UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C.  20549

FORM 6-K

REPORT OF FOREIGN ISSUER

PURSUANT TO RULE 13a-16 OR 15b-16 OF

THE SECURITIES EXCHANGE ACT OF 1934

For the month of March 2015

 Commission File Number 001-35591

GRAÑA Y MONTERO S.A.A.

(Exact name of registrant as specified in its charter)

GRAÑA Y MONTERO GROUP

(Translation of registrant’s name into English)

Republic of Peru

(Jurisdiction of incorporation or organization)

Avenida Paseo de la República 4667, Lima 34,

Surquillo, Lima

Peru

(Address of principal executive offices)

Indicate by check mark whether the registrant files or will file annual reports under cover Form 20-F or Form 40-F.

Form 20-F ___X____ Form 40-F _______

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1): [ ]

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7): [ ]

Indicate by check mark whether the registrant by furnishing the information contained in this Form is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.

Yes _______ No ___X____

If “Yes” is marked, indicate below the file number assigned to the registrant in connection with Rule 12g3-2(b): Not applicable.

____________________

/s/Dennis Gray Febres

Stock Market Representative

Graña y Montero S.A.A.

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

GRAÑA Y MONTERO S.A.A.

By: /s/ DENNIS GRAY FEBRES

Name: Dennis Gray Febres

Title: Stock Market Representative

March 2, 2015

(All amounts expressed in thousands of S/. unless otherwise stated)

GRAÑA Y MONTERO S.A.A. AND SUBSIDIARIES

CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2012, 2013 AND 2014

(All amounts expressed in thousands of S/. unless otherwise stated)

GRAÑA Y MONTERO S.A.A. AND SUBSIDIARIES

CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2012, 2013 AND 2014

CONTENTS

	Pages
Report of Independent Registered Public Accounting Firm	1
Consolidated Statement of Financial Position	2
Consolidated Income Statement	3
Consolidated Statement of Comprehensive Income	4
Consolidated Statement of Changes in Shareholders’ Equity	5 - 6
Consolidated Statement of Cash Flows	7
Notes to the Consolidated Financial Statements	8 - 111

S/.      =      New Peruvian Sol

US$           =            United States dollar

(Free translation from the original in Spanish)

INDEPENDENT AUDITOR’S REPORT

To the Shareholders and Board of Directors

Graña y Montero S.A.A.

March 1, 2015

We have audited the accompanying consolidated financial statements of Graña y Montero S.A.A. and subsidiaries, which comprise the consolidated statements of financial position as at December 31, 2014 and 2013 and the consolidated statements of income, comprehensive income, changes in equity and cash flows for the years ended December 31, 2012, 2013 and 2014, and a summary of significant accounting policies and other explanatory information included in notes 1 to 35.

Management’s responsibility for the consolidated financial statements

Management is responsible for the preparation and fair presentation of these financial statements in accordance with International Financial Reporting Standards, and for such internal control as Management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

Auditor’s responsibility

Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with International Standards on Auditing approved for application in Peru by the Board of Deans of Institutes of Peruvian Certified Public Accountants. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the Group’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Group’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.

March 1, 2015

Graña y Montero S.A.A.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Opinion

In our opinion, the accompanying consolidated financial statements present fairly, in all material aspects the financial position of Graña y Montero S.A.A. and subsidiaries at December 31, 2013 and 2014, their financial performance and cash flows for the years ended December 31, 2012, 2013 and 2014, in accordance with International Financial Reporting Standards.

Countersigned by

------------------------------------------------------(partner)

/s/ Hernán Aparicio P.

Peruvian Certified Public Accountant

Registration No.01-020944

- 1 - 

(All amounts are expressed in thousands of S/. unless otherwise stated)

GRAÑA Y MONTERO S.A.A. AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF FINANCIAL POSITION
ASSETS							LIABILITIES AND EQUITY
			As of December 31,							As of December 31,
	Note		2013		2014			Note		2013		2014
Current assets							Current liabilities
Cash and cash equivalents		8		959,415		818,402	Borrowings		18		486,119		1,425,455
Financial asset at fair value through profit or loss				-		7,105	Trade accounts payable		19		991,397		1,178,849
Trade accounts receivables		10		521,872		1,109,209	Accounts payable to related parties		12		25,585		83,027
Unbilled work in progress		11		971,743		1,152,790	Current income tax				66,645		89,615
Accounts receivable from related parties		12		87,328		99,061	Other accounts payable		20		837,683		1,007,743
Other accounts receivable		13		553,218		579,654	Provisions		21		8,895		11,441
Inventories		14		762,797		833,570	Total current liabilities				2,416,324		3,796,130
Prepaid expenses				25,687		26,444
Non-current assets classified as held for sale		16		21,473		9,513	Non-current liabilities
Total current assets				3,903,533		4,635,748	Borrowings		18		309,703		326,124
							Long-term trade accounts payable		19		2,157		3,779
Non-current assets							Other long-term accounts payable		20		205,396		291,332
Long-term trade accounts receivable		10		591,917		579,956	Provisions		21		43,418		46,904
Long-term unbilled work in progress		11		-		35,971	Derivative financial instruments		7		3,911		2,999
Prepaid expenses				-		9,478	Deferred income tax liability		23		138,554		79,155
Other long-term accounts receivable		13		38,151		44,553	Total non-current liabilities				703,139		753,847
Available-for-sale financial assets		9		88,333		93,144	Total liabilities				3,119,463		4,549,977
Investments in associates and joint ventures		15		87,967		229,563
Investment property				36,945		36,244	Equity		22
Property, plant and equipment		16		952,906		1,148,651	Capital				660,054		660,054
Intangible assets		17		480,885		780,784	Legal reserve				111,657		132,011
Deferred income tax asset		23		135,521		135,807	Share Premium				1,027,533		899,311
Total non-current assets				2,412,625		3,094,151	Other reserves				18,423		(113,895	)
							Retained earnings				947,766		1,113,697
							Equity attributable to controlling interest in the Company				2,765,433		2,691,178
							Non-controlling interest				431,262		488,744
							Total equity				3,196,695		3,179,922
Total assets				6,316,158		7,729,899	Total liabilities and equity				6,316,158		7,729,899
The accompanying notes on pages 8 to 111 are an integral part of the consolidated financial statements.

- 2 -

(All amounts are expressed in thousands of S/. unless otherwise stated)

GRAÑA Y MONTERO S.A.A. AND SUBSIDIARIES

CONSOLIDATED INCOME STATEMENT
			For the year ended
			December 31,
	Note		2012			2013			2014
Revenues from construction activities				3,341,539			3,820,393			4,749,159
Revenues from services provided				1,536,275			1,748,127			1,912,646
Revenue from real estate and sale of goods				354,071			398,980			346,875
				5,231,885			5,967,500			7,008,680
Cost of construction activities				(2,969,687	)		(3,354,420	)		(4,336,388	)
Cost of services provided				(1,335,092	)		(1,349,850	)		(1,489,573	)
Cost of real estate and goods sold				(215,040	)		(259,108	)		(231,150	)
		25		(4,519,819	)		(4,963,378	)		(6,057,111	)
Gross profit				712,066			1,004,122			951,569
Administrative expenses		25		(257,180	)		(361,792	)		(421,367	)
Other income and expenses		27		75,619			25,302			15,136
Profit from the sale of investments		15		-			5,722			-
Operating profit				530,505			673,354			545,338
Financial expenses		26		(68,129	)		(152,802	)		(102,816	)
Financial income		26		57,846			40,353			11,462
Share of the profit or loss in associates and joint
ventures under the equity method of accounting		15		604			33,562			53,445
Profit before income tax				520,826			594,467			507,429
Income tax		28		(154,575	)		(182,323	)		(146,196	)
Profit for the year				366,251			412,144			361,233
Profit attributable to:
Owners of the Company				289,954			320,016			299,744
Non-controlling interest				76,297			92,128			61,489
				366,251			412,144			361,233
Earnings per share from continuing operations
attributable to owners of the Company during
the year		33		0.519			0.533			0.454
The accompanying notes on pages 8 to 111 are an integral part of the consolidated financial statements.

- 3 -

(All amounts are expressed in thousands of S/. unless otherwise stated)

GRAÑA Y MONTERO S.A.A. AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
			For the year ended
			December 31,
	Note		2012			2013			2014
Profit for the year				366,251			412,144			361,233
Other comprehensive income:
Items that will not be reclassified to profit or loss
Remeasurement of actuarial gains and losses, net of tax		29		(3,678	)		(6,121	)		(1,777	)
Items that may be subsequently reclassified to profit or loss
Cash flow hedge, net of tax		29		(2,369	)		3,733			568
Foreign currency translation adjustment, net of tax				(2,019	)		(1,071	)		(21,040	)
Change in value of available-for-sale financial assets, net of tax		9		-			19,060			4,649
Exchange difference from net investment in a foreign operation		29		-			-			(12,794	)
				(4,388	)		21,722			(28,617	)
Other comprenhensive income for the year, net of tax				(8,066	)		15,601			(30,394	)
Total comprehensive income for the year				358,185			427,745			330,839
Comprehensive income attributable to:
Owners of  the Company				282,870			337,564			277,913
Non-controlling interest				75,315			90,181			52,926
				358,185			427,745			330,839
The accompanying notes on pages 8 to 111 are an integral part of the consolidated financial statements.

- 4 -

(All amounts expressed in thousands of S/. unless otherwise stated)

GRAÑA Y MONTERO S.A.A. AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 2012, 2013 AND 2014
	Attributable to the controlling interests of the Company
	Number			Premium		Other
	of shares		Legal	for issuance		reserves		Retained				Non-controlling
	In thousands	Capital	reserve	of shares				earnings		Total		interest		Total
	In thousands
Balances as of January 1, 2012	558,284	390,488	78,104	4,880		(310	)	715,860		1,189,022		264,064		1,453,086
Profit for the year	-	-	-	-		-		289,954		289,954		76,297		366,251
Cash flow hedge	-	-	-	-		(2,251	)	-		(2,251	)	(118	)	(2,369	)
Adjustment for actuarial gains and losses	-	-	-	-		-		(3,678	)	(3,678	)	-		(3,678	)
Foreign currency translation adjustment	-	-	-	-		(1,155	)	-		(1,155	)	(864	)	(2,019	)
Comprehensive income of the year	-	-	-	-		(3,406	)	286,276		282,870		75,315		358,185
Transactions with shareholders:
- Transfer to legal reserve	-	-	28,907	-		-		(28,907	)	-		-		-
- Dividend distribution (Note 32 and 34 g)	-	-	-	-		-		(86,723	)	(86,723	)	(37,512	)	(124,235	)
- Capitalization	-	167,485	-	-		-		(167,485	)	-		-		-
- Subsidiaries constitution	-	-	-	-		-		-		-		5,750		5,750
- Purchase of subsidiaries (Note 31 d-e)	-	-	-	-		-		-		-		48,055		48,055
- Debt capitalization (Note 34 f)	-	-	-	-		-		-		-		12,232		12,232
- Contributions of non-controlling shareholders (Note 34 d)	-	-	-	-		-		-		-		26,096		26,096
- Acquisition of non-controlling interest in Survial S.A. (Note 34 a)	-	-	-	364		-		-		364		(4,757	)	(4,393	)
- Sale to non-controlling interest in GyM S.A. and Concar S.A. (Note 34 b)	-	-	-	291		-		-		291		902		1,193
- Sale and purchase of treasury shares	-	140	-	1,292		-		-		1,432		-		1,432
- Others	-	171	-	(171	)	-		4,951		4,951		889		5,840
Total transactions with shareholders	-	167,796	28,907	1,776		-		(278,164	)	(79,685	)	51,655		(28,030	)
Balances as of December 31, 2012	558,284	558,284	107,011	6,656		(3,716	)	723,972		1,392,207		391,034		1,783,241
Balances as of January 1, 2013	558,284	558,284	107,011	6,656		(3,716	)	723,972		1,392,207		391,034		1,783,241
Profit for the year	-	-	-	-		-		320,016		320,016		92,128		412,144
Cash flow hedge	-	-	-	-		3,546		-		3,546		187		3,733
Adjustment for actuarial gains and losses	-	-	-	-		-		(4,591	)	(4,591	)	(1,530	)	(6,121	)
Foreign currency translation adjustment	-	-	-	-		(467	)	-		(467	)	(604	)	(1,071	)
Change in value of available-for-sale financial assets	-	-	-	-		19,060		-		19,060		-		19,060
Comprehensive income of the year	-	-	-	-		22,139		315,425		337,564		90,181		427,745
Transactions with shareholders:
- Transfer to legal reserve	-	-	4,646	-		-		(4,646	)	-		-		-
- Dividend distribution (Note 32 and 34 g)	-	-	-	-		-		(86,985	)	(86,985	)	(51,794	)	(138,779	)
- Issuance of shares (Note 22 c)	101,770	101,770	-	1,055,488		-		-		1,157,258		-		1,157,258
- Contributions of non-controlling shareholders (Note 34 d)	-	-	-	-		-		-		-		34,774		34,774
- Additional acquisition of non-controlling (Note 34 a)	-	-	-	(34,611	)	-		-		(34,611	)	(29,257	)	(63,868	)
- Deconsolidation of former subsidiaries (Note 34 e)	-	-	-	-		-		-		-		(19,377	)	(19,377	)
- Purchase of subsidiaries (Note 31 c)	-	-	-	-		-		-		-		15,701		15,701
Total transactions with shareholders	101,770	101,770	4,646	1,020,877		-		(91,631	)	1,035,662		(49,953	)	985,709
Balances as of December 31, 2013	660,054	660,054	111,657	1,027,533		18,423		947,766		2,765,433		431,262		3,196,695

- 5 -

	Attributable to the controlling interests of the Company
	Number					Other
	of shares		Legal	Share		reserves		Retained				Non-controlling
	In thousands	Capital	reserve	Premium				earnings		Total		interest		Total
Balances as of January 1, 2014	660,054	660,054	111,657	1,027,533		18,423		947,766		2,765,433		431,262		3,196,695
Profit for the year	-	-	-	-		-		299,744		299,744		61,489		361,233
Cash flow hedge	-	-	-	-		540		-		540		28		568
Adjustment for actuarial gains and losses	-	-	-	-		-		(1,332	)	(1,332	)	(445	)	(1,777	)
Foreign currency translation adjustment	-	-	-	-		(13,086	)	-		(13,086	)	(7,954	)	(21,040	)
Change in value of available-for-sale financial assets	-	-	-	-		4,649		-		4,649		-		4,649
Exchange difference from net investment in a foreign operation	-	-	-	-		(12,602	)	-		(12,602	)	(192	)	(12,794	)
Comprehensive income of the year	-	-	-	-		(20,499	)	298,412		277,913		52,926		330,839
Transactions with shareholders:
- Transfer to legal reserve	-	-	20,354	-		-		(20,354	)	-		-		-
- Dividend distribution (Note 32 and 34 g)	-	-	-	-		-		(112,127	)	(112,127	)	(68,062	)	(180,189	)
- Contributions of non-controlling shareholders (Note 34 d)	-	-	-	-		-		-		-		47,376		47,376
- Additional acquisition of non-controlling (Note 34 a)	-	-	-	(128,222	)	-		-		(128,222	)	(50,109	)	(178,331	)
- Sale to non-controlling interest in GyM Chile Spa (Note 34 b)	-	-	-	-		-		-		-		1,627		1,627
- Deconsolidation of subsidiaries (Note 34 e)	-	-	-	-		-		-		-		2,284		2,284
- Put option liability from acquisition of non-controlling (Note 20)	-	-	-	-		(111,819	)	-		(111,819	)	(2,010	)	(113,829	)
- Purchase of subsidiaries (Note 31 a-b)	-	-	-	-		-		-		-		73,450		73,450
Total transactions with shareholders	-	-	20,354	(128,222	)	(111,819	)	(132,481	)	(352,168	)	4,556		(347,612	)
Balances as of December 31, 2014	660,054	660,054	132,011	899,311		(113,895	)	1,113,697		2,691,178		488,744		3,179,922
		-	-	-		-		-		-		-		-
The accompanying notes on pages 8 to 111 are an integral part of the consolidated financial statements.

