vote at shareholders’ meetings either in person or through a proxy.

Holders of common shares have the right to participate in the distribution of dividends and shareholder equity resulting from liquidation. Our by-laws do not establish a maximum time limit for the payment of the dividends. However, according to Article 232 of the Peruvian Corporate law, the right to collect past-due dividends in the case of companies that are publicly held companies, such as ours, expires 10 years after the date on which the dividend payment was due.

Our share capital may be increased by a decision of holders of common shares at a shareholders’ meeting. Capital reductions may be voluntary or mandatory and must be approved by holders of common shares at a shareholders’ meeting. Capital reductions are mandatory when accumulated losses exceed 50% of the capital and to the extent such accumulated losses are not offset by accumulated earnings and capital increases within the following fiscal year. Capital increases and reductions must be communicated to the Peruvian Securities Commission, the Lima Stock Exchange and the Superintendencia Nacional de Administración Tributaria (SUNAT). Voluntary capital reductions must also be published in the official gazette El Peruano and in a widely circulated newspaper in the city in which we are located.

Investment Shares

Under Peruvian Corporate Law, investment shares do not represent share capital. Accordingly, our balance sheet reflects the investment shares as a separate account from our share capital. Holders of investment shares are neither entitled to vote nor to participate in shareholders’ meetings. However, investment shares confer upon the holders thereof the right to participate in the dividends distributed according to their par value, in the same manner as common shares. Investment shares also confer to the holders thereof the preemptive right to (i) maintain the current proportion of the investment shares in the case of a capital increase through new contributions; (ii) increase the number of investment shares upon capitalization of retained earnings, revaluation surplus or other reserves that do not represent cash contributions; (iii) participate in the distribution of assets resulting from a liquidation in the same manner as common shares; and, (iv) redeem the investment shares in case of a merger and/or change of business activity.

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Liquidation Rights

If we are liquidated, our shareholders have the right to receive net assets resulting from the liquidation, after we comply with our obligation to pay all our creditors and after discounting any existing dividend liabilities. For this reason, we cannot assure that we will be able to reimburse 100% of the book value of the common shares and investment shares in case of bankruptcy or liquidation.

Ordinary and Extraordinary Meetings

Pursuant to Peruvian Corporate Law and our by-laws, the annual shareholders’ meeting must be held during the three-month period after the end of each fiscal year. Additional shareholders’ meetings may be held during the year. Because we are a publicly-held corporation, we are subject to the special control of the Peruvian Securities Commission, as provided in Article 253 of the Peruvian Corporate Law. If we do not hold the annual shareholders’ meeting during the three-month period after the end of each fiscal year or any other shareholders’ meeting required by our by-laws, a public notary or a competent judge shall call for such a meeting at the request of at least one shareholder of the common shares. Such meeting will take place within a reasonable period of time.

Other shareholders’ meetings are convened by the board of directors when deemed convenient by our company or when it is requested by the holders of at least 20% of our common shares. If, at the request of holders of 20% of the common shares, the shareholders’ meeting is not convened by the board of directors within 15 business days of the receipt of such request, or the board expressly or implicitly refuses to convene the shareholders’ meeting, a public notary or a competent judge will call pursuant to Law No. 29560 for such meeting at the request of holders of at least 20% of our common shares. If a public notary or competent judge calls for a shareholders’ meeting, the place, time and hour of the meeting, the agenda and the person who will preside shall be indicated on the meeting notice. If the meeting called is other than the annual shareholders’ meeting or a shareholders’ meeting required by the Peruvian Corporate Law or the by-laws, the agenda will contain those matters requested by the shareholders who requested the meeting.

Holders of investment shares have no right to request the board to call a shareholders’ meeting.

Notices of Meetings

Since we are a publicly-held corporation, notice of shareholders’ meetings must be given by publication of a notice. The publication shall occur at least 25 days prior to any shareholders’ meeting in the Peruvian Official Gazette, El Peruano, and in a widely circulated newspaper in the city in which we are located. The notice requirement may be waived at the shareholders’ meeting by agreement of the holders of 100% of the outstanding common shares.

Quorum and Voting Requirements

According to Article 25 of our by-laws and Article 257 of the Peruvian Corporate Law, shareholders’ meetings called for the purpose of considering a capital increase or decrease, the issuance of obligations, a change in the by-laws, the sale in a single act of assets with an accounting value that exceeds 50% of our share capital, a merger, division, reorganization, transformation or dissolution, are subject to a first, second and third quorum call, each of the second and third quorum call to occur upon the failure of the preceding one. A quorum for the first call requires the presence of shareholders holding 50% of our total common shares. For the second call, the presence of shareholders holding at least 25% of our total common shares is adequate, while for the third call there is no quorum requirement. These decisions require the approval of the majority of the common shares represented at the shareholders’ meeting. Shareholders’ meetings convened to consider all other matters are subject to a first and second quorum call, the second quorum call to occur upon the failure of the first quorum.

In accordance with Peruvian Corporate Law, only those holders of common shares whose names are registered in our stock ledger not less than 10 days in advance of a meeting will be entitled to attend the shareholders’ meeting and to exercise their rights.

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Limitations on the Rights of Non-residents or Foreign Shareholders

There are no limitations under our by-laws or Peruvian Corporate Law on the rights of nonresidents or foreign shareholders to own securities or exercise voting rights with respect to our securities.

Disclosure of Shareholdings and Tender Offer Regulations

Disclosure of Shareholdings

There are no provisions in our by-laws governing the ownership threshold above which share ownership must be disclosed.

However, according to Article 10 of CONASEV Resolution No. 090-2005-EF-94.10, as amended, we must inform the Peruvian Securities Commission of the members of our economic group and a list of our holders of common shares owning more than a 5% share interest, as well as any change to such information.

Tender Offer Regulations

Peruvian security regulations include mandatory takeover rules applicable to the acquisition of control of a listed company.

Subject to certain conditions, such regulations generally establish the obligation to make a tender offer when a person or group of persons acquires a relevant interest in a listed company. According to Peruvian law, a person acquires a relevant interest in a listed company when such person (a) holds or has the power to exercise directly or indirectly 25%, 50% or 60% of the voting rights in a listed company, or (b) has the power to appoint or remove the majority of the board members or to amend its by-laws.

In general, the tender offer must be launched prior to the acquisition of the relevant interest. The tender offer may be launched after the “relevant interest” is acquired if it is acquired (a) by means of an indirect transaction, (b) as a consequence of a public sale offer, or (c) in no more than four transactions within a three-year period.

This mandatory procedure has the effect of alerting other shareholders and the market that an individual or financial group has acquired a significant percentage of a company’s voting shares, and gives other shareholders the opportunity to sell their shares at the price offered by the purchaser. The purchaser is required to launch a tender offer unless: (a) shareholders representing 100% of the voting rights consent in writing, (b) voting shares are acquired by a depositary in order to subsequently issue ADSs, or (c) voting shares are acquired pursuant to the exercise of preemptive rights.

Changes in Capital

Our by-laws do not establish special conditions to increase or reduce our share capital beyond what is required under Peruvian Corporate Law.

Anti-Takeover Provisions

Our by-laws do not contain any provision that would have the effect of delaying, deferring or preventing a change of control. However, acquisitions of shares of our capital stock that involve a change of control may be subject to Peruvian securities and exchange regulations (Ley de Mercado de Valores y Reglamento de Oferta Pública de Adquisición y de Compra de Valores por Exclusión) applicable to tender offers.

Form and Transfer

Common shares and investment shares may be either physical share certificates in registered form or book-entry securities in the CAVALI S.A. ICLV book-entry settlement system, also in registered form.

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Furthermore, the Peruvian Corporate Law forbids publicly-held corporations, such as us, from including in their by-laws stipulations limiting the transfer of their shares or restraining their trading in other ways. In addition, pursuant to our by-laws, we cannot recognize a shareholders’ agreement that contemplates limitations, restrictions or preferential rights on the transfer of shares, even if such an agreement is recorded in our stock ledger (matrícula de acciones) or in CAVALI S.A. ICLV.

C. Material Contracts

On December 31, 2007, we entered into a contract for the general management and provision of services with ASPI, pursuant to which we provide legal and corporate services to it. See “Item 7. Major Shareholders and Related Party Transactions—A. Related Party Transactions.”

On February 1, 2008, we entered into a surface rights agreement with Compañía Minera Ares S.A.C., pursuant to which we lease a plot of land adjacent to our headquarters to our affiliate, Compañía Minera Ares S.A.C., a subsidiary of Hochschild Mining plc. See “Item 7. Major Shareholders and Related Party Transactions—A. Related Party Transactions.”

On June 30, 2008, we entered into a property lease agreement with ASPI pursuant to which we lease part of our headquarters as office space to ASPI. See “Item 7. Major Shareholders and Related Party Transactions—A. Related Party Transactions.”

On June 3, 2010, we entered into a long-term electricity supply agreement with Electroperú, a government-owned company, which expires in July 2020, to serve the electricity requirements of our Pacasmayo facility. Electroperú has agreed to provide us with sufficient energy to operate our Pacasmayo facility at pre-determined maximum amounts during the term of the contract. Payments for electricity are based on a formula that takes into consideration our energy consumption and certain market variables, such as the U.S. purchase price index, the global price of oil, the local price of natural gas and the import price of bituminous coal. See “Item 4. Information on the Company—A. History and Development of the Company—Raw Materials and Energy Sources.”

On December 27, 2011, we entered into a secured loan with BBVA Banco Continental in the amount of S/.202.2 million (US$75 million) accruing interest at an annual rate of 6.37% for the first year, 6.64% for the second year and 7.01% for the following years, and maturing in December 2018. The loan is secured by our current collateral trust, which holds substantially all of our assets at our Pacasmayo facility and our Acumulación Tembladera quarry. This loan was paid in full in February 2013. See “Item 5. Operating and Financial Review and Prospects—B. Liquidity and Capital Resources.”

On September 28, 2012, we entered into a supply agreement, later amended on February 21, 2013, with ThyssenKrupp Polysius and Loesche for US$113.4 million for the provision of key equipment for our new plant in Piura, which is expected to have an annual production capacity of 1.6 million metric tons of cement and 1.0 million tons of clinker.

On February 8, 2013, we issued US$300,000,000 of our 4.50% Senior Notes due 2023, in our inaugural international bond offering, pursuant to an indenture. A portion of the proceeds were used to prepay amounts outstanding our secured loan agreement with BBVA Banco Continental, and the remaining proceeds will be used to cover a portion of the capital expenditures we expect to incur in connection with the construction and development of the new Piura plant and our cement business. See “Item 5. Operating and Financial Review and Prospects—B. Liquidity and Capital Resources.”

On September 26, 2013, we entered into a contract for the construction and electromechanical assembly services for the Piura plant with the consortium formed by JJC Contratistas Generales S.A., SSK Montajes e Instalaciones S.A.C. and JJC Schrader Camargo S.A.C. The first of these companies will be responsible for executing the civil works, while the other two companies will be in charge of the electromechanical assembly activities, within a 19-month period

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D. Exchange Controls

Since August 1990, there have been no exchange controls in Peru and all foreign exchange transactions are based on free market exchange rates. Prior to August 1990, the Peruvian foreign exchange market consisted of several alternative exchange rates. Additionally, during the 1990s, the Peruvian currency experienced a significant number of large devaluations, and Peru has consequently adopted, and operated under, various exchange rate control practices and exchange rate determination policies, ranging from strict control over exchange rates to market determination of rates. Current Peruvian regulations on foreign investment allow the foreign holders of equity shares of Peruvian companies to receive and repatriate 100 percent of the cash dividends distributed by such companies. Such investors are allowed to purchase foreign exchange at free market currency rates through any member of the Peruvian banking system and transfer such foreign currency outside Peru without restriction.

E. Taxation

The following summary contains a description of certain Peruvian and United States federal income tax consequences of the acquisition, ownership and disposition of common shares or ADSs, but it does not purport to be a comprehensive description of all the tax considerations that may be relevant to a decision to purchase common shares or ADSs. The summary is based upon the tax laws of Peru and regulations thereunder and on the tax laws of the United States and regulations thereunder as in effect on the date hereof, which are subject to change.

Prospective holders of common shares or ADSs should consult their own tax advisors as to the tax consequences of the acquisition, ownership and disposition of common shares or ADSs in their particular circumstances.

Peruvian Tax Considerations

The following are the principal tax consequences of ownership of common shares or ADSs by non-resident individuals or entities (“Non-Peruvian Holders”) as of the date hereof. Legislative, judicial or administrative changes or interpretations may, however, be forthcoming. Any such changes or interpretations could affect the tax consequences to holders of common shares or ADSs and could alter or modify the conclusions set forth herein. This summary is not intended to be a comprehensive description of all the tax consequences of acquisition, ownership and disposition of common shares or ADSs and does not describe any tax consequences arising under the laws of any taxing jurisdiction other than Peru or applicable to a resident of Peru or to a person with a permanent establishment in Peru.

For purposes of Peruvian taxation:

• individuals are residents of Peru, if they are Peruvian nationals who have established their principal place of residence in Peru or if they are foreign nationals with a permanence in Peru of 183 days in any 12-month period (the condition of Peruvian resident can only be acquired as of the 1st of January of the year following the fulfillment of residence conditions); and

• legal entities are residents of Peru if they are established or incorporated in Peru.

Changes to Peruvian tax law

In December 2014, the Peruvian Government approved the progressive reduction of the income tax rate from 30% to 28% to be effective in 2015 and 2016, to 27% during 2017 and 2018 and 26% starting from 2019 onwards. At the same time it approved the increase of the income tax rate on dividends applicable to not-Peruvian entities from 4.1% to 6.8% to be effective in 2015 and 2016, to 8% during 2017 and 2018 and 9.3% from 2019 onwards.

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Cash Dividends and Other Distributions

Cash dividends paid with respect to common shares and amounts distributed with respect to ADSs are currently subject to a Peruvian withholding tax, at a rate of 4.1% of the dividend paid, when the dividend is paid to shareholders that are non-Peruvian persons. In December 2014, the Peruvian government approved the increase in the withholding tax rate on dividend paid to non-Peruvians from 4.1% to 6.8%, effective in 2015 and 2016 to 8% in 2017 and 2018 and 9.3% since 2019 hereinafter. As a general rule, the distribution of additional common shares representing profits, distribution of shares which differ from the distribution of earnings or profits, as well as the distribution of preemptive rights with respect to common shares, which are carried out as part of a pro rata distribution to shareholders, will not be subject to Peruvian tax or withholding taxes.

Capital Gains

Pursuant to Article 6 of the Peruvian income tax law, individuals and entities resident in Peru are subject to Peruvian income tax on their worldwide income while Non-Peruvian Holders are subject to Peruvian income tax on Peruvian source income only.

Peruvian income tax law provides that income derived from the disposal of securities issued by Peruvian entities is considered Peruvian source income and is therefore subject to income tax. Peruvian income tax law also provides that capital gains resulting from the disposal of ADSs that represent shares issued by Peruvian entities are considered Peruvian source income and therefore also subject to Peruvian income tax. Peruvian income tax law also provides that taxable income resulting from the disposal of securities is determined by the difference between the sale price of the securities at market value and the tax basis.

Notwithstanding the foregoing, capital gains resulting from the disposal of ADSs or beneficial interest in ADSs that represent shares issued by a Peruvian entity are not considered Peruvian source income as long as the ADSs issued by the foreign depositary are held in the name of a nominee and such ADSs are not transferred to a third party as a result of the disposal of the ADSs.

In the event ADSs are exchanged into common shares and such common shares are disposed of, capital gains resulting therefrom will be subject to an income tax rate of either 5% or 30%, depending on where the transaction takes place. If the transaction is consummated in Peru, the income tax rate is 5%; if the transaction is consummated outside of Peru, capital gains are taxed at a rate of 30%. Peruvian income tax law regulations have stated that transactions are deemed to be consummated in Peru if the common shares are transferred through the Lima Stock Exchange. Any gain resulting from the conversion of ADSs into common shares or common shares into ADSs will not be subject to taxation in Peru.

Any Non-Peruvian Holder who acquires common shares will have the following tax basis: (i) for common shares purchased by the transferor, the acquisition price paid for the shares; (ii) for common shares received by the transferor as a result of a share capital increase because of a capitalization of net profits, the face or nominal value of such common shares; (iii) for other common shares received free of any payment, the stock market value of such shares if listed on the Lima Stock Exchange or, if not, the face or nominal value of such common shares and (iv) for common shares of the same type acquired at different opportunities and at different values, the tax basis will be the weighted average cost. In cases where common shares are sold by Non-Peruvian Holders outside the Lima Stock Exchange, the tax basis must be certified by the Peruvian tax administration prior to the time payment is made to the transferor; otherwise it would not be possible to deduct the tax basis and a 30% Peruvian income tax would apply to the total sale price. Under Peruvian income tax law, tax basis certification is granted by the tax authorities within 30 days from the date of the application (which application must contain supporting evidence with respect to the tax basis) is made by the transferor. If the tax authorities do not respond within such 30 day period, the tax basis presented for approval by the transferor is deemed automatically approved.

On December 31, 2010, Law No. 29645 was enacted and took effect from January 1, 2011. This law states that in transactions relating to Peruvian securities through the Lima Stock Exchange, CAVALI S.A. ICLV (the Peruvian clearing house) will act as withholding agent to the extent that such transactions are settled in cash through CAVALI’s account (liquidación en efectivo). The implementing regulations of Law No. 29645 enacted

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on July 9, 2011 provide that CAVALI began acting as a withholding agent as from November 1, 2011. As a result, while such regulations do not apply to securities transferred though the Lima Stock Exchange by a Non-Peruvian Holder, such transferor must still self-assess and pay its income tax liability directly to Peruvian tax authorities within the first 12 working days following the month in which Peruvian source income was earned. With respect to transactions of Peruvian securities conducted through the Lima Stock Exchange that are settled directly without CAVALI’s intervention (liquidación directa), Non-Peruvian Holders are required to self-assess and pay income taxes directly to the Peruvian tax authorities within the first 12 working days following the month in which income from a Peruvian source was earned. Finally, if the purchaser is resident in Peru and the sale is not performed through the Lima Stock Exchange, the purchaser will act as withholding agent.

Other Considerations

No Peruvian estate or gift taxes are imposed on the gratuitous transfer of ADSs or common shares. No stamp, transfer or similar tax applies to any transfer of ADSs or common shares, except for commissions payable by seller and buyer to the Lima Stock Exchange (0.15% of value sold), fees payable to CONASEV (0.05% of value sold), brokers’ fees (about 0.05% to 1% of value sold) and Value Added Tax (at the rate of 18%) on commissions and fees. Any investor who sells its common shares on the Lima Stock Exchange will incur these fees and taxes upon purchase and sale of the common shares.

United States Federal Income Tax Considerations

The following are the material United States federal income tax consequences as of the date hereof to a United States Holder (as defined below) of the acquisition, ownership and disposition of our common shares and ADSs. Except where noted, this summary deals only with common shares and ADSs held as capital assets (generally, property held for investment). As used herein, the term “United States Holder” means a beneficial owner of common shares or ADSs that is for United States federal income tax purposes:

• an individual citizen or resident of the United States;

• a corporation (or other entity treated as a corporation for United States federal income tax purposes) created or organized in or under the laws of the United States, any state thereof or the District of Columbia;

• an estate the income of which is subject to United States federal income taxation regardless of its source; or

• a trust if it (1) is subject to the primary supervision of a court within the United States and one or more United States persons have the authority to control all substantial decisions of the trust, or (2) has a valid election in effect under applicable United States Treasury regulations to be treated as a United States person.

This summary does not represent a detailed description of the United States federal income tax consequences applicable to you if you are subject to special treatment under the United States federal income tax laws, including if you are:

• a dealer in securities or currencies;

• a financial institution;

• a regulated investment company;

• a real estate investment trust;

• an insurance company;

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• a tax-exempt organization;

• a person holding our common shares or ADSs as part of a hedging, integrated or conversion transaction, a constructive sale or a straddle;

• a trader in securities that has elected the mark-to-market method of accounting for your securities;

• a person liable for alternative minimum tax;

• a person who owns or is deemed to own 10% or more of our voting stock;

• a partnership or other pass-through entity for United States federal income tax purposes; or

• a person whose “functional currency” is not the U.S. dollar.

The discussion below is based upon the provisions of the U.S. Internal Revenue Code of 1986, as amended (the “Code”), and regulations, rulings and judicial decisions thereunder as of the date hereof, and such authorities may be replaced, revoked or modified so as to result in United States federal income tax consequences different from those discussed below. There is currently no income tax treaty between the United States and Peru that would provide for United States federal income tax consequences different from those discussed below. In addition, this summary is based, in part, upon representations made by the depositary to us and assumes that the deposit agreement, and all other related agreements, will be performed in accordance with their terms.

If a partnership (or other entity treated as a partnership for United States federal income tax purposes) holds our common shares or ADSs, the tax treatment of a partner in the partnership will generally depend upon the status of the partner and the activities of the partnership. If you are a partner of a partnership holding our common shares or ADSs, you should consult your tax advisors.

This summary does not address the Medicare tax on net investment income or the effects of any state, local or non-United States tax laws. If you are considering the acquisition, ownership or disposition of our common shares or ADSs, you should consult your own tax advisors concerning the United States federal income tax consequences to you in light of your particular situation as well as any consequences arising under the laws of any other taxing jurisdiction.

ADSs

If you hold ADSs, for United States federal income tax purposes, you generally will be treated as the owner of the underlying common shares that are represented by such ADSs. Accordingly, deposits or withdrawals of common shares for ADSs will not be subject to United States federal income tax.

Taxation of Dividends

The gross amount of distributions on the ADSs or common shares (including amounts withheld to reflect Peruvian withholding taxes) will be taxable as dividends, to the extent paid out of our current or accumulated earnings and profits, as determined under United States federal income tax principles.

To the extent that the amount of any distribution (including amounts withheld to reflect Peruvian withholding taxes) exceeds our current and accumulated earnings and profits for a taxable year, as determined under United States federal income tax principles, the distribution will first be treated as a tax-free return of capital, causing a reduction in the adjusted basis of the ADSs or common shares, and the balance in excess of adjusted basis will be taxed as capital gain recognized on a sale or exchange. However, we do not expect to keep earnings and profits in accordance with United States federal income tax principles. Therefore, you should expect that a distribution will generally be treated as a dividend. Such dividends (including withheld taxes) will be includable in your gross income as ordinary income on the day actually or constructively received by you, in the case of the common shares, or by the depositary, in the case of ADSs. Such dividends will not be eligible for the dividends received deduction allowed to corporations under the Code.

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With respect to non-corporate United States Holders, certain dividends received from a qualified foreign corporation may be subject to reduced rates of taxation. A non-United States corporation is treated as a qualified foreign corporation with respect to dividends received from that corporation on common shares (or ADSs backed by such shares) that are readily tradable on an established securities market in the United States. United States Treasury Department guidance indicates that our ADSs, which are listed on the New York Stock Exchange, but not our common shares, are readily tradable on an established securities market in the United States. Thus, we believe that dividends we pay on our common shares that are represented by ADSs, but not our common shares that are not so represented, will meet such conditions required for the reduced tax rates. There can be no assurance that our ADSs will be considered readily tradable on an established securities market in later years. Non-corporate United States Holders that do not meet a minimum holding period requirement during which they are not protected from the risk of loss or that elect to treat the dividend income as “investment income” pursuant to Section 163(d)(4) of the Code will not be eligible for the reduced rates of taxation regardless of our status as a qualified foreign corporation. In addition, the rate reduction will not apply to dividends if the recipient of a dividend is obligated to make related payments with respect to positions in substantially similar or related property. This disallowance applies even if the minimum holding period has been met. You should consult your own tax advisors regarding the application of these rules given your particular circumstances.

The amount of any dividend paid in nuevos soles will equal the U.S. dollar value of the nuevos soles received, calculated by reference to the exchange rate in effect on the date the dividend is actually or constructively received by you, in the case of the common shares, or by the depositary, in the case of ADSs, regardless of whether the nuevos soles are converted into U.S. dollars at that time. If the nuevos soles received as a dividend are converted into U.S. dollars on the date they are received, you generally will not be required to recognize foreign currency gain or loss in respect of the dividend income. If the nuevos soles received as a dividend are not converted into U.S. dollars on the date of receipt, you will have a tax basis in the nuevos soles equal to their U.S. dollar value on the date of receipt. Any gain or loss realized on a subsequent conversion or other disposition of the nuevos soles will be treated as United States source ordinary income or loss.

