20-F

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

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

For the fiscal year ended December 31, 2016

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, 2016 531,461,479 common shares 13,226,544 investment shares (excluding 37,276,580 investment shares held in treasury)*

* Note: As of April 28, 2017, 423,868,449 common shares and 4,238,397 investment shares (excluding 36,040,497 investment shares held in treasury) were outstanding. On March 1, 2017, we spun off Fosfatos del Pacífico S.A. into a new company called Fossal S.A.A. and as a result the common shares was reduced by 107,593,030 shares and the investment shares were reduced by 10,244,230.

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

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  ☒

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  ☐

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, a non-accelerated filer, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer ☒ Accelerated filer ☐ Non-accelerated filer ☐ Emerging growth company ☐

If an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards† provided pursuant to Section 13(a) of the Exchange Act.  ☐

† The term “new or revised financial accounting standard” refers to any update issued by the Financial Accounting Standards Board to its Accounting Standards Codification after April 5, 2012.

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  ☒ 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  ☒

Table of Contents

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	21
ITEM 4A.	UNRESOLVED STAFF COMMENTS	49
ITEM 5.	OPERATING AND FINANCIAL REVIEW AND PROSPECTS	49
ITEM 6.	DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES	74
ITEM 7.	MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS	83
ITEM 8.	FINANCIAL INFORMATION	86
ITEM 9.	THE OFFER AND LISTING	87
ITEM 10.	ADDITIONAL INFORMATION	91
ITEM 11.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	103
ITEM 12.	DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES	103
PART II		105
ITEM 13.	DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES	105
ITEM 14.	MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS	105
ITEM 15.	CONTROLS AND PROCEDURES	105
ITEM 16.	[RESERVED]	107
ITEM 16A.	AUDIT COMMITTEE FINANCIAL EXPERT	107
ITEM 16B.	CODE OF ETHICS	107
ITEM 16C.	PRINCIPAL ACCOUNTANT FEES AND SERVICES	107
ITEM 16D.	EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES	107
ITEM 16E.	PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS	108
ITEM 16F.	CHANGE IN REGISTRANT’S CERTIFYING ACCOUNTANT	108
ITEM 16G.	CORPORATE GOVERNANCE	108
ITEM 16H.	MINE SAFETY DISCLOSURE	109
PART III		110
ITEM 17.	FINANCIAL STATEMENTS	110
ITEM 18.	FINANCIAL STATEMENTS	110
ITEM 19.	EXHIBITS	110

i

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 terms “sol” and “soles” 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 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, which is a financial measure that is not recognized under IFRS. We refer to such financial measure as a “non-IFRS” financial measure. 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 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. EBITDA should not 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, as calculated by us, may not be comparable to a similarly titled measure reported by other companies, including those in the cement industry. For a calculation of EBITDA and a reconciliation of EBITDA to the most directly comparable IFRS financial measure, see “Item 3. Key Information—A. Selected Financial Data.”

We have translated some of the 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 soles amounts to U.S. dollars was S/3.356 to US$1.00, which was the period-end exchange rate (tipo de cambio contable) reported on December 31, 2016 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 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 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 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.

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.

1

“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.

“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.

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”);

• 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); and

• the Global Competitiveness Index prepared by the World Economic Forum.

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;

2

• 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;

• 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. As of December 31, 2016, the consolidated financial statements comprise the financial statements of our 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. (in liquidation). As of December 31, 2016, Fosfatos del Pacifico S.A. was classified as a group of assets (along with related liabilities) held for distribution to shareholders and as a discontinued operation. Discontinued operations are excluded from the results of continuing operations and are presented as a single amount as profit or loss after tax from discontinued operations in the income statement.

The following selected financial data as December 31, 2016 and 2015 of and for the years ended December 31, 2016, 2015, 2014, 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. The following selected financial data as of December 31, 2014, 2013 and 2012 and for the years ended December 31, 2013 and 2012 have been derived from our annual reports also prepared in accordance with IFRS as issued by the IASB not included in this annual report.

3

	Year ended December 31,
	2016			2016			2015			2014			2013			2012
Income Statement Data:	(in millions of US$, except share and per share data)(1)			(in millions of S/, except share and per share data)(1)
Sales of goods	US$	369.6		S/	1,240.2		S/	1,231.0		S/	1,242.6		S/	1,239.7		S/	1,169.8
Cost of sales		(219.5	)		(736.6	)		(695.8	)		(724.1	)		(716.2	)		(713.0	)
Gross profit		150.1			503.6			535.3			518.4			523.4			456.8
Operating income (expenses):
Administrative expenses		(57.7	)		(193.4	)		(179.7	)		(185.5	)		(200.4	)		(193.6	)
Selling and distribution expenses		(11.9	)		(39.9	)		(31.5	)		(30.5	)		(29.8	)		(30.9	)
Net gain on sale of available-for-sale financial investment		—			—			—			10.5			—			—
Other operating income, net		0.7			2.4			3.9			(2.9	)		8.0			7.9
Total operating expenses, net		(68.8	)		(230.8	)		(207.3	)		(208.4	)		(222.2	)		(216.6	)
Operating profit		81.3			272.8			328.0			310.0			301.3			240.1
Other income (expenses):
Finance income		1.0			3.2			3.4			11.3			26.7			22.4
Finance costs		(22.5	)		(75.4	)		(36.8	)		(31.2	)		(37.1	)		(23.8	)
Gain (loss) from exchange difference, net		(0.8	)		(2.5	)		12.2			(14.7	)		(48.4	)		(0.2	)
Total other expenses, net		(22.3	)		(74.7	)		(21.2	)		(34.6	)		(58.8	)		(1.6	)
Profit before income tax		59			198.1			306.8			275.4			242.5			238.5
Income tax expense		23.4			(78.6	)		(89.4	)		(78.8	)		(85.9	)		(77.0	)
Profit for the year from continuing operations		35.6			119.5			217.4			196.5			156.6			161.5
Loss for the year from discontinued operations		(1.9	)		(6.6	)		(5.7	)		(7.7	)		(4.3	)		(5.9	)
Profit for the year		33.7			112.9			211.7			188.8			152.3			155.6
Attributable to:
Equity holders of the parent		34.6			116.2			215.5			192.8			155.6			159.0
Non-controlling interests		(1.0	)		(3.3	)		(3.9	)		(4.0	)		(3.4	)		(3.4	)
	US$	33.6		S/	112.9		S/	211.7		S/	188.8		S/	152.3		S/	155.6
Share and Per Share Data:
Profit per share (3)	US$	0.06		S/	0.21		S/	0.38		S/	0.33		S/	0.27		S/	0.28
Number of shares outstanding (4)					544,688,023			573,998,649			581,964,603			581,964,603			581,964,603
Dividends per share	US$	0.08		S/	0.285		S/	0.28		S/	0.20		S/	0.10		S/	0.089

4

	As of December 31,
	2016			2016			2015			2014		2013		2012
Balance Sheet Data:	(in millions of US$)(1)			(in millions of S/, except share and per share data)(1)
Current assets
Cash and term deposits	US$	23.9		S/	80.2		S/	158.0		S/	580.5	S/	977.0	S/	473.8
Trade and other receivables		24.2			81.1			110.9			110.8		68.5		69.4
Income tax prepayments		13.9			46.5			44.9			15.0		27.7		21.5
Inventories		103.2			346.5			307.5			324.1		334.5		278.1
Prepayments		2.4			8.0			7.2			4.4		11.7		10.6
Total current assets		167.6			562.3			628.5			1,034.8		1,419.4		853.4
Assets held for distribution		100.8			338.4			—			—		—		—
Non-current assets
Other receivables		7.5			25.1			64.1			53.9		46.3		36.1
Prepayments		0.4			1.2			1.4			2.3		—		—
Available-for-sale financial investments		0.2			0.7			0.4			0.7		36.1		34.9
Other financial instruments		20.8			69.9			124.8			12.3		—		—
Property, plant and equipment		677.3			2,273.1			2,490.8			2,061.0		1,537.1		1,394.8
Exploration and evaluation assets		12.8			43.0			81.9			57.7		59.3		49.5
Deferred income tax assets		1.9			6.4			21.1			17.2		15.2		13.4
Other assets		0.2			0.6			0.8			1.0		1.2		1.2
Total non-current assets		721.1			2,419.9			2,785.3			2,206.1		1,695.2		1,529.9
Total assets		989.5			3,320.6			3,413.8			3,240.9		3,114.5		2,383.3
Current liabilities
Trade and other payables		42.6			142.8			170.8			137.6		126.9		132.8
Interest-bearing loans and borrowings		—			—			—			—		—		22.9
Income tax payable		1.0			3.5			3.9			8.7		2.8		0.1
Provisions		9.4			31.7			28.9			53.8		28.0		24.0
Total current liabilities		53.0			178.0			203.5			200.1		157.7		179.8
Liabilities directly related to assets held for distribution		0.8			2.7			—			—		—		—
Non-current liabilities
Interest-bearing loans and borrowings		297.4			998.2			1,012.4			883.6		824.0		192.5
Other non-current provisions		6.6			22.0			32.6			0.7		20.5		16.6
Deferred income tax liabilities, net		41.7			139.8			119.1			85.9		102.9		100.3
Total non-current liabilities		345.7			1,160.0			1,164.1			970.1		947.4		309.4
Total liabilities		399.5			1,340.6			1,367.7			1,170.2		1,105.1		489.2
Equity:
Capital stock		158.4			531.5			531.5			531.5		531.5		531.5
Investment shares		15.1			50.5			50.5			50.5		50.5		50.5
Treasury shares		(32.2	)		(108.2	)		(108.2	)		—		—		—
Additional paid-in capital		162.5			545.2			553.5			553.8		556.3		558.5
Legal reserve		56.1			188.1			176.5			154.9		119.8		105.2
Other reserves		(5.0	)		(16.6	)		11.6			5.1		19.0		16.7
Retained earnings		201.8			677.1			727.8			696.7		653.7		570.9
Non-controlling interests		33.6			112.6			103.1			78.1		78.6		60.9
Total equity		590.0			1,980.0			2,046.1			2,070.7		2,009.5		1,894.1
Total liabilities and equity	US$	989.5		S/	3,320.6		S/	3,413.8		S/	3,240.9	S/	3,114.5	S/	2,383.3

5

	As of and for the year ended December 31,
	2016		2016			2015			2014			2013			2012
Other Financial Information:	(in millions of US$)(1)		(in millions of S/, except percentage and operating data)
Net working capital(4)	US$	114.5		S/ 384.3			S/ 424.9			S/ 834.7			S/ 1,261.7			S/ 673.6
Capital expenditures(5)		35.8		120.3			490.8			586.6			200.6			248.2
Depreciation and amortization(6)		33.2		111.3			70.8			64.8			55.9			48.0
Net cash flows from operating activities(6)		72.0		241.7			275.6			240.4			191.8			99.7
Net cash flows from (used in) investing activities(6)		40.4		(135.6	)		(475.9	)		(553.5	)		194.5			(667.4	)
Net cash flows from (used in) financing activities(6)		52.9		(177.5	)		(257.8	)		(114.8	)		507.4			273.7
EBITDA		110.5		371.0			389.7			365.3			348.9			278.5
EBITDA margin(7)				29.9	%		31.7	%		29.4	%		28.1	%		23.8	%
Operating Data:
Installed capacity (thousand metric tons per year):
Cement:
Pacasmayo				2,900			2,900			2,900			2,900			2,900
Rioja				440			440			440			440			200
Piura				1,600			1,600			—			—			—
Total				4,940			4,940			3,340			3,340			3,100
Clinker:
Pacasmayo				1,500			1,500			1,500			1,500			1,500
Rioja				280			280			280			280			200
Piura				1,000			1,000			—			—			—
Total				2,780			2,780			1,780			1,780			1,700
Quicklime:
Pacasmayo				240			240			240			240			240
Production (thousand metric tons):
Cement:
Pacasmayo				1,177			1,884			2,054			2,101			2,053
Rioja				281			288			296			240			200
Piura				817			161			—			—			—
Total				2,276			2,333			2,350			2,341			2,253
Clinker:
Pacasmayo				887			967			1,014			1,189			1,209
Rioja				215			235			228			196			159
Piura				629			—			—			—			—
Total				1,731			1,202			1,242			1,385			1,368
Quicklime:
Pacasmayo				156			98			101			67			101

(1) Calculated based on the exchange rate of S/3.356 to US$1.00 as of December 31, 2016 which was the average accounting exchange rate reported by the SBS on December 31, 2016.

(2) 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 weighted average number of shares in 2015 takes into account the weighted average effect of changes in our treasury shares. On October 15, 2015, we acquired 37,276,580 of our investment shares.

(3) Data for 2015 and 2016 is net of weighted average number of treasury shares.

(4) Represents current assets minus current liabilities.

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

(6) Includes continuing and discontinued operations. For detail on cash flow from discontinued operations please see “Item 18. Financial Statements – Consolidated Statements of Cash Flow.”

(7) EBITDA margin is calculated by dividing EBITDA by sales.

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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.

EBITDA should not 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, as calculated by us, may not be comparable to a similarly titled measure reported by other companies, including those in the cement industry.

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

	Year ended December 31,
	2016			2016			2015			2014			2013			2012
	(in millions of US$)(1)			(in millions of S/)
Profit	US$	33.6			S/ 112.9			S/ 211.7			S/ 188.8			S/ 152.3			S/ 155.6
Finance income		(1.0	)		(3.3	)		(3.5	)		(11.7	)		(27.2	)		(23.3	)
Finance costs		22.5			75.4			36.8			31.2			37.1			23.8
(Gain) loss from exchange difference, net		0.7			2.5			(12.4	)		14.8			48.4			0.7
Income tax expense		21.5			72.2			86.2			77.5			82.4			73.7
Depreciation and amortization		33.2			111.3			70.8			64.8			55.9			48.0
EBITDA		110.5			371.0			389.7			365.3			348.9			278.5

(1) Calculated based on the exchange rate of S/3.356 to US$1.00 as of December 31, 2016 which was the accounting exchange rate reported by the SBS on December 31, 2016.

Exchange Rates

The Peruvian 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.

The following table sets forth, for the periods indicated, certain information regarding the exchange rates for 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 soles.

	High		Low		Average(1)		Period end
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
2015		3.411		2.982		3.186		3.411
2016		3.537		3.249		3.375		3.356
October 2016		3.409		3.352		3.386		3.363
November 2016		3.424		3.361		3.403		3.411
December 2016		3.421		3.355		3.395		3.356
January 2017		3.392		3.277		3.340		3.285
February 2017		3.292		3.242		3.260		3.261
March 2017		3.295		3.242		3.264		3.248
April 2017 (through April 18)		3.253		3.246		3.249		3.247

Source: SBS

(1) Averages are based on daily exchange rates.

On April 26, 2017, the exchange rate was S/3.249 per US$1.00.

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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, significant currency devaluation and high rates of 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 recent years, political tensions, high levels of poverty and unemployment, and social conflicts with local and indigenous 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 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, including those owned by us. 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, Pedro Pablo Kuczynski has been in office since July 28, 2016. This administration has adopted and espouses open-market policies and is expected to continue the economic model of recent governments, as well as undertake reforms to improve macroeconomic performance. However, since he does not have a majority in Congress, it may be difficult for President Kuczynski to get significant reforms approved, and he

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will have to negotiate with the opposition which may dilute intended economic results. The election of Mr. Kuczynski initially generated tremendous optimism and high expectations from the business community. However, the recent corruption scandal related to Odebrecht’s alleged bribery of Peruvian officials, the impact of several weather phenomena and other political challenges have decreased the pace of economic growth. While this has significantly impacted Mr. Kuczynski’s approval ratings and delayed progress, his plans to invest in Peru’s infrastructure remain in place.

Although the new Kuczynski administration espouses business friendly and open-market policies, we cannot assure you that it will maintain 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.

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

Fluctuations in the value of the sol relative to the U.S. dollar could adversely affect Peru’s economy. In addition, a depreciation of the sol could increase, in terms of soles, certain of our production costs. Substantially all of our revenues are denominated in soles. However, certain of our expenses, such as the purchase of some coal and electricity, and some imported clinker, are denominated in U.S. dollars. In 2016, approximately 24% of our cost of sales was denominated in U.S. dollars. In addition, in February 2013, we issued 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, 2016, we had hedged our exchange rate exposure related to the Senior Notes. As of December 31, 2016, the sol had appreciated 1.6% with respect to the U.S. dollar as compared to December 31, 2015. In the past, the exchange rate between the sol and the U.S. dollar has fluctuated significantly. We cannot assure you that the value of the 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.

In addition, although Peruvian law currently imposes no restrictions on our ability to convert 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 2012 and 2016 of 3.3% as measured by the Peruvian Consumer Price Index (Índice de Precios al Consumidor del Perú) that is calculated and published by the INEI. During 2016, 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.

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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. Even though 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, the provisioning of raw material, the distribution of our products and, consequently, our business, financial condition and results of operations. During the first quarter of 2017, northern Peru has experienced severe rain, landslides and flooding, which have affected the demand for cement, and our ability to fulfill orders and ship our products, as well as our ability to access raw materials since some roads and bridges have been destroyed or are impassable. As of the date of this annual report, our plants have not suffered any significant damage that has affected our ability to operate normally. However, GDP growth rates for 2017 are expected to be adversely affected by these natural disasters.

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.

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 2016, commodity prices increased, partly as a result of expectations of higher infrastructure spending in the United States in the case of base metals, and the increase in speculative positions, which resulted in short-term growth in Peruvian GDP. 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 main 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 generally 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.

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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 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 2016, auto-construcción accounted for approximately 58% 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.

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 2016, approximately 25% of our cement sales were derived from private construction (other than auto-construcción) and 17% 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. During the first half of 2016, there was an increase in public spending related to preventive works for the expected negative impact of the El Niño phenomenon which was forecast to hit during the first months of the year. In subsequent months and given the change in president following the elections in July 2016, public investment slowed down again. We expect public investment to pick up during the second half of 2017 due to reconstruction works in the North following recent efforts of national disasters and the Kuczynski administration’s announced investment plan.

The level of public infrastructure investment also depends, to a great extent, on the priorities and financial resources of the national, regional and local governmental authorities. The Peruvian government in recent years has promoted significant public spending in infrastructure projects in the north in response to needed infrastructure development and to stimulate the economy. We cannot assure you that the Peruvian government will continue promoting public infrastructure spending in northern Peru or more broadly. A reduction in public infrastructure spending in our market would adversely affect our business, financial condition and results of operations.

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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 2016, energy expenditures represented approximately 26.2% of our cement production costs, compared to 22.7% in 2015. 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 supply the electricity requirements of our Pacasmayo and Piura facilities until 2025. We have also entered into a supply agreement with Electro Oriente S.A. (“ELOR”) to supply the Rioja facility until November 2022. 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.

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 2016, our cost of admixtures and raw materials supplied by third parties as a percentage of our cement production costs was approximately 10.5% compared to 9.7% in 2015. In 2012, due to an increase in demand for cement and the corrective maintenance of our principal kiln, we began using imported clinker. Since we began to produce clinker at the Piura plant, we have stopped all use of imported clinker, but there was some use during the first months of the year which represented approximately 6.0% of our cement production cost in 2016. 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

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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 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.

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.

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Our business depends on the continued operation of our Pacasmayo and Piura facilities.

Our production facilities in Pacasmayo and Piura are essential to our business. In 2016, approximately 88% of our total cement and all of our quicklime was produced at the Pacasmayo and Piura facilities. We estimate that for 2017, close to 40% of our total cement will be produced at the new Piura facility, and 50% at the Pacasmayo facility. These plants are subject to normal hazards of operating any cement production facility, including accidents, natural disasters and unexpected malfunctioning of the equipment. Any interruption in our operation of the Pacasmayo or Piura facilities or a decrease in the effective capacity of these facilities would adversely affect our results of operations, and any prolonged disruption in the operation of these facilities 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 drywall, could decrease the demand for cement and concrete. In Peru, drywall has only been introduced into the housing construction market in recent years and it is not widely used. However, the use of drywall 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 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.

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. During the first quarter of 2017, northern of Peru has experienced severe rain, landslides and flooding, which have affected the demand for cement, and our ability to fulfill orders and ship our products, as well as our ability to access raw materials since some roads and bridges have been destroyed or are impassible. As of the date of this annual report, our plants have not suffered any significant damage that has affected our normal 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, or “MEM”) 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

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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.

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, 2016, approximately 13% 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

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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.

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 Project

As of March 1, 2017, we had spun-off our phosphates assets, which are currently held by FOSSAL. Therefore, the implementation of the phosphates project is no longer a risk to our cement operations. However, we continue to be invested in the brine project. Nevertheless, we maintain the management of Fosfatos del Pacífico and FOSSAL, until such time as it is able to retain separate management and operate independently.

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 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.

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 brine project is 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 a non-metallic mining project to develop brine deposits. However, we are developing basic engineering studies and we cannot assure you that this project 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 brine minerals to assess our potential performance. The development of this project 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.

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We may face several factors that may impair our ability to execute this project 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;

• 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 this project and may increase our projected capital costs. If we are unable to complete this project, any costs incurred in connection with this project 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 this project or achieve the intended economic benefits, which would materially and adversely affect our business, financial condition and results of operations.

In, addition we may face difficulties in marketing and distributing the products derived from this project. 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.

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

Our brine initiative is a complex project that requires significant capital investment. Our estimated capital amounts for this project is based on preliminary estimates and assumptions we have made about the mineral deposits, equipment, labor, permits and other factors required to complete the project. 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 brine 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 Quimpac to develop our brine project, we may face difficulties in carrying out this project.

We are unfamiliar with the commercial market for brine products and are seeking to develop this project with a partner that has expertise in commercializing these products. 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 Quimpac, we may not be able to execute this project as currently contemplated.

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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.

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

As of March 31, 2017, our controlling shareholder beneficially owned 50.01% 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.

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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 meetings of our shareholders.

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 Superintendencia del Mercado de Valores (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 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 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

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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.

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.

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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.

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, 2017, Eduardo Hochschild, directly and indirectly, owned and controlled 54.20% of the shares of Hochschild Mining plc. Through Inversiones ASPI S.A. (“ASPI”), Eduardo Hochschild, directly and indirectly, owns and controls 50.01% of the outstanding common 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.

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Cementos Pacasmayo, was incorporated in Lima, Peru in 1949, by a group of private investors that founded our 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.

• 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 has 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.

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• In 2014, we entered into cross currency swap agreements for US$120 million to manage foreign exchange risks to hedge against our U.S. dollar-denominated debt.

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

• In 2015, we entered into cross currency swap agreements for US$180 million to manage foreign exchange risks to hedge against our U.S. dollar-denominated debt. The principal amount of all currency swaps is US$300 million, covering all of our U.S. dollar-denominated debt.

• In September 2015, we began producing cement at our new plant in Piura. This was a very important milestone for our company, since we had been investing in this project since 2012 and in the full year 2016 we were able to reap the full benefits of this investment.

• In January 2016, we began producing clinker at our new cement plant in Piura, finishing the start-up of the plant, adding 1 million metric tons of clinker’s annual production capacity.

• In March 2017, the spin-off of our phosphate assets was consummated.

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 raised in 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.

We expect to finance our brine project with a combination of new borrowings and financial contributions from us and Quimpac, our minority partner. 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.

The table below sets forth our total capital expenditures incurred in 2016, 2015 and 2014.

	Year ended December 31,
(in millions of S/)	2016		2015		2014
Construction of diatomite brick plant		0.4		10.5		15.8
Expansion of Rioja cement plant		2.7		6.2		5.4
Expansion of Pacasmayo cement plant		29.9		11.2		28.8
New cement plant in Piura		61.3		415.7		506.0
Phosphate project(1)		15.6		37.4		12.1
Brine project		—		—		0.3
Concrete and block business		10.4		9.6		17.5
Other investing activities		—		0.2		1.4
Total		120.3		490.8		587.3

(1) Capital expenditures for the Phosphate project are classified as discontinued operations. These are included in the caption assets held for distribution to shareholder that is disclosed in our consolidated statements of financial position as of December 31, 2016.

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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 59 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 2016, our cement shipments were approximately 2.3 million metric tons, representing an estimated 21.0% share of Peru’s total cement shipments and substantially all the cement consumed in the northern region of Peru. From 2012 to 2016, our cement sales volume grew at a compound annual growth rate (“CAGR”) of 0.3%. Growth in sales volumes have been close to flat primarily due to a slowdown in public and private investment mainly due to a decrease in investor confidence during the administration of President Humala. We believe the construction sector has significant potential to grow with the expected continued expansion of the economy, the lack of infrastructure and the continued housing deficit in the country. Reconstruction of damaged infrastructure and housing that resulted from the recent natural disaster in northern Peru will, over the long-term, also result in further demand for cement.

We own three cement production facilities, our flagship Pacasmayo facility located in the northwest region of Peru, our new cement plant in Piura and our smaller Rioja facility located in the northeast. Our facilities have total installed annual cement production capacity of approximately 4.9 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 and seashell needs for approximately 100 years, based on our 2016 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 finished the construction of our new cement plant in Piura during 2015. This new facility has an annual production capacity of 1.6 million metric tons of cement. In September 2015, we began cement production, and clinker production began in January 2016. We believe that this development will allow us to meet projected increases in demand for cement in the northern region of Peru in coming years, as well as to achieve improved EBITDA margin for current cement production due to the state-of-the-art technology, the fact that we are no longer using imported clinker and have optimized logistics costs due to the proximity of our plants to the end markets.

We provide consumers 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 216 independent retailers and 360 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.

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

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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,
	2016			2015			2014
Economic data(1):
GDP growth in Peru		3.9	%		3.3	%		2.4	%
Construction sector growth (contraction) in Peru		(3.1	)%		(5.9	)%		1.9	%
Operating data:
Capacity (thousands metric tons per year):
Installed cement capacity		4,940			4,940			3,340
Installed clinker capacity		2,780			2,780			1,780
Production (thousands metric tons):
Cement production		2,276			2,333			2,350
Clinker production		1,731			1,202			1,242
Utilization rate at Pacasmayo plant(2):
Cement		40.6	%		65.0	%		70.8	%
Clinker		59.1	%		64.5	%		67.6	%
Utilization rate at Rioja plant(2):
Cement		64.0	%		65.3	%		67.4	%
Clinker		76.7	%		83.9	%		81.3	%
Utilization rate at Piura plant(2):
Cement		51.1	%		30.4	%		—
Clinker		62.9	%		—			—
Gross profit		503.6			535.3			518.4
Gross profit margin		40.6	%		43.5	%		41.7	%
EBITDA (3)		371.0			389.7			365.3
EBITDA margin		29.9	%		31.7	%		29.4	%
Profit		112.9			211.7			188.8
Profit margin		9.1	%		17.2	%		15.2	%

(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 relevant period by installed production capacity.

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

Peruvian Cement Market

Peru has experienced sustained economic growth over the past decade. From 2012 to 2016, GDP grew at a CAGR of 3.8%. Growth during the 2012 to 2016 period was accompanied by low inflation, which averaged 3.3% per year. In addition, at December 31, 2016, the government had accumulated foreign exchange reserves of approximately US$61.7 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 21.8% in 2016. According to the Central Bank of Peru, the Peruvian economy is estimated to have grown at a rate of 3.9% in 2016 and is projected to grow at a rate of 3.5% in 2017.

We sell substantially all our cement in the northern region of Peru, which in 2016 accounted for approximately 23% of the country’s population and 13.2% 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 2012 to 2016, total cement consumption in Peru grew at a CAGR of 1.7% 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 0.6% over the same period. Peru continues to have a significant housing deficit, estimated by the INEI at 1.9 million homes nationwide. 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 2016 sales to the auto-construcción segment accounted for approximately 58% of our total sales of cement, private construction projects accounted for 25% and public construction projects accounted for the remaining 17%. Approximately 91% of our total cement sales in 2016 were in the form of bagged cement, substantially all of which was sold through retailers.

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Even though our ready mix sales are still a small proportion of our sales, we expect this trend to change as infrastructure becomes a bigger driver of demand in the upcoming years.

Phosphate Assets Spinoff

In September 2016, our general shareholders’ meeting approved the spin-off of a portion of the net assets (composed by the assets and liabilities related to the Company’s interest in Fosfatos del Pacífico S.A.) to Fossal S.A.A. (“FOSSAL”), a newly formed entity created as a subsidiary of Inversiones ASPI S.A. The purpose of the spin-off was to allocate our assets and liabilities in accordance with the specialization of each business, cement and phosphate, therefore creating greater flexibility for shareholders who wish to invest in only one line of business, and greater clarity in long-term operations. The spin-off was consummated in March 2017, and as a result our capital stock was reduced by approximately S/107,593,000, from S/531,461,000 to S/423,868,000.

For each common share of Cementos Pacasmayo, existing shareholders received approximately 0.20 common share of FOSSAL and approximately 0.80 common share of Cementos Pacasmayo. For each investment share of Cementos Pacasmayo, shareholders will also receive approximately 0.20 investment shares of FOSSAL and approximately 0.80 investment shares of Cementos Pacasmayo.

Our Brine Project

We 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. In December 2014, the Ministry of Production approved the Environmental Impact Study associated with this project.

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 2016, we generated cash flow from operating activities (including discontinued operations) of S/241.7 million (US$72.02 million) and EBITDA of S/371.0 million (US$110.5 million), recorded profit for the year of S/112.9 million (US$33.6 million), and our operating and EBITDA margins were 22.0% and 29.9%, respectively. EBITDA for 2016 decreased by 4.8% (S/18.7 million) compared to 2015, mainly due to higher fixed costs resulting from lower sales volumes, an increase in administrative and selling expenses, as well as one-off expenses related to the permanent environmental closure of our zinc operations and the dissolution of Calizas del Norte, the subsidiary which used to exploit the limestone mines that are now operated by third parties.

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 2016, the northern region accounted for approximately 23.0% of the country’s population and 13.2% of its GDP. From 2012 to 2016, GDP in the northern region grew at a CAGR of 1.8%. During the same period, our cement sales volume grew at a CAGR of 0.3%, mainly as a consequence of decreased investment confidence and a decrease in public spending due to changes in authorities. However, the northern region continues to experience significant housing and infrastructure deficits which we expect will drive demand for cement in coming years, especially considering the reconstruction investment expected over the next years due to the destruction in infrastructure caused by El Niño.

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 216 independent retailers with 360 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. In 2015, we finished the construction of our new cement plant in Piura, the third largest city in northern Peru, which has an annual production capacity of 1.6 million metric tons of cement. The first ton of cement from the Piura facility was produced and shipped on September 17, 2015. This was a very important milestone for us, since we have been investing in this project since 2012 and can now begin to reap the benefits of this investment. The new plant improves our competitive position in the northern region of Peru. With production from three plants, we are able to serve our market more efficiently. This state-of-the-art plant is the most modern in Latin America. It also reduces transportation costs by enabling the dispatching of cement from plants within closer proximity to the point of sale. Clinker production started in January 2016, so we expect to achieve significant efficiencies at the consolidated level due to the elimination of imported clinker. It is important to highlight that the project was completed under budget, with a total estimated investment of US$365 million, below the original budget of US$386 million.

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.

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In July 2016, we created the Innovation department with the main objective of systematizing the continuous transformation process of the business in order to ensure a sustainable growth for our company and the improvement of its margins. To achieve this objective it is necessary to:

• Put the customer in the center of all our processes;

• Design an innovation management model; and

• Promote an organizational culture that encourages entrepreneurship and innovation.

We made this decision given that customers’ consumption patterns change at a faster pace, and it is necessary to quickly adapt so as to keep our customers. This phenomenon has been driven, in part, by technological and scientific advances.

We made a benchmark in the market for the creation of this area, and we decided to hire a consultant to support us in the design of the management model. We selected Insitum, a Mexican consultant with offices in nine countries and over 13 years of experience.

In 2016, we achieved the following key enhancements to our operations:

• Definition of the innovation strategy and process, complying with the schedule of activities;

• Selection by MIT’s second year MBA students to develop a joint project; and

• Implementation of collaborative workspaces.

Strong relationship with local communities

Since we began operations 59 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 9,293 students in various technical fields, some of whom currently work for us and our affiliates.

Highly experienced and professional management and board of directors

Our management team, with an average of 15 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.

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 (the “SEC”) and the Peruvian Securities Commission 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 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. Furthermore in 2016, we received the Top Social Responsibility Award (Distintivo de Empresa Socialmente Responsable) for fifth 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.

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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, under two principal brands, and other building solutions, such as assembly gravity walls, piles, precast beams, among others. 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.

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.

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Our Products

Our core products are cement and other cement-related materials. We also produce quicklime. In 2016, cement, concrete and blocks accounted for 89.0% of our net sales and quicklime accounted for 6.1%. We also sell and distribute construction materials, such as steel rebar, cables and pipes, manufactured by large third-party manufacturing companies, which in 2016 represented 4.9% 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)	2016		2015		2014
Cement, concrete and blocks(1)		2,286		2,310		2,347
Quicklime		152		104		100

(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/)	2016		2015		2014
Cement, concrete and blocks		1,103.4		1,089.2		1,085.4
Quicklime		75.1		64.1		61.0
Construction supplies(1)		59.9		75.6		95.4
Others		1.8		2.1		0.8
Total		1,240.2		1,231.0		1,242.6

(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.

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.

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• 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, Rioja and Piura 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 19 fixed and mobile ready-mix plants.

• 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.

• New cement-based products. We have developed, and are in the process of developing more cement-based products that are innovative and easy building solutions. These products include assembly gravity walls using large concrete blocks, piles, seawalls, as well as more complex products such as basic bathroom and housing units.

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,

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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.

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.

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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.

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 and Other Calcareous Resources

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. For our Piura plant, we extract seashells from our Bayovar 4 and Virrilá quarries, located approximately 140 and 120 kilometers, respectively, from the 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.

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Bayovar 4. For our Piura production, we have a concession with an indefinite term to extract seashells and other minerals from our Bayovar 4 quarry, a 22,326 hectare open-pit mine located in the district of Sechura, in the department of Piura. We acquired this concession in 2008

Virrilá. For our Piura production, we also have a group of concessions with an indefinite term to extract seashells and other minerals from our Virrilá quarry, a 931 hectare open-pit mine located in the district of Sechura, in the department of Piura. We acquired these concessions between 2000 and 2008.

In each of our limestone and seashell 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 1.5 million metric tons in 2014, 1.0 million metric tons in 2015, and 0.7 million metric tons in 2016, which were used for cement and quicklime production in our Pacasmayo facility. We extracted from our Calizas Tioyacu quarry approximately 573,217 metric tons in 2014, 481,858 metric tons in 2015, and 293,990 million metric tons in 2016, which were used for cement production at our Rioja facility. We extracted from our Bayovar 4 quarry approximately 22,983 metric tons of seashells in 2015, and 44,702 million metric tons in 2016, which were used for cement production at our Piura facility. We extracted from our Virrilá quarry approximately 391,080 metric tons of seashells in 2015 and 1,189,199 million metric tons in 2016, which were used for cement production at our Piura facility.

We estimate that as of December 31, 2016, our Acumulación Tembladera quarry contains approximately 110.7 million metric tons of proven and probable limestone reserves with an average grade of 85.7% of calcium carbonate; our Calizas Tioyacu quarry contains approximately 8.5 million metric tons of proven limestone reserves with an average grade of 90.3% of calcium carbonate; our Bayovar 4 quarry contains approximately 20.0 million metric tons of proven seashells reserves with an average grade of 87.2% of calcium carbonate; and our Virrilá quarry contains approximately 119.5 million metric tons of proven seashells reserves with an average grade of 90.1% of calcium carbonate. Based on limestone consumption at 2016 levels, we estimate that our limestone reserves at our Acumulación Tembladera quarry have a remaining life of approximately 85 years and our limestone reserves at our Calizas Tioyacu quarry have a remaining life of approximately 22 years. Based on seashell consumption for 2016, we estimate that our seashells reserves at our Bayovar 4 and Virrilá quarries have a remaining life of approximately 132 years. It is important to note that 2016 was still a ramp up year so the consumption of seashells is still lower than what we expect for full year operations from 2017 onwards. Our estimates were prepared by our internal engineers and geologist and are reviewed periodically.

In addition to our Acumulación Tembladera, Calizas Tioyacu, Bayovar 4 and Virrilá quarries, we also own concession rights to various other calcareous material quarries consisting, in the aggregate, of approximately 40,997 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.

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 MEM 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 46,719 metric tons of clay in 2014, 53,855 metric tons in 2015, and 41,772 metric tons in 2016.

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For cement production in our Rioja facility, we extract clay from our Pajonal 2 quarry, a 400 hectares open-pit concession located in the district and province of Rioja, department of San Martin. This concession was granted to us by the MEM 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 35,103 metric tons of clay in 2014, 53,632 metric tons in 2015, and 41,592 metric tons in 2016.

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 120,000 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 MEM 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 in 2014, we extracted 127,746 metric tons and used 80,073 metric tons. In 2015, we used 59,694 metric tons from our stock. and in 2016 we extracted 65,691 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 MEM in 1998. We did not use pozzolanic materials to produce cement in 2014, 2015 or 2016.

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.

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 2015, we used approximately 415,512 metric tons of imported clinker and 96,518 in 2016, exclusively during the first months of the year when the Piura plant was ramping up. Since April 2016, we have not used any imported clinker.

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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 eight months.

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, 2016, all of the electricity requirements for our Pacasmayo and Piura facilities were supplied by Electroperú and for our Rioja facility by ELOR.

We have a long-term electricity supply contract with Electroperú currently valid until 2025. Electroperú has agreed to provide us with sufficient energy to operate our Pacasmayo and Piura facilities 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, which was recently extended until November 2022. ELOR supplies the Rioja facility with 6 megawatts of electricity at peak hours and 8 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.

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.