- 6 -

(All amounts expressed in thousands of S/. unless otherwise stated)

GRAÑA Y MONTERO S.A.A. AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF CASH FLOWS
			For the year ended
			December 31,
	Note		2012			2013			2014
OPERATING ACTIVITIES
Profit before income tax				520,826			594,467			507,429
Adjustments to  profit not affecting cash flows from
operating activities:
Depreciation		16		173,018			181,479			185,309
Amortization of other assets		17		71,485			78,387			74,730
Impairment of inventory		14		10,981			2,239			62
Impairment of accounts receivable		10		2,707			110			71
Impairment of property, machinery and equipment				-			-			2,415
Impairment of other assets				-			774			14,170
Recovery of impairment of inventory				-			-			(1,169	)
Provisions		21		-			15,084			6,559
Share of the profit and loss in associates
under the equity method of accounting		15 a-b		(604	)		(33,562	)		(53,445	)
Reversal of provisions		27		(67,556	)		(14,556	)		(9,394	)
Profit on sale of property, plant and equipment		16		(1,261	)		(734	)		(4,845	)
Profit on sale of investments in associates		15a		-			(5,722	)		-
Net variations in assets and liabilities:
Decrease in trade accounts receivable				(49,897	)		(783,965	)		(594,993	)
Increase (decrease) in other accounts receivable				(346,429	)		(33,606	)		32,157
Decrease in other accounts receivable from related parties				(24,451	)		(34,089	)		(15,291	)
Decrease in inventories				(197,802	)		(21,071	)		(51,489	)
Increase (decrease) in pre-paid expenses and other assets				21,644			(539	)		(8,632	)
Increase in trade accounts payable				224,935			56,836			82,051
Increase (decrease) in other accounts payable				373,637			(145,379	)		(19,731	)
Increase (decrease) in other accounts payable to related parties				23,069			(14,677	)		58,342
Decrease in other provisions				(3,759	)		(16,269	)		(7,208	)
Payments related to Norvial Concession				(28,406	)		(2,329	)		(82,698	)
Payment of income tax				(159,408	)		(190,556	)		(154,878	)
Net cash provided by (applied to) operating activities				542,729			(367,678	)		(40,478	)
INVESTING ACTIVITIES
Sale of investment in associates				-			6,800			-
Sale of available-for-sale investment				342			-			-
Sale of property, plant and equipment				23,471			15,861			42,968
Dividends received		15 -a,b		2,057			4,688			36,718
Payment for purchase of available-for-sale investment				-			(56,100	)		-
Payment for purchase of investments properties				(956	)		(2,974	)		(1,450	)
Payments for intangible purchase				(10,851	)		(22,375	)		(60,846	)
Payments for purchase and contributions on investment in associate and joint ventures		15 -a,b		-			-			(129,859	)
Direct cash outflow from acquisition of subsidiaries		31		(133,648	)		(88,342	)		(167,921	)
Payments for property, plant and equipment purchase				(280,402	)		(197,553	)		(265,567	)
Net cash applied to investing activities				(399,987	)		(339,995	)		(545,957	)
FINANCING ACTIVITIES
Loans received				610,399			1,351,964			2,852,271
Amortization of loans received				(490,398	)		(1,378,359	)		(2,053,422	)
Interest payment				(46,659	)		(61,013	)		(46,411	)
Dividends paid to owners of the parent				(86,723	)		(86,986	)		(112,127	)
Dividends paid to non-controlling interest				(37,512	)		(51,794	)		(63,990	)
Cash received from non-controlling shareholders		34-d		26,096			34,774			47,376
Acquisition or sale of interest in a subsidiary of non-controlling shareholders				(3,200	)		(63,868	)		(175,824	)
Capital contribution				5,750			-			-
Issuance of shares, net of related expenses				-			1,147,418			-
Repurchase of shares				1,432			-			-
Net cash (applied to) provided by financing activities				(20,815	)		892,136			447,873
Net increase (net decrease) in cash				121,927			184,463			(138,562	)
Cash decrease in deconsolidation				-			(5,162	)		(2,451	)
Cash and cash equivalents at the beginning of the year				658,187			780,114			959,415
Cash and cash equivalents at the end of the year				780,114			959,415			818,402
NON-CASH TRANSACTIONS:
Capitalization of retained earnings				167,485			-			-
Debt capitalization				12,232			7,989			-
Acquisition of assets through finance leases				123,815			43,812			163,399
Net assets transferred for acquisition to Stracon GyM				24,994			-			-
Adjustment for deconsolidation of former subsidiaries							(19,943	)		2,284
Change in fair vaue of available-for-sale financial asset				-			19,060			4,649
Account payable - acquisition of Morelco				-			-			45,684
Put option liability from acquisition of non-controlling				-			-			113,829
The accompanying notes on pages 8 to 111 are an integral part of the consolidated financial statements.

- 7 -

(All amounts expressed in thousands of S/. unless otherwise stated)

GRAÑA Y MONTERO S.A.A. AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2012, 2013 AND 2014

1   GENERAL INFORMATION

a)Incorporation and operations -

Graña y Montero S.A.A. (hereinafter indistinctly the Company or the Parent) was established in Peru on August 12, 1996 as a result of the equity spin-off of Inversiones GyM S.A. (formerly Graña y Montero S.A.). The Company’s legal address is Av. Paseo de la República 4675, Surquillo Lima, Peru and it is listed on the Lima Stock Exchange and the New York Stock Exchange (NYSE).

The Company is the parent company of the Graña y Montero Group (hereinafter the Group) and its principal activity is the holding of the investments in the different companies of the Group. Additionally, the Company provides services of general management, financial management, commercial management, legal advisory and human resources management to the Group´s companies; it is also engaged in the leasing of offices to the Group’s companies.

The Group is a conglomerate of companies with operations including different business activities, of which the most significant are engineering and construction, infrastructure (public concession ownership and operation), real estate businesses and technical services. See details of operating segments in Note 6.

b) Issuance of new common shares -

At the Board of Shareholders’ General Meeting held on March 26, 2013, and the subsequent Board of Directors’ meetings held on May 30, July 23 and August 22, 2013, shareholders agreed to the issuance of common shares through a public offering of American Depositary Shares (ADS) registered with the Securities and Exchange Commission (SEC) and the New York Stock Exchange (NYSE).

As a consequence in July and August 2013, the Company issued 101,769,600 new common shares, equivalent to 20,353,920 ADS in two tranches, with a unit price of US$21.13, resulting total proceeds of US$430,078, equivalent to S/.1,195,793 before issuance related costs.

The total outstanding common shares as of the date of the financial statements are 660,053,790 shares listed in the Lima Stock Exchange, from that 253,635,480 shares are represented in ADS in the the NYSE.

The excess of the total proceeds obtained by this transaction in comparison with the nominal value of the shares amounted to S/.1,055,488 (net of commissions, other related costs and tax effects for that amounted to S/.38,535) recorded as share premium in the consolidated statement of financial position (Note 22).

c) Authorization for issue of the financial statements -

The consolidated financial statements for the year ended December 31, 2014 have been prepared and authorized by Management on January 29, 2015, which will submit them for the consideration of the Board and Annual Shareholders’ Meeting to be held within the term established by Peruvian law. Management expects that the financial statements as of December 31, 2014 will be approved by the Board of Directors’ and the General Shareholders’ Meetings with no changes.

- 8 -

2              SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The principal accounting policies applied in the preparation of these consolidated financial statements are set out below. These policies have been consistently applied to all the years presented, unless otherwise stated.

2.1 Basis of preparation

The consolidated financial statements of the Company have been prepared in accordance with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board.

The consolidated financial statements have been prepared under the historical cost convention, except for derivative financial instruments, financial assets at fair value through profit and loss and available-for-sale financial assets which are measured at fair value. The financial statements are presented in thousands of New Peruvian Soles, unless otherwise stated.

The preparation of the consolidated financial statements in conformity with IFRS requires the use of certain critical accounting estimates. It also requires management to exercise its judgment in the process of applying the Group’s accounting policies. The areas involving a higher degree of judgment or complexity, or areas where assumptions and estimates are significant to the consolidated financial statements are disclosed in Note 4.

2.2 Consolidation of financial statements

a)  Subsidiaries -

Subsidiaries are all entities (including structured entities) over which the Group has control. The Group controls an entity when the group is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. Subsidiaries are fully consolidated from the date on which control is transferred to the Group. They are deconsolidated from the date that control ceases.

The Group applies the acquisition method to account for business combinations. The consideration transferred for the acquisition of a subsidiary is the fair value of the assets transferred, the liabilities incurred to the former owners of the acquiree and the equity instruments issued by the Group. The consideration transferred includes the fair value of any asset or liability resulting from a contingent consideration arrangement. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date.

The Group recognizes any non-controlling interest in the acquiree on an acquisition-by-acquisition basis, either at fair value or at the non-controlling interest’s proportionate share of the recognized amounts of acquirer’s identifiable net assets.

Acquisition-related costs are expensed as incurred.

If the business combination is achieved in stages, the carrying value of the acquirer’s previously held equity interest in the acquiree is re-measured to fair value at the acquisition date; any gains or losses arising from such re-measurement are recognised in profit or loss.

Any contingent consideration to be transferred by the group is recognised at fair value at the acquisition date. Subsequent changes to the fair value of the contingent consideration that is deemed to be an asset or liability is recognised in accordance with IAS 39 either in profit or loss or as a change to other comprehensive income. Contingent consideration that is classified as equity is not re-measured, and its subsequent settlement is accounted for within equity.

- 9 -

Goodwill is initially measured as the excess of the aggregate of the consideration transferred, the acquisition date fair value of any previous equity interest in the acquire and the fair value of non-controlling interest over the net identifiable assets acquired and liabilities assumed. If this consideration is lessthan the fair value of the net assets of the subsidiary acquired, the difference is recognized in profit or loss as a bargain purchase at the time of acquisition.

Balances, income and expenses from transactions between Group companies are eliminated. Profits and losses resulting from inter-company transactions that are recognized as assets are also eliminated. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the Group.

b)  Changes in ownership interests in subsidiaries without change of control -

Transactions with non-controlling interests that do not result in loss of control are accounted for as equity transactions - that is, as transactions with the owners in their capacity as owners. The difference between fair value of any consideration paid and the relevant share acquired of the carrying value of net assets of the subsidiary is recorded in equity. Gains or losses on disposals to non-controlling interests, are also recorded in equity at the time of disposal.

c)  Disposal of subsidiaries -

When the Group ceases to have control over a subsidiary any retained interest in the entity is re-measured to its fair value at the date when control is lost, with the change in carrying amount recognized in profit or loss at such date. The fair value is the initial carrying amount for the purposes of subsequently accounting for the retained interest as an associate, joint venture or financial asset. In addition, any amounts previously recognized in other comprehensive income in respect of that entity are accounted for as if the Group had directly disposed of the related assets or liabilities. This may mean that amount previously recognized in other comprehensive income is reclassified to profit or loss.

d)  Joint arrangements -

Investments in joint arrangements are classified as either joint operations or joint ventures depending on the contractual rights and obligations of each investor. The Group has assessed the nature of its joint arrangements and determined them to have both joint ventures as well as joint operations.

Joint ventures are accounted for using the equity method (par.e below). Under the equity method of accounting, interests in joint ventures are initially recognized at cost and adjusted thereafter to recognize the Group’s share of the post-acquisition profits or losses and movements in other comprehensive income. When the Group’s share of losses in a joint venture equals or exceeds its interests in the joint ventures (which includes any long-term interests that, in substance, form part of the group’s net investment in the joint ventures), the Group does not recognize further losses, unless it has incurred obligations or made payments on behalf of the joint ventures.

Unrealized gains on transactions between the Group and its joint ventures are eliminated to the extent of the Group’s interest in the joint ventures. Unrealized losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred. Accounting policies of the joint ventures have been changed where necessary to ensure consistency with the policies adopted by the Group.

Joint operation is a joint arrangement whereby the parties that have joint control of the arrangement, have rights to the assets, and obligations for the liabilities, relating to the arrangement. Each party recognizes its assets, liabilities, revenue and expenses and its share of any asset and liability jointly held and of any revenue or expense arisen from the joint operation.

- 10 -

e)  Associates -

Associates are all entities over which the Group has significant influence but not control, generally accompanying a holding of between 20% and 50% of the voting rights. Investments in associates are accounted for using the equity method of accounting. Under the equity method, the investment is initially recognized at cost, and the carrying amount is increased or decreased to recognize the Group’s share of the post-acquisition profits or losses. The Group’s investment in associates includes goodwill identified on acquisition.

If ownership interest in an associate is reduced but significant influence is retained, only a proportionate share of the amounts previously recognized in other comprehensive income is reclassified to profit or loss where appropriate. The Group’s share of post-acquisition profit or loss is recognized in the income statement, and its share of post-acquisition movements in other comprehensive income is recognized in other comprehensive income with a corresponding adjustment to the cost of the investment. When the Group’s share of losses in an associate equals or exceeds its interest in the associate, including any other unsecured receivables, the Group does not recognize further losses, unless it has incurred legal or constructive obligations or made payments on behalf of the associate.

The Group determines at each reporting date whether there is any objective evidence that the investment in the associate is impaired. If this is the case, the Group calculates the amount of impairment as the difference between the recoverable amount of the associate and its carrying value and recognizes the amount adjacent to ‘share of profit or loss in associates and joint ventures under the equity method of accounting’ in the income statement.

Profits and losses resulting from upstream and downstream transactions between the Group and its associates are recognized in the Group’s financial statements only to the extent of unrelated investor’s interests in the associates. Unrealized losses are eliminated unless the transaction provides evidence of an impairment of the asset transferred. Accounting policies of associates have been changed where necessary to ensure consistency with the policies adopted by the Group.

Dilution gains and losses arising in investments in associates are recognized in the income statement.

2.3 Segment reporting

Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision-maker of the Group. The chief operating decision-maker, who is responsible for allocating resources and assessing performance of the operating segments, has been identified as the Executive Committee, led by the Corporate General Manager.

If an entity changes the structure of its internal organization in a manner that causes the composition of its reportable segments to change, the Group restates the information for earlier periods unless the information is not available.

2.4 Foreign currency translation

a)  Functional and presentation currency -

Items included in the financial statements of each of the Group’s entities are measured using the currency of the primary economic environment in which each entity operates (the functional currency). The consolidated financial statements are presented in New Peruvian Soles, which is the Company’s functional currency and the Group’s presentation currency. All subsidiaries, joint arrangements and associates use the New Peruvian Sol as their functional currency, except for foreign entities, for which the functional currency is the currency of the country in which they operate.

b)  Transactions and balances -

Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the date of the transactions or valuation when items are re-measured. Foreign exchange gains and losses resulting from the settlement of such transactions and from the changes at year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognized in the income statement, except when deferred in equity as qualifying cash flow hedges.

- 11 -

Foreign exchange gains and losses of all monetary items are presented in the income statement within financial expenses and financial income.

c)  Group companies -

The results and financial position of all the Group entities (none of which has the currency of a hyper-inflationary economy) that have a functional currency different from the presentation currency of the Group are translated into the presentation currency as follows:

i) assets and liabilities for each statement of the financial position presented are translated using the closing rate at the date of the statement of financial position;

ii) income and expenses for each income statement are translated at the average exchange rate (unless this average is not a reasonable approximation of the cumulative effect of the rates prevailing on the transaction dates, in which case income and expenses are translatedd using the rate on the date of the transaction);

iii) capital is translated by using the historical exchange rate for each capital contribution made; and

iv) all resulting exchange differences are recognized as separate components in other comprehensive income.

Goodwill and fair value adjustments arising because of the acquisition of a foreign entity are treated as assets and liabilities of the foreign entity and are translated at the closing exchange rate. Exchange differences arising are recognized in other comprehensive income.

Exchange differences arising on loans from the Parent to its subsidiaries in foreign currencies are recognized in the separate financial statements of the Parent and individual financial statements of the subsidiaries. In the consolidated financial statements, such exchange differences are recognized in other comprehensive income and are subsequently re-classified in the income statement on the disposal of the subsidiary; to the extent such loans qualifying as part of the “net investment of the foreign operation”.

2.5 Public services concession agreements

Concession agreements signed between the Group and the Peruvian Government entitles the Group, as a Concessionaire, to assume obligations for the construction or improvement of infrastructure and which qualify as public service concessions as defined by IFRIC 12, “Service Concession Arrangements”.  The consideration to be received from the Government for the services of constructing or improving public infrastructure is recognized as a financial asset or as an intangible asset, as set forth below.

Under these agreements, the government controls and regulates services provided by the Group with the infrastructure and dictates to whom it must provide them and at what price.  The concession agreement establishes the obligation for the Group to return the infrastructure to the grantor at the end of the concession period or when there is an expiration event.  This feature gives the grantor control of the risks and rewards of the residual value of the assets at the end of the concession period. For this reason, the Group will not recognize the infrastructure as part of its property, plant and equipment.

The Group manages three types of concessions which accounting recognition is as follows:

- 12 -

a)  Recognizes a financial asset to the extent that it has a contractual right to receive cash or another financial assets either because the Government secures the payment of specified or determinable amounts or because the Government will cover any difference arising from the amounts actually received from public service users in relation with the specified or determinable amounts. These financial assets are recognized initially at fair value and subsequently at amortized cost (the financial model).

b)  Recognizes an intangible asset to the extent that the service agreement grants the Group a contractual right to charge users of the public service. The resulting intangible asset is measured at cost and is amortized as described in Note 2.16 (the intangible asset model).

c)  Recognizes a financial asset and an intangible asset when the Group recovers its investment partially by a financial asset and partially by an intangible asset (the bifurcated model).

2.6 Cash and cash equivalents

In the consolidated statement of cash flows, cash and cash equivalents include cash on hand, on-demand bank deposits, other highly liquid investments with original maturities of three months or less and bank overdrafts. In the consolidated financial statements, bank overdrafts are included in the balance of financial obligations as current liabilities in the statement of financial position.

2.7 Financial assets

2.7.1 Classification

The Group classifies its financial assets in the following categories: financial assets at fair value through profit or loss, financial assets held-to-maturity, loans and account receivables and financial assets available for sale. The classification depends on the purpose for which the financial assets were acquired. Management determines the classification of its financial assets at initial recognition. As of the date of the financial statements, the Group has classified its financial assets in the following three categories:

a)  Financial assets at fair value through profit or loss -

Financial assets at fair value through profit or loss are non-derivatives that are designated by the Group as at fair value upon initial recognition and are held-for-trading. They are included in current assets. The changes in their fair value are recognized in “Other income and expenses” in the income statement.

b)  Loans and accounts receivable –

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They are included in current assets, except for those which maturity is greater than 12 months after the statement of financial position. These are classified as non-current assets. The Group’s loans and receivables comprise ‘trade accounts receivables’, ‘accounts receivable from related parties’, ‘other accounts receivable’, ‘unbilled work in progress’ and ‘cash and cash equivalents’.

c)  Available-for-sale financial assets -

Available-for-sale financial assets are non-derivatives that are either designated in this category or not classified in any of the other categories. They are included in non-current assets unless Management intends to dispose of them within 12 months of the date of the statement of financial position.