Subject to certain conditions and limitations, Peruvian withholding taxes on dividends may be treated as foreign taxes eligible for credit against your United States federal income tax liability. For purposes of calculating the foreign tax credit, dividends paid on the ADSs or common shares will be treated as foreign source income and will generally constitute passive category income. However, in certain circumstances, if you have held the ADSs or common shares for less than a specified minimum period during which you are not protected from risk of loss, or are obligated to make payments related to the dividends, you will not be allowed a foreign tax credit for any Peruvian withholding taxes imposed on dividends paid on the ADSs or common shares. If you do not elect to claim a United States foreign tax credit, you may instead claim a deduction for Peruvian income tax withheld, but only for a taxable year in which you elect to do so with respect to all foreign income taxes paid or accrued in such taxable year. The rules governing the foreign tax credit are complex. You are urged to consult your tax advisors regarding the availability of the foreign tax credit under your particular circumstances.

Taxation of Capital Gains

For United States federal income tax purposes, you will recognize taxable gain or loss on any sale or exchange of ADSs or common shares in an amount equal to the difference between the amount realized for the ADSs or common shares and your tax basis in the ADSs or common shares. Such gain or loss will generally be capital gain or loss. Capital gains of non-corporate United States Holders derived with respect to capital assets held for more than one year are eligible for reduced rates of taxation. The deductibility of capital losses is subject to limitations.

If Peruvian income tax is withheld on the sale or other disposition of our ADSs or common shares, your amount realized will include the gross amount of the proceeds of that sale or other disposition before deduction of the Peruvian income tax. Any gain or loss recognized by you will generally be treated as United States source gain or loss. Consequently, in the case of gain from the disposition of ADSs or common shares that is subject to Peruvian income tax, you may not be able to benefit from the foreign tax credit for that Peruvian income tax

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(i.e., because the gain from the disposition would be United States source), unless you can apply the credit (subject to applicable limitations) against United States federal income tax payable on other income from foreign sources. Alternatively, you may take a deduction for the Peruvian income tax if you do not take a credit for any foreign taxes paid or accrued during the taxable year. You are urged to consult your tax advisors regarding the tax consequences if Peruvian income tax is imposed on a disposition of ADSs or common shares, including the availability of the foreign tax credit under your particular circumstances.

Passive Foreign Investment Company

We do not believe that we are, for United States federal income tax purposes, a passive foreign investment company (“PFIC”), and we expect to operate in such a manner so as not to become a PFIC. If, however, we are or become a PFIC, you could be subject to additional United States federal income taxes on gain recognized with respect to the ADSs or common shares and on certain distributions, plus an interest charge on certain taxes treated as having been deferred under the PFIC rules. Non-corporate United States Holders will not be eligible for reduced rates of taxation on any dividends received from us (as discussed above under “Taxation of Dividends”), if we are a PFIC in the taxable year in which such dividends are paid or in the preceding taxable year.

Information Reporting and Backup Withholding

In general, information reporting will apply to dividends in respect of our ADSs or common shares and the proceeds from the sale, exchange or redemption of our ADSs or common shares that are paid to you within the United States (and in certain cases, outside the United States), unless you are an exempt recipient. Backup withholding may apply to such payments if you fail to provide a taxpayer identification number or certification of other exempt status or fail to report in full dividend and interest income.

Any amounts withheld under the backup withholding rules will be allowed as a refund or a credit against your United States federal income tax liability provided the required information is furnished to the Internal Revenue Service in a timely manner.

The above description is not intended to constitute a complete analysis of all tax consequences relating to the acquisition, ownership or disposition of our ADSs or common shares. You should consult your own tax advisors concerning the overall tax consequences to you, including the consequences under laws other than United States federal income tax laws, of an investment in our ADSs or common shares.

F. Dividends and Paying Agents

Not applicable.

G. Statement by Experts

Not applicable.

H. Documents on Display

We make our filings in electronic form under the EDGAR filing system of the SEC. Our filings are available through the EDGAR system at www.sec.gov. In addition, our filings are available to the public over our website www.cementospacasmayo.com.pe. Such filings and other information on our website are not incorporated by reference in this annual report. You may request a copy of this filing, and any other report, at no cost, by writing to us at the following address or telephoning us:

Investor Relations Department

Calle La Colonia 150,

Urbanización El Vivero, Surco,

Lima, Peru.

Tel.: + (511) 317-6000

E-mail: cbustamante@cpsaa.com.pe

109

I. Subsidiary Information

See note 1 to our consolidated financial statements included in this annual report for a description of our subsidiaries.

ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

For a description of our market risks, see note 29 to our consolidated financial statements included in this annual report.

ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES

A. Debt Securities

Not applicable.

B. Warrants and Rights

Not applicable.

C. Other Securities

Not applicable.

D. American Depositary Shares

Fees and expenses

JPMorgan Chase Bank, N.A., as depositary, pursuant to our Deposit Agreement, dated as of February 7, 2012 (the “Deposit Agreement”), may charge each person to whom ADSs are issued, including, without limitation, issuances against deposits of common shares, issuances in respect of common share distributions, rights and other distributions, issuances pursuant to a stock dividend or stock split declared by us or issuances pursuant to a merger, exchange of securities or any other transaction or event affecting the ADSs or deposited securities, and each person surrendering ADSs for withdrawal of deposited securities or whose ADSs or American Depositary Receipts representing ADSs (“ADRs”) are cancelled or reduced for any other reason, US$5.00 for each 100 ADSs (or any portion thereof) issued, delivered, reduced, cancelled or surrendered, as the case may be. The depositary may sell (by public or private sale) sufficient securities and property received in respect of a common share distribution, rights and/or other distribution prior to such deposit to pay such charge.

The following additional charges shall be incurred by the ADR holders, by any party depositing or withdrawing common shares or by any party surrendering ADSs or to whom ADSs are issued (including, without limitation, issuance pursuant to a stock dividend or stock split declared by us or an exchange of stock regarding the ADRs or the deposited securities or a distribution of ADSs), whichever is applicable:

• a fee of US$1.50 per ADR or ADRs for transfers of certificated or direct registration ADRs;

• a fee of US$0.05 or less per ADS for any cash distribution made pursuant to the deposit agreement;

• a fee of US$0.05 or less per ADS per calendar year (or portion thereof) for services performed by the depositary in administering the ADRs (which fee may be charged on a periodic basis during each calendar year and shall be assessed against holders of ADRs as of the record date or record dates set by the depositary during each calendar year and shall be payable in the manner described in the next succeeding provision);

110

• reimbursement of such fees, charges and expenses as are incurred by the depositary and/or any of the depositary’s agents (including, without limitation, the custodian and expenses incurred on behalf of holders in connection with compliance with foreign exchange control regulations or any law or regulation relating to foreign investment) in connection with the servicing of the common shares or other deposited securities, the delivery of deposited securities or otherwise in connection with the depositary’s or its custodian’s compliance with applicable law, rule or regulation (which charge shall be assessed on a proportionate basis against holders as of the record date or dates set by the depositary and shall be payable at the sole discretion of the depositary by billing such holders or by deducting such charge from one or more cash dividends or other cash distributions);

• a fee for the distribution of securities (or the sale of securities in connection with a distribution), such fee being in an amount equal to US$0.05 per ADS issuance fee for the execution and delivery of ADSs which would have been charged as a result of the deposit of such securities (treating all such securities as if they were common shares) but which securities or the net cash proceeds from the sale thereof are instead distributed by the depositary to those holders entitled thereto;

• stock transfer or other taxes and other governmental charges;

• cable and facsimile transmission and delivery charges incurred at your request in connection with the deposit or delivery of common shares;

• transfer or registration fees for the registration of transfer of deposited securities on any applicable register in connection with the deposit or withdrawal of deposited securities; and

• expenses of the depositary in connection with the conversion of foreign currency into U.S. dollars.

We will pay all other charges and expenses of the depositary and any agent of the depositary (except the custodian) pursuant to agreements from time to time between us and the depositary. The charges described above may be amended from time to time by agreement between us and the depositary.

Our depositary has agreed to reimburse us for certain expenses we incur that are related to establishment and maintenance of the ADR program, including investor relations expenses and exchange application and listing fees. The amounts of reimbursements available to us are not based upon the amounts of fees the depositary collects from investors. The depositary collects its fees for issuance and cancellation of ADSs directly from investors depositing common shares or surrendering ADSs for the purpose of withdrawal or from intermediaries acting on their behalf. 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 will generally set off the amounts owing from distributions made to holders of ADSs. If, however, no distribution exists and payment owing is not timely received by the depositary, the depositary may refuse to provide any further services to holders that have not paid those fees and expenses owing until such fees and expenses have been paid. At the discretion of the depositary, all fees and charges owing under the deposit agreement are due in advance and/or when declared owing by the depositary.

The Deposit Agreement is filed as Exhibit 2.2 to this annual report. We encourage you to review this document carefully if you are a holder of ADRs.

111

PART II

ITEM 13. DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES

Not applicable.

ITEM 14. MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS

Not applicable.

ITEM 15. CONTROLS AND PROCEDURES

A. Disclosure Controls and Procedures

As of the end of the period covered by this annual report, management, with the participation of the company’s Chief Executive Officer and Chief Financial Officer, performed an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act. Our disclosure controls and procedures are designed to ensure that information required to be disclosed in the reports we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including the Chief Executive Officer and the Chief Financial Officer, to allow timely decisions regarding required disclosures. Any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objective. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, as of December 31, 2014, the design and operation of our disclosure controls and procedures were effective at the reasonable assurance level.

B. Management’s Annual Report on Internal Control Over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting. Our internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of the financial statements for external purposes in accordance with generally accepted accounting principles.

Because of its inherent limitations, internal control over financial reporting may not necessarily prevent or detect some misstatements. It can only provide reasonable assurance regarding financial statement preparation and presentation. Also, projections of any evaluation of effectiveness for future periods are subject to the risk that controls may become inadequate because of changes in conditions or because the degree of compliance with the polices or procedures may deteriorate over time.

Management assessed the effectiveness of its internal control over financial reporting for the year ended December 31, 2014. The assessment was based on criteria established in the framework “Internal Controls—Integrated Framework” issued by the Committee of Sponsoring Organizations of the Treadway Commission (1992 Framework) (COSO). Based on the assessment, our management has concluded that as of December 31, 2014, our internal control over financial reporting was effective.

The effectiveness of internal control over financial reporting as of December 31, 2014 has been audited by Paredes, Zaldivar, Burga & Asociados SCRL, member firm of EY (former Ernst & Young), an independent registered public accounting firm, as stated in their attestation report, which is included under “Item 15—Controls and Procedures—C. Attestation Report of Independent Registered Public Accounting Firm.”

C. Attestation Report of the Independent Registered Public Accounting Firm

To the Board of Directors and Shareholders of Cementos Pacasmayo S.A.A.

112

We have audited Cementos Pacasmayo S.A.A.’s internal control over financial reporting as of December 31, 2014, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (1992 Framework) (the COSO criteria). Cementos Pacasmayo S.A.A.’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’s Annual Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the company’s internal control over financial reporting based on our audit.

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.

A company’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’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’s assets that could have a material effect on the financial statements.

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.

In our opinion, Cementos Pacasmayo S.A.A. and subsidiaries maintained, in all material respects, effective internal control over financial reporting as of December 31, 2014, based on the COSO criteria.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States of America), the consolidated statements of financial position of Cementos Pacasmayo S.A.A. and subsidiaries as of December 31, 2014 and 2013, and the related consolidated statements of profit or loss, other comprehensive income, changes in equity and cash flows, for each of the three years in the period ended December 31, 2014 of Cementos Pacasmayo S.A.A. and subsidiaries and our report dated April 30, 2015, expressed an unqualified opinion thereon.

Lima, Perú,

April 30, 2015

Countersigned by:

/s/ Carlos Valdivia

C.P.C.C. Register No. 27255

113

D. Changes in Internal Control Over Financial Reporting

There have been no changes in our internal control over financial reporting identified in connection with the evaluation required under Rules 13a-15 or 15d-15 that occurred during the period covered by this annual report that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

ITEM 16. [RESERVED]

ITEM 16A. AUDIT COMMITTEE FINANCIAL EXPERT

The Board of Directors has determined that Ms. Hilda Ochoa-Brillembourg, a member of the audit committee, is a “financial expert,” as such term is defined in the SEC rules. We have determined that Ms. Hilda Ochoa- Brillembourg, Mr. Rolando Arellano Cueva and Mr. Felipe Ortiz de Zevallos are independent under the standards of the New York Stock Exchange listing rules and Rule 10A-3 under the Exchange Act.

ITEM 16B. CODE OF ETHICS

We have adopted a code of ethics that applies to our directors, officers and employees. Our code of ethics is available on our website http://www.cementospacasmayo.com.pe. Information on our website is not incorporated by reference in this form.

If we make any substantive amendment to the code of ethics or if we grant any waivers, including any implicit waiver, from a provision of the code of ethics, we will disclose the nature of such amendment or waiver in a Form 6-K or in our subsequent annual report on Form 20-F to be filed with the SEC. During the year ended December 31, 2014, no such amendment was made nor did we grant any waiver to any provision of our code of ethics.

ITEM 16C. PRINCIPAL ACCOUNTANT FEES AND SERVICES

Audit and Non-Audit Fees

The following table presents the aggregate fees for professional services and other services rendered by our independent auditors, Paredes, Zaldivar, Burga & Asociados SCRL, member firm of EY (former Ernst & Young), responsible for auditing the annual consolidated financial statements included in the annual report, during the fiscal years ended December 31, 2014 and 2014.

	Year Ended December 31,
(in thousands of S/.)	2014		2013
Audit fees		1,525		1,533
Audit-related fees		408		—
Tax fees		258		259
All other fees		—		—
Total fees		2,191		1,792

Audit fees in the above table are the aggregate fees billed and billable by our independent auditors in connection with the audit of the Company’s annual consolidated financial statements and review of the Company’s quarterly financial information.

Tax fees in the above table are fees billed relating to tax compliance services.

114

Our audit committee is responsible for the oversight of the independent auditors and has established pre-approval procedures for the engagement of its independent registered public accounting firm for audit and non-audit services. Such services can only be contracted if they are approved by the audit committee, they comply with the restriction provided under applicable rules and they do not jeopardize the independence of our auditors.

ITEM 16D. EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES

Not applicable.

ITEM 16E. PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS

Not applicable.

ITEM 16F. CHANGE IN REGISTRANT’S CERTIFYING ACCOUNTANT

Not applicable.

ITEM 16G. CORPORATE GOVERNANCE

We are a “foreign private issuer” within the meaning of the New York Stock Exchange corporate governance standards. Under New York Stock Exchange rules, a foreign private issuer may elect to comply with the practices of its home country and not to comply with certain corporate governance requirements applicable to U.S. companies with securities listed on the exchange.

We currently follow certain Peruvian practices concerning corporate governance and intend to continue to do so. There are significant differences in the Peruvian corporate governance practices as compared to those followed by United States domestic companies under the New York Stock Exchange’s listing standards.

The New York Stock Exchange listing standards provide that the board of directors of a U.S. listed company must have a majority of independent directors at the time the company ceases to be a “controlled company”. Under Peruvian corporate governance practices, a Peruvian company is not required to have a majority of independent members on its board of directors.

The listing standards for the New York Stock Exchange also require that U.S. listed companies, at the time they cease to be “controlled companies,” have a nominating/corporate governance committee and a compensation committee (in addition to an audit committee). Each of these committees must consist solely of independent directors and must have a written charter that addresses certain matters specified in the listing standards. Under Peruvian law, a Peruvian company may, but is not required to, form special governance committees, which may be composed partially or entirely of non-independent directors.

In addition, New York Stock Exchange rules require the independent non-executive directors of U.S. listed companies to meet on a regular basis without management being present. There is no similar requirement under Peruvian law.

The New York Stock Exchange’s listing standards also require U.S. listed companies to adopt and disclose corporate governance guidelines. In November 2013, the Peruvian Securities Commission and a committee comprised of regulatory agencies and associations prepared and published a list of suggested non-mandatory corporate governance guidelines called the “Good Corporate Governance Code for Peruvian Companies.” These principles are disclosed on the Peruvian Securities Commission web page http:// http://www.smv.gob.pe/ and the Lima Stock Exchange web page http://www.bvl.com.pe. Although we have implemented a number of these measures and have been selected to form part of the Best Corporate Governance Practices Index of the Lima Stock Exchange, we are not required to comply with the referred corporate governance guidelines by law or regulation, only to disclose whether or not we are in compliance.

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ITEM 16H. MINE SAFETY DISCLOSURE

Not applicable.

PART III

ITEM 17. FINANCIAL STATEMENTS

Not applicable.

ITEM 18. FINANCIAL STATEMENTS

See our consolidated financial statements beginning at page F-1. Our financial statements have been prepared in accordance with IFRS as issued by the IASB.

ITEM 19. EXHIBITS

Exhibit Number	Description of Document
1.1	By-laws of the Registrant, as currently in effect, incorporated by reference to Exhibit 1.1 of the Registrant’s Annual Report on Form 20-F filed with the SEC on April 30, 2014 (File No. 001-35401)
2.1	Registrant’s Form of American Depositary Receipt, incorporated by reference to Exhibit 4.1 to the Registrant’s Registration Statement on Form F-1 filed with the SEC on January 6, 2012 (File No. 333-178922)
2.2	Deposit Agreement dated January 19, 2012 among the Registrant, J.P. Morgan Chase N.A., as depositary, and the holders from time to time of American depositary shares issued thereunder, incorporated by reference to Exhibit 4.2 to the Registrant’s Registration Statement on Form F-1 filed with the SEC on January 6, 2012 (File No. 333-178922)
2.3	Indenture, dated as of February 8, 2013, among the Registrant, the Subsidiary Guarantors named therein and Deutsche Bank Trust Company Americas incorporated by reference to Exhibit 2.3 of the Registrant’s Annual Report on Form 20-F filed with the SEC on April 30, 2014 (File No. 001-35401)
4.1	Power Supply Agreement, dated June 3, 2010, between the Registrant and Electroperú S.A., incorporated by reference to Exhibit 4.1 of the Registrant’s Annual Report on Form 20-F filed with the SEC on April 30, 2012 (File No. 001-35401)
4.2	Contract of General Management and Provision of Services, dated December 31, 2007, between the Registrant and Inversiones ASPI S.A. (formerly Inversiones Pacasmayo S.A.), incorporated by reference to Exhibit 4.2 of the Registrant’s Annual Report on Form 20-F filed with the SEC on April 30, 2012 (File No. 001-35401)
4.3	Property Lease Agreement, dated June 30, 2008, between the Registrant and Inversiones ASPI S.A. (formerly Inversiones Pacasmayo S.A.), incorporated by reference to Exhibit 4.3 of the Registrant’s Annual Report on Form 20-F filed with the SEC on April 30, 2012 (File No. 001-35401)
4.4	Surface Rights Agreement, dated February 1, 2008, between the Registrant and Compañía Minera Ares S.A.C., incorporated by reference to Exhibit 4.4 of the Registrant’s Annual Report on Form 20-F filed with the SEC on April 30, 2012 (File No. 001-35401)
4.5	Equipment Supply Contract, dated September 28, 2012 between the Registrant and Loesche GmbH, incorporated by reference to Exhibit 4.1 of the Registrant’s Annual Report on Form 20-F filed with the SEC on April 30, 2013 (File No. 001-35401)
4.6	Equipment Supply Contract, dated September 28, 2012 between the Registrant and Thyssenkrupp Polysius AG and Polysius Do Brasil Ltda., incorporated by reference to Exhibit 4.2 of the Registrant’s Annual Report on Form 20-F filed with the SEC on April 30, 2013 (File No. 001-35401)

116

4.7	Addendum 1 to the Equipment Supply Contract between the Registrant and Thyssenkrupp Polysius AG and Polysius Do Brasil Ltda. dated February 21, 2013, incorporated by reference to Exhibit 4.3 of the Registrant’s Annual Report on Form 20-F filed with the SEC on April 30, 2013 (File No. 001-35401)
4.8	Steel Structure Supply Contract, dated September 28, 2012 between the Registrant and Polysius Ingenieria y Servicios del Perú S.A., incorporated by reference to Exhibit 4.4 of the Registrant’s Annual Report on Form 20-F filed with the SEC on April 30, 2013 (File No. 001-35401)
4.9	Construction Contract (Civil works and Electro-mechanical setup), dated September 16, 2013 between the Registrant and Consorcio Cementos Piura (English summary) incorporated by reference to Exhibit 4.9 of the Registrant’s Annual Report on Form 20-F filed with the SEC on April 30, 2014 (File No. 001-35401)
8.1	List of Subsidiaries incorporated by reference to Exhibit 8.1 of the Registrant’s Annual Report on Form 20-F filed with the SEC on April 30, 2014 (File No. 001-35401)
12.1	Certification of the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
12.2	Certification of the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
13.1*	Certification pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 for Chief Executive Officer
13.2*	Certification pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 for Chief Financial Officer

* This certification will not be deemed “filed” for purposes of Section 18 of the Exchange Act (15 U.S.C. 78r), or otherwise subject to the liability of that section. Such certification will not be deemed to be incorporated by reference into any filing under the Securities Act or the Exchange Act, except to the extent that the Registrant specifically incorporates it by reference.

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SIGNATURES

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 Form 20-F on its behalf.

CEMENTOS PACASMAYO S.A.A.
By:	/s/ Humberto Nadal Del Carpio
Name: Humberto Nadal Del Carpio
Title:   Chief Executive Officer
By:	/s/ Manuel Ferreyros Peña
Name: Manuel Ferreyros Peña
Title:   Chief Financial Officer

Date: April 30, 2015

118

Cementos Pacasmayo S.A.A. and Subsidiaries

Consolidated financial statements as of December 31, 2014 and 2013 together with the Independent Auditors’ Report

Cementos Pacasmayo S.A.A. and Subsidiaries

Consolidated financial statements as of December 31, 2014 and 2013 together with the Independent Auditors’ Report

Content

Independent Auditors’ Report
Consolidated financial statements
Consolidated statements of financial position	F-2
Consolidated statements of profit or loss	F-3
Consolidated statements of other comprehensive income	F-4
Consolidated statements of changes in equity	F-5
Consolidated statements of cash flows	F-6
Notes to the consolidated financial statements	F-8

Report of the Independent Registered Public Accounting Firm

To the Board of Directors and Shareholders of Cementos Pacasmayo S.A.A.

We have audited the accompanying consolidated statements of financial position of Cementos Pacasmayo S.A.A. and subsidiaries (together the “Group”) as of December 31, 2014 and 2013, and the related consolidated statements of profit or loss, other comprehensive income, changes in equity and cash flows for each of the three years in the period ended December 31, 2014. These consolidated financial statements are the responsibility of the Company’s Management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free from material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated 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 provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above, present fairly, in all material respects, the consolidated financial position of Cementos Pacasmayo S.A.A. and subsidiaries as of December 31, 2014 and 2013 and the consolidated results of their operations and their cash flows for each of the three years in the period ended December 31, 2014, in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board (IASB).

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), Cementos Pacasmayo S.A.A. and subsidiaries’ internal control over financial reporting as of December 31, 2014, based on criteria established in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (1992 framework) and our report dated April 30, 2015 expressed an unqualified opinion thereon.