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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, Piura and Rioja facilities supply the entire northern region of Peru, interchangeably subject to where it is most efficient to ship from at the moment, depending on the distance and type of cement being produced, among other factors.

In 2016, approximately 91% 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 9% 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 360 local hardware stores, with which 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 our ready mix sales are still a small proportion of our toal sales, we expect this trend to change as infrastructure becomes a bigger driver of demand in coming years. 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.

Our marketing expenses in 2016 were approximately S/15.6 million, or 1.3% 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 Financiera Efectiva to provide our customers with small loans to help finance the purchase of our products.

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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 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 main 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 2016, our cement shipments were approximately 2.3 million metric tons, representing an estimated 21.0% 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.

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 MEM. 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 MEM. 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.

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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$1,129) per year per hectare, in case of metallic mining concessions, and 10% of one tax unit (approximately US$113) 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

• 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

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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	%

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 Mining Royalty Law were unconstitutional, because they impose a mining royalty tax on non-mining activities. For instance, for cement companies, the amended Mining Royalty 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”).

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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 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.

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 (Limites 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.

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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$677,400); 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.

In 2016, by Ministerial Resolution No. 201-2016-MINAM, the “National Protocol of Continuous Emission Monitoring Systems - CEMS” was approved. Its objective is to standardize the process of continuous monitoring of polluting gases and particles emitted into the atmosphere by manufacturing activities. This resolution establishes the technical criteria for the selection of continuous monitoring methodologies, as well as the location of the monitoring points, the operation of the equipment and the tests required for the assurance of the quality of the measurements.

By Ministerial Resolution No. 191-2016-MINAM, the “National Plan for the Integral Management of Solid Waste - PLANRES 2016-2024” was approved. This resolution establishes, among other things, obligations regarding the management of non-municipal solid waste, as well as the modification of the environmental impact studies in case solid waste co-processing is part of the operation.

Prior Consultation with Local Indigenous Communities

On September 7, 2011, Peru enacted Law No. 29785, titled 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 for the benefit 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 MEM prior to the granting of a new processing concession.

According to pronouncements from 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 prior consultation procedures with indigenous peoples. According to Ministerial Resolution No. 003-2013-MEM-DM, the MEM 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).

Local indigenous communities do not have a veto right with respect to the grant of mining concessions. Upon completion of this prior consultation procedure, the Peruvian government has discretion to 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

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• 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 MEM;

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

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

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

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.

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 make use of an IQPF must obtain an IQPF User Certificate (Certificado de

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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 (Ministerio de Cultura) 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/850.00 per month. Peruvian labor legislation establishes a maximum eight-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,

(ii) two additional months’ salary per year, one in July and one in December (pursuant to Law No. 29351, Law 30334 and Legislative Decree 012-2016-TR said payments are not subject to any social contribution, except for Income Tax; consequently, employers pay 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,

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(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

(vii) a percentage of the company’s annual income net of taxes (10% in the case of income derived from industrial cement operations, and 8% in the case of income derived from our mining or commercial 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 for an acquisition from 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%.

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. (in liquidation); is engaged in the prospecting, exploration, marketing and transportation of other goods. On May 31, 2016, we decided to dissolve this subsidiary and engaged a third party to operate these activities on our behalf.

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• 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%.

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 three cement facilities. Our largest plant is located in the city of Pacasmayo, department of La Libertad, approximately 667 kilometers north of Lima. A second facility is located in the city of Piura, department of Piura, approximately 330 kilometers north of Pacasmayo. This facility started cement production in September 2015. 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 the Pacasmayo and Piura facilities we supply cement principally to the coastal and central regions of northern Peru, including the cities of Piura, Chiclayo, Cajamarca, Trujillo and Chimbote. 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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Pacasmayo Facility

As of December 31, 2016, our Pacasmayo facility had ten kilns that 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, 2016, our Pacasmayo facility had total 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 also equipped to produce quicklime.

Piura Facility

Our Piura facility has 1,600,000 metric tons of annual installed cement production capacity and 1,000,000 metric tons of clinker. The Piura plant operates with a horizontal kiln with a total annual installed clinker production capacity of 1 million metric tons per year, as well as a cement mill with a total annual installed cement production capacity of 1.6 million metric tons per year. Moreover, it has 2 storage silos with a capacity of 24,000 metric tons of cement.

Rioja Facility

Our Rioja facility has annual installed cement production capacity of 440,000 metric tons and 280,000 metric tons of clinker. Our Rioja facility currently 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 cement 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.

Ready-Mix Concrete Facilities

We also have 19 fixed and mobile ready-mix concrete facilities located in the northern cities of Chimbote, Trujillo, Chiclayo, Piura, Cajamarca, Tarapoto, and Moyobamba, 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, 2016, our ready-mix operations had 118 mixer trucks and 26 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, Piura and Rioja facilities, and respective utilization rates for the periods indicated.

(in thousands of metric tons, except percentages)	As of and for the year ended December 31,
	2016							2015							2014
	Capacity		Production		Utilization rate(1)			Capacity		Production		Utilization rate(1)			Capacity		Production		Utilization rate(1)
Cement:
Pacasmayo facility		2,900		1,177		40.6	%		2,900		1,884		65.0	%		2,900		2,054		70.8	%
Piura facility(2)		1,600		817		51.1	%		1,600		161		10.1	%		—		—		—
Rioja facility		440		281		64.0	%		440		288		65.5	%		440		296		67.3	%
Total		4,940		2,276		46.1	%		4,940		2,333		47.2	%		3,340		2,350		70.4	%
Clinker:
Pacasmayo facility		1,500		887		59.1	%		1,500		967		64.5	%		1,500		1,014		67.6	%
Piura facility		1,000		629		62.9	%		—		—		—			—		—		—
Rioja facility		280		215		76.7	%		280		235		83.9	%		280		228		81.4	%
Total		2,780		1,731		62.3	%		1,780		1,202		67.5	%		1,780		1,242		69.8	%
Quicklime(3):
Pacasmayo facility		240		156		65.2	%		240		98		40.8	%		240		101		42.1	%

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

(2) Our Piura facility started producing cement in September 2015 and clinker in February 2016.

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

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Brine Project

Overview

We have 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. As of the date of this annual report, 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 disbursement of 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

The 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 approved the Environmental Impact Study we submitted.

Insurance

We maintain a comprehensive insurance program that is designed to protect 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.

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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 9,293 students in various technical fields, some of whom currently 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 2016, this program benefited over 550 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 2016 benefited 116 stakeholders.

Mi Escuela, mi Comunidad (My School, My Community.) We have developed this project for a second year in partnership with the Instituto Peruano de Acción Empresarial – IPAE (Peruvian Institute of Business Action). In 2016, 42 educational institutions from the area in and around Pacasmayo, Rioja and Tembladera participated in this project which is focused on strengthening management skills of school leaders in order to mobilize resources for the education of students. In 2016, this program benefited over 6,242 students and teachers.

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, Acuicola Los Paches 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.

ITEM 4A. UNRESOLVED STAFF COMMENTS

Not applicable.

ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS

A. Operating Results

Overview

We are a leading Peruvian cement company, and the only cement manufacturer in the northern region of Peru. With more than 59 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.

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In 2016, our cement shipments were approximately 2.3 million metric tons, representing an estimated 21.0% 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 1.1 million metric tons of quicklime.

We own three cement production facilities, our Pacasmayo and Piura facilities 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 4.9 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 100 years, based on our 2016 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. In 2015, we finished construction of our new cement plant in Piura, the third largest city in northern Peru, which has an annual production capacity of 1.6 million metric tons of cement. The first ton of cement from the Piura facility was produced and shipped on September 17, 2015. The new plant improves our competitive position in the northern region of Peru.

This state-of-the-art plant is the most modern in Latin America. With production from three plants, we are able to serve our market more efficiently. It also reduces transportation costs by enabling the dispatching of cement from plants within closer proximity to the point of sale.

Clinker production started in January 2016, so we expect to be able to achieve significant efficiencies at the consolidated level due to the elimination of imported clinker.

We own concessions where we have discovered deposits of brine that have a variety of uses in the agricultural fertilizer, animal feed and construction industries, among others. We have developed the basic engineering and are continuing to evaluate the feasibility of this project, particularly in the context of market trends. See “Item 4. History and Development of the Company – B. Business Overview – Our Brine Project,” “D. Property, Plant and Equipment—Brine Project.”

Factors Affecting our Results of Operations

Revenue Drivers

In 2016, approximately 91% 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 9% 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 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 58% of our total cement sales in 2016, 55% in 2015 and 55% in 2014; private construction projects, both large and small, accounted for approximately 25% of our total cement sales in 2016, 26% in 2015 and 22% in 2014; and public construction projects accounted for the remaining 17% of our total cement sales in 2016, 16% in 2015 and 23% in 2014. 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.

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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. During 2016, there was significant public investment during the first months of the year due to El Niño prevention investments, but this slowed down significantly afterwards for the rest of the year. GDP in the northern region of Peru is estimated to have grown 0.6% in 2016, 1.2% in 2015 and 2.4% in 2014. Our cement volumes, which represented substantially all cement sales in the northern region of Peru, contracted by 1.0% in 2016, contracted by 1.6% in 2015, and contracted by 0.1% in 2014 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 2016, public spending increased during the first three months of the year due to significant spending in infrastructure in prevention of the El Niño phenomenon. After this, public and private investment slowed down due to changes in national authorities, and a corruption scandal involving some Latin American construction companies that has delayed the progress in infrastructure development. Despite these issues, the government’s plans to invest in Peru’s infrastructure remain in place. We expect public investment to pick up during the second half of 2017 due to reconstruction works in the north of Peru and the government’s investment plan.

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 13.1% of our costs of production in 2016, 11.3% in 2015 and 15.0% in 2014. The slight increase in the proportion of coal as a percentage of our costs in 2016 is largely a result of the decrease in raw materials as a percentage of costs due to the stop in usage of imported clinker. 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 2025. Our Rioja facility is powered primarily with electricity from ELOR, with which we have a medium-term supply agreement expiring in 2022. 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 13.1% of our cost of production in 2016, 11.3% in 2015 and 12.6% in 2014. 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.

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 2016, we used approximately 96,518 metric tons of imported clinker, which represented approximately 6.0% of our cement production cost for 2016, compared to approximately 415,512 metric tons of imported clinker in 2015, which represented 17.9% of our cement production cost for 2015. Because the Piura plant started producing clinker during the first quarter of 2016, we have not used imported clinker since then and do not plan to do so in the near future. This factor reduces our operating costs.

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 10.5% of our cost of production in 2016, 9.7% in 2015 and 9.9% in 2014.

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Our labor costs increased slightly in 2016, mainly as a result of one-off severance payments. Personnel expenses represented 21.4% of our total costs and expenses in 2016, 19.8% in 2015 and 19.7% in 2014.

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 and the exchange rate between the sol and the U.S. dollar between the time we purchase these products and the time we resell them. 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.

New Mining Royalty Tax

On September 29, 2011, the Peruvian government amended the Mining Royalty 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 the mining concessionaire’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 Mining Royalty Law. Mining royalty payments are deductible for income tax purposes in the fiscal year in which 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 in effect since 2016, see note 2.3.20 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.

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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

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, 2016 and 2015, 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. 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.

As of December 31, 2016 and 2015, no amortization under units-of-production method was determined since none of the mining projects were in production phase.

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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 operation are recorded as part of cost of production.

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 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 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 are not available for use, they are 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 exploitable 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. If capital expenditure is no longer

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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 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 renewed;

(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 assets is unlikely to be recovered in full from successful development or by sale.

If any indication 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 received. 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.

We have concluded that we are acting as a principal in all of our revenue arrangements.

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 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.

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 amount. An asset’s recoverable value is the higher of an asset’s or cash-generating unit’s fair value less costs of

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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 companies or other available fair value indicators.

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 or 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 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 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.

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.

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 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.

56

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, the amount capitalized is calculated using a weighted average of rates applicable to our general borrowings 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.

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 other comprehensive income (“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 is 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 “Unrealized gain on cash flow hedge,” 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.

57

Non-current assets held for distribution to equity holders of the parent and discontinued operations

We classify non-current assets and disposal groups as held for distribution to equity holders of the parent if their carrying amounts will be recovered principally through a distribution rather than through continuing use. Such non-current assets and disposal groups classified as held for distribution are measured at the lower of their carrying amount and fair value less costs to distribute. Costs to distribute are the incremental costs directly attributable to the distribution, excluding finance costs and income tax expense.

The criteria for held for distribution classification is regarded as met only when the distribution is highly probable and the asset or disposal group is available for immediate distribution in its present condition. Actions required to complete the distribution should indicate that it is unlikely that significant changes to the distribution will be made or that the decision to distribute will be withdrawn. Management must be committed to the distribution expected within one year from the date of the classification.

Assets and liabilities classified as held for distribution are presented separately as current items in the statement of financial position. Discontinued operations are excluded from the results of continuing operations and are presented as a single amount as profit or loss after tax from discontinued operations in the statement of profit or loss.

Additional disclosures are provided in Note 1 to our audited financial statements. All other notes to the financial statements include amounts for continuing operations, unless indicated otherwise.

Results of Operations

Comparison of Year Ended December 31, 2016 to Year Ended December 31, 2015

	Year ended December 31,
(amounts in millions of S/)	2016			2015			Variation %
Sales of goods		1,240.2			1,231.0			0.7	%
Cost of sales		(736.5	)		(695.8	)		5.8	%
Gross profit		503.6			535.3			(5.9	%)
Operating income (expenses):
Administrative expenses		(193.4	)		(179.7	)		7.6	%
Selling and distribution expenses		(39.9	)		(31.5	)		26.7	%
Net gain on sale of available-for-sale financial investment		—			—			—
Other operating income, net		2.4			3.9			(38.5	%)
Total operating expense, net		(230.8	)		(207.3	)		11.3	%
Operating profit		272.8			328.0			(16.8	%)
Other income (expenses):
Finance income		3.2			3.4			(5.9	)%
Finance costs		(75.4	)		(36.8	)		104.9	%
Gain (loss) from exchange difference, net		(2.5	)		12.2			(120.5	%)
Total other expenses, net		(74.7	)		(21.2	)		252.4	%
Profit before income tax		198.1			306.8			(35.4	%)
Income tax expense		(78.6	)		(89.4	)		(12.1	%)
Profit for the year from continuing operations		119.5			217.4			(45.0	%)
Loss for the year from discontinued operations		(6.6	)		(5.7	)		15.8	%
Profit for the year		112.9			211.7			(46.7	%)

Sales of Goods

The following table sets forth a breakdown of our sales of goods by segment for 2016 and 2015:

	Year ended December 31,
	2016				2015
	(in millions of S/)		% of total		(in millions of S/)		% of total
Cement, concrete and blocks		1,103.4		88.9		1,089.2		88.5
Quicklime		75.1		6.1		64.1		5.2
Construction supplies		59.9		4.8		75.6		6.1
Other		1.8		0.2		2.1		0.2
Total sales of goods		1,240.2		100.0		1,231.0		100.0

58

Our total sales of goods increased by 0.7%, or S/9.2 million, to S/1,240.2 million in 2016 from S/1,231.0 million in 2015. This increase was primarily due to the following factors:

• a 1.3%, or S/14.2 million, increase in 2016 in sales of cement, concrete and blocks as a result of strong growth from sales to the public sector during the first months of the year, despite a slowdown after this period; and

• a 17.2%, or S/11.0 million, increase in 2016 in sales of quicklime, due to increased sales volume;

• offset in part by a 20.8%, or S/15.7 million, decrease in 2016 in the sale of construction supplies, due to increased competition in this segment and a general slowdown in the construction sector.

The following table sets forth the composition of our sales of cement, concrete and blocks for 2016 and 2015:

	Year ended December 31,
	2016		2015		Variation
	(in millions of S/)				%
Cement		924.4		928.7		(0.5	)%
Concrete		152.6		123.9		23.2	%
Blocks		26.4		36.5		(27.7	)%
Total		1,103.4		1,089.2		1.3	%

Our total sales of cement, concrete and blocks increased by 1.3%, or S/14.2 million, to S/1,103.4 million in 2016 from S/1,089.2 million in 2015. This increase was primarily due to the following factors:

• sales of cement decreased slightly by 0.5%, or S/4.3 million, in 2016 due to an increase in the average price of cement (1.5%), offset by lower sales volume of cement (2.0%); and

• sales of concrete increased by 23.2%, or S/28.7 million, in 2016 due to an increase in sales volume (11.7%) and an increase in the average price of concrete (11.5%);

• partially offset by a 27.7%, or S/10.1 million, decrease in sales of blocks, in 2016. During 2015, we introduced a new product called “piles” that was supplied to the developer for the upgrade of the Talara oil refinery project being developed on behalf of Petroperu, which accounted for S/11.6 million and S/2.2 million in 2016. Excluding this product, sales of blocks in 2016 decreased by 2.9%, or S/0.7 million, due to decreased volume (6.9%) offset by an increase in the average price of blocks (4.0%).

59

Cost of Sales

The following table sets forth a breakdown of our cost of sales by segment for 2016 and 2015:

	Year ended December 31,
	2016				2015
	(in millions of S/)		% of total		(in millions of S/)		% of total
Cement, concrete and blocks		615.8		83.6		572.0		82.2
Quicklime		60.9		8.3		49.0		7.0
Construction supplies		58.7		8.0		73.1		10.5
Other		1.2		0.2		1.7		0.2
Total		736.6		100.0		695.8		100.0

Our total cost of sales increased by 5.9%, or S/40.8 million, to S/736.6 million for 2016, from S/695.8 million for 2015, primarily due to the following factors:

• a 7.7%, or S/43.8 million, increase in the cost of sales of cement, concrete and blocks in 2016, due primarily to higher depreciation expense of the Piura plant; and

• a 24.3%, or S/11.9 million, increase in 2016 in the cost of sales of quicklime, due primarily to higher sales volume;

• offset in part by a 19.7%, or S/14.4 million, decrease in 2016 in the cost of sales of construction supplies, due to a decrease in sales volume and lower price paid for steel bars.

The following table sets forth the composition of our cost of sales of cement, concrete and blocks for 2016 and 2015:

	Year ended December 31,
	2016		2015		Variation
	(in millions of S/)				%
Cement		489.5		460.2		6.4
Concrete		105.3		87.9		19.8
Blocks		21.0		23.9		(12.1	)
Total		615.8		572.0		7.7

Our cost of sales represented 55.8% of our sales in 2016, compared to 52.5% in 2015. Our total cost of sales of cement, concrete and blocks increased by 7.7%, or S/43.8 million, in 2016, primarily due to the following factors:

• cost of sales of cement increased by 6.4%, or S/29.3 million, in 2016, mainly due to a 2.0% decrease in sales volume of cement offset by an 8.4% increase in production cost, due to higher depreciation expsense of the Piura plant; and

• an increase in the cost of sales of concrete of 19.8%, or S/17.4 million, in 2016, due to an 11.7% increase in sales volume as well as a 8.1% increase in production cost;

• offset by a 12.1%, or S/2.9 million, decrease in the cost of sales of blocks in 2016. Excluding the S/6.3 million increase in cost of sales of piles sold to the Talara refinery in 2015 and S/1.2 million in 2016, cost of sales of blocks increased by 11.9%, or S/2.1 million in 2016, due primarily to a 6.9% decrease in sales volume offset by a 18.8% increase in production cost.

60

Gross Profit

The following table sets forth a breakdown of our gross profit and gross profit margin by segment for 2016 and 2015:

	Year ended December 31,
	2016				2015
	Gross profit		Gross profit margin		Gross profit		Gross profit margin
	(in millions of S/)		% of total		(in millions of S/)		% of total
Cement, concrete and blocks		487.7		44.2		517.3		47.5
Quicklime		14.2		18.9		15.1		23.6
Construction supplies		1.2		2.0		2.5		3.3
Other		0.5		27.8		0.4		19.0
Total gross profit		503.6		40.6		535.3		43.5

Gross profit decreased by 5.9%, or S/31.7 million, to S/503.6 million in 2016 from S/535.3 million in 2015 mainly as a result of, depreciation expense related to the Piura plant, and to a lesser extent due to a 6.0%, or S/0.9 million decrease in gross profit from the quicklime segment in 2016 that resulted from a decrease in sales of the higher priced product during the year, despite an overall increase in sales volume. Our gross profit margin (gross profit as a percentage of net sales) for 2016 was 40.6% compared to 43.5% for 2015.

The following table sets forth a breakdown of our gross profit and gross profit margin for the cement, concrete and blocks segments for 2016 and 2015:

	Year ended December 31,
	2016				2015
	Gross profit		Gross profit margin		Gross profit		Gross profit margin		Variation
	(in millions of S/)		%		(in millions of S/)		%		percentage points
Cement		434.9		47.0		468.6		50.4		(3.4	)
Concrete		47.3		31.0		36.0		29.1		1.9
Blocks		5.5		20.8		12.7		34.5		(13.7	)
Total gross profit		487.7		44.2		517.3		47.5		(3.3	)

Gross profit margin for the cement, concrete and blocks segment decreased 3.3 percentage points in 2016 compared to 2015. This was due mainly to a decrease in cement margin (3.4 percentage points) that resulted from increased depreciation expense related to the Piura plant, a 13.7 percentage point decrease in the margin of our blocks segment attributable to sales of piles for the Talara refinery in 2015, partially offset by a 1.9 percentage point increase in concrete margin that resulted primarily from higher prices and dilution of fixed costs that resulted from increased demand during the first nine months of the year.

Operating Income (Expense)

Our operating expenses primarily reflect administrative and selling and distribution expenses. In 2016, our operating expenses increased by S/23.6 million to S/230.9 million in 2016 from S/207.3 million in 2015.

61

Administrative Expenses

The following table sets forth the composition of our administrative expenses for 2016 and 2015:

	Year ended December 31,
(in millions of S/)	2016		2015
Personnel expenses		100.1		94.1
Third-party services		63.0		56.6
Board of directors compensation		6.1		7.1
Depreciation and amortization		12.8		10.7
Taxes		2.9		2.2
Consumption of supplies		2.1		2.4
Donations		5.8		6.1
Others		0.6		0.5
Total		193.4		179.7

Our administrative expenses increased by 7.6%, or S/13.7 million, to S/193.4 million in 2016 from S/179.7 million in 2015. Personnel expenses increased by S/6.0 million, primarily as a result of higher severance payments and third-party services increased by S/6.4 million mainly due to an increase in consulting services in IT, environment and security, and logistics services for the Piura plant, among others.

Administrative expenses related to the cement, concrete and blocks segment accounted for approximately 89.6% of total administrative expenses for 2016 compared to approximately 90.1% for 2015. Administrative expenses related to the quicklime, construction supplies and other segments accounted for approximately 7.5%, 0.5% and 2.4% respectively, of total administrative expenses for 2016 compared to approximately 6.3%, 0.7% and 2.9% respectively, for 2015.

Selling and Distribution Expenses

The following table sets forth the components of our selling and distribution expenses for 2016 and 2015:

	Year ended December 31,
(in millions of S/)	2016		2015
Personnel expenses		17.1		16.2
Advertising and promotion expenses		15.6		8.5
Other		7.2		6.8
Total		39.9		31.5

Our total selling and distribution expenses increased by 26.7%, or S/8.4 million, to S/39.9 million in 2016 from S/31.5 million in 2015, primarily related to an increase in advertising and promotion expenses invested to protect our market share in light of decreased sales volumes during the year.

Selling and distribution expenses related to the cement, concrete and blocks segment represented approximately 95.4% of total selling and distribution expenses for 2016, compared to 94.3% for 2015. Selling and distribution expenses related to quicklime, the construction supplies and other segments represented approximately 0%, 4.1% and 0.5% respectively, of total selling and distribution expenses for 2016, compared to 0%, 4.8% and 0.9%, respectively, for 2015.

Other Operating Income, Net

Our other operating income, net decreased S/1.5 million, to S/2.4 million in 2016 from S/3.9 million in 2015.

Other Expenses, Net

Our other expenses, net increased by S/53.5 million, to S/74.7 million in 2016 from S/21.2 million in 2015, mainly due to an increase in finance cost, due to the termination of borrowing cost capitalization following the conclusion of the Piura plant project, and to an adverse exchange rate effect since we held cash in dollars, which depreciated in relation to the sol, resulting in a loss of S/2.5 million, compared to a gain of S/12.2 million in 2015.

62

Income Tax Expense

Our income tax expense decreased by 12.0%, or S/10.8 million, to S/78.6 million for 2016 from S/89.4 million for 2015. In December 2016, the Peruvian government approved an increase of the income tax rate from 28% to 29.5% to be effective as of January 1, 2017. This increase resulted in an increase in our deferred income tax liability of S/22,344,000 and increased the deferred income tax asset by S/8,529,000 (S/14,639,000 was recognized as a higher income tax expense in the consolidated statement of profit or loss and S/824,000 as an income in Other Comprehensive Income). Our effective tax rate for 2016 was 39.0%, and 28.9% for 2015.

Profit from Continuing Operations

As a result of the foregoing, our profit from continuing operations for 2016 decreased by 45.0%, or S/97.9 million, from S/217.4 million for 2015 to S/119.5 million for 2016.

Results of Operations

Comparison of Year Ended December 31, 2015 to Year Ended December 31, 2014

	Year ended December 31,
(amounts in millions of S/)	2015			2014			Variation %
Sales of goods		1,231.0			1,242.6			(0.9	)
Cost of sales		(695.8	)		(724.1	)		(3.9	)
Gross profit		535.3			518.4			3.2
Operating income (expense):
Administrative expenses		(179.7	)		(185.5	)		3.1
Selling and distribution expenses		(31.5	)		(30.5	)		(3.2	)
Net gain on sale of available-for-sale financial investment		—			10.5			N/M
Other operating income, net		3.9			(2.9	)		34.5
Total operating expense, net		(207.3	)		(208.4	)		(0.5	)
Operating profit		328.0			310.0			6.1
Other income (expense):
Finance income		3.4			11.3			(69.9	)
Finance costs		(36.8	)		(31.2	)		18.0
Gain (loss) from exchange difference, net		12.2			(14.7	)		(15.6	)
Total other expenses, net		(21.2	)		(34.6	)		(38.7	)
Profit before income tax		306.8			275.4			11.4
Income tax expense		(89.4	)		(78.8	)		13.5
Profit for the year from continuing operations		217.4			196.5			10.6
Profit for the year from discontinued operations		(5.7	)		(7.7	)		(26.0	)
Profit for the year		211.7			188.8			12.1

N/M means not meaningful.

63

Sales of Goods

The following table sets forth a breakdown of our sales of goods by segment for 2015 and 2014:

	Year ended December 31,
	2015				2014
	(in millions of S/)		% of total		(in millions of S/)		% of total
Cement, concrete and blocks		1,089.2		88.5		1,085.4		87.3
Quicklime		64.1		5.2		61.1		4.9
Construction supplies		75.6		6.1		95.4		7.7
Other		2.1		0.2		0.8		0.1
Total sales of goods		1,231.0		100.0		1,242.6		100.0

Our total sales of goods decreased by 0.9%, or S/11.6 million, to S/1,231.0 million in 2015 from S/1,242.6 million in 2014. This decrease was primarily due to the following factors:

• a 0.3%, or S/3.8 million, increase in 2015 in sales of cement, concrete and blocks as a result of very strong growth from the public sector during the last months of the year, despite a slowdown during the first eight months of the year; and

• a 4.9%, or S/3 million, increase in 2015 in the sales of quicklime, due to product sales mix and higher sales during the first half of the year;

• partially offset by a 20.8%, or S/19.8 million, decrease in 2015 in the sale of construction supplies, due to increased competition in this segment and a general slowdown in the construction sector.

The following table sets forth the composition of our sales of cement, concrete and blocks for 2015 and 2014:

	Year ended December 31,
	2015		2014		Variation
	(in millions of S/)				%
Cement		928.7		929.5		(0.1	)
Concrete		123.9		124.0		(0.1	)
Blocks		36.5		31.9		14.4
Total		1,089.2		1,085.4		0.4

Our total sales of cement, concrete and blocks increased by 0.4%, or S/3.8 million, to S/1,089.2 million in 2015 from S/1,085.4 million in 2014. This increase was primarily due to the following factors:

• sales of cement in 2015 decreased slightly by 0.1%, or S/0.8 million, due to a 0.2% increase in the average price of cement, offset by a 0.3% decrease in volume of cement sold; and

• sales of concrete decreased by 0.1%, or S/0.1 million, in 2015, due to an 8.2% decrease in volume offset by an 8.1% increase in the average price of concrete;

• offset by a 14.4%, or S/4.6 million, increase in sales of blocks in 2015. During 2015, we sold a new product called “piles” that was supplied for the upgrade of the Talara refinery, which accounted for S/11.6 million of our total sales of blocks. Excluding this new product, sales of blocks decreased by 21.6%, or S/6.9 million, in 2015, due to a 16.7% decrease in sales volume and to a 4.9% decrease in the average price of blocks sold.

64

Cost of Sales

The following table sets forth a breakdown of our cost of sales by segment for 2015 and 2014:

	Year ended December 31,
	2015				2014
	(in millions of S/)		% of total		(in millions of S/)		% of total
Cement, concrete and blocks		572.0		82.2		578.9		79.9
Quicklime		49.0		7.0		51.9		7.2
Construction supplies		73.1		10.5		92.5		12.8
Other		1.7		0.2		0.8		0.1
Total		695.8		100.0		724.1		100.0

Our total cost of sales decreased by 3.9%, or S/28.3 million, to S/695.8 million for 2015 from S/724.1 million for 2014, primarily due to the following factors:

• a 1.2%, or S/6.9 million, decrease in the cost of sales of cement, concrete and blocks in 2015, 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;

• a 5.6%, or S/2.9 million, decrease in 2015 in the cost of sales of quicklime, due primarily to lower sales volume; and

• a 21.0%, or S/19.4 million, decrease in 2015 in the cost of sales of construction supplies, due to a decrease in sales volume and price of steel bars.

The following table sets forth the composition of our cost of sales of cement, concrete and blocks for 2015 and 2014:

	Year ended December 31,
	2015		2014		Variation
	(in millions of S/)				%
Cement		460.2		471.4		(2.4	)
Concrete		87.9		85.1		3.3
Blocks		23.9		22.4		6.9
Total		572.0		578.9		(1.2	)

Our cost of sales represented 52.5% of our sales in 2015, compared to 53.3% in 2014. Our total cost of sales of cement, concrete and blocks decreased by 1.2%, or S/6.9 million, in 2015, primarily due to the following factors:

• cost of sales of cement decreased by 2.4%, or S/11.2 million, in 2015, mainly due to a 0.3% decrease in volume of cement sold and a 2.1% decrease in production cost;

• a 3.3%, or S/2.8 million, increase in the cost of sales of concrete in 2015, due to an 8.2% decrease in volume sold offset by an 11.5% increase in production cost;

• offset by a 6.9%, or S/1.5 million, increase in the cost of sales of blocks in 2015. Excluding the S/5.1 million cost of sales attributable to our production of piles for the Talara refinery, cost of sales of blocks decreased by 16.2%, or S/3.6 million in 2015, due primarily to a 16.7% decrease in volume sold offset in part by a 0.5% increase in production cost.

65

Gross Profit

The following table sets forth a breakdown of our gross profit and gross profit margin by segment for 2015 and 2014:

	Year ended December 31,
	2015				2014
	Gross profit		Gross profit margin		Gross profit			Gross profit margin
	(in millions of S/)		%		(in millions of S/)			%
Cement, concrete and blocks		517.3		47.5		506.5			46.7
Quicklime		15.1		23.6		9.1			14.9
Construction supplies		2.5		3.3		2.9			3.0
Other		0.4		19.0		(0.1	)		(12.5	)
Total gross profit		535.3		43.5		518.4			41.7

Total gross profit increased by 3.3%, or S/16.9 million, to S/535.3 million in 2015, from S/518.4 million in 2014 mainly as a result of the operational efficiencies implemented in the production process during 2015, in spite of the decreased volume of cement sold, and to a lesser extent, due to an increase of 65.9% or S/6.0 million in gross profit in 2015 derived from the quicklime segment that was attributable to an increase in sales volume during the first six months of the year, as well as a sustained increase in sales of the higher priced product during the year. Our gross profit margin (gross profit as a percentage of net sales) for 2015 was 43.5% compared to 41.7% for 2014.

The following table sets forth a breakdown of our gross profit and gross profit margin for the cement, concrete and blocks segments for 2015 and 2014:

	Year ended December 31,
	2015				2014
	Gross profit		Gross profit margin		Gross profit		Gross profit margin		Variation
	(in millions of S/)		%		(in millions of S/)		%		percentage points
Cement		468.6		50.4		458.1		49.3		1.1
Concrete		36.0		29.1		38.9		31.4		(2.3	)
Blocks		12.7		34.5		9.5		29.8		4.7
Total gross profit		517.3		47.5		506.5		46.7		0.8

Gross profit margin for the cement, concrete and blocks segment increased 0.8 percentage points in 2015 compared to 2014. This was due mainly to an increase of 1.1 percentage points in cement margin that resulted from operational efficiencies implemented in the production processes during 2015, an increase of 4.7 percentage points in the blocks margin due to sales of piles for the Talara refinery, partially offset by a decrease of 2.3 percentage points in concrete margin as a result of lower sales volume.

Operating Income (Expense)

Our operating expenses primarily reflect administrative and selling and distribution expenses. In 2015, our operating expenses decreased by S/1.1 million to S/207.3 million in 2015 from S/208.4 million in 2014.

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Administrative Expenses

The following table sets forth the composition of our administrative expenses for 2015 and 2014:

	Year ended December 31,
(in millions of S/)	2015		2014
Personnel expenses		94.1		96.9
Third-party services		56.7		60.2
Board of directors compensation		7.1		4.9
Depreciation and amortization		10.7		11.5
Taxes		2.2		2.7
Consumption of supplies		2.4		2.9
Donations		6.1		5.9
Others		0.4		0.5
Total		179.7		185.5

Our administrative expenses decreased by 3.1%, or S/5.8 million, to S/179.7 million in 2015 from S/185.5 million in 2014. Personnel expenses decreased by S/2.8 million and third-party services decreased by S/3.5 million mainly due to a decrease in headcount.

Administrative expenses related to the cement, concrete and blocks segment accounted for approximately 90.1% of total administrative expenses for 2015 compared to approximately 90.8% for 2014. Administrative expenses related to the quicklime, construction supplies and other segments accounted for approximately 6.3%, 0.7% and 2.9% respectively, of total administrative expenses for 2015 compared to approximately 6.0%, 0.8% and 2.4%, respectively, for 2014.

Selling and Distribution Expenses

The following table sets forth the components of our selling and distribution expenses for 2015 and 2014:

	Year ended December 31,
(in millions of S/)	2015		2014
Personnel expenses		16.2		15.4
Advertising and promotion expenses		8.5		9.7
Other		6.8		5.4
Total		31.5		30.5

Our total selling and distribution expenses increased by 3.3%, or S/1.0 million, to S/31.5 million in 2015 from S/30.5 million in 2014.

Selling and distribution expenses related to the cement, concrete and blocks segment represented approximately 94.3% of total selling and distribution expenses for 2015, compared to 94.0% for 2014. Selling and distribution expenses related to quicklime, the construction supplies and other segments represented approximately 0%, 4.8% and 0.9%, respectively, of total selling and distribution expenses for 2015, compared to 0%, 5.8% and 0.3%, respectively, for 2014.

Other Operating Income, Net

Our other operating income, net increased S/6.9 million, to a gain of S/3.9 million in 2015 from a loss of S/3.0 million in 2014. This increase was due mainly to income from the sale of real estate assets during 2015.

Other Expenses, Net

Our other expenses, net decreased by S/13.4 million, to S/21.2 million in 2015 from S/34.6 million in 2014, mainly due to reduced exposure to exchange rate fluctuations which represented a loss of S/14.7 million in 2014, and a gain of S/12.2 million in 2015, and to a decrease in finance income which represented S/3.4 million in 2015, versus S/11.3 million in 2014. The decrease in exposure was mainly due to the fact that we entered into cross

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currency swap agreements to hedge our entire foreign exchange exposure related to the US$300 million of Senior Notes we issued in 2013. The decrease in finance income was mainly due to lower cash levels because of the increase in expenditures related to completion of construction of the Piura plant.

Income Tax Expense

Our income tax expense increased by 13.5%, or S/10.6 million, to S/89.4 million for 2015 from S/78.8 million for 2014. 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/2,646,000 during 2015 as a reduction of our deferred income tax liability and such amount was recognized as a reduction of income tax expense in our consolidated statement of profit or loss in 2015. Our effective tax rate for 2015 was 28.9% and 29.1% for 2014.

Profit

As a result of the foregoing, our profit for 2015 increased by 12.1%, or S/22.9 million, from S/188.8 million for 2014 to S/211.7 million for 2015.

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 US$300 million 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.

Cash Flows

The table below sets forth certain components of our cash flows for the years ended December 31, 2016, 2015 and 2014.

	Year ended December 31,
(in millions of S/)	2016			2015			2014
Net cash flows from operating activities(1)		241.7			275.6			240.4
Net cash flows used in investing activities(1)		(135.6	)		(475.9	)		(553.5	)
Net cash flows used in financing activities(1)		(177.5	)		(257.8	)		(114.8	)
Decrease (increase) in cash		(71.4	)		(458.1	)		(427.9	)

(1) Includes continuing and discontinued operations. For detail on cash flow from discontinued operations please see Item 18. Financial Statements – Consolidated Statements of Cash Flow.

Cash Flows from Operating Activities

Net cash flow from operating activities decreased by 12.3% or S/33.9 million, to S/241.7 million in 2016 from S/275.6 million in 2015, due primarily to a decrease in our operating profit.

Net cash flow from operating activities increased by 14.6% or S/35.2 million, to S/275.6 million in 2015 from S/240.4 million in 2014, due primarily to an increase in operating income.