- 13 -

2.7.2 Recognition and measurement

Regular purchases and sales of financial assets are recognized on the trade-date, the date on which the Group commits to purchase or sell the asset. Investments are initially recognized at fair value plus transaction costs for all financial assets not carried at fair value through profit or loss. Financial assets are derecognized when the rights to receive cash flows from the investments have expired or have been transferred and the Group has transferred substantially all risks and rewards of ownership. Available-for-sale financial assets are subsequently carried at fair value. Loans and receivables are subsequently carried at amortized cost using the effective interest method.

Gains or losses arising from changes in the fair value of the ‘financial assets at fair value through profit or loss’ category are presented in the income statement within ‘Other income and expenses’ in the period in which they arise. Dividend income from financial assets at fair value through profit or loss is recognised in the income statement as part of other income when the group’s right to receive payments is established.

Changes in the fair value of monetary securities classified as available for sale are recognised in other comprenhensive income, When a financial asset classified as available for sale is sold or impaired, the accumulated fair value adjustments recognised in equity are recycled to the income statement.

Dividends on available-for-sale equity instruments are recognized in the income statement as part of “other income” when the Group’s right to receive payments is established.

2.8 Offsetting financial instruments

Financial assets and liabilities are offset and its net amount is reported in the statement of financial position when there is a legally enforceable right to offset the recognized amounts and there is an intention to settle on a net basis or realize the asset and settle the liability simultaneously. The legally enforceable right must not be contingent on future events and must be enforceable in the normal course of business and in the event of default, insolvency or bankruptcy of the company or the counterparty.

2.9 Impairment of financial assets

a)  Assets carried at amortized cost -

The Group assesses at the end of each reporting period whether there is objective evidence that a financial asset or a group of financial assets is impaired. If a financial asset or a group of financial assets is impaired, the impairment losses are incurred only if there is objective evidence of impairment as a result of one or more events that occurred after the initial recognition of the asset (a ‘loss event’) and that loss event (or events) has an impact on the estimated future cash flows of the financial asset or 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 changes in arrears or economic conditions that correlate with defaults.

For the loans and receivables category, the amount of the loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows (excluding future credit losses that have not been incurred) discounted at the financial asset’s original effective interest rate. The carrying amount of the asset is reduced and the amount of the loss is recognized in the statement of comprehensive income. If a loan or an account receivable has a variable interest rate, the discount rate for measuring any impairment loss is the current effective interest rate determined under the contract. As a practical expedient, the Group may measure impairment on the basis of an instrument’s fair value using an observable market price.

If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognized (such as an improvement in the debtor’s credit rating), the reversal of the previously recognized impairment loss is recognized in the income statement.

- 14 -

b)  Assets classified as available-for-sale -

The Group assesses at the end of each reporting period whether there is objective evidence that a financial asset or a group of financial assets available for sale is impaired.

For debt securities, if any such evidence exists the cumulative loss – measured as the difference between the acquisition cost and the current fair value, less any impairment loss on that financial asset previously recognised in profit or loss – is removed from equity and recognized in profit or loss. If, in a subsequent period, the fair value of a debt instrument classified as available for sale increases and the increase can be objectively related to an event occurring after the impairment loss was recognized in profit or loss, the impairment loss is reversed through the consolidated income statement.

For equity investments, a significant or prolonged decline in the fair value of the security below its cost is also evidence that the assets are impaired. If any such evidence exists for available-for-sale financial assets, the cumulative loss - measured as the difference between the acquisition cost and the current fair value, less any impairment loss on that financial asset previously recognized in profit or loss - is removed from equity and recognized in profit or loss. Impairment losses recognized in the income statement on equity instruments are not reversed through the income statement.

2.10 Derivative financial instruments and hedging activities

Derivatives are initially recognized at fair value on the date a derivative contract is entered into and are subsequently re-measured at their fair value.  The method of recognizing the resulting gain or loss depends on whether the derivative is designated as a hedging instrument, and if so, the nature of the item being hedged. The Group designates certain derivatives as hedges of a particular risk associated with a recognized asset or liability (fair value hedge) or a highly probable forecast transaction (cash flow hedge).

The Group documents, at the inception of the transaction, the relationship between hedging instruments and hedged items, as well as its risk management objectives and strategy for undertaking various hedging transactions.  The Group also documents its assessment, both at hedge inception and on an ongoing basis, of whether the derivatives that are used in hedging transactions are highly effective in offsetting changes in fair values or cash flows of hedged items.

The fair values of various derivative instruments used for hedging purposes and changes in the account reserves for hedging in equity are disclosed in Note 7. The full fair value of a hedging derivative is classified as a non-current asset or liability when the remaining maturity period of the hedged item is more than 12 months and as a current asset or liability when the remaining maturity period of the hedged item is less than 12 months.  Trading derivatives are classified as a current asset or liability.

Cash flow hedge -

The effective portion of changes in the fair value of derivatives that are designated and qualify as fair value hedges is recognized as other comprehensive income. The gain or loss relating to the ineffective portion is recognized immediately in the income statement.

Amounts accumulated in equity are reclassified to profit or loss in the periods when the hedged item affects profit or loss (for example, when the forecasted sale that is hedged takes place). The gain or loss relating to the effective portion of interest rate swaps hedging variable rate borrowings is recognized in the income statement as ‘Financial income or expenses’. However, when the forecasted transaction that is hedged results in the recognition of a non-financial asset (for example, inventory or fixed assets), the gains or losses previously deferred in equity are transferred from equity and are included in the initial measurement of the cost of the non-financial asset. The deferred amounts are ultimately recognized in cost of goods sold in the case of inventory or in depreciation in the case of fixed assets. When a hedging instrument expires or is sold, or when a hedge no longer meets the criteria for hedge accounting, any cumulative gain or loss existing in equity at that time remains in equity and is recognized when the forecasted transaction is ultimately recognized in the income statement. When a forecasted transaction is no longer expected to occur, the cumulative gain or loss that was reported in equity is immediately transferred to the income statement within ‘other (losses) gains- net’.

- 15 -

2.11 Trade receivables

Trade receivables are amounts due from customers for goods or services sold by the Company’s subsidiaries. If collection is expected in one year or less, they are classified as current assets. If not, they are presented as non-current assets.

Trade receivables are recognized initially at fair value and subsequently measured at amortized cost using the effective interest method, less any provision for impairment.

2.12 Unbilled work in progress

Unbilled work in progress comprises the estimation made by the Management of the Engineering and Construction segment related to the unbilled rights receivable for services rendered and not yet approved by the client (valuation based on the percentage of completion).

It also includes the balance of work in progress costs incurred that relates to future activities of the construction contracts (see Note 2.26 for detail on Revenue from construction activities)

2.13 Inventories

Inventory mainly includes land, work in progress and finished property which is assigned to the real- estate activity. It also includes material used in the construction activity. Goods and supplies correspond to goods that the Group trades as part of its IT segment. Materials and supplies used in construction activities and IT equipment are determined under the weighted average cost method.

Land intended to carry out real estate projects is recognized at acquisition cost. Work in progress and finished property comprise design costs, material, labor costs, other indirect costs and general expenses related to the construction and do not include exchange differences.

Net realizable value is the estimated selling price in the ordinary course of business, less applicable variable selling expenses. For the reductions in the carrying amount of inventories to their net realizable value, a provision is made for inventory impairment with a charge to the results of the period in which such reductions are made.

Materials and other supplies are not written down below cost if the finished products in which they will be incorporated are expected to generate margin. When a decline in the price of materials indicates that the cost of the finished products exceeds net their realizable value, the materials are written down to their replacement cost.

2.14 Investment properties

Investment properties are shown at cost less accumulated depreciation and impairment losses, if any. Subsequent costs attributable to investment properties are capitalized only if it is probable that future economic benefits will flow to the Company and the cost of these assets can be measured reliably; if not, they are recognized as expenses when incurred.

- 16 -

Repair and maintenance expenses are recognized in profit and loss when they are incurred. A property’s carrying amount is written down immediately to its recoverable amount if the property’s carrying amount is greater than its estimated recoverable amount. The cost and accumulated depreciation on disposals are eliminated from the respective accounts and the resulting gain or loss is recognized in profit or loss for the period. The depreciation of this asset is calculated under the straight-line method at a rate that is considered sufficient to absorb the property’s cost over its estimated useful life and considering its significant components with substantially different useful lives (each component is treated separately for depreciation purposes and depreciated over its individual useful life). The estimated useful life of investments properties fluctuate between 5 and 20 years.

The Group maintains only one investment property, a Shopping Mall owned by the subsidiary Viva GyM S.A. Its fair value amounted to US$19 million at December 31, 2014. The stores in this mall are leased to third parties under operating leases.

2.15 Property, plant and equipment

Property, plant and equipment are stated at historical cost less depreciation. Historical cost includes expenditure that is directly attributable to the acquisition of these items.

Subsequent costs are included in the asset’s carrying amount or are recognized as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably. The carrying amount of the replaced asset is derecognized. All other repairs and maintenance are charged to the income statement during the financial period in which they are incurred.

Assets in the construction stage are capitalized as a separate component. At their completion, the cost of such assets is transferred to their definitive category.

Replacement units are major spare parts which depreciation starts when are installed for use within the related asset.

Land is not depreciated. Depreciation of machinery and equipment and vehicles recognized as “Major equipment” are depreciated based on their hours of use. Under this method, the total number of work hours that machinery and equipment is capable to produce is estimated and a charge per hour is determined. The depreciation of other assets that do not qualify as “Major equipment” is calculated under the straight-line method to allocate their cost less their residual values over their estimated useful lives, as follows:

- 17 -

	Years
Own occupied buildings	Between 33 and 50
Machinery and equipment	Between 4 and 10
Vehicles	Between 4 and 10
Furniture and fixtures	Between 2 and 10
Other equipment	Between 2 and 10
Replacement units	5

The assets’ residual values and useful lives are reviewed, and adjusted as appropriate, at each date of the statement of financial position. An asset’s carrying amount is written-down immediately to its recoverable amount if the asset’s carrying amount is greater than its estimated recoverable amount. Gains and losses on disposals are determined by comparing the proceeds with the carrying amount and are recognized in “Other income and expenses” in the income statement.

Non - current assets (or disposal groups) are classified as non- current assets held for sale when its carrying amount is recovered mainly through a sale operation and this sale is considered highly probable. These are estimated through the lowest carrying amount and the fail value amount less sale costs.

2.16 Intangible assets

a)  Goodwill -

Goodwill arises on the acquisition of subsidiaries and represents the excess of the consideration transferred, the amount of any non-controlling interest in the acquiree and the acquisition-date fair value of any previous equity interest in the acquire over the fair value of the identifiable net assets acquired. If the total of consideration transferred, non-controlling interest recognised and previously held interest measured at fair value is less than the fair value of the net assets of the subsidiary acquired, in the case of a bargain purchase, the difference is recognised directly in the income statement.

Goodwill acquired in a business combination is allocated to each of the cash-generating units (CGU), or group of CGUs, that is expected to benefit from the synergies of the combination. Each unit or group of units to which the goodwill is allocated represents the lowest level within the entity at which the goodwill is monitored for internal management purposes. Goodwill is monitored at the operating segment level.

Goodwill impairment reviews are undertaken annually or more frequently if events or changes in circumstances indicate a potential impairment. The carrying value of goodwill is compared to its recoverable amount, which is the higher of its value in use and its fair value less costs of disposal. Any impairment is recognized immediately as an expense and is not subsequently reversed.

b)  Trademarks -

Separately acquired trademarks and licences are shown at historical cost. Trademarks and licences acquired in a business combination are recognised at fair value at the acquisition date. Trademarks and licences have an indefinite useful life.

c)  Concessions rights -

The intangible asset related to the right to charge users for the services related to service concessions agreements (Note 2.5 and.5.b) is amortized under the straight-line method, from the date when toll collection started using the lower of its estimated expected useful life or effective period of the concession agreement.

- 18 -

d)  Contractual relationships with customers -

Contractual relationships with customers are assets resulting from business combinations that were initially recognized at fair value, as determined based on the future cash flows expected from those relationships over an estimated period of time based on the time period those customers will remain as customers of the Group (the estimation of useful life is based on the contract terms which fluctuate between 2 and 5 years).  The useful life and the impairment of these assets are individually assessed.

e)  Cost of development of Wells -

Costs incurred to prepare the wells to extract the hydrocarbons associated with Block I and Block V, are capitalized as intangible assets.  The Company capitalizes the development stage costs associated with preparing the wells for extraction.  These costs are amortized based on the useful life of the wells (9 and 10 years for Blocks I and V, respectively), which is less than the overall period of the service contract with Perupetro.

f)  Internally generated software and development costs -

Costs associated with maintaining computer software programs are recognized as an expense as incurred.  Development costs that are directly attributable to the design and testing of identifiable and unique software products controlled by the Group are recognized as intangible assets when the following criteria are met:

·  it is technically feasible to complete the software product so that it will be available for use;

·  management intends to complete the software product and use or sell it;

·  there is an ability to use or sell the software product;

·  it can be demonstrated how the software product will generate probable future economic benefits;

·  adequate technical, financial and other resources to complete the development and to use or sell the software product are available; and

·  the expenditure attributable to the software product during its development can be reliably measured.

Directly attributable costs, such as development employee costs and an appropriate portion of relevant overhead, are capitalized as part of the software.

Other development expenditures that do not meet these recognition criteria are expensed as incurred. Development costs previously recognized as an expense are not recognized as an asset in a subsequent period. Computer software development costs recognized as assets are amortized over their estimated useful lives not exceeding three years.

g)  Rights of use of land -

Righst of use of land are stated at historical cost less amortization and anyaccumulated impairment losses.The useful life ofthis asset is based on the agreement signed (60 years) and their effective period may be extended if agreed by the parties.  Amortization will begin when it becomes ready for its intended use by Management.

2.17 Impairment of non-financial assets

Assets that have an indefinite useful life are not subject to amortization and are tested annually for impairment. Assets that are subject to amortization are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognized for the amount by which the asset’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs to sell and value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows (cash-generating units). Non-financial assets other than goodwill that were adjusted for impairment are reviewed for possible reversal of such impairment at each reporting date.

- 19 -

2.18 Trade payables

Trade payables are obligations to pay for goods or services that have been acquired in the ordinary course of business. Accounts payable are classified as current liabilities if payment is due within one year or less (or in the normal operating cycle of the business if longer). If not, they are presented as non-current liabilities.

Trade payables are recognized initially at fair value and subsequently measured at amortized cost using the effective interest method.

2.19 Borrowings

Borrowings are recognized initially at fair value, net of transaction costs incurred. Borrowings are subsequently carried at amortized cost; any difference between the proceeds (net of transaction costs) and the redemption value is recognized in the income statement over the period of the borrowings using the effective interest method.

Fees paid for entering into loan facilities are recognized as transaction costs of the loan to the extent that it is probable that some or all of the facility will be drawn down. In this case, the fee is deferred until the draw-down occurs.

2.20 Borrowing costs

General and specific borrowing costs directly attributable to acquisitions, construction or development of qualifying assets, which are assets that necessarily take a substantial period of time to get ready for their intended use or sale, are added to the cost of those assets, until such time as the assets are substantially ready for their intended use or sale.

Investment income earned on the temporary investment of specific borrowings pending their expenditure on qualifying assets is deducted from the borrowing costs eligible for capitalization. All other borrowing costs are recognized in profit or loss in the period in which they are incurred.

2.21 Current and deferred income tax

The tax expense for the period comprises current and deferred tax. Tax is recognized in the income statement, except to the extent that it relates to items recognized in other comprehensive income or directly in equity. In this case, the tax is also recognized in statement of comprehensive income or directly in equity, respectively.

The current income tax charge is calculated on the basis of the tax laws enacted or substantively enacted at the date of the statement of financial position in the countries where the Company and its subsidiaries operate and generate taxable income. Management periodically evaluates positions taken in tax returns with respect to situations in which applicable tax regulation is subject to interpretation. Management, where appropriate, establishes provisions on the basis of amounts expected to be paid to the tax authorities.

Deferred income tax is recognized, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the consolidated financial statements.  However, deferred tax liabilities are not recognized if they arise from the initial recognition of goodwill; deferred income tax is not accounted for if it arises from initial recognition of an asset or liability in a transaction other than a business combination that at the time of the transaction affects neither accounting nor taxable profit or loss.  Deferred income tax is determined using tax rates (and laws) that have been enacted or substantially enacted by the balance sheet date and are expected to apply when the related deferred income tax asset is realized or the deferred income tax liability is settled.

- 20 -

Deferred income tax assets are recognized only to the extent that it is probable that future taxable profit will be available against which the temporary differences can be utilized.

Deferred income tax is provided on temporary differences arising on investments in subsidiaries and associates, except for deferred income tax liability where the timing of the reversal of the temporary difference is controlled by the Group and it is probable that the temporary difference will not reverse in the foreseeable future.

Deferred income tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets against current tax liabilities and when the deferred income tax assets and liabilities relate to income taxes levied by the same taxation authority.

The deferred income tax arising from the temporary differences in investments in subsidiaries, associates and interest in joint-controlled businesses is not recognized due the tax legislation in Chile, Colombia, Panama, Brasil, Dominican Republic and Peru does not consider the income from dividends as a taxable item and the Group expects to recover the investment through the dividends rather than their sale.