Lima, Peru,

April 30, 2015

Signed by:

/S/ Carlos Valdivia

C.P.C.C. Register No.27255

F-1

Cementos Pacasmayo S.A.A. and Subsidiaries

Consolidated statements of financial position

As of December 31, 2014 and 2013

	Note		2014		2013
			S/.(000)		S/.(000)
Asset
Current assets
Cash and term deposits		6		580,499		976,952
Trade and other receivables		7		110,843		68,542
Income tax prepayments				15,042		27,679
Inventories		8		324,070		334,471
Prepayments				4,367		11,727
				1,034,821		1,419,371
Non-current assets
Other receivables		7		53,948		46,292
Prepayments				2,268		—
Available-for-sale financial investments		9		744		36,058
Other financial instruments		30		12,251		—
Property, plant and equipment		10		2,060,976		1,537,111
Exploration and evaluation assets		11		57,740		59,330
Deferred income tax assets		15		17,175		15,155
Other assets				981		1,220
				2,206,083		1,695,166
Total asset				3,240,904		3,114,537
Liability and equity
Current liabilities
Trade and other payables		12		137,569		126,897
Income tax payable				8,720		2,780
Provisions		13		53,826		27,984
				200,115		157,661
Non-current liabilities
Interest-bearing loans and borrowings		14		883,564		824,022
Other non-current provisions		13		657		20,497
Deferred income tax liabilities		15		85,883		102,887
				970,104		947,406
Total liability				1,170,219		1,105,067
Equity		16
Capital stock				531,461		531,461
Investment shares				50,503		50,503
Additional paid-in capital				553,791		556,294
Legal reserve				154,905		119,833
Other reserves				5,144		19,045
Retained earnings				696,736		653,704
Equity attributable to equity holders of the parent				1,992,540		1,930,840
Non-controlling interests				78,145		78,630
Total equity				2,070,685		2,009,470
Total liability and equity				3,240,904		3,114,537

The accompanying notes are an integral part of these consolidated financial statements.

F-2

Cementos Pacasmayo S.A.A. and Subsidiaries

Consolidated statements of profit or loss

For the years ended December 31, 2014, 2013 and 2012

	Note			2014			2013			2012
				S/.(000)			S/.(000)			S/.(000)
Sales of goods		17			1,242,579			1,239,688			1,169,808
Cost of sales		18			(724,148	)		(716,239	)		(713,058	)
Gross profit					518,431			523,449			456,750
Operating income (expenses)
Administrative expenses		19			(194,855	)		(208,915	)		(203,067	)
Selling and distribution expenses		20			(30,534	)		(29,817	)		(30,865	)
Net gain on sale of available-for-sale financial investment		9	(b)		10,537			—			—
Other operating income, net		22			(3,040	)		8,281			7,706
Total operating expenses, net					(217,892	)		(230,451	)		(226,226	)
Operating profit					300,539			292,998			230,524
Other income (expenses)
Finance income		23			11,705			27,213			23,326
Finance costs		24			(31,196	)		(37,103	)		(23,771	)
Loss from exchange difference, net		5			(14,791	)		(48,430	)		(736	)
Total other expenses, net					(34,282	)		(58,320	)		(1,181	)
Profit before income tax					266,257			234,678			229,343
Income tax expense		15			(77,468	)		(82,395	)		(73,743	)
Profit for the year					188,789			152,283			155,600
Attributable to:
Equity holders of the parent					192,827			155,634			159,005
Non-controlling interests					(4,038	)		(3,351	)		(3,405	)
					188,789			152,283			155,600
Earnings per share		26
Basic and diluted, profit for the year attributable to equity holders of common shares and investment shares of the parent (S/. per share)					0.33			0.27			0.28

The accompanying notes are an integral part of these consolidated financial statements.

F-3

Cementos Pacasmayo S.A.A. and Subsidiaries

Consolidated statements of other comprehensive income

For the years ended December 31, 2014, 2013 and 2012

	Note			2014			2013			2012
				S/.(000)			S/.(000)			S/.(000)
Profit for the year					188,789			152,283			155,600
Other comprehensive income
Other comprehensive income to be reclassified to profit or loss in subsequent periods (net of income tax):
Change in fair value of available-for-sale financial investments		9	(a)		(16,378	)		1,171			12,813
Net gain on cash flows hedges		30	(b)		4,926			—			—
Deferred income tax related to component of other comprehensive income		15			8,088			(352	)		(3,844	)
Exchange differences on translation of foreign currency					—			—			(321	)
Transfer to profit or loss of fair value of available-for-sale financial investments sold		9	(b)		(10,537	)		—			—
Transfer to profit or loss of cumulative exchange differences on translation of foreign currency, note 2.3.3					—			1,591			—
Other comprehensive income for the year, net of income tax					(13,901	)		2,410			8,648
Total comprehensive income for the year, net of income tax					174,888			154,693			164,248
Total comprehensive income attributable to:
Equity holders of the parent					178,926			157,968			167,687
Non-controlling interests					(4,038	)		(3,275	)		(3,439	)
					174,888			154,693			164,248

The accompanying notes are an integral part of these consolidated financial statements.

F-4

Cementos Pacasmayo S.A.A. and Subsidiaries

Consolidated statements of changes in equity

For the years ended December 31, 2014, 2013 and 2012

	Attributable to equity holders of the parent
	Capital stock		Investment shares		Additional paid-in capital			Legal reserve		Unrealized gain (loss) on available-for- sale investments			Unrealized gain on cash flow hedge		Foreign currency translation reserve			Retained earnings			Total			Non- controlling interests			Total equity
	S/.(000)		S/.(000)		S/.(000)			S/.(000)		S/.(000)			S/.(000)		S/.(000)			S/.(000)			S/.(000)			S/.(000)			S/.(000)
Balance as of January 1, 2012		418,777		49,575		—			90,451		9,257			—		(1,228	)		473,721			1,040,553			33,032			1,073,585
Profit for the year		—		—		—			—		—			—		—			159,005			159,005			(3,405	)		155,600
Other comprehensive income		—		—		—			—		8,969			—		(287	)		—			8,682			(34	)		8,648
Total comprehensive income		—		—		—			—		8,969			—		(287	)		159,005			167,687			(3,439	)		164,248
Proceeds from the issue of common and investment shares, note 16 (a) y (b)		111,484		928		561,191			—		—			—		—			—			673,603			—			673,603
Appropriation of legal reserve, note 16 (e)		—		—		—			14,770		—			—		—			(14,770	)		—			—			—
Dividends, note 16 (h)		—		—		—			—		—			—		—			(52,000	)		(52,000	)		—			(52,000	)
Contribution of non-controlling interests, note 16(i)		—		—		—			—		—			—		—			—			—			28,557			28,557
Sale of treasury shares, note 16 (c)		1,200		—		—			—		—			—		—			4,922			6,122			—			6,122
Other adjustments of non-controlling interests, note 16(i)		—		—		(2,713	)		—		—			—		—			—			(2,713	)		2,713			—
Balance as of December 31, 2012		531,461		50,503		558,478			105,221		18,226			—		(1,515	)		570,878			1,833,252			60,863			1,894,115
Profit for the year		—		—		—			—		—			—		—			155,634			155,634			(3,351	)		152,283
Other comprehensive income		—		—		—			—		819			—		1,515			—			2,334			76			2,410
Total comprehensive income		—		—		—			—		819			—		1,515			155,634			157,968			(3,275	)		154,693
Refund of capital in subsidiary to non-controlling interests, note 22 (a)		—		—		—			—		—			—		—			—			—			(1,024	)		(1,024	)
Appropriation of legal reserve, note 16(e)		—		—		—			14,612		—			—		—			(14,612	)		—			—			—
Dividends, note 16 (h)		—		—		—			—		—			—		—			(58,196	)		(58,196	)		—			(58,196	)
Contribution of non-controlling interests, note 16(i)		—		—		—			—		—			—		—			—			—			19,882			19,882
Other adjustments of non-controlling interests, note 16(i)		—		—		(2,184	)		—		—			—		—			—			(2,184	)		2,184			—
Balance as of December 31, 2013		531,461		50,503		556,294			119,833		19,045			—		—			653,704			1,930,840			78,630			2,009,470
Profit for the year		—		—		—			—		—			—		—			192,827			192,827			(4,038	)		188,789
Other comprehensive loss		—		—		—			—		(18,827	)		4,926		—			—			(13,901	)		—			(13,901	)
Total comprehensive income		—		—		—			—		(18,827	)		4,926		—			192,827			178,926			(4,038	)		174,888
Appropriation of legal reserve, note 16(e)		—		—		—			33,402		—			—		—			(33,402	)		—			—			—
Terminated dividends, note 16(h)		—		—		—			1,670		—			—		—			—			1,670			—			1,670
Dividends, note 16 (h)		—		—		—			—		—			—		—			(116,393	)		(116,393	)		—			(116,393	)
Contribution of non-controlling interests, note 16(i)		—		—		—			—		—			—		—			—			—			1,050			1,050
Other adjustments of non-controlling interests, note 16(i)		—		—		(2,503	)		—		—			—		—			—			(2,503	)		2,503			—
Balance as of December 31, 2014		531,461		50,503		553,791			154,905		218			4,926		—			696,736			1,992,540			78,145			2,070,685

The accompanying notes are an integral part of these consolidated financial statements.

F-5

Cementos Pacasmayo S.A.A. and Subsidiaries

Consolidated statements of cash flows

For the years ended December 31, 2014, 2013 and 2012

	2014			2013			2012
	S/.(000)			S/.(000)			S/.(000)
Operating activities
Profit before income tax		266,257			234,678			229,343
Non-cash adjustments to reconcile profit before income tax to net cash flows
Depreciation and amortization		64,759			55,871			47,954
Finance costs		31,196			37,103			23,771
Unrealized exchange difference related to monetary transactions		19,143			48,486			—
Net loss (gain) on disposal of property, plant and equipment		6,466			2,555			(3,901	)
Long-term incentive plan		5,944			6,701			5,529
Amortization of costs of issuance of senior notes		1,644			1,493			—
Adjustment as a result of physical inventories		1,069			3,360			(4,107	)
Unwinding of discount of long-term incentive plan		598			475			140
Other operating, net		(399	)		(1,405	)		(311	)
Finance income		(11,705	)		(27,213	)		(23,326	)
Net gain on sale of available-for-sale investment		(10,537	)		—			—
(Recovery) provision of impairment of inventories, net		(453	)		(2,192	)		3,278
Estimation of impairment of trade and other accounts receivables		(43	)		227			105
Change in the estimation of rehabilitation costs		—			(1,068	)		—
Write-off of exploration and evaluation costs		—			—			2,447
Working capital adjustments
(Increase) decrease in trade and other receivables		(54,814	)		(19,993	)		17,224
Decrease (increase) in prepayments		9,777			(1,111	)		1,013
Decrease (increase) in inventories		9,785			(57,490	)		(71,218	)
Increase (decrease) in trade and other payables		734			(20,277	)		2,411
		339,421			260,200			230,352
Interests received		12,612			37,650			7,514
Interests paid		(41,820	)		(20,704	)		(26,412	)
Income tax paid		(69,827	)		(85,392	)		(111,723	)
Net cash flows from operating activities		240,386			191,754			99,731

F-6

Consolidated statement of cash flows (continued)

	2014			2013			2012
	S/.(000)			S/.(000)			S/.(000)
Investing activities
Purchase of property, plant and equipment		(574,802	)		(200,599	)		(248,194	)
Purchase of exploration and evaluation assets		(690	)		(9,844	)		(22,038	)
Proceeds from sale of other assets		—			(151	)		—
Proceeds from sale of available for sale investment		18,936			—			—
Proceeds from sale of property, plant and equipment		3,061			1,161			6,828
Liquidation of time deposits with original maturities greater than 90 days		—			1,065,950			—
Acquisition of time deposits with original maturities greater than 90 days		—			(662,000	)		(403,950	)
Net cash flows from (used in) investing activities		(553,495	)		194,517			(667,354	)
Financing activities
Dividends paid		(115,824	)		(58,093	)		(52,016	)
Contribution of non-controlling interests		1,050			19,882			28,557
Proceeds from issuance of senior notes, net of related issuance costs		—			762,067			—
Proceeds from bank overdraft and borrowings		—			19,914			13,255
Payment of borrowings		—			(202,200	)		(388,394	)
Payment of bank overdraft		—			(33,169	)		—
Refund of capital in subsidiary to non-controlling interests		—			(1,024	)		—
Proceeds from issuance of common and investment shares		—			—			666,180
Proceeds from sale of treasury shares		—			—			6,122
Net cash flows from (used in) financing activities		(114,774	)		507,377			273,704
Net increase (decrease) in cash and cash equivalents		(427,883	)		893,648			(293,919	)
Net foreign exchange difference		31,430			13,469			475
Cash and cash equivalents as of January 1		976,952			69,835			363,279
Cash and cash equivalents as of December 31		580,499			976,952			69,835
Transactions with no effects in cash flows:
Unrealized exchange difference related to monetary transactions		19,143			48,486			—
Purchase of property, plant and equipment, pending of liquidation		11,752			—			—

The accompanying notes are an integral part of these consolidated financial statements.

F-7

Cementos Pacasmayo S.A.A. and Subsidiaries

Notes to the consolidated financial statements

As of December 31, 2014, 2013 and 2012

1. Corporate information

Cementos Pacasmayo S.A.A. (hereinafter “the Company”) was incorporated in 1957 and, under the Peruvian General Corporation Law, is an open stock corporation with publicly traded shares. The Company is a subsidiary of Inversiones ASPI S.A., which holds 50.94% of the Company’s common and investment shares and 52.63% of its common shares as of December 31, 2014 and 2013. The Company’s registered address is Calle La Colonia No.150, Urbanizacion El Vivero, Santiago de Surco, Lima, Peru.

The Company’s main activity is the production and marketing of cement, blocks, concrete and quicklime in La Libertad region, in the North of Peru.

The issuance of the consolidated financial statements of the Company and its subsidiaries (hereinafter “the Group”) for the year ended December 31, 2014 was authorized by the Company’s Management on April 30, 2015. The consolidated financial statements as of December 31, 2013 and for the year ended that date were finally approved by the General Shareholders’ Meeting on March 25, 2014.

As of December 31, 2014, the consolidated financial statements comprise the financial statements of the Company and its subsidiaries: Cementos Selva S.A. and subsidiaries, Distribuidora Norte Pacasmayo S.R.L., Empresa de Transmisión Guadalupe S.A.C., Fosfatos del Pacífico S.A., Salmueras Sudamericanas S.A. and Calizas del Norte S.A.C.

The main activities of the subsidiaries incorporated in the consolidated financial statements are described as follows:

• Cementos Selva S.A. is engaged in production and marketing of cement and other construction materials in the northeast region of Peru. Also, it holds shares in Dinoselva Iquitos S.A.C. (a cement and construction materials distributor in the north of Peru) and in Acuícola Los Paiches S.A.C. (a fish farm entity).

• Distribuidora Norte Pacasmayo S.R.L. is mainly engaged in selling cement produced by the Company. Additionally, it produces and sells blocks, cement bricks and ready-mix concrete.

• Empresa de Transmision Guadalupe S.A.C. is mainly engaged in providing energy transmission services to the Company.

• Fosfatos del Pacifico S.A., hereinafter “Fosfatos”, is mainly engaged in the exploration of phosphate rock deposits and the production of diatomite in the northern region of Peru. To develop the phosphate project, the subsidiary has a minority shareholder MCA Phosphates Pte. Ltd, hereinafter “MCA” (subsidiary of Mitsubishi corporation, hereinafter “Mitsubishi”) which holds 30% of its common shares.

• Salmueras Sudamericanas S.A. (“Salmueras”) was incorporated in 2011. This subsidiary is engaged in the exploration of a brine project located in the northern region of Peru. To develop this brine project the subsidiary has a minority shareholder Quimpac S.A. which holds 25.1% of its common shares.

F-8

Notes to the consolidated financial statements (continued)

• Calizas del Norte S.A.C. was incorporated in November 22, 2013. This subsidiary was created to be engaged in the mining activities of prospecting, exploration, marketing and transportation operations of other goods.

As explained above, as of December 31, 2014 and 2013, the Company has 100 % interest in all its subsidiaries, except the following listed below:

Subsidiary	%
Salmueras Sudamericanas S.A.		74.90
Fosfatos del Pacifico S.A.		70.00

F-9

Notes to the consolidated financial statements (continued)

The table presented below shows the summary of the main captions of the audited financial statements of the subsidiaries controlled by the Group as of December 31, 2014, 2013 and 2012:

	Assets				Liabilities				Net equity				Net income (loss)
Entity	2014		2013		2014		2013		2014		2013		2014			2013			2012
	S/.(000)		S/.(000)		S/.(000)		S/.(000)		S/.(000)		S/.(000)		S/.(000)			S/.(000)			S/.(000)
Cementos Selva S.A. and Subsidiaries		273,910		265,081		95,983		113,594		177,927		151,487		26,337			16,132			6,136
Fosfatos del Pacifico S.A.		237,623		233,756		16,091		5,689		221,532		228,067		(10,765	)		(7,495	)		(9,588	)
Distribuidora Norte Pacasmayo S.R.L.		212,992		215,823		107,609		115,671		105,383		100,152		5,231			5,314			10,721
Empresa de Transmisión Guadalupe S.A.C.		47,842		46,712		521		841		47,321		45,871		1,446			1,315			862
Salmueras Sudamericanas S.A.		46,820		45,792		263		5,116		46,557		40,676		(3,219	)		(4,122	)		(3,716	)
Calizas del Norte S.A.C.		37,645		5,000		3,756		—		33,889		5,000		1,974			—			—
Zemex LLC		—		—		—		—		—		—		—			(657	)		3,859

F-10

Notes to the consolidated financial statements (continued)

2. Significant accounting policies -

2.1 Basis of preparation -

The consolidated financial statements of the Group have been prepared in accordance with International Financial Reporting Standards (IFRS), as issued by the International Accounting Standards Board (IASB).

The consolidated financial statements have been prepared on a historical cost basis, except for available-for-sale financial investments, derivatives financial instruments and the call option that have been measured at fair value. The carrying values of recognized assets and liabilities that are designated as hedged items in fair value hedges that would otherwise be carried at amortized cost are adjusted to record changes in fair values attributable to the risks that are being hedged in effective hedge relationships. The consolidated financial statements are presented in Nuevos Soles and all values are rounded to the nearest thousand (S/.000), except when otherwise indicated.

The consolidated financial statements provide comparative information in respect of the previous period, except of certain standards and amendments applied for the first time by the Group during 2014 that did not require the restatement of previous financial statements, explained in Note 2.3.19.

2.2 Basis of consolidation -

The consolidated financial statements comprises the financial statements of the Company and its subsidiaries as of December 31, 2014 and 2013. Control is achieved when the Group is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee. Specifically, the Group controls an investee if and only if it has: i) power over the investee (i.e. existing rights that give it the current ability to direct the relevant activities of the investee), ii) exposure, or rights, to variable returns from its involvement with the investee, and iii) the ability to use its power over the investee to affect its returns.

Generally, there is a presumption that a majority of voting rights result in control. To support this presumption and when the Group has less than a majority of the voting or similar rights of an investee, the Group considers all relevant facts and circumstances in assessing whether it has power over an investee, including: i) the contractual arrangement with the other vote holders of the investee, ii) rights arising from other contractual arrangements, iii) the Group’s voting rights and potential voting rights.

The Group reassesses whether or not it controls an investee if facts and circumstances indicate that there are changes to one or more of the three elements of control. Consolidation of a subsidiary begins when the Group obtains control over the subsidiary and ceases when the Group loses control of the subsidiary. Assets, liabilities, income and expenses of a subsidiary acquired or disposed of during the year are included in the statement of comprehensive income from the date the Group gains control until the date the Group ceases to control the subsidiary.

F-11

Notes to the consolidated financial statements (continued)

Profit or loss and each component of other comprehensive income (OCI) are attributed to the equity holders of the parent of the Group and to the non-controlling interests, even if this results in the non-controlling interests having a deficit balance. When necessary, adjustments are made to the financial statements of subsidiaries to bring their accounting policies into line with the Group’s accounting policies. All intra-group assets and liabilities, equity, income, expenses and cash flows relating to transactions between members of the Group are eliminated in full on consolidation.

A change in the ownership interest of a subsidiary, without a loss of control, is accounted for as an equity transaction.

If the Group losses control over a subsidiary it derecognizes the related assets (including goodwill, liabilities, non-controlling interest and other components of equity) while any resultant gain or loss is recognized in profit or loss. Any investment retained is recognized at fair value.

2.3 Summary of significant accounting policies -

2.3.1 Cash and cash equivalents -

Cash and cash equivalents presented in the statements of cash flows comprise cash at banks and on hand and term deposits with original maturity of three months or less.

2.3.2. Financial instruments-initial recognition and subsequent measurement –

A financial instrument is any contract that gives rise to a financial asset of one entity and a financial liability or equity instrument to another entity.

(i) Financial assets -

Initial recognition and measurement -

Financial assets are classified, at initial recognition, as financial assets at fair value through profit or loss, loans and receivables, held-to-maturity investments, available-for-sale financial assets or as derivatives designated as hedging instruments in an effective hedge, as appropriate.

All financial assets are recognized initially at fair value plus, in the case of assets not recorded at fair value through profit or loss, transaction costs that are attributable to the acquisition of the financial assets.

Purchases or sales of financial assets that require delivery of assets within a time frame established by regulation or convention in the market place (regular way trades) are recognized on the trade date, i.e., the date that the Group commits to purchase or sell the asset.

The Group’s financial assets include cash and cash equivalents, trade and other receivables, call options, available-for-sale financial investments and derivatives financial instruments.

F-12

Notes to the consolidated financial statements (continued)

Subsequent measurement -

For purpose of subsequent measurement of financial assets are classified in four categories:

Financial assets at fair value through profit or loss -

Financial assets at fair value through profit or loss includes financial assets held for trading and financial assets designated upon initial recognition as at fair value through profit or loss. Financial assets are classified as held for trading if they are acquired for the purpose of selling or repurchasing in the near term. Derivatives, including separated embedded derivatives, also classified as held for trading unless they are designated as effective hedging instruments as defined by IAS 39. Financial assets at fair value through profit and loss are carried in the consolidated statement of financial position at fair value with net changes in fair value presented as finance costs (negative net changes in fair value) or finance income (positive net changes in fair value) in the consolidated statement of profit or loss.

The Group has not designated any financial assets upon initial recognition as at fair value through profit or loss as of December 31, 2014 and 2013.

Loans and receivables -

This category is the most relevant to the Group. Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. After initial measurement, such financial assets are subsequently measured at amortized cost using the effective interest rate method (EIR), less impairment. Amortized cost is calculated by taking into account any discount or premium on acquisition and fees or costs that are an integral part of the EIR. The EIR amortization is included in finance income in the consolidated statement of profit or loss. The losses arising from impairment are recognized in the consolidated statement of profit or loss in finance costs for loans and in selling and distribution expenses for receivables.

This category applies to trade and other receivables. For more information on receivables, refer to Note 7.

Held-to-maturity investments -

Non-derivative financial assets with fixed or determinable payments and fixed maturities are classified as held-to-maturity when the Group has the positive intention and ability to hold them to maturity. After initial measurement, held-to-maturity investments are measured at amortized cost using the EIR, less impairment. Amortized cost is calculated by taking into account any discount or premium on acquisition and fees or costs that are an integral part of the EIR. The EIR amortization is included as finance income in the consolidated statement of profit or loss. The losses arising from impairment are recognized in the consolidated statement of profit or loss as finance costs.

The Group did not have any held-to-maturity investments during the years ended as of December 31, 2014 and 2013.

F-13

Notes to the consolidated financial statements (continued)

Available-for-sale (AFS) financial investments -

AFS financial investments include equity and debt securities. Equity investments classified as AFS are those that are neither classified as held for trading nor designated at fair value through profit or loss.

After initial measurement, AFS financial investments are subsequently measured at fair value with unrealized gains or losses recognized in OCI and credited in the unrealized gain on available-for-sale investments until investment is derecognized, at which time the cumulative gain or loss is recognized in other operating income, or the investment is determined to be impaired, when the cumulative loss is reclassified from the AFS reserve to the consolidated statement of profit or loss in finance costs. Interest earned whilst holding AFS financial investments is reported as interest income using EIR method.

The Group evaluates whether the ability and intention to sell its AFS financial assets in the near term is still appropriate. When, in rare circumstances, the Group is unable to trade these financial assets due to inactive markets, the Group may elect to reclassify these financial assets if the management has the ability and intention to hold the assets for foreseeable future or until maturity.

The Group has classified equity securities as available-for-sale financial investments as of December 31, 2014 and 2013.