Net cash flows from operating activities was S/240.4 million in 2014, due primarily to lower inventory purchases, mainly imported clinker and an increase in profit in 2014, as well as a decrease in trade and other payables, net of an increase in trade and other receivables.

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Cash Flows used in Investing Activities

Net cash flows used in investing activities were S/135.6 million for 2016, and were primarily related to complimentary investments for the operation of the new cement plant in Piura.

Net cash flows used in investing activities were S/475.9 million for 2015, and were primarily related to the purchase of property, plant and equipment for the Piura plant, net of the income derived from the sale of real estate assets.

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

Cash Flows used in Financing Activities

Net cash flows used in financing activities were S/177.5 million for 2016, and were primarily due to dividends paid to our shareholders.

Net cash flows used in financing activities were S/257.8 million for 2015, and were primarily due to dividends paid to our shareholders and the buyback of our investment shares from our shareholders.

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

Indebtedness

As of December 31, 2016, we had total outstanding indebtedness of S/1,006.8 million (US$300 million). As of December 31, 2016, we have entered into cross currency swap hedging agreements for a notional amount of US$300 million to manage our foreign exchange risks related to this debt, on which we will pay S/913.3 million and receive US$300 million in 2023.

(amounts in millions of S/)	As of December 31, 2016		Interest rate			Maturity date
4.50% Senior Notes due 2023		1,006.8		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 was used to prepay amounts outstanding on our secured loan agreement with BBVA Banco Continental, and the remaining proceeds to cover 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,

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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. (in liquidation).

Derivative Financial Instruments

As of December 31, 2016, we had entered into a cross currency swap hedging agreement in aggregate principal amount of US$300 million to hedge against the foreign exchange risks associated with our U.S. dollar-denominated debt.

Capital Expenditures

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

C. Research and Development, Patents and Licenses, Etc.

As of December 31, 2016, our research and development group consisted of 14 geologists and one scientist. 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 2016.

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Geographic Breakdown

Northern Region (thousands of metric tons)
Plant	2012		2013		2014		2015		2016		% share
C. Pacasmayo		2,045		2,110		2,051		2,022		2,004		18.4	%
C. Selva		200		240		296		288		281		2.6	%
Imports		29		34		40		12		—		—
Total		2,274		2,384		2,387		2,322		2.285		21.0	%
Central Region (thousands of metric tons)
Plant	2012		2013		2014		2015		2016		% share
UNACEM		5,315		5,612		5,701		5,546		5,110		47.0	%
Caliza Inca		157		288		383		357		347		3.2	%
Imports		409		465		461		507		490		4.5	%
Total		5,881		6,365		6,545		6,410		5,947		54.7	%
Southern Region (thousands of metric tons)
Plant	2012		2013		2014		2015		2016		% share
Grupo Yura		2,203		2,515		2,600		2,480		2,645		24.3	%
Total		2,203		2,515		2,600		2,480		2,645		24.3	%
Total Regions		10,358		11,264		11,532		11,212		10,877		100.0	%
														Sources: 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	✓(1)	✓(1)	✓(1)	✓	✓
Pacasmayo plant	✓	✓(2)	✓	✓		✓(2)	✓
Rioja plant	✓(1)	✓(1),(3)	✓(1),(3)				✓
Cementos Sur	✓	✓(2)	✓(2)	✓	✓
Yura	✓	✓(2)	✓(2)	✓	✓

Source: ASOCEM

(1) Low alkaline content.

(2) Our Portland cement II is the same as our type MS/MH/R cement.

(3) Manufactured upon request.

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Although a large part of housing construction in Peru is concentrated in the Lima metropolitan area, the housing market in the provinces of Peru, including the northern region, has expanded significantly in recent years. Despite this trend, Peru continues to have significant housing shortages, estimated by the INEI at 1.9 million homes nationwide. Economic growth, particularly in the mining and agribusiness sectors, rising employment levels and the development of residential 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 43 places on the Global Competitiveness Index published by the World Economic Forum which measures the quality of infrastructure, among other things, from 110th place in 2008 to 67th in 2016, it continues to have a significant deficit in infrastructure. In recent years, 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. During 2016, the Peruvian government presented to Congress a series of Legislative Decrees elaborated under the delegation of powers during the fourth quarter of 2016, aimed at promoting and trying to facilitate investment in large infrastructure projects. We expect to see results from these measures during 2017-18, in addition to required new development to counteract the effects of recent natural disasters.

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 specifications and 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 six 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.

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• 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.

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.

F. Tabular Disclosure of Contractual Obligations

The following table sets forth our contractual obligations with definitive payment terms as of December 31, 2016.

	Payments due by period
(in millions of S/)	Less than 1 Year		1-3 Years		3-5 Years		More than 5 Years		Total
Long-term debt(1)		—		—		—		913.3		913.3
Interest payments		45.4		90.7		90.7		68.0		294.8
Brine project(2)		2.0		2.0		18.0		254.9		276.9
Hedge finance cost payable		27.0		54.0		54.0		40.5		175.5
Energy Supply (3)		8.9		1.0		—		—		9.9
Total		83.3		147.7		162.7		1,276.7		1,670.4

(1) Does not include issuance costs.

(2) Relates to our contractual commitment for the establishment of Salmueras jointly with Quimpac and investment of US$100.0 million if we 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, 2016, we and Quimpac have collectively made contributions of US$30.7 million to Salmueras for the development of our brine project.

(3) Relates to take or pay contracts for the supply of gas to Fosfatos and Cementos Pacasmayo.

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.”

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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 11 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 our annual shareholders’ meeting and hold office for terms of three years. Directors may be re-elected to multiple terms. Our current board of directors is composed of nine directors and three 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.

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.

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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 March 24, 2017, our annual shareholders’ meeting was held and new directors were elected for the period 2017-2020.

Name	Position	Year of Birth
Eduardo Hochschild Beeck	Chairman of the Board	1963
José Raimundo Morales Dasso	Vice Chairman of the Board	1946
Roberto Dañino Zapata	Director	1951
Carlos Miguel Heeren Ramos	Director	1968
Humberto Reynaldo 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
Marco Antonio Zaldivar Garcia	Director	1960
Robert Patrick Bredthauer	Alternate director	1947
Manuel Bartolomé 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 serves as 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. He is also a member of the boards of directors of Banco de Crédito del Perú, El Pacífico Peruano-Suiza Compañía de Seguros y Reaseguros, Fosfatos del Pacífico, Salmueras Sudamericanas, 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). In addition, Mr. Hochschild is Vice-Chairman of the Silver Trust of Peru, and an expert consultant of the Economic Counsel of the Episcopal Conference.

José Raimundo Morales Dasso. Mr. Morales serves as Director since March 2008, and as Vice Chairman since April 2017. He holds a bachelor degree in Economics and Business Administration from Universidad del Pacífico and a master in Business Administration from Wharton Business School, University of Pennsylvania, United States. Between 1970 and 1980 he worked in different positions at Bank of America and Wells Fargo Bank. In 1980 he started to work at Banco de Crédito del Perú and served in various senior management positions and was the Chief Executive Officer of Banco de Crédito del Perú from October 1990 to April 2008. Currently, he is Chairman of the Board of 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. In addition, he is a member of the boards of directors of Pacífico Vida, Salmueras Sudamericanas, Fosfatos del Pacífico, Alicorp S.A.A., Grupo Romero, JJC Contratistas Generales, Cerámica Lima S.A., Corporación Cerámica S.A., and Inversiones y Propiedades S.A. He is also a member of the board of directors of Peruvian Institute of Economics.

Roberto Dañino Zapata. Mr. Dañino serves as Director since 1995, and served as Vice-Chairman of the Board until December 2016. 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 was the Ambassador of Peru

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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 the Board of Fosfatos del Pacífico. In addition, he is an Independent Director of Inversiones Centenario, Results for Development, LUMNI and ACCIÓN International, as well as member of the Advisory Board of UBER Technologies, Open Society Foundation, and Goldman Sachs.

Carlos Miguel Heeren Ramos. Mr. Heeren has served as a Director since March 2017. He is Executive Director of the University of Engineering and Technology (UTEC) and TECSUP. He holds a bachelor degree in economics from Universidad del Pacifico, with a master degree in economics from the University of Texas at Austin. He previously served as partner in APOYO Consultoría. He is also a member of the boards of directors of San Fernando, Interbank, Talma, Montana and other non-profit companies and institutions. Independent Director.

Humberto Reynaldo Nadal Del Carpio. Mr. Nadal joined our company as Corporate Development Manager in June 2007 and has served as Director since March 2008 and as Chief Executive Officer since April 2011. He has a bachelor degree in Economics from Universidad del Pacífico and a master degree in Business Administration from Georgetown University. He is the representative of Cementos Pacasmayo in the General Management of ASPI, Fosfatos del Pacífico and Salmueras. In addition, he is Chairman of the Board of Trustees of Universidad del Pacífico. 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, Chief Executive Officer at Socosani S.A and Chairman of Fondo Mi Vivienda. He has been recognized by the Institutional Investor magazine as one of the three best CEO’s in the construction industry in Latin America for 2014, 2015 and 2016.

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 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 a member of the board of directors of S&P Global, where she is also a member of its audit and financial policy committees. Independent Director.

Felipe Ortiz de Zevallos Madueño. Mr. Ortiz de Zevallos has been a Director since March 2014. He 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 Apoyo since 1977. He served as Ambassador of Peru to the United States from 2006 to 2009 where he was responsible for negotiating the US Congress’ approval of the Free Trade Agreement between both countries. He has been professor at Universidad del Pacífico and served as said university’s President from 2004 a 2006. He is currently an independent board member of various companies and non-profit organizations. In addition, he is currently President of the Asociación Civil Transparencia (Transparency Civil Association). 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 his 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. He has been recently appointed as Ad-Honorem Presidential Adviser by Supreme Resolution 182-2016 published on August 3, 2016. Independent Director.

Dionisio Romero Paoletti. Mr. Romero has served as a Director since March 2005. He holds a degree in Economics from Brown University and a master 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 a member of the board of directors of Banco de Crédito del Peru since 2003, and was appointed Vice Chairman in 2008 and Chairman in 2009. He is also the chairman of the boards of directors 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., Palmas del Espino S.A., Agrícola del Chira S.A., Agrícola del Chira S.A., among others. Furthermore, he is Vice-Chairman of the Board of Ransa Comercial S.A., Inversiones Centenario S.A. and a member of the board of directors of Banco de Crédito e Inversiones - BCI, and Sierra Metals Inc. Independent Director.

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Marco Antonio Zaldivar Garcia. Mr. Zaldivar has been a Director since March 2017. He is President of the Lima Stock Exchange. He is a Certified Public Accountant, graduated from the University of Lima and the General Management Program at PAD, Universidad de Piura. He holds a master in Business Administration from the Adolfo Ibañez School of Management (USA). Previously he worked at Ernst & Young as a Partner in charge of Risk Management and Regulatory Matters, Senior Partner of the Firm’s Audit and Business Advisory Division. He has also been Vice Dean of the Lima Public Accountants’ Association, chairman of the board of directors of the corporate governance committee of Procapitales. He is currently an independent director of Banco Santander del Perú, Edpyme Santander Consumo and Unión de Cervecerías Peruanas Backus y Johnston, among other positions, highlighting his extensive experience in corporate governance issues. Independent Director.

Robert Patrick Bredthauer Garcia. 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 Bartolomé Ferreyros Peña. Mr. Ferreyros has been an alternate director since March 2008 and our Chief Financial Officer since January 2008. He is also an alternate member of the Board of Directors of Fosfatos del Pacífico. Mr. Ferreyros has a bachelor degree in Business Administration from Universidad de Lima, a Multinational MBA from the Adolfo Ibañez School of Management, Miami and a master degree 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. He has been recognized by Institutional Inverstor magazine as one of the three best CFO’s in the construction industry of Latin America for 2014, 2015 and 2016. Alternate Director.

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 our company and their respective positions:

Name	Position	Year of Birth		Year of Appointment
Humberto Reynaldo Nadal Del Carpio	Chief Executive Officer		1964		2011
Carlos Julio Pomarino Pezzia	Vice President, Cement Business		1962		2009
Manuel Bartolomé Ferreyros Peña	Chief Financial Officer		1966		2008
Jorge Javier Durand Planas	General Counsel		1966		2008
Martin Ferraro Murdock	Innovation Director		1982		2016
Rodolfo Ricardo Jordan Musso	Infrastructure and Engineering Director, Cement Business		1952		2009
Joaquin Larrea Gubbins	Special Projects Director		1974		2011
Carlos Paul Cateriano Alzamora	Corporate Social Responsibility Director		1957		2006
Hugo Pedro Villanueva Castillo	Operations Director, Pacasmayo and Rioja Cement Plant		1962		2012
Diego Reyes Pazos	Supply Chain Director		1977		2013
Tito Alberto Inope Mantero	Industrial Planning Director		1972		2015
Rosaura Vasquez Arrieta	Quality, Research and Development Director		1963		2015

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

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

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Carlos Julio Pomarino Pezzia. Mr. Pomarino has acted as 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 Bartolomé Ferreyros Peña. See “—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. Mr. Durand holds a law degree from Universidad de Lima (Peru), and a master in Business Administration from Universidad del Pacífico (Peru). Among other studies, he has 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 he is a member of the board of directors of UTEC and TECSUP. In addition, Mr. Durand is an alternate director of the National Confederation of Private Business Associations (CONFIEP).

Martin Ferraro Murdock. Mr. Ferraro has served as Central Manager of Innovation since July 2016. He holds a degree in Business Administration and Finance from the Universidad Peruana de Ciencias Aplicadas - UPC (Peruvian University of Applied Sciences) and a master in Business Administration from Stanford Graduate School of Business. Mr. Ferraro joined our company in January 2004 and since then has served in different positions, the most recent of which were Commercial Manager from June 2012 to December 2014 and Finance, IT and Administration Manager from January 2015 to June 2016.

Rodolfo Ricardo Jordan Musso. Mr. Jordan has acted as Engineering and Infrastructure Director 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 acted as Special Projects Director since October 2016. He holds a degree in Business Administration from Universidad de Lima (University of 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. In Cementos Pacasmayo, he served as Business Manager of the Zinc Division for one year, as our Corporate Finance Head for five years, and as Central Manager of Corporate Development for five years.

Carlos Paul Cateriano Alzamora. Mr. Cateriano has acted as Corporate Social Responsibility and Human Resources Director since June 2012. Previously, he was Human Resources Manager from 2006 to 2012. He studied 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.

Hugo Pedro Villanueva Castillo. Mr. Villanueva has acted as Operations Directorfor the Pacasmayo and Rioja cement plant since January 2012. Previously he was Operations Manager for Cementos Selva S.A. for more than nine 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. He has also participated in different specialty programs related to the industry.

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Diego Reyes Pazos. Mr. Reyes has been our Supply Chain Director 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 our Industrial Planning Director since January 2015. He is an economist, graduated from Universidad de Lima and has a master in Business Administration from Universidad Peruana de Ciencias Aplicadas (UPC). Mr. Inope has worked at our company since 1996 and has held different management positions during the past 18 years.

Rosaura Vasquez Arrieta. Mrs. Vásquez has been our Quality, Research and Development Director since March 2015. She has a degree in Industrial Engineering from Universidad de Piura, holds a master 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 our company since 1998, and has held different management positions during the past 16 years. Before joining our company she was a professor at the Universidad de Piura. She has been a speaker at various industry events and has published a variety of articles on non- metallic mining, cement and additives.

B. Compensation

As of December 31, 2016, total short term compensation amounted to S/21,752,000 (2015: S/23,074,000) and total long term compensation amounted to S/16,088,000 (2015: S/14,159,000). This compensation included payments made in connection with the workers’ profit sharing plan under Peruvian labor law, which require us to distribute between 8% and 10% of our taxable 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 2016 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.

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

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• 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.

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;

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• 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 or sixth anniversary of the creation or beginning 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 or beginning 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 “—A. Directors and Senior Management.”

Benefits upon Termination of Employment

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

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.

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Antitrust Best Practices Committee

The antitrust best practices committee is composed of three members: 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 two, Mrs. Hilda Ochoa-Brillembourg, who is the chairman of the audit committee and Mr. Felipe Ortiz de Zevallos. Mr. Marco Antonio Zaldívar will become a member as of May 2, 2017. All of the members of the audit committee qualify as independent in accordance with the SEC rules applicable to foreign private issuers. Mrs. Hilda Ochoa-Brillembourg and Mr. Marco Antonio Zaldivar also qualify as financial experts under applicable 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.

D. Employees

As of December 31, 2016, we had a total of 1,331 permanent employees. The following table sets forth a breakdown of our employees by category as of the periods indicated.

	As of December 31,
	2016		2015		2014
Management		30		35		33
Administrative personnel		1,004		1,002		974
Plant workers		297		507		475
Total (1)		1,331		1,544		1,482

(1) Workers from our social venture Acuicola Los Paiches S.A.C. are excluded from these calculations.

As of December 31, 2016, approximately 13% of our employees were members of labor unions (Sindicato Único de Trabajadores de Cementos Pacasmayo S.A.A). 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 February 2016 three-year Union Agreements were signed with our Pacasmayo Plant union.

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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, 2016, approximately 12% of our employees were enrolled with the national public pension fund and 88% 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, 2017, persons who are currently members of our board of directors and our executive officers held as a group 1,035,096 of our common shares and no investment shares (not including common shares held by Mr. Eduardo Hochschild through ASPI). This amount represented less than 1% of our outstanding share capital as of March 31, 2017. Mr. Eduardo Hochschild through ASPI indirectly controls 211,985,547 common shares.

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

ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS

A. Major Shareholders

As of March 31, 2017, our issued and outstanding share capital was composed of 423,868,449 common shares. In addition, as of March 31, 2017, we had 40,278,894 non-voting investment shares outstanding, 36,040,497 of which were held in treasury.

The following table sets forth the beneficial ownership of our common shares and non-voting investment shares as of March 31, 2017.

	Common shares					Investment shares					Total
Shareholder	Number of shares		Percentage			Number of shares		Percentage			Number of shares		Percentage
ASPI(1)		211,985,547		50.01	%		—		—			211,985,547		45.67	%
CPSAA(treasury shares)		—		—			36,040,497		89.48	%		36,040,497		7.76	%
RI—Fondo 2 (AFP Prima)		16,376,138		3.86	%		—		—			16,376,138		3.53	%
RI—Fondo 3 (AFP Prima)		15,405,338		3.63	%							15,405,338		3.32	%
Directors and officers(2)		1,035,096		0.24	%		—		—			1,035,096		0.22	%
American Depositary Receipt Program		71,728,096		16.92	%		—		—			71,728,096		15.45	%
Other shareholders		107,338,234		25.32	%		4,238,397		10.52	%		111,576,631		24.04	%
Total		423,868,449		100.00	%		40,278,894		100.00	%		461,147,343		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 presented above include those held through ASPI.

(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.

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Changes in Ownership

The following sets forth the composition of ownership from December 31, 2014 to December 31, 2016.

Shareholder	2016			2015			2014
ASPI		45.67	%		45.67	%		50.94	%
CPSAA (treasury shares)		6.41	%		6.41	%		—
IN—Fondo 2 (AFP Integra)		—			—			1.05	%
RI—Fondo 2 (AFP Prima)		4.19	%		5.10	%		4.66	%
RI—Fondo 3 (AFP Prima)		3.12	%		4.29	%		4.29	%
HO-Fondo 3 (AFP Horizonte)		—			—			—
HO-Fondo 2 (AFP Horizonte)		—			—			—
IN—Fondo 3 (AFP Integra)		—			—			0.78	%
PR—Fondo 2 (AFP Profuturo)		—			—			0.86	%
PR—Fondo 3 (AFP Profuturo)		—			—			0.50	%
American Depositary Receipt Program		16.23	%		16.66	%		18.13	%
Other shareholders		24.38	%		21.87	%		18.79	%
Total		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 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.

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.

On October 14 and 15, 2015, ASPI sold 9,863,277 and 4,036,723 of our common shares.

On October 15, 2015, we bought back 37,276,580 investment shares, which we currently hold in treasury.

On January 19, 2017, our management approved the buyback of 7,911,845 investment shares, which we currently hold in treasury.

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, 2017, we estimate that there were 14,345,619 ADSs, which represented 16.23% of our common shares outstanding as of such date. As of December 31, 2016, 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 27.

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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).

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, 2016, we had an accounts receivable balance with ASPI, our controlling shareholder, in the amount of S/109,000 (US$32,479).

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/293,000 in 2014, S/330,000 in 2015, and S/326,000 in 2016.

• We lease part of our headquarters as office space to ASPI and its affiliates. We received rental payments of S/254,000 in 2014, S/334,000 in 2015, and S/374,000 in 2016.

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• We provide back office management and administrative services to ASPI and its affiliates, for which we received S/498,000 in 2014, S/505,000 in 2015, and S/1,103,000 in 2016.

• 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/1,350,000 in 2014, S/1,146,000 in 2015, and S/1,301,000 in 2016 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 Item 19. — 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.

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.

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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/)
2016		155,236,000		0.28500
2015		162,950,000		0.28000
2014		116,393,000		0.20000
2013		58,196,000		0.10000
2012		52,000,000		0.08935
2011		91,000,000		0.19380

At the annual shareholders’ meeting held on March 24, 2017, the shareholders unanimously approved the financial statements for fiscal year 2016 including the net income for such year and delegated to the Board of Directors the authority to decide the distribution of dividends on the retained earnings account and fiscal year 2017 operating results.

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 18, 2017, the closing price on the New York Stock Exchange was US$11.36 per ADS.

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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
2016:
January		7.26		6.25
February		6.75		6.20
March		7.85		6.52
April		8.94		7.15
May		9.46		8.88
June		9.10		8.57
July		9.44		8.70
August		9.75		9.00
September		10.30		9.31
October		9.68		9.23
November		9.57		8.94
December		9.21		8.99
2017:
January		9.58		9.22
February		9.94		9.07
March		11.40		9.73
April (through April 18)		11.41		10.96

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 18, 2017, the closing price on the Lima Stock Exchange was S/7.38 per common share and S/4.81 per investment share. Historically, trading volumes of our common shares and investment shares on the Lima Stock Exchange have been limited.

The following table sets forth for the five most recent full years the high and low closing prices in 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
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
2015		5.45		3.57		2.60		2.25
2016		6.70		4.27		4.70		2.13

The following table sets forth for each quarter of the three most recent financial years the high and low closing prices in 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
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

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	Common Shares				Investment Shares
(in S/)	High		Low		High		Low
2015:
First quarter		5.45		4.64		2.50		2.45
Second quarter		5.15		4.37		2.60		2.46
Third quarter		5.27		3.80		2.60		2.25
Fourth quarter		5.00		3.57		—		—
2016:
First quarter		5.36		4.27		2.33		2.13
Second quarter		6.08		4.90		3.39		2.70
Third quarter		6.70		6.38		4.70		4.43
Fourth quarter		6.60		6.10		4.55		4.30

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 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
2016:
October		6.60		6.28		4.55		4.30
November		6.45		6.15		4.30		4.30
December		6.30		6.10		4.30		4.30
2017:
January		6.50		6.18		4.30		4.30
February		6.56		5.95		4.30		4.30
March		7.52		6.35		4.80		4.20
April (through April 18)		7.40		7.25		4.81		4.75

B. Plan of Distribution

Not applicable.

C. Markets

Trading in the Peruvian securities market

The Lima Stock Exchange

As of December 31, 2016, there were 283 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, 2016, The Lima Stock Exchange had a share capital of S/182,092,340, divided into (173,659,481 class “A” shares and 8,432,859 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, 2016, the Lima Stock Exchange had 224 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).

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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 an effort 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, (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.

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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.

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, 2017, 423,868,449 of our common shares were outstanding. As of March 31, 2017, there were 7,053 owners of record of our common shares (considering the ADSs listed on the New York Stock Exchange are held by one registered 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 with the Securities Public Registry of the Peruvian Securities Commission and listed on the Lima Stock Exchange.

Investment Shares

As of March 31, 2017, 4,238,397 of our investment shares were outstanding, excluding 36,040,497 investment shares that we held in treasury. 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 a

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company’s equity. As of March 31, 2017, there were 403 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 with the Securities Public Registry of the Peruvian Securities Commission and listed on the Lima Stock Exchange.

Shareholders’ Liability

Under Article 133 of the Peruvian Corporate Law, a shareholder must abstain from voting if such shareholder has a conflict of interest. A resolution adopted in violation of this provision may be challenged under Article 139 of the Peruvian Corporate Law and any shareholder that participates in the voting in breach of this provision, if such shareholder’s vote was determinative in achieving 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 a preemptive 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 securities 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. Shareholders who are in default in respect 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 rights 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.

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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 where our executive office is located.

Investment Shares

Under the Peruvian Corporate Law and applicable accounting regulation, 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 capital 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.

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 our 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 outstanding. If, at the request of holders of 20% or more of our common shares, the shareholders’ meeting is not called 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 appointed at the request of such holders of our common shares will call for such meeting pursuant to Law No. 29560. 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.

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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 where our executive offices 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 the Peruvian Corporate Law, only those holders of common shares whose names are registered in our stock ledger not less than 10 days before the date set for a meeting will be entitled to attend the shareholders’ meeting and to exercise their voting and other rights.

Limitations on the Rights of Non-residents or Foreign Shareholders

There are no limitations under our by-laws or the Peruvian Corporate Law on the rights of non-residents 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.

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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 shares waive this right 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 the 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. 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.

Dispute Resolution

On March 29, 2016, our shareholders approved and we amended in our by-laws to include the following arbitration clause for settlement of disputes:

“X. DISPUTE RESOLUTION

ARTICLE 56.- Any dispute, disagreement or conflict arising between shareholders, between shareholders and the Company, or between the Company and its Directors during the existence or dissolution process of the Company, in connection to their rights or obligations or in connection to the interpretation, application, validity or compliance with these By-laws or in connection with any agreement adopted by the Company’s General Shareholders’ Meetings or Board of Directors’ meetings, which have not been resolved through direct negotiation and in amicable terms between the parties, or by means of mediation or conciliation, within thirty (30) business days from the notification to one of the parties, the parties agree to waive their rights to solve any dispute, disagreement or conflict within the competent courts of their domiciles and agree that all disputes, disagreements or conflicts will be settled by arbitration at law, except for those disputes which shall be ventilated under a specific jurisdiction as mandated by law, in which case the Peruvian Arbitration Law (Legislative Decree No. 1071), or any law amending or replacing it, shall be applied as well as the additional provisions established for such effects.

The arbitration will be held in Lima, Perú and in Spanish language according to the agreements in this clause. For all the matters not provided herein, the arbitration shall be organized and conducted in accordance with the provisions set forth in the Rules and Regulations of the Arbitration Center of the American Chamber of Commerce of Perú (AmCham Perú). - Cámara de Comercio Americana del Perú.

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The Tribunal shall consist of three (03) arbitrators, following the rules below for their designation:

(a) The party requesting the arbitration shall submit the first request to the Arbitration Center of AmCham Perú indicating the name of the person designated as first arbitrator, and inviting the opposing party, in turn, to designate the second arbitrator. The Arbitration Center of AmCham Perú shall submit a copy of the first request to the opposing party.

(b) Five calendar days after receiving the copy of the request referred to in letter (a) above, the opposing party shall indicate the name of the person designated as second arbitrator. If the opposing party fails to designate an arbitrator within the stated term, the Arbitration Center of AmCham Perú shall designate the second arbitrator.

(c) Five calendar days after the designation of the second arbitration pursuant to the provisions in letter (b) above, both parties shall, mutually agree, on the person who will serve as third arbitrator, who will chair the Tribunal. In the event that the parties fail to reach an agreement, the Arbitration Center of AmCham Perú shall designate the Chair of the Tribunal upon the request of either of the parties.

The Tribunal shall decide by majority on the subject matter of the arbitration. For this purpose, the Tribunal shall issue an arbitration award and the reasons therefore in writing within the term set in the By-laws and Regulations of the Arbitration Center of AmCham Perú. The arbitration award shall be final, binding upon the parties and unappealable, unless otherwise provided in the applicable rules.

In addition, the arbitration award shall determine the manner to confront the expenses related to the arbitration pursuant to the provisions set forth by the rules of the Arbitration Center of AmCham Perú.”

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—B. 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—B. 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—B. 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. We entered into an addendum to this agreement, effective February 1, 2016, which extends the term of the agreement until December 31, 2025, reduces the prices for the 2016-2020 period and establishes new prices for the 2020-2025 period. 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.”

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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.”

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% 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.

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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 2016, the Peruvian government approved an increase in the income tax rate from 28% to 29.5% to be effective from as of January 1, 2017.

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 5% of the dividend paid. In December 2016, the Peruvian government approved the decrease in the withholding tax rate on dividends paid from 6.8% to 5% effective in 2017. 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.

The general rule of the 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 capital gain tax. Peruvian income tax law also provides that capital gains resulting from the disposal of American Depositary Receipts (“ADRs”) that represent shares issued by Peruvian entities are considered Peruvian source income and therefore also subject to Peruvian capital gain 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.

Any Non-Peruvian Holder who disposes of Peruvian securities (common shares or ADRs) must request a tax basis certification from the Peruvian Tax Authority prior to the time payment is made to such Non-Peruvian Holder (except when the transaction is executed within the Lima Stock Exchange). The certification is provided within 30 days counted from the date the application (which application must contain supporting evidence with respect to the tax basis) is made by the transferor. If the Tax Authority does not respond within such 30 day period, the tax basis presented for approval by the transferor is deemed automatically approved.

Capital gains obtained by the transfer of securities (common shares or ADRs) may be subject to either 5% or 30% capital gain tax, depending on where the transaction takes place. If the transaction is executed in Peru, the capital gain tax rate is 5%; where the transaction is executed outside of Peru (including a foreign stock exchange), capital gains are taxed at a rate of 30%. Any gain resulting from the conversion of ADRs into common shares or common shares into ADRs will not be subject to taxation in Peru.

Notwithstanding the above, there is a temporary regime enacted by Law No. 30341 on December 12, 2015 which took effect on January 1, 2016, and Legislative Decree No. 1262, which complements Law No. 30341 and took effect on January 1, 2017. Said regime will be in effect until December 31, 2019 under which capital gains resulting from the transfer of Peruvian securities (shares or ADRs) are exempted from tax provided the following conditions are met:

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a) The transaction is executed through the Lima Stock Exchange.

b) The seller and its related parties must not transfer 10% or more of the shares or ADRs within a 12-month period.

c) The securities have stock market presence.

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 the Peruvian Securities Commission (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 soles will equal the U.S. dollar value of the 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 soles are converted into U.S. dollars at that time. If the 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 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 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 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 (i.e., because the

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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:

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Investor Relations Department

Calle La Colonia 150,

Urbanización El Vivero, Surco,

Lima, Peru

Tel.: + (511) 317-6000

E-mail: cbustamante@cpsaa.com.pe

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, as amended by Amendment No. 1 thereto dated as of February 21, 2017 (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$0.05 or less per ADS for any cash distribution made pursuant to the deposit agreement;

• a fee of US$1.50 per ADR or ADRs for transfers of certificated or direct registration ADRs;

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• 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;

• 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);

• a fee for the 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 sale of securities (including, without limitation, the 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 fees and charges 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);

• stock transfer or other taxes and other governmental charges;

• SWIFT, cable, telex and facsimile transmission and delivery charges incurred at the request of persons depositing, or holders delivering common shares, ADRs or deposited securities;

• transfer or registration fees for the registration or 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 and Amendment number 1 to the Deposit Agreement is filed as Exhibit 2.3 to this annual report. We encourage you to review this document carefully if you are a holder of ADRs.

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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. See “Item 10. Additional Information—B. Memorandum and Articles of Association—Dispute Resolution.”

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 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, 2016, 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, 2016. 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 (2013 Framework) (COSO). Based on the assessment, our management has concluded that as of December 31, 2016, our internal control over financial reporting was effective.

The effectiveness of internal control over financial reporting as of December 31, 2016 has been audited by Paredes, 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. Report of Independent Registered Public Accounting Firm

To the Board of Directors and Shareholders of Cementos Pacasmayo S.A.A. and Subsidiaries

105

We have audited Cementos Pacasmayo S.A.A. and Subsidiaries’ internal control over financial reporting as of December 31, 2016, based on criteria established in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 Framework) (the COSO criteria). Cementos Pacasmayo S.A.A. and Subsidiaries’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, 2016, 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, 2016 and 2015, 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, 2016 of Cementos Pacasmayo S.A.A. and subsidiaries and our report dated April 28, 2017, expressed an unqualified opinion thereon.

Lima, Peru,

April 28, 2017

Paredes, Burga & Asociados Sociedad Civil de Responsabilidad Limitada

Countersigned by:

/S/ Carlos Valdivia

C.P.C.C. Register No. 27255

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.

106

ITEM 16. [RESERVED]

ITEM 16A. AUDIT COMMITTEE FINANCIAL EXPERT

The Board of Directors has determined that Mrs. Hilda Ochoa-Brillembourg and Mr. Marco Antonio Zaldivar, members of the audit committee, meet the requirements of a “financial expert,” as set forth in the SEC rules. We have determined that Ms. Hilda Ochoa- Brillembourg 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. Mr. Marco Antonio Zaldívar will also be considered independent under the standards of the New York Stock Exchange Listing rules and Rule 10A-3 under the Exchange Act when he becomes a member of the audit committee in May 2017.

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 annual report.

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, 2016, 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, Burga & Asociados SCRL, member firm of EY (formerly Ernst & Young), responsible for auditing the annual consolidated financial statements included in the annual report, during the fiscal years ended December 31, 2016 and 2015.

	Year Ended December 31,
(in thousands of S/)	2016		2015
Audit fees		1,491		1,516
Audit-related fees		—		—
Tax fees		196		232
All other fees		—		—
Total fees		1,687		1,748

Audit fees in the above table are the aggregate fees billed and billable by our independent auditors in connection with the audit of our annual consolidated financial statements and review of our quarterly financial information.

Tax fees in the above table are fees billed relating to tax compliance services.

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.

107

ITEM 16E. PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS

Below is a list of purchases of investment shares by the Company or affiliated purchasers.

Period	Total Number of Shares Purchased		Average Price Paid Per Share			Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs		Maximum Number (or Approximate Dollar Value) of Shares that May Yet Be Purchased Under the Plans or Programs
October 2015		37,276,580		S/	2.90		—		—
January 2017		7,911,845		S/	4.32		—		—

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.

108

ITEM 16H. MINE SAFETY DISCLOSURE

Not applicable.

109

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	Amended and Restated By-laws of the Registrant, as currently in effect
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 on February 21, 2017 (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	Amendment No. 1 dated as of February 21, 2017 to Deposit Agreement among the Registrant, J.P. Morgan Chase N.A., as depositary, and the holders from time to time of American depositary receipts issued thereunder
2.4	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	Addendum, effective February 1, 2016, to the Power Supply Agreement, dated June 3, 2010, between the Registrant and Electroperú S.A. incorporated by reference to Exhibit 4.10 of the Registrant’s Annual Report on Form 20-F filed with the SEC on April 29, 2015 (File No. 001-35401)
4.6	Addemdum, effective as of January 1, 2017, to Power Supply Agreement dated January 2, 2011, between the Registrant and Electro Oriente S.A.
8.1	List of Subsidiaries
12.1	Certificationof the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

110

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.

111

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 Bartolomé Ferreyros Peña
Name:	Manuel Bartolomé Ferreyros Peña
Title:	Chief Financial Officer

Date: April 28, 2017

112

Cementos Pacasmayo S.A.A. and Subsidiaries

Consolidated financial statements as of December 31, 2016 and 2015 together with the Report of Independent Registered Public Accounting Firm

Contents

	Page
Report of Independent Registered Public Accounting Firm		F-1
Consolidated financial statements
Consolidated statements of financial position		F-3
Consolidated statements of profit or loss		F-4
Consolidated statements of other comprehensive income		F-5
Consolidated statements of changes in equity		F-6
Consolidated statements of cash flows		F-7
Notes to the consolidated financial statements		F-9

Report of Independent Registered Public Accounting Firm

To the Board of Directors and Shareholders of Cementos Pacasmayo S.A.A. and Subsidiaries

We have audited the accompanying consolidated statements of financial position of Cementos Pacasmayo S.A.A. and Subsidiaries (together the “Company”) as of December 31, 2016 and 2015, 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, 2016. 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, 2016 and 2015 and the consolidated results of their operations and their cash flows for each of the three years in the period ended December 31, 2016, in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board (IASB).

F-1

Report of Independent Registered Public Accounting Firm (continue)

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, 2016, based on criteria established in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) and our report dated April 28, 2017 expressed an unqualified opinion thereon.