2.22 Employee benefits

a)Profit sharing -

The Peruvian entities of the Group recognize a liability and an expense for statutory workers’ profit sharing. Workers’ profit sharing is equivalent to 5% of the taxable income determined separately by each of the Group’s Peruvian entities, according to the income tax law currently in force. The branch based in the Dominican Republic has a similar profit sharing scheme, which rate is 10% of the taxable income. In Brazil, Colombia and Chile these benefits are not provided to employees.

b)Bonuses -

The Peruvian entities of the Group recognize an expense and the related liability for statutory bonuses based on applicable laws and regulations effective in Peru. Statutory bonuses comprise two additional one-month salaries paid every year in July and December, respectively. According to Chilean legislation, employees receive a fixed amount of sixty five thousand of Chilean pesos (equivalent to three hundred and eighteen nuevos soles) in September and December. In Brazil, Colombia and Dominican Republic these benefits are not provided to employees.

c)Severance indemnities -

The employees’ severance payments for time of service of the Group’s Peruvian staff comprise their indemnification rights, calculated in accordance with the regulations in force, which have to be credited to the bank accounts designated by workers in May and November each year.  The compensation for time of service amounts to an additional one-month’s salary effective at the date of bank deposits. The Group has no obligations to make any additional payments once the annual deposits to which workers are entitled have been made.

d)Vacation leave -

Annual vacation leave is recognized on an accrual and cumulative basis. Provision for the estimated obligations of annual vacations is recognized at the date of the statement of financial position and it corresponds to one month for Peruvian and Brazilian employees and fifteen days for Chilean, Dominican and Colombian employees, per year.

- 21 -

e)  Pension plans -

The subsidiary CAM Chile has in place a pension plan scheme with its workers. These commitments comprise both defined benefit and defined contribution plans.  A defined benefit plan defines an amount of pension benefit that an employee will receive on retirement, usually dependent on one or more factors such as age, years of service and compensation.

The liability recognized in the balance sheet in respect of defined benefit pension plan is the present value of the defined benefit obligation at the end of the reporting period less the fair value of plan assets. The defined benefit obligation is calculated annually by independent actuaries using the projected unit credit method. The present value of the defined benefit obligation is determined by discounting the estimated future cash outflows using interest rates of high-quality corporate bonds that are denominated in the currency in which the benefits will be paid, and that have terms to maturity approximating to the terms of the related pension obligation. In countries where there is no deep market in such bonds, the market rates on government bonds are used.

Remeasurements arising from experience adjustments and changes in actuarial assumptions are charged or credited to equity in other comprehensive income in the period in which they arise.

2.23 Provisions

a)  General -

Provisions are recognized when the Group has a present legal or constructive obligation as a result of past events; it is probable that an outflow of resources will be required to settle the obligation; and the amount has been reliably estimated. If the time value of money is significant, provisions are discounted using a pre-tax rate that reflects, when applicable, the specific risks related to the liability. Reversal of the discount due to the passage of time results in the obligation being recognized with a charge to the income statement as a financial expense. Provisions are not recognized for future operating losses.

Contingent obligations are disclosed for possible obligations that are not yet determined to be probable. Contingent assets are not recognized and only disclosed if it is probable that future economic benefits will flow to the Company.

b)  Provision for the closure of production wells -

Group entities recognize a provision for the closure of operating units that correspond to the legal obligation to close oil production wells once the production phase has been completed. At the initial date of recognition, the liability that arises from said obligation is measured at cash flow discounted to present value, the same amount is simultaneously charged to the intangible account in the statement of financial position.

Subsequently, the liability will increase in each period to reflect the financial cost considered in the initial measurement of the discount, and the capitalized cost is depreciated based on the useful life of the related asset. When a liability is settled, the Group’s entities will recognize any gain or loss that may arise. The fair value changes estimated for the initial obligation and interest rates are recognized as an increase or decrease of the carrying amount of the obligation and related asset, according to IFRIC 1 ‘Changes in Existing Decommissioning, Restoration and Similar Liabilities’; any decrease in the provision, and any decrease of the asset that may exceed the carrying amount of said asset is immediately recognized in the income statement.

If the review of the estimated obligation results in the need to increase the provision and, accordingly, increase the carrying amount of the asset, the Group’s entities will also take into consideration if said increase corresponds to an indicator that asset has been impaired and, if so, impairment tests are carried out, according to the guidelines of IAS 36, “Impairment of assets” (Note 2.17).

- 22 -

c)  Provision for periodic maintenance –

The service concession arrangement of Norvial have maintenance obligations that it must fulfill during the operation phase to maintain the infrastructure to a specific level of service at all times and to restore the infrastructure to a specified level condition before it is handed back to the grantor.  The Group recognizes and measures such obligations, except for an upgrade element, in accordance with IAS 37, 'Provisions, contingent assets and liabilities.  The Company apply a criteria of maintenance provision based on the use of the infrastructure, so the level of use of the road is the fact that determines the amount of the obligation over the time.

2.24 Put option arrangement

The potential cash payments related to put options issued by the group on shares of an existing subsidiary that are held by non-controlling interests are accounted for as financial liabilities.

The financial liability is recognised at the present value of the redemption amount and accreted through finance charges in the income statement over the contract period up to the final redemption amount. Any adjustments to the redemption amount are recognised as finance charges in the income statement. In the event that the option expires unexercised, the liability is derecognised with a corresponding adjustment to equity.

2.25 Capital

Common shares are classified as equity.

Incremental costs directly attributable to the issue of new shares or options are shown in equity, as a deduction, net of taxes, of the proceeds.

Where any Group company purchases the company’s equity shares (treasury shares), the consideration paid, including any directly attributable incremental costs (net of income taxes) is deducted from equity attributable to the company’s equity holders until the shares are cancelled or reissued.  Where such shares are subsequently reissued, any consideration received, net of any directly attributable incremental transaction costs and the related income tax effects is included in equity attributable to the Group’s equity holders.

2.26 Revenue recognition

Revenue is measured at the fair value of the consideration received or receivable.  Revenue is stated net of sales rebates, discounts and after eliminating sales between Group companies.

The Group recognizes revenue when the amount of revenue can be reliably measured; when it is probable that future economic benefits will flow to the entity; and when specific criteria have been met for each of the Group’s activities.

The Group’s revenue recognition policy is described as follows:

i)  Revenue from construction activities-

Revenues from construction contracts are recognized using the percentage-of-completion of the contract based on the completion of a physical proportion of the contract work considering total costs and revenues estimated at the end of the project, in accordance with IAS 11, Construction Contracts. Under the physical proportion method revenues are determined based on the proportion of actual physical completion compared to the total contract physical construction commitment.

- 23 -

Revenue is billed once approval is received by the owners of the work in progress.

With respect to services that have been provided but not billed, due to the outstanding approval by the owners, the Company recognizes revenue with an increase in accounts receivable - “Unbilled work in progress”.

Accounts receivable derived from work services are shown net of the advances received from customers to the extent the related contracts include settlement provisions.

A variation is an instruction by the customer for a change in the scope of the work to be performed under the contract. A variation may lead to an increase or a decrease in contract revenue. A variation is included in contract revenue when it is probable that the customer will approve the variation and the amount of revenue arising from the variation; and the amount of revenue can be reliably measured.

A claim is an amount that the Group seeks to collect from the customer or third party as reimbursement for costs not included in the contract price. Claims are included in contract revenue only when negotiations have reached an advanced stage such that it is probable that the customer will accept the claim; and the amount that it is probable will be accepted by the customer can be measured reliably.

ii)  Revenue from engineering, advisory, consulting services and other services-

For sales of services, revenue is recognised in the accounting period in which the services are rendered.

iii)  Sales of real-estate properties -

Revenue from sales of real estate properties is recognized in the results of the period when sales occur, that is, when the properties are delivered and the risks and rewards inherent to ownership are transferred to the buyer and the collection of the corresponding receivables is reasonably assured.

iv)  Revenue from IT services -

The sale of computer equipment includes some services to be provided in a subsequent date to the  asset sale as installation and maintenance. When sales agreements include multiple elements, the amount of the revenue is attributed to each element based on their related fair values. The fair value of each element is determined based on the market price prevailing for each element when sold separately. Revenue derived from computer equipment is recognized when the related risks and rewards are transferred to the customer, which occurs upon delivery. Revenue relating to each service element is recognized as a percentage of the total services to be performed during the period of service.

v)  Interest income -

Revenue from interest is recognized on a time-proportion basis, using the effective interest method.

vi)  Dividend income -

Dividend income is recognized when the right to receive payment is established.

vii)  Revenue for concession services -

Revenue for concession services is recognized according to its nature. Construction and restoration activities are accounted for applying the percentage-of-completion method as described above and operation and maintenance services in the accounting period when they are provided (see Note 2.5).

- 24 -

2.27 Construction contract costs

Construction contract costs are recognized as an expense in the period in which they are incurred.

Contract costs include all direct costs such as materials, labor, subcontracting costs, manufacturing and supply costs of equipment, start-up costs and indirect costs. Periodically, the Company evaluates the reasonableness of the estimates used in the determination of the percentage-of-completion. If, as a result of this evaluation, there are modifications to the revenue or cost previously estimated, or if the total estimated cost of the project exceeds expected revenues, an adjustment is made in order to reflect the effect in results of the period in which the adjustment or loss is incurred.

When the outcome of a construction work cannot be estimated reliably, the revenue of the contract is recognized only up to the amount of the contractual costs incurred and that are likely to be recovered.

Changes in contract relating to the work to be performed, lawsuits and payment of incentives are included in the revenue from the contract to the extent that they have been agreed with the client and can be measured reliably.

2.28 Leases

Leases in which a significant portion of the risks and rewards of ownership are retained by the lessor are classified as operating leases. Payments made under operating leases (net of any incentives received from the lessor) are charged to the profit or loss of the period on a straight-line basis over the period of the lease.

The Group leases certain property, plant and equipment. Leases of property, plant and equipment where the Group has substantially assumed all the risks and rewards of ownership are classified as finance leases. Finance leases are capitalized at the lease’s commencement at the lower of the fair value of the leased property and the present value of the minimum lease payments.

Each lease payment is allocated between the liability and finance charges in order to obtain a constant rate on the balance pending payment. The corresponding rental obligations, net of finance charges, are included in other long-term payables. The interest element of the finance cost is charged to the income statement over the lease period so as to produce a constant periodic rate of interest on the remaining balance of the liability for each period. The property, plant and equipment acquired under finance leases are depreciated over the shorter of the useful life of the asset and the lease term.

2.29 Dividend distribution

Dividend distribution to the Company’s shareholders is recognized as a liability in the financial statements in the period in which the dividends are approved by the Company’s shareholders.

2.30 Contingent liabilities and assets

Contingent liabilities are not recognized in the financial statements, but are  disclosed in the Notes to the financial statements.. Contingent assets are not recognized in the financial statements and are only disclosed when it is probable that an inflow of resources will flow to the Company.

2.31 Significant non-operating items

Significant non-operating items are separately shown in the financial statements when they are necessary to provide a better understanding of the Group’s financial performance. These material items are income or expenses shown separately due to the significance of their nature or amount.

2.32 New standards, amendments and interpretations

a)  New standards, amendments and interpretations adopted by the Group in 2014

- 25 -

The following standards have been adopted by the group for the first time for the 2014 financial statements.  Principal impacts of the adoption of these standards are related to the presentation and disclosure of the financial statements:

-  Amendment to IAS 32, “Financial Instruments: Presentation”. This amendment clarifies that the right of set-off must not be contingent on a future event. It must also be legally enforceable for all counterparties in the normal course of business, as well as in the event of default, insolvency or bankruptcy. The amendment also considers settlement mechanisms. The amendment did not have a significant effect on the group financial statements.

-  Amendments to IAS 36, “Impairment of assets”. This amendment removed some disclosure requirements regarding: a) eliminating the requirement about disclosing the recoverable value when a cash generating unit (CGU) contains a goodwill or indefinite life intangible assets, but that has not been impaired; b) disclosing the recoverable value of an asset CGU when an impairment loss has been recognized or reversed and c) detailed disclosures about how the recoverable value less costs of sales has been measured when an impairment loss has been recognized or reversed. The Group has applied the amendment and consequently there has been no significant impact on the Group financial statements.

-  Amendments to IAS 39 “Financial instruments: Recognition and measurement”. This amendment requires to discontinue the hedging accounting when a hedging instrument expires or is sold, finished or exercised, unless the replacement or incorporation of a hedging instrument in another hedging instrument is part of the hedging strategy documented by the entity. The Group has applied the amendment and consequently there has been no significant impact on the Group financial statements.

-  Amendment to IAS 19 “Employee benefits”. The amendment applies to contributions from employees or third parties to defined benefit plans and clarifies the treatment of such contributions. The amendment distinguishes between contributions that are linked to service only in the period in which they arise and those linked to service in more than one period. The objective of the amendment is to simplify the accounting for contributions that are independent of the number of years of employee service, for example employee contributions that are calculated according to a fixed percentage of salary. Entities with plans that require contributions that vary with service will be required to recognize the benefit of those contributions over employee’s working lives. The Group has applied the amendment and consequently there has been no significant impact on the Group financial statements.

-  IFRIC 21, “Levies”, sets out the accounting for an obligation to pay a levy if that liability is not income tax. The interpretation addresses what the obligating event is that gives rise to pay a levy and when a liability should be recognized. The Group is not currently subjected to significant levies so the impact on the Group is not material.

Other standards, amendments and interpretations which are effective for the financial year beginning on January 1, 2014 are not material to the Group

b)  New standards, amendments and interpretations not yet adopted

A number of new standards and amendments to standards and interpretations are effective for annual periods beginning after 1 January 2014, and have not been applied in preparing these consolidated financial statements. None of these is expected to have a significant effect on the consolidated financial statements of the Group, except the following set out below:

-  IFRS 9, ‘Financial instruments,’ addresses the classification, measurement and recognition of financial assets and financial liabilities. The complete version of IFRS 9 was issued in July 2014. It replaces the guidance in IAS 39 that relates to the classification and measurement of financial instruments. IFRS 9 retains but simplifies the mixed measurement model and establishes three primary measurement categories for financial assets: amortized cost, fair value through Other Comprehensive Income and fair value through Profit and Loss. The basis of classification depends on the entity’s business model and the contractual cash flow characteristics of the financial asset. Investments in equity instruments are required to be measured at fair value through profit or loss with the irrevocable option at inception to present changes in fair value in Other Comprehensive Income not recycling. There is now a new expected credit losses model that replaces the incurred loss impairment model used in IAS 39. For financial liabilities there were no changes to classification and measurement except for the recognition of changes in own credit risk in other comprehensive income, for liabilities designated at fair value through profit or loss. IFRS 9 relaxes the requirements for hedge effectiveness by replacing the bright line hedge effectiveness tests. It requires an economic relationship between the hedged item and hedging instrument and for the ‘hedged ratio’ to be the same as the one management actually use for risk management purposes. Contemporaneous documentation is still required but is different to that currently prepared under IAS 39. The standard is effective for accounting periods beginning on or after January 1, 2018. Early adoption is permitted. The Group is yet to assess IFRS 9’s full impact.

- 26 -

-  IFRS 15, ‘Revenue from contracts with customers’ deals with revenue recognition and establishes principles for reporting useful information to users of financial statements about the nature, amount, timing and uncertainty of revenue and cash flows arising from an entity’s contracts with customers. Revenue is recognised when a customer obtains control of a good or service and thus has the ability to direct the use and obtain the benefits from the good or service. The standard replaces IAS 18 ‘Revenue’ and IAS 11 ‘Construction contracts’ and related interpretations. The standard is effective for annual periods beginning on or after 1 January 2017 and earlier application is permitted. The group is in the process of assessing the impact of IFRS 15, whose application is expected to impact several operating segments of the Group. As part of this assessment the Group is evaluating the transition options established by IFRS 15 and the effect on the current contracts entered into by the different subsidiaries.

-  Amendments to IFRS 10‘Consolidated Financial Statements’ and IAS 28 ‘Investments in associates’, prospectively applicable from January 1, 2016. Amendments will only be applicable to transactions in which the investor sells or transfers of assets to its associates or joint ventures. Amendments are not intended to take into account the accounting that an investor will apply in selling or transfer of assets transactions to joint ventures. The resulting impact is that the investor will recognize all the profit or loss in cases in which non-monetary assets constitute a business. If assets do not meet the business definition, the investor will recognize the profit or loss up to the limit of the interest of the other investors in the associate or joint venture. The Group is evaluating the impact of these amendments.

There are no other IFRSs or IFRIC interpretations that are not yet effective that would be expected to have a material impact on the Group.

3              FINANCIAL RISK MANAGEMENT

Financial risk management is carried out by the Group’s Management. Management oversees the general management of risks in specific areas, such as foreign exchange rate risk, price risk, cash flow and fair value interest rate risk, credit risk, the use of derivative and non-derivative financial instruments and the investment of excess liquidity as well as financial risks, and carries out periodic supervision and monitoring.

3.1 Financial risk factors

The Group’s activities expose it to a variety of financial risks: market risk (including foreign exchange risk, price risk, fair value interest rate risk and cash flow interest rate risk), credit risk and liquidity risk. The Group’s overall risk management program focuses on the unpredictability of financial markets and seeks to minimize potential adverse effects on the Group’s financial performance. The Group uses derivative financial instruments to hedge certain risk exposures in some of its subsidiaries and considers the use of other derivatives, in the event that it identifies risks that may generate an adverse effect for the Group in the short and medium-term.

- 27 -

a)  Market risks -

i)  Foreign exchange risk -

The Group is exposed to exchange rate risk as a result of the transactions carried out locally in foreign currency and due to its operations abroad. As of December 31, 2014 and 2013, this exposure is mainly concentrated in fluctuations of the U.S. dollar and Chilean and Colombian pesos. The foreign exchange risk of the investments in Brazil, and Dominican Republic are not significant due their low level of operations.