Derecognition -

A financial asset is primarily derecognized when:

(i) The rights to receive cash flow from such asset have expired; or

(ii) The Group has transferred its rights to receive cash flows from the asset or has assumed an obligation to pay the received cash flows in full without material delay to a third party under a “pass through” arrangement; and either (a) the Group has transferred substantially all the risks and rewards of the asset, or (b) the Group has neither transferred nor retained substantially all of the risks and rewards of the asset, but has transferred control of the asset.

F-14

Notes to the consolidated financial statements (continued)

When the Group has transferred its rights to receive cash flows from an asset or has entered into a pass-through arrangement, it evaluates if and to what extent it has retained the risks and rewards of ownership. When it has neither transferred nor retained substantially all of the risks and rewards of the asset, nor transferred control of the asset, the Group continues to recognize the transferred asset to the extent of the Group’s continuing involvement. In that case, the Group also recognizes an associated liability. The transferred asset and the associated liability are measured on a basis that reflects the rights and obligations that the Group has retained.

(ii) Impairment of financial assets -

Further disclosures relating to impairment of financial assets are also provided in the following notes:

• Disclosures for significant assumptions, note 3

• Financial assets, note 30

• Trade receivables, note 7

The Group assesses, at each reporting date, whether there is any objective evidence that a financial asset or a group of financial assets is impaired. An impairment exists if one or more events that has occurred since the initial recognition of the asset (an incurred “loss event”), has an impact on the estimated future cash flows of the financial asset or the group of financial assets that can be reliably estimated. Evidence of impairment may include indications that the debtors or a group of debtors is experiencing significant financial difficulty, default or delinquency in interest or principal payments, the probability that they will enter bankruptcy or other financial reorganization and where observable data indicate that there is a measurable decrease in the estimated future cash flows, such as economic conditions that correlate with defaults.

Financial assets carried at amortized cost

For financial assets carried at amortized cost, the Group first assesses whether impairment exists individually for financial assets that are individually significant, or collectively for financial assets that are not individually significant. If the Group determines that no objective evidence of impairment exists for an individually assessed financial assets, whether significant or not, it includes the asset in a group of financial assets with similar credit risk characteristics and collectively assesses them for impairment. Assets that are individually assessed for impairment and for which an impairment loss is, or continues to be, recognized are not included in a collective assessment of impairment.

F-15

Notes to the consolidated financial statements (continued)

The amount of any impairment loss identified is measured as the difference between the assets carrying amount and the present value of estimated future cash flows (excluding future expected credit losses that have not yet been incurred). The present value of the estimated future cash flows is discounted at the financial asset’s original effective interest rate. If a loan has a variable interest rate, the discount rate for measuring any impairment loss is the current effective interest rate.

The carrying amount of the asset is reduced through the use of an allowance account and the amount of the loss is recognized in the consolidated statement of profit or loss. Interest income (recorded as finance income in the consolidated statement of profit or loss) continues to be accrued on the reduced carrying amount and is accrued using the rate of interest used to discount the future cash flows for the purpose of measuring the impairment loss. Loans together with the associated allowance are written off when there is no realistic prospect of future recovery and all collateral has been realized or has been transferred to the Group. If, in a subsequent year, the amount of the estimated impairment loss increases or decreases because of an event occurring after the impairment was recognized, the previously recognized impairment loss is increased or reduced by adjusting the allowance account. If write-off is later recovered, the recovery is credited to finance costs in the consolidated statement of profit or loss.

Available-for-sale (AFS) financial investments

For AFS financial investments, the Group assesses at each reporting date whether there is objective evidence that an investment or a group of investments is impaired.

In the case of equity investments classified as AFS, objective evidence would include a significant or prolonged decline in the fair value of the investment below its cost. “Significant” is evaluated against the original cost of the investment and “prolonged” against the period in which the fair value has been below its original cost. Where there is evidence of impairment, the cumulative loss – measured as the difference between the acquisition cost and the current fair value, less any impairment loss on that investment previously recognized in the consolidated statement of profit or loss – is removed from OCI and recognized in the consolidated statement of profit or loss. Impairment losses on equity investment are not reversed through profit or loss; increases in their fair value after impairment are recognized in OCI.

The determination of what is “Significant” or “Prolonged” requires judgment. In making this judgment, the Group evaluates, among others factors the duration or extent to which the fair value of an investment is less than its cost.

F-16

Notes to the consolidated financial statements (continued)

(iii) Financial liabilities -

Initial recognition and measurement -

Financial liabilities are classified, at initial recognition, as financial liabilities at fair value through profit or loss, loans and borrowings, payables, or as derivatives designated as hedging instruments in an effective hedge, as appropriate.

All financial liabilities are recognized initially at fair value and, in the case of loans and borrowings and payables, net of directly attributable transaction costs.

The Group’s financial liabilities include trade and other payables, interest-bearing loans and borrowings, including bank overdrafts.

Subsequent measurement -

The measurement of financial liabilities depends on their classification, as follows:

Financial liabilities at fair value through profit or loss -

Financial liabilities at fair value through profit or loss include financial liabilities held for trading, derivatives and financial liabilities designated upon initial recognition as at fair value through profit or loss.

The Group has not classified any financial liability as fair value through profit or loss as of December 31, 2014 and 2013.

Loans and borrowings -

This is the Group’s most relevant category. After their initial recognition, interest-bearing loans and borrowings are subsequently measured at amortized cost using the EIR method. Gains and losses are recognized in the consolidated statement of profit or loss when the liabilities are derecognized as well as through the EIR amortization process.

Amortized cost is calculated by taking into account any discount or premium on acquisition and fees or costs that are an integral part of the EIR. The EIR amortization is included as finance costs in the consolidated statement of profit or loss.

This category includes trade and other payables and interest-bearing loans and borrowings. For more information refer note 12 and 14.

F-17

Notes to the consolidated financial statements (continued)

Derecognition -

A financial liability is derecognized when the obligation under the liability is discharged or cancelled or expires. When an existing financial liability is replaced by another one from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as a derecognition of the original liability and the recognition of a new liability. The difference in the respective carrying amount is recognized in the consolidated statement of profit or loss.

(iv) Offsetting of financial instruments -

Financial assets and financial liabilities are offset and the net amount is reported in the consolidated statement of financial position if there is a currently enforceable legal right to offset the recognized amounts and there is an intention to settle on a net basis, to realize the assets and settle the liabilities simultaneously.

(v) Fair value measurement –

The Group measures financial instruments as derivative financial instruments and available-for-sale investments at fair value at each statement of financial position date. Fair values related disclosures for financial instruments that are measured at fair value or where fair values are disclosed are summarized in Note 30.

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value measurement is based on the presumption that the transaction to sell the asset or transfer the liability takes place either:

• In the principal market for the asset or liability, or

• In the absence of a principal market, in the most advantageous market for the asset or liability.

The principal or the most advantageous market must be accessible by the Group.

The fair value of an asset or a liability is measured using the assumptions that market participants would use when pricing the asset or liability, assuming that market participants act in their economic best interest.

The Group uses valuation techniques that are appropriate in the circumstances and for which sufficient data are available to measure fair value, maximizing the use of relevant observable inputs and minimizing the use of unobservable inputs.

F-18

Notes to the consolidated financial statements (continued)

All assets and liabilities for which fair value is measured or disclosed in the financial statements are categorized within the fair value hierarchy, described as follows, based on the lowest level input that is significant to the fair value measurement as a whole:

• Level 1 — Quoted (unadjusted) market prices in active markets for identical assets or liabilities.

• Level 2 — Valuation techniques for which the lowest level input that is significant to the fair value measurement is directly or indirectly observable.

• Level 3 — Valuation techniques for which the lowest level input that is significant to the fair value measurement is unobservable.

For assets and liabilities that are recognized in the financial statements on a recurring basis, the Group determines whether transfers have occurred between levels in the hierarchy by re-assessing categorization (based on the lowest level input that is significant to the fair value measurement as a whole) at the end of each reporting period.

The Group’s financial management determines the policies and procedures for both recurring fair value measurement, such as AFS financial assets, and for non-recurring measurement.

At each reporting date, the financial management analyses the movements in the values of assets and liabilities which are required to be re-measured or re-assessed as per the Group’s accounting policies. For this analysis, the financial management verifies the major inputs applied in the latest valuation by agreeing the information in the valuation computation to contracts and other relevant documents.

Management also compares the changes in the fair value of each asset and liability with relevant external sources to determine whether the change is reasonable.

For the purpose of fair value disclosures, the Group has determined classes of assets and liabilities on the basis of the nature, characteristics and risks of the asset or liability and the level of the fair value hierarchy as explained previously.

(vi) Put and call options over non-controlling interests

Call options

The call option is a financial asset initially recognized at its fair value, with any subsequent changes in its fair value recognized in profit or loss. The exercise price of the call option are at the higher of fair value or book value of the shares, consequently, the Company concluded that the fair value of this option would not be significant.

F-19

Notes to the consolidated financial statements (continued)

Put options

Put options granted to non-controlling interests with exercise contingencies that are under the control of the Company, do not give rise to a financial liability. The contingencies that would trigger exercisability of the deadlock put/call are based on events under the Company’s control and therefore do not represent a financial liability.

(vii) Derivative financial instruments and hedge accounting -

Initial recognition and subsequent measurement:

The Group uses derivative financial instruments, such as cross currency swaps, to hedge its foreign currency risk. Such derivative financial instruments are initially recognized at fair value on the date on which a derivative contract is entered into and are subsequently remeasured at fair value. Derivatives are carried as financial assets when the fair value is positive and as financial liabilities when fair value is negative.

Any gains or losses arising from changes in the fair value of derivatives are taken directly to profit or loss, except for the effective portion of cash flows hedges, which is recognized in OCI and later reclassified to profit or loss when the hedges item affects profit or loss.

For the purpose of hedge accounting, the cross currency swap instrument was classified as cash flow hedge.

At inception of the hedge relationship, the Group formally designates and documents the hedge relationship to which it wishes to apply hedge accounting and the risk management objective and strategy for undertaking the hedge. The documentation includes identification of the hedging instrument, the hedged item or transaction, the nature of the risk being hedged and how the entity will assess the effectiveness of changes in the hedging instrument’s fair value in offsetting the exposure to changes in the hedged item’s fair value or cash flows attributable to the hedged risk. Such hedges are expected to be highly effective in achieving offsetting changes in fair value or cash flows and are assessed on an ongoing basis to determine that they actually have been highly effective throughout the financial reporting periods for which they were designated.

Hedges that meet the strict criteria for hedge accounting and are between a range of 80 and 125 of effectiveness, are accounted for as described below:

Cash flow hedges

The effective portion of the gain or loss on the hedging instrument is recognized directly in other comprehensive income in the caption “Cash flow hedges reserve”, while any ineffective portion is recognized immediately in the consolidated statements of profit or loss as finance costs.

Amounts recognized as other comprehensive income are transferred to the consolidated statements of profit or loss when the hedged transaction affects profit or loss, such as when the hedged financial income or financial expense is recognized or when a forecast sale occurs.

F-20

Notes to the consolidated financial statements (continued)

If the hedging instrument expires or is sold, terminated or exercised without replacement or rollover, or if its designation as a hedge is revoked, or when the hedge no longer meets the criteria for hedge accounting, any cumulative gain or loss previously recognized in OCI hedge reserve remains separately in equity until the forecast transaction occurs or the foreign currency firm commitment is met.

2.3.3 Foreign currencies -

The Group’s consolidated financial statements are presented in Nuevos Soles, which is also the parent company’s functional currency. Each subsidiary determines its own functional currency and items included in financial statements of each subsidiary are measured using that functional currency.

Transactions and balances

Transactions in foreign currencies are initially recorded by the Group at their respective functional currency spot rates at the date the transaction first qualifies for recognition.

Monetary assets and liabilities denominated in foreign currencies are translated at the functional currency spot rates of exchange at the reporting date. Differences arising on settlement or translation of monetary items are recognized in profit or loss.

Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rates at the dates of the initial transactions.

2.3.4 Inventories -

Inventories are valued at the lower of cost and net realizable value. Costs incurred in bringing each product to its present location and conditions are accounted for as follows:

Raw materials

• Purchase cost determined using the weighted average method.

Finished goods and work in progress

• Cost of direct materials and supplies, services provided by third parties, direct labor and a proportion of manufacturing overheads based on normal operating capacity, excluding borrowing costs and exchange currency differences.

Inventory in transit

• Purchase cost.

Net realizable value is the estimated selling price in the ordinary course of business, less estimated cost of completion and the estimated costs necessary to make the sale.

2.3.5 Borrowing costs -

Borrowing costs directly attributable to the acquisition, construction or production of an asset that necessarily takes a substantial period of time to get ready for its intended use or sale are capitalized as part of the cost of the respective assets. All other borrowing costs are expensed in the period in which they occur. Borrowing costs consist of interest and other costs that an entity incurs in connection with the borrowing of funds. Where the funds used to finance a project form part of general borrowings,

F-21

Notes to the consolidated financial statements (continued)

the amount capitalized is calculated using a weighted average of rates applicable to relevant general borrowings of the Group during the period. All other borrowing costs are recognized in the consolidated statement of profit or loss in the period in which they are incurred.

2.3.6 Leases -

The determination of whether an agreement is, or contains, a lease is based on the substance of the arrangement at the inception of the lease. The arrangement is or contains, a lease if fulfillment of the arrangement is dependent on the use of a specific asset or assets and the arrangement conveys a right to use the asset or assets, even if that right is not explicitly specified in an arrangement.

Group as a lessee:

A lease is classified at the inception date as a finance lease or an operating lease. A lease that transfers substantially all the risks and rewards incidental to ownership to the Group is classified as a finance lease.

Finance leases are capitalized at the commencement of the lease at the inception date fair value of the leased property or, if lower, at the present value of the minimum lease payments. Lease payments are apportioned between financial charges and reduction of the lease liability so as to achieve a constant rate of interest on the remaining balance of the liability. Finance charges are recognized in finance costs in the consolidated statement of profit or loss.

A leased asset is depreciated over the useful life of the asset. However, if there is no reasonable certainty that the Group will obtain ownership by the end of the lease term, the asset is depreciated over the shorter of the estimated useful life of the asset and the lease term.

Operating lease payments are recognized as an operating expense in the consolidated statement of profit or loss on a straight-line basis over the lease term.

2.3.7 Property, plant and equipment -

Property, plant and equipment is stated at cost, net of accumulated depreciation and/or accumulated impairment losses, if any. Such cost includes the cost of replacing component parts of the property, plant and equipment and borrowing costs for long-term construction projects if the recognition criteria are met. The capitalized value of a finance lease is also included within property, plant and equipment. When significant parts of plant and equipment are required to be replaced at intervals, the Group recognizes such parts as individual assets with specific useful lives and depreciated them separately based on their specific useful lives. Likewise, when major inspection is performed, its cost is recognized in the carrying amount of the plant and equipment as a replacement if the recognition criteria are satisfied. All other repair and maintenance costs are recognized in profit or loss as incurred. The present value of the expected cost for the decommissioning of an asset after its use is included in the cost of the respective asset if the recognition criteria for a provision are met. Refer to significant accounting judgments, estimates and assumptions (Note 2.3.13) and decommissioning provisions (Note 13).

F-22

Notes to the consolidated financial statements (continued)

Depreciation of assets is determined using the straight-line method over the estimated useful lives of such assets as follows:

	Years
Buildings and other constructions:
Administrative facilities	Between 35 and 48
Main production structures	Between 30 and 49
Minor production structures	Between 20 and 35
Machinery and equipment:
Mills and horizontal furnaces	Between 42 and 49
Vertical furnaces, crushers and grinders	Between 23 and 36
Electricity facilities and other minors	Between 12 and 35
Furniture and fixtures	10
Transportation units:
Heavy units	Between 11 and 21
Light units	Between 8 and 11
Computer equipment	4
Tools	Between 5 and 10

The asset’s residual value, useful lives and methods of depreciation are reviewed at each reporting period, and adjusted prospectively if appropriate.

An item of property, plant and equipment and any significant part initially recognized is derecognized upon disposal or when no future economic benefits are expected from its use or disposal. Any gain or loss arising on derecognition of the asset (calculated as the difference between the net disposal proceeds and the carrying amount of the asset) is included in the consolidated statement of profit or loss when the asset is derecognized.

2.3.8 Mining concessions -

Mining concessions correspond to the exploration rights in areas of interest acquired. Mining concessions are stated at cost, net of accumulated amortization and/or accumulated impairment losses, if any, and are presented within the property, plant and equipment caption. Those mining concessions are amortized starting from the production phase following the units-of-production method based on proved reserves to which they relate. The unit-of-production rate for the amortization of mining concessions takes into account expenditures incurred to the date of the calculation. In the event the Group abandons the concession, the costs associated are written-off in the consolidated statement of profit or loss.

As of December 31, 2014 and 2013, no amortization under units-of-production method was determined since the mining concessions of the Group are not yet on production phase.

2.3.9 Mine development costs and stripping costs

Mine development costs

Mine development costs incurred are stated at cost and are the next step in development of mining projects after exploration and evaluation stage. Mine development costs are, upon commencement of the production phase, presented net of accumulated amortization and/or accumulated impairment losses, if any, and are presented within the property, plant and equipment caption. The amortization is calculated using the unit of-production method based on proved reserves to which they relate. The unit-of-production rate for the amortization of mine development costs takes into account expenditures incurred to the date of the calculation. Expenditures that increase significantly the economic reserves in the mining unit under exploitation are capitalized.

F-23

Notes to the consolidated financial statements (continued)

As of December 31, 2014 and 2013, no amortization under units-of-production method was determined since the projects of the Group are not yet on production phase.

Stripping costs

Stripping costs incurred in the development of a mine before production commences are capitalized as part of mine development costs and subsequently amortized over the life of the mine on a units-of-production basis, using the proved reserves.

Stripping costs incurred subsequently during the production phase of its operation are recorded as part of cost of production.

2.3.10 Exploration and evaluation assets -

Exploration and evaluation activity involves the search for mineral resources, the determination of technical feasibility and the assessment of commercial viability of an identified resource. Exploration and evaluation activity includes:

• Researching and analyzing historical exploration data.

• Gathering exploration data through geophysical studies.

• Exploratory drilling and sampling.

• Determining and examining the volume and grade of the resource.

• Surveying transportation and infrastructure requirements.

• Conducting market and finance studies.

License costs paid in connection with a right to explore in an existing exploration area are capitalized and amortized over the term of the license.

Once the legal right to explore has been acquired, exploration and evaluation costs are charged to the consolidated statement of profit or loss, unless management concludes that a future economic benefit is more likely than not to be realized, in which case such costs are capitalized. These costs include directly attributable employee remuneration, materials and fuel used, surveying costs, drilling costs and payments made to contractors.

In evaluating if costs meet the criteria to be capitalized, several different sources of information are used, including the nature of the assets, extension of the explored area and results of sampling, among others. The information that is used to determine the probability of future benefits depends on the extent of exploration and evaluation that has been performed.

Exploration and evaluation costs are capitalized when the exploration and evaluation activity is within an area of interest for which it is expected that the costs will be recouped by future exploitation and active and significant operations in relation to the area are continuing or planned for the future.

The main estimates and assumptions the Group uses to determine whether is likely that future exploitation will result in future economic benefits include: expected operational costs, committed capital expenditures, expected mineral prices and mineral resources found. For this purpose, the future economic benefit of the project can reasonably be regarded as assured when mine-site

F-24

Notes to the consolidated financial statements (continued)

exploration is being conducted to confirm resources, mine-site exploration is being conducted to convert resources to reserves or when the Group is conducting a feasibility study, based on supporting geological information.

As the capitalized exploration and evaluation costs asset is not available for use, it is not amortized. These exploration costs are transferred to mine development assets once the work completed to date supports the future development of the property and such development receives appropriate approvals. In this phase, the exploration costs are amortized in accordance with the estimated useful life of the mining property from the time the commercial exploitation of the reserves begins. All capitalized exploration and evaluation costs are monitored for indications of impairment. Where a potential impairment is indicated, assessment is performed for each area of interest in conjunction with the group of operating assets (representing a cash generating unit) to which the exploration is attributed. Exploration areas in which resources have been discovered but require major capital expenditure before production can begin, are continually evaluated to ensure that commercial quantities of resources exist or to ensure that additional exploration work is under way or planned. To the extent that capitalized expenditure is no longer expected to be recovered it is charged to the consolidated statement of profit or loss. The Group assesses at each reporting date whether there is an indication that an exploration and evaluation assets may be impaired. The following facts and circumstances are considered in this assessment:

(i) the period for which the entity has the right to explore in the specific area has expired during the period or will expire in the near future, and is not expected to be renewed.

(ii) substantive expenditure on further exploration for and evaluation of mineral resources in the specific area is neither budgeted nor planned.

F-25

Notes to the consolidated financial statements (continued)

(iii) exploration for and evaluation of mineral resources in the specific area have not led to the discovery of commercially viable quantities of mineral resources and the entity has decided to discontinue such activities in the specific area.

(iv) sufficient data exist to indicate that, although a development in the specific area is likely to proceed, the carrying amount of the exploration and evaluation asset is unlikely to be recovered in full from successful development or by sale.

If any indication exists, the Group exploration and evaluation assess for impairment is required.

2.3.11 Ore reserve and resource estimates -

Ore reserves are estimates of the amount of ore that can be economically and legally extracted from the Group’s mining properties and concessions. The Group estimates its ore reserves and mineral resources, based on information compiled by appropriately qualified persons relating to the geological data on the size, depth and shape of the ore body, and requires complex geological judgments to interpret the data. The estimation of recoverable reserves is based upon factors such as estimates of foreign exchange rates, commodity prices, future capital requirements, and production costs along with geological assumptions and judgments made in estimating the size and grade of the ore body. Changes in the reserve or resource estimates may impact upon the carrying value of exploration and evaluation assets, provision for rehabilitation and depreciation and amortization charges.

2.3.12 Impairment of non-financial assets –

The Group assesses, at each reporting date, whether there is an indication that an asset may be impaired. If any indication exists, or when annual impairment testing for an asset is required, the Group estimates the asset’s recoverable amount. An asset’s recoverable amount is the higher of an asset’s or cash-generating unit’s (CGU) fair value less costs of disposal and its value in use and is determined for an individual asset, unless the asset does not generate cash inflows that are largely independent of those from other assets or groups of assets. Where the carrying amount of an asset of CGU exceeds its recoverable amount, the asset is considered impaired and is written down to its recoverable amount.

In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. In determining fair value less costs of disposal, recent market transactions are taken into account. If no such transactions can be identified, an appropriate valuation model is used. These calculations are corroborated by valuation multiples, quoted share prices for publicly traded companies or other available fair value indicators.

The Group supports its impairment calculation on detailed budgets and forecast calculations, which are prepared separately for each of the Group’s CGUs to which the individual assets are allocated.

F-26

Notes to the consolidated financial statements (continued)

Impairment losses of continuing operations, including impairment on inventories, are recognized in the consolidated statement of profit or loss in expense categories consistent with the function of the impaired asset.

An assessment is made at each reporting date to determine whether there is any indication that previously recognized impairment losses may no longer exist or have decreased. If such indication exists, the Group estimates the asset’s or CGU’s recoverable amount. A previously recognized impairment loss is reversed only if there has been a change in the assumptions used to determine the asset’s recoverable amount since the last impairment loss was recognized. The reversal is limited so that the carrying amount of the asset does not exceed its recoverable amount, nor exceed the carrying amount that would have been determined, net of depreciation, had no impairment loss been recognized for the asset in prior years. Such reversal is recognized in the consolidated statement of profit or loss.

Exploration and evaluation assets are tested for impairment annually as of December 31, either individually or at the cash-generating unit level, as appropriate, and when circumstances indicate that the carrying value may be impaired.

2.3.13 Provisions -

General

Provisions are recognized when the Group has a present obligation (legal or constructive) as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. When the Group expects some or all of a provision to be reimbursed, for example under an insurance contract, the reimbursement is recognized as a separate asset but only when the reimbursement is virtually certain. The expense relating to any provision is presented in profit or loss net of any reimbursement. If the effect of the time value of money is material, provisions are discounted using a current pre-tax rate that reflects where appropriate, the risks specific to the liability. When discounting is used, the increase in the provision due to the passage of time is recognized as finance cost in the consolidated statement of profit or loss.