Lima, Peru,

April 28, 2017

Paredes, Burga & Asociados Sociedad Civil de Responsabilidad Limitada

Signed by:

/s/ Carlos Valdivia

Carlos Valdivia Valladares

C.P.C.C. Register No.27255

F-2

Cementos Pacasmayo S.A.A. and Subsidiaries

Consolidated statements of financial position

As of December 31, 2016 and 2015

	Note		2016			2015
			S/(000)			S/(000)
Asset
Current asset
Cash and cash equivalents		6		80,215			158,007
Trade and other receivables		7		81,121			110,897
Income tax prepayments				46,546			44,910
Inventories		8		346,535			307,478
Prepayments				7,909			7,188
Total current asset				562,326			628,480
Assets held for distribution		1		338,411			—
Non-current asset
Trade and other receivables		7		25,120			64,145
Prepayments				1,222			1,432
Available-for-sale financial investments		9		657			436
Derivative financial instruments		30		69,912			124,770
Property, plant and equipment		10		2,273,048			2,490,815
Exploration and evaluation assets		11		43,028			81,862
Deferred income tax assets		15		6,350			21,077
Other assets				549			777
Total non-current asset				2,419,886			2,785,314
Total asset				3,320,623			3,413,794
Liability and equity
Current liabilities
Trade and other payables		12		142,773			170,761
Income tax payable				3,464			3,906
Provisions		13		31,711			28,880
Total current liabilities				177,948			203,547
Liabilities directly related to assets held for distribution		1		2,704			—
Non-current liabilities
Interest-bearing loans and borrowings		14		998,148			1,012,406
Other non-current provisions		13		22,042			32,638
Deferred income tax liabilities		15		139,752			119,069
Total non-current liabilities				1,159,942			1,164,113
Total liability				1,340,594			1,367,660
Equity		16
Capital stock				531,461			531,461
Investment shares				50,503			50,503
Treasury shares				(108,248	)		(108,248	)
Additional paid-in capital				545,165			553,466
Legal reserve				188,075			176,458
Other reserves				(16,602	)		11,649
Retained earnings				677,086			727,765
Equity attributable to equity holders of the parent				1,867,440			1,943,054
Non-controlling interests				112,589			103,080
Total equity				1,980,029			2,046,134
Total liability and equity				3,320,623			3,413,794

The accompanying notes are an integral part of these consolidated financial statements.

F-3

Cementos Pacasmayo S.A.A. and Subsidiaries

Consolidated statements of profit or loss

For the years ended December 31, 2016, 2015 and 2014

	Note	2016			2015			2014
		S/(000)			S/(000)			S/(000)
Sales of goods	17		1,240,169			1,231,015			1,242,579
Cost of sales	18		(736,530	)		(695,757	)		(724,148	)
Gross profit			503,639			535,258			518,431
Operating income (expenses)
Administrative expenses	19		(193,376	)		(179,723	)		(185,546	)
Selling and distribution expenses	20		(39,899	)		(31,481	)		(30,534	)
Net gain on sale of available-for-sale financial investment	9(b)		—			—			10,537
Other operating income (expense), net	22		2,444			3,913			(2,900	)
Total operating expenses, net			(230,831	)		(207,291	)		(208,443	)
Operating profit			272,808			327,967			309,988
Other income (expenses)
Finance income	23		3,240			3,416			11,268
Finance costs	24		(75,397	)		(36,807	)		(31,196	)
(Loss) gain from exchange difference, net	5		(2,541	)		12,194			(14,686	)
Total other expenses, net			(74,698	)		(21,197	)		(34,614	)
Profit before income tax			198,110			306,770			275,374
Income tax expense	15		(78,627	)		(89,383	)		(78,836	)
Profit for the year from continuing operations			119,483			217,387			196,538
Loss for the year from discontinued operations	1		(6,589	)		(5,720	)		(7,749	)
Profit for the year			112,894			211,667			188,789
Attributable to:
Equity holders of the parent			116,174			215,532			192,827
Non-controlling interests			(3,280	)		(3,865	)		(4,038	)
			112,894			211,667			188,789
Earnings per share	26
Basic and diluted profit from continuing and discontinued operations attributable to equity holders of common shares and investment shares of Cementos Pacasmayo S.A.A. (S/ per share)			0.21			0.38			0.33

The accompanying notes are an integral part of these consolidated financial statements.

F-4

Cementos Pacasmayo S.A.A. and Subsidiaries

Consolidated statements of other comprehensive income

For the years ended December 31, 2016, 2015 and 2014

	Note		2016			2015			2014
			S/(000)			S/(000)			S/(000)
Profit for the year				112,894			211,667			188,789
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)		221			(308	)		(16,378	)
Net (loss) gain on cash flows hedges		30(b)		(39,511	)		10,832			4,926
Deferred income tax related to component of other comprehensive income		15		11,039			(4,019	)		8,088
Transfer to profit or loss of fair value of available-for-sale financial investments sold		9(b)		—			—			(10,537	)
Other comprehensive income for the year, net of income tax				(28,251	)		6,505			(13,901	)
Total comprehensive income for the year, net of income tax				84,643			218,172			174,888
Total comprehensive income attributable to:
Equity holders of the parent				87,923			222,037			178,926
Non-controlling interests				(3,280	)		(3,865	)		(4,038	)
				84,643			218,172			174,888

The accompanying notes are an integral part of these consolidated financial statements.

F-5

Cementos Pacasmayo S.A.A. and Subsidiaries

Consolidated statements of changes in equity

For the years ended December 31, 2016, 2015 and 2014

	Attributable to equity holders of the parent
	Capital stock		Investment shares		Treasury shares			Additional paid-in capital			Legal reserve		Unrealized gain (loss) on available-for- sale investments			Unrealized gain on cash flow hedge			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, 2014		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 income		—		—		—			—			—		(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(g)		—		—		—			—			1,670		—			—			—			1,670			—			1,670
Dividends, note 16(g)		—		—		—			—			—		—			—			(116,393	)		(116,393	)		—			(116,393	)
Contribution of non-controlling interests, note 16(h)		—		—		—			—			—		—			—			—			—			1,050			1,050
Other adjustments of non-controlling interests, note 16(h)		—		—		—			(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
Profit for the year		—		—		—			—			—		—			—			215,532			215,532			(3,865	)		211,667
Other comprehensive income		—		—		—			—			—		(229	)		6,734			—			6,505			—			6,505
Total comprehensive income		—		—		—			—			—		(229	)		6,734			215,532			222,037			(3,865	)		218,172
Appropriation of legal reserve, note 16(e)		—		—		—			—			21,553		—			—			(21,553	)		—			—			—
Acquisition of treasury shares, note 16(c)		—		—		(108,248	)		—			—		—			—			—			(108,248	)		—			(108,248	)
Dividends, note 16(g)		—		—		—			—			—		—			—			(162,950	)		(162,950	)		—			(162,950	)
Contribution of non-controlling interests, note 16(h)		—		—		—			—			—		—			—			—			—			28,475			28,475
Other adjustments of non-controlling interests, note 16(h)		—		—		—			(325	)		—		—			—			—			(325	)		325			—
Balance as of December 31, 2015		531,461		50,503		(108,248	)		553,466			176,458		(11	)		11,660			727,765			1,943,054			103,080			2,046,134
Profit for the year		—		—		—			—			—		—			—			116,174			116,174			(3,280	)		112,894
Other comprehensive loss		—		—		—			—			—		156			(28,407	)		—			(28,251	)		—			(28,251	)
Total comprehensive income		—		—		—			—			—		156			(28,407	)		116,174			87,923			(3,280	)		84,643
Appropriation of legal reserve, note 16(e)		—		—		—			—			11,617		—			—			(11,617	)		—			—			—
Dividends, note 16(g)		—		—		—			—			—		—			—			(155,236	)		(155,236	)		—			(155,236	)
Contribution of non-controlling interests, note 16(h)		—		—		—			—			—		—			—			—			—			4,488			4,488
Other adjustments of non-controlling interests, note 16(h)		—		—		—			(8,301	)		—		—			—			—			(8,301	)		8,301			—
Balance as of December 31, 2016		531,461		50,503		(108,248	)		545,165			188,075		145			(16,747	)		677,086			1,867,440			112,589			1,980,029

The accompanying notes are an integral part of these consolidated financial statements.

F-6

Cementos Pacasmayo S.A.A. and Subsidiaries

Consolidated statements of cash flows

For the years ended December 31, 2016, 2015 and 2014

	Note	2016			2015			2014
		S/(000)			S/(000)			S/(000)
Operating activities
Profit before income tax			185,122			297,909			266,257
Non-cash adjustments to reconcile profit before income tax to net cash flows
Depreciation and amortization	10 y 11		111,266			70,810			64,759
Finance costs	24		75,397			36,807			31,196
Long-term incentive plan	21		16,088			14,159			5,944
Change in the estimation of rehabilitation costs	22		5,259			514			—
Adjustment as a result of physical inventories			4,683			2,548			1,069
Provision (recovery) of impairment of inventories, net			3,493			8,909			(453	)
Net loss (gain) on disposal of property, plant and equipment			3,445			(6,674	)		6,466
Estimation (recovery) of impairment of trade and other accounts receivables	20		114			315			(43	)
Net gain on sale of available-for-sale investment	9(b)		—			—			(10,537	)
Finance income			(3,251	)		(3,478	)		(11,705	)
Unrealized exchange difference related to monetary transactions			(1,268	)		(10,029	)		19,143
Other operating, net			220			1,217			(399	)
Working capital adjustments
Decrease (increase) in trade and other receivables			28,079			(6,230	)		(54,814	)
(Increase) decrease in prepayments			(734	)		(1,985	)		9,777
(Increase) decrease in inventories			(49,967	)		5,135			9,785
(Decrease) increase in trade and other payables			(36,203	)		2,949			2,976
			341,743			412,876			339,421
Interests received			2,619			3,176			12,612
Interests paid			(48,000	)		(43,200	)		(41,820	)
Income tax paid			(54,683	)		(97,208	)		(69,827	)
Net cash flows from operating activities			241,679			275,644			240,386
Which includes cash used in discontinued operations for	1		(14,647	)		(9,421	)		(23,475	)

The accompanying notes are an integral part of these consolidated financial statements.

F-7

Consolidated statement of cash flows (continued)

		2016			2015			2014
		S/(000)			S/(000)			S/(000)
Investing activities
Purchase of property, plant and equipment			(126,449	)		(471,179	)		(574,802	)
Purchase of exploration and evaluation assets	11		(10,619	)		(12,187	)		(690	)
Proceeds from sale of available for sale investment			—			—			18,936
Proceeds from sale of property, plant and equipment			1,441			7,499			3,061
Net cash flows used in investing activities			(135,627	)		(475,867	)		(553,495	)
Which includes cash used in investment activities of discontinued operations for	1		(22,352	)		(42,737	)		(29,595	)
Financing activities
Dividends paid			(154,401	)		(162,168	)		(115,824	)
Payment of hedge finance cost			(27,624	)		(15,898	)		—
Contribution of non-controlling interests	16(h)		4,488			28,475			1,050
Purchase of treasury shares	16(c)		—			(108,218	)		—
Net cash flows used in financing activities			(177,537	)		(257,809	)		(114,774	)
Which includes cash provided from financing activities of discontinued operations for	1		4,015			28,198			—
Net decrease in cash and cash equivalents			(71,485	)		(458,032	)		(427,883	)
Net foreign exchange difference			1,268			35,540			31,430
Cash and cash equivalents as of January 1	6		158,007			580,499			976,952
Cash transferred to held assets for distribution	1		(7,575	)		—			—
Cash and cash equivalents as of December 31	6		80,215			158,007			580,499
Transactions with no effect in cash flows:
Unrealized exchange difference related to monetary transactions			(1,268	)		(10,029	)		19,143
Purchase of property, plant and equipment, pending of liquidation			—			7,441			11,752
Sale of property, plant and equipment, pending of collect			8,419			4,034			—
Deferred income tax on costs related to the purchase of treasury shares	15		—			30			—

The accompanying notes are an integral part of these consolidated financial statements.

F-8

Notes to the consolidated financial statements (continued)

Cementos Pacasmayo S.A.A. and Subsidiaries

Notes to the consolidated financial statements

As of December 31, 2016, 2015 and 2014

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 50.01 percent of the Company’s common shares as of December 31, 2016 and 2015. 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, 2016 was authorized by the Company’s Board of Directors on April 28, 2017. The consolidated financial statements as of December 31, 2015 and for the year ended that date were finally approved by the General Shareholders’ Meeting on March 29, 2016.

As of December 31, 2016, 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. (on liquidation).

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, which also produces and sells blocks, cement bricks and ready-mix concrete) 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.

F-9

Notes to the consolidated financial statements (continued)

• 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”) is mainly 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.

• Calizas del Norte S.A.C. (on liquidation); is engaged in the mining activities of prospecting, exploration, marketing and transportation of other goods. On May 31, 2016, the Company decided to liquidate the subsidiary Calizas del Norte S.A.C., because the Group decided to engage a third party the Subsidiary’s activities.

As explained above, as of December 31, 2016 and 2015, 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

Spin-off project -

On September 2016, the General Shareholders’ Meeting of the Company approved a spin-off project that will allow the transfer of a portion of net assets (composed by the assets and liabilities related to the Company’s interest in Fosfatos del Pacífico S.A.) in favor of Fossal S.A.A. (enterprise created as a subsidiary of Inversiones ASPI S.A.). The purpose of the spin-off project is allocating the assets and liabilities of the Company in accordance with the specialization of each business, creating greater flexibility for shareholders and greater clarity in long-term operations. Management estimates that the spin-off will take place in March 2017, and as a result, the capital stock will be reduced by approximately S/107,593,000 (from S/531,461,000 to S/423,868,000).

The project contemplates that for each common and investment share of Cementos Pacasmayo S.A., the shareholders will receive approximately 0.20 common shares of Fossal S.A.A. and approximately 0.80 common shares of Cementos Pacasmayo S.A.A.

As of December 31, 2016, Fosfatos del Pacifico S.A. was classified as a group of assets (along with related liabilities) held for distribution to shareholders and as a discontinued operation.

F-10

Notes to the consolidated financial statements (continued)

The net assets to be transferred are presented in the segment denominated “Other” in Note 31.

Below is set out the results generated by Fosfatos del Pacífico S.A. (net of intercompany eliminations), which have been included in the consolidated statements of profit or loss for the years 2016, 2015 and 2014:

	Fosfatos del Pacífico S.A. (net of intercompany transactions)
	2016			2015			2014
	S/(000)			S/(000)			S/(000)
Sales		2,044			—			—
Cost of sales		(6,881	)		—			—
Administrative expenses		(6,352	)		(8,868	)		(9,309	)
Other expense		(1,006	)		(212	)		(140	)
Finance income		11			62			437
(Loss) gain from exchange difference, net		(804	)		157			(105	)
Loss from discontinued operations before income tax		(12,988	)		(8,861	)		(9,117	)
Income tax		6,399			3,141			1,368
Loss for the year from discontinued operations		(6,589	)		(5,720	)		(7,749	)

As of December 31, 2016, the assets and liabilities of Fosfatos del Pacífico S.A. (net of intercompany eliminations), which have been classified as held for distribution mainly comprise the following:

	S/(000)
Assets -
Cash and cash equivalents		7,575
Inventories		2,734
Income tax prepayments		3,892
Other current assets		248
Other receivables non current		48,985
Property, plant and equipment, net		204,725
Exploration and evaluation assets		47,630
Deferred income tax assets		22,622
		338,411
Liabilities -
Trade and other payables		(2,704	)
Net assets held for distribution		335,707

F-11

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, 2016, 2015 and 2014:

	Assets				Liabilities				Net equity				Net income (loss)
Entity	2016		2015		2016		2015		2016		2015		2016			2015			2014
	S/(000)		S/(000)		S/(000)		S/(000)		S/(000)		S/(000)		S/(000)			S/(000)			S/(000)
Cementos Selva S.A. and subsidiaries		260,927		268,464		36,477		57,375		224,450		211,089		37,361			33,158			26,337
Fosfatos del Pacifico S.A.		339,236		315,935		3,495		10,384		335,741		305,551		(9,010	)		(9,972	)		(10,765	)
Distribuidora Norte Pacasmayo S.R.L.		211,787		232,212		87,182		118,849		124,605		113,363		11,242			7,980			5,231
Empresa de Transmisión Guadalupe S.A.C.		49,339		50,959		724		2,848		48,615		48,111		504			790			1,446
Salmueras Sudamericanas S.A.		47,661		45,698		382		219		47,279		45,479		(2,300	)		(3,478	)		(3,219	)
Calizas del Norte S.A.C. (on liquidation)		1,219		38,144		409		2,476		810		35,668		407			1,779			1,974

F-12

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 and derivative financial instruments 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 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, there are certain standards and amendments applied for the first time by the Group during 2016 that did not require the restatement of previous financial statements, as explained in Note 2.3.20.

2.2 Basis of consolidation -

The consolidated financial statements comprise the financial statements of the Company and its subsidiaries as of December 31, 2016 and 2015. 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 consolidated financial statements from the date the Group gains control until the date the Group ceases to control the subsidiary.

F-13

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 the consolidated statement of 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 short-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 of 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 asset.

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-14

Notes to the consolidated financial statements (continued)

Subsequent measurement -

For purpose of subsequent measurement, financial assets are classified in four categories:

• Financial assets at fair value through profit or loss

• Loans and receivables

• Held-to-maturity investments

• Available for sale financial investments

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, are 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 at fair value through profit or loss as of December 31, 2016 and 2015.

Loans and receivables -

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

F-15

Notes to the consolidated financial statements (continued)

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 December 31, 2016 and 2015.

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 investments 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, 2016 and 2015, see Note 9.

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 the risks and rewards of the asset, but has transferred control of the asset.

F-16

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.

Continuing involvement that takes the form of a guarantee over the transferred asset is measured at the lower of the original carrying amount of the asset and the maximum amount of consideration that the Group could be required to repay.

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 and other 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-17

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.

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-18

Notes to the consolidated financial statements (continued)

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.

Subsequent measurement -

The measurement of financial liabilities depends on their classification, as described below:

Financial liabilities at fair value through profit or loss -

Financial liabilities at fair value through profit or loss include financial liabilities held for trading 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, 2016 and 2015.

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 to Notes 12 and 14.

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.

F-19

Notes to the consolidated financial statements (continued)

(iii) 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.

(iv) Fair value measurement –

The Group measures financial instruments such as derivative financial instruments and available-for-sale investments at fair value at each statement of financial position date. Fair value 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.

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.

F-20

Notes to the consolidated financial statements (continued)

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 and 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.

Financial 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.

(v) 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.

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.

(vi) 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.

F-21

Notes to the consolidated financial statements (continued)

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 other comprehensive income (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 “Unrealized gain on cash flow hedge”, 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.

F-22

Notes to the consolidated financial statements (continued)

2.3.3 Foreign currencies -

The Group’s consolidated financial statements are presented in 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 Non-current assets held for distribution to equity holders of the parent and discontinued operations -

The Group classifies non-current assets and disposal groups as held for distribution to equity holders of the parent if their carrying amounts will be recovered principally through a distribution rather than through continuing use. Such non-current assets and disposal groups classified as held for distribution are measured at the lower of their carrying amount and fair value less costs to distribute. Costs to distribute are the incremental costs directly attributable to the distribution, excluding finance costs and income tax expense.

The criteria for held for distribution classification is regarded as met only when the distribution is highly probable and the asset or disposal group is available for immediate distribution in its present condition. Actions required to complete the distribution should indicate that it is unlikely that significant changes to the distribution will be made or that the decision to distribute will be withdrawn. Management must be committed to the distribution expected within one year from the date of the classification.

Assets and liabilities classified as held for distribution are presented separately in the statement of financial position.

Discontinued operations are excluded from the results of continuing operations and are presented as a single amount as profit or loss after tax from discontinued operations in the statement of profit or loss.

Additional disclosures are provided in Note 1. All other notes to the financial statements include amounts for continuing operations, unless indicated otherwise.

F-23

Notes to the consolidated financial statements (continued)

2.3.5 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.

2.3.6 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 asset. 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, 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.

2.3.7 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.

F-24

Notes to the consolidated financial statements (continued)

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.

An operating lease is a lease other than financial lease. 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.

Group as a lessor:

Leases in which the Group does not transfer substantially all the risks and rewards of ownership of an asset are classified as operating leases. Initial direct costs incurred in negotiating and arranging an operating lease are added to the carrying amount of the leased asset and recognized over the lease term on the same basis as rental income. Contingent rents are recognized as revenue in the period in which they are earned.

2.3.8 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 3) and decommissioning provisions (Note 13).

F-25

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.

2.3.9 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, 2016 and 2015, no amortization under units-of-production method was determined since the mining concessions of the Group are not yet on production phase.

F-26

Notes to the consolidated financial statements (continued)

2.3.10 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.

As of December 31, 2016 and 2015, 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.

2.3.11 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.

F-27

Notes to the consolidated financial statements (continued)

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 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-28

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.

2.3.12 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.

2.3.13 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-29

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.

2.3.14 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-30

Notes to the consolidated financial statements (continued)

As of December 31, 2016 and 2015, the Group only has a rehabilitation provision for the closing of the quarries exploited in operations and 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.

2.3.15 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 government bond 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.

2.3.16 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 received. 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 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:

F-31

Notes to the consolidated financial statements (continued)

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.

2.3.17 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.

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.

F-32

Notes to the consolidated financial statements (continued)

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 net 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.

Sales tax -

Expenses and assets are recognized net of the amount of sales tax, except:

(i) When 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.

F-33

Notes to the consolidated financial statements (continued)

2.3.18 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. On October 15, 2015 the Company acquired 37,276,580 of its investment shares which are presented as a reduction of equity, for further details see Note 16(c).

2.3.19 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.

2.3.20 New amended standards and interpretations -

The Group applied for the first time certain standards and amendments in 2016, although these new standards and amendments did not have a material impact on the consolidated financial statements of the Group. A summary of the new standards related to the Group is described below:

• 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 applied prospectively, with early adoption permitted.

F-34

Notes to the consolidated financial statements (continued)

• Annual Improvements 2012-2014 Cycle

These improvements are effective for annual periods beginning on or after 1 January 2016. They include:

IFRS 5 Non-current assets held for sale and discontinued operations

Assets (or disposal groups) are generally disposed of either through sale or distribution to the owners. The amendment clarifies that changing from one of these disposal methods to the other would not be considered a new plan of disposal, rather it is a continuation of the original plan. There is, therefore, no interruption of the application of the requirements in IFRS 5. This amendment is applied prospectively.

IFRS 7 Financial Instruments: Disclosures

(i) Servicing contracts

The amendment clarifies that a servicing contract that includes a fee can constitute continuing involvement in a financial asset. An entity must assess the nature of the fee and the arrangement against the guidance for continuing involvement in IFRS 7 in order to assess whether the disclosures are required. The assessment of which servicing contracts constitute continuing involvement must be done retrospectively. However, the required disclosures need not be provided for any period beginning before the annual period in which the entity first applies the amendments.

(ii) Applicability of the amendments to IFRS 7 to condensed interim financial statements

The amendment clarifies that the offsetting disclosure requirements do not apply to condensed interim financial statements, unless such disclosures provide a significant update to the information reported in the most recent annual report. This amendment is applied retrospectively.

IAS 19 Employee Benefits

The amendment clarifies that market depth of high quality corporate bonds is assessed based on the currency in which the obligation is denominated, rather than the country where the obligation is located. When there is no deep market for high quality corporate bonds in that currency, government bond rates must be used. This amendment is applied prospectively.

F-35

Notes to the consolidated financial statements (continued)

• Amendments to IAS 1Disclosure Initiative

The amendments to IAS 1Presentation of Financial Statements clarify, rather than significantly change, existing IAS 1 requirements. The amendments clarify:

• The materiality requirements in IAS 1.

• That specific line items in the statement(s) of profit or loss and OCI and the statement of financial position may be disaggregated.

• That entities have flexibility as to the order in which they present the notes to financial statements.

• That the share of OCI of associates and joint ventures accounted for using the equity method must be presented in aggregate as a single line item, and classified between those items that will or will not be subsequently reclassified to profit or loss.

Furthermore, the amendments clarify the requirements that apply when additional subtotals are presented in the statement of financial position and the statement(s) of profit or loss and OCI.

• Amendments to IFRS 10, IFRS 12 and IAS 28 Investment Entities: Applying the Consolidation Exception

The amendments address issues that have arisen in applying the investment entities exception under IFRS 10.The amendments to IFRS 10 clarify that the exemption from presenting consolidated financial statements applies to a parent entity that is a subsidiary of an investment entity, when the investment entity measures all of its subsidiaries at fair value.

Furthermore, the amendments to IFRS 10 clarify that only a subsidiary of an investment entity that is not an investment entity itself and that provides support services to the investment entity is consolidated. All other subsidiaries of an investment entity are measured at fair value. The amendments to IAS 28 allow the investor, when applying the equity method, to retain the fair value measurement applied by the investment entity associate or joint venture to its interests in subsidiaries.

These amendments are applied retrospectively.

The Group has not 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.

F-36

Notes to the consolidated financial statements (continued)

Other disclosures relating to the Group’s exposure to risks and uncertainties includes:

• Capital management, Note 29.

• Financial instruments risk management and policies, Note 29.

• Sensitivity analyses disclosures, Note 29.

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 2.3.8, 2.3.9, 2.3.10 and 2.3.11.

• Recognition of exploration and evaluation assets and mine development costs – Notes 2.3.10, 2.3.11 and Note 11.

• Ore reserve and resource estimates – Note 2.3.12.

• Review of asset carrying values and impairment charges – note 2.3.2, 2.3.13 and Note 10.

• Income tax – Notes 2.3.17 and 15.

• Cash flow hedges – Notes 2.3.2(vi) and 30(b).

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 that brings together all three aspects of the accounting for 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 1 January 2018, with early application permitted. Retrospective application is required but providing comparative information is not compulsory. The Group will assess the impact of IFRS 9 and plans to adopt the new standard on the required effective date.

F-37

Notes to the consolidated financial statements (continued)

• 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 new revenue standard is applicable for all entities and will supersede all current revenue recognition requirements under IFRS. Either a full retrospective application or a modified retrospective application is required for annual periods beginning on or after 1 January 2018 with early adoption permitted.

The Group plans to adopt the new standard on the required effective date using the full retrospective method. For this purpose, management has prepared a detailed plan of adoption that contemplates tasks (diagnostic, review of systems, internal control and policies and procedures), deadlines and responsible persons, which has started on the fourth quarter of 2016 and is expected to be completed by October, 2017.

The Group is in the business of production and commercialization of cement, blocks, concrete and quicklime, as well as the commercialization of construction supplies. These goods are sold in identified contracts with customers.

Contracts with customers in which the sale of goods is expected to be the only performance obligation, are not expected to have any impact on the Group’s profit or loss. The Group expects the revenue recognition to occur at a point in time when control of the asset is transferred to the customer, generally on delivery of the goods.

In preparing to IFRS 15, the Group is considering the following:

(i) Variable consideration -

Some contracts with customers provide trade discounts for volume sold. Currently, the Group recognizes revenue from the sale of goods measured at the fair value of the consideration received, net of discounts. The Group will assess whether a variable consideration under IFRS 15 should be recognized for this purpose.

(ii) Presentation requirements and disclosures –

IFRS 15 provides presentation and disclosure requirements that represent a significant change from current practice and significantly increases the volume of disclosures required in the Group’s financial statements. Many of the disclosures requirements in IFRS 15 are completely new. In 2016, the Group started the assessment of the effect of these new requirements on the systems, internal control, policies and procedures necessary to collect and disclose the required information.

F-38

Notes to the consolidated financial statements (continued)

• IAS 7 Disclosure Initiative – Amendments to IAS 7

The amendments to IAS 7 Statement of Cash Flows are part of the IASB’s Disclosure Initiative and require an entity to provide disclosures that enable users of financial statements to evaluate changes in liabilities arising from financing activities, including both changes arising from cash flows and non-cash changes. On initial application of the amendment, entities are not required to provide comparative information for preceding periods. These amendments are effective for annual periods beginning on or after 1 January 2017, with early application permitted. Application of amendments will result in additional disclosure provided by the Group.

• IAS 12 Recognition of Deferred Tax Assets for Unrealized Losses – Amendments to IAS 12

The amendments clarify that an entity needs to consider whether tax law restricts the sources of taxable profits against which it may make deductions on the reversal of that deductible temporary difference. Furthermore, the amendments provide guidance on how an entity should determine future taxable profits and explain the circumstances in which taxable profit may include the recovery of some assets for more than their carrying amount.

Entities are required to apply the amendments retrospectively. However, on initial application of the amendments, the change in the opening equity of the earliest comparative period may be recognized in opening retained earnings (or in another component of equity, as appropriate), without allocating the change between opening retained earnings and other components of equity. Entities applying this relief must disclose that fact.

These amendments are effective for annual periods beginning on or after 1 January 2017 with early application permitted. If an entity applies the amendments for an earlier period, it must disclose that fact. These amendments are not expected to have any impact on the Group.

• IFRS 16 Leases

IFRS 16 sets out the principles for the recognition, measurement, presentation and disclosure of leases and requires lessees to account for all leases under a single on-balance sheet model similar to the accounting for finance leases under IAS 17. The standard includes two recognition exemptions for lessees – leases of ’low-value’ assets and short-term leases.

At the commencement date of a lease, a lessee will recognize a liability to make lease payments and an asset representing the right to use the underlying asset during the lease term. Lessees will be required to separately recognize the interest expense on the lease liability and the depreciation expense on the right-of-use asset.

Lessees will be also required to re measure the lease liability upon the occurrence of certain events (e.g., a change in the lease term, a change in future lease payments resulting from a change in an index or rate used to determine those payments). The lessee will generally recognize the amount of the remeasurement of the lease liability as an adjustment to the right-of-use asset.

F-39

Notes to the consolidated financial statements (continued)

Lessor accounting under IFRS 16 is substantially unchanged from today’s accounting under IAS 17. Lessors will continue to classify all leases using the same classification principle as in IAS 17 and distinguish between two types of leases: operating and finance leases.

IFRS 16 also requires lessees and lessors to make more extensive disclosures than under IAS 17.

IFRS 16 is effective for annual periods beginning on or after 1 January 2019. Early application is permitted, but not before an entity applies IFRS 15. A lessee can choose to apply the standard using either a full retrospective or a modified retrospective approach. The standard’s transition provisions permit certain reliefs.

The Group is assessing the potential effect of IFRS 16 on its consolidated financial statements.

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, 2016 the exchange rates for transactions in United States dollars, published by this institution, were S/3.352 for purchase and S/3.360 for sale (S/3.408 for purchase and S/3.413 for sale as of December 31, 2015).

As of December 31, 2016 and 2015, the Group had the following assets and liabilities in United States dollars:

	2016			2015
	US$(000)			US$(000)
Assets
Cash and cash equivalents		3,371			29,153
Trade and other receivables		5,517			8,472
Advances to suppliers for work in progress		2,733			5,997
Assets held for distribution		1,885			—
		13,506			43,622
Liabilities
Trade and other payables		(15,224	)		(15,174	)
Liabilities held for distribution		(379	)		—
Interest-bearing loans and borrowings		(300,000	)		(300,000	)
		(315,603	)		(315,174	)
		(302,097	)		(271,552	)
Cross currency swap position		300,000			300,000
Net monetary position		(2,097	)		28,448

As of December 31, 2016 and 2015, the Group maintains cross currency swaps contracts (“CCS”) designated as cash flow hedges for its Senior Notes denominated in US dollars, see note 14.

F-40

Notes to the consolidated financial statements (continued)

During 2016, the net loss originated from exchange differences was approximately S/2,541,000, during 2015 the net gain from exchange difference amounted to S/12,194,000, and in 2014 the net result from exchange differences was a loss of S/14,686,000, which were presented in the “(Loss) gain from exchange difference, net” caption in the consolidated statements of profit or loss.

6. Cash and cash equivalents

(a) This caption was made up as follows:

	2016		2015		2014
	S/(000)		S/(000)		S/(000)
Cash on hand		1,391		1,388		2,763
Cash at banks (b)		28,424		46,419		283,568
Short-term deposits (c)		50,400		110,200		294,168
		80,215		158,007		580,499

(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.

(c) As of December 31, 2016, 2015 and 2014, 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 2017, 2016 and 2015, respectively.

During the years 2016, 2015 and 2014, the term deposits generated interests for S/2,154,000, S/2,587,000 and S/6,824,000, respectively, see Note 23. From these amounts S/114,000 and S/131,000 are pending of collection as of December 31, 2016 and 2015, respectively, see Note 7(a).

F-41

Notes to the consolidated financial statements (continued)

7. Trade and other receivables

(a) This caption was made up as follows:

	Current						Non-current
	2016			2015			2016		2015
	S/(000)			S/(000)			S/(000)		S/(000)
Trade receivables (b)		68,529			73,154			—		—
Other receivables from sale of fixed assets		2,780			4,034			5,639
Loans to employees		1,972			1,267			—		—
Accounts receivable from Parent company and affiliates, note 25		704			504			—		—
Funds restricted to tax payments		353			2,190			—		—
Interests receivables, note 6(c)		114			131			—		—
Other accounts receivable		4,069			5,038			—		—
Allowance for doubtful accounts (e)		(781	)		(667	)		—		—
Financial assets classified as receivables (f)		77,740			85,651			5,639		—
Value-added tax credit (c)		2,752			24,681			9,511		54,175
Tax refund receivable (d)		629			565			9,970		9,970
Non-financial assets classified as receivables		3,381			25,246			19,481		64,145
		81,121			110,897			25,120		64,145

(b) Trade account receivables are interest bearing and are generally 30-90 day terms.

(c) As of December 31, 2016, the value-added tax credit is mainly related to the activities of Salmueras Sudamericanas S.A. (Salmueras). According to the Peruvian current tax rules, the Group has the right to compensate this credit against the value-added tax to be generated by Salmueras on its future sales. This kind of tax credit never expires. From the total amount, S/5,582,000 will be recovered in the long term when the brine project begins operations.

(d) As of December 31, 2016 and 2015, 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-42

Notes to the consolidated financial statements (continued)

(e) The movement of the allowance for doubtful accounts is as follows:

	2016		2015		2014
	S/(000)		S/(000)		S/(000)
Opening balance		667		352		395
Additions, note 20		114		315		—
Recovery, note 20		—		—		(43	)
Ending balance		781		667		352

(f) The aging analysis of trade and other accounts receivable as of December 31, 2016 and 2015, 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)
2016		83,379		58,865		17,551		1,477		651		374		4,461
2015		85,651		68,332		13,138		1,586		643		282		1,670

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:

	2016			2015
	S/(000)			S/(000)
Goods and finished products		21,427			22,929
Work in progress		107,882			88,349
Raw materials		71,248			74,393
Packages and packing		2,045			2,081
Fuel and carbon		29,033			41,745
Spare parts and supplies		117,643			89,550
Inventory in transit		3,941			2,486
		353,219			321,533
Less - Provision for inventory obsolescence and net realizable value (b)		(6,684	)		(14,055	)
		346,535			307,478

F-43

Notes to the consolidated financial statements (continued)

(b) Movement in the provision for inventory obsolescence and net realizable value is set forth below:

	2016			2015			2014
	S/(000)			S/(000)			S/(000)
Opening balance		14,055			5,146			5,599
Additions		1,725			9,335			80
Recoveries		(226	)		(426	)		(533	)
Disposals		(8,870	)		—			—
Final balance		6,684			14,055			5,146

9. Available–for-sale financial investments

(a) Movement in available-for-sale financial investments is as follow:

	2016		2015			2014
	S/(000)		S/(000)			S/(000)
Beginning balance		436		744			36,058
Fair value change recorded in other comprehensive income		221		(308	)		(16,378	)
Disposals (b)		—		—			(18,936	)
Ending balance		657		436			744

(b) Available-for-sale financial investments include the following:

	2016
	Cost		Unrealized gain			Fair value
	S/(000)		S/(000)			S/(000)
Equity securities – listed Peruvian company		450		207			657
Total		450		207			657
	2015
	Cost		Unrealized loss			Fair value
	S/(000)		S/(000)			S/(000)
Equity securities – listed Peruvian company		450		(14	)		436
Total		450		(14	)		436

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. (listed Peruvian company) shares are publicly traded in Lima Stock Exchange (LSE).

F-44

Notes to the consolidated financial statements (continued)

As of January 1, 2014 the Company had equity shares of Sindicato de Inversiones y Administración S.A. (SIA), the main shareholder of Union Andina de Cementos S.A.A. with a participation of 43.38% in its capital stock. 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 2016 and 2015 is as follows (number of shares):

	2016		2015
Unión Andina de Cementos S.A.A. (*)		256,624		256,624

(*) Represents 0.016% 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, 2016 and 2015.

F-45

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		Capitalized interests		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)			S/(000)
Cost
As of January 1, 2015		77,487			102,010			218,066			313,769			810,666			29,840			117,219			45,511			4,575		22,773		771,324			2,513,240
Additions		1,734			23,117			3,421			—			3,192			1,316			7,045			3,349			—		—		435,446			478,620
Capitalized interests (d)		—			—			—			—			—			—			—			—			—		38,822		—			38,822
Disposals		(4	)		—			(2,247	)		(283	)		(362	)		(88	)		(292	)		(236	)		—		—		(2,026	)		(5,538	)
Transfers		—			—			—			123,184			173,146			29			1,314			4,390			—		—		(313,998	)		(11,935	)
As of December 31, 2015		79,217			125,127			219,240			436,670			986,642			31,097			125,286			53,014			4,575		61,595		890,746			3,013,209
Additions		484			4,944			44			—			13,297			109			2,651			1,803			1,488		—		82,362			107,182
Capitalized interests (d)		—			—			—			—			—			—			—			—			—		3,309		—			3,309
Disposals		—			—			—			—			(13,661	)		(9	)		(7,020	)		(18	)		—		—		(871	)		(21,579	)
Transfers		136			1,473			61			240,992			515,631			19			502			1,307			—		—		(758,749	)		1,372
Assets held for distribution		(3,029	)		(89,959	)		—			(20,114	)		(65,525	)		(703	)		(1,711	)		(2,605	)		—		—		(28,835	)		(212,481	)
As of December 31, 2016		76,808			41,585			219,345			657,548			1,436,384			30,513			119,708			53,501			6,063		64,904		184,653			2,891,012
Accumulated depreciation
As of January 1, 2015		12,161			9,457			—			42,353			182,366			25,916			48,319			34,266			1,432		—		—			356,270
Additions		72			—			—			10,048			46,826			768			9,824			3,258			—		14		—			70,810
Disposals		—			—			—			(35	)		(178	)		(79	)		(160	)		(228	)		—		—		—			(680	)
As of December 31, 2015		12,233			9,457			—			52,366			229,014			26,605			57,983			37,296			1,432		14		—			426,400
Additions		72			296			—			17,194			76,322			852			11,104			3,572			—		1,403		—			110,815
Disposals		—			—			—			—			(4,613	)		(3	)		(2,866	)		(7	)		—		—		—			(7,489	)
Assets held for distribution		(186	)		—			—			(615	)		(3,805	)		(250	)		(1,511	)		(1,389	)		—		—		—			(7,756	)
As of December 31, 2016		12,119			9,753			—			68,945			296,918			27,204			64,710			39,472			1,432		1,417		—			521,970
Impairment mining assets (b)		41,213			24,048			258			13,837			12,166			168			26			400			3,143		—		735			95,994
Net book value
As of December 31, 2016		23,476			7,784			219,087			574,766			1,127,300			3,141			54,972			13,629			1,488		63,487		183,918			2,273,048
Assets held for distribution as of December 31, 2016		2,843			89,959			—			19,499			61,720			453			200			1,216			—		—		28,835			204,725
As of December 31, 2015		25,771			91,622			218,982			370,467			745,462			4,324			67,277			15,318			—		61,581		890,011			2,490,815

F-46

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/41,213,000 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 2016 and 2015.