Management has set up a policy to require Group companies to manage their foreign exchange risk against their functional currency. The Group companies are required to hedge their entire foreign exchange risk exposure in coordination with the Group treasury. To manage their foreign exchange risk arising from future commercial transactions and recognized assets and liabilities, Group companies sometimes use forward contracts, previously approved by Group treasury. Foreign exchange risk arises when future commercial transactions or recognized assets or liabilities are denominated in a currency other than the entity’s functional currency.

As of December 31, 2014, the consolidated statement of financial position includes assets and liabilities in foreign currency (U.S.dollar) equivalent to S/.2,096 million and S/.2,176 million, respectively (S/.1,886 million and S/.2,746 million, respectively, as of December 31, 2013) equivalent to US$455.5 million and US$580 million respectively (US$470 million and US$811 million respectively as of December, 2013).

During 2014 the Nuevo Sol has been exposed against the U.S. dollar and Chilean Pesos. The Group’s exchange gains and losses for 2014 amounted to S/.357.3 million and S/.401.6 million, respectively (S/.431 million and S/.501 million respectively in 2013, and S/.264 million and 243 million, respectively in 2012).

If, at December 31, 2014, the new Peruvian sol and the Chilean pesos had strengthened/weakened by 2% against the U.S. dollar and Chilean and Colombian Pesos, with all variables held constant, the pre-tax profit for the year would have increased/decreased by S/.0.9 million (S/.1.4 million in 2013 and S/.0.4 million in 2012).

As of December 31, 2014, the consolidated statement of changes in shareholder´s equity comprises a foreign currency translation adjustment originated by its subsidiaries. Their financial position include assets and liabilities in functional currency equivalent to Ch$109,187 million and Ch$62,163 million respectively (Ch$90,904 million and Ch$77,415 million, respectively as of December, 2013), Col$189,649 million and Col$149,150 million respectively (Col$38,545 million and Col$27,595 million, respectively as of December, 2013), R$20.1 million and R$7.05 million respectively (R$29 million and R$22 million, respectively as of December, 2013). The Group´s foreign currency translation adjustment for 2014 amounted to S/.18.27 million (S/. 1.1 million in 2013 and S/.2.02 million in 2012).

ii)  Price risk -

Management considers that the exposure of the Group to the price risk of its investments in mutual funds, bonds and equity securities is low, since the invested amounts are not significant. Any fluctuation in their fair value will not have any significant impact on the balances reported in the consolidated financial statements.

- 28 -

iii)  Cash flow and fair value interest rate risk -

The Group’s interest rate risk mainly arises from its long-term borrowings. Borrowings issued at variable rates expose the Group to cash flow interest rate risk. Borrowings issued at fixed rates expose the Group to fair value interest rate risk. Group policy is to maintain most of its borrowings in fixed rate instruments; 97% of total debt in 2014 (86% in 2013) was contracted at fixed rates.

Management has established mechanisms with the banks to negotiate in time intervals the interest rates of loans.

During 2014 and 2013 the Group’s borrowings at variable rates are denominated in U.S. dollars and the Group’s policy is to manage their cash flow risk by using interest-rate swaps, which are recognized under hedge accounting.

The variable portion of the hedging derivative only comprises 3% of the total debt for 2014 and (14% in 2013) and an increase or decrease of 5% in interest rate would not have a material effect on the Group’s results. There was no material ineffectiveness on cash flow hedges occurred in fiscal years 2014 and 2013.

b)  Credit risk -

Credit risk arises from cash and cash equivalents and deposits with banks and financial institutions, as well as customer credit counterparties, including the outstanding balance of accounts receivable and committed transactions. For banks and financial institutions, only independently rated parties with a minimum rating of ‘A’ are accepted.

For accounts receivable, Management of each of the Group’s companies evaluates the credit quality of the client taking into consideration its financial position, past experience and other factors. Individual risk limits are set based on internal or external ratings in accordance with limits set by the board. The utilization of credit limits is regularly monitored.

With respect to loans to related parties, the Group has measures in place to ensure the recovery of these loans through the controls maintained by the Corporate Finance Management and the performance evaluation conducted by the Board.

No credit limits were exceeded during the reporting period, and Management does not expect the Group to incur any losses from non-performance by these counterparties.

c)  Liquidity risk -

Prudent liquidity risk management implies maintaining sufficient cash and cash equivalents, the availability of funding through an adequate number of sources of committed credit facilities and the capacity to close out positions in the market. In this sense, the Group has no significant liquidity risks given the fact that historically its cash flows have enabled it to maintain sufficient cash to meet its obligations.

Group Corporate Finance monitors rolling forecasts of the Group’s liquidity requirements to ensure it has sufficient cash to meet operational needs while maintaining sufficient headroom on its undrawn committed borrowing facilities (Note 18), so that the Group does not breach borrowing limits or covenants, where applicable, on any of its borrowing facilities. Less significant financing transactions are controlled by the Finance Management of each subsidiary.

Such forecasting takes into consideration the Group’s debt financing plans, covenant compliance, compliance with internal statement of financial position ratio targets and, if applicable, external regulatory or legal requirements; for example, currency restrictions.

- 29 -

Surplus cash held by the operating entities over  the balance required for working capital management are invested in interest-bearing checking accounts or time deposits, selecting instruments with appropriate maturities and sufficient liquidity.

The following table analyzes the Group’s financial liabilities into relevant maturity groupings based on the remaining period from the date of the statement of financial position to the contractual maturity date. The amounts disclosed in the table are the contractual undiscounted cash flows.

	Less than 1 year		From 1 to 2 years		From 2 to 5 years		Over 5 years		Total
At December 31, 2013
Other financial liabilities (except finance leases)		371,302		118,347		64,698		-		554,347
Finance leases		115,698		82,492		87,829		22,912		308,931
Trade payable		991,397		2,157		-		-		993,554
Payables to related parties		25,585		-		-		-		25,585
Other payables		215,413		28,745		5,197		2,354		251,709
Other non-financial liabilities		-		3,911		-		-		3,911
At December 31, 2014		1,719,395		235,652		157,724		25,266		2,138,037
Other financial liabilities (except finance leases)		1,318,817		72,696		56,206		-		1,447,719
Finance leases		138,988		92,242		122,378		11,224		364,832
Trade payables		1,178,849		3,779		-		-		1,182,628
Payables to related parties		83,027		-		-		-		83,027
Other payables		337,692		45,684		-		-		383,376
Other non-financial liabilities		-		2,999		-		-		2,999
		3,057,373		217,400		178,584		11,224		3,464,581

3.2 Capital management -

The Group’s objectives when managing capital are to safeguard the Group’s ability to continue as a going concern in order to provide returns for shareholders, benefits for other stakeholders and to maintain an optimal capital structure to reduce the cost of capital.

In order to maintain or adjust the capital structure, the Group may adjust the amount of dividends paid to shareholders, return capital to shareholders, issue new shares or sell assets to reduce debt.

The Group monitors capital on the basis of the gearing ratio. This ratio is calculated as net debt divided by total capital. Net debt is calculated as total borrowings (including current and non-current borrowings), less cash and cash equivalents. Total capital is calculated as ‘equity’ as shown in the consolidated statement of financial position plus net debt.

As of December 31, 2013, there is no gearing ratio due to the Company having a cash surplus higher than borrowings and equity was not used to guarantee the fulfilment of those borrowings. As of December 31, 2014, the gearing ratio is presented below indicating the Company’s strategy to keep it in a range from 0.10 to 1.00.

As of December 31, 2013 and 2014 the gearing ratio was as follows:

	2013			2014
Total borrowing		795,822			1,751,579
Less: Cash and cash equivalents		(959,415	)		(818,402	)
Net debt		(163,593	)		933,177
Total equity		3,196,695			3,179,922
Total capital		3,033,102			4,113,099
Gearing ratio		0.00			0.23

- 30 -

3.3 Fair value estimation -

For the classification of the type of valuation used by the Group for its financial instruments at fair value, the following levels of measurement have been established.

-  Level 1: Measurement based on quoted prices in active markets for identical assets or liabilities.

-  Level 2: Measurement based on inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (that is, as prices) or indirectly (that is, derived from prices).

-  Level 3: Measurement based on inputs for the asset or liability that are not based on observable market data (that is, unobservable inputs, generally based on internal estimates and assumptions of the Group).

The fair value of the investment held in Transportadora de Gas del Perú S.A. (TGP) classified as  available-for-sale financial asset was based on unobservable inputs in the market; the Group calculated its fair value based on its discounted cash flows as of the financial statement date. The information used to determine the fair value of this investment corresponds to Level 3 (Note 9).

Financial assets classified as at fair value through profit or loss corresponds to investments in mutual funds and bonds. Their fair value has been determined with observable information of Level 2.

Other financial instruments measured at fair value correspond to the interest rate swaps signed by subsidiary GMP S.A., by which a variable-interest instrument is changed to a fixed interest rate (cash flow hedge) and the forward foreign exchange contracts signed by the subsidiaries GyM Ferrovías S.A. and Viva GyM S.A. (the later up-to 2013) to hedge the Group’s exposure to changes in the exchange rate of the Euro and US Dollars. The information used for determining the fair value of these instruments are Level 2 and has been determined based on the present value of discounted future cash flows applied to the interest-rate change projections of Citibank N.A.

The carrying amounts of cash and cash equivalents correspond to their fair values. The Company considers that the carrying amount of trade accounts receivable and payable is similar to their fair values. The fair value of financial liabilities, disclosed in Note 18-c), has been estimated by discounting the future contractual cash flows at the interest rate currently prevailing in the market and which is available to the Company for similar financial instruments (Level 2).

4              CRITICAL ACCOUNTING ESTIMATES AND JUDGMENTS

Estimates and judgments used are continuously evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances.

4.1 Critical accounting estimates and assumptions

The Group makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, seldom equal the related actual results. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are addressed below.

a)  Estimated impairment of goodwill and other intangible assets with indefinite useful life

Impairment reviews are undertaken annually to determine if goodwill arising from business acquisitions and other intangible assets with indefinite useful life have suffered any impairment, in accordance with the policy described in Note 2.16). For this purpose, goodwill is attributed to the different CGUs to which it relates while other intangible assets with indefinite useful life are assessed individually. The recoverable amounts of the CGUs and of other intangible assets with indefinite useful life have been determined based on their value-in-use. This evaluation requires the exercise of Management’s professional judgment to analyze any potential indicators of impairment as well as the use of estimates in determining the value in use, including the preparation of future cash flows, macro-economic forecasts as well as defining the interest rate at which said cash flows will be discounted.

- 31 -

Value in use is usually determined on the basis of discounted estimated future net cash flows. Determination as to whether and how much an asset is impaired involves management estimates on highly uncertain matters such as future commodity prices, the effects of inflation on operating expenses, discount rates, production profiles and the outlook for global or regional market supply-and-demand conditions for crude oil, natural gas and refined products.

If the Group experiences a significant drop in revenues or a drastic increase in costs or changes in other factors the fair value of business units might decrease. If management determines the factors that reduce the fair value of the business are permanent, those economic factors will be taken into consideration to determine the recoverable amount of the business units and, therefore, goodwill as well as other intangible assets with indefinite useful life may be deemed to be impaired, which may cause their write-down to be necessary.

Based on the impairment tests performed by Group Management, no goodwill nor intangible (trademarks) impairment losses were required to be recognized because the recoverable amount of the CGUs subject to testing was substantially higher than their related carrying amounts.

The most significant assumptions are gross margin, growth rate and discount rate which are included in Note 17. The Group has performed a sensitivity analysis on the gross margin and discount rate which is included below

i.  Gross margin

The Group’s fair value is above its carrying amount and if the gross margin was adjusted down by 10% the fair value would be 26.04% higher than the carrying amount and if the gross margin was adjusted up by 10% the fair value would be 88.26% higher than carrying amount. Therefore the Group’s businesses would still be greater than the carrying amount even under a significant decline in the Group’s gross margin and the Group would not need to impair its goodwill.

ii.  Discount rate

The Group’s fair value is significantly above its carrying amount and if the discount rate was adjusted down by 10% the fair value would be 76.64% higher than the carrying amount and if the discount rate was adjusted up by 10% the fair value would be 39.42% higher than carrying amount. Therefore the Group’s businesses would still be greater than the carrying amount even under a significant upward adjustment to the discount rate in value and the Group would not need to impair its goodwill.

b)  Income taxes -

Determination of the tax obligations and expenses requires interpretations of the applicable tax laws and regulations. The Company seeks legal tax counsel’s advice before making any decision on tax matters. Although Management considers its estimates to be prudent and appropriate, differences of interpretation may arise with Tax Authorities (mainly Peruvian, Chilean and Colombian Authorities) which may require future tax adjustments.

Deferred tax assets and liabilities are calculated by taking the temporary differences of the tax basis of assets and liabilities and the financial statement basis using the tax rates in effect for each of the years in which the difference is expected to reverse. Any change in tax rates will affect the deferred tax assets and liabilities. This change will be recognized in income in the period the change takes effect.

Deferred income tax assets are recognized only to the extent that it is probable that future taxable profit will be available against which the temporary differences and tax loss carryforwards can be utilized. For this purpose, the Group takes into consideration all available positive and negative evidence, including factors such as historical data, projected income, current operations and tax planning strategies.. A tax benefit related to a tax position is only recognized if it is more likely than not that the benefit will ultimately be realized.

- 32 -

The maximum exposure of the Group related to tax contingencies amounts to S/.17,155.

c)  Percentage of completion revenue recognition -

Revenue from construction contracts is recognized under the percentage-of-completion method which requires the final margin from construction contracts to be estimated. Projections of these margins are performed by Management based on work execution budgets and adjusted periodically based on updated information reflecting the actual performance of work. The estimated contract revenue and total cost estimates are reviewed often as work progresses and is approved. In this regard, Management considers that the estimates made at the year-end closing are reasonable. When unapproved change orders occur, revenue is recognized equal to costs incurred (no profit component recognized) until the additional work is approved.

Contract revenue is recognized as revenue in the income statement in the accounting periods in which the work is performed. Contract costs are recognized as cost of sales in the income statement in the accounting period in which the work to which they relate is performed. However, any expected and probable excess of total contract costs over total contract revenue for the contract is expensed immediately. Furthermore, any changes in contract estimates are recognized as a change in accounting estimates and recognized in the period the change is made and in future periods as applicable. In certain construction contracts, the terms of these agreements allow for an amount to be withheld by the customers until construction has been completed. Under these contracts the full amount may not be recognized until the next operating cycle. As of December 31, 2014, 2013 and 2012, a sensitivity analysis was performed considering a 10% increase/decrease in the Group’s gross margins, as follows:

- 33 -

	2012			2013			2012
Sales		3,341,539			3,820,393			4,749,159
Gross profit		371,852			465,973			412,771
%		11.13			12.20			8.69
Increase 10%		12.24			13.42			11.15
Increase in profit before taxes		37,185			46,597			41,249
		409,037			512,570			454,020
Decrease 10%		10.02			10.98			7.82
Decrease in profit before taxes		(37,185	)		(46,597	)		(41,387	)
		334,667			419,376			371,384

d)  Provision for well closure costs -

The Group estimates the present value of its future obligation for well closure costs, or well closure liability, and increases the carrying amount of the asset that will be withdrawn in the future and that is shown under the heading of intangibles in the statement of financial position. The discount pre-tax rate used for the present value calculation was 2.17% based on the 10 year bond rate as of December, 2014 (2.74% as of December, 2013). At December 31, 2014 the present value of the estimated provision for closure activities for 78 wells amounted to S/. 7.21 million (S/.4.85 million as of December 31, 2013 for closure activities for 83 wells). The well closure liability is adjusted to reflect the changes that resulted from the passage of time and from revisions of either the date of occurrence or the amount of the present value of the obligations originally estimated.

If, at December 31, 2014, the estimated rate would have increased or decreased by 10%, with all variables held constant, the pre-tax profit for the year would have been as follows:

	Impact in pretax		Impact in pretax
	profit 2013		profit 2014
+10%	(59	)	(59	)
-10%	59		60

During 2014, the Company recorded a provision amounting to S/.2.7 million with charge to intangibles to reflect the estimated obligation to close productive wells included in the service agreements for Blocks I and V.

4.2 Critical judgments in applying the entity’s accounting policies

Consolidation of entities in which the Group holds less than 50% -

The Company owns some direct and indirect subsidiaries of which the Group has control even though it has less than 50% of the voting rights. These subsidiaries mainly comprise indirect subsidiaries in the real-estate business owned through Viva GyM S.A., where even though the Group holds interest between 30% and 50%, has the power to affect the relevant activities that impact the subsidiaries’ returns. Additionally, the Group owns de facto control of Promotora Larcomar S.A. on which owns 42.80% of equity interest considering the fact that the ownership of the 57.2% is disperse.