Rehabilitation provision

The Group records the present value of estimated costs of legal and constructive obligations required to restore operating locations in the period in which the obligation is incurred. Rehabilitation costs are provided at the present value of expected costs to settle the obligation using estimated cash flows and are recognized as part of the cost of that particular asset. The cash flows are discounted at a current risk free pre-tax rate. The unwinding of the discount is expensed as incurred and recognized in the consolidated statement of profit or loss as a finance cost. The estimated future costs of rehabilitation are reviewed annually and adjusted as appropriate. Changes in the estimated future costs or in the discount rate applied are added to or deducted from the cost of the asset.

F-27

Notes to the consolidated financial statements (continued)

As of December 31, 2014 and 2013, the Group only has a rehabilitation provision for the Bongara mine (fully impaired in 2011), accordingly, changes in estimated future costs have been recorded directly to the consolidated statement of profit or loss.

Environmental expenditures and liabilities

Environmental expenditures that relate to current or future revenues are expensed or capitalized as appropriate. Expenditures that relate to an existing condition caused by past operations and do not contribute to current or future earnings are expensed.

Liabilities for environmental costs are recognized when a clean-up is probable and the associated costs can be reliably estimated. Generally, the timing of recognition of these provisions coincides with the commitment to a formal plan of action or, if earlier, on divestment or on closure of inactive sites.

The amount recognized is the best estimate of the expenditure required. Where the liability will not be settled for a number of years, the amount recognized is the present value of the estimated future expenditure.

2.3.14 Employees benefits -

The Group has short-term obligations for employee benefits including salaries, severance contributions, legal bonuses, performance bonuses and profit sharing. These obligations are monthly recorded on an accrual basis.

Additionally, the Group has a long-term incentive plan for key management. This benefit is settled in cash, measured on the salary of each officer and upon fulfilling certain conditions such as years of experience within the Group and permanency. According to IAS 19 “Employee benefits”, the Group recognizes the long-term obligation at its present value at the end of the reporting period using the projected credit unit method. To calculate the present value of these long-term obligations the Group uses a current market discount rate at the date of the consolidated financial statements. This liability is annually reviewed on the date of the consolidated financial statements, and the accrual updates and the effect of changes in discount rates are recognized in the consolidated statement of profit or loss, until the liability is extinguished.

2.3.15 Revenue recognition -

Revenue is recognized to the extent it is probable that the economic benefits will flow to the Group and the revenue can be reliably measured, regardless of when the payment is being made. Revenue is measured at the fair value of the consideration received or receivable, taking into account contractually defined terms of payment and excluding taxes or duty.

F-28

Notes to the consolidated financial statements (continued)

The Group has concluded that it is acting as a principal in all of its revenue arrangements. The following specific recognition criteria must also be met before revenue is recognized:

Sales of goods -

Revenue from sales of goods is recognized when the significant risks and rewards of ownership have passed to the buyer, on delivery of the goods. Revenue from the sale of goods is measured at fair value of the consideration received or receivable, net of returns and trade discounts.

Operating lease income -

Income from operating lease of land and office was recognized on a monthly accrual basis during the term of the lease.

Interest income -

For all financial instruments measured at amortized cost and interest-bearing financial assets, interest income is recorded using the effective interest rate (EIR). EIR is the rate that exactly discounts the estimated future cash payments or receipts over the expected life of the financial instrument or a shorter period, where appropriate, to the net carrying amount of the financial asset or liability. Interest income is included in finance income in the consolidated statement of profit or loss.

2.3.16 Taxes -

Current income tax -

Current income tax assets and liabilities are measured at the amount expected to be recovered from or paid to the taxation authorities. The tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted, at the reporting date in Peru, where the Group operates and generates taxable income.

Current income tax relating to items recognized directly in equity is recognized in equity and not in the consolidated statement of profit or loss. Management periodically evaluates positions taken in the tax returns with respect to situations in which applicable tax regulations are subject to interpretation and establishes provisions where appropriate.

Deferred tax -

Deferred tax is provided using the liability method on temporary differences between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes at the reporting date.

Deferred tax liabilities are recognized for all taxable temporary differences.

F-29

Notes to the consolidated financial statements (continued)

Deferred tax assets are recognized for all deductible temporary differences, the carry forward of unused tax credits and unused tax losses. Deferred tax assets are recognized to the extent that it is probable that taxable profit will be available against which the deductible temporary differences, and the carry forward of unused tax credits and unused tax losses can be utilized, except in respect of deductible temporary differences associated with investments in subsidiaries, where deferred assets are recognized only to the extent that it is probable that the temporary differences will reverse in the foreseeable future and taxable profit will be available against which the temporary differences can be utilized.

The carrying amount of deferred tax assets is reviewed at each reporting date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred tax asset to be utilized. Unrecognized deferred tax assets are re-assessed at each reporting date and are recognized to the extent that it has become probable that future taxable profits will allow the deferred tax asset to be recovered.

Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the year when the asset is realized or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted at the reporting date.

Deferred tax related to items recognized outside profit or loss is recognize outside profit or loss. Deferred tax items are recognized in correlation to the underlying transaction either in OCI or directly in equity.

Deferred tax assets and deferred tax liabilities are offset if a legally enforceable right exists to set off current tax assets against current income tax liabilities and the deferred taxes relate to the same taxable entity and the same taxation authority.

Mining royalties -

Mining royalties are accounted for under IAS 12 when they have the characteristics of an income tax. This is considered to be the case when they are imposed under government authority and the amount payable is based on taxable income rather than based on quantity produced or as a percentage of revenue after adjustment for temporary differences. For such arrangements, current and deferred tax is provided on the same basis as described above for income tax. Obligations arising from royalty arrangements that do not satisfy these criteria are recognized as current provisions and included in results of the year.

F-30

Notes to the consolidated financial statements (continued)

Sales tax -

Expenses and assets are recognized net of the amount of sales tax, except:

(i) Where the sales tax incurred on a purchase of assets or services is not recoverable from the taxation authority, in which case, the sales tax is recognized as part of the cost of acquisition of the asset or as part of the expense item, as applicable.

(ii) When receivables and payables are stated with the amount of sales tax included.

The net amount of sales tax recoverable from, or payable to, the taxation authority is included as part of receivables or payables in the consolidated statement of financial position.

2.3.17 Treasury shares -

Own equity instruments which are reacquired (treasury shares) are recognized at cost and deducted from equity. No gain or loss is recognized in the consolidated statement of profit or loss on the purchase, sale, issue or cancellation of the Group’s own equity instruments. Any difference between carrying amount and the consideration, if reissued, is recognized in capital stock. The Company had common shares in treasury through a subsidiary until 2012, when these shares were disposed, see note 16(c).

2.3.18 Current versus non-current classification -

The Group presents assets and liabilities in statement of financial position based on current/non-current classification. An asset is current when it is:

• Expected to be realized or intended to sold or consumed in normal operating cycle.

• Held primarily for the purpose of trading.

• Expected to be realized within twelve months after the reporting period, or

• Cash or cash equivalent unless restricted from being exchanged or used to settle a liability for at least twelve months after the reporting period.

All other assets are classified as non-current.

A liability is current when it is:

• Expected to be settled in normal operating cycle.

• Held primarily for the purpose of trading.

• Due to be settled within twelve months after the reporting period, or

• There is no unconditional right to defer the settlement of the liability for at least twelve months after the reporting period.

The Group classifies all other liabilities as non-current.

Deferred tax assets and liabilities are classified as non-current assets and liabilities.

F-31

Notes to the consolidated financial statements (continued)

2.3.19 New amended standards and interpretations -

As follows, new standards in force since 2014 which did not impact the consolidated financial statements. The nature and impact of each new standard/amendment is described below:

• Investment Entities (Amendments to IFRS 10, IFRS 12 and IAS 27)

These amendments provide an exception to the consolidation requirement for entities that meet the definition of an investment entity under IFRS 10 Consolidated Financial Statements and must be applied retrospectively, subject to certain transition relief. The exception to consolidation requires investment entities to account for subsidiaries at fair value through profit or loss. These amendments have no impact to the Group, since none of the entities in the Group qualifies to be an investment entity under IFRS 10.

• Offsetting Financial Assets and Financial Liabilities—Amendments to IAS 32

These amendments clarify the meaning of “currently has a legally enforceable right to set-off” and the criteria for non-simultaneous settlement mechanisms of clearing houses to qualify for offsetting and is applied retrospectively. These amendments have no impact on the Group, since none of the entities in the Group has any offsetting arrangements.

• Novation of Derivatives and Continuation of Hedge Accounting—Amendments to IAS 39. These amendments provide relief from discontinuing hedge accounting when novation of a derivative designated as a hedging instrument meets certain criteria and retrospectively application is required. These amendments have no impact to the Group as the Group has not novated its derivatives during the current or prior periods.

• IFRIC 21 Levies

IFRIC 21 clarifies that an entity recognizes a liability for a levy when the activity that triggers payments, as identified by the relevant legislation, occurs. For a levy that is triggered upon reaching a minimum threshold, the interpretation clarifies that no liability should be anticipated before the specified minimum threshold is reached. Retrospective application is required for IFRIC 21. The adoption of IFRIC 21 has no impact on the Group as it has applied the recognition principles under IAS 37 Provision, Contingent liabilities and Contingent Assets consistent with the requirements of IFRIC 21 in prior years.

F-32

Notes to the consolidated financial statements (continued)

• Annual improvements 2010-2012 Cycle

In the 2010-2012 annual improvements cycle, the IASB issued seven amendments to six standards, which included an amendment to IFRS 13 Fair Value Measurement. The amendment to IFRS 13 is effective immediately and, thus, for periods beginning as of January 1, 2014, and it clarifies in the Basis for Conclusions that short-term receivables and payables with no stated interest rates can be measured at invoice amounts when the effect of discounting is immaterial. This amendment to IFRS 13 has no impact on the Group.

• Annual improvements 2011-2013 Cycle

In the 2011-2013 annual improvements cycle, the IASB issued four amendments to four standards, which included an amendment to IFRS 1 First-time Adoption of International Financial Reporting Standards. The amendment to IFRS 1 is effective immediately and, thus, for periods beginning as of January 1, 2014, and clarifies in the Basis for Conclusions that an entity may choose to apply either a current standard or a new standard that is not yet mandatory, but permits early application, provided either standard is applied consistently throughout the periods presented in the entity’s first IFRS financial statements. This amendment to IFRS 1 has no impact on the Group, since the Group is an existing IFRS preparer.

The Company has not yet early adopted any other standard, interpretation or amendment that has been issued but is not yet effective.

3. Significant accounting judgments, estimates and assumptions

The preparation of the Group’s consolidated financial statements requires management to make judgments, estimates and assumptions that affect the reported amounts of revenues, expenses, assets and liabilities, and the accompanying disclosures. Uncertainty about these assumptions and estimates could result in outcomes that require a material adjustment to the carrying amount of assets or liabilities affected in future periods.

Estimates and assumptions -

The key assumptions concerning the future and other key sources of estimation uncertainty at the reporting date, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are described below. The Group based its assumptions and estimates on parameters available when the consolidated financial statements were prepared. Existing circumstances and assumptions about future developments, however, may change due to market changes or circumstances arising beyond the control of the Group. Such changes are reflected in the assumptions when they occur.

The significant areas are summarized below:

• Determination of useful lives of assets for depreciation and amortization purposes – notes 2.3.7, 2.3.8 and 2.3.9.

• Recognition of exploration and evaluation assets and mine development costs – notes 2.3.9, 2.3.10 and note 11.

• Review of asset carrying values and impairment charges – note 2.3.12 and note 10.

• Income tax – note 2.3.16 and note 15.

• Cash flow hedges – note 2.3.2 (vii) and note 30 (b).

F-33

Notes to the consolidated financial statements (continued)

4. Standards issued but not yet effective

The standards and interpretations that are issued, but not yet effective, up to the date of issuance of the Group’s financial statements are disclosed below. The Group intends to adopt these standards, if applicable, when they become effective:

• IFRS 9 Financial Instruments

In July 2014, the IASB issued the final version of IFRS 9 Financial Instruments which reflects all phases of the financial instruments project and replaces IAS 39 Financial Instruments: Recognition and Measurement and all previous versions of IFRS 9. The standard introduces new requirements for classification and measurement, impairment, and hedge accounting. IFRS 9 is effective for annual periods beginning on or after January 1, 2018, with early application permitted. Retrospective application is required, but comparative information is not compulsory. Early application of previous versions of IFRS 9 (2009, 2010 and 2013) is permitted if the date of initial application is before February 1, 2015. The Group will assess the impact of IFRS 9 and plans to adopt the new standard on the required effective date.

IFRS 15 Revenue from Contracts with Customers

IFRS 15 was issued in May 2014 and establishes a new five-step model that will apply to revenue arising from contracts with customers. Under IFRS 15 revenue is recognized at an amount that reflects the consideration to which an entity expects to be entitled in exchange for transferring goods or services to a customer. The principles in IFRS 15 provide a more structured approach to measuring and recognizing revenue.

The new revenue standard is applicable to all entities and will supersede all current revenue recognition requirements under IFRS. Either a full or modified retrospective application is required for annual periods beginning on or after January 1, 2017 with early adoption permitted. The Group will assess the impact of IFRS 15 and plans to adopt the new standard on the required effective date.

Amendments to IAS 16 and IAS 38: Clarification of Acceptable Methods of Depreciation and Amortization

The amendments clarify the principle in IAS 16 and IAS 38 that revenue reflects a pattern of economic benefits that are generated from operating a business (of which the asset is part) rather than the economic benefits that are consumed through use of the asset. As a result, a revenue-based method cannot be used to depreciate property, plant and equipment and may only be used in very limited circumstances to amortize intangible assets.

The amendments are effective prospectively for annual periods beginning on or after January 1, 2016, with early adoption permitted. These amendments are not expected to have any impact to the Group given that the Group has not used a revenue-based method to depreciate its non-current assets.

5. Transactions in foreign currency

Transactions in foreign currency take place at the open-market exchange rates published by the Superintendent of Banks, Insurance and Pension Funds Administration. As of December 31, 2014 the exchange rates for transactions in United States dollars, published by this institution, were S/.2.981 for purchase and S/.2.989 for sale (S/.2.794 for purchase and S/.2.796 for sale as of December 31, 2013).

F-34

Notes to the consolidated financial statements (continued)

As of December 31, 2014 and 2013, the Group had the following assets and liabilities in United States dollars:

	2014			2013
	US$(000)			US$(000)
Assets
Cash and term deposits		164,612			150,472
Trade and other receivables		9,181			5,566
Advances to suppliers for work in progress		32,849			—
		206,642			156,038
Liabilities
Trade and other payables		17,700			13,263
Interest-bearing loans and borrowings		300,000			300,000
		317,700			313,263
		(111,058	)		(157,225	)
Cross currency swap position		120,000			—
Net monetary position		8,942			(157,225	)

As of December 31, 2014, the Group maintains cross currency swaps contracts (“CCS”) designated as cash flow hedges for a portion of the Senior Notes denominated in US dollars, see note 14. As of December 31, 2013, the Group had no financial instruments to hedge its foreign exchange risk.

During 2014, 2013 and 2012, the net loss originated from exchange differences was approximately S/.14,791,000, S/.48,430,000 and S/.736,000, which were presented in the “Loss from exchange difference, net” caption in the consolidated statements of profit or loss.

F-35

Notes to the consolidated financial statements (continued)

6. Cash and term deposits

(a) This caption was made up as follows:

	2014		2013		2012
	S/.(000)		S/.(000)		S/.(000)
Cash on hand		2,763		1,788		1,973
Cash at banks (b)		283,568		446,244		37,870
Short-term deposits (c)		294,168		528,920		29,992
Cash balances included in the consolidated statements of cash flows		580,499		976,952		69,835
Time deposits with original maturity greater than 90 days (c)		—		—		403,950
		580,499		976,952		473,785

(b) Cash at banks is denominated in local and foreign currencies, is deposited in local and foreign banks and is freely available. The demand deposits interest yield is based on daily bank deposit rates. As of December 31, 2014 these bank accounts included approximately S/.233,234,000, related to the proceeds obtained on February 2013 through the issuance of Senior Notes, see note 14.

(c) As of December 31, 2014, 2013 and 2012, the short-term deposits held in local banks were freely available and earned interest at the respective short-term deposits rates. These short-term deposits, with original maturities of less than three months, were collected in January 2015, 2014 and 2013, respectively. In addition, during 2012, the Group had time deposits with original maturities greater than 90 days (18 months), which were liquidated during 2013.

As of December 31, 2014, 2013 and 2012, the term deposits generated interests for S/.7,261,000, S/.26,300,000, and S/.22,194,000, respectively, see note 23. From these amounts S/.166,000 and S/.5,066,000 are pending of collection as of December 31, 2014 and 2013, respectively, see note 7(a).

These short-term deposits include approximately S/.119,240,000 related to the proceeds obtained on February 2013 through the issuance of Senior Notes.

F-36

Notes to the consolidated financial statements (continued)

7. Trade and other receivables

(a) This caption was made up as follows:

	Current						Non-current
	2014			2013			2014		2013
	S/.(000)			S/.(000)			S/.(000)		S/.(000)
Trade receivables (b)		59,146			51,834			—		—
Funds restricted to tax payments		3,078			799			—		—
Loans to employees		1,063			1,126			—		—
Accounts receivable from Parent company and affiliates, note 25		557			409			—		—
Interests receivables, note 6(c)		166			5,066			—		—
Other accounts receivable		5,347			6,081			—		—
Allowance for doubtful accounts (e)		(352	)		(395	)		—		—
Financial assets classified as receivables (f)		69,005			64,920			—		—
Value-added tax credit (c)		41,655			3,622			43,978		36,322
Tax refund receivable (d)		183			—			9,970		9,970
Non-financial assets classified as receivables		41,838			3,622			53,948		46,292
		110,843			68,542			53,948		46,292

(b) Trade account receivables are interest bearing and are generally 30-90 day terms.

(c) The value-added tax credit is mainly related to the activities of Fosfatos del Pacífico S.A. (Fosfatos) and the construction of a new cement plant in Piura. According to the Peruvian current tax rules, the Group has the right to compensate this credit against the value-added tax to be generated on the future sales of Fosfatos and Cementos Pacasmayo S.A.A. This kind of tax credit never expires. From the total amount, S/.34,802,000 will be recovered in the long term when the phosphate project begins operations.

(d) As of December 31, 2014, 2013 and 2012, the Group had value-added tax refund receivables related to the operations of Dinoselva Iquitos S.A.C. of S/.9,970,000. These tax refund receivables are value-added tax credits originated from purchases made from 2005 to 2007 in the northeast region of Peru. The Group has a formal disagreement with the Peruvian tax authorities in connection with these refunds. In the Group’s legal advisors opinion, the Group has strong basis to recover these tax refunds, however, they consider that such recovery will occur in the long-term, considering the long time that this kind of procedures last due to all instances and formal processes that have to be completed.

F-37

Notes to the consolidated financial statements (continued)

(e) The movement of the allowance for doubtful accounts is as follows:

	2014			2013		2012
	S/.(000)			S/.(000)		S/.(000)
Opening balance		395			168		63
Additions, note 20		—			227		105
Write-off, note 20		(43	)		—		—
Ending balance		352			395		168

(f) The aging analysis of trade and other accounts receivable as of December 31, 2014 and 2013, is as follows:

					Past due but not impaired
	Total		Neither past due nor impaired		< 30 days		30-60 days		61-90 days		91-120 days		> 120 days
	S/.(000)		S/.(000)		S/.(000)		S/.(000)		S/.(000)		S/.(000)		S/.(000)
2014		69,005		56,788		8,624		633		808		541		1,611
2013		64,920		58,050		2,849		2,241		371		303		1,106

See note 29 on credit risk of trade receivables, which explains how the Group manages and measures credit quality of trade receivables that are neither past due nor impaired.

8. Inventories

(a) This caption is made up as follows:

	2014			2013
	S/.(000)			S/.(000)
Goods and finished products		18,951			19,102
Work in progress		69,711			59,561
Raw materials		77,107			70,868
Packages and packing		2,565			2,336
Fuel and carbon		69,316			98,728
Spare parts and supplies		77,660			71,198
Inventory in transit		13,906			18,277
		329,216			340,070
Less—Provision for inventory obsolescence and net realizable value (b)		(5,146	)		(5,599	)
		324,070			334,471

F-38

Notes to the consolidated financial statements (continued)

(b) Movement in the provision for inventory obsolescence and net realizable value is set forth below:

	2014			2013			2012
	S/.(000)			S/.(000)			S/.(000)
Opening balance		5,599			7,791			4,513
Charge for the year		80			260			3,278
Recoveries		(533	)		(2,452	)		—
Final balance		5,146			5,599			7,791

During 2014, 2013 and 2012 S/.80,000, S/.260,000 and S/.3,278,000, respectively, were recognized as an expense for inventory obsolescence and for the inventory carried a net realizable value. During 2014 and 2013, the Company reversed part of the provision for inventory carried at net realizable value for S/.533,000 and S/,2,542,000, respectively.

9. Available–for-sale financial investments

(a) Movement in available-for-sale financial investments is as follow:

	2014			2013		2012
	S/.(000)			S/.(000)		S/.(000)
Beginning balance		36,058			34,887		22,074
Fair value change recorded in other comprehensive income		(16,378	)		1,171		12,813
Disposals (b)		(18,936	)		—		—
Ending balance		744			36,058		34,887

(b) Available-for-sale financial investments include the following:

	2014
	Cost		Unrealized gains		Fair value
	S/.(000)		S/.(000)		S/.(000)
Equity securities – listed Peruvian company		450		294		744
Total		450		294		744
	2013
	Cost		Unrealized gains		Fair value
	S/.(000)		S/.(000)		S/.(000)
Equity securities – listed Peruvian company		450		517		967
Equity securities – unlisted Peruvian company		8,399		26,692		35,091
Total		8,849		27,209		36,058

During the period there were no reclassifications between quoted and unquoted investments.

F-39

Notes to the consolidated financial statements (continued)

The fair value of the listed shares is determined by reference to published price quotations in an active market. Union Andina de Cementos S.A.A. shares are publicly traded in Lima Stock Exchange (LSE).

Sindicato de Inversiones y Administración S.A. (SIA) is the main shareholder of Union Andina de Cementos S.A.A. with a participation of 43.38% in its capital stock as of December 31, 2013. On October 10, 2014 the Company sold its available-for-sale financial investment in SIA for approximately US$6,514,000 (equivalent to S/.18,936,000). As a result of this disposal, in October 2014, the Company transferred a gain of S/. 10,537,000 from the OCI to the consolidated statement of profit or loss.

(c) The breakdown of the investments in equity securities held for the years 2014 and 2013 is as follows (number of shares):

	2014		2013
Unión Andina de Cementos S.A.A. (*)		256,624		256,624
Sindicato de Inversiones y Administración S.A. (SIA) (**)		—		4,825

(*) Represents 0.016% of its common shares.

(**) Represents 1.30% of its common shares.

There were no changes in the movement of the number of shares of Union Andina de Cementos S.A.A. during the years ended as of December 31, 2014 and 2013.