(d) During 2016 and 2015 the Group capitalized borrowing costs by S/3,309,000 and S/38,822,000 mainly related with the expansion of the cement plant located in Piura. The rate used to determine the amount of borrowings costs eligible for capitalization was approximately 5.00 percent as of December 31, 2016, 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 on qualifying assets. Since September, 2015 a part of this project is operating. On February, 2016 a significant part of this cement plant was launched to operations, and the Group ceased to capitalize borrowing costs.

(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, 2016.

(f) Work in progress included in property, plant and equipment as of December 31, 2016 amounted to S/183,918,000 (2015: S/890,011,000) is mainly related to complementary facilities of the cement plant located in 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, 2015		57,740
Additions (b)		12,187
Transfers		11,935
As of December 31, 2015		81,862
Additions (b)		10,619
Transfers		(1,372	)
Amortization		(451	)
Assets held for distribution		(47,630	)
As of December 31, 2016		43,028

F-47

Notes to the consolidated financial statements (continued)

(b) As of December 31, 2016, the exploration and evaluation assets mainly include S/33,469,000 related to brine project, and S/9,559,000 related to others minor projects. As of December 31, 2015, mainly include S/33,469,000 related to brine project, S/40,521,000 related to phosphates project, and S/7,872,000 related to others minor projects.

(c) As of December 31, 2016 and 2015, 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:

	2016		2015
	S/(000)		S/(000)
Trade payables		64,098		86,067
Interests payable		17,892		18,174
Taxes and contributions		15,003		8,011
Remuneration payable		14,108		19,030
Hedge finance cost payable		11,073		10,897
Board of Directors’ fees		5,406		6,329
Dividends payable, note 16(g)		5,070		4,235
Guarantee deposits		2,302		4,177
Advances from customers		1,181		7,428
Other accounts payable		6,640		6,413
		142,773		170,761

Trade accounts payable result from the purchases of material, services and supplies for the Group operation, and mainly correspond to invoices payable to domestic suppliers. Are non-interest bearing and are normally settled on 60 to 120 days term.

Other payables are non-interest bearing and have an average term of 3 months.

Interest payable is normally settled semiannually throughout the financial year.

For explanations on the Group´s liquidity risk management processes, refer to Note 29.

F-48

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, 2016		21,273			36,906			3,339			61,518
Additions, notes 21 and 25		18,692			16,088			1,488			36,268
Change in estimates, note 22		—			—			5,259			5,259
Unwinding of discount, note 24		—			345			—			345
Payments and advances		(22,947	)		(18,971	)		(7,719	)		(49,637	)
At December 31, 2016		17,018			34,368			2,367			53,753
Current portion		17,018			13,817			876			31,711
Non-current portion		—			20,551			1,491			22,042
		17,018			34,368			2,367			53,753
At January 1, 2015		29,353			21,959			3,171			54,483
Additions, notes 21 and 25		23,393			14,159			—			37,552
Change in estimates, note 22		—			—			514			514
Unwinding of discount, note 24		—			788			—			788
Payments and advances		(31,473	)		—			(346	)		(31,819	)
At December 31, 2015		21,273			36,906			3,339			61,518
Current portion		21,273			5,788			1,819			28,880
Non-current portion		—			31,118			1,520			32,638
		21,273			36,906			3,339			61,518

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.

F-49

Notes to the consolidated financial statements (continued)

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: to a group on the sixth year since the creation of this bonuses plan, to a second group on the seventh year since the creation of this bonuses plan and the last payment at the end of the ninth 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 value of this deferred obligation and the related current deferred cost, considering the expected increases in salary base and the corresponding current government bond discount rate. As of December 31, 2016 and 2015, the Group maintains a recorded liability for S/34,368,000 and S/36,906,000, respectively, related to this compensation.

Rehabilitation provision -

As of December 31, 2016 and 2015, it corresponds to the provision for the future costs of rehabilitating the quarries exploited in Company’s operations and 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 and the range of risk free discount rates used in the calculation of the present value of this provision as of December 31, 2016 were from 6.52 to 7.65 percent (average rate of 6.09 percent as of December 31, 2015).

Management expects to incur a significant part of this obligation in the medium and long 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		2016		2015
	%				S/(000)		S/(000)
Senior Notes
Principal, net of issuance costs		4.50		Feb 8, 2023		998,148		1,012,406
Total non-current loans						998,148		1,012,406

F-50

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 has been used in capital expenditures 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. (on liquidation).

As of December 31, 2016 and 2015, the Senior Notes accrued interest recorded in the consolidated statement of profit or loss for S/44,729,000 and S/8,108,000, net of capitalization of interest, 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, 2016 and 2015, the Company has not entered in any of the operations mentioned before.

As of December 31, 2016, the Group entered into cross currency swaps contracts (“CCS”) to reduce the foreign exchange risk of its Senior Notes which are denominated in US dollars, see Note 30(b).

F-51

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, 2015			Effect on profit or loss			Effect on OCI			Effect on Equity			As of December 31, 2015			Effect on profit or loss			Effect on OCI			Discontinued operations			As of December 31, 2016
	S/(000)			S/(000)			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		17,183			3,944			—			—			21,127			301			—			(16,475	)		4,953
Pre-operating costs		—			—			—			—			—			1,287			—			—			1,287
Provision for vacations		369			(14	)		—			—			355			(116	)		—			(167	)		72
Other		66			(4	)		—			—			62			10			—			(36	)		36
		17,618			3,926			—			—			21,544			1,482			—			(16,678	)		6,348
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	)		(24	)		—			—			(467	)		14			—			455			2
		(443	)		(24	)		—			—			(467	)		14			—			455			2
Total deferred income tax assets, net		17,175			3,902			—			—			21,077			1,496			—			(16,223	)		6,350
Movement of deferred income tax liabilities:
Deferred income tax assets
Impairment of zinc mining assets		24,986			—			—			—			24,986			3,332			—			—			28,318
Long-term incentive plan		6,149			4,185			—			—			10,334			(196	)		—			—			10,138
Provision for vacations		3,406			645			—			—			4,051			(382	)		—			—			3,669
Other		3,240			2,555			—			—			5,795			(2,016	)		—			—			3,779
		37,781			7,385			—			—			45,166			738			—			—			45,904
Deferred income tax liabilities
Effect of differences between book and tax bases of fixed assets and in the depreciation rates used for book purposes		(113,307	)		(10,850	)		—			—			(124,157	)		(33,479	)		—			—			(157,636	)
Effect of available-for-sale investments		(76	)		—			79			—			3			—			(65	)		—			(62	)
Net gain on cash flow hedge		(1,995	)		(26,346	)		(4,098	)		—			(32,439	)		711			11,104			—			(20,624	)
Effect of costs of issuance of senior notes		(3,678	)		460			—			—			(3,218	)		312			—			—			(2,906	)
Other		(4,608	)		214			—			(30	)		(4,424	)		(4	)		—			—			(4,428	)
		(123,664	)		(36,522	)		(4,019	)		(30	)		(164,235	)		(32,460	)		11,039			—			(185,656	)
Total deferred income tax liabilities, net		(85,883	)		(29,137	)		(4,019	)		(30	)		(119,069	)		(31,722	)		11,039			—			(139,752	)
					(25,235	)		(4,019	)		(30	)					(30,226	)		11,039			—

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-52

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 2016, 2015 and 2014 is as follows:

	2016			2015			2014
	S/(000)			S/(000)			S/(000)
Profit before income tax from continuing operations		198,110			306,770			275,374
Loss before income tax from discontinued operations		(12,988	)		(8,861	)		(9,117	)
Accounting profit before income tax		185,122			297,909			266,257
At statutory income tax rate of 28% (2016) , 28% (2015) and 30% (2014)		(51,834	)		(83,415	)		(79,877	)
Permanent differences
Dividends obtained from available-for-sale investments		8			34			103
Effect of tax-loss carry forward non-recognized		(171	)		(233	)		(275	)
Non-deductible expenses, net		(5,592	)		(5,274	)		(7,916	)
Effect of the change in income tax-rate		(14,639	)		2,646			10,497
At the effective income tax rate of 39% in 2016 (2015 and 2014: 29%)		(72,228	)		(86,242	)		(77,468	)
Income tax from continuing operations		(78,627	)		(89,383	)		(78,836	)
Income tax from discontinued operations		6,399			3,141			1,368
		(72,228	)		(86,242	)		(77,468	)

In December 2016, the Peruvian Government approved an increase of the income tax rate from 28 percent to 29.50 percent to be effective from 2017 onwards. This increase on future tax rates has increased the deferred income tax liability on S/22,344,000 and increased the deferred income tax asset on S/8,529,000 (S/14,639,000 was recognized as a higher income tax expense in the consolidated statement of profit or loss and S/824,000 as an income in OCI).

In December 2014, the Peruvian Government approved the progressive reduction of the income tax rate from 30 percent to 28 percent to be effective in 2015 and 2016, to 27 percent during 2017 and 2018 and 26 percent starting from 2019 onwards. As of December 31, 2015 and 2014, this reduction on future tax rates had a net impact of S/2,646,000 and S/10,497,000, as a reduction of the deferred income tax liability of the Group, respectively. Such amount was recognized as a reduction of income tax expense in the consolidated statement of profit or loss.

F-53

Notes to the consolidated financial statements (continued)

The income tax expenses shown for the years ended December 31, 2016, 2015 and 2014 are:

	2016			2015			2014
	S/(000)			S/(000)			S/(000)
Consolidated statements of profit or loss
Current		(48,401	)		(61,007	)		(88,404	)
Deferred		(30,226	)		(28,376	)		9,568
		(78,627	)		(89,383	)		(78,836	)

The income tax recorded directly to other comprehensive income during the year 2016 is a gain of S/11,039,000; during 2015 and 2014 was a loss of S/4,019,000 and a gain of S/8,088,000, respectively.

Following is the composition of deferred tax related to items recognized in OCI and equity during the year:

	2016			2015			2014
	S/(000)			S/(000)			S/(000)
Tax effect on unrealized gain (loss) on available-for-sale financial asset		(57	)		79			8,088
Tax effect on unrealized gain (loss) on derivative financial asset		10,272			(4,098	)		—
Effect of the change in income tax-rate		824			—			—
Total deferred income tax in OCI		11,039			(4,019	)		8,088
Temporary difference on purchase of treasury shares		—			(30	)		—
Total deferred income tax in equity		—			(30	)		—

As of December 31, 2016, the deferred income tax asset related to tax-losses carry forward was mainly determined by the subsidiary Salmueras Sudamericanas S.A. for approximately S/4,953,000. As of December 31, 2015 and 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/21,127,000 and S/17,183,000, 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/2,843,000 ( 2015: S/2,258,000).

F-54

Notes to the consolidated financial statements (continued)

As of December 31, 2016, 2015 and 2014, 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 generate a deferred tax liability aggregate to S/57,615,000 (2015: S/48,012,000), which should not be recognized in the consolidated financial statements according with IAS 12

16. Equity

(a) Share capital -

As of December 31, 2016, 2015 and 2014 share capital is represented by 531,461,479, authorized common shares subscribed and fully paid, with a nominal value of one Sol per share. From the total outstanding common shares as of December 31, 2016 and 2015; 111,484,000 are listed in the New York Stock Exchange and 419,977,479 in the Lima Stock Exchange.

(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;

(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, 2016, 2015 and 2014, the Company has 50,503,124 investment shares subscribed and fully paid, with a nominal value of one Sol per share.

(c) Treasury shares -

Corresponds to 37,276,580 of the Company’s investment shares acquired in October 15, 2015 for an amount of S/108,248,000.

(d) Additional paid-in capital -

Additional paid-in capital is represented mainly 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 on 2012. This amount corresponds to the excess of the total proceeds obtained by this transaction in relation to the nominal value of these shares.

F-55

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) Other reserves -

This reserve records fair value changes on available-for-sale financial assets and the unrealized results on cash flow hedge.

(g) Distributions made and proposed –

	2016		2015		2014
	S/(000)		S/(000)		S/(000)
Cash dividends on ordinary shares declared and paid
Dividend for 2016: S/0.28500 per share (2015: S/0.28000 per share, 2014: S/0.20000 per share)		155,236		162,950		116,393
		155,236		162,950		116,393

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, 2016 and 2015, dividends payable amount to S/5,070,000 and S/4,235,000, respectively. On 2014, 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.

(h) 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 February 2, 2016 agreed a contribution of S/4,100,000. The General Shareholders’ Meeting held on June 4, 2015, agreed a contribution of S/2,400,000. The General Shareholders’ Meeting held on March 6, 2014 and July 1, 2014 agreed a contribution of S/7,100,000 and S/2,000,000 respectively. During 2016, the contribution made by Quimpac S.A. amounted to S/473,000 (S/277,000 and S/1,050,000; during 2015 and 2014, respectively).

All these contributions are partial payments of the capital commitment assumed by the Company and Quimpac S.A., if the brine project is developed up to US$100,000,000 and US$14,000,000, respectively, to maintain its interests in this subsidiary.

F-56

Notes to the consolidated financial statements (continued)

The effect of the difference on capital contributions and interests acquired by each shareholder amounted to S/556,000, S/325,000 and S/1,234,000, during the years 2016, 2015 and 2014, 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 August 2, 2016 agreed a contribution of S/13,384,000. During the year ended December 31, 2016, the contribution made by MCA Phosphates Pte. amounted to S/4,015,000.

The General Shareholders´ Meeting of the subsidiary Fosfatos del Pacifico S.A. held on July 14 and September 25, 2015, agreed a contribution of S/78,178,000 and S/15,813,000, respectively. In connection with this agreement, during the year ended December 31, 2015, the contribution made by MCA Phosphates Pte. amounted to S/28,198,000.

Fosfatos del Pacifico S.A. has a brick plant; regarding this project, during February, July, September and December, 2016, the Company made additional capital contributions of S/23,216,000, S/1,000,000, S/1,200,000 and S/400,000, respectively, which were approved by the Board of Directors. 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. All these contributions did not include a change in the percentage interests held by the current shareholders.

The effect of the difference on capital contributions and interests maintained by each shareholder amounted to S/7,745,000 and S/1,269,000 during the years 2016 and 2014, 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:

	2016		2015		2014
	S/(000)		S/(000)		S/(000)
Cement, concrete and blocks		1,103,426		1,089,232		1,085,366
Building materials		59,888		75,565		95,405
Quicklime		75,090		64,140		61,051
Other		1,765		2,078		757
		1,240,169		1,231,015		1,242,579

F-57

Notes to the consolidated financial statements (continued)

18. Cost of sales

This caption is made up as follows:

	2016			2015			2014
	S/(000)			S/(000)			S/(000)
Beginning balance of goods and finished products, note 8(a)		22,929			18,951			19,102
Beginning balance of work in progress, note 8(a)		88,349			69,711			59,561
Consumption of miscellaneous supplies		246,033			286,420			306,187
Maintenance and third-party services		172,781			113,042			124,273
Depreciation and amortization		94,726			58,856			52,132
Shipping costs		95,031			106,464			106,636
Personnel expenses, note 21(b)		90,139			67,681			71,298
Costs of packaging		35,924			34,273			30,785
Other manufacturing expenses		19,927			51,637			42,836
Ending balance of goods and finished products, note 8(a)		(21,427	)		(22,929	)		(18,951	)
Ending balance of work in progress, note 8(a)		(107,882	)		(88,349	)		(69,711	)
		736,530			695,757			724,148

19. Administrative expenses

This caption is made up as follows:

	2016		2015		2014
	S/(000)		S/(000)		S/(000)
Personnel expenses, note 21(b)		100,059		94,129		96,944
Third-party services		63,085		56,669		60,198
Depreciation and amortization		12,761		10,671		11,531
Board of Directors compensation		6,149		7,105		4,887
Donations		5,832		6,060		5,876
Taxes		2,861		2,214		2,681
Consumption of supplies		2,053		2,419		2,921
Environmental expenditures, note 27		576		456		508
		193,376		179,723		185,546

F-58

Notes to the consolidated financial statements (continued)

20. Selling and distribution expenses

This caption is made up as follows:

	2016		2015		2014
	S/(000)		S/(000)		S/(000)
Personnel expenses, note 21(b)		17,096		16,230		15,438
Advertising and promotion		15,631		8,410		9,710
Third-party services		4,551		4,596		2,812
Provision (recovery) for doubtful accounts, note 7(e)		114		315		(43	)
Other		2,507		1,930		2,617
		39,899		31,481		30,534

21. Employee benefits expenses

(a) Employee benefits expenses are made up as follow:

	2016		2015		2014
	S/(000)		S/(000)		S/(000)
Wages and salaries		101,250		87,052		91,622
Social contributions		23,687		17,739		18,284
Cessation payments		19,184		6,834		7,919
Workers ‘profit sharing, note 13		18,692		23,393		31,854
Long-term compensation, note 13		16,088		14,159		5,944
Legal bonuses		13,477		12,124		12,601
Vacations		11,974		11,338		11,559
Training		1,510		3,429		1,748
Others		1,432		1,972		2,149
		207,294		178,040		183,680

(b) Employee benefits expenses are allocated as follows:

	2016		2015		2014
	S/(000)		S/(000)		S/(000)
Cost of sales, note 18		90,139		67,681		71,298
Administrative expenses, note 19		100,059		94,129		96,944
Selling and distribution expenses, note 20		17,096		16,230		15,438
		207,294		178,040		183,680

F-59

Notes to the consolidated financial statements (continued)

22. Other operating income (expense), net

This caption is made up as follows:

	2016			2015			2014
	S/(000)			S/(000)			S/(000)
Net income from sale of impaired inventories		2,593			—			—
Income from management and administrative services provided to related parties, note 25		1,103			505			498
Recovery of expenses		1,053			2,533			1,346
Income from land rental and office lease, note 25		700			664			547
Changes in the estimation of rehabilitation provision, note 13		(5,259	)		(514	)		—
Net (loss) gain on disposal of property, plant and equipment		(3,466	)		6,851			(6,466	)
Impairment of inventories		—			(9,335	)		—
Other minor, net		5,720			3,209			1,175
		2,444			3,913			(2,900	)

23. Finance income

This caption is made up as follows:

	2016		2015		2014
	S/(000)		S/(000)		S/(000)
Interest on term deposits, note 6(c)		2,154		2,587		6,824
Other finance income		623		206		—
Interests on accounts receivable		437		492		451
Dividends received		26		131		343
Gain on financial instrument (forward)		—		—		3,650
		3,240		3,416		11,268

F-60

Notes to the consolidated financial statements (continued)

24. Finance costs

This caption is made up as follows:

	2016		2015		2014
	S/(000)		S/(000)		S/(000)
Finance cost on cross currency swaps		27,800		25,169		1,626
Interest on senior notes, net of capitalization, note 14		44,729		8,108		26,565
Amortization of costs of issuance of senior notes		1,644		1,644		1,644
Other		94		1,098		763
Total interest expense		74,267		36,019		30,598
Unwinding of discount of long-term incentive plan, note 13		345		788		598
Unwinding of discount of other receivables		785		—		—
Total finance costs		75,397		36,807		31,196

25. Related party disclosure

Transactions with related entities -

During the years 2016, 2015 and 2014, the Company carried out the following transactions with its parent company Inversiones ASPI S.A. and its affiliates:

	2016		2015		2014
	S/(000)		S/(000)		S/(000)
Income
Inversiones ASPI S.A. (ASPI)
Income from office lease		13		12		11
Fees for management and administrative services		1,095		497		492
Servicios Corporativos Pacasmayo S.A.C. (Sercopa)
Income from office lease		13		12		11
Fees for management and administrative services		8		8		6
Compañía Minera Ares S.A.C. (Ares)
Income from land rental services		326		330		293
Income from office lease		348		310		232
Expense
Security services provided by Compañía Minera Ares		1,301		1,146		1,350
Other
Purchase of investments shares to Inversiones ASPI S.A.		—		48,585		—

F-61

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, 2016 and 2015:

	2016				2015
	Accounts receivable		Accounts payable		Accounts receivable		Accounts payable
	S/(000)		S/(000)		S/(000)		S/(000)
Inversiones ASPI S.A.		109		—		97		—
Other		595		—		407		—
		704		—		504		—

Terms and conditions of transactions with related parties -

The sales to and purchases from related parties are made on terms equivalent to those that prevail in arm’s length transactions. Outstanding balances with related parties 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, 2016, 2015 and 2014, 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, 2016, the total short term compensations amounted to S/21,752,000 (2015: S/23,074,000, 2014: S/20,225,000) and the total long term compensations amounted to S/16,088,000 (2015: S/14,159,000, 2014: S/5,944,000). The Company does not compensate Management with post-employment or contract termination benefits or share-based payments.

F-62

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 following reflects the income and share data used in the basic and diluted EPS computations:

	2016			2015			2014
	S/(000)			S/(000)			S/(000)
Numerator
Net profit from continuing operations attributable to ordinary equity holders of the Parent		120,060			218,260			197,346
Net loss from discontinued operations attributable to ordinary equity holders of the Parent		(3,886	)		(2,728	)		(4,519	)
Net profit attributable to ordinary equity holders of the Parent		116,174			215,532			192,827
	2016			2015			2014
	Thousands			Thousands			Thousands
Denominator
Weighted average number of common and investment shares		544,687			573,998			581,964
	2016			2015			2014
	S/			S/			S/
Basic and diluted profit for common and investment shares from continuing operations		0.22			0.39			0.34
Basic and diluted loss for common and investment shares from discontinued operations		(0.01	)		(0.01	)		(0.01	)
Basic and diluted profit for common and investment shares from continuing and discontinued operations		0.21			0.38			0.33

The weighted average number of shares in 2016, takes into account the weighted average effect of changes in treasury shares, explained in Note 16(c).

The Group has no dilutive potential ordinary shares as of December 31, 2016 and 2015.

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, except as indicated in Note 32.

F-63

Notes to the consolidated financial statements (continued)

27. Commitments and contingencies

Operating lease commitments – Group as lessor

As of December 31, 2016, 2015 and 2014, 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 provided an annual rent of S/326,000, S/330,000 and S/293,000, respectively; see Note 25.

Lease commitments

In May 2012, the Group signed a contract with a third party regarding to the use of a land located in the north of Peru for the Phosphates project. The lease has a term of maturity of 30 years and accrued an annual rent of US$200,000 from 2012 to 2015, and from 2016 to the maturity date of the contract the rent will be equivalent to 0.64 percent of the sales of phosphoric rock of the subsidiary Fosfatos del Pacífico S.A., but may not be less than US$1,600,000 annually. As of December 31, 2016 these payments has been recognized as part of the “Assets held for distribution” caption in the consolidated statement of financial position.

Future minimum rentals payable under non-cancellable leases as of December 31, 2016 and 2015 are as follows:

	2016		2015
	S/(000)		S/(000)
Within one year		5,376		5,461
After one year but not more than 3 years		10,752		10,922
After three 3 years but not more than five years		10,752		10,922
More than five years		107,520		114,676
		134,400		141,981

Capital commitments

As of 31 December 2016, the Group had the following main commitments:

• Commitment of capital contribution, if developed, on brine Project up to US$100,000,000. In connection with this commitment, as of December 31, 2016 the Group has made contributions for S/54,601,000.

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.

• Since July 2015, the Group has a five-year period natural gas supply agreement for a cement plant located in Piura, 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. As of December 31, 2016 and 2015, the Company has accomplished with the requirements established in this agreement.

F-64

Notes to the consolidated financial statements (continued)

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.

Mining royalty

Third parties

The subsidiary Fosfatos del Pacífico S.A., signed an agreement for the transfer of mining concession with the Peruvian Government, Fundación 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/804,000, S/793,000 and S/694,000 for the years ended December 31, 2016, 2015 and 2014, respectively.

In December 2013, the Company signed an agreement with a third party, related to the use of the Virrilá concession, to carry out other non-metallic mining activities. 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, 2016 and 2015 amounted to S/5,517,000 and S/1,592,000, respectively, and was recognized as part of property, plant and equipment on the statement of financial position. As part of this agreement, the Company is required to pay an equivalent amount to US$4.5 each for each metric tons of calcareous extracted; the annual royalty may not be less than the equivalent to 850,000 metric tons since the fourth year of production.

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

F-65

Notes to the consolidated financial statements (continued)

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 2016, 2015 and 2014 amounted to S/1,052,000, S/743,000 and S/603,000, respectively, and recorded in “Administrative expenses” caption on the consolidated statement of profit or loss.

Tax situation

The Company is subject to Peruvian tax law. As of December 31, 2016 and 2015, the income tax rate is 28 percent (30 percent as of December 31, 2014) of the taxable profit after deducting employee participation, which is calculated at a rate of 8 to 10 percent of the taxable income.

According to Legislative Decree No.1261, issued in December 2016, the income tax rate for 2017 onwards is 29.5 percent of the taxable profit after deducting employee participation, and the additional tax on dividend income is 5 percent, applicable to earnings generated from 2017 onwards. This Legislative Decree replaces Law No.30296, which established a 27 percent income tax rate for the years 2017 and 2018, and of 26 percent for the year 2019 onwards, as well an additional tax on dividend income of 8 percent for the years 2017 and 2018, and of 9.3 percent for 2019 onwards.

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, 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, 2016 and 2015.

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
Cementos Pacasmayo S.A.A.	2012-2016	Dec. 2012-2016
Cementos Selva S.A.	2009/2012-2016	Dec. 2012-2016
Distribuidora Norte Pacasmayo S.R.L.	2012-2016	Dec. 2012-2016
Empresa de Transmisión Guadalupe S.A.C.	2012-2016	Dec. 2012-2016
Fosfatos del Pacífico S.A.	2012/2014-2016	Dec. 2012-2016
Salmueras Sudamericanas S.A.	2012-2016	Dec. 2012-2016
Calizas del Norte S.A.C. (on liquidation)	2013-2016	2013-2016

F-66

Notes to the consolidated financial statements (continued)

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, 2016 and 2015.

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, 2015.

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.

F-67

Notes to the consolidated financial statements (continued)

The Peruvian authorities approved the EIS, DES and EAMP 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
					2016		2015		2014
					S/(000)		S/(000)		S/(000)
Rioja	Limestone	OF.28-2002-MITINCI	2002	EAMP		409		255		287
Tembladera	Limestone	RD.019-97-EM/DGM	1997	EAMP		167		201		206
Bayovar	Phosphoric rock	OF.02121-2009 and 260- 2014/PRODUCE	2009/2014	DES/EIS		—		—		15
						576		456		508

The Group incurs in environmental expenditures related to existing environmental damages caused by current operations. These expenditures which amounted to S/576,000, S/456,000 and S/508,000 during 2016, 2015 and 2014, respectively, are expensed in the year the expenditure is incurred and are presented in administrative expenses caption, see Note 19. As of December 31, 2016 and 2015, the Group did not have liabilities in connection with these expenditures since they were all settled before year-end.

F-68

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, 2016 and 2015, the Group maintains a provision for the closing of the quarries exploited in operations and for a mining unit (Bongara), which is currently without operations, amounting to S/2,367,000 and S/3,339,000, 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

The Group has received claims from third parties in relation with its operations which in aggregate represent S/9,575,000. From this total amount, S/2,373,000 corresponded to labor claims from former employees; S/2,298,000 and S/4,904,000 is 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, 2016 and 2015.

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	2016 %		2015 %
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:

	2016		2015
	S/(000)		S/(000)
Fosfatos del Pacífico S.A.		100,722		91,665
Salmueras Sudamericanas S.A.		11,867		11,415

F-69

Notes to the consolidated financial statements (continued)

(c) Loss allocated to material non-controlling interest:

	2016		2015		2014
	S/(000)		S/(000)		S/(000)
Fosfatos del Pacífico S.A.		2,703		2,992		3,230
Salmueras Sudamericanas S.A.		577		873		808

(d) The summarized financial information of these subsidiaries is provided below. This information is based on amounts before inter-company transactions’ 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)
2016
Sales of goods		1,965			—
Cost of sales		(6,881	)		—
Administrative expenses		(8,694	)		(3,829	)
Other expenses		(1,006	)		52
Finance expense		(793	)		(114	)
Loss before tax		(15,409	)		(3,891	)
Income tax		6,399			1,591
Total comprehensive loss		(9,010	)		(2,300	)
Attributable to non-controlling interest		(2,703	)		(577	)
Dividends paid to non-controlling interest		—			—
2015
Administrative expenses		(11,775	)		(4,257	)
Other expenses		(212	)		(2	)
Finance (expense) income		(1,126	)		14
Loss before tax		(13,113	)		(4,245	)
Income tax		3,141			767
Total comprehensive loss		(9,972	)		(3,478	)
Attributable to non-controlling interest		(2,992	)		(873	)
Dividends paid to non-controlling interest		—			—

F-70

Notes to the consolidated financial statements (continued)

	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 (expense)		223			(44	)
Loss 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		—			—

Summarized statement of financial position as of December 31:

	Fosfatos del Pacífico S.A.			Salmueras Sudamericanas S.A.
	S/(000)			S/(000)
2016
Cash, inventories and other current assets		14,450			593
Other receivables, property, plant and equipment and other non-current assets		324,786			47,068
Trade and other payables current		(3,495	)		(382	)
Total equity		335,741			47,279
Attributable to:
Equity holders of parent		235,019			35,412
Non-controlling interest		100,722			11,867
2015
Cash, inventories and other current assets		14,357			212
Other receivables, property, plant and equipment and other non-current assets		301,578			45,486
Trade and other payables current		(10,384	)		(219	)
Total equity		305,551			45,479
Attributable to:
Equity holders of parent		213,886			34,064
Non-controlling interest		91,665			11,415

F-71

Notes to the consolidated financial statements (continued)

Summarized statement of cash flow for the year ended December31:

	Fosfatos del Pacífico S.A.			Salmueras Sudamericanas S.A.
	S/(000)			S/(000)
2016
Net cash flows used in operating activities		(17,332	)		(3,870	)
Net cash flows (used in) provided from investing activities		(22,352	)		83
Net cash flows provided from financing activities		39,200			4,100
Net (decrease) increase in cash and cash equivalents		(484	)		313
2015
Net cash flows used in operating activities		(21,950	)		(4,490	)
Net cash flows used in investing activities		(55,495	)		—
Net cash flows provided from financing activities		82,676			2,400
Net increase (decrease) in cash and cash equivalents		5,231			(2,090	)
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

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 short 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-72

Notes to the consolidated financial statements (continued)

Market risk -

Market risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market prices. 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, 2016 and 2015. 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, 2016.

The following assumptions have been made in calculating the sensitivity analyses:

• The sensitivity of the relevant statement of profit or loss items 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, 2016 and 2015, 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, 2016 and 2015, 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 Soles of its Senior Notes which are denominated in US dollars, by using cross currency swaps contracts.

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.

2016	Change in US$ rate		Effect on profit before tax
U.S. Dollar	%		S/(000)
		+5		(605	)
		+10		(1,209	)
		-5		605
		-10		1,209

2015	Change in US$ rate		Effect on profit before tax
U.S. Dollar	%		S/(000)
		+5		4,851
		+10		9,702
		-5		(4,851	)
		-10		(9,702	)

F-73

Notes to the consolidated financial statements (continued)

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. For the calculation of the commodity price sensitivity, the purchases of this raw material of the last 12 months are used as a basis.

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)
2016
		+10		(3,780	)
		-10		3,780
2015
		+10		(2,101	)
		-10		2,101

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.

As of December 31, 2016 and 2015, the exposure to listed equity securities at fair value was S/657,000 and S/436,000, respectively, see Note 9(a). At the reporting date, a decrease of 10% on Lima stock exchange (BVL) market index could have an impact of approximately S/66,000 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.

F-74

Notes to the consolidated financial statements (continued)

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, 2016 and 2015, the Group had 3 and 2 customers, respectively, that owed the Group more than S/3,000,000 each accounted for approximately 21% and 20% for all receivables owing, respectively. There were 27 and 28 customers as of December 31, 2016 and 2015, respectively, with balances smaller than S/700,000 each and accounting for over 68% and 70%, respectively, 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.

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, 2016 and 2015, 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, 2016 and 2015 no portion of Senior Notes will mature in less than one year.

F-75

Notes to the consolidated financial statements (continued)

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-76

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, 2016
Long term debt		—		—		—		—		913,300		913,300
Interests		—		22,680		22,680		181,440		68,040		294,840
Hedge finance cost payable		—		13,503		13,503		108,025		40,510		175,541
Trade and other payables		—		118,829		8,941		—		—		127,770
Energy supply		—		3,738		5,246		914		—		9,898
As of December 31, 2015
Long term debt		—		—		—		—		913,300		913,300
Interests		—		23,038		23,038		184,302		115,189		345,567
Hedge finance cost payable		—		13,708		13,708		109,665		55,442		192,523
Trade and other payables		—		152,160		10,590		—		—		162,750
Energy supply		—		4,428		7,217		2,786		—		14,431

The disclosed financial derivative instruments in the table below 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, 2016
Inflows		—		—			—			—			259,195			259,195
Outflows		—		(2,942	)		(13,556	)		(105,069	)		(36,948	)		(158,515	)
Net		—		(2,942	)		(13,556	)		(105,069	)		222,247			100,680
Discounted at the applicable interbank rates		—		(2,933	)		(13,341	)		(97,541	)		183,727			69,912
As of December 31, 2015
Inflows		—		—			—			—			358,156			358,156
Outflows		—		(2,988	)		(13,890	)		(107,921	)		(62,577	)		(187,376	)
Net		—		(2,988	)		(13,890	)		(107,921	)		295,579			170,780
Discounted at the applicable interbank rates		—		(2,976	)		(13,558	)		(96,555	)		237,859			124,770

F-77

Notes to the consolidated financial statements (continued)

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 Senior Notes in the current period.

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, 2016 and 2015.

30. Financial assets and financial liabilities

(a) Financial asset and liabilities –

	2016		2015
	S/(000)		S/(000)
Derivative Financial instruments
Cash flow hedge (cross currency swaps)		69,912		124,770
Total cash flow hedge		69,912		124,770
Available-for-sale financial investments
Quoted equity shares		657		436
Total available-for-sale investments, note 9(b)		657		436
Total financial instruments at fair value		70,569		125,206
Total current		—		—
Total non-current		70,569		125,206
		70,569		125,206

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 receivable, which are non-derivative financial assets carried at amortized cost, which 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.

F-78

Notes to the consolidated financial statements (continued)

Financial liabilities -

All financial liabilities of the Group include trade and other payables and Senior Notes which are classified as loans and borrowings and are carried at amortized cost.

(b) Hedging activities and derivatives -

Cash flow hedges -

Foreign currency risk -

Cross currency swap contracts are designated as hedging instruments in cash flows hedges of the 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$300,000,000).

The cross currency swap contracts balances vary with the level of expected forward exchange rates.

	2016				2015
	Assets		Liabilities		Assets		Liabilities
	S/(000)		S/(000)		S/(000)		S/(000)
Cross currency swap contracts designated as hedging instruments
Fair value		69,912		—		124,770		—
		69,912		—		124,770		—

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 loss of S/39,511,000 and a net unrealized gain of S/10,832,000 was included in OCI as of December 31, 2016 and 2015, respectively. The amounts retained in OCI as of December 31, 2016 are expected to mature and affect the consolidated statement of profit or loss in each of the future years until 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
	2016		2015		2016		2015
	S/(000)		S/(000)		S/(000)		S/(000)
Financial assets
Derivatives financial instruments – Cross currency swaps		69,912		124,770		69,912		124,770
Available-for-sale financial investments		657		436		657		436
Total financial assets - non-current		70,569		125,206		70,569		125,206
Financial liabilities
Financial obligations:
Senior Notes (*)		998,148		1,012,406		1,012,607		961,411
Total financial liabilities		998,148		1,012,406		1,012,607		961,411

F-79

Notes to the consolidated financial statements (continued)

Management assessed that cash and term deposits, trade receivables, trade payables and other current liabilities approximate their carrying amounts largely due to the short-term maturities of these instruments.

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, 2016 and 2015.

• Fair value of available-for-sale investments is derived from quoted market prices in active markets.

F-80

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, 2016 –

	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		69,912		—		69,912		—
Available-for-sale financial investments (Note 9):
Quoted equity shares		657		657		—		—
Total financial assets		70,569		657		69,912		—
Liabilities for which fair values are disclosed:
Senior Notes		1,012,607		1,012,607		—		—
Total financial liabilities		1,012,607		1,012,607		—		—

There have been no transfers between levels during the period ending December 31, 2016.