- 34 -

5              INTERESTS IN OTHER ENTITIES

The consolidated financial statements of the Group include the accounts of the Company and of its subsidiaries. Additionally, the consolidated financial statements of the Group include its interest in joint operations in which the Company or certain subsidiaries have joint control with their joint operations partners (Note 2.2-d).

a)  Principal subsidiaries -

The following chart shows the principal direct and indirect subsidiaries allocated by operating segment (Note 6):

Name	Country	Economic activity
Engineering and Construction:
GyM S.A.	Peru and Dominican Republic	Civil construction, electro-mechanic assembly, buildings, management and implementing housing development projects and other related services.
Stracon GyM S.A.	Peru and Panama	Mining contracting activities, providing mining services and  carrying out drilling, demolition and any other activity related to construction and mining operations.
GyM Chile S.p.A.	Chile	Electromechanical assemblies and services to energy, oil, gas  and mining sector.
V y V - DSD S.A. (*)	Chile	Electromechanical assemblies and services. Develop activities related to the construction of engineering projects, civil construction projects and electromechanical assemblies, as well as architectural design and installations in general. Construction and electromechanical assemblies and services in the areas of energy, oil and gas and mining.
GMI S.A.	Peru	Advisory and consultancy services in engineering, carrying out  studies and projects, managing projects and supervision of works.
Morelco S.A.S	Colombia and Ecuador	Providing construction and assembly services, supplying  equipment and material to design, build, assemble, operate and maintain all types mechanical engineering,  instrumentation and civil work.
Infrastructure:
GMP S.A.	Peru	Concession of services for treating and selling oil, natural  gas and by-products as well as for storing and dispatching fuel extracted from demonstrated feasible fields.
Oiltanking Andina Services S.A.	Peru	Operation of the gas processing plant of Pisco – Camisea.
Transportadora de Gas Natural Comprimido Andino S.A.C.	Peru	Concession for constructing, operating and maintaining the supply  system of compressed natural gas in certain provinces of Peru.
GyM Ferrovías S.A.	Peru	Concession for operating the Lima Metro transportation system.
Survial S.A.	Peru	Concession for constructing, operating and maintaining the  Section 1 of the “Southern Inter-oceanic” road.
Norvial S.A.	Peru	Concession for restoring, operating and maintaining the  “Ancón - Huacho - Pativilca” section of the Panamericana Norte road.

- 35 -

Concesión Canchaque S.A.	Peru	Concession for operating and maintaining the Buenos Aires - Canchaque road.
Concesionaria Vía Expresa Sur S.A.	Peru	Concession for designing, constructing, operating and maintaining  the Via Expresa - Paseo de la República in Lima.
Real estate:
VIVA GyM S.A.	Peru	Developing and managing real estate projects directly or together  with other partners.
Technical services:
GMD S.A.	Peru	Information technology services.
Gestión de Servicios Digitales S.A.	Peru	Information technology services.
CAM Holding S.p,A.	Chile, Peru Brazil and Colombia	Electric and technological services for the power industry.
Concar S.A.	Peru	Operating and maintaining roads under concession.
Coasin Instalaciones Ltda.	Chile	Installing and maintaining network and equipment for telecommunications.
Parent company operation:
Generadora Arabesco S.A.	Peru	Implementing projects related to electric power-generating activities.
Larcomar S.A.	Peru	Exploiting land right to use the Larcomar Shopping Center.
Promotora Larcomar S.A.	Peru	Building a hotel complex on a plot of land located in the district of Miraflores.
Promotores Asociados de Inmobiliarias S.A.	Peru	Operating in the real-estate industry and engaged in the Inmobiliarias S.A. development and selling office facilities in Peru.
(*)The subsidiaries Ingeniería y Construcción, Vial y Vives S.A., DSD Construcciones y Montajes S.A. and GyM Minería S.A. (all from Chile) merged and combined in July 2014, The merged entity’s name is V y V – DSD S.A.

- 36 -

The following are the Group’s subsidiaries and related interests on December 31, 2014:

										Percentage of
	Percentage of			Percentage of			Percentage of			ordinary shares
	ordinary shares			ordinary shares			ordinary shares			held by non-
	directly held by			held by			held by			controlling
	Parent (%)			Subsidiaries (%)			the Group (%)			interests (%)
Engineering and Construction:
GyM S.A.		98.23	%		-		98.23		%		1.77	%
- GyM S.A. subsidiarias		-			-			-			14.20	%
Stracon GyM S.A.		-			87.64	%		87.64	%		12.36	%
GyM Chile SpA		-			99.99	%		99.99	%		0.01	%
V y V - DSD S.A.		-			82.04	%		82.04	%		17.96	%
GMI S.A.		89.41	%		-			89.41	%		10.59	%
Morelco S.A.S.		-			70.00	%		70.00	%		30.00	%
Infrastructure:
GMP S.A.		95.00	%		-			95.00	%		5.00	%
Oiltanking Andina Services S.A.		-			50.00	%		50.00	%		50.00	%
Transportadora de Gas Natural Comprimido
Andino S.A.C		-			99.93	%		99.93	%		0.07	%
GyM Ferrovias S.A.		75.00	%		-			75.00	%		25.00	%
Survial S.A.		99.99	%		-			99.99	%		0.01	%
Norvial S.A.		67.00	%		-			67.00	%		33.00	%
Concesion Canchaque S.A.		99.97	%		-			99.97	%		0.03	%
Concesionaria Via Expresa Sur S.A.		99.98	%		-			99.98	%		0.02	%
Real Estate:
Viva GyM S.A.		60.62	%		38.97	%		99.59	%		0.41	%
- Viva GyM S.A. subsidiarias		-			-			-			40.58	%
Technical Services:
GMD S.A.		89.15	%		-			89.15	%		10.85	%
Cam Holding S.p.A.		100.00	%		-			100.00	%		-
Concar S.A.		99.74	%		-			99.74	%		0.26	%
Gestion de Servicios Digitales S.A.		-			100.00	%		100.00	%		-
Coasin Instalaciones Ltda.		-			100.00	%		100.00	%		-
Parent company operations:
Generadora Arabesco S.A.		99.00	%		-			99.00	%		1.00	%
Larcomar S.A.		79.66	%		-			79.66	%		20.34	%
Promotora Larcomar S.A.		42.80	%		-			42.80	%		57.20	%
Promotores Asociados de
Inmobiliarias S.A.		99.99	%		-			99.99	%		0.01	%

In December 2014, the Group through its subsidiary GyM S.A. acquired control over Morelco S.A.S. for a consideration amounting to US$93.7 million (equivalent to S/.277.1 million).

In March 2014, the Group through its subsidiary CAM Chile S.A. acquired control of Coasin Instalaciones Ltda. (hereinafter Coasin) for a consideration amounting to US$2.1 million (equivalent to S/.6.4 million).

The details of these transactions and their resulting accounting impact are disclosed in Note 31.

- 37 -

The following are the Group’s subsidiaries and related interests on December 31, 2013:

										Percentage of
	Percentage of			Percentage of			Percentage of			ordinary shares
	ordinary shares			ordinary shares			ordinary shares			held by non-
	directly held by			held by			held by			controlling
	Parent (%)			Subsidiaries (%)			the Group (%)			interests (%)
Engineering and Construction:
GyM S.A.		93.67	%		-			93.67	%		6.33	%
- GyM S.A. subsidiaries		-			-			-			13.68	%
Stracon GyM S.A.		-			74.15	%		74.15	%		25.85	%
GyM Chile SpA		-			99.99	%		99.99	%		0.01	%
DSD Construcciones y Montajes S.A.		-			85.95	%		85.95	%		14.05	%
Ingenieria y Construccion Vial y Vives S.A.		-			80.40	%		80.40	%		19.60	%
GyM Mineria S.A.		-			99.90	%		99.90	%		0.10	%
GMI S.A.		89.41	%		-			89.41	%		10.59	%
Infrastructure:
GMP S.A.		95.00	%		-			95.00	%		5.00	%
Oiltanking Andina Services S.A.		-			50.00	%		50.00	%		50.00	%
Transportadora de Gas Natural
Comprimido Andino S.A.C.		-			99.93	%		99.93	%		0.07	%
GyM Ferrovias S.A.		75.00	%		-			75.00	%		25.00	%
Survial S.A.		99.99	%		-			99.99	%		0.01	%
Norvial S.A.		67.00	%		-			67.00	%		33.00	%
Concesion Canchaque S.A.		99.97	%		-			99.97	%		0.03	%
Concesionaria Via Expresa Sur S.A.		99.99	%		-			99.99	%		0.01	%
Real Estate:
Viva GyM S.A.		59.25	%		38.97	%		98.22	%		1.78	%
- Viva GyM S.A. subsidiaries		-			-			-			40.58	%
Technical Services:
GMD S.A.		89.15	%		-			89.15	%		10.85	%
Cam Holding S.p.A.		100.00	%		-			100.00	%		-
Concar S.A.		99.74	%		-			99.74	%		0.26	%
Gestion de Servicios Digitales S.A.		-			100.00	%		100.00	%		-
Parent company operations:
Generadora Arabesco S.A.		99.00	%		-			99.00	%		1.00	%
Larcomar S.A.		79.66	%		-			79.66	%		20.34	%
Promotora Larcomar S.A.		42.80	%		-			42.80	%		57.20	%
Promotores Asociados de
Inmobiliarias S.A.		99.99	%		-			99.99	%		0.01	%

In August 2013, the Group through some of its subsidiaries, GyM Minería S.A., Ingeniería y Construcción Vial y Vives S.A. and GyM Chile S.p A., acquired control of DSD Construcciones y Montajes S.A. for a consideration amounting to US$37.2 million (equivalent to S/.103.9 million).

In 2012, the Group, through some of its subsidiaries acquired control of certain entities as follows:

i)  A Chilean entity, Ingeniería y Construcción Vial y Vives S.A. (hereinafter Vial y Vives) for a consideration amounting to US$55.6 million (equivalent to S/.142 million), and

ii)  Stracon GyM, for a consideration amounting to US$16.4 million (equivalent to S/.41.9 million).

The details of these transactions and their resulting accounting impact are disclosed in Note 31.

All subsidiaries undertakings are included in the consolidation. The proportion of the voting rights in the subsidiaries’ undertakings are held directly by the parent company and do not differ from the proportion of common shares held. There is no restriction to access or use of the assets or to the settlement of the liabilities of the Group.

- 38 -

At December 31, the total non-controlling interest is attributable to the following subsidiaries:

	2013		2014
Viva GyM S.A. subsidiaries		176,210		191,826
Viva GyM S.A.		5,411		8,414
GyM S.A. subsidiaries		101,601		147,660
GyM S.A.		40,616		18,953
Norvial S.A.		39,811		41,820
CAM Holding S.p.A.		19,585		24,137
GMP S.A.		18,853		18,204
GyM Ferrovias S.A.		14,042		19,878
Promotora Larcomar S.A.		9,960		9,697
Others		5,173		8,155
		431,262		488,744

Summarized financial information of subsidiaries with material non-controlling interests

Set out below is the summarized financial information for each subsidiary that has non-controlling interests that are material to the Group.

Summarized statement of financial position

	Viva GYM S.A.						GyM S.A.						Norvial S.A.
	December 31,						December 31,						December 31,
	2013			2014			2013			2014			2013			2014
Current:
Assets		672,627			760,815			1,794,604			2,622,112			19,977			6,092
Current liabilities, net		(217,609	)		(266,576	)		(1,578,685	)		(2,490,013	)		(50,362	)		(109,134	)
		455,018			494,239			215,919			132,099			(30,385	)		(103,042	)
Non-current:
Assets		76,506			117,352			915,000			1,221,016			152,228			230,401
Liabilities		(97,762	)		(138,880	)		(385,495	)		(391,293	)		(1,207	)		(633	)
Total non-current net assets
(liabilities), net		(21,256	)		(21,528	)		529,505			829,723			151,021			229,768
Net assets		433,762			472,711			745,424			961,822			120,636			126,726

Summarized income statement

	Viva GYM S.A.									GyM S.A.									Norvial S.A.
	December 31,									December 31,									December 31,
	2012			2013			2014			2012			2013			2014			2012			2013			2014
Revenue		240,110			313,731			224,560			3,341,539			3,903,916			4,861,362			85,700			92,252			178,170
Profit before
income tax		65,282			80,467			37,967			250,132			350,687			239,597			38,734			40,341			41,998
Income tax		(19,967	)		(21,427	)		(11,452	)		(79,690	)		(105,674	)		(54,657	)		(11,578	)		(10,245	)		(10,908	)
Post-tax profit		45,315			59,040			26,515			170,442			245,013			184,940			27,156			30,096			31,090
Other comprehensive
Income		-			-			(25	)		(962	)		(1,240	)		(26,199	)		-			-			-
Total comprehensive
income		45,315			59,040			26,490			169,480			243,773			158,741			27,156			30,096			31,090

- 39 -

Summarized cash flows

	Viva GyM S.A.									GyM S.A.									Norvial S.A.
	December 31,									December 31,									December 31,
	2012			2013			2014			2012			2013			2014			2012			2013			2014
Cash flows from operating
activities (used), net		5,104			(46,450	)		18,656			467,606			69,768			143,917			48,052			37,746			30,645
Cash flows from investing
activities (used), net		(4,158	)		(5,609	)		(39,444	)		(263,724	)		(139,563	)		(207,645	)		(16,729	)		(412	)		(71,469	)
Cash flows from financing
activities (used), net		22,804			22,081			32,030			(179,416	)		(87,296	)		84,710			(32,757	)		(24,791	)		20,832
Increase (decrease) in cash
And cash equivalents, net		23,750			(29,978	)		11,242			24,466			(157,091	)		20,982			(1,434	)		12,543			(19,992	)
Cash received for
acquisition		-			-			-			-			-			( 2,614	)		-			-			-
Cash decrease due to
deconsolidation		-			-			-			-			(1,458	)		-			-			-			-
Cash and cash equivalents
and overdrafts at the
beginning of the year		49,254			73,004			43,026			398,435			422,901			264,352			14,383			12,949			25,492
Cash and cash equivalents
at the end of the year		73,004			43,026			54,268			422,901			264,352			282,720			12,949			25,492			5,500

The information above is the amount before inter-company eliminations.

b)  Public services concessions -

The Group acts as concessionaire in various public services concessions. When applicable, revenue attributable to the construction or restoration of infrastructure has been accounted for by applying the models set forth in Note 2.5 (financial, intangible and bifurcated model). The concessions of the Group are described as follows:

Financial model:

i)  Survial S.A. concession

Under the Survial concession, the Company operates and maintains a 750 km road from the San Juan de Marcona port to Urcos, Peru, which is connected to an interoceanic road that runs up to the Peruvian-Brazilian border. The road has five toll stations and three weigh stations. The concession was awarded to Survial in 2007 for a 25-year term. The Company owns 99.9% of Survial.

The obligations under the concession include the construction of the road, which was completed in 2010 with an investment of US$98.9 million. The concession maintains payback mechanisms through the annual payment for maintenance and operation of the road, hereinafter PAMO, which is paid to Survial by the Peruvian Ministry of Transport and Communications (“MTC”), according to the terms established in the contract.

PAMO revenues are generated by periodic and routine maintenance. The 46.88% of the total PAMO is periodic maintenance, and the difference is for routine maintenance. The revenue in this concession does not depend on traffic volume.

This concession is recognized as a financial asset because Survial has the unconditional contractual right to receive cash or other financial asset and such operation is secured contractually by the Peruvian Government. Survial receives specific and determinable amounts of cash and measures the financial asset at amortized cost, taking into consideration the effective interest rate method as prescribed in IAS 39, ‘Financial Instruments: Recognition and Measurement’.

ii)      Canchaque S.A. concession

Under the Canchaque concession, the Company operates and periodically maintains a 78 km road from the towns of Buenos Aires to Canchaque, in Peru.  The road has one toll station. The concession was awarded to Canchaque in 2006 for a 15-year term.  The Company owns 99.97% of Canchaque S.A. The obligations under the concession include the construction of the road 1B from Buenos Aires to Canchaque in Piura, which was completed in 2009; the total investment amounted to US$26.1 million. Revenue from this concession consists of an annual fee paid by the MTC in consideration for the operation and maintenance of the road (PAMO), which can vary depending on the amount of road maintenance required due to road wear and tear. The revenue received by the Company in this concession does not depend on traffic volume. These revenues are guaranteed by a minimum amount of US$310,648 per year. The 20.30% of the total PAMO is periodic maintenance, and the difference is for routine maintenance.

- 40 -

This concession granted to the Company comprises public services and investments qualifying as a financial asset as the Company has the unconditional right to receive cash or other financial assets from the collection of annual payments for maintenance and operation.  Canchaque S.A. recognizes such financial asset at amortized cost, taking into consideration effective interest rate method, as prescribed in IAS 39, ‘Financial instruments: recognition and measurement’.

iii)      La Chira S.A. concession

In 2011, the Company was awarded a 25-year concession for the construction, operation and maintenance of La Chira waste water treatment plant in the south of Lima. The project is aimed at addressing Lima’s environmental problems caused by sewage discharged directly into the sea. The Company holds a 50% interest in this project and the Company´s partner Acciona Agua holds the remaining 50%. La Chira’s annual revenues under the concession are in the form of a fee paid by Sedapal S.A., the public utility company responsible for the supervision of the water service in Lima. The total investment amounted to S/.450.5 million.

The concession maintains payback mechanisms through certificates of progress of the works, hereinafter CAO´s, because the concession is under construction.

At December 31, 2013, the concession has issued two CAO´s by advancing work executed, corresponding to 38.54 % of the total of the project. It is estimated that a total of seven CAOS will be issued. During 2014, no CAO was issued.

This concession granted to the Company comprises public services and investments qualifying as a financial asset as the Company has the unconditional right to receive cash or other financial assets through collections of revenue charged for maintaining the plant.

The concession is recognized as a financial asset at its amortized cost, taking into consideration the effective interest rate method calculation set forth in IAS 39, ‘Financial Instruments: Recognition and Measurement’.

iv)      GyM Ferrovías S.A. concession

In 2011, the Company was awarded a 30-year concession for the operation of Line 1 of the Lima Metro, Peru’s only urban railway system. The concession was awarded to the subsidiary GyM Ferrovías, in which the Company holds a 75% ownership interest, with the other 25% being held by Ferrovías S.A.C. The obligations under the contract include (i) the operation and maintenance of the five existing trains provided by the government; (ii) the acquisition of 19 new trains on behalf of the Peruvian government, which will be the legal owner of such trains; (iii) the operation and maintenance of the 19 additional trains; and (iv) the design and construction of the railway maintenance and repair yard.  The total investment amounted to US$549.8 million. Revenue from this concession consists of a quarterly fee that is received from the MTC based on the kilometers travelled per train. The revenue does not depend on passenger traffic volume.