F-40

Notes to the consolidated financial statements (continued)

10. Property, plant and equipment

(a) The composition and movement in this caption as of the date of the consolidated statements of financial position is presented below:

	Mining concessions (b)			Mine development costs (b)		Land			Buildings and other construction		Machinery, equipment and related spare parts			Furniture and accessories			Transportation units			Computer equipment and tools			Mine rehabilitation costs		Works in progress and units in transit			Total
	S/.(000)			S/.(000)		S/.(000)			S/.(000)		S/.(000)			S/.(000)			S/.(000)			S/.(000)			S/.(000)		S/.(000)			S/.(000)
Cost
As of January 1, 2013		83,101			56,829		211,842			228,353		647,902			28,287			108,584			39,201			4,575		335,299			1,743,973
Additions		2,590			29,109		5,263			—		8,324			963			8,233			2,632			—		143,485			200,599
Capitalized interests (d)		—			—		—			—		—			—			—			—			—		1,264			1,264
Disposals		(204	)		—		(44	)		—		(211	)		(76	)		(2,319	)		(27	)		—		(1,660	)		(4,541	)
Transfers		621			—		—			64,304		108,881			83			2,322			654			—		(176,865	)		—
As of December 31, 2013		86,108			85,938		217,061			292,657		764,896			29,257			116,820			42,460			4,575		301,523			1,941,295
Additions		3,486			12,771		2,508			—		26,462			746			3,247			1,722			—		535,612			586,554
Capitalized interests (d)		—			—		—			—		—			—			—			—			—		16,282			16,282
Disposals		—			—		(1,504	)		—		(531	)		(90	)		(1,443	)		(190	)		—		(11,436	)		(15,194	)
Transfers		—			—		—			2,678		30,580			—			663			1,396			—		(35,317	)		—
As of December 31, 2014		89,594			98,709		218,065			295,335		821,407			29,913			119,287			45,388			4,575		806,664			2,528,937
Accumulated depreciation
As of January 1, 2013		13,452			7,679		—			31,451		112,203			23,229			34,802			28,979			1,349		—			253,144
Additions		97			—		—			7,777		36,035			505			8,565			2,892			—		—			55,871
Disposals		—			—		—			—		(52	)		(76	)		(681	)		(16	)		—		—			(825	)
As of December 31, 2013		13,549			7,679		—			39,228		148,186			23,658			42,686			31,855			1,349		—			308,190
Additions		—			—		—			8,997		42,332			644			9,475			3,311			—		—			64,759
Disposals		—			—		—			—		(382	)		(7	)		(531	)		(62	)		—		—			(982	)
As of December 31, 2014		13,549			7,679		—			48,225		190,136			24,295			51,630			35,104			1,349		—			371,967
Impairment mining assets (b)		44,103			21,370		257			17,069		9,070			104			28			32			3,226		735			95,994
Net book value
As of December 31, 2014		31,942			69,660		217,808			230,041		622,201			5,514			67,629			10,252			—		805,929			2,060,976
As of December 31, 2013		28,456			56,889		216,804			236,360		607,640			5,495			74,106			10,573			—		300,788			1,537,111

F-41

Notes to the consolidated financial statements (continued)

(b) Mining concessions mainly include net acquisition costs by S/.15,367,000 related to coal concessions acquired through a purchase option executed from 2011 to 2013. The caption also includes some concessions acquired by the Group for exploration activities related to the cement business.

In previous years management recognized a full impairment charge of approximately S/.95,994,000, related to the total net book value of a closed zinc mining unit which includes concession costs, development costs and related facilities and equipments. From this amount, S/.44,103,000 corresponds to concessions costs. According to the management’s expectation the recovery amount of this zinc mining unit is zero.

(c) There were no additions under finance leases during the years 2014 and 2013.

(d) During 2014 and 2013 the Group capitalized borrowing costs by S/.16,282,000 and S/.1,264,000 mainly related with the expansion of the cement plant located in Piura. This project is expected to be completed during 2015. The carrying amount of these eligible assets was S/.534,961,000 as of December 31, 2014 (S/.60,676,000 as of December 31,2013). The rate used to determine the amount of borrowings costs eligible for capitalization was 5.13% as of December 31, 2014, which is the effective rate of the only borrowing the Group has as of such date. The amount of borrowing costs eligible for capitalization is determined by applying the capitalization rate to the capital expenditures incurred in eligible assets.

(e) The Group has assessed the recoverable amount of its long-term assets and did not find an impairment of these assets as of December 31, 2014.

(f) Work in progress included in property, plant and equipment as of December 31, 2014 amounted to S/.805,929,000 (2013: S/.300,788,000) are mainly related to a cement plant under construction at the location of Piura, Peru.

11. Exploration and evaluation assets

(a) The composition and movement of this caption as of the date of the consolidated statements of financial position is presented below:

	S/.(000)
Cost
As of January 1, 2013		49,486
Additions		9,844
As of December 31, 2013		59,330
Additions (b)		690
Disposals		(2,280	)
As of December 31, 2014		57,740

(b) During 2014, it mainly includes exploration costs related to brine project, located in the district of Morrope, Department of Lambayeque, developed by the subsidiary Salmueras Sudamericanas S.A.

As of December 31, 2014, the exploration and evaluation assets mainly include S/.33,469,000 related to brine project, S/.17,253,000 related to phosphates project, and S/.7,018,000 related to others minor projects.

F-42

Notes to the consolidated financial statements (continued)

(c) As of December 31, 2014, the Group has assessed the use conditions of its exploration and evaluation assets and did not find any indicator that these assets may be impaired.

12. Trade and other payables

This caption is made up as follows:

	2014		2013
	S/.(000)		S/.(000)
Trade payables		70,826		62,618
Interests payable		15,916		14,889
Remuneration payable		16,172		14,305
Guarantee deposits		7,935		1,187
Taxes and contributions		7,218		10,304
Advances from customers		5,336		7,303
Board of Directors’ fees		3,999		5,083
Dividends payable, note 16(h)		3,453		4,554
Accounts payable to ASPI and its affiliates, note 25		—		279
Other accounts payable		6,714		6,375
		137,569		126,897

Trade accounts payable result from the purchases of material and supplies for the Group, and mainly correspond to invoices payable to domestic suppliers. They are non-interest bearing and are normally settled on 60 to 120 days term.

Other payables non-interest bearing and have an average term of 3 months.

Interest payable is normally settled monthly throughout the financial year.

For explanations on the Group’s liquidity risk management processes, refer to Note 29.

F-43

Notes to the consolidated financial statements (continued)

13. Provisions

This caption is made up as follows:

	Workers’ profit-sharing			Long-term incentive plan			Rehabilitation provision			Total
	S/.(000)			S/.(000)			S/.(000)			S/.(000)
At January 1, 2014		25,991			18,845			3,645			48,481
Additions, note 21		31,854			5,944			—			37,798
Unwinding of discount, note 24		—			598			—			598
Payments and advances		(28,492	)		(3,428	)		(474	)		(32,394	)
At December 31, 2014		29,353			21,959			3,171			54,483
Current portion		29,353			21,959			2,514			53,826
Non-current portion		—			—			657			657
		29,353			21,959			3,171			54,483
	Workers’ profit-sharing			Long-term incentive plan			Rehabilitation provision			Total
	S/.(000)			S/.(000)			S/.(000)			S/.(000)
At January 1, 2013		24,029			11,669			4,909			40,607
Additions, note 21		29,184			6,701			—			35,885
Changes in estimates, note 22		—			—			(1,068	)		(1,068	)
Unwinding of discount, note 24		—			475			—			475
Payments and advances		(27,222	)		—			(196	)		(27,418	)
At December 31, 2013		25,991			18,845			3,645			48,481
Current portion		25,991			—			1,993			27,984
Non-current portion		—			18,845			1,652			20,497
		25,991			18,845			3,645			48,481

Workers’ profit sharing -

In accordance with Peruvian legislation, the Group maintains an employee profit sharing plan between 8% and 10% of annual taxable income. Distributions to employees under the plan are based 50% on the number of days that each employee worked during the preceding year and 50% on proportionate annual salary levels.

Long-term incentive plan -

In 2011, the Group implemented a compensation plan for its key management. This long-term benefit is payable in cash, based on the salary of each officer and depends on the years of service of each officer in the Group. Under the plan, the executive would receive the equivalent of an annual salary for each year of service beginning to accrue from 2011. This benefit accrues and accumulates for each officer, and is payable in two moments: at the end of the first five years since the creation of this bonuses plan, and at the end of the eighth year from the creation of the plan. If the executive decides to voluntarily leave the Group before a scheduled distribution, he will not receive this compensation. In accordance with IAS 19, the Group used the Projected Unit Credit Method to determine the present

F-44

Notes to the consolidated financial statements (continued)

value of this deferred obligation and the related current deferred cost, considering the expected increases in salary base and the corresponding current market discount rate. As of December 31, 2014 and 2013, the Group maintains a recorded liability for S/.21,959,000 and S/.18,845,000, respectively, related to this compensation.

Rehabilitation provision -

As of December 31, 2014 and 2013, it corresponds to the provision for the future costs of rehabilitating the zinc mine site (fully impaired in 2011), located in the Region of Amazonas. The provision has been created based on studies made by internal specialists. Management believes that the assumptions used, based on current economic environment, are a reasonable basis upon which to estimate the future liability. These estimates are reviewed regularly to take into account any material change to the assumptions. However, actual rehabilitation costs will ultimately depend upon future market prices for the necessary decommissioning works required to reflect future economic conditions.

Future cash flows were estimated from financial budgets approved by senior management covering a six year period. The risk free discount rate used in the calculation of the present value of this provision as of December 31, 2014 and 2013 was 4.53%.

Management expects to incur in these expenses in the short-term. The Group estimates that this liability is sufficient according to the current environmental protection laws approved by the Ministry of Energy and Mines.

14. Interest-bearing loans and borrowings

This caption is made up as follows:

	Nominal interest rate		Maturity		2014		2013
	%				S/.(000)		S/.(000)
Senior Notes
Principal, net of issuance costs		4.50		Feb 8, 2023		883,564		824,022
						883,564		824,022
Less – current portion						—		—
Non-current portion						883,564		824,022

F-45

Notes to the consolidated financial statements (continued)

Senior Notes

The General Shareholder’s Meeting held on January 7, 2013, approved that the Company complete a financing transaction. In connection with this, the Board of Directors’ Meeting held on January 24, 2013, agreed to issue Senior Notes through a private offering under Rule 144A and Regulation S of the U.S. Securities Act of 1933. Also it was agreed to list these securities in the Ireland Stock Exchange. Consequently, on February 1, 2013, the Company issued Senior Bonds with a face value of US$300,000,000, with a nominal annual interest rate of 4.50%, and maturity in 2023, obtaining total net proceeds of US$293,646,000 (S/.762,067,000). The Company has used part of the net proceeds from the offering to prepay certain of its existing debt and the difference will be used in capital expenditures to be incurred in connection with its cement business. The Senior Notes are guaranteed by the following Company’s subsidiaries: Cementos Selva S.A., Distribuidora Norte Pacasmayo S.R.L., Empresa de Transmision Guadalupe S.A.C., Dinoselva Iquitos S.A.C and Calizas del Norte S.A.C.

As of December 31, 2014 and 2013, the Senior Notes accrued interest recorded in the consolidated statement of profit or loss for S/.26,565,000, and S/.31,725,000, respectively, see note 24.

In the case that the Company and guarantee subsidiaries require to issue debt or equity instruments or merges with another company or dispose or rent significant assets, The Senior Notes will activate the following covenants, calculated on the Company and Guarantee Subsidiaries annual consolidated financial statements:

• The fixed charge covenant ratio would be at least 2.5 to 1.

• The consolidated debt-to-EBITDA ratio would be no greater than 3.5 to 1.

As of December 31, 2014 and 2013, the Company has not entered in any of the operations mentioned before.

As of December 31, 2014, the Group entered into cross currency swaps contracts (“CCS”) with the intention of reducing the foreign exchange risk of a portion of the Senior Notes which are denominated in US dollars, see note 30(b).

F-46

Notes to the consolidated financial statements (continued)

15. Deferred income tax assets and liabilities, net

This caption is made up as follows:

	As of January  01, 2013			Effect on profit or loss			Tax effect of available-for-sale investments			As of December  31, 2013			Effect on profit or loss			Tax effect of available-for-sale investments		As of December  31, 2014
	S/.(000)			S/.(000)			S/.(000)			S/.(000)			S/.(000)			S/.(000)		S/.(000)
Movement of deferred income tax assets
Deferred income tax assets
Tax-loss carry forward		13,171			1,668			—			14,839			2,344			—		17,183
Provision for vacations		189			63			—			252			117			—		369
Other		78			(14	)		—			64			2			—		66
		13,438			1,717			—			15,155			2,463			—		17,618
Deferred income tax liabilities
Effect of differences between book and tax bases of fixed assets and in the depreciation rates used for book purposes		—			—			—			—			(443	)		—		(443	)
		—			—			—			—			(443	)		—		(443	)
Total deferred income tax assets, net		13,438			1,717			—			15,155			2,020			—		17,175
Movement of deferred income tax liabilities:
Deferred income tax assets
Impairment of zinc mining assets		28,830			—			—			28,830			(3,844	)		—		24,986
Long-term incentive plan		3,500			2,153			—			5,653			496			—		6,149
Provision for vacations		4,105			(489	)		—			3,616			(210	)		—		3,406
Other		3,478			(343	)		—			3,135			105			—		3,240
		39,913			1,321			—			41,234			(3,453	)		—		37,781
Deferred income tax liabilities
Effect of differences between book and tax bases of fixed assets and in the depreciation rates used for book purposes		(127,511	)		920			—			(126,591	)		13,284			—		(113,307	)
Effect of available-for-sale investments		(7,812	)		—			(352	)		(8,164	)		—			8,088		(76	)
Net gain on cash flow hedge		—			—			—			—			(1,995	)		—		(1,995	)
Effect of costs of issuance of senior notes		—			(4,433	)		—			(4,433	)		755			—		(3,678	)
Other		(4,898	)		(35	)		—			(4,933	)		325			—		(4,608	)
		(140,221	)		(3,548	)		(352	)		(144,121	)		12,369			8,088		(123,664	)
Total deferred income tax liabilities, net		(100,308	)		(2,227	)		(352	)		(102,887	)		8,916			8,088		(85,883	)
					(510	)		(352	)					10,936			8,088

The Group offsets tax assets and liabilities if and only if it has a legally enforceable right to set off current tax assets and current tax liabilities and the deferred tax assets and deferred tax liabilities relate to income taxes levied by the same tax authority.

F-47

Notes to the consolidated financial statements (continued)

A reconciliation between tax expenses and the product of the accounting profit multiplied by Peruvian tax rate for the years 2014, 2013 and 2012 is as follows:

	2014			2013			2012
	S/.(000)			S/.(000)			S/.(000)
Accounting profit before income tax		266,257			234,678			229,343
At statutory income tax rate of 30%		79,877			70,403			68,803
Permanent differences
Dividends obtained from available-for-sale investments		(103	)		(93	)		(167	)
Effect of tax-loss carry forward non-recognized		—			3,924			—
Non-deductible expenses, net		8,191			8,161			5,107
Effect of the change in income tax-rate		(10,497	)		—			—
At the effective income tax rate of 29% in 2014 (2013: 35%, 2012: 32%)		77,468			82,395			73,743

In December 2014, the Peruvian Government approved the progressive reduction of the income tax rate from 30% to 28% to be effective in 2015 and 2016, to 27% during 2017 and 2018 and 26% starting from 2019 onwards. This reduction on future tax rates had a net impact of S/.10,497,000 as a reduction of the deferred income tax liability of the Group, such amount was recognized as a reduction of income tax expense in the consolidated statement of profit or loss in 2014.

The income tax expenses shown for the years ended December 31, 2014, 2013 and 2012 are:

	2014			2013		2012
	S/.(000)			S/.(000)		S/.(000)
Consolidated statements of profit or loss
Current		88,404			81,885		85,592
Deferred		(10,936	)		510		(11,849	)
		77,468			82,395		73,743

The income tax recorded directly to other comprehensive income during the year 2014 is a gain of S/.8,088,000, during 2013 and 2012 was a loss of S/.352,000 and S/.3,844,000, respectively. The income tax recorded in OCI during the years 2014, 2013 and 2012 is related to unrealized gain (loss) on available for sale financial assets.

As of December 31, 2014, the deferred income tax asset related to tax-losses carry forward was mainly determined by the subsidiaries Fosfatos del Pacífico S.A. and Salmueras Sudamericanas S.A. for approximately S/.17,183,000 (S/.14,839,000 and S/.13,171,000 as of December 31, 2013 and 2012, respectively). The tax losses related are available indefinitely for offset against 50% of future annual taxable profits. The amount of losses carried out is subject to the outcome of the reviews of the tax authorities referred in note 27.

Deferred tax assets have not been recognized in respect of certain losses as they may not be used to offset taxable profits elsewhere in the Group, they have arisen in subsidiaries that have been loss-making for some time, and there are no other tax planning opportunities or other evidence of recoverability in the near future. If the Group were able to recognize all unrecognized deferred tax assets, the profit would increase by S/.255,000.

F-48

Notes to the consolidated financial statements (continued)

As of December 31, 2014, 2013 and 2012, it is not necessary to recognize deferred tax liability for taxes that would be payable on the unremitted earnings of the Group’s subsidiaries. The Group has determined that the timing differences will be reversed by means of dividends to be received in the future that, according to the tax rules in effect in Peru, are not subject to income tax.

For information purposes, temporary difference associated with investments in subsidiaries, would generated a deferred tax liability aggregate to S/.39,641,000 (2013: S/.38,888,000), which should not be recognize in the consolidated financial statements according with IAS 12.

There are no income tax consequences attached to the payment of dividends in 2014, 2013 or 2012 by the Group to its shareholders. In December 2014, Peruvian Government approved the increase of rate to dividend to not-domiciled from 4.1% to 6.8% to be effective in 2015 and 2016, to 8% during 2017 and 2018 and 9.3% since 2019 onwards.

16. Equity

(a) Share capital -

As of December 31, 2014, 2013 and 2012 share capital is represented by 531,461,479, authorized common shares subscribed and fully paid, with a nominal value of one Nuevo Sol per share. From the total outstanding common shares as of December 31, 2014 and 2013, 111,484,000 are listed in the New York Stock Exchange and 419,977,479 in the Lima Stock Exchange.

Issuance of common shares in 2012 -

At the Board of Directors’ Meeting held on January 6, 2012, it was agreed to the issuance of new common shares through a public offering of American Depositary Shares (“ADS”) registered with the SEC. As a consequence, on February 7, 2012 the Company issued 100,000,000 new common shares, equivalent to 20,000,000 ADSs, with a unit price of US$11.5, resulting total proceeds of US$219,540,000 (net of related commissions and costs), equivalent to S/.591,869,000.

On March 2, 2012, the Company issued 11,484,000 additional shares, equivalent to 2,296,800 ADSs pursuant to an overallotment option granted to the underwriters in that offering, resulting total proceeds of US$25,489,000 (net of related commissions and costs), equivalent to S/.68,616,000.

The excess of the total proceeds obtained by this transaction in relation to the nominal value of these shares amounted to S/.556,424,000 (net of commissions and other related costs for S/.27,490,000 and tax effects for S/.7,423,000) and was recorded in the additional paid-in capital caption of the consolidated statement of changes in equity.

(b) Investment shares -

Investment shares do not have voting rights or participate in shareholder’s meetings but do participate in the distribution of dividends. Investment shares confer upon the holders thereof the right to participate in dividends distributed according to their nominal value, in the same manner as common shares. Investment shares also confer the holders thereof the right to:

(i) maintain the current proportion of the investment shares in the case of capital increase by new contributions;

F-49

Notes to the consolidated financial statements (continued)

(ii) increase the number of investment shares upon capitalization of retained earnings, revaluation surplus or other reserves that do not represent cash contributions;

(iii) participate in the distribution of the assets resulting from liquidation of the Company in the same manner as common shares; and,

(iv) redeem the investment shares in case of a merger and/or change of business activity of the Company.

As of December 31, 2014 and 2013, the Company has 50,503,124 investment shares subscribed and fully paid, with a nominal value of one Nuevo Sol per share, and as of December 31, 2011, the Company had 49,575,341 investment shares, subscribed and fully paid, with a nominal value of one Nuevo Sol per share. On March 30, 2012, the Company issued 927,783 investment shares, pursuant to a preemptive right offer in connection with the issuance of ADSs, so the holders of investment shares have rights to maintain their proportional ownership in the share capital of the Company. The total investment shares offered by the Company were 13,574,990, from these only 927,783 were exercised, equivalent to S/.928,000.

The excess of the total proceeds obtained by this issuance of investment shares and the nominal value of these shares amounted to S/.4,767,000 and was recorded in the additional paid-in capital caption of the consolidated statement of changes in equity.

(c) Treasury shares -

Corresponds to 1,200,000 of the Company’s common shares acquired in 2008 by its subsidiary Distribuidora Norte Pacasmayo S.R.L. at a cost of S/.3,180,000. On October 2012, the subsidiary sold these treasury shares to third parties through Lima Stock Exchange for S/.6,122,000 (net of the related income tax effect). The net gain of this transaction amounted to S/.4,922,000 (net of the tax effect) and was recorded in the retained earnings caption of the consolidated statement of changes in equity.

(d) Additional paid-in capital -

During 2012, the additional paid-in capital was increased by S/.561,191,000 by the issue of 111,484,000 common shares and 928,000 investment shares corresponding to a public offering of American Depositary Shares (ADS) registered with the New York Stock Exchange and Lima Stock Exchange. This amount corresponds to the excess of the total proceeds obtained by this transaction in relation to the nominal value of these shares, see previous paragraph (a) and (b).

F-50

Notes to the consolidated financial statements (continued)

(e) Legal reserve -

Provisions of the General Corporation Law require that a minimum of 10% of the distributable earnings for each period, after deducting the income tax, be transferred to a legal reserve until such is equal to 20 % of the capital. This legal reserve can offset losses or can be capitalized, and in both cases there is the obligation to replenish it.

(f) Unrealized net gain on available for-sale investments -

This reserve records fair value changes on available-for-sale financial assets.

(g) Foreign currency translation reserve -

The foreign currency translation reserve was used to record exchange differences arising from the translation of the financial statements of the subsidiary Zemex LLC.

(h) Distributions made and proposed -

	2014		2013		2012
	S/.(000)		S/.(000)		S/.(000)
Cash dividends on ordinary shares declared and paid
Dividend for 2014: S/.0.20000 per share (2013: S/.0.10000 per share, 2012: S/.0.08935 per share)		116,393		58,196		52,000
		116,393		58,196		52,000

Proposed dividend on ordinary shares are subject to approval at the annual general meeting and are not recognized as a liability as at 31 December.

As of December 31, 2014 and 2013, dividends payable amount to S/.3,453,000 and S/.4,554,000, respectively. In order to comply with Peruvian law requirements, S/.1,670,000 corresponding to dividends payable with aging greater than ten years were transferred from dividends payable caption to legal reserve caption in the consolidated statements of changes in equity.

(i) Contributions of non-controlling interest -

Salmueras Sudamericanas S.A.

In order to finance the Salmueras project, the General Shareholders’ Meeting of the subsidiary held on March 6, 2014, and July 1, 2014, agreed a contribution of S/.7,100,000 and S/.2,000,000, respectively. The General Shareholders’ Meeting held on July 15, 2013, agreed a contribution of S/.10,000,000. During the year ended December 31, 2014, the contribution made by Quimpac S.A. amounted to S/.1,050,000 (S/.1,152,000 during the year 2013).

All these contributions are partial payments of the capital commitment assumed by the Company and Quimpac S.A. for the brine project up to US$100,000,000 and US$14,000,000, respectively, to maintain its interests in this subsidiary.

F-51

Notes to the consolidated financial statements (continued)

The effect of the difference on capital contributions and interests acquired by each shareholder amounted to S/.1,234,000 and S/.1,355,000, during the years 2014 and 2013, respectively, and were recognized as a debit in additional paid-in capital and a credit in non-controlling interest.

Fosfatos del Pacifico S.A.

The General Shareholders’ Meeting of the subsidiary Fosfatos del Pacifico S.A. held on July 31, 2013, agreed a contribution of US$22,500,000, to be held in two parts of US$11,500,000 and US$11,000,000 in July and September 2013, respectively. In connection with this agreement, during the year ended December 31, 2013, the contribution made by MCA Phosphates Pte. amounted to US$ 6,750,000 (equivalent to S/.18,730,000).

Fosfatos del Pacifico S.A. has a brick plant which is in a commissioning period. Regarding this project, the General Shareholders’ Meeting of the subsidiary Fosfatos del Pacifico S.A. held on July 31, 2013 approved a capital contribution up to US$3,300,000 from the Company, which will not include a change in the percentage interests held by the current shareholders. This capital contribution is destined to achieve nominal capacity of the brick plant. The effect of the difference on capital contributions and interests maintained by each shareholder amounted to S/.1,269,000 and S/.829,000 during the year 2014 and 2013, respectively, and it was recognized as a debit in additional paid-in capital and a credit in non-controlling interest.