F-81

Notes to the consolidated financial statements (continued)

Quantitative disclosures fair value measurement hierarchy for assets and liabilities as of December 31, 2015 –

	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		124,770		—		124,770		—
Available-for-sale financial investments (Note 9):
Quoted equity shares		436		436		—		—
Total financial assets		125,206		436		124,770		—
Liabilities for which fair values are disclosed:
Senior Notes		961,411		961,411		—		—
Total financial liabilities		961,411		961,411		—		—

There have been no transfers between levels during the period ending December 31, 2015.

F-82

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		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			Net income from continuing operations			Net loss from discontinued operations			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)
2016
Cement, concrete and blocks		1,103,426		487,671			1,907		(173,200	)		(38,070	)		(75,397	)		3,194		(2,238	)		203,867			(80,912	)		122,955			—			122,955
Construction supplies		59,888		1,220			136		(1,051	)		(1,643	)		—			24		(19	)		(1,333	)		529			(804	)		—			(804	)
Quicklime		75,090		14,216			—		(14,464	)		—			—			—		(118	)		(366	)		145			(221	)		—			(221	)
Other		1,765		532			401		(4,661	)		(186	)		—			22		(166	)		(4,058	)		1,611			(2,447	)		(6,589	)		(9,036	)
Consolidated		1,240,169		503,639			2,444		(193,376	)		(39,899	)		(75,397	)		3,240		(2,541	)		198,110			(78,627	)		119,483			(6,589	)		112,894
2015
Cement, concrete and blocks		1,089,232		517,266			3,877		(161,950	)		(29,687	)		(36,807	)		3,384		11,141			307,224			(89,515	)		217,709			—			217,709
Construction supplies		75,565		2,506			4		(1,228	)		(1,519	)		—			32		19			(186	)		54			(132	)		—			(132	)
Quicklime		64,140		15,116			—		(11,306	)		—			—			—		969			4,779			(1,392	)		3,387			—			3,387
Other		2,078		370			32		(5,239	)		(275	)		—			—		65			(5,047	)		1,470			(3,577	)		(5,720	)		(9,297	)
Consolidated		1,231,015		535,258			3,913		(179,723	)		(31,481	)		(36,807	)		3,416		12,194			306,770			(89,383	)		217,387			(5,720	)		211,667
2014
Cement, concrete and blocks		1,085,366		506,511			7,448		(168,544	)		(28,716	)		(31,192	)		11,233		(13,604	)		283,136			(81,138	)		201,998			—			201,998
Construction supplies		95,405		2,874			91		(1,455	)		(1,754	)		—			35		(16	)		(225	)		64			(161	)		—			(161	)
Quicklime		61,051		9,114			—		(11,054	)		—			—			—		(1,085	)		(3,025	)		867			(2,158	)		—			(2,158	)
Other		757		(68	)		98		(4,493	)		(64	)		(4	)		—		19			(4,512	)		1,371			(3,141	)		(7,749	)		(10,890	)
Consolidated		1,242,579		518,431			7,637		(185,546	)		(30,534	)		(31,196	)		11,268		(14,686	)		275,374			(78,836	)		196,538			(7,749	)		188,789

F-83

Notes to the consolidated financial statements (continued)

	Segment assets		Other assets		Assets held for distribution		Total assets		Operating liabilities		Liabilities held for distribution		Total liabilites		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)		S/(000)			S/(000)
2016
Cement, concrete and blocks		2,678,871		69,912		—		2,748,783		1,316,144		—		1,316,144		101,729		(102,900	)		(1,499	)
Construction supplies		27,652		—		—		27,652		20,760		—		20,760		—		—			—
Quicklime		122,446		—		—		122,446		—		—		—		—		(4,377	)		—
Other		82,674		657		338,411		421,742		986		2,704		3,690		16,072		(3,989	)		—
Consolidated		2,911,643		70,569		338,411		3,320,623		1,337,890		2,704		1,340,594		117,801		(111,266	)		(1,499	)
2015
Cement, concrete and blocks		2,743,007		124,770		—		2,867,777		1,326,650		—		1,326,650		454,275		(67,221	)		426
Construction supplies		27,719				—		27,719		30,182		—		30,182		—		—			—
Quicklime		125,584				—		125,584		—		—		—		—		(2,264	)		—
Other		392,278		436		—		392,714		10,828		—		10,828		36,532		(1,325	)		(9,335	)
Consolidated		3,288,588		125,206		—		3,413,794		1,367,660		—		1,367,660		490,807		(70,810	)		(8,909	)
2014
Cement, concrete and blocks		2,744,140		12,251		—		2,756,391		1,129,792		—		1,129,792		557,307		(58,881	)		430
Construction supplies		28,215		—		—		28,215		32,858		—		32,858		—		—			—
Quicklime		129,483		—		—		129,483		—		—		—		—		(4,582	)		—
Other		326,071		744		—		326,815		7,569		—		7,569		29,937		(1,296	)		23
Consolidated		3,227,909		12,995		—		3,240,904		1,170,219		—		1,170,219		587,244		(64,759	)		453

F-84

Notes to the consolidated financial statements (continued)

During 2016, revenues from two customers, arising from sales within the quicklime segment, amounted to S/55,657,000. During 2015 and 2014, revenues from one customer, arising from sales within the quicklime segment, amounted to S/27,182,000 and S/28,518,000, respectively.

Capital expenditure consists of S/117,801,000, S/490,807,000 and S/587,244,000 during the years ended as of December 31, 2016, 2015 and 2014, respectively, and are related to additions of property, plant and equipment, exploration and evaluation assets and other minor non-current assets. During 2016, 2015 and 2014, there were no purchases of assets through capital leases.

Inter-segment revenues obtained during the years ended December 31, 2016, 2015 and 2014 were eliminated for 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, 2016 corresponds to the available-for-sale investments caption and fair value of financial derivate instrument (cross currency swap) for approximately S/657,000 and S/69,912,000, respectively (2015: S/436,000 and S/124,770,000 ; 2014: S/744,000 and S/12,251,000, respectively), which are not allocated to a segment.

Geographic information

All revenues are from Peruvian clients.

As of December 31, 2016 and December 31, 2015, all non-current assets are located in Peru.

32. Events after the reporting period

On January 19, 2017, the Company’s Management approved the purchase of 7,911,845 investment shares of the Company’s own issuance at S/34,216,000.

On March 1, 2017, the Company completed the spin-off project (see Note 1), therefore, the capital stock was reduced by S/107,593,000 (from S/531,461,000 to S/423,868,000). Additionally, under the terms of the reorganization, Cementos Pacasmayo S.A.A. contributed S/34,178,000 of cash and S/5,822,000 in accounts receivable to Fossal S.A.A.

F-85

EX-1.1

Exhibit 1.1

BYLAWS

I. NAME, PURPOSE, REGISTERED OFFICE, DURATION, DATE OF

COMMENCEMENT OF ACTIVITIES

FIRST ARTICLE. CEMENTOS PACASMAYO S.A.A. is a company organized under the form of a publicly held company, subject to the General Law of Companies, to the Law of Securities Market and other applicable provisions.

The company shall be named “CEMENTOS PACASMAYO SOCIEDAD ANONIMA ABIERTA” or its abbreviation “CEMENTOS PACASMAYO S.A.A.”

SECOND ARTICLE. The purpose of the Company preparing and manufacturing cements, lime, aggregates, blocks and cement bricks, concrete pre-mix and other construction material, its derivatives and similar, including its trading and sale in the Republic of Peru and abroad. The company may also carry out all kinds of mining activities such as prospecting, exploration, development, exploitation, merchandising, benefit and transport; as well as any activity related with goods transport service in general, materials and hazardous wastes, including chemical supplies and controlled goods; and execute and subscribe all acts and suitable contracts for the fulfillment of its purpose, including activities to acquire, sell, build, lease and manage real and personal property and perform all civil and commercial activities that are convenient, including its participation in other companies in the Republic of Peru and abroad.

THIRD ARTICLE. The address of the Company shall be in the province and department of Lima. The Company may establish agencies, branch offices and offices in any place in the Republic of Peru and/or abroad, by Board of Directors’ resolution.

FOURTH ARTICLE. The duration of the Company shall be perpetual, having commenced activities December 10^th 1998.

II. CAPITAL STOCK AND SHARES

FIFTH ARTICLE. The capital Stock of the company is S/. 423,868,449 (four hundred twenty-three million, eight hundred sixty-eight thousand, four hundred forty-nine and 00/100 Soles) that shall be represented by 423,868,449 shares with S/1.00 (one Sol) par value per share, fully subscribed and totally paid.

SIXTH ARTICLE. The liability of each shareholder shall be limited to the amount of his contribution according to the nominal value of the shares of which he is holder.

SEVENTH ARTICLE. The shares are nominal and will have titles that shall be recorded in certificates or account entries. One sole title can represent one or more shares of one owner or joint owners.

The certificates shall be signed by two Directors and will include the following:

A. The name of the company, its capital stock, domicile, and duration, the date of the public deed of incorporation and the Notary before whom it was issued, as well as the information of its registration in the Public Registry.

B. The name of the shareholder, the issuance date, the serial number, the number and the class of shares it represents and the number each share bears.

C. The nominal value per share, the amount paid and subsequent payments that are made on account of their nominal value or the statement that the shares are totally paid.

D. Liens or charges that could have been established on the share.

Provisional Certificates of Shares or Subscription Records may be issued, under the terms of Article 87 of the General Corporations Law as a result of capital increases agreed by the Company, subject to the applicable laws.

The account entries shall be made according to the applicable law.

EIGHT ARTICLE. The company shall recognize as owner of each share whoever appears as such in the “Registry of Shares” to be kept by the Company. Also registered, shall be the consecutive transfers of shares and the establishment of real rights or court measures that could affect the same.

When there is a legal action concerning the ownership of the shares, the Company shall admit the exercise of the rights of shareholders to the person to be considered as holder, pursuant to provisions of foregoing paragraph, except if otherwise ordered by court mandate.

NINTH ARTICLE. There are no limitations, restrictions or priorities in a transfer of shares.

The Company shall not recognize agreements between shareholders containing limitations, restrictions or priorities to a free transfer of shares.

TENTH ARTICLE. The preferential right of shareholders to subscribe increase of capital stock with new contributions is incorporated to a security, called certificate of preferential subscription or by a notation on account, both freely transferable.

Shareholders cannot exercise this shareholder’s right if they are in default in dividends payable and their shares will not be calculated to establish the prorate participation in preferential right.

There is no preferential right of subscription in an increase of capital stock by conversion of obligations into shares, in the case of articles 103 and 259 of the General Law of Companies, or in cases of reorganization of companies stipulated in above mentioned law.

The General Shareholders’ Meeting can decide that shareholders do not have preferential right of subscription who are believed to fall under cases established in article 259 of the General Law of Companies, provided requirements provided in said article are met.

The content of a certificate of preferential subscription, and its exercise and procedure of subscription, is ruled by legal provisions on this subject matter stipulated in the General Law of Companies and in the Law of Securities Market and provisions established by the General Meeting, or otherwise by the Board of Directors.

ELEVENTH ARTICLE. Each share gives right to a vote, except for election of Board of Director purposes, when it will be subject to provision of article 164 of the General Law of Companies. Each share is indivisible and cannot be represented but by one person only.

Always when by inheritance or any other title or right, legal or contractual, a number of natural persons acquire the joint property of one or more shares, they shall designate, among the co-owners, one among them to exercise the rights of shareholder, certifying in writing such designation, either through private or public instrument.

In case of disability, impairment or inconvenience of all the co-owners, they shall designate an common attorney that will exercise their rights, certifying in writing such appointment and indicating whether the term is fixed or indefinite.

All such designations referred to in his article shall be accredited and notified to the Company, and shall be considered valid before the Company until a revocation has been notified.

TWELFTH ARTICLE. In the case of loss or destruction of the titles representing the shares, the issue of new titles will be completed, after procedures determined by law and upon the guaranties that the Board of Directors shall deem convenient. The cost shall be charged to the applicant.

THIRTEENTH ARTICLE. Any shareholder for the fact of so being, is subject to the Bylaws of the Company and resolutions of the General Shareholders’ Meeting and the Board of Directors, adopted pursuant to this same Bylaws.

III. CORPORATE BODIES

FOURTEENTH ARTICLE. The company bodies are: the General Shareholders’ Meeting, the Board of Directors, and Management.

IV. GENERAL SHAREHOLDERS MEETINGS

FIFTEENTH ARTICLE. The General Shareholders’ Meeting is the supreme body of the company, and decides on any of the matters proper of its competence.

SIXTEENTH ARTICLE. The General Shareholders’ Meeting shall be called to meet in the place of the corporate domicile or in the place indicated in the call.

At the written request of shareholders representing at least three fourths of the shares subscribed with right to vote, or by resolution of the Board of Directors by unanimous vote of attendees, can hold a General Shareholders’ Meeting in a different place, whether in the county or abroad.

SEVENTEENTH ARTICLE. The General Shareholders’ Meeting will meet at least once a year within the first three months following the end of each annual fiscal year; this meeting is called the Annual Mandatory General Shareholders’ Meeting.

EIGHTEENTH ARTICLE. The General Shareholders’ Meeting will meet in any place when decided by the Board of Directors or requested by notary means by a number of shareholders representing at least five percent of subscribed shares with right to vote.

NINETEENTH ARTICLE. The Board of Directors gives notice of Shareholders’ Meetings through a published notice once in the Official Gazette “El Peruano”, and in one of major circulation newspaper of Lima at least twenty-five calendar days in advance to the date the Annual Mandatory Shareholders’ Meeting is to be held and when any other General Shareholders’ Meeting is to be held.

The notice may also contain the date in which a General Shareholders’ Meeting will be held in second or third call. In this case, between one and the next call, not less than three and no more than ten calendar days must pass.

The notice shall specify the date, time and place where the meeting will be held and the subject matters to be discussed.

TWENTIETH ARTICLE. When a General Shareholders’ Meeting is not held if more than half an hour has passed and there is no quorum, or is not held for any other reason, a second call shall be made, unless the latter has been provided for in the notice referred to in foregoing article

The second call shall be made within the next thirty-calendar days to the date the Meeting was not held upon de first call, and the third call within an equal term from the second, with the same requirements of the notice specified in the first call.

TWENTY FIRST ARTICLE. A General Shareholders’ Meeting can be held without need of prior notice provided all shareholders present or represented, represent all shares subscribed with right to vote and record their unanimous consent to meet and discuss the matters proposed in the Book of Minutes.

TWENTY SECOND ARTICLE. Entitled to attend a General Shareholders’ Meeting, with voice and vote, are the holders of shares with right to vote registered in the Registry of Shares, ten calendar days previous to the meeting.

Also entitled to attend a General Shareholders’ Meeting are, with voice not vote, the Directors and Managers of the Company that are not shareholders.

By invitation, Attorneys, Auditors and Officers of the Company, not being shareholders, may attend a General Shareholders’ Meeting, as well as individuals determined by the Meeting, all of which will have voice but not vote.

TWENTY THIRD ARTICLE. Shareholders can be represented by a proxy in General Meetings.

The representation shall be notified by simple letter, cable, telex, fax or any other means of communication that can issue a written certification, understanding that the representation is for each General Meeting, except when the Power of Attorney is granted through a Public Instrument.

The powers need to be registered with the Company until to the day before the Meeting is held. Any person can represent one or several shareholders.

TWENTY FOURTH ARTICLE. A General Meeting to be hold in first call, the requirement is that the attendance, personal or through proxies or attorneys in fact, of shareholders represent at least fifty percent of subscribed shares with right to vote.

For the second or third call, the attendance of any number of subscribed shares with right to vote shall suffice. The exception to the provision in this article is stipulated in the next article.

TWENTY FIFTH ARTICLE. A General Shareholders’ Meeting that will discuss the increase or reduction of the capital stock, the issue of obligations, transformation, merge, split off, reorganization or dissolution of the corporation, the resolution to sell, in one only act, the assets whose book value exceeds fifty percent of the capital stock of the company, and in general, any modification of the Bylaws, requires, for the first call, the attendance, personal or through proxies or attorneys in fact, of shareholders represent at least fifty percent of subscribed shares with right to vote.

For the second call, it will suffice the representation of at least twenty-five percent of subscribed shares with right to vote,

In the event this quorum is not reached in second call, the General Meeting will be held in third call, when any number of subscribed shares with right to vote shall suffice.

TWENTY SIXTH ARTICLE. The General Shareholders’ Meeting shall be chaired by the President and in his absence, by the Vice-president.

If both are absent, it shall be presided by whoever is representing the greater number of shares, and when two or more meet these same conditions, then it will be by lot.

The Company Manager shall act as Secretary or, in his absence or impairment, then the person who the General Meeting will appoint in each case.

TWENTY SEVENTH ARTICLE. The Annual Mandatory General Shareholders’ Meeting shall:

A. Discuss the corporate management and economic results of previous fiscal year, expressed in the financial statements for such period.

B. Decide on the application of company profits, if any,

C. Choose when necessary, the members of the Board of Directors and fix their remuneration.

D. Designate or delegate upon the Board the appointment of external auditors, when required,

E. Decide on other proper matters pursuant to these Bylaws and any other specified in the call.

TWENTY EIGHTH ARTICLE. The General Shareholders’ Meeting also shall:

A. Remove the members of the Board at any time and without need to express cause, and choose who are to replace them,

B. Amend the Bylaws,

C. Increase or reduce the capital stock,

D. Issue obligations,

E. Agree the sale, in one single action, of assets whose book value exceeds fifty percent of the company capital stock,

F. Agree on investigations, audits or balances,

G. Transform, merge, split off, reorganize, dissolve and liquidate the company,

H. Decide on any kind of matters, provided the law or the Bylaws agree an intervention, and in any other matter that requires a corporate interest.

TWENTY NINTH ARTICLE. The resolutions of a General Shareholders’ Meeting shall be adopted by absolute majority of subscribed shares with right to vote representing such majority.

THIRTIETH ARTICLE. The right to vote shall not be exercised by shareholders that:

A. Are late in paying their contributions to the company. The shares that are not entitled to exercise their right to vote shall not be accounted for to complete quorum or to establish a majority vote.

B. Have, in the matters submitted to the General Meeting, on their own right or third party right, a conflict of interest with the company. The shares that are not entitled to exercise their right to vote shall not be accounted for to complete quorum or to establish a majority vote.

THIRTY FIRST ARTICLE. At the request of shareholders representing not less than twenty-five percent of subscribed shares with right to vote, the General Meeting may be adjourned only once, for not less than three days and no more than five calendar days, and without need of a new call, for the discussion and vote of matters upon which the shareholders so requesting it, deemed not being sufficiently informed.

Any number of meetings in which the Meeting is eventually held, shall be deemed as only one, and a single minutes shall be draw up.

THIRTY SECOND ARTICLE. The resolutions of the General Meeting shall be recorded in the minutes draw up in a special book, certified according to Law, and kept by the company manager.

THIRTY THIRD ARTICLE. When under any circumstance, the minutes of a General Shareholders’ Meeting cannot be draw up in respective book; a special document shall be issued, with the same formalities and requirements, specified in foregoing article.

The text of the special document shall be adhere or transcribed timely, in the book of minutes.

THIRTY FOURTH ARTICLE. The General Shareholders’ Meeting established, subject to provisions set forth in these Bylaws, legally represents all the shareholders of the company, and its resolutions bind them all, including dissidents and those not attending the meeting.

V. BOARD OF DIRECTORS

THIRTY FIFTH ARTICLE. The Board of Directors is the executive body of resolutions adopted by the General Shareholders’ Meeting, exercises the authority and rights concerning the representation, management and administration of the company; and it is under their competence to decide any business that by law or by these Bylaws are not expressly reserved to the General Shareholders’ Meeting. The Board can meet within or outside the company premises.

The Board shall be formed by a minimum of 7 (seven) members and a maximum of 11 (eleven) members. Before the election, The General Shareholders’ Meeting shall decide on the number of Directors to elect for the applicable period.

In addition, the Board can have a minimum of 3 (thee) Alternate Directors and a maximum of 5 (five) Alternate Directors that shall be elected by the General Shareholders’ Meeting, in the same way as the Regular Directors and rule over them all legal and statutory provisions applicable to regular members when attending in their stead.

Alternate Directors may attend any Board meeting. The President of the Board shall designate the Alternate Director or Directors that will replace the Regular Director, as applicable, on a definite fashion in a case of vacancy, or on a temporary fashion in the event of absence or impediment. The simple vacancy, absence or impediment of a regular member fully validates the acting of the alternate member who replaces him.

THIRTY SIXTH ARTICLE. For the purposes of election of the Board, and Alternate Directors, each share gives right to as many votes as directors need to be elected, and each shareholder can accumulate his votes in behalf of one person only or distribute it among various.

Directors will be proclaimed when they obtain a greater number of votes, following the order of these. When two or more persons obtain an equal number of votes and all of them cannot be part of the Board because the fixed number of directors according to these Bylaws will not allow it, it will be decided by lot, who among them shall become member of the Board.

This article is not applicable when the directors are elected unanimously.

THIRTY SEVENTH ARTICLE. The office of Director ends:

A. By resignation, death, illness, civil impairment or another cause that definitely prevents him to exercise his functions,

B. When the General Shareholders’ Meeting so agrees, in the form provided for in sub item A) of article twentieth.

THIRTY EIGHTH ARTICLE. In the case of vacancy from office of any of the Directors, while a new election shall take place by the General Shareholders’ Meeting, the Board shall designate the Alternate Director that will replace him on a definite manner.

In case there is a vacancy of Directors in a number such that the Board cannot meet validly, the regular Directors will assume ad interim the administration and shall call promptly a General Shareholders’ Meeting, to elect the missing Directors.

THIRTY NINTH ARTICLE. The Directors will elect among them, a President, who will chair their meetings, and the General Shareholders’ Meetings, and a Vice-president, who will exercise the same functions in the case of absence or impediment of the former.

When neither the President of the Board nor the Vice-president attend, the meeting shall chaired by the oldest Director.

Acting as the Secretary of the meeting shall be the Manager of the company or, in his absence, the person that in each case is designated by the Company.

Company Attorneys, Auditors and Officers of the Company, may attend the Board Meeting, at the invitation of the latter, all of which will have voice but not vote.

FORTIETH ARTICLE. The Directors will be appointed for three (3) year-long periods, except for appointments made to complete a term. The Directors can be reelected by one or more additional periods.

The Board may appoint one or more Directors to resolve or execute certain acts. The delegation may be made to act individually or, if two or more Directors, to serve as Committee.

The position of Director is remunerated. The Annual Mandatory Shareholders’ Meeting will set the fixed remuneration of the Board when ruling on corporate management and economic performance of the previous year expressed in the individual annual audited financial statements. The fixed remuneration corresponding to the President of the Board will be twice the remuneration that corresponds to any other director. As part of the directors’ remuneration, an additional remuneration to the diet provided to each director may be granted to the Directors that participate in one or more committees, according to the work they undertake at such committees. The total amount of the additional payment corresponding to all Directors shall not exceed the total amount of fixed compensation corresponding to all Directors.

The term of the Board ends when the Annual Mandatory Meeting resolves on the balance of the previous fiscal year and the election of a new Board, but Directors will continue in position, although having concluded the term, until a new election is held, and the elected members have accepted the office.

FORTY FIRST ARTICLE. The President of the Board, or whoever performs his office, shall call a meeting whenever deemed necessary or when any Director or the General Manager so requests it. The Board should gather at least four times a year.

The meetings of the Board are called by the President or the person he designates, by means of notices with acknowledgment of receipt that shall be addressed to the domicile of each Director, with at least three day notice from the date of the meeting.

The notices shall be delivered by registered mail, facsimile, telex, or any other means, assuring its receipt, and shall clearly specify the place, day and time the meeting will take place, and the matters to be discussed therein.

Any Director may submit for consideration of the Board, the matters deemed of interest for the company, although these may not be included among the matters set in the notice, and resolve about them in cases when all the members of the Board are present.

FORTY SECOND ARTICLE. A call to a meeting will not be necessary when all Directors are present, and register in the Book of Minutes, their unanimous consent to hold a meeting without prior notice, and to discuss matters that are expressly proposed to them; the meeting can be held immediately.

FORTY THIRD ARTICLE. A meeting of the Board is held with the attendance of half the number of the members plus one. If the number of members is an odd number, then the attendance required of the number of Directors is equal to the full number immediately higher than half of it.

Meeting of the Board where members are not present can be held through written electronic means or other nature that will allow communication and ensure the authenticity of the resolution, except if any one Director is opposed to use this procedure.

FORTY FOURTH ARTICLE. Each Director has one vote.

A resolution of the Board shall be adopted by the favorable vote of the absolute majority of Directors attending. In case of a tie, the President shall have the casting vote.

FORTY FIFTH ARTICLE. A Director, who in any matter has an interest contrary to the company’s shall state so to the Board, and not participate in the discussion and resolution concerning such matter. The impeded Director shall be deemed present for quorum purposes, but his vote shall not be calculated to establish the majority of the votes,

FORTY SIXTH ARTICLE. The resolutions of the meetings of the Board shall be registered in the minutes in the Book of Minutes, or in separate pages with the use a mechanical system, certified according to law, to be kept by the Secretary of the Company.

All Directors are entitled to have their votes and their grounds be registered when they so consider convenient; which can be done in respective minutes, or through a notary letter.

FORTY SEVENTH ARTICLE. The Board has the power of legal representation and of the necessary management for the administration and steering of the company with the limitations provided by law and the Bylaws.

The main duties and powers of the Board are:

A) Conduct and control each and all the company business and activities,

B) Regulate their own operation,

C) Organize the company offices and determine their expenses,

D) Name and remove the General Manager, the Managers, Attorneys, representatives and any other officer on company service, delegate upon them the authority deemed convenient, specify their obligations and remunerations, grant them bonuses, when considered applicable, limit and revoke their powers previously delegated and establish all the rules and regulations believed necessary for the good provision of services of the company.

E) Dispose onerously, exchange, purchase, sell, promise to purchase and give promise of sale of real property, as well as establish mortgage upon them, according to common law or under the conditions required by commercial banks or other public promotional institutions and other credit institutions, according to their laws and regulations, or pursuant to other special laws.

F) Pledge assets, whether common, industrial, and mercantile or of any other nature, according to common laws, or according to special laws, whatever these may be.

G) Obtain and grant mutual loans, credits in checking accounts, advance or overdrafts, documentary credits, advance in checking accounts and other similar operations, with or without guarantee.

H) Open branch offices, agencies or offices of the company deemed necessary, and reform them or close them.

I) Waive the domicile jurisdiction.

J) Propose to the General Shareholders’ Meeting the resolutions deemed convenient for the corporate interests.

K) Submit annually to the Mandatory Shareholders’ Meeting, the General Balance and the Annual Report of the fiscal year.

L) Render accounts

M) Grant general or special powers to complete one or several acts referred to in foregoing sub items, except those referred in foregoing sub items K) and L), modify or renew them.

N) Delegate all or some of the powers, except those referred in foregoing sub items K) and L).

O) Review, approve any other type of contracts required to fulfill corporate purposes that exceeds the powers of Management.

P) Ensure compliance of legal and statutory provisions, as well as the resolutions of the General Meeting, being authorize to dictate and modify in-house regulations,

Q) Discuss and resolve all the other matters that according to these Bylaws are not submitted to resolutions by the General Shareholders’ Meeting.

VI. MANAGEMENT

FORTY EIGHTH ARTICLE. The Company will have one General Manager who will be appointed by the Board of Directors.

The General Manager is in charge of the administration of the Company.

The General Management may be the responsibility of a natural or a legal person, when a legal person is named Manager, immediately one or more natural persons representing the legal person shall be named for this purpose.

FORTY NINTH ARTICLE. The General Management is responsible of:

A) Organizing the internal system of the Company.

B) Conduct all the business activities of the Company, in order to maintain it in optimum conditions of productive technique, of administrative, commercial and financial efficiency, safety, legal efficiency and validity, economic profitability and technological progress. For this, he is authorized to execute actions and regular contracts concerning the corporate purpose, as well as the work, the Board and the General Shareholders’ Meeting shall entrust upon him.

C) Responding for the existence, regularity and authenticity of the books that the law orders the company to keep and issue the correspondence of the same.

D) Name and remove officers or technicians of high responsibility and high remuneration, determining their obligations and remunerations, as well as employees and workers that are required, promote them, change their functions and set their remunerations.

E) Represent the Company before any kind of authorities, whether political, administrative, fiscal, municipal or legal, with general and special powers of articles 74 and 75 of the Civil Procedural Code. Consequently, the Manager is authorized to conduct all the acts of disposal of substantive and procedural law and, in particular, to sue, counterclaim, respond to suits and counterclaims, abandon proceedings, acquiesce the claim, compromise, submit to arbitration controversial issues, substitute or delegate procedural representation, and for all the other acts required by law.

F) Account for the course and condition of Corporate Business when the Board so requests.

G) Order payments and collection

H) Jointly with another Manager or Company Attorney, he is authorized to agree and verify credit operations deemed necessary; open, close and manage checking, deposit or credit accounts, in local or foreign currency, within or outside the country, deposit, draw and acknowledge statements or contest them; enter into credit agreements in checking accounts, with or without guarantee, for the product of

the same be applied to paying obligations of the company or be deposited in its accounts, complete any kind of operations concerning bills of exchange, checks, promissory notes, warrants, letters or orders of credit, invoices or other commercial or bank documents, whether to order or to bearer, the same that he will draw, subscribe, accept, reaccept, ratify, extend, endorse, whether as guarantee, collection, discount, or fee simple, guarantee, cancel and negotiate and order a protest, as applicable and deemed convenient; request credits through notes, promissory notes or checking account, in local or foreign currency, for the product of the same be applied to paying obligations of the company or be deposited in its accounts; rent safe deposit boxes, use them and terminate the rent; register and acquire trademarks, register, obtain and buy patents; and endorse freight bills and bills of lading.

I) Exercise the other functions that the Board may entrust upon him, as well as to conduct administrative actions deemed necessary or convenient to fulfill the corporate purposes, as well as to exercise any other authority according to the nature of his office and that are not in opposition with statements by these Bylaws.

FIFTIETH ARTICLE. The Board may also name one or more Managers and Assistant Managers that will have the authority agreed to in their respective appointments or in by separate acts.

VII. INDEMNIFICATION FOR DIRECTORS AND GENERAL MANAGER

FIFTY FIRST ARTICLE. The company will take responsibility for all reasonable expenses in which the Board or the general manager may incur, as well as the damages they are obliged to pay regarding any action, trial or procedure in which they may have been part for being Director or general manager, except those in which is it determined by judicial or arbitral definitive statement that may have been caused as a result of agreements or acts against the law or the bylaws, or for wishful misconduct, abuse of authority or gross negligence, in which case, the involved Director or general manager will remain obliged to refund the company, all the expenses incurred by the company.

VIII. FINANCIAL STATEMENTS AND PROFIT APPLICATION

FIFTY SECOND ARTICLE. Within a maximum term of eighty calendar days after December 31^st of each year, the Board shall prepare the Annual Report and the Financial Statements of the Company at December 31 of the previous year, according to provisions set forth by the General Law of Companies and the General Accounting Plan, as well as a proposal for the application of the profits; these documents shall be submitted for the approval of the Annual Mandatory General Shareholders’ Meeting.

The Financial Statements shall be signed by the Accountant and countersigned by the President of the Board or the General Manager, or the legal representative duly authorized for this purpose.

FIFTY THIRD ARTICLE. The General Shareholders’ Meeting may agree, prior approval of applicable Financial Statements, the distribution of provisional dividends from net gains of the annual fiscal year, provided the Company has no accumulated losses.

The profits resulting from Annual Financial Statements, after discounting all expenses, making corrections and having deduced the necessary amount to create a reserve fund or reserves to be created according to law, shall be applied as follows:

A. Remuneration of the Board.

B. The remaining amount, should the Board decide so, shall be capitalized the amount agreed by the Meeting. IN this case, the shares issued in terms of capitalization shall be delivered to shareholders proportionally to the nominal value of the shares they posses, and if by virtue of the number of shares possessed by each shareholder, the distribution among them of the shares so issued are not exactly possible, the shareholders will compensate among them the differences or, if this is not convenient, it will be adjudicated by lot among them, the remaining shares that cannot be fully distributed, in order to respect the principle of indivisibility of each share.

C. Of the remaining, the General Meeting shall agree the amount to establish a special fund or voluntary reserve.

D. The final balance that may still remain shall be distributed as dividend among the shareholders.

IX. CORPORATE DISSOLUTION AND LIQUIDATION

FIFTY FOURTH ARTICLE. If a case of liquidation arises, the General Shareholders’ Meeting that resolves on the liquidation, shall designate the natural persons or legal persons that will take charge; during the liquidation period the regulations of these Bylaws shall be observed wherever applicable, those stipulated by the General Law of Companies, the Code of Commerce, in other applicable laws and in the Regulations of the Mercantile Registry and the resolutions of the General Meetings.

FIFTY FIFTH ARTICLE. If after having paid the debts of the Company there is a remaining balance, this should be distributed pro rata among all shareholders proportionately to the nominal capital representing the shares they posses.

Further, once the liquidation is completed, the shareholders shall designate the person or entity that will keep the books and the documents of the Company.

X. DISPUTE RESOLUTION

FIFTY SIXTH ARTICLE. Any dispute, disagreement or conflict arising between shareholders, between shareholders and the Company, or between the Company and its Directors during the existence or dissolution process of the Company, in connection to their rights or obligations or in connection to the interpretation, application, validity or compliance with this By-laws or in connection with any agreement adopted by the Company’s General Shareholders’ Meetings or Board of Directors’ meetings, which have not been resolved through direct negotiation and in amicable terms between the parties, or by means of mediation or conciliation, within thirty (30) business days from the notification to one of the parties, the parties agree to waive their rights to solve any dispute, disagreement or conflict within the competent courts of their domiciles and agree that all disputes, disagreements or conflicts will be settled by arbitration at law, except for those disputes which shall be ventilated under a specific jurisdiction as mandated by law, in which case the Peruvian Arbitration Law (Legislative Decree No. 1071), or any law amending or replacing it, shall be applied as well as the additional provisions established for such effects.

The arbitration will be held in Lima, Perú and in Spanish language according to the agreements in this clause. For all the matters not provided herein, the arbitration shall be organized and conducted in accordance with the provisions set forth in the Rules and Regulations of the Arbitration Center of the American Chamber of Commerce of Perú (AmCham Perú). - Cámara de Comercio Americana del Perú

The Tribunal shall consist of three (03) arbitrators, following the rules below for their designation:

(a) The party requesting the arbitration shall submit the first request to the Arbitration Center of AmCham Perú indicating the name of the person designated as first arbitrator, and inviting the opposing party, in turn, to designate the second arbitrator. The Arbitration Center of AmCham Perú shall submit a copy of the first request to the opposing party.

(b) Five calendar days after receiving the copy of the request referred to in letter (a) above, the opposing party shall indicate the name of the person designated as second arbitrator. If the opposing party fails to designate an arbitrator within the stated term, the Arbitration Center of AmCham Perú shall designate the second arbitrator.

(c) Five calendar days after the designation of the second arbitration pursuant to the provisions in (b), both parties shall, mutually agree, on the person who will serve as third arbitrator, who will chair the Tribunal. In the event that the parties fail to reach an agreement, the Arbitration Center of AmCham Perú shall designate the Chair of the Tribunal upon the request of either of the parties.

The Tribunal shall decide by majority on the subject matter of the arbitration. For this purpose, the Tribunal shall issue an arbitration award and the reasons therefore in writing within the term set in the By-laws and Regulations of the Arbitration Center of AmCham Perú. The arbitration award shall be final, binding upon the parties and unappealable, unless otherwise provided in the applicable rules.

In addition, the arbitration award shall determine the manner to confront the expenses related to the arbitration pursuant to the provisions set forth by the rules of the Arbitration Center of AmCham Perú.

EX-2.3

Exhibit 2.3

AMENDMENT NO. 1 TO DEPOSIT
AGREEMENT AMONG
CEMENTOS PACASMAYO S.A.A.,
JPMORGAN CHASE BANK, N.A. AS
DEPOSITARY AND
HOLDERS OF AMERICAN DEPOSITARY
RECEIPTS WORLDWIDE SECURITIES SERVICES
jpmorgan.com
J.P.Morgan

AMENDMENT NO. 1, dated as of February 21, 2017 (the “Amendment”), to the Deposit Agreement dated as of February 7, 2012 (the “Deposit Agreement”) among Cementos Pacasmayo S.A.A., incorporated under the laws of the Republic of Peru (the “Company”), JPMorgan Chase Bank, N.A., as depositary (the “Depositary”), and all holders from time to time of American depositary receipts (“ADRs”) issued thereunder.

W I T N E S S E T H:

WHEREAS, the Company and the Depositary executed the Deposit Agreement for the purposes set forth therein; and

WHEREAS, pursuant to paragraph (16) of the form of ADR contained in the Deposit Agreement, the Company and the Depositary desire to amend the terms of the Deposit Agreement and ADRs.

NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Company and the Depositary hereby agree to amend the Deposit Agreement as follows:

ARTICLE I

DEFINITIONS

SECTION 1.01. Definitions. Unless otherwise defined in this Amendment, all capitalized terms used, but not otherwise defined, herein shall have the meaning given to such terms in the Deposit Agreement.

ARTICLE II

AMENDMENTS TO DEPOSIT AGREEMENT AND ADRs

SECTION 2.01. All references in the Deposit Agreement to the term “Deposit Agreement” shall, as of the date hereof, refer to the Deposit Agreement dated as of February 7, 2012 and as amended by this Amendment.

SECTION 2.02. Sections 4 and 6 of the Deposit Agreement are amended by inserting “SWIFT,” immediately before the word “cable” contained therein.

SECTION 2.03. The second paragraph of Section 8 of the Deposit Agreement is amended by replacing “City of New York” with “United States”.