The concession given to the Company comprises public services and investments qualifying as a financial asset as the Company has the unconditional right to receive cash or other financial asset for the collection of the secured kilometers.

- 41 -

The concession is recognized as a financial asset at its amortized cost, taking into consideration the effective interest rate calculation set forth in IAS 39, ‘Financial Instruments: Recognition and Measurement’.

v)      Transportadora de Gas Natural Comprimido Andino S.A.C. concession

In July 2013 the Group, through its subsidiary GMP S.A., obtained from the Local Government the concession to design, finance, build, maintain and operate the system supply of compressed natural gas in Jauja, Huancayo, Huancavelica, Huamanga, Huanta, Andahuaulas, Abancay, Cusco, Juliaca and Puno. The concession term is 10 years with an option to extend for 20 more years. According to the contract the infrastructure will reverse to the grantor at the end of the concession term. The estimated initial investment during the first nine months will result in US$14.1 million. In the sixth year the amount will be about US$1.76 million.

This concession granted to the Company comprises public services and investments qualifying as financial assets, the Company has the unconditional right to receive cash or other financial assets due as the granted income which is higher than the investment costs.

The concession is recognized as a financial asset at its amortized cost, taking into consideration the effective interest rate method set forth in IAS 39, ‘Financial Instruments: Recognition and Measurement’.

Intangible model:

i)  Norvial S.A. concession

Under the Norvial concession, the Company operates and maintains part of the only highway that connects Lima to the northwest of Peru. This 183-km road known as Red Vial 5, runs from the cities of Ancón to Pativilca and has three toll stations. The concession was awarded to Norvial in 2003 for a 25-year term.  The Company owns 67% of Norvial. Norvial’s revenue derives from the collection of tolls. The toll fee is determined by the MTC and adjusted on a yearly basis in accordance with a contractual formula that takes into account the new Peruvian sol/U.S. dollar exchange rate andPeruvian and U.S. inflation. The Company is required to transfer 5.5% of monthly toll revenue to the MTC and pay a 1% regulatory fee to the Peruvian Supervisory Agency for Investment in Public Transportation Infrastructure. The obligations under the concession include expanding the already existing road by, among other things, adding two additional lanes. The first stage of construction was completed in 2008 and the second stage has begun in 2014. The total investment of the concession amounted to US$50 million in the first stage while the second stage will amount to US$102 million. As part of the construction of the second stage, the Company is also required to pay a one-time estimated fee of approximately US$1.8 million to the Peruvian Supervisory Agency for Investment in Public Transportation Infrastructure.

The concession contract given to the Company comprises public services and investments and qualifies as an intangible asset because the concession agreement grants the right to charge a predefined and adjustable rate to the users. The cost of the intangible asset comprises the investment or executed to the extent their amount and borrowing costs can be estimated reliably.

Bifurcated model:

ii)  Vía Expresa Sur S.A. concession

On August 8, 2013, the Company obtained the concession for a 40-year term for designing, financing, building, operating and maintaining the infrastructure associated with the Vía Expresa Sur Project. This project involves the second stage expansion of the Via Expresa - Paseo de la República, between Av. República de Panamá and Panamericana highway.

- 42 -

The estimated investment in this concession is expected to be US$196.8 million. The contract gives the Company the right to charge users of the public service according to a pre-defined price list; however, the grantor (Government) has agreed to pay the difference if the revenues generated during the operation stage are lower than US$18 million in the first two years and US$19.7 million from the third year until the fifteenth year. Revenue for the construction activities and other initial activities are accounted for as a financial asset for the portion that the government guarantees to the Company, and as an intangible, for the unguaranteed investment.

c)  Principal Joint Operations -

As of December 31, 2014, the Group participated in 65 Joint Operations in association with third parties (64 as of December 31, 2013). The following table contains the principal Joint Operations in which the Group participated:

	Percentage of interest
Joint Operations	2013			2014
Grana y Montero S.A.A.
- Concesionaria la Chira S.A.		50.00	%		50.00	%
GyM S.A.
- Consorcio Constructor Alto Cayma		50.00	%		50.00	%
- Consorcio Rio Pallca - Huanza		40.00	%		40.00	%
- Consorcio Tren electrico		33.00	%		29.64	%
- Consorcio Alto Cayma		49.00	%		49.00	%
- Consorcio Vial Ayacucho		50.00	%		50.00	%
- Consorcio Lima Actividades Comerciales		50.00	%		50.00	%
- Consorcio GyM - COSAPI		50.00	%		50.00	%
- Consorcio Atocongo		40.00	%		40.00	%
- Consorcio Norte Pachacutec		49.00	%		49.00	%
- Consorcio La Chira		50.00	%		50.00	%
- Consorcio Rio Urubamba		60.00	%		60.00	%
- Consorcio Vial Quinua		46.00	%		46.00	%
- Consorcio Rio Mantaro		50.00	%		50.00	%
- Consorcio GyM - CONCIVILES		66.70	%		66.70	%
- Consorcio Toromocho		55.00	%		55.00	%
- Consorcio Construcciones y Montajes CCN		50.00	%		25.00	%
- Consorcio CGB		50.00	%		50.00	%
- Consorcio HV GyM		50.00	%		50.00	%
- Consorcio Stracon Motta Engil JV		50.00	%		50.00	%

- 43 -

	Percentage of interest
Joint Operations	2013			2014
GMP S.A.
- Consorcio Terminales		50.00	%		50.00	%
- Terminales del Peru		-			50.00	%
CONCAR S.A.
- Consorcio Ancon-Pativilca		50.10	%		50.10	%
- Consorcio Peruano de Conservacion		50.00	%		50.00	%
GMD S.A.
- Consorcio Cosapi-Data - GMD S.A.		70.00	%		70.00	%
- Consorcio TLBG		66.45	%		66.45	%
- Consorcio Procesos digitales		43.65	%		43.65	%
- Consorcio Indra		50.00	%		50.00	%
- Consorcio Fabrica de Software		50.00	%		50.00	%
- Consorcio Gestion de Procesos Electorales (ONPE)		50.00	%		50.00	%
Viva GyM S.A.
- Consorcio Cuartel San Martin		50.00	%		-
Cam Holding S.p.A.
- Consorcio Mecam		50.00	%		59.00	%
- Consorcio Seringel		50.00	%		50.00	%

All of the joint arrangements listed above operate in Peru.

The description of the main activities of the joint arrangements is as follows:

Joint arrangements in	Economic activity
Grana y Montero S.A.A.	Construction, operation and maintenance of La Chira waste water treatment plant in the south of Lima. The project is aimed to solve Lima's environmental problems caused by sewage discharged directly into the sea.
GyM S.A.	The activities of the joint operations of this subsidiary are: Civil works division: construction in general in the energy, mining, infrastructure, industry.
	Electromechanical Division: assembly, installation and supply of materials and / or electromechanical equipment and laying of transmission lines.
	Building division: building houses, offices and commercial premises Services division: mining services.
GMP S.A.	Consorcio Terminales and Terninales del Peru provide services for reception, storing, shipping and transportation for liquid hydrocarbons, such as gasoline, jet fuel, diesel fuel and residual among others.
CONCAR S.A.	Joint operations Concar provides rehabilitation service, routine and periodic maintenance of the road, further provides conservation services and supervision.

- 44 -

Joint arrangements in	Economic activity
GMD S.A.	GMD joint arrangements are specially engaged in supply services derived from contracts of business online BPO (Business Process Outsourcing).
Viva GyM S.A.	Construction of a five star hotel with a convention center, a business center and entertainment center.
CAM Holding S.A.	Outsourcing services to the electric power sector.

The Group’s consolidated financial statements do not include any other type of entities in addition to those mentioned above, such as trust funds or special purpose entities.

6              SEGMENT REPORTING

Operating segments are reported consistently with the internal reports that are reviewed by the Executive Committee led by the Corporate General Manager; this Committee is the chief operating decision maker, responsible for allocating resources and evaluating the performance of each operating segment.

The Group's operating segments are assessed by the activity of the following business units: (i) engineering and construction, (ii) infrastructure, (iii) real estate and (iv) technical services.

As set forth under IFRS 8, reportable segments by significance of income are: ‘engineering and construction’ and ‘technical services’. However, the Group has voluntarily decided to report on all its operating segments as detailed in this Note.

The revenues derived from foreign operations (Chile, Brazil, Panama, Dominican Republic, Colombia and Bolivia) comprise 17.23% of the Group’s total revenue in 2014 (13.72% in 2013 and 17.21% in 2012).

Inter-segmental sales transactions are carried out at arm’s length. Revenues from external customers reported to the Corporate General Management are measured in a manner consistent with the preparation basis of the financial statements.

Group sales and receivables are not concentrated in a few customers.

The following segments set forth the principal activities of the Group:

a)  Engineering and construction: This segment includes: (i) engineering, from traditional engineering services such as structural, civil and design engineering, and architectural planning to advanced specialties including process design, simulation, and environmental services; (ii) civil works, such as the construction of hydroelectric power stations and other large infrastructure facilities; (iii) electro mechanic construction, such as concentrator plants, oil and natural gas pipelines, and transmission lines; (iv) building construction, such as office buildings, residential buildings, hotels, affordable housing projects, shopping centers and industrial facilities; (v) contract mining, such as earthworks, blasting, loading and hauling ore.

b)  Infrastructure: The Group has long-term concessions or similar contractual arrangements in Peru for three toll roads, the Lima Metro, a waste water treatment plant in Lima, multiple fuel storage facilities, two producing oil fields, and a gas processing plant.

c)  Real Estate: The Group develops and sells homes targeted to low and middle-income population sectors which are experiencing a significant increase in disposable income, as well as, to a lesser extent, office and commercial space.

- 45 -

d)  Technical Services: The Group provides: (i) operation and maintenance services for infrastructure assets; (ii) information technology (IT) services, including IT outsourcing, systems integration, application outsourcing and business process outsourcing services; and (iii) electricity networks services (maintenance) in telecommunications.

e)  Parent Company Operation corresponds to the services which the Holding company provides, managing, logistics and accounting services, among others, to the different related entities of the Group.

Below are shown the financial statements of the Group according to its operating segments:

- 46 -

(All the amounts are expressed in thousand of S/. unless otherwise stated) AUDITED

Operating segments financial position

Segment reporting
	Engineering		Infrastructure												Parent
	and construction		Energy		Toll roads		Mass transit		Water treatment		Real estate		Technical services		Company Operations		Eliminations			Consolidated
As of December 31, 2013
Assets.-
Cash and cash equivalents		265,788		17,764		80,785		23,318		445		43,026		46,469		481,820		-			959,415
Trade Accounts receivable		265,544		29,527		12,347		4,090		-		17,938		192,382		44		-			521,872
Unbilled work in progress		734,976		6,966		2,433		31,187		37,489		-		158,692		-		-			971,743
Accounts receivable from related parties		111,210		4,083		18,660		163		-		561		53,845		733,645		(834,839	)		87,328
Other accounts receivable		360,936		26,840		11,180		34,263		4,557		17,939		65,794		33,469		(1,760	)		553,218
Inventories		90,671		7,741		-		11,927		-		590,567		63,912		486		(2,507	)		762,797
Prepaid expenses		7,440		1,318		5,442		4,394		3		2,596		4,131		363		-			25,687
Non-current assets classified as held for sale		21,473		-		-		-		-		-		-		-		-			21,473
Total Current assets		1,858,038		94,239		130,847		109,342		42,494		672,627		585,225		1,249,827		(839,106	)		3,903,533
Long-term trade accounts receivable		-		-		-		591,917		-		-		-		-		-			591,917
Long-term trade accounts receivable from related parties		-		-		-		-		-		-		-		69,001		(69,001	)		-
Other long-term accounts receivable		-		-		10,081		-		1,858		11,811		12,301		2,100		-			38,151
Available-for-sale financial asset		-		1,058		-		-		-		-		2		88,333		(1,060	)		88,333
Investments in associates and joint ventures		153,555		7,287		-		-		-		16,297		10,454		1,309,293		(1,408,919	)		87,967
Investment property		-		-		-		-		-		36,945		-		-		-			36,945
Property, plant and equipment		534,067		190,844		3,919		6,724		-		5,636		114,081		103,840		(6,205	)		952,906
Intangible assets		174,771		101,978		145,711		6,450		1,151		957		18,883		15,282		15,702			480,885
Deferred income tax asset		68,700		644		4,258		8,765		-		4,860		42,119		1,264		4,911			135,521
Total non-current assets		931,093		301,811		163,969		613,856		3,009		76,506		197,840		1,589,113		(1,464,572	)		2,412,625
Total assets		2,789,131		396,050		294,816		723,198		45,503		749,133		783,065		2,838,940		(2,303,678	)		6,316,158
Liabilities.-
Borrowings		195,083		33,847		46,007		-		5,869		77,854		126,872		587		-			486,119
Trade accounts payable		751,097		19,950		3,353		9,912		280		42,484		160,104		4,217		-			991,397
Accounts payable to related parties		43,373		877		25,572		642,510		35,558		21,493		77,613		24,928		(846,339	)		25,585
Current taxes		54,670		519		1,627		-		366		1,841		7,622		-		-			66,645
Other accounts payable		589,412		13,840		43,779		960		-		73,937		101,925		13,830		-			837,683
provisions		-		4,207		3,846		-		-		-		842		-		-			8,895
Total current liabilities		1,633,635		73,240		124,184		653,382		42,073		217,609		474,978		43,562		(834,839	)		2,416,324
Borrowings		127,067		86,334		9,780		-		-		52,318		31,367		2,837		-			309,703
Long-term trade accounts payable		-		-		-		2,157		-		-		-		-		-			2,157
Accounts payables to related parties		-		-		-		-		-		28,500		29,001		-		(57,501	)		-
Other long-term accounts payable		124,344		-		462		-		-		9,723		69,957		910		-			205,396
Other provisions		14,832		4,668		-		-		-		-		23,918		-		-			43,418
Derivative financial instruments		-		3,563		-		201		-		147		-		-		-			3,911
Deferred income tax liability		119,367		453		166		-		340		7,074		5,864		3,599		1,691			138,554
Total non-current liabilities		385,610		95,018		10,408		2,358		340		97,762		160,107		7,346		(55,810	)		703,139
Total liabilities		2,019,245		168,258		134,592		655,740		42,413		315,371		635,085		50,908		(902,149	)		3,119,463
Equity		622,899		211,431		120,407		50,594		3,090		152,713		125,738		2,778,148		(1,299,587	)		2,765,433
Non-controlling interest		146,987		16,361		39,817		16,864		-		281,049		22,242		9,884		(101,942	)		431,262
Total liabilities and equity		2,789,131		396,050		294,816		723,198		45,503		749,133		783,065		2,838,940		(2,303,678	)		6,316,158

- 47 -

(All the amounts are expressed in thousand of S/. unless otherwise stated)AUDITED

Operating segments financial position

Segment reporting
	Engineering		Infrastructure												Parent
	and construction		Energy		Toll roads		Mass transit		Water treatment		Real estate		Technical services		Company Operations		Eliminations			Consolidated
As of December 31, 2014
Assets.-
Cash and cash equivalents		285,367		54,085		53,312		51,522		8,407		54,268		134,679		176,762		-			818,402
Available-for-sale financial assets		7,105		-		-		-		-		-		-		-		-			7,105
Trade Accounts receivable		604,951		35,201		46,598		71,817		-		57,584		293,024		34		-			1,109,209
Unbilled work in progress		1,136,404		1,414		-		-		14,972		-		-		-		-			1,152,790
Accounts receivable from related parties		121,989		6,723		-		216		-		6,561		65,242		371,765		(473,435	)		99,061
Other accounts receivable		384,484		10,781		9,042		29,515		3,154		11,409		63,797		66,414		1,058			579,654
Inventories		126,293		7,921		-		13,909		-		630,758		55,601		486		(1,398	)		833,570
Prepaid expenses		11,489		891		822		6,056		407		235		5,119		1,425		-			26,444
Non-current assets classified as held for sale		9,513		-		-		-		-		-		-		-		-			9,513
Total Current assets		2,687,595		117,016		109,774		173,035		26,940		760,815		617,462		616,886		(473,775	)		4,635,748
Long-term trade accounts receivable		-		-		-		579,956		-		-		-		-		-			579,956
Long-term Unbilled work in progress		-		25,387		10,584		-		-		-		-		-		-			35,971
Prepaid expenses		-		-		2,416		7,062		-		-		-		-		-			9,478
Long-term trade accounts receivable from related parties		-		-		408		-		-		-		433		182,548		(183,389	)		-
Other long-term accounts receivable		6,192		4,449		11,776		4,131		1,587		9,705		4,496		2,217		-			44,553
Available-for-sale financial assets		-		1,058		-		-		-		-		2		93,144		(1,060	)		93,144
Investments in associates and joint ventures		161,938		7,316		-		-		-		62,863		10,059		1,729,640		(1,742,253	)		229,563
Investment property		-		-		-		-		-		36,244		-		-		-			36,244
Property, plant and equipment		652,797		193,183		2,036		14,270		-		7,344		166,323		119,483		(6,785	)		1,148,651
Intangible assets		325,943		146,477		234,923		6,247		1,100		1,187		32,838		17,417		14,652			780,784
Deferred income tax asset		91,361		714		4,604		244		-		9		37,363		926		586			135,807
Total non-current assets		1,238,231		378,584		266,747		611,910		2,687		117,352		251,514		2,148,866		(1,921,740	)		3,094,151
Total assets		3,925,826		495,600		376,521		784,945		29,627		878,167		868,976		2,765,752		(2,395,515	)		7,729,899
Liabilities.-
Borrowings		629,584		69,577		95,902		404,915		-		144,314		80,531		632		-			1,425,455
Trade accounts payable		940,042		27,148		3,250		12,385		159		31,690		155,714		8,461		-			1,178,849
Accounts payable to related parties		89,445		1,061		55,679		278,819		24,552		24,106		82,203		12,421		(485,259	)		83,027
Current taxes		71,288		5,493		249		32		138		1,150		11,259		6		-			89,615
Other accounts payable		771,127		18,518		26,076		2,308		-		65,316		101,973		22,425		-			1,007,743
provisions		-		8,414		-		-		-		-		3,027		-		-			11,441
Total current liabilities		2,501,486		130,211		181,156		698,459		24,849		266,576		434,707		43,945		(485,259	)		3,796,130
Borrowings		144,081		99,767		633		-		-		16,368		63,070		2,205		-			326,124
Long-term trade accounts payable		-		-		1,622		2,157		-		-		-		-		-			3,779
Accounts payables to related parties		-		-		-		-		-		109,126		62,522		-		(171,648	)		-
Other long-term accounts payable		214,462		349		495		4,820		-		4,679		69,201		880		-			294,886
provisions		26,878		5,774		-		-		-		-		14,252		-		-			46,904
Derivative financial instruments		-		2,999		-		-		-		-		-		-		-			2,999
Deferred income tax liability		51,556		1,331		-		-		325		8,707		7,021		10,215		-			79,155
Total non-current liabilities		436,977		110,220		2,750		6,977		325		138,880		216,066		13,300		(171,648	)		753,847
Total liabilities		2,938,463		240,431		183,906		705,436		13,674		405,456		650,773		57,245		(656,907	)		4,549,977
Equity attributable to controlling interest in the Company		817,356		236,925		150,788		59,633		15,953		157,276		128,429		2,695,401		(1,559,083	)		2,691,178
Non-controlling interest		170,007		18,244		41,827		19,876		-		315,435		89,774		9,615		(176,034	)		488,744
Total liabilities and equity		3,925,826		495,600		376,521		784,945		29,627		878,167		868,976		2,762,261		(2,392,024	)		7,729,899

- 48 -

(All amounts are expressed in thousands of S/. unless otherwise stated) AUDITED

Operating segments performance

Segment Reporting
	Engineering			Infrastructure																		Parent
	and construction			Energy			Toll roads			Mass transit			Water treatment			Real estate			Technical services			Company operations			Eliminations			Consolidated
Year 2012 -
Revenues		3,524,585			287,040			123,345			73,067			41,007			240,110			1,083,323			44,654			(185,246	)		5,231,885
Gross profit		408,021			110,847			53,341			(2,712	)		11,155			86,706			103,935			(26	)		(59,201	)		712,066
Administrative expenses		(159,845	)		(14,739	)		(6,361	)		(7,926	)		(1,485	)		(17,409	)		(105,363	)		(3,971	)		59,919			(257,180	)
Other income and expenses		(602	)		(2,530	)		61			(27	)		-			(1,711	)		73,585			8,426			(1,583	)		75,619
Profit before interests
and taxes		247,574			93,578			47,041			(10,665	)		9,670			67,586			72,157			4,429			(865	)		530,505
Financial expenses		(17,727	)		(5,529	)		(8,382	)		(3,958	)		(6,557	)		(4,366	)		(13,615	)		(8,538	)		543			(68,129	)
Financial income		37,393			3,765			3,219			15			126			2,062			8,550			7,438			(4,722	)		57,846
Share of the profit or loss in
associates and joint ventures under
the equity method		9,178			-			-			-			-			-			-			294,607			(303,181	)		604
Profit before income tax		276,418			91,814			41,878			(14,608	)		3,239			65,282			67,092			297,936			(308,225	)		520,826
Income tax		(87,918	)		(28,457	)		(12,526	)		3,584			(972	)		(19,967	)		(5,638	)		(4,235	)		1,554			(154,575	)
Profit for the year		188,500			63,357			29,352			(11,024	)		2,267			45,315			61,454			293,701			(306,671	)		366,251
Profit attributable to:
Owners of the Company		165,116			58,029			15,800			(8,268	)		1,134			12,375			50,623			293,242			(298,097	)		289,954
Non-controlling interest		23,384			5,328			13,552			(2,756	)		1,133			32,940			10,831			459			(8,574	)		76,297
Profit for the year		188,500			63,357			29,352			(11,024	)		2,267			45,315			61,454			293,701			(306,671	)		366,251

- 49 -

(All amounts are expressed in thousands of S/. unless otherwise stated) AUDITED

Operating segment performance

Segment Reporting
	Engineering			Infrastructure																		Parent
	and construction			Energy			Toll roads			Mass transit			Water treatment			Real estate			Technical services			Company operations			Eliminations			Consolidated
Year 2013 -
Revenue		4,075,255			321,097			195,861			118,541			45,489			313,731			1,169,115			51,525			(323,114	)		5,967,500
Gross profit		559,544			97,495			66,455			19,670			3,179			113,732			179,175			(4,031	)		(31,097	)		1,004,122
Administrative expenses		(217,927	)		(16,170	)		(6,600	)		(8,025	)		(212	)		(20,993	)		(132,486	)		(8,616	)		49,237			(361,792	)
Other income and expenses		10,762			(3,561	)		(35	)		758			(2	)		(1,749	)		24,669			(2,689	)		(2,851	)		25,302
Gains from the sale of investments		-			-			-			-			-			3,197			-			2,525			-			5,722
Profit before interests
and taxes		352,379			77,764			59,820			12,403			2,965			94,187			71,358			(12,811	)		15,289			673,354
Financial expenses		(49,349	)		(14,264	)		(7,416	)		(40,012	)		(44	)		(14,639	)		(17,881	)		(21,615	)		12,418			(152,802	)
Financial income		22,714			33			3,006			14,035			14			855			2,028			35,680			(38,012	)		40,353
Share of the profit or loss
in associates and joint venturesunder the equity
method of accounting		41,971			1,587			-			-			-			64			1,070			318,705			(329,835	)		33,562
Profit before income tax		367,715			65,120			55,410			(13,574	)		2,935			80,467			56,575			319,959			(340,140	)		594,467
Income tax		(111,240	)		(20,066	)		(14,971	)		477			(881	)		(21,427	)		(16,655	)		(781	)		3,221			(182,323	)
Net profit for the period		256,475			45,054			40,439			(13,097	)		2,054			59,040			39,920			319,178			(336,919	)		412,144
Profit attributable to:
Owners of the Company		211,594			41,635			26,077			(9,823	)		2,054			19,154			34,296			319,275			(324,246	)		320,016
Non-controlling interest		44,881			3,419			14,362			(3,274	)		-			39,886			5,624			(97	)		(12,673	)		92,128
Net profit for the period		256,475			45,054			40,439			(13,097	)		2,054			59,040			39,920			319,178			(336,919	)		412,144

- 50 -

(All amounts are expressed in thousands of S/. unless otherwise stated) AUDITED

Operating segment performance

Segment Reporting
	Engineering			Infrastructure																		Parent
	and construction			Energy			Toll roads			Mass transit			Water treatment			Real estate			Technical services			Company operations			Eliminations			Consolidated
Year 2014 -
Revenue		5,035,674			350,339			338,153			166,951			29,323			224,560			1,208,168			53,241			(397,729	)		7,008,680
Gross profit		535,360			124,455			76,697			42,109			2,307			62,413			142,343			(7,574	)		(26,541	)		951,569
Administrative expenses		(258,554	)		(17,256	)		(8,035	)		(14,714	)		(317	)		(21,058	)		(122,506	)		(35,444	)		56,517			(421,367	)
Other income and expenses		(9,796	)		(3,359	)		33			18			-			(852	)		7,995			22,063			(966	)		15,136
Loss from the sale of investments		-			-			-			-			-			-			(2,139	)		-			2,139			-
Profit before interests
and taxes		267,010			103,840			68,695			27,413			1,990			40,503			25,693			(20,955	)		31,149			545,338
Financial expenses		(69,046	)		(11,564	)		(10,822	)		(5,245	)		(55	)		(14,807	)		(27,393	)		(1,566	)		37,682			(102,816	)
Financial income		6,623			120			1,320			727			16			93			1,821			59,734			(58,992	)		11,462
Share of the profit or loss
in associates and joint ventures under the equity
method of accounting		48,242			29			-			-			-			12,178			591			270,045			(277,640	)		53,445
Profit before income tax		252,829			92,425			59,193			22,895			1,951			37,967			712			307,258			(267,801	)		507,429
Income tax		(59,252	)		(29,768	)		(16,158	)		(10,842	)		(588	)		(11,452	)		(5,788	)		(12,582	)		234			(146,196	)
Net profit for the period		193,577			62,657			43,035			12,053			1,363			26,515			(5,076	)		294,676			(267,567	)		361,233
Profit attributable to:
Owners of the Company		164,095			59,010			32,774			9,040			1,363			9,527			(5,339	)		294,948			(265,674	)		299,744
Non-controlling interest		29,482			3,647			10,261			3,013			-			16,988			263			(272	)		(1,893	)		61,489
Net profit for the period		193,577			62,657			43,035			12,053			1,363			26,515			(5,076	)		294,676			(267,567	)		361,233

- 51 -

(All amounts are expressed in thousands of S/. unless otherwise stated)

Operating segments cash flows

Segment Reporting

	Engineering			Infrastructure																		Parent
	and construction			Energy			Toll roads			Mass transit			Water treatment			Real estate			Technical services			Company operations			Eliminations			Consolidated
Year 2012 -
Profit before income tax		276,418			91,814			41,878			(14,608	)		3,239			65,282			67,092			297,936			(308,225	)		520,826
Adjustments to profit
Depreciation and amortization		131,133			42,821			24,494			454			104			2,922			39,447			2,075			1,053			244,503
Accounts receivable		(62,061	)		(6,356	)		1,941			(5,464	)		(37,419	)		(18,902	)		5,868			(22	)		72,518			(49,897	)
Inventories		(61,468	)		(908	)		-			(6,251	)		-			(154,804	)		14,197			851			10,581			(197,802	)
Accounts payable		159,597			(26,566	)		(667	)		9,866			(14	)		58,190			(5,976	)		782			29,723			224,935
Other variations		126,885			5,047			51,143			47,270			31,836			52,416			(33,573	)		(475,969	)		(4,891	)		(199,836	)
Cash flows from operating activities		570,504			105,852			118,789			31,267			(2,254	)		5,104			87,055			(174,347	)		(199,241	)		542,729
Sale of assets		(60,205	)		392			(17	)		(458	)		-			(1,032	)		(961	)		9,637			76,115			23,471
Dividends received		4,119			-			-			-			-			-			-			252,288			(254,350	)		2,057
Purchase of assets		(393,856	)		(63,113	)		101			(3,940	)		-			(3,126	)		(30,582	)		(22,229	)		91,230			(425,515	)
Loans to subsidiaries, net		-			-			-			-			-			-			-			(144,160	)		144,160			0
Cash flows from investing activities		(449,942	)		(62,721	)		84			(4,398	)		-			(4,158	)		(31,543	)		95,536			57,155			(399,987	)
Debt repayment		17,465			38,991			(23,108	)		-			8,271			34,728			(2,934	)		153,845			(107,257	)		120,001
Dividend distribution		(100,820	)		(87,429	)		(20,750	)		-			-			(10,571	)		(29,956	)		(124,235	)		249,526			(124,235	)
Cash received from non-controlling shareholders		-			-			-			-			-			-			-			26,096			5,750			31,846
Acquisiton of interest in non-controlling subsidiary		-			-			-			-			-			-			-			(4,393	)		-			(4,393	)
Sale of interest in non-controlling subsidiary																							1,193						1,193
Other payments		(14,354	)		(3,128	)		(7,849	)		(262	)		(6,557	)		(1,353	)		(10,736	)		4,619			(5,607	)		(45,227	)
Cash flows from financing activities		(97,709	)		(51,566	)		(51,707	)		(262	)		1,714			22,804			(43,626	)		57,125			142,412			(20,815	)
Cash increase (decrease)		22,853			(8,435	)		67,166			26,607			(540	)		23,750			11,886			(21,686	)		326			121,927
Cash at the beginning of the year		400,479			39,085			23,478			1,705			608			49,254			73,401			70,177			-			658,187
Cash at the end of the year		423,332			30,650			90,644			28,312			68			73,004			85,287			48,491			326			780,114

- 52 -

(All amounts are expressed in thousands of S/. Uless otherwise stated)

Operating segments cash flows

Segment Reporting

	Engineering			Infrastructure																		Parent
	and									Mass			Water			Real			Technical			Company
	construction			Energy			Toll roads			transit			treatment			estate			services			operations			Eliminations			Consolidated
Year 2013 -
Profit before income tax		367,715			65,120			55,410			(13,574	)		2,935			80,467			56,575			319,959			(340,140	)		594,467
Adjustments to profit
Depreciation and amortization		151,885			53,432			10,047			632			52			3,610			37,219			1,986			1,003			259,866
Accounts receivable		(388,772	)		(10,343	)		(4,316	)		(322,993	)		(20,131	)		1,949			(137,016	)		(41,017	)		70,979			(851,660	)
Inventories		64,957			546			-			(5,508	)		-			(58,500	)		(4,667	)		-			(17,899	)		(21,071	)
Accounts payable		34,397			753			(7,250	)		337,027			16,444			(50,784	)		32,424			5,184			(471,415	)		(103,220	)
Other variations		(149,752	)		(24,371	)		(26,279	)		4,735			(622	)		(23,192	)		(29,371	)		(322,254	)		325,046			(246,060	)
Cash flows from operating activities		80,430			85,137			27,612			319			(1,322	)		(46,450	)		(44,836	)		(36,142	)		(432,426	)		(367,678	)
Sale of assets		15,134			86			-			-			-			317			316			6,799			9			22,661
Dividends received		12,064			1,708			-			-			-			-			-			119,791			(128,875	)		4,688
Purchase of assets		(171,126	)		(70,835	)		(555	)		(5,313	)		-			(5,926	)		(30,880	)		(134,946	)		52,237			(367,344	)
Loans to subsidiaries, net		-			-			-			-			-			-			-			(446,387	)		446,387			-
Cash flows from investing activities		(143,928	)		(69,041	)		(555	)		(5,313	)		-			(5,609	)		(30,564	)		(454,743	)		369,758			(339,995	)
Debt repayment		(371,997	)		(29,430	)		(10,662	)		(34,400	)		(43,567	)		(135,472	)		(285,472	)		(537,484	)		9,112			(1,439,372	)
Dividend distribution		(73,936	)		(29,163	)		(25,240	)		-			-			(32,581	)		(4,728	)		(86,986	)		113,854			(138,780	)
Contribution of non-controlling shareholders		-			-			-			-			-			34,774			-			-			-			34,774
Acquisiton of interest in non-controlling subsidiary		(9,104	)		-			-			-			-			-			-			(54,764	)		-			(63,868	)
Issue of common shares,
proceeds from shares issuance, net of related expenses		-			-			-			-			-			-			-			1,147,418			-			1,147,418
Other payments		362,449			32,881			(1,014	)		34,400			45,300			155,360			327,182			437,332			(41,926	)		1,351,964
Loans received from subsidiaries, net		-			-			-			-			-			-			-			19,107			(19,107	)		-
Cash flows from financing activities		(92,588	)		(25,712	)		(36,916	)		-			1,733			22,081			36,982			924,623			61,933			892,136
Cash increase (decrease)		(156,086	)		(9,616	)		(9,859	)		(4,994	)		411			(29,978	)		(38,418	)		433,738			(735	)		184,463
Cash decrease in deconsolidation		(1,458	)		(3,270	)		-			-			(34	)		-			(400	)		-			-			(5,162	)
Cash at the beginning of the year		423,332			30,650			90,644			28,312			68			73,004			85,287			48,082			735			780,114
Cash at the end of the year		265,788			17,764			80,785			23,318			445			43,026			46,469			481,820			-			959,415

- 53 -

(All amounts are expressed in thousands of S/. unless otherwise stated)

Operating segments cash flows

Segment Reporting
	Engineering			Infrastructure																		Parent
	and									Mass			Water			Real			Technical			Company
	construction			Energy			Toll roads			transit			treatment			estate			services			operations			Eliminations			Consolidated
Year 2014 -
Profit before income tax		252,829			92,425			59,193			22,895			1,951			37,967			712			307,258			(267,801	)		507,429
Adjustments to profit
Depreciation and amortization		144,235			58,144			11,419			907			52			3,821			37,185			3,222			1,054			260,039
Accounts receivable		(484,177	)		(16,538	)		(6,651	)		(26,838	)		24,192			(37,035	)		8,962			(73,546	)		28,905			(578,125	)
Inventories		(12,127	)		(180	)		-			(1,982	)		-			(30,861	)		3,972			-			(10,311	)		(51,489	)
Accounts payable		385,388			10,656			11,353			32,175			(11,129	)		54,846			95,353			14,036			(472,016	)		120,662
Other variations		(128,619	)		(21,640	)		(98,536	)		(6,261	)		(1,004	)		(15,762	)		(34,997	)		(270,528	)		278,335			(298,994	)
Cash flows from operating activities		157,529			122,867			(23,222	)		20,896			14,062			12,976			111,187			(19,558	)		(437,215	)		(40,478	)
Sale of assets		40,058			1,259			31			-			-			-			18,618			-			(16,998	)		42,968
Dividends received		38,810			-			(17,056	)		-			-			3,375			-			164,929			(153,340	)		36,718
Purchase of assets		(289,024	)		(101,854	)		(16,314	)		(8,265	)		-			(42,819	)		(71,816	)		(297,701	)		202,150			(625,643	)
Loans