17. Sales of goods

This caption is made up as follows:

	2014		2013		2012
	S/.(000)		S/.(000)		S/.(000)
Cement, concrete and blocks		1,085,366		1,102,079		972,241
Building materials		95,405		103,293		143,165
Quicklime		61,051		31,851		52,738
Other		757		2,465		1,664
		1,242,579		1,239,688		1,169,808

F-52

Notes to the consolidated financial statements (continued)

18. Cost of sales

This caption is made up as follows:

	2014			2013			2012
	S/.(000)			S/.(000)			S/.(000)
Beginning balance of goods and finished products, note 8(a)		19,102			23,924			22,209
Beginning balance of work in progress, note 8(a)		59,561			56,018			52,642
Consumption of miscellaneous supplies		306,187			295,012			287,664
Maintenance and third-party services		124,273			124,609			164,502
Shipping costs		106,636			94,485			93,085
Personnel expenses, note 21(b)		71,298			72,493			67,805
Depreciation		52,132			45,518			37,259
Other manufacturing expenses		42,836			53,411			40,250
Costs of packaging		30,785			29,432			27,584
Ending balance of goods and finished products, note 8(a)		(18,951	)		(19,102	)		(23,924	)
Ending balance of work in progress, note 8(a)		(69,711	)		(59,561	)		(56,018	)
		724,148			716,239			713,058

19. Administrative expenses

This caption is made up as follows:

	2014		2013		2012
	S/.(000)		S/.(000)		S/.(000)
Personnel expenses, note 21 (b)		100,490		106,366		91,683
Third-party services		64,424		72,594		81,978
Depreciation and amortization		12,627		10,353		10,695
Donations		5,934		6,256		6,750
Board of Directors compensation		4,887		5,618		5,103
Consumption of supplies		3,035		3,691		3,204
Taxes		2,870		3,396		2,828
Environmental expenditures, note 27		588		641		826
		194,855		208,915		203,067

F-53

Notes to the consolidated financial statements (continued)

20. Selling and distribution expenses

This caption is made up as follows:

	2014			2013		2012
	S/.(000)			S/.(000)		S/.(000)
Personnel expenses, note 21(b)		15,438			14,517		13,960
Advertising and promotion		9,710			10,538		10,826
Third-party services		2,812			1,694		1,157
Provision (recovery) for doubtful accounts, note 7(e)		(43	)		227		105
Other		2,617			2,841		4,817
		30,534			29,817		30,865

21. Employee benefits expenses

(a) Employee benefits expenses are made up as follow:

	2014		2013		2012
	S/.(000)		S/.(000)		S/.(000)
Wages and salaries		93,628		100,486		87,990
Workers ‘profit sharing, note 13		31,854		29,184		27,522
Severance payments		18,728		19,432		17,451
Legal bonuses		12,932		13,530		12,892
Vacations		11,719		10,682		13,225
Long-term compensation, note 13		5,944		6,701		5,529
Training		1,945		2,817		2,903
Others		10,476		10,544		5,936
		187,226		193,376		173,448

(b) Employee benefits expenses are allocated as follows:

	2014		2013		2012
	S/.(000)		S/.(000)		S/.(000)
Cost of sales, note 18		71,298		72,493		67,805
Administrative expenses, note 19		100,490		106,366		91,683
Selling and distribution expenses, note 20		15,438		14,517		13,960
		187,226		193,376		173,448

F-54

Notes to the consolidated financial statements (continued)

22. Other operating income, net

This caption is made up as follows:

	2014			2013			2012
	S/.(000)			S/.(000)			S/.(000)
Net (gain) loss on disposal of property, plant and equipment		(6,466	)		(2,555	)		3,901
Recovery of expenses		1,346			9,009			2,413
Income from land rental and office lease, note 25		547			461			449
Income from management and administrative services provided to Parent company, note 25		498			397			376
Sales of miscellaneous supplies and laboratory tests		15			566			1,420
Changes in the estimation of rehabilitation provision, note 13		—			1,068			—
Dissolution of Zemex LLC (a)		—			(910	)		—
Other minor-less than S/.200,000, net		1,020			245			(853	)
		(3,040	)		8,281			7,706

(a) During 2013, the subsidiary Zemex LLC was liquidated and the capital contributions and final cash resulting from subsidiary liquidation were returned to both shareholders of the subsidiary. As a result, a final total amount of US$374,000 (equivalent to approximately S/.1,024,000) was distributed to the non-controlling interest. Under the Delaware Limited Liability Company Act, which is the corporate law applicable to Zemex LLC, the member of a dissolved LLC is not liable for the amount of any liquidation distribution received unless an action to recover such distribution is commenced within three years after the date of distribution and the distribution is judicially determined to have been wrongfully made. The effect of the dissolution of this subsidiary was an expense of S/.910,000.

23. Finance income

This caption is made up as follows:

	2014		2013		2012
	S/.(000)		S/.(000)		S/.(000)
Interest on term deposits, note 6(c)		7,261		26,300		22,194
Gain on financial instrument		3,650		—		—
Interests on accounts receivable		451		604		567
Dividends received		343		309		558
Interest on loans granted to Parent company, note 25		—		—		7
		11,705		27,213		23,326

F-55

Notes to the consolidated financial statements (continued)

24. Finance costs

This caption is made up as follows:

	2014		2013		2012
	S/.(000)		S/.(000)		S/.(000)
Interest on senior notes, note 14		26,565		31,725		—
Amortization of costs of issuance of senior notes		1,644		1,493		—
Commissions on cross currency swap		1,626		—		—
Interest on loans and borrowings		—		2,579		14,655
Commissions on prepayments of debts		—		808		7,354
Finance charges under finance leases		—		—		952
Other		763		23		670
Total interest expense		30,598		36,628		23,631
Unwinding of discount of long-term incentive plan, note 13		598		475		140
Total finance costs		31,196		37,103		23,771

25. Related party disclosure

Transactions with related entities -

During the years 2014, 2013 and 2012, the Company carried out the following transactions with its parent Company: Inversiones ASPI S.A. and its affiliates:

	2014		2013		2012
	S/.(000)		S/.(000)		S/.(000)
Income
Inversiones ASPI S.A. (ASPI)
Income from office lease		11		9		7
Fees for management and administrative services		492		389		365
Servicios Corporativos Pacasmayo S.A.C. (Sercopa)
Income from office lease		11		9		7
Fees for management and administrative services		6		8		11
Compañía Minera Ares S.A.C. (Ares)
Income from land rental services		293		278		273
Income from office lease		232		165		162
Interest on loans		—		—		7
Expense
Security services provided by Compañía Minera Ares		1,350		1,372		1,160
Other transactions
Loans provided to Sercopa		—		—		240

F-56

Notes to the consolidated financial statements (continued)

As a result of these transactions, the Company had the following rights and obligations with Inversiones ASPI S.A. and its affiliates as of December 31, 2014 and 2013:

	2014				2013
	Accounts receivable		Accounts payable		Accounts receivable		Accounts payable
	S/.(000)		S/.(000)		S/.(000)		S/.(000)
Inversiones ASPI S.A.		187		—		62		14
Other		370		—		347		265
		557		—		409		279

Terms and conditions of transactions with related parties -

The sales to and purchases from related parties are made at terms equivalent to those that prevail in arm’s length transactions. Outstanding balances at the year-end are unsecured and interest free and settlement occurs in cash. There have been no guarantees provided or received for any related party receivables or payables. For the years ended as of December 31, 2014, 2013 and 2012, the Group has not recorded impairment of receivables relating to amounts owed by relating parties. This assessment is undertaken each financial year through examining the financial position of the related party and the market in which the related party operates.

Compensation of key management personnel of the Group -

The compensation paid to key management personnel includes expenses for profit-sharing, compensation and other concepts for members of the Board of Directors and the key management. As of December 31, 2014, the total short term compensations amounted to S/. 20,225,000 (2013: S/.21,342,000, 2012: S/.20,687,000) and the total long term compensations amounted to S/.5,944,000 (2013: S/.6,701,000, 2012: S/.6,000,000). The Company does not compensate Management with post-employment or contract termination benefits or share-based payments.

F-57

Notes to the consolidated financial statements (continued)

26. Earnings per share (EPS)

Basic earnings per share amounts are calculated by dividing the profit for the year attributable to common shares and investment shares of the equity holders of parent by the weighted average number of common shares and investment shares outstanding during the year.

The Group has no dilutive potential ordinary shares as of December 31, 2014, 2013 and 2012.

The following reflects the income and share data used in the basic and diluted EPS computations:

	2014 S/.(000)		2013 S/.(000)		2012 S/.(000)
Numerator
Net profit attributable to ordinary equity holders of the Parent		192,827		155,634		159,005
	2014		2013		2012
	Thousands		Thousands		Thousands
Denominator
Weighted average number of common and investment shares		581,964		581,964		570,072
	2014		2013		2012
	S/.		S/.		S/.
Basic and diluted earnings for common and investment shares		0.33		0.27		0.28

The weighted average number of shares in 2012, takes into account the weighted average effect of changes in treasury share and the issuance of common and investment shares, explained in note 16 (a), (b) and (c).

There have been no other transactions involving common shares and investment shares between the reporting date and the date of the authorization of these consolidated financial statements.

27. Commitments and contingencies

Operating lease commitments – Group as lessor

As of December 31, 2014, 2013 and 2012, the Group, as lessor, has a land lease with Compañía Minera Ares S.A.C. a related party of Inversiones ASPI S.A. This lease is annually renewable, and provides an annual rent of S/.293,000, S/.278,000 and S/.273,000, respectively.

Operating lease commitments – Group as lessee

In May, 2013, the Group signed a contract with a third party to lease a land near a marine area located in the north of Peru. The lease has a term of maturity of 30 years. The expense for the years 2014 and 2013 amounted to S/.512,000 in both years, and it was recognized in the administrative expenses caption in the consolidated statement of profit or loss.

F-58

Notes to the consolidated financial statements (continued)

Future minimum rentals payable under non-cancellable operating leases as of December 31, 2014 and 2013 are as follows:

	2014		2013
	S/.(000)		S/.(000)
Within one year		598		559
After one year but not more than 3 years		9,565		5,033
After three 3 years but not more than five years		9,565		8,947
More than five years		105,213		102,893
		124,941		117,432

Capital commitments

As of 31 December 2014, the Group had the following main commitments:

• Construction of a cement plant located in Piura by S/.83,795,000.

• Development activities of phosphoric rock by S/.862,000.

• Commissioning of a diatomites brick plant in the North of Peru by S/.281,000.

• Transmission line related to the cement plant located in Piura by S/.1,509,000.

• Commitment for development of brine Project up to US$100,000,000. In connection with this commitment, as of December 31, 2014 the Group has made contributions for US$18,129,000.

Others commitments

• Commitment of future sales of phosphoric rock to Mitsubishi Corporation when the project starts production.

• The Group maintains long-term electricity supply agreements which billings are determined taking into consideration consumption of electricity and other market variables.

• Since November 2013, the Group has a five-year period natural gas supply agreement for its diatomite brick plant, which billings are determined taking into account consumption of natural gas and other market variables. Also, the volumes are subject to take or pay clauses that establish minimum levels of natural gas consumption.

Put and call options (“deadlock put/call options”)

According to the shareholders’ agreement subscribed between the Company and MCA, in case of occurrence a deadlock situation or unexpected event, MCA has the option to sell all or a portion of the Fosfatos’ shares to the Company. At the same time, in case of occurrence of a deadlock situation or unexpected event, as defined in the agreement, the Company has the option to require MCA to sell all or a portion of the Fosfatos’ shares. MCA has no restrictions to sell its non-controlling interest during any time to third parties. The only other condition for the put and call is that each party must have own at least a 15% of interest in Fosfatos. The objective of the deadlock put/call option provision is to provide for an exit mechanism in those rare circumstances when reaching agreement on a critical matter becomes impossible. The Company concluded that because the conditions that would make the put option over non-controlling interest exercisable are within the control of the company, the put option does not represent a financial liability at the consolidated statement of financial position date.

F-59

Notes to the consolidated financial statements (continued)

Mining royalty -

Third parties

The subsidiary Fosfatos del Pacífico S.A., signed an agreement for the transfer of mining concession with the Peruvian Government, Fundacion Comunal San Martin de Sechura and Activos Mineros S.A.C. related to the use of the Bayovar concession, which contains phosphoric rock and diatomites. As part of this agreement, the Subsidiary Fosfatos del Pacifico S.A. is required to pay to Fundación Comunal San Martin de Sechura and Activos Mineros S.A.C. an equivalent amount to US$3 for each metric tons of diatomite extracted. The annual royalty may not be less than the equivalent to 40,000 metric tons during the first and second year of production and 80,000 metric tons since the third year of production. The related royalty expense amounted to S/.694,000, S/.672,000 and S/.612,000 for the years ended December 31, 2014, 2013 and 2012, respectively.

In December 2013, the Company signed an agreement with a third party, related to the usufruct, surface and servitude of the subjacent land of the Bayovar concession, to carry out other non-metallic mining activities relating the commissioning of the cement plant under construction in Piura. This agreement has a term of maturity of 30 years, with fixed annual payments of US$600,000 for the first three years and variables to the rest of the contract. The related expense as of December 31, 2014 amounted to S/.1,686,000, and was recognized as part of property, plant and equipment on the balance sheet.

Peruvian government

According to the Royalty Mining Law in force since October 1, 2011, the royalty for the exploitation of metallic and nonmetallic resources is payable on a quarterly basis in an amount equal to the greater of: (i) an amount determined in accordance with a statutory scale of rates based on operating profit margin that is applied to the quarterly operating profit, adjusted by certain items, and (ii) 1% of net sales, in each case during the applicable quarter. These amounts are estimated based on the unconsolidated financial statements of Cementos Pacasmayo S.A.A. and the subsidiaries affected by this mining royalty, prepared in accordance with IFRS. Mining royalty payments will be deductible for income tax purposes in the fiscal year in which such payments are made.

Mining royalty expense paid to the Peruvian Government for 2014, 2013 and 2012 amounted to S/.603,000, S/.461,000, and S/.366,000, respectively, and recorded in the consolidated statement of profit or loss.

Tax situation

The Company is subject to Peruvian tax law. As of December 31, 2014 and 2013, the rate of income tax is 30 percent on taxable income after deducting the workers’ profit sharing, which is calculated at a rate of 8 to 10% on taxable income.

In attention to the 30296 Act, the tax rate applicable income on taxable income, after deducting the participation of workers is as follows:

• Exercise 2015 and 2016: 28 percent.

• Exercise 2017 and 2018: 27 percent.

• Exercise 2019 onwards: 26 percent.

Legal persons not domiciled in Peru and individuals are subject to retention of an additional tax on dividends received.

F-60

Notes to the consolidated financial statements (continued)

In this regard, attention to the 30296 Act, the additional tax on dividend income generated is as follows:

4.1 percent of the profits generated until December 31, 2014.

For the profits generated from 2015 onwards, whose distribution is made after that date the percentages will be the following:

• 2015 and 2016: 6.8 percent.

• 2017 and 2018: 8 percent.

• 2019 onwards: 9.3 percent.

For purposes of determining income tax, transfer pricing transactions with related companies and companies resident in territories with low or no taxation, must be supported with documentation and information on the valuation methods used and the criteria considered for determination. Based on the analysis of operations of the Group’s Management and its legal advisors believe that as a result of the application of these standards will not result in significant contingencies for the Group as of December 31, 2014 and 2013.

During the four years following the year tax returns are filed, the tax authorities have the power to review and, as applicable, correct the income tax computed by each individual company. The income tax and value-added tax returns for the following years are open to review by the tax authorities:

	Years open to review by Tax Authorities
Entity	Income tax	Value-added tax
Cemento Pacasmayo S.A.A.	2011-2014	2010-2014
Cementos Selva S.A.	2009/2011-2014	2011-2014
Distribuidora Norte Pacasmayo S.R.L.	2010/2012-2014	2010-2014
Empresa de Transmisión Guadalupe S.A.C.	2010-2014	2010-2014
Fosfatos del Pacífico S.A.	2010-2014	2010-2014
Salmueras Sudamericanas S.A.	2011-2014	2011-2014
Calizas del Norte S.A.C.	2014	2013-2014
Corianta S.A. (*)	2010-2011	(**)
Tinku Generacion S.A.C. (*)	2010-2011	Dec. 2010-2011

(*) These subsidiaries were merged with the Company in December 2011.

(**) The years open to review by tax authorities for this entity are from January to May 2010 and from September to December 2011.

Due to possible interpretations that the tax authorities may give to legislation in effect, it is not possible to determine whether or not any of the tax audits will result in increased liabilities for the Group. For that reason, tax or surcharge that could arise from future tax audits would be applied to the income of the period in which it is determined. However, in management’s opinion and legal advisors, any possible additional payment of taxes would not have a material effect on the consolidated financial statements as of December 31, 2014 and 2013.

Environmental matters

The Group’s exploration and exploitation activities are subject to environmental protection standards. Such standards are the same as those disclosed on the consolidated financial statement as of December 31, 2013 and the only change on this subject in the consolidated financial statements as of December 31, 2014 is the approval by the Peruvian authorities as of March and December 2014, of the EIS (Environmental Impact Study) presented by the Group for its phosphates and brine project.

F-61

Notes to the consolidated financial statements (continued)

Environmental remediation -

Law No. 28271 regulates environmental liabilities in mining activities. This Law has the objectives of ruling the identification of mining activity’s environmental liabilities and financing the remediation of the affected areas. According to this law, environmental liabilities refer to the impact caused to the environment by abandoned or inactive mining operations.

In compliance with the above-mentioned laws, the Group presented environmental impact studies (EIS), declaration of environmental studies (DES) and Environmental Adaptation and Management Programs (EAMP) for its mining concessions.

The Peruvian authorities approved the PES, DES and EIS presented by the Group for its mining concessions and exploration projects. A detail of plans and related expenses approved is presented as follows:

Project unit	Resource	Resolution Number	Year of approval		Program approved		Year expense
							2014		2013		2012
							S/.(000)		S/.(000)		S/.(000)
Tembladera	Quicklime	RD.019-97-EM/DGM		1997		EAMP		206		230		312
Rioja	Quicklime	OF.28-2002-MITINCI		2002		EAMP		287		339		280
Bayovar	Diatomite	OF.5757-01/PRODUCE		2011		DES		80		72		171
Bayovar	Phosphoric rock	OF.02121-2009 and 260-2014/PRODUCE		2009/2014		DES/EIS		15		—		32
Bongara	Zinc	RD.176-2007-MEN/AAM		2007		EIS		—		—		31
								588		641		826

The Group incurs in environmental expenditures related to existing environmental damages caused by current operations. These expenditures which amounted to S/.588,000, S/.641,000 and S/.826,000 during 2014, 2013 and 2012, respectively, are expensed in the year the expenditure is incurred and are presented in administrative expenses caption, see note 19. As of December 31, 2014 and 2013, the Group did not have liabilities in connection with these expenditures since they were all settled before year-end.

F-62

Notes to the consolidated financial statements (continued)

Rehabilitation provision -

Additionally, Law No. 28090 regulates the obligations and procedures that must be met by the holders of mining activities for the preparation, filing and implementation of Mine Closure Plans, as well as the establishment of the corresponding environmental guarantees to secure fulfillment of the investments that this includes, subject to the principles of protection, preservation and recovery of the environment. In connection with this obligation, as of December 31, 2014 and 2013, the Group maintains a provision for the closing of a mining unit (Bongara), which is currently without operations, amounting to S/.3,171,000 and S/.3,645,000, respectively. The Group believes that this liability is adequate to meet the current environmental protection laws approved by the Ministry of Energy and Mines, refer to note 13.

Legal claim contingency

Some third parties have commenced actions against the Group in relation with its operations which claims in aggregate represent S/.16,069,000. From this total amount, S/.1,186,000 corresponded to labor claims from former employees, S/.7,681,000 is related to property tax assessment received from Pacasmayo District Municipality for periods from 2009 to 2014, and S/.2,298,000 and S/.4,904,000 related to the tax assessments received from the tax administration corresponding to 2009 and 2010 tax period, which was reviewed by the tax authority during 2012 and 2013, respectively.

Management expects that these claims will be resolved within the next five years based on prior experience; however, the Group cannot assure that these claims will be resolved within this period because the authorities do not have a maximum term to resolve cases. The Group has been advised by its legal counsel that it is only possible, but not probable, that these actions will succeed. Accordingly, no provision for any liability has been made in these consolidated financial statements as of December 31, 2014 and 2013.

28. Material partly-owned subsidiaries

Financial information of subsidiaries that have material non-controlling interests is provided below:

(a) Proportion of equity interest held by non-controlling interests:

Name	Country of incorporation and operation	2014 %		2013 %
Fosfatos del Pacífico S.A.	Peru		30.00		30.00
Salmueras Sudamericanas S.A.	Peru		25.10		25.10

(b) Accumulated balances of material non-controlling interest:

	2014		2013
	S/.(000)		S/.(000)
Fosfatos del Pacífico S.A.		66,459		68,420
Salmueras Sudamericanas S.A.		11,686		10,210

F-63

Notes to the consolidated financial statements (continued)

(c) Loss allocated to material non-controlling interest:

	2014		2013		2012
	S/.(000)		S/.(000)		S/.(000)
Fosfatos del Pacífico S.A.		3,230		2,248		2,876
Salmueras Sudamericanas S.A.		808		1,035		933

(d) The summarized financial information of these subsidiaries is provided below. This information is based on amounts before inter-company eliminations:

Summarized statement of profit or loss for the year ended December 31:

	Fosfatos del Pacífico S.A.			Salmueras Sudamericanas S.A.
	S/.(000)			S/.(000)
2014
Administrative expenses		(12,216	)		(3,677	)
Other expenses		(140	)		(9	)
Finance income		223			(44	)
Profit before tax		(12,133	)		(3,730	)
Income tax		1,368			511
Total comprehensive income		(10,765	)		(3,219	)
Attributable to non-controlling interest		(3,230	)		(808	)
Dividends paid to non-controlling interest		—			—
2013
Administrative expenses		(11,733	)		(5,992	)
Other income (expenses)		256			83
Finance income		520			148
Loss before tax		(10,957	)		(5,761	)
Income tax		3,462			1,639
Total comprehensive income		(7,495	)		(4,122	)
Attributable to non-controlling interest		(2,248	)		(1,035	)
Dividends paid to non-controlling interest		—			—
2012
Administrative expenses		(13,053	)		(5,888	)
Other expenses		(133	)		—
Finance income		312			631
Profit before tax		(12,874	)		(5,257	)
Income tax		3,286			1,541
Total comprehensive income		(9,588	)		(3,716	)
Attributable to non-controlling interest		(2,876	)		(933	)
Dividends paid to non-controlling interest		—			—

F-64

Notes to the consolidated financial statements (continued)

Summarized statement of financial position as of December 31:

	Fosfatos del Pacífico S.A.			Salmueras Sudamericanas S.A.
	S/.(000)			S/.(000)
2014
Cash, inventories and other current assets		7,675			2,186
Other receivables, property, plant and equipment and other non-current assets		229,948			44,634
Trade and other payables current		(16,091	)		(263	)
Total equity		221,532			46,557
Attributable to:
Equity holders of parent		155,073			34,871
Non-controlling interest		66,459			11,686
2013
Cash, inventories and other current assets		39,029			138
Other receivables, property, plant and equipment and other non-current assets		194,727			45,654
Trade and other payables current		(5,689	)		(5,116	)
Total equity		228,067			40,676
Attributable to:
Equity holders of parent		159,647			30,466
Non-controlling interest		68,420			10,210

F-65

Notes to the consolidated financial statements (continued)

Summarized statement of cash flow for the year ended December 31:

	Fosfatos del Pacífico S.A.			Salmueras Sudamericanas S.A.
	S/.(000)			S/.(000)
2014
Net cash flows used in operating activities		(15,986	)		(4,787	)
Net cash flows used in investing activities		(29,595	)		(186	)
Net cash flows provided from financing activities		13,830			7,100
Net (decrease) increase in cash and cash equivalents		(31,751	)		2,127
2013
Net cash flows used in operating activities		(19,935	)		(8,835	)
Net cash flows used in investing activities		(46,207	)		(5,748	)
Net cash flows provided from financing activities		65,205			12,000
Net decrease in cash and cash equivalents		(937	)		(2,583	)
2012
Net cash flows used in operating activities		(17,282	)		(7,020	)
Net cash flows used in investing activities		(34,637	)		(16,428	)
Net cash flows provided from financing activities		87,380			20,000
Net increase (decrease) in cash and cash equivalents		35,461			(3,448	)

29. Financial risk management, objectives and policies

The Group’s main financial liabilities, other than derivatives, comprise loans and borrowings, trade payables and other payables. The main purpose of these financial liabilities is to finance the Group’s operations. The Group’s main financial assets include cash and term deposits and trade and other receivables that derive directly from its operations. The Group also holds available-for-sale financial investments and cash flow hedges instruments.