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SECTION 2.04. Section 9 of the Deposit Agreement is amended to read as follows:

Any Custodian in acting hereunder shall be subject to the directions of the Depositary and shall be responsible solely to it. The Depositary reserves the right to add, replace or remove a Custodian. The Depositary will give prompt notice of any such action, which will be advance notice if practicable.    

Any Custodian may resign from its duties hereunder by providing at least 30 days prior written notice to the Depositary. The Depositary may discharge any Custodian at any time upon notice to the Custodian being discharged. Any Custodian ceasing to act hereunder as Custodian shall deliver, upon the instruction of the Depositary, all Deposited Securities held by it to a Custodian continuing to act. If upon the effectiveness of such resignation there would be no Custodian acting hereunder, the Depositary shall, promptly after receiving such notice, use commercially reasonable efforts to appoint a substitute custodian or custodians, each of which shall thereafter be a Custodian hereunder. Notwithstanding anything to the contrary contained in this Deposit Agreement (including the ADRs) and subject to the penultimate sentence of paragraph (14) of the form of ADR, the Depositary shall not be responsible for, and shall incur no liability in connection with or arising from, any act or omission to act on the part of the Custodian except to the extent that (A) the Custodian has been determined by a final non-appealable judgment of a court of competent jurisdiction to have (i) committed fraud or willful misconduct in the provision of custodial services to the Depositary or (ii) failed to use reasonable care in the provision of custodial services to the Depositary as determined in accordance with the standards prevailing in the jurisdiction in which the Custodian is located and (B) the Company or the Holders have incurred direct damages as a result of such act or omission to act on the part of the Custodian.

SECTION 2.05. The first sentence of Section 14 of the Deposit Agreement is amended to read as follows:

On or before the first date on which the Company makes any communication available to holders of Deposited Securities or any securities regulatory authority or stock exchange, by publication or otherwise, the Company shall transmit to the Depositary a copy thereof in English or with an English translation or summary.

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SECTION 2.06. Section 15 of the Deposit Agreement is amended by (a) replacing “Neither” in the first sentence thereof with “The Company agrees with the Depositary that neither” and (b) inserting the following immediately after the second sentence thereof:

At the reasonable request of the Depositary where it deems necessary, the Company will furnish the Depositary with legal opinions, in forms and from counsels reasonably acceptable to the Depositary, dealing with such issues requested by the Depositary.

SECTION 2.07. Section 16 of the Deposit Agreement is amended to read as follows:

16. Indemnification. The Company shall indemnify, defend and save harmless each of the Depositary, the Custodian and their respective directors, officers, employees, agents and affiliates against any loss, liability or expense (including reasonable fees and expenses of counsel) which may arise out of acts performed or omitted, in connection with the provisions of this Deposit Agreement and of the ADRs, as the same may be amended, modified or supplemented from time to time in accordance herewith (i) by either the Depositary or a Custodian or their respective directors, officers, employees, agents and affiliates, except for any liability or expense directly arising out of the negligence or willful misconduct of the Depositary or its directors, officers or affiliates acting in their capacities as such hereunder, or (ii) by the Company or any of its directors, officers, employees, agents and affiliates.

The indemnities set forth in the preceding paragraph shall also apply to any liability or expense which may arise out of any misstatement or alleged misstatement or omission or alleged omission in any registration statement, proxy statement, prospectus (or placement memorandum), or preliminary prospectus (or preliminary placement memorandum) relating to the offer or sale of ADSs, except to the extent any such liability or expense arises out of (i) information relating to the Depositary or its agents (other than the Company), as applicable, furnished in writing by the Depositary and not changed or altered by the Company expressly for use in any of the foregoing documents or (ii) if such information is provided, the failure to state a material fact necessary to make the information provided not misleading.

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Except as provided in the next succeeding paragraph, the Depositary shall indemnify, defend and save harmless the Company against any direct loss, liability or expense (including reasonable fees and expenses of counsel) incurred by the Company in respect of this Deposit Agreement to the extent such loss, liability or expense is due to the negligence or willful misconduct of the Depositary.

Notwithstanding any other provision of this Deposit Agreement or the ADRs to the contrary, neither the Company nor the Depositary, nor any of their agents shall be liable to the other for any indirect, special, punitive or consequential damages (excluding reasonable fees and expenses of counsel) or lost profits (collectively “Special Damages”) of any form incurred by any of them or any other person or entity, whether or not foreseeable and regardless of the type of action in which such a claim may be brought; provided, however, that to the extent Special Damages arise from or out of a claim brought by a third party (including, without limitation, Holders) against the Depositary or any of its agents acting under the Deposit Agreement, the Depositary and its agents shall be entitled to full indemnification from the Company for all such Special Damages, unless such Special Damages are found to have been a direct result of the gross negligence or willful misconduct of the Depositary.    

The obligations set forth in this Section 16 shall survive the termination of this Deposit Agreement and the succession or substitution of any indemnified person.

SECTION 2.08. Section 17(a) of the Deposit Agreement is amended to read as follows:

JPMorgan Chase Bank, N.A.

4 New York Plaza, Floor 12

New York, New York, 10004

Attention: Depositary Receipts Group

Fax: (212) 552-1950

SECTION 2.09. The first sentence of Section 18 of the Deposit Agreement is amended to read as follows:

This Deposit Agreement is for the exclusive benefit of the Company, the Depositary, the Holders, and their respective successors hereunder, and, except to the extent specifically set forth in Section 16 of this Deposit Agreement, shall not give any legal or equitable right, remedy or claim whatsoever to any other person.

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SECTION 2.10. The second paragraph of Section 19 of the Deposit Agreement is deleted and replaced with the following:

The Company has appointed CT Corporation System, 111 Eighth Avenue, New York, New York, as its authorized agent (the “Authorized Agent”) upon which process may be served in any such action arising out of or based on this Deposit Agreement or the transactions contemplated hereby which may be instituted in any state or federal court in New York, New York by the Depositary or any Holder, and waives any other requirements of or objections to personal jurisdiction with respect thereto. The Company represents and warrants that the Authorized Agent has agreed to act as said agent for service of process, and the Company agrees to take any and all action, including the filing of any and all documents and instruments, that may be necessary to continue such appointment in full force and effect as aforesaid. The Company further hereby irrevocably consents and agrees to the service of any and all legal process, summons, notices and documents in any suit, action or proceeding against the Company, by service by mail of a copy thereof upon the Authorized Agent (whether or not the appointment of such Authorized Agent shall for any reason prove to be ineffective or such Authorized Agent shall fail to accept or acknowledge such service), with a copy mailed to the Company by registered or certified air mail, postage prepaid, to its address provided in Section 16(b) hereof. The Company agrees that the failure of the Authorized Agent to give any notice of such service to it shall not impair or affect in any way the validity of such service or any judgment rendered in any action or proceeding based thereon. If, for any reason, the Authorized Agent named above or its successor shall no longer serve as agent of the Company to receive service of process in New York, the Company shall promptly appoint a successor that is a legal entity with offices in New York, New York, so as to serve and will promptly advise the Depositary thereof. In the event the Company fails to continue such designation and appointment in full force and effect, the Company hereby waives personal service of process and/or notice upon it and consents that any such service of process and/or notice may be made by certified or registered mail, return receipt requested, directed to the Company at its address last specified for notices hereunder, and service of process and/or notice so made shall be deemed completed five (5) days after the same shall have been so mailed. Notwithstanding the foregoing, any action based on this Deposit Agreement may be instituted by the Depositary in any competent court in the Republic of Peru and/or the United States.

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By holding an ADS or an interest therein, Holders and owners of ADSs each irrevocably agree that any legal suit, action or proceeding against or involving the Company or the Depositary, arising out of or based upon this Deposit Agreement, the ADSs or the transactions contemplated herein, therein or hereby, may only be instituted in a state or federal court in New York, New York, and by holding an ADS or an interest therein each irrevocably waives any objection which it may now or hereafter have to the laying of venue of any such proceeding, and irrevocably submits to the exclusive jurisdiction of such courts in any such suit, action or proceeding.    

SECTION 2.11. The third paragraph of paragraph (1) of the form of ADR, and all outstanding ADRs, is amended to read as follows:

Every person depositing Shares under the Deposit Agreement represents and warrants that (a) such Shares and the certificates therefor are duly authorized, validly issued and outstanding, fully paid, nonassessable and legally obtained by such person (b) all pre-emptive and comparable rights, if any, with respect to such Shares have been validly waived or exercised, (c) the person making such deposit is duly authorized so to do, (d) the Shares presented for deposit are free and clear of any lien, encumbrance, security interest, charge, mortgage or adverse claim and (e) such Shares (A) are not “restricted securities” as such term is defined in Rule 144 under the Securities Act of 1933 (“Restricted Securities”) unless at the time of deposit the requirements of paragraphs (c), (e), (f) and (h) of Rule 144 shall not apply and such Shares may be freely transferred and may otherwise be offered and sold freely in the United States or (B) have been registered under the Securities Act of 1933. To the extent the person depositing Shares is an “affiliate” of the Company as such term is defined in Rule 144, the person also represents and warrants that upon the sale of the ADSs, all of the provisions of Rule 144 which enable the Shares to be freely sold (in the form of ADSs) will be fully complied with and, as a result thereof, all of the ADSs issued in respect of such Shares will not be on the sale thereof, Restricted Securities. Such representations and warranties shall survive the deposit and withdrawal of Shares and the issuance and cancellation of ADSs in respect thereof and the transfer of such ADSs. The Depositary will not knowingly accept for deposit under the Deposit Agreement any Shares required to be registered under the Securities Act of 1933 and not so registered; The Depositary may refuse to accept for such deposit any Shares identified by the Company in order to facilitate the Company’s compliance with the requirements of the Securities Act of 1933 or the Rules made thereunder.

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SECTION 2.12. The proviso in the penultimate sentence of paragraph (3) of the form of ADR, and all outstanding ADRs, is amended to read as follows:

provided that the Depositary may close the ADR Register at any time or from time to time when deemed expedient by it or, in the case of the issuance book portion of the ADR Register, when reasonably requested by the Company in order for the Company to comply with applicable law

SECTION 2.13. The last sentence of paragraph (4) of the form of ADR, and all outstanding ADRs, is amended to read as follows:

The issuance of ADRs, the acceptance of deposits of Shares, the registration, registration of transfer, split-up or combination of ADRs or, subject to the last sentence of paragraph (2), the withdrawal of Deposited Securities may be suspended, generally or in particular instances, when the ADR Register or any register for Deposited Securities is closed or when any such action is deemed advisable by the Depositary.

SECTION 2.14. The first sentence of paragraph (5) of the form of ADR, and all outstanding ADRs, is amended to read as follows:

If any tax or other governmental charges (including any penalties and/or interest) shall become payable by or on behalf of the Custodian or the Depositary with respect to this ADR, any Deposited Securities represented by the ADSs evidenced hereby or any distribution thereon, such tax or other governmental charge shall be paid by the Holder hereof to the Depositary and by holding or having held an ADR the Holder and all prior Holders hereof, jointly and severally, agree to indemnify, defend and save harmless each of the Depositary and its agents in respect thereof.

SECTION 2.15. The antepenultimate sentence of paragraph (5) of the form of ADR, and all outstanding ADRs, is amended by inserting “transfer” immediately before “records”.

SECTION 2.16. The ultimate sentence of paragraph (5) of the form of ADR, and all outstanding ADRs, is amended by inserting “officers” immediately after “respective”.

SECTION 2.17. The second sentence of paragraph (6) of the form of ADR, and all outstanding ADRs, is amended by inserting “written” before “request” therein.

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SECTION 2.18. The body of paragraph (7) of the form of ADR, and all outstanding ADRs, is amended to read as follows:

The Depositary may charge, and collect from, (i) each person to whom ADSs are issued, including, without limitation, issuances against deposits of Shares, issuances in respect of Share Distributions, Rights and Other Distributions (as such terms are defined in paragraph (10)), issuances pursuant to a stock dividend or stock split declared by the Company, or issuances pursuant to a merger, exchange of securities or any other transaction or event affecting the ADSs or the Deposited Securities, and (ii) each person surrendering ADSs for withdrawal of Deposited Securities or whose ADSs are cancelled or reduced for any other reason, U.S.$5.00 for each 100 ADSs (or 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 Share Distributions, Rights and Other Distributions prior to such deposit to pay such charge. The following additional charges shall be incurred by the Holders, by any party depositing or withdrawing Shares or by any party surrendering ADSs and/or to whom ADSs are issued (including, without limitation, issuances pursuant to a stock dividend or stock split declared by the Company or an exchange of stock regarding the ADSs or the Deposited Securities or a distribution of ADSs pursuant to paragraph (10)), whichever is applicable (i) a fee of U.S.$0.05 or less per ADS for any Cash distribution made pursuant to the Deposit Agreement, (ii) a fee of U.S.$1.50 per ADR or ADRs for transfers made pursuant to paragraph (3) hereof, (iii) a fee for the distribution or sale of securities pursuant to paragraph (10) hereof, such fee being in an amount equal to the fee for the execution and delivery of ADSs referred to above which would have been charged as a result of the deposit of such securities (for purposes of this paragraph (7) treating all such securities as if they were Shares) but which securities or the net cash proceeds from the sale thereof are instead distributed by the Depositary to Holders entitled thereto, (iv) an aggregate fee of U.S.$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 as of the record date or record dates set by the Depositary during each calendar year 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

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distributions), and (v) a fee for the reimbursement of such fees, charges and expenses as are incurred by the Depositary and/or any of its 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 Shares or other Deposited Securities, the sale of securities (including, without limitation, 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 fees and charges 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). The Company 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 the Company and the Depositary, except (i) stock transfer or other taxes and other governmental charges (which are payable by Holders or persons depositing Shares), (ii) SWIFT, cable, telex and facsimile transmission and delivery charges incurred at the request of persons depositing, or Holders delivering Shares, ADRs or Deposited Securities (which are payable by such persons or Holders), (iii) transfer or registration fees for the registration or transfer of Deposited Securities on any applicable register in connection with the deposit or withdrawal of Deposited Securities (which are payable by persons depositing Shares or Holders withdrawing Deposited Securities; there are no such fees in respect of the Shares as of the date of the Deposit Agreement), and (iv) in connection with the conversion of foreign currency into U.S. dollars, JPMorgan Chase Bank, N.A. (“JPMorgan”) shall deduct out of such foreign currency the fees, expenses and other charges charged by it and/or its agent (which may be a division, branch or affiliate) so appointed in connection with such conversion. JPMorgan and/or its agent may act as principal for such conversion of foreign currency. Such charges may at any time and from time to time be changed by agreement between the Company and the Depositary. For further details see https://www.adr.com.

The Depositary anticipates reimbursing the Company for certain expenses incurred by the Company that are related to the establishment and maintenance of the ADR program upon such terms and conditions as the Company and the Depositary may agree from time to time. The Depositary may make available to the Company a set amount or a portion

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of the Depositary fees charged in respect of the ADR program or otherwise upon such terms and conditions as the Company and the Depositary may agree from time to time.

The right of the Depositary to receive payment of fees, charges and expenses as provided above shall survive the termination of the Deposit Agreement. As to any Depositary, upon the resignation or removal of such Depositary, such right shall extend for those fees, charges and expenses incurred prior to the effectiveness of such resignation or removal.

SECTION 2.19. Subsection (a)(iii) of the first sentence of paragraph (10) of the form of ADR, and all outstanding ADRs, is amended by inserting “and/or its agents’ fees and” immediately before “expenses” therein.

SECTION 2.20. Paragraph (10) of the form of ADR, and all outstanding ADRs, is amended by replacing the final two sentences thereof with the following:

The Depositary reserves the right to utilize a division, branch or affiliate of JPMorgan Chase Bank, N.A. to direct, manage and/or execute any public and/or private sale of securities hereunder. Such division, branch and/or affiliate may charge the Depositary a fee in connection with such sales, which fee is considered an expense of the Depositary contemplated above and/or under paragraph (7) hereof. Any U.S. dollars available will be distributed by checks drawn on a bank in the United States for whole dollars and cents. Fractional cents will be withheld without liability and dealt with by the Depositary in accordance with its then current practices. All purchases and sales of securities will be handled by the Depositary in accordance with its then current policies, which are currently set forth in the “Depositary Receipt Sale and Purchase of Security” section of https://www.adr.com/Investors/FindOutAboutDRs, the location and contents of which the Depositary shall be solely responsible for.

SECTION 2.21. The body of paragraph (12) of the form of ADR, and all outstanding ADRs, is amended to read as follows:

Subject to the next sentence, as soon as practicable after receipt of notice of any meeting at which the holders of Shares are entitled to vote, or of solicitation of consents or proxies from holders of Shares or other Deposited Securities, the Depositary shall fix the ADS record date in accordance with paragraph (11) above in respect of such meeting or solicitation of consent or proxy. The Depositary shall, if requested by the Company in writing in a timely manner (the Depositary having no

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obligation to take any further action if the request shall not have been received by the Depositary at least 30 days prior to the date of such vote or meeting) and at the Company’s expense and provided no legal prohibitions exist, distribute to Holders a notice stating (a) such information as is contained in such notice and any solicitation materials, (b) that each Holder on the record date set by the Depositary therefor will, subject to any applicable provisions of Peruvian law, be entitled to instruct the Depositary as to the exercise of the voting rights, if any, pertaining to the Deposited Securities represented by the ADSs evidenced by such Holder’s ADRs and (c) the manner in which such instructions may be given, including instructions to give a discretionary proxy to a person designated by the Company. Upon actual receipt by the ADR department of the Depositary of instructions of a Holder on such record date in the manner and on or before the time established by the Depositary for such purpose, the Depositary shall endeavor insofar as practicable and permitted under the provisions of or governing Deposited Securities and Peruvian law (the Depositary having no obligation to interpret Peruvian law) to vote or cause to be voted the Deposited Securities represented by the ADSs evidenced by such Holder’s ADRs in accordance with such instructions. The Company understands that, as a result, the Depositary may be presenting votes on behalf of some instructing Holders that may be contrary to votes it presents on behalf of other instructing Holders. To the extent not prohibited by Peruvian law, the Company agrees to accept such any and all such votes. The Depositary will not itself exercise any voting discretion in respect of any Deposited Securities. There is no guarantee that Holders generally or any Holder in particular will receive the notice described above with sufficient time to enable such Holder to return any voting instructions to the Depositary in a timely manner or that the Depositary will be able to vote as instructed by each Holder to the extent there are any limitations under Peruvian law. Notwithstanding anything contained in the Deposit Agreement or any ADR, the Depositary may, to the extent not prohibited by law or regulations, or by the requirements of the stock exchange on which the ADSs are listed, in lieu of distribution of the materials provided to the Depositary in connection with any meeting of, or solicitation of consents or proxies from, holders of Deposited Securities, distribute to the Holders a notice that provides Holders with, or otherwise publicizes to Holders, instructions on how to retrieve such materials or receive such materials upon request (i.e., by reference to a website containing the materials for retrieval or a contact for requesting copies of the materials). Holders are strongly encouraged to forward their voting instructions as soon as possible. Voting instructions will not be deemed received until such time as the ADR

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department responsible for proxies and voting has received such instructions notwithstanding that such instructions may have been physically received by JPMorgan Chase Bank, N.A., as Depositary, prior to such time.

SECTION 2.22. Paragraph (13) of the form of ADR, and all outstanding ADRs, is amended to read as follows:

Subject to paragraphs (4) and (5), the Depositary may, in its discretion, and shall if reasonably requested by the Company, amend this ADR or distribute additional or amended ADRs (with or without calling this ADR for exchange) or cash, securities or property on the record date set by the Depositary therefor to reflect any change in par value, split up, consolidation, cancellation or other reclassification of Deposited Securities, any Share Distribution or Other Distribution not distributed to Holders or any cash, securities or property available to the Depositary in respect of Deposited Securities from (and the Depositary is hereby authorized to surrender any Deposited Securities to any person and, irrespective of whether such Deposited Securities are surrendered or otherwise cancelled by operation of law, rule, regulation or otherwise, to sell by public or private sale any property received in connection with) any recapitalization, reorganization, merger, consolidation, liquidation, receivership, bankruptcy or sale of all or substantially all the assets of the Company, and to the extent the Depositary does not so amend this ADR or make a distribution to Holders to reflect any of the foregoing, or the net proceeds thereof, whatever cash, securities or property results from any of the foregoing shall constitute Deposited Securities and each ADS evidenced by this ADR shall automatically represent its pro rata interest in the Deposited Securities as then constituted. Promptly upon the occurrence of any of the aforementioned changes affecting Deposited Securities, the Company shall notify the Depositary in writing of such occurrence and may instruct the Depositary to give notice thereof, at the Company’s expense, to Holders in accordance with the provisions hereof. Upon receipt of such instruction, the Depositary shall give notice to the Holders in accordance with the terms thereof, as soon as reasonably practicable.

SECTION 2.23. The body of paragraph (14) of the form of ADR, and all outstanding ADRs, is amended to read as follows:

The Depositary, the Company, their agents and each of them shall: (a) incur no liability to Holders or beneficial owners of ADSs (i) if any present

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or future law, rule, regulation, fiat, order or decree of the United States, the Republic of Peru or any other country or jurisdiction, or of any governmental or regulatory authority or any securities exchange or market or automated quotation system, the provisions of or governing any Deposited Securities, any present or future provision of the Company’s charter, any act of God, war, terrorism, nationalization, expropriation, currency restrictions, work stoppage, strike, civil unrest, revolutions, rebellions, explosions, computer failure or circumstance beyond its direct and immediate control shall prevent or delay, or shall cause any of them to be subject to any civil or criminal penalty in connection with, any act which the Deposit Agreement or this ADR provides shall be done or performed by it or them (including, without limitation, voting pursuant to paragraph (12) hereof), or (ii) by reason of any exercise or failure to exercise any discretion given it in the Deposit Agreement or this ADR (including, without limitation, any failure to determine that any distribution or action may be lawful or reasonably practicable); (b) assume no liability to Holders or beneficial owners of ADSs except to perform its obligations to the extent they are specifically set forth in this ADR and the Deposit Agreement without gross negligence or willful misconduct; (c) in the case of the Depositary and its agents, be under no obligation to appear in, prosecute or defend any action, suit or other proceeding in respect of any Deposited Securities or this ADR; (d) in the case of the Company and its agents hereunder be under no obligation to appear in, prosecute or defend any action, suit or other proceeding in respect of any Deposited Securities or this ADR, which in its opinion may involve it in expense or liability, unless indemnity satisfactory to it against all expense (including fees and disbursements of counsel) and liability be furnished as often as may be required; or (e) not be liable to Holders or beneficial owners of ADSs for any action or inaction by it in reliance upon the advice of or information from legal counsel, accountants, any person presenting Shares for deposit, any Holder, or any other person believed by it to be competent to give such advice or information. The Depositary shall not be liable for the acts or omissions made by, or the insolvency of, any securities depository, clearing agency or settlement system. The Depositary shall not be responsible for, and shall incur no liability in connection with or arising from, the insolvency of any Custodian that is not a branch or affiliate of JPMorgan Chase Bank, N.A. The Depositary shall not have any liability for the price received in connection with any sale of securities, the timing thereof or any delay in action or omission to act nor shall it be responsible for any error or delay in action, omission to act, default or negligence on the part of the party so retained in connection with any such sale or proposed sale. Notwithstanding anything

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to the contrary contained in the Deposit Agreement (including the ADRs), subject to the penultimate sentence of this paragraph (14), the Depositary shall not be responsible for, and shall incur no liability in connection with or arising from, any act or omission to act on the part of the Custodian except to the extent that (A) the Custodian has been determined by a final non-appealable judgment of a court of competent jurisdiction to have (i) committed fraud or willful misconduct in the provision of custodial services to the Depositary or (ii) failed to use reasonable care in the provision of custodial services to the Depositary as determined in accordance with the standards prevailing in the jurisdiction in which the Custodian is located and (B) the Company or the Holders have incurred direct damages as a result of such act or omission to act on the part of the Custodian. The Depositary, its agents and the Company may rely and shall be protected in acting upon any written notice, request, direction, instruction or document believed by them to be genuine and to have been signed, presented or given by the proper party or parties. The Depositary shall be under no obligation to inform Holders or any other holders of an interest in any ADSs about the requirements of Peruvian law, rules or regulations or any changes therein or thereto. The Depositary and its agents will not be responsible for any failure to carry out any instructions to vote any of the Deposited Securities, for the manner in which any such vote is cast or for the effect of any such vote. The Depositary may rely upon instructions from the Company or its counsel in respect of any approval or license required for any currency conversion, transfer or distribution. The Depositary and its agents may own and deal in any class of securities of the Company and its affiliates and in ADRs. Notwithstanding anything to the contrary set forth in the Deposit Agreement or an ADR, the Depositary and its agents may fully respond to any and all demands or requests for information maintained by or on its behalf in connection with the Deposit Agreement, any Holder or Holders, any ADR or ADRs or otherwise related hereto or thereto to the extent such information is requested or required by or pursuant to any lawful authority, including without limitation laws, rules, regulations, administrative or judicial process, banking, securities or other regulators. None of the Depositary, the Custodian or the Company shall be liable for the failure by any Holder or beneficial owner to obtain the benefits of credits or refunds of non-U.S. tax paid against such Holder’s or beneficial owner’s income tax liability. The Depositary and the Company shall not incur any liability for any tax or tax consequences that may be incurred by Holders or beneficial owners on account of their ownership or disposition of the ADRs or ADSs. The Depositary shall not incur any liability for the content of any information submitted to it by or on behalf

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of the Company for distribution to the Holders or for any inaccuracy of any translation thereof, for any investment risk associated with acquiring an interest in the Deposited Securities, for the validity or worth of the Deposited Securities, for the credit-worthiness of any third party, for allowing any rights to lapse upon the terms of the Deposit Agreement or for the failure or timeliness of any notice from the Company. Notwithstanding anything herein or in the Deposit Agreement to the contrary, the Depositary and the Custodian(s) may use third party delivery services and providers of information regarding matters such as pricing, proxy voting, corporate actions, class action litigation and other services in connection herewith and the Deposit Agreement, and use local agents to provide extraordinary services such as attendance at annual meetings of issuers of securities. Although the Depositary and the Custodian will use reasonable care (and cause their agents to use reasonable care) in the selection and retention of such third party providers and local agents, they will not be responsible for any errors or omissions made by them in providing the relevant information or services. The Depositary shall not be liable for any acts or omissions made by a successor depositary whether in connection with a previous act or omission of the Depositary or in connection with any matter arising wholly after the removal or resignation of the Depositary. By holding an ADS or an interest therein, Holders and owners of ADSs each irrevocably agree that any legal suit, action or proceeding against or involving the Company or the Depositary, arising out of or based upon the Deposit Agreement, the ADSs or the transactions contemplated herein, therein or hereby, may only be instituted in a state or federal court in New York, New York, and by holding an ADS or an interest therein each irrevocably waives any objection which it may now or hereafter have to the laying of venue of any such proceeding, and irrevocably submits to the exclusive jurisdiction of such courts in any such suit, action or proceeding. The Company has agreed to indemnify the Depositary and its agents under certain circumstances. Neither the Depositary, the Company nor any of their respective agents shall be liable to Holders or beneficial owners of interests in ADSs for any indirect, special, punitive or consequential damages (including, without limitation, legal fees and expenses) or lost profits, in each case of any form incurred by any person or entity, whether or not foreseeable and regardless of the type of action in which such a claim may be brought. No disclaimer of liability under the Securities Act of 1933 is intended by any provision hereof.

SECTION 2.24. Paragraph (16) of the form of ADR, and all outstanding ADRs, is amended by inserting “SWIFT,” immediately before the word “cable” contained therein.

SECTION 2.25. The form of ADR, and all outstanding ADR, each after giving effect to this Amendment, shall be in the form attached hereto as Exhibit A.

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ARTICLE III

REPRESENTATIONS AND WARRANTIES

SECTION 3.01. Representations and Warranties of the Company. The Company represents and warrants to, and agrees with, the Depositary, that:

(a) This Amendment, when executed and delivered by the Company, will be duly and validly authorized, executed and delivered by the Company, and it and the Deposit Agreement as amended hereby constitute the legal, valid and binding obligations of the Company, enforceable against the Company in accordance with their respective terms, subject to bankruptcy, insolvency, fraudulent transfer, moratorium and similar laws of general applicability relating to or affecting creditors’ rights and to general equity principles; and

(b) In order to ensure the legality, validity, enforceability or admissibility into evidence of this Amendment or the Deposit Agreement as amended hereby, neither of such agreements need to be filed or recorded with any court in the Republic of Peru, nor does any stamp or similar tax or governmental charge need to be paid in the Republic of Peru on or in respect of such agreements. The Company agrees to make all necessary filings with the Peruvian regulator and/or Peruvian stock exchanges within the time frames required.

ARTICLE IV

MISCELLANEOUS

SECTION 4.01. Effective Date. This Amendment is dated as of the date set forth above and shall be effective thirty days after the date notice hereof is first provided to Holders.

SECTION 4.02. Indemnification. The parties hereto shall be entitled to the benefits of the indemnification provisions of the Deposit Agreement in connection with any and all liability it or they may incur as a result of the terms of this Amendment and the transactions contemplated herein.

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SECTION 4.03. Counterparts. This Amendment may be executed in any number of counterparts, each of which shall be deemed an original and all of which taken together shall constitute one instrument.

SECTION 4.04. Miscellaneous. THIS AMENDMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE CONSTRUED IN ACCORDANCE WITH, AND GOVERNED BY, NEW YORK LAW. Delivery of an executed signature page of this Deposit Agreement by facsimile or other electronic transmission (including “.pdf”, “.tif” or similar format) shall be effective as delivery of a manually executed counterpart hereof. The provisions of Section 18 of the Deposit Agreement are incorporated herein by reference and deemed to be a part hereof.

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IN WITNESS WHEREOF, CEMENTOS PACASMAYO S.A.A. and JPMORGAN CHASE BANK, N.A. have duly executed this Amendment No. 1 to Deposit Agreement as of the day and year first above set forth and all holders of ADRs shall become parties hereto upon acceptance by them of ADRs issued in accordance with the terms hereof.

CEMENTOS PACASMAYO S.A.A.
By:
Name:	Humberto Nadal Del Carpio
Title:	Chief Executive Officer
JPMORGAN CHASE BANK, N.A.
By:
Name:
Title:	Executive Director

[Signature page to Cementos Pacasmayo S.A.A. Amendment to Deposit Agreement]

IN WITNESS WHEREOF, CEMENTOS PACASMAYO S.A.A. and JPMORGAN CHASE BANK, N.A. have duly executed this Amendment No. 1 to Deposit Agreement as of the day and year first above set forth and all holders of ADRs shall become parties hereto upon acceptance by them of ADRs issued in accordance with the terms hereof.

CEMENTOS PACASMAYO S.A.A.
By:
Name:
Title:
JPMORGAN CHASE BANK, N.A.
By:
Name:	Gram A. Luverds
Title:	Executive Director

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EXHIBIT A

[FORM OF FACE OF ADR]

	No. of ADSs:
Number
	Each ADS represents
	Five Shares
	CUSIP:

AMERICAN DEPOSITARY RECEIPT

evidencing

AMERICAN DEPOSITARY SHARES

representing

COMMON SHARES

of

CEMENTOS PACASMAYO S.A.A.

(Incorporated under the laws of the Republic of Peru)

JPMORGAN CHASE BANK, N.A., a national banking association organized under the laws of the United States of America, as depositary hereunder (the “Depositary”), hereby certifies that            is the registered owner (a “Holder”) of              American Depositary Shares (“ADSs”), each (subject to paragraph (13)) representing five common shares (including the rights to receive Shares described in paragraph (1), “Shares” and, together with any other securities, cash or property from time to time held by the Depositary in respect or in lieu of deposited Shares, the “Deposited Securities”), of Cementos Pacasmayo S.A.A., a corporation organized under the laws of the Republic of Peru (the “Company”), deposited under the Deposit Agreement dated as of February 7, 2012 (as amended from time to time, the “Deposit Agreement”) among the Company, the Depositary and all Holders from time to time of American Depositary Receipts issued thereunder (“ADRs”), each of whom by accepting an ADR becomes a party thereto. The Deposit Agreement and this ADR (which includes the provisions set forth on the reverse hereof) shall be governed by and construed in accordance with the laws of the State of New York.

A-1

(1) Issuance and Pre-Release of ADSs. This ADR is one of the ADRs issued under the Deposit Agreement. Subject to the other provisions hereof, the Depositary may so issue ADRs for delivery at the Transfer Office (as hereinafter defined) only against deposit of: (a) Shares in a form satisfactory to the Custodian; (b) rights to receive Shares from the Company or any registrar, transfer agent, clearing agent or other entity recording Share ownership or transactions; or (c) in accordance with the next paragraph hereof.

In its capacity as Depositary, the Depositary shall not lend Shares or ADSs; provided, however, that, unless requested in writing by the Company to cease doing so during reasonable periods necessary in order to enable compliance with applicable law, the Depositary may (i) issue ADSs prior to the receipt of Shares and (ii) deliver Shares prior to the receipt of ADSs for withdrawal of Deposited Securities, including ADSs which were issued under (i) above but for which Shares may not have been received (each such transaction a “Pre-Release”). The Depositary may receive ADSs in lieu of Shares under (i) above (which ADSs will promptly be canceled by the Depositary upon receipt by the Depositary) and receive Shares in lieu of ADSs under (ii) above. Each such Pre-Release will be subject to a written agreement whereby the person or entity (the “Applicant”) to whom ADSs or Shares are to be delivered (a) represents that at the time of the Pre-Release the Applicant or its customer owns the Shares or ADSs that are to be delivered by the Applicant under such Pre-Release, (b) agrees to indicate the Depositary as owner of such Shares or ADSs in its records and to hold such Shares or ADSs in trust for the Depositary until such Shares or ADSs are delivered to the Depositary or the Custodian, (c) unconditionally guarantees to deliver to the Depositary or the Custodian, as applicable, such Shares or ADSs, and (d) agrees to any additional restrictions or requirements that the Depositary deems appropriate. Each such Pre-Release will be at all times fully collateralized with cash, U.S. government securities or such other collateral as the Depositary deems appropriate, terminable by the Depositary on not more than five (5) business days’ notice and subject to such further indemnities and credit regulations as the Depositary deems appropriate. The Depositary will normally limit the number of ADSs and Shares involved in such Pre-Release at any one time to thirty percent (30%) of the ADSs outstanding (without giving effect to ADSs outstanding under (i) above), provided, however, that the Depositary reserves the right to change or disregard such limit from time to time as it deems appropriate. The Depositary may also set limits with respect to the number of ADSs and Shares involved in Pre-Release with any one person on a case-by-case basis as it deems appropriate. The Depositary may retain for its own account any compensation received by it in conjunction with the foregoing. Collateral provided in connection with Pre-Release transactions, but not the earnings thereon, shall be held for the benefit of the Holders (other than the Applicant).

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Every person depositing Shares under the Deposit Agreement represents and warrants that (a) such Shares and the certificates therefor are duly authorized, validly issued and outstanding, fully paid, nonassessable and legally obtained by such person (b) all pre-emptive and comparable rights, if any, with respect to such Shares have been validly waived or exercised, (c) the person making such deposit is duly authorized so to do, (d) the Shares presented for deposit are free and clear of any lien, encumbrance, security interest, charge, mortgage or adverse claim and (e) such Shares (A) are not “restricted securities” as such term is defined in Rule 144 under the Securities Act of 1933 (“Restricted Securities”) unless at the time of deposit the requirements of paragraphs (c), (e), (f) and (h) of Rule 144 shall not apply and such Shares may be freely transferred and may otherwise be offered and sold freely in the United States or (B) have been registered under the Securities Act of 1933. To the extent the person depositing Shares is an “affiliate” of the Company as such term is defined in Rule 144, the person also represents and warrants that upon the sale of the ADSs, all of the provisions of Rule 144 which enable the Shares to be freely sold (in the form of ADSs) will be fully complied with and, as a result thereof, all of the ADSs issued in respect of such Shares will not be on the sale thereof, Restricted Securities. Such representations and warranties shall survive the deposit and withdrawal of Shares and the issuance and cancellation of ADSs in respect thereof and the transfer of such ADSs. The Depositary will not knowingly accept for deposit under the Deposit Agreement any Shares required to be registered under the Securities Act of 1933 and not so registered; The Depositary may refuse to accept for such deposit any Shares identified by the Company in order to facilitate the Company’s compliance with the requirements of the Securities Act of 1933 or the Rules made thereunder.

(2) Withdrawal of Deposited Securities. Subject to paragraphs (4) and (5), commencing with the time the preliminary stock certificates (certificados provisionales) have been converted into Shares upon surrender of (i) a certificated ADR in a form satisfactory to the Depositary at the Transfer Office or (ii) proper instructions and documentation in the case of a Direct Registration ADR, the Holder hereof is entitled to delivery at, or to the extent in dematerialized form from, the Custodian’s office of the Deposited Securities at the time represented by the ADSs evidenced by this ADR, provided that the Depositary may deliver Shares prior to the receipt of ADSs for withdrawal of Deposited Securities, including ADSs which were issued under (1) above but for which Shares may not have been received (until such ADSs are actually deposited, “Pre-released Shares”) only if all the conditions in (1) above related to such Pre-Release are satisfied). At the request, risk and expense of the Holder hereof, the Depositary may deliver such Deposited Securities at such other place as may have been requested by the Holder. Notwithstanding any other provision of the Deposit Agreement or this ADR, the withdrawal of Deposited Securities may be restricted only for the reasons set forth in General Instruction I.A.(1) of Form F-6 (as such instructions

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may be amended from time to time) under the Securities Act of 1933. Some or all of the Shares may be held by the Custodian through CAVALI S.A. ICLV (“CAVALI”) book-entry settlement system. Under applicable Peruvian law, Shares deposited with CAVALI cannot be withdrawn from CAVALI without complying with applicable regulations in Peru. It is expected that a Holder wishing to hold Shares directly will be required to establish or maintain an account at CAVALI to receive delivery of such Shares. As of the date of this Deposit Agreement, CAVALI permits accounts to be held by individuals and entities through brokers or other custodians, and regulations regarding CAVALI do not discriminate between (a) citizens or residents and (b) non-citizens or non-residents of Peru.

(3) Transfers of ADRs. The Depositary or its agent will keep, at a designated transfer office (the “Transfer Office”), (a) a register (the “ADR Register”) for the registration, registration of transfer, combination and split-up of ADRs, and, in the case of Direct Registration ADRs, shall include the Direct Registration System, which at all reasonable times will be open for inspection by Holders and the Company for the purpose of communicating with Holders in the interest of the business of the Company or a matter relating to the Deposit Agreement and (b) facilities for the delivery and receipt of ADRs. The term ADR Register includes the Direct Registration System. Title to this ADR (and to the Deposited Securities represented by the ADSs evidenced hereby), when properly endorsed (in the case of ADRs in certificated form) or upon delivery to the Depositary of proper instruments of transfer, is transferable by delivery with the same effect as in the case of negotiable instruments under the laws of the State of New York; provided that the Depositary, notwithstanding any notice to the contrary, may treat the person in whose name this ADR is registered on the ADR Register as the absolute owner hereof for all purposes and neither the Depositary nor the Company will have any obligation or be subject to any liability under the Deposit Agreement to any holder of an ADR, unless such holder is the Holder thereof. Subject to paragraphs (4) and (5), this ADR is transferable on the ADR Register and may be split into other ADRs or combined with other ADRs into one ADR, evidencing the aggregate number of ADSs surrendered for split-up or combination, by the Holder hereof or by duly authorized attorney upon surrender of this ADR at the Transfer Office properly endorsed (in the case of ADRs in certificated form) or upon delivery to the Depositary of proper instruments of transfer and duly stamped as may be required by applicable law; provided that the Depositary may close the ADR Register at any time or from time to time when deemed expedient by it or, in the case of the issuance book portion of the ADR Register, when reasonably requested by the Company in order for the Company to comply with applicable law. At the request of a Holder, the Depositary shall, for the purpose of substituting a certificated ADR with a Direct Registration ADR, or vice versa, execute and deliver a certificated ADR or a Direct Registration ADR, as the case may be, for any authorized number of ADSs requested, evidencing the same aggregate number of ADSs as those evidenced by the certificated ADR or Direct Registration ADR, as the case may be, substituted.

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(4) Certain Limitations. Prior to the issue, registration, registration of transfer, split-up or combination of any ADR, the delivery of any distribution in respect thereof, or, subject to the last sentence of paragraph (2), the withdrawal of any Deposited Securities, and from time to time in the case of clause (b)(ii) of this paragraph (4), the Company, the Depositary or the Custodian may require: (a) payment with respect thereto of (i) any stock transfer or other tax or other governmental charge, (ii) any stock transfer or registration fees in effect for the registration of transfers of Shares or other Deposited Securities upon any applicable register and (iii) any applicable charges as provided in paragraph (7) of this ADR; (b) the production of proof satisfactory to it of (i) the identity of any signatory and genuineness of any signature and (ii) such other information, including without limitation, information as to citizenship, residence, exchange control approval, beneficial ownership of any securities, compliance with applicable law, regulations, provisions of or governing Deposited Securities and terms of the Deposit Agreement and this ADR, as it may deem necessary or proper; and (c) compliance with such regulations as the Depositary may establish consistent with the Deposit Agreement. The issuance of ADRs, the acceptance of deposits of Shares, the registration, registration of transfer, split-up or combination of ADRs or, subject to the last sentence of paragraph (2), the withdrawal of Deposited Securities may be suspended, generally or in particular instances, when the ADR Register or any register for Deposited Securities is closed or when any such action is deemed advisable by the Depositary.

(5) Taxes. If any tax or other governmental charges (including any penalties and/or interest) shall become payable by or on behalf of the Custodian or the Depositary with respect to this ADR, any Deposited Securities represented by the ADSs evidenced hereby or any distribution thereon, such tax or other governmental charge shall be paid by the Holder hereof to the Depositary and by holding or having held an ADR the Holder and all prior Holders hereof, jointly and severally, agree to indemnify, defend and save harmless each of the Depositary and its agents in respect thereof. The Depositary may refuse to effect any registration, registration of transfer, split-up or combination hereof or, subject to the last sentence of paragraph (2), any withdrawal of such Deposited Securities until such payment is made. The Depositary may also deduct from any distributions on or in respect of Deposited Securities, or may sell by public or private sale for the account of the Holder hereof any part or all of such Deposited Securities (after attempting by reasonable means to notify the Holder hereof prior to such sale), and may apply such deduction or the proceeds of any such sale in payment of such tax or other governmental charge, the Holder hereof remaining liable for any deficiency, and shall reduce the number of ADSs evidenced hereby to reflect any such sales of Shares. In connection with any distribution to Holders, the Company will remit to the appropriate governmental authority or agency all amounts (if any) required

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to be withheld and owing to such authority or agency by the Company; and the Depositary and the Custodian will remit to the appropriate governmental authority or agency all amounts (if any) required to be withheld and owing to such authority or agency by the Depositary or the Custodian. The Depositary will forward to the Company such information from its transfer records maintained by it in its capacity as depositary hereunder as the Company may reasonably request to enable the Company to file any necessary reports with governmental authorities or agencies that are required in order to enable Holders to benefit from any applicable tax withholding treaties. If the Depositary determines that any distribution in property other than cash (including Shares or rights) on Deposited Securities is subject to any tax that the Depositary or the Custodian is obligated to withhold, the Depositary may dispose of all or a portion of such property in such amounts and in such manner as the Depositary deems necessary and practicable to pay such taxes, by public or private sale, and the Depositary shall distribute the net proceeds of any such sale or the balance of any such property after deduction of such taxes to the Holders entitled thereto. Each Holder of an ADR or an interest therein agrees to indemnify the Depositary, the Company, the Custodian and any of their respective officers, directors, employees, agents and affiliates against, and hold each of them harmless from, any claims by any governmental authority with respect to taxes, additions to tax, penalties or interest arising out of any refund of taxes, reduced rate of withholding at source or other tax benefit obtained.

(6) Disclosure of Interests. To the extent that the provisions of or governing any Deposited Securities may require disclosure of or impose limits on beneficial or other ownership of Deposited Securities, other Shares and other securities and may provide for blocking transfer, voting or other rights to enforce such disclosure or limits, Holders and all persons holding ADRs agree to comply with all such disclosure requirements and ownership limitations and to comply with any reasonable Company instructions in respect thereof. The Depositary agrees to forward, upon the written request and at the expense of the Company, any written request for beneficial ownership information from the Company to the Holders, and at the Company’s expense, to promptly forward to the Company any responses received by the Depositary. The Company reserves the right to instruct Holders to deliver their ADSs for cancellation and withdrawal of the Deposited Securities so as to permit the Company to deal directly with the Holder thereof as a holder of Shares and Holders agree to comply with such instructions. The Depositary agrees to cooperate with the Company in its efforts to inform Holders of the Company’s exercise of its rights under this paragraph and agrees to consult with, and provide reasonable assistance without risk, liability or expense on the part of the Depositary, to the Company on the manner or manners in which it may enforce such rights with respect to any Holder.

(7) Charges of Depositary. The Depositary may charge, and collect from, (i) each person to whom ADSs are issued, including, without limitation, issuances against

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deposits of Shares, issuances in respect of Share Distributions, Rights and Other Distributions (as such terms are defined in paragraph (10)), issuances pursuant to a stock dividend or stock split declared by the Company, or issuances pursuant to a merger, exchange of securities or any other transaction or event affecting the ADSs or the Deposited Securities, and (ii) each person surrendering ADSs for withdrawal of Deposited Securities or whose ADSs are cancelled or reduced for any other reason, U.S.$5.00 for each 100 ADSs (or 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 Share Distributions, Rights and Other Distributions prior to such deposit to pay such charge. The following additional charges shall be incurred by the Holders, by any party depositing or withdrawing Shares or by any party surrendering ADSs and/or to whom ADSs are issued (including, without limitation, issuances pursuant to a stock dividend or stock split declared by the Company or an exchange of stock regarding the ADSs or the Deposited Securities or a distribution of ADSs pursuant to paragraph (10)), whichever is applicable (i) a fee of U.S.$0.05 or less per ADS for any Cash distribution made pursuant to the Deposit Agreement, (ii) a fee of U.S.$1.50 per ADR or ADRs for transfers made pursuant to paragraph (3) hereof, (iii) a fee for the distribution or sale of securities pursuant to paragraph (10) hereof, such fee being in an amount equal to the fee for the execution and delivery of ADSs referred to above which would have been charged as a result of the deposit of such securities (for purposes of this paragraph (7) treating all such securities as if they were Shares) but which securities or the net cash proceeds from the sale thereof are instead distributed by the Depositary to Holders entitled thereto, (iv) an aggregate fee of U.S.$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 as of the record date or record dates set by the Depositary during each calendar year 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), and (v) a fee for the reimbursement of such fees, charges and expenses as are incurred by the Depositary and/or any of its 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 Shares or other Deposited Securities, the sale of securities (including, without limitation, 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 fees and charges 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). The Company will pay all other charges and expenses of the Depositary and any agent of the Depositary (except the Custodian)

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pursuant to agreements from time to time between the Company and the Depositary, except (i) stock transfer or other taxes and other governmental charges (which are payable by Holders or persons depositing Shares), (ii) SWIFT, cable, telex and facsimile transmission and delivery charges incurred at the request of persons depositing, or Holders delivering Shares, ADRs or Deposited Securities (which are payable by such persons or Holders), (iii) transfer or registration fees for the registration or transfer of Deposited Securities on any applicable register in connection with the deposit or withdrawal of Deposited Securities (which are payable by persons depositing Shares or Holders withdrawing Deposited Securities; there are no such fees in respect of the Shares as of the date of the Deposit Agreement), and (iv) in connection with the conversion of foreign currency into U.S. dollars, JPMorgan Chase Bank, N.A. (“JPMorgan”) shall deduct out of such foreign currency the fees, expenses and other charges charged by it and/or its agent (which may be a division, branch or affiliate) so appointed in connection with such conversion. JPMorgan and/or its agent may act as principal for such conversion of foreign currency. Such charges may at any time and from time to time be changed by agreement between the Company and the Depositary. For further details see https://www.adr.com.

The Depositary anticipates reimbursing the Company for certain expenses incurred by the Company that are related to the establishment and maintenance of the ADR program upon such terms and conditions as the Company and the Depositary may agree from time to time. The Depositary may make available to the Company a set amount or a portion of the Depositary fees charged in respect of the ADR program or otherwise upon such terms and conditions as the Company and the Depositary may agree from time to time.

The right of the Depositary to receive payment of fees, charges and expenses as provided above shall survive the termination of the Deposit Agreement. As to any Depositary, upon the resignation or removal of such Depositary, such right shall extend for those fees, charges and expenses incurred prior to the effectiveness of such resignation or removal.

(8) Available Information. The Deposit Agreement, the provisions of or governing Deposited Securities and any written communications from the Company, which are both received by the Custodian or its nominee as a holder of Deposited Securities and made generally available to the holders of Deposited Securities, are available for inspection by Holders at the offices of the Depositary and the Custodian and at the Transfer Office. The Depositary will distribute copies of such communications (or English translations or summaries thereof) to Holders when furnished by the Company. The Company is subject to the periodic reporting requirements of the Securities Exchange Act of 1934 and accordingly files certain reports with the United States Securities and Exchange Commission (the “Commission”).

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Such reports and other information may be inspected and copied at public reference facilities maintained by the Commission located at the date hereof at 100 F Street, NE, Washington, DC 20549.

(9) Execution. This ADR shall not be valid for any purpose unless executed by the Depositary by the manual or facsimile signature of a duly authorized officer of the Depositary.

Dated:

JPMORGAN CHASE BANK, N.A., as Depositary

By

Authorized Officer

The Depositary’s office is located at 4 New York Plaza, Floor 12, New York, New York, 10004.

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[FORM OF REVERSE OF ADR]

(10) Distributions on Deposited Securities. Subject to paragraphs (4) and (5), to the extent practicable, the Depositary will distribute to each Holder entitled thereto on the record date set by the Depositary therefor at such Holder’s address shown on the ADR Register, in proportion to the number of Deposited Securities (on which the following distributions on Deposited Securities are received by the Custodian) represented by ADSs evidenced by such Holder’s ADRs: (a) Cash. Any U.S. dollars available to the Depositary resulting from a cash dividend or other cash distribution or the net proceeds of sales of any other distribution or portion thereof authorized in this paragraph (10) (“Cash”), on an averaged or other practicable basis, subject to (i) appropriate adjustments for taxes withheld, (ii) such distribution being impermissible or impracticable with respect to certain Holders, and (iii) deduction of the Depositary’s and/or its agents’ fees and expenses in (1) converting any foreign currency to U.S. dollars by sale or in such other manner as the Depositary may determine to the extent that it determines that such conversion may be made on a reasonable basis, (2) transferring foreign currency or U.S. dollars to the United States by such means as the Depositary may determine to the extent that it determines that such transfer may be made on a reasonable basis, (3) obtaining any approval or license of any governmental authority required for such conversion or transfer, which is obtainable at a reasonable cost and within a reasonable time and (4) making any sale by public or private means in any commercially reasonable manner. (b) Shares. (i) Additional ADRs evidencing whole ADSs representing any Shares available to the Depositary resulting from a dividend or free distribution on Deposited Securities consisting of Shares (a “Share Distribution”) and (ii) U.S. dollars available to it resulting from the net proceeds of sales of Shares received in a Share Distribution, which Shares would give rise to fractional ADSs if additional ADRs were issued therefor, as in the case of Cash. (c) Rights. (i) Warrants or other instruments in the discretion of the Depositary representing rights to acquire additional ADRs in respect of any rights to subscribe for additional Shares or rights of any nature available to the Depositary as a result of a distribution on Deposited Securities (“Rights”), to the extent that the Company timely furnishes to the Depositary evidence satisfactory to the Depositary that the Depositary may lawfully distribute the same (the Company has no obligation to so furnish such evidence), or (ii) to the extent the Company does not so furnish such evidence and sales of Rights are practicable, any U.S. dollars available to the Depositary from the net proceeds of sales of Rights as in the case of Cash, or (iii) to the extent the Company does not so furnish such evidence and such sales cannot practicably be accomplished by reason of the nontransferability of the Rights, limited markets therefor, their short duration or otherwise, nothing (and any Rights may lapse). (d) Other Distributions. (i) Securities or property available to the Depositary resulting from any distribution on Deposited Securities other than Cash, Share Distributions and Rights (“Other Distributions”), by any means that the Depositary may deem equitable and practicable, or (ii) to the extent the Depositary deems distribution of such securities or property not to be equitable and practicable, any U.S.

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dollars available to the Depositary from the net proceeds of sales of Other Distributions as in the case of Cash. The Depositary reserves the right to utilize a division, branch or affiliate of JPMorgan Chase Bank, N.A. to direct, manage and/or execute any public and/or private sale of securities hereunder. Such division, branch and/or affiliate may charge the Depositary a fee in connection with such sales, which fee is considered an expense of the Depositary contemplated above and/or under paragraph (7) hereof. Any U.S. dollars available will be distributed by checks drawn on a bank in the United States for whole dollars and cents. Fractional cents will be withheld without liability and dealt with by the Depositary in accordance with its then current practices. All purchases and sales of securities will be handled by the Depositary in accordance with its then current policies, which are currently set forth in the “Depositary Receipt Sale and Purchase of Security” section of https://www.adr.com/Investors/FindOutAboutDRs, the location and contents of which the Depositary shall be solely responsible for.

(11) Record Dates. The Depositary may, after consultation with the Company if practicable, fix a record date (which, to the extent applicable, shall be as near as practicable to any corresponding record date set by the Company) for the determination of the Holders who shall be responsible for the fee assessed by the Depositary for administration of the ADR program and for any expenses provided for in paragraph (7) hereof as well as for the determination of the Holders who shall be entitled to receive any distribution on or in respect of Deposited Securities, to give instructions for the exercise of any voting rights, to receive any notice or to act in respect of other matters and only such Holders shall be so entitled or obligated.

(12) Voting of Deposited Securities. Subject to the next sentence, as soon as practicable after receipt of notice of any meeting at which the holders of Shares are entitled to vote, or of solicitation of consents or proxies from holders of Shares or other Deposited Securities, the Depositary shall fix the ADS record date in accordance with paragraph (11) above in respect of such meeting or solicitation of consent or proxy. The Depositary shall, if requested by the Company in writing in a timely manner (the Depositary having no obligation to take any further action if the request shall not have been received by the Depositary at least 30 days prior to the date of such vote or meeting) and at the Company’s expense and provided no legal prohibitions exist, distribute to Holders a notice stating (a) such information as is contained in such notice and any solicitation materials, (b) that each Holder on the record date set by the Depositary therefor will, subject to any applicable provisions of Peruvian law, be entitled to instruct the Depositary as to the exercise of the voting rights, if any, pertaining to the Deposited Securities represented by the ADSs evidenced by such Holder’s ADRs and (c) the manner in which such instructions may be given, including instructions to give a discretionary proxy to a person designated by the Company. Upon actual receipt by the ADR department of the Depositary of instructions of a Holder on such record date in the manner and on or before the time established by the Depositary for such purpose, the Depositary shall endeavor insofar as practicable and permitted

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under the provisions of or governing Deposited Securities and Peruvian law (the Depositary having no obligation to interpret Peruvian law) to vote or cause to be voted the Deposited Securities represented by the ADSs evidenced by such Holder’s ADRs in accordance with such instructions. The Company understands that, as a result, the Depositary may be presenting votes on behalf of some instructing Holders that may be contrary to votes it presents on behalf of other instructing Holders. To the extent not prohibited by Peruvian law, the Company agrees to accept such any and all such votes. The Depositary will not itself exercise any voting discretion in respect of any Deposited Securities. There is no guarantee that Holders generally or any Holder in particular will receive the notice described above with sufficient time to enable such Holder to return any voting instructions to the Depositary in a timely manner or that the Depositary will be able to vote as instructed by each Holder to the extent there are any limitations under Peruvian law. Notwithstanding anything contained in the Deposit Agreement or any ADR, the Depositary may, to the extent not prohibited by law or regulations, or by the requirements of the stock exchange on which the ADSs are listed, in lieu of distribution of the materials provided to the Depositary in connection with any meeting of, or solicitation of consents or proxies from, holders of Deposited Securities, distribute to the Holders a notice that provides Holders with, or otherwise publicizes to Holders, instructions on how to retrieve such materials or receive such materials upon request (i.e., by reference to a website containing the materials for retrieval or a contact for requesting copies of the materials). Holders are strongly encouraged to forward their voting instructions as soon as possible. Voting instructions will not be deemed received until such time as the ADR department responsible for proxies and voting has received such instructions notwithstanding that such instructions may have been physically received by JPMorgan Chase Bank, N.A., as Depositary, prior to such time.

(13) Changes Affecting Deposited Securities. Subject to paragraphs (4) and (5), the Depositary may, in its discretion, and shall if reasonably requested by the Company, amend this ADR or distribute additional or amended ADRs (with or without calling this ADR for exchange) or cash, securities or property on the record date set by the Depositary therefor to reflect any change in par value, split-up, consolidation, cancellation or other reclassification of Deposited Securities, any Share Distribution or Other Distribution not distributed to Holders or any cash, securities or property available to the Depositary in respect of Deposited Securities from (and the Depositary is hereby authorized to surrender any Deposited Securities to any person and, irrespective of whether such Deposited Securities are surrendered or otherwise cancelled by operation of law, rule, regulation or otherwise, to sell by public or private sale any property received in connection with) any recapitalization, reorganization, merger, consolidation, liquidation, receivership, bankruptcy or sale of all or substantially all the assets of the Company, and to the extent the Depositary does not so amend this ADR or make a distribution to Holders to reflect any of the foregoing, or the net proceeds thereof, whatever cash, securities or property results from any of the

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foregoing shall constitute Deposited Securities and each ADS evidenced by this ADR shall automatically represent its pro rata interest in the Deposited Securities as then constituted. Promptly upon the occurrence of any of the aforementioned changes affecting Deposited Securities, the Company shall notify the Depositary in writing of such occurrence and may instruct the Depositary to give notice thereof, at the Company’s expense, to Holders in accordance with the provisions hereof. Upon receipt of such instruction, the Depositary shall give notice to the Holders in accordance with the terms thereof, as soon as reasonably practicable.

(14) Exoneration. The Depositary, the Company, their agents and each of them shall: (a) incur no liability to Holders or beneficial owners of ADSs (i) if any present or future law, rule, regulation, fiat, order or decree of the United States, the Republic of Peru or any other country or jurisdiction, or of any governmental or regulatory authority or any securities exchange or market or automated quotation system, the provisions of or governing any Deposited Securities, any present or future provision of the Company’s charter, any act of God, war, terrorism, nationalization, expropriation, currency restrictions, work stoppage, strike, civil unrest, revolutions, rebellions, explosions, computer failure or circumstance beyond its direct and immediate control shall prevent or delay, or shall cause any of them to be subject to any civil or criminal penalty in connection with, any act which the Deposit Agreement or this ADR provides shall be done or performed by it or them (including, without limitation, voting pursuant to paragraph (12) hereof), or (ii) by reason of any exercise or failure to exercise any discretion given it in the Deposit Agreement or this ADR (including, without limitation, any failure to determine that any distribution or action may be lawful or reasonably practicable); (b) assume no liability to Holders or beneficial owners of ADSs except to perform its obligations to the extent they are specifically set forth in this ADR and the Deposit Agreement without gross negligence or willful misconduct; (c) in the case of the Depositary and its agents, be under no obligation to appear in, prosecute or defend any action, suit or other proceeding in respect of any Deposited Securities or this ADR; (d) in the case of the Company and its agents hereunder be under no obligation to appear in, prosecute or defend any action, suit or other proceeding in respect of any Deposited Securities or this ADR, which in its opinion may involve it in expense or liability, unless indemnity satisfactory to it against all expense (including fees and disbursements of counsel) and liability be furnished as often as may be required; or (e) not be liable to Holders or beneficial owners of ADSs for any action or inaction by it in reliance upon the advice of or information from legal counsel, accountants, any person presenting Shares for deposit, any Holder, or any other person believed by it to be competent to give such advice or information. The Depositary shall not be liable for the acts or omissions made by, or the insolvency of, any securities depository, clearing agency or settlement system. The Depositary shall not be responsible for, and shall incur no liability in connection with or arising from, the insolvency of any Custodian that is not a branch or affiliate of JPMorgan Chase Bank, N.A. The Depositary shall not have any liability for the price received in connection with any sale of securities, the timing thereof or any

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delay in action or omission to act nor shall it be responsible for any error or delay in action, omission to act, default or negligence on the part of the party so retained in connection with any such sale or proposed sale. Notwithstanding anything to the contrary contained in the Deposit Agreement (including the ADRs), subject to the penultimate sentence of this paragraph (14), the Depositary shall not be responsible for, and shall incur no liability in connection with or arising from, any act or omission to act on the part of the Custodian except to the extent that (A) the Custodian has been determined by a final non-appealable judgment of a court of competent jurisdiction to have (i) committed fraud or willful misconduct in the provision of custodial services to the Depositary or (ii) failed to use reasonable care in the provision of custodial services to the Depositary as determined in accordance with the standards prevailing in the jurisdiction in which the Custodian is located and (B) the Company or the Holders have incurred direct damages as a result of such act or omission to act on the part of the Custodian. The Depositary, its agents and the Company may rely and shall be protected in acting upon any written notice, request, direction, instruction or document believed by them to be genuine and to have been signed, presented or given by the proper party or parties. The Depositary shall be under no obligation to inform Holders or any other holders of an interest in any ADSs about the requirements of Peruvian law, rules or regulations or any changes therein or thereto. The Depositary and its agents will not be responsible for any failure to carry out any instructions to vote any of the Deposited Securities, for the manner in which any such vote is cast or for the effect of any such vote. The Depositary may rely upon instructions from the Company or its counsel in respect of any approval or license required for any currency conversion, transfer or distribution. The Depositary and its agents may own and deal in any class of securities of the Company and its affiliates and in ADRs. Notwithstanding anything to the contrary set forth in the Deposit Agreement or an ADR, the Depositary and its agents may fully respond to any and all demands or requests for information maintained by or on its behalf in connection with the Deposit Agreement, any Holder or Holders, any ADR or ADRs or otherwise related hereto or thereto to the extent such information is requested or required by or pursuant to any lawful authority, including without limitation laws, rules, regulations, administrative or judicial process, banking, securities or other regulators. None of the Depositary, the Custodian or the Company shall be liable for the failure by any Holder or beneficial owner to obtain the benefits of credits or refunds of non-U.S. tax paid against such Holder’s or beneficial owner’s income tax liability. The Depositary and the Company shall not incur any liability for any tax or tax consequences that may be incurred by Holders or beneficial owners on account of their ownership or disposition of the ADRs or ADSs. The Depositary shall not incur any liability for the content of any information submitted to it by or on behalf of the Company for distribution to the Holders or for any inaccuracy of any translation thereof, for any investment risk associated with acquiring an interest in the Deposited Securities, for the validity or worth of the Deposited Securities, for the credit-worthiness of any third party, for allowing any rights to lapse upon the terms of the Deposit Agreement or for the failure or timeliness of any notice from the Company. Notwithstanding anything

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herein or in the Deposit Agreement to the contrary, the Depositary and the Custodian(s) may use third party delivery services and providers of information regarding matters such as pricing, proxy voting, corporate actions, class action litigation and other services in connection herewith and the Deposit Agreement, and use local agents to provide extraordinary services such as attendance at annual meetings of issuers of securities. Although the Depositary and the Custodian will use reasonable care (and cause their agents to use reasonable care) in the selection and retention of such third party providers and local agents, they will not be responsible for any errors or omissions made by them in providing the relevant information or services. The Depositary shall not be liable for any acts or omissions made by a successor depositary whether in connection with a previous act or omission of the Depositary or in connection with any matter arising wholly after the removal or resignation of the Depositary. By holding an ADS or an interest therein, Holders and owners of ADSs each irrevocably agree that any legal suit, action or proceeding against or involving the Company or the Depositary, arising out of or based upon the Deposit Agreement, the ADSs or the transactions contemplated herein, therein or hereby, may only be instituted in a state or federal court in New York, New York, and by holding an ADS or an interest therein each irrevocably waives any objection which it may now or hereafter have to the laying of venue of any such proceeding, and irrevocably submits to the exclusive jurisdiction of such courts in any such suit, action or proceeding. The Company has agreed to indemnify the Depositary and its agents under certain circumstances. Neither the Depositary, the Company nor any of their respective agents shall be liable to Holders or beneficial owners of interests in ADSs for any indirect, special, punitive or consequential damages (including, without limitation, legal fees and expenses) or lost profits, in each case of any form incurred by any person or entity, whether or not foreseeable and regardless of the type of action in which such a claim may be brought. No disclaimer of liability under the Securities Act of 1933 is intended by any provision hereof.

(15) Resignation and Removal of Depositary; the Custodian. The Depositary may resign as Depositary by written notice of its election so to do delivered to the Company, such resignation to take effect upon the appointment of a successor depositary and its acceptance of such appointment as provided in the Deposit Agreement. The Depositary may at any time be removed by the Company by no less than 60 days prior written notice of such removal, to become effective upon the later of (i) the 60th day after delivery of the notice to the Depositary and (ii) the appointment of a successor depositary and its acceptance of such appointment as provided in the Deposit Agreement. The Depositary may appoint substitute or additional Custodians and the term “Custodian” refers to each Custodian or all Custodians as the context requires.

(16) Amendment. Subject to the last sentence of paragraph (2), the ADRs and the Deposit Agreement may be amended by the Company and the Depositary, provided that any amendment that imposes or increases any fees or charges (other than stock

A-15

transfer or other taxes and other governmental charges, transfer or registration fees, SWIFT, cable, telex or facsimile transmission costs, delivery costs or other such expenses), or that shall otherwise prejudice any substantial existing right of Holders, shall become effective 30 days after notice of such amendment shall have been given to the Holders. Every Holder of an ADR at the time any amendment to the Deposit Agreement so becomes effective shall be deemed, by continuing to hold such ADR, to consent and agree to such amendment and to be bound by the Deposit Agreement as amended thereby. In no event shall any amendment impair the right of the Holder of any ADR to surrender such ADR and receive the Deposited Securities represented thereby, except in order to comply with mandatory provisions of applicable law. Any amendments or supplements which (i) are reasonably necessary (as agreed by the Company and the Depositary) in order for (a) the ADSs to be registered on Form F-6 under the Securities Act of 1933 or (b) the ADSs or Shares to be traded solely in electronic book-entry form and (ii) do not in either such case impose or increase any fees or charges to be borne by Holders, shall be deemed not to prejudice any substantial rights of Holders. Notwithstanding the foregoing, if any governmental body or regulatory body should adopt new laws, rules or regulations which would require amendment or supplement of the Deposit Agreement or the form of ADR to ensure compliance therewith, the Company and the Depositary may amend or supplement the Deposit Agreement and the ADR at any time in accordance with such changed laws, rules or regulations. Such amendment or supplement to the Deposit Agreement in such circumstances may become effective before a notice of such amendment or supplement is given to Holders or within any other period of time as required for compliance. Notice of any amendment to the Deposit Agreement or form of ADRs shall not need to describe in detail the specific amendments effectuated thereby, and failure to describe the specific amendments in any such notice shall not render such notice invalid, provided, however, that, in each such case, the notice given to the Holders identifies a means for Holders to retrieve or receive the text of such amendment (i.e., upon retrieval from the Commission’s, the Depositary’s or the Company’s website or upon request from the Depositary).

(17) Termination. The Depositary may, and shall at the written direction of the Company, terminate the Deposit Agreement and this ADR by mailing notice of such termination to the Holders at least 30 days prior to the date fixed in such notice for such termination; provided, however, if the Depositary shall have (i) resigned as Depositary hereunder, notice of such termination by the Depositary shall not be provided to Holders unless a successor depositary shall not be operating hereunder within 60 days of the date of such resignation, or (ii) been removed as Depositary hereunder, notice of such termination by the Depositary shall not be provided to Holders unless a successor depositary shall not be operating hereunder on the 60th day after the Company’s notice of removal was first provided to the Depositary. After the date so fixed for termination, the Depositary and its agents will perform no further acts under the Deposit Agreement and this ADR, except to receive and hold (or sell) distributions

A-16

on Deposited Securities and deliver Deposited Securities being withdrawn. As soon as practicable after the expiration of six months from the date so fixed for termination, the Depositary shall sell the Deposited Securities and shall thereafter (as long as it may lawfully do so) hold in a segregated account the net proceeds of such sales, together with any other cash then held by it under the Deposit Agreement, without liability for interest, in trust for the pro rata benefit of the Holders of ADRs not theretofore surrendered. After making such sale, the Depositary shall be discharged from all obligations in respect of the Deposit Agreement and this ADR, except to account for such net proceeds and other cash. After the date so fixed for termination, the Company shall be discharged from all obligations under the Deposit Agreement except for its obligations to the Depositary and its agents.

(18) Appointment. Each Holder and each person holding an interest in ADSs, upon acceptance of any ADSs (or any interest therein) issued in accordance with the terms and conditions of the Deposit Agreement shall be deemed for all purposes to (a) be a party to and bound by the terms of the Deposit Agreement and the applicable ADR(s), and (b) appoint the Depositary its attorney-in-fact, with full power to delegate, to act on its behalf and to take any and all actions contemplated in the Deposit Agreement and the applicable ADR(s), to adopt any and all procedures necessary to comply with applicable law and to take such action as the Depositary in its sole discretion may deem necessary or appropriate to carry out the purposes of the Deposit Agreement and the applicable ADR(s), the taking of such actions to be the conclusive determinant of the necessity and appropriateness thereof.

(19) Waiver. EACH PARTY TO THE DEPOSIT AGREEMENT (INCLUDING, FOR AVOIDANCE OF DOUBT, EACH HOLDER AND BENEFICIAL OWNER AND/OR HOLDER OF INTERESTS IN ADRS) HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN ANY SUIT, ACTION OR PROCEEDING AGAINST THE DEPOSITARY AND/OR THE COMPANY DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THE SHARES OR OTHER DEPOSITED SECURITIES, THE ADSs OR THE ADRs, THE DEPOSIT AGREEMENT OR ANY TRANSACTION CONTEMPLATED HEREIN OR THEREIN, OR THE BREACH HEREOF OR THEREOF (WHETHER BASED ON CONTRACT, TORT, COMMON LAW OR ANY OTHER THEORY).

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EX-4.6

Exhibit 4.6

Addendum, effective January 1, 2017, to Power Supply Agreement dated January 2, 2011

(ELECTRICITY SUPPLY CONTRACT BETWEEN

ELECTRO ORIENTE S.A. AND CEMENTOS PACASMAYO)

Term: Through November 30, 2022

Through the Third Addendum to the Electricity Supply Contract signed between Cementos Selva S.A. (CSSA) and ELECTRO ORIENTE (ELOR) both parties agreed to: (i) extend the term of the Agreement for an additional term of five (5) years until November 30, 2022, and (ii) reduce the rate by 18%.

Also, ELOR assumes the following additional commitments that benefit CSSA: (i) Assuming all types of overheads for thermal generation; (ii) Maintenance of certain infrastructure corresponding to CSSA (60KV sub-transmission line, 22.9KV medium voltage primary line, power station substation, and yard of keys); (Iii) Improve the reliability of the supply from the primary line in 22.9KV from the SET of Rioja; (iv) Implement the SCADA system in the 60KV power SET of CSSA property for remote operational automation; And (v) Manage the Project-Execution of the Moyobamba New SET of 50 MVA, in 138 kV, which will be in operation together with the LL.TT project. Carhuaquero - Cáclic - Moyobamba 220 kV.

EX-8.1

Exhibit 8.1

List of Subsidiaries

Subsidiary*	Jurisdiction of Incorporation	Name Under Which the Subsidiary Does Business
Cementos Selva S.A.	Perú
Distribuidora Norte Pacasmayo S.R.L.	Perú	Dino
Dinoselva Iquitos S.A.C.	Perú	Dino Selva
Calizas del Norte S.A.C. En Liquidación	Perú
Empresa de Transmisión Guadalupe S.A.C.	Perú
Salmueras Sudamericanas S.A.	Perú
Acuícola Los Paiches S.A.C.	Perú

* All subsidiaries are wholly owned, directly or indirectly, by Cementos Pacasmayo S.A.A., except for Salmueras Sudamericanas S.A. in which Cemento Pacasmayo S.A.A. holds a 74.9% interest.

EX-12.1

EXHIBIT 12.1

CERTIFICATION PURSUANT TO

SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Humberto Nadal Del Carpio, certify that:

1. I have reviewed this annual report on Form 20-F of Cementos Pacasmayo S.A.A.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the company as of, and for, the periods presented in this report;

4. The company’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the company and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the company, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the company’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the company’s internal control over financial reporting that occurred during the period covered by the annual report that has materially affected, or is reasonably likely to materially affect, the company’s internal control over financial reporting; and

5. The company’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the company’s auditors and the audit committee of the company’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the company’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the company’s internal control over financial reporting.

Date: April 28, 2017

/s/ Humberto Nadal Del Carpio

Humberto Nadal Del Carpio

Chief Executive Officer

EX-12.2

EXHIBIT 12.2

CERTIFICATION PURSUANT TO

SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Manuel Bartolome Ferreyros Peña, certify that:

1. I have reviewed this annual report on Form 20-F of Cementos Pacasmayo S.A.A.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the company as of, and for, the periods presented in this report;

4. The company’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the company and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the company, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the company’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the company’s internal control over financial reporting that occurred during the period covered by the annual report that has materially affected, or is reasonably likely to materially affect, the company’s internal control over financial reporting; and

5. The company’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the company’s auditors and the audit committee of the company’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the company’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the company’s internal control over financial reporting.

Date: April 28, 2017

/s/ Manuel Bartolome Ferreyros Peña

Manuel Bartolome Ferreyros Peña

Chief Financial Officer

EX-13.1

EXHIBIT 13.1

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE U.S. SARBANES-OXLEY ACT OF 2002

In connection with the Annual Report of Cementos Pacasmayo S.A.A. (the “Company”) on Form 20-F for the fiscal year ended December 31, 2016, as filed with the U.S. Securities and Exchange Commission on the date hereof (the “Report”), I, Humberto Nadal Del Carpio, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the U.S. Sarbanes-Oxley Act of 2002, that to the best of my knowledge:

(i) the Report fully complies with the requirements of Section 13(a) or 15(d) of the U.S. Securities Exchange Act of 1934; and

(ii) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: April 28, 2017

/s/ Humberto Nadal Del Carpio

Humberto Nadal Del Carpio

Chief Executive Officer

EX-13.2

EXHIBIT 13.2

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE U.S. SARBANES-OXLEY ACT OF 2002

In connection with the Annual Report of Cementos Pacasmayo S.A.A. (the “Company”) on Form 20-F for the fiscal year ended December 31, 2016, as filed with the U.S. Securities and Exchange Commission on the date hereof (the “Report”), I, Manuel Bartolome Ferreyros Peña, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the U.S. Sarbanes-Oxley Act of 2002, that to the best of my knowledge:

(i) the Report fully complies with the requirements of Section 13(a) or 15(d) of the U.S. Securities Exchange Act of 1934; and

(ii) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: April 28, 2017

/s/ Manuel Bartolome Ferreyros Peña

Manuel Bartolome Ferreyros Peña

Chief Financial Officer