The Group is exposed to market risk, credit risk and liquidity risk. The Group’s senior management oversees the management of these risks. The Group’s senior management is supported by financial management that advises on financial risks and the appropriate financial risk governance framework for the Group. The financial management provides assurance to the Group’s senior management that the Group’s financial risk-taking activities are governed by appropriate policies and procedures and that financial risks are identified, measured and managed in accordance with the Group’s policies and risk objectives. Derivative activities for risk management purposes are carried out by specialist teams that have the appropriate skills, experience and supervision.

The Management reviews and agrees policies for managing each of these risks, which are summarized below.

F-66

Notes to the consolidated financial statements (continued)

Market risk -

Market risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in market risk. Market risk comprise three types of risk: interest rate risk, currency risk and other price risk, such as equity price risk and commodity risk. Financial instruments affected by market risk include borrowings, deposits, available-for-sale financial investments and derivative financial instruments.

The sensitivity analyses shown in the following sections relate to the Group’s consolidated position as of December 31, 2014 and 2013. The sensitivity analyses have been prepared on the basis that the amount of net debts and the proportion of financial instruments in foreign currencies are all constant and on the basis of the hedge designations in place as of December 31, 2014.

The following assumptions have been made in calculating the sensitivity analyses:

• The sensitivity of the relevant statement of profit or loss item is the effect of the assumed changes in respective market risks. This is based on the financial assets and financial liabilities held as of December 31, 2014 and 2013, including the effect of hedge accounting.

Interest rate risk -

Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates.

As of December 31, 2014 and 2013, all of the Group’s borrowings are at a fixed rate of interest; consequently, the management evaluated that is not relevant to do an interest rate sensitivity analysis.

Foreign currency risk -

Foreign currency risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in foreign exchange rates. The Group’s exposure to the risk of changes in foreign exchange relates primarily to the Group’s operating activities (when revenue or expense is denominated in a different currency from the Group’s functional currency).

Since November of 2014, the Group hedges its exposure to fluctuations on the translation into Nuevos Soles of its Senior Notes which are denominated in US dollars, by using cross currency swaps contracts.

F-67

Notes to the consolidated financial statements (continued)

Foreign currency sensitivity

The following table demonstrates the sensitivity to a reasonably possible change in the US dollar exchange rate, with all other variables held constant. The impact on the Group’s profit before income tax is due to changes in the fair value of monetary assets and liabilities.

2014	Change in US$ rate		Effect on profit before tax
U.S. Dollar	%		S/.(000)
		+5		1,334
		+10		2,669
		-5		(1,334	)
		-10		(2,669	)

2013	Change in US$ rate		Effect on profit before tax
U.S. Dollar	%		S/.(000)
		+5		(21,972	)
		+10		(43,944	)
		-5		21,972
		-10		43,944

Commodity price risk -

The Group is affected by the price volatility of certain commodities. Its operating activities require a continuous supply of coal. The Group does not use forward commodity purchase contracts to hedge the purchase price of coal. In order to calculate the sensitivity to the price of the coal, the Group uses the purchases of this raw material of the last twelve months.

Commodity price sensitivity

The following table shows the effect of price changes in coal:

	Change in year-end price		Effect on profit before tax
	%		S/.(000)
2014
		+10		(1,162	)
		-10		1,162
2013
		+10		(4,795	)
		-10		4,795

F-68

Notes to the consolidated financial statements (continued)

Equity price risk -

The Group’s listed equity securities are susceptible to market price risk arising from uncertainties about future values of the investment securities. The Group’s Board of Directors reviews and approves all equity investment decisions.

At the reporting date, the exposure to listed equity securities at fair value was S/.744,000, see note 9(a). A decrease of 10% on Lima stock exchange (BVL) market index could have an impact of approximately S/.75,000 on the income or equity attributable to the Group, depending on whether or not the decline is significant or prolonged. An increase of 10% in the value of the listed securities would only impact equity but would not have an effect on profit or loss.

Credit risk -

Credit risk is the risk that counterparty will not meet its obligations under a financial instrument or customer contract, leading to a financial loss. The Group is exposed to a credit risk from its operating activities (primarily for trade receivables) and from its financing activities, including deposits with banks and financial institutions, foreign exchange transactions and other financial instruments.

Trade receivables

Customer credit risk is managed by each business unit subject to the Group’s established policy, procedures and control relating to customer credit risk management. Credit quality of the customer is assessed and individual credit limits are defined in accordance with this assessment. Outstanding customer receivables are regularly monitored and any shipments to major customers are generally covered by letters of credit. As of December 31, 2014 and 2013, the Group had 3 and 2 customers, respectively, that owed the Group more than S/.3,000,000 each accounted for approximately 22% for all receivables owing. There were 20 and 18 customers as of December 31, 2014 and 2013, respectively, with balances smaller than S/.700,000 each and accounting for over 63% of the total amounts receivable.

An impairment analysis is performed at each reporting date on an individual basis for major clients. In addition, a large number of minor receivables are grouped into homogenous groups and assessed for impairment collectively. This calculation is based on actual incurred historical data.

The maximum exposure to credit risk at the reporting date is the carrying value of each class of financial assets disclosed in note 7. The Group does not hold collateral as security.

F-69

Notes to the consolidated financial statements (continued)

Financial instruments and cash deposits

Credit risk from balances with banks and financial institutions is managed by the Group’s treasury department in accordance with the Group’s policy. Investments of surplus funds are made only with approved counterparties and within credit limits assigned to each counterparty. Counterparty credit limits are reviewed by the Management on an annual basis, and may be updated throughout the year subject to approval of the Group’s financial management. The limits are set to minimize the concentration of risks and therefore mitigate financial loss through potential counterparty’s failure to make payments. As of December 31, 2014 and 2013, the Group’s maximum exposure to credit risk for the components of the consolidated statement of financial position is the carrying amounts as showed in note 6, except for derivative financial instruments. The Group’s maximum exposure relating to financial derivative instruments is noted in the liquidity table therefore.

Liquidity risk -

The Group monitors its risk of shortage of funds using a recurring liquidity planning tool.

The Group’s objective is to maintain a balance between continuity of funding and flexibility through the use of bank loans, debentures and finance leases contracts. Access to sources of funding is sufficiently available and debt maturing within 12 months can be rolled over with existing lenders.

As of December 31, 2014 no portion of Senior Notes will mature in less than one year.

Excessive risk concentration –

Concentrations arise when a number of counterparties are engaged in similar business activities, or activities in the same geographical region, or have economic features that would cause their ability to meet contractual obligations to be similarly affected by changes in economic, political or other conditions. Concentrations indicate the relative sensitivity of the Group’s performance to developments affecting a particular industry.

In order to avoid excessive concentrations of risk, the Group’s policies and procedures include specific guidelines to focus on the maintenance of a diversified portfolio. Identified concentrations of credit risks are controlled and managed accordingly.

F-70

Notes to the consolidated financial statements (continued)

The table below summarizes the maturity profile of the Group’s financial liabilities based on contractual undiscounted payments:

	On demand		Less than 3 months		3 to 12 months		1 to 5 years		More than 5 years		Total
	S/.(000)		S/.(000)		S/.(000)		S/.(000)		S/.(000)		S/.(000)
As of December 31, 2014
Interest-bearing loans		—		—		—		—		883,564		883,564
Interests		—		20,176		20,176		161,406		141,230		342,988
Trade and other payables		—		115,612		14,739		—		—		130,351
As of December 31, 2013
Interest-bearing loans		—		—		—		—		824,022		824,022
Interests		—		18,873		18,873		150,984		169,857		358,587
Trade and other payables		279		112,560		3,754		—		—		116,593

The disclosed financial derivative instruments in the above table are the gross undiscounted cash flows. However, those amounts may be settled gross or net. The following table shows the corresponding reconciliation to those amounts to their carrying amounts:

	On demand		Less than 3 months			3 to 12 months			1 to 5 years			More than 5 years			Total
	S/.(000)		S/.(000)			S/.(000)			S/.(000)			S/.(000)			S/.(000)
As of December 31, 2014
Inflows		—		—			—			—			87,414			87,414
Outflows		—		(910	)		(4,247	)		(33,169	)		(26,368	)		(64,694	)
Net		—		(910	)		(4,247	)		(33,169	)		61,046			22,720
Discounted at the applicable interbank rates		—		(910	)		(4,150	)		(29,821	)		47,132			12,251

Capital management -

For the purpose of the Group’s capital management, capital includes capital stock, investment shares, additional paid-in capital and all other equity reserves attributable to the equity holders of the parent. The primary objective of the Group’s capital management is to maximize the shareholders’ value.

In order to achieve this overall objective, the Group’s capital management, among other things, aims to ensure that it meets financial covenants attached to the interest-bearing loans and borrowings that define capital structure requirements. Breaches in meeting the financial covenants would permit the creditors to immediately call senior notes. There have been no breaches in the financial covenants of any interest-bearing loans and borrowing in the current period.

F-71

Notes to the consolidated financial statements (continued)

The Group manages its capital structure and makes adjustments to it in light of changes in economic conditions and the requirements of the financial covenants. To maintain or adjust the capital structure, the Group may adjust the dividend payment to shareholders, return capital to shareholders or issue new shares.

No changes were made in the objectives, policies or processes for managing capital during the years ended December 31, 2014 and 2013.

30. Financial assets and financial liabilities

(a) Financial asset and liabilities –

Financial assets -

	2014		2013
	S/.(000)		S/.(000)
Financial instruments at fair value through OCI
Cash flow hedge (cross currency swaps)		12,251		—
Total cash flow hedge		12,251		—
Available-for-sale financial investments at fair value through OCI
Quoted equity shares		744		967
Unquoted equity shares		—		35,091
Total available-for-sale investments, note 9(b)		744		36,058
Total financial instruments at fair value		12,995		36,058
Total current		—		—
Total non-current		12,995		36,058
		12,995		36,058

Financial instruments at fair value through OCI reflect the positive change in fair value of cross currency swaps contracts, designated as cash flow hedges to hedge the Senior Notes balance denominated in US dollars.

Except cash flow hedge and available-for-sale investments , all financial assets which included cash and cash equivalents and trade and other receivables are classified in the category of loans and receivables are non-derivative financial assets carried at amortized cost, held to maturity and generate a fixed or variable interest income for the Group. The carrying value may be affected by changes in the credit risk of the counterparties.

Financial liabilities -

All financial liabilities of the Group include trade and other payables and interest-bearing loans and borrowings are classified as loans and borrowings and are carried at amortized cost.

F-72

Notes to the consolidated financial statements (continued)

(b) Hedging activities and derivatives -

Cash flow hedges -

Foreign currency risk -

Cross currency swap contracts measured at fair value through OCI area designated as hedging instruments in cash flows hedges of a portion of Senior Notes denominated in US dollars with the intention of reducing the foreign exchange risk of expected disbursements of Senior Notes, for a notional amount of US$120,000,000.

The cross currency swap contracts balances vary with the level of expected forward exchange rates.

	2014
	Assets		Liabilities
	S/.(000)		S/.(000)
Cross currency swap contracts designated as hedging instruments
Fair value		12,251		—
		12,251		—

The terms of the cross currency swaps contracts match the terms of the related Senior Notes.

The cash flow hedge of the expected future payments was assessed to be highly effective and a net unrealized gain of S/.4,926,000 is included in OCI. The amounts retained in OCI as of December 31, 2014 are expected to mature and affect the consolidated statement of profit or loss in 2023.

(c) Fair values -

Set out below, is a comparison by class of the carrying amounts and fair values of the Group’s financial instruments that are carried in the consolidated financial statements:

	Carrying amount				Fair value
	2014		2013		2014		2013
	S/.(000)		S/.(000)		S/.(000)		S/.(000)
Financial assets
Derivatives financial assets – Cross currency swaps		12,251		—		12,251		—
Available-for-sale financial investments		744		36,058		744		36,058
Total financial assets—non-current		12,995		36,058		12,995		36,058
Financial liabilities
Financial obligations:
Senior Notes / Loans at fixed rates		883,564		824,022		814,313		738,527
Total financial liabilities		883,564		824,022		814,313		738,527

Management assessed that cash and term deposits, trade receivables, trade payables, bank overdrafts and other current liabilities approximate their carrying amounts largely due to the short-term maturities of these instruments.

F-73

Notes to the consolidated financial statements (continued)

The fair value of the financial assets and liabilities is included at the amount at which the instrument could be exchanged in a current transaction between wiling parties, other than in a forced or liquidation sale. The following methods and assumptions were used to estimate the fair values:

• The fair value of cross currency swaps is measured by using valuation techniques where inputs are based on market data. The most frequently applied valuation techniques include swap valuation models, using present value calculations. The models incorporate various inputs, including the credit quality of counterparties, foreign exchange, forward rates and interest rate curves.

A credit valuation adjustment (CVA) is applied to the “Over-The-Counter” derivative exposures to take into account the counterparty’s risk of default when measuring the fair value of the derivative. CVA is the mark-to market cost of protection required to hedge credit risk from counterparties in this type of derivatives portfolio. CVA is calculated by multiplying the probability of default (PD), the loss given default (LGD) and the expected exposure (EE) at the time of default.

A debit valuation adjustment (DVA) is applied to incorporate the Group’s own credit risk in the fair value of derivatives (that is the risk that the Group might default on its contractual obligations), using the same methodology as for CVA.

• The fair value of the quoted senior notes is based on price quotations at the reporting date. The Group has not unquoted liability instruments for which fair value is disclosed as of December 31, 2014 and 2013.

• Fair value of available-for-sale investments is derived from quoted market prices in active markets.

• Fair value of unquoted available-for-sale financial investments is estimated using a technique for which all inputs which have a significant effect on the recorded fair value are observable, either directly or indirectly.

F-74

Notes to the consolidated financial statements (continued)

(d) Fair value measurement -

All financial instruments for which fair value is recognized or disclosed are categorized within the fair value hierarchy, based on the lowest level input that is significant to the fair value measurement as a whole, as follows:

Level 1—Quoted (unadjusted) market prices in active markets for identical assets or liabilities.

Level 2—Valuation techniques for which the lowest level input that is significant to the fair value measurement is directly or indirectly observable.

Level 3—Valuation techniques for which the lowest level input that is significant to the fair value measurement is unobservable.

For assets and liabilities that are recognized at fair value on a recurring basis, the Group determines whether transfers have occurred between levels in the hierarchy by re-assessing categorization (based on the lowest level input that is significant to the fair value measurement as a whole) at the end of each reporting period.

The following table provides the fair value measurement hierarchy of the Group’s assets and liabilities.

Quantitative disclosures fair value measurement hierarchy for assets and liabilities as of December 31, 2014 –

	Fair value measurement using
	Total		Quoted prices in active markets (Level 1)		Significant observable inputs (Level 2)		Significant unobservable inputs (Level 3)
	S/.(000)		S/.(000)		S/.(000)		S/.(000)
Assets measured at fair value:
Derivative financial assets:
Cross currency swaps		12,251		—		12,251		—
Available-for-sale financial investments (Note 9):
Quoted equity shares		744		744		—		—
Total financial assets		12,995		744		12,251		—
Liabilities for which fair values are disclosed:
Senior Notes		814,313		—		814,313		—
Total financial liabilities		814,313		—		814,313		—

F-75

Notes to the consolidated financial statements (continued)

There have been no transfers between levels during the period ending December 31, 2014.

Quantitative disclosures fair value measurement hierarchy for assets and liabilities as of December 31, 2013 –

	Fair value measurement using
	Total		Quoted prices in active markets (Level 1)		Significant observable inputs (Level 2)		Significant unobservable inputs (Level 3)
	S/.(000)		S/.(000)		S/.(000)		S/.(000)
Assets measured at fair value:
Available-for-sale financial investments (Note 9):
Quoted equity shares		967		967		—		—
Unquoted equity shares		35,091		—		35,091		—
Total financial assets		36,058		967		35,091		—
Liabilities for which fair values are disclosed:
Senior Notes		738,527		—		738,527		—
Total financial liabilities		738,527		—		738,527		—

There have been no transfers between levels during the period ending December 31, 2013.

F-76

Notes to the consolidated financial statements (continued)

31. Segment information

For management purposes, the Group is organized into business units based on their products and activities and have three reportable segments as follows:

• Production and marketing of cement, concrete and blocks in the northern region of Peru.

• Sale of construction supplies (steel rebar and building materials) in the northern region of Peru.

• Production and marketing of quicklime in the northern region of Peru.

No operating segments have been aggregated to form the above reportable operating segments.

Management monitors the profit before income tax of each business unit separately for the purpose of making decisions about resource allocation and performance assessment. Segment performance is evaluated based on profit before income tax and is measured consistently with profit before income tax in the consolidated financial statements.

Transfer prices between operating segments are on an arm’s length basis in a manner similar to transactions with third parties.

	Revenues from external customers		Revenues from inter segments			Total revenue			Gross profit margin			Other operating income, net			Administrative expenses			Selling and distribution expenses			Finance costs			Finance income		(Loss) gain from exchange difference, net			Profit before income tax			Income tax expense			Profit for the year
	S/.(000)		S/.(000)			S/.(000)			S/.(000)			S/.(000)			S/.(000)			S/.(000)			S/.(000)			S/.(000)		S/.(000)			S/.(000)			S/.(000)			S/.(000)
2014
Cement, concrete and blocks		1,085,366		—			1,085,366			506,511			6,619			(168,544	)		(28,167	)		(28,925	)		10,461		(13,604	)		284,351			(82,732	)		201,619
Construction supplies		95,405		—			95,405			2,874			91			(1,455	)		(1,754	)		—			35		(16	)		(225	)		65			(160	)
Quicklime		61,051		—			61,051			9,114			829			(11,054	)		(549	)		(2,267	)		772		(1,085	)		(4,240	)		1,234			(3,006	)
Other		757		—			757			(68	)		(42	)		(13,802	)		(64	)		(4	)		437		(86	)		(13,629	)		3,965			(9,664	)
Consolidated		1,242,579		—			1,242,579			518,431			7,497			(194,855	)		(30,534	)		(31,196	)		11,705		(14,791	)		266,257			(77,468	)		188,789
2013
Cement, concrete and blocks		1,102,079		2			1,102,081			514,785			12,257			(184,365	)		(27,591	)		(35,714	)		25,341		(46,588	)		258,125			(90,627	)		167,498
Construction supplies		103,293		48			103,341			3,363			445			(2,054	)		(1,893	)		(2	)		52		4			(85	)		30			(55	)
Quicklime		31,851		—			31,851			5,035			289			(5,997	)		(253	)		(1,387	)		990		(1,857	)		(3,180	)		1,116			(2,064	)
Other		2,465		2,896			5,361			266			(4,710	)		(16,499	)		(80	)		—			830		11			(20,182	)		7,086			(13,096	)
Adjustments and eliminations		—		(2,946	)		(2,946	)		—			—			—			—			—			—		—			—			—			—
Consolidated		1,239,688		—			1,239,688			523,449			8,281			(208,915	)		(29,817	)		(37,103	)		27,213		(48,430	)		234,678			(82,395	)		152,283
2012
Cement, concrete and blocks		972,241		1,415			973,656			440,502			3,326			(169,157	)		(27,123	)		(22,250	)		20,529		(431	)		245,396			(78,905	)		166,491
Construction supplies		143,165		980			144,145			4,898			354			(2,669	)		(2,406	)		—			56		(21	)		212			(68	)		144
Quicklime		52,738		—			52,738			12,898			43			(10,051	)		(820	)		(1,520	)		1,441		(23	)		1,968			(632	)		1,336
Other		1,664		2,567			4,231			(1,548	)		3,983			(21,190	)		(516	)		(1	)		1,300		(261	)		(18,233	)		5,862			(12,371	)
Adjustments and eliminations		—		(4,962	)		(4,962	)		—			—			—			—			—			—		—			—			—			—
Consolidated		1,169,808		—			1,169,808			456,750			7,706			(203,067	)		(30,865	)		(23,771	)		23,326		(736	)		229,343			(73,743	)		155,600

F-77

Notes to the consolidated financial statements (continued)

	Segment assets		Other assets		Total assets		Operating liabilities		Capital expenditure		Depreciation			Provision of inventory net realizable value and obsolescence
	S/.(000)		S/.(000)		S/.(000)		S/.(000)		S/.(000)		S/.(000)			S/.(000)
2014
Cement, concrete and blocks		2,744,140		—		2,744,140		1,129,792		557,307		(58,881	)		430
Construction supplies		28,215		—		28,215		32,858		—		—			—
Quicklime		129,483		—		129,483		—		—		(4,582	)		—
Other		326,071		12,995		339,066		7,569		29,937		(1,296	)		23
Consolidated		3,227,909		12,995		3,240,904		1,170,219		587,244		(64,759	)		453
2013
Cement, concrete and blocks		2,596,649		—		2,596,649		1,051,566		155,657		(50,409	)		(260	)
Construction supplies		21,773		—		21,773		45,839		47		(59	)		—
Quicklime		134,924		—		134,924		—		2,904		(4,333	)		—
Other		325,133		36,058		361,191		7,662		51,986		(1,070	)		2,452
Consolidated		3,078,479		36,058		3,114,537		1,105,067		210,594		(55,871	)		2,192
2012
Cement, concrete and blocks		1,929,599		—		1,929,599		445,985		215,647		(45,738	)		(830	)
Construction supplies		23,122		—		23,122		33,728		15		(71	)		—
Quicklime		133,748		—		133,748		—		—		(1,607	)		—
Other		261,968		34,887		296,855		9,496		54,570		(538	)		(2,448	)
Consolidated		2,348,437		34,887		2,383,324		489,209		270,232		(47,954	)		(3,278	)

F-78

Notes to the consolidated financial statements (continued)

Revenues from one customer, arising from sales within the quicklime segment, amounted to S/.28,518,000, S/.22,450,000 and S/.21,105,000 in 2014, 2013 and 2012, respectively.

Capital expenditure consists of S/.587,244,000, S/.210,594,000 and S/.270,232,000 in December 2014, 2013 and 2012, respectively, corresponding to additions of property, plant and equipment, exploration and evaluation assets and other minor non-current assets. During 2014, 2013 and 2012, there were no purchases of assets through capital leases.

During 2014 there were no inter-segment revenues. Inter-segment revenues of S/.2,946,000 and S/.4,962,000 during the years ended as of December 31, 2013 and 2012, respectively were eliminated on consolidation.

The “other” segment includes activities that do not meet the threshold for disclosure under IFRS 8.13 and represent non-material operations of the Group (including phosphates and brine projects).

Other assets

As of December 31, 2014 corresponds to the available-for-sale investments caption and other financial instruments for approximately S/.744,000 and S/.12,251,000, respectively, which are not allocated to a segment. As of December 31, 2013 corresponds to the available-for-sale investments caption for approximately S/.36,058,000.

Geographic information

All revenues are from Peruvian clients.

As of December 31, 2014 and December 31, 2013, all non-current assets are located in Peru.

32. Events after the reporting period

On January 22, 2015 and April 10, 2015 Cementos Pacasmayo S.A.A. closed the terms of three cross currency swaps contracts (“CCS”) for an aggregate amount of US$50,000,000 with the purpose of hedging the foreign exchange risk of a portion of its Senior Notes.

F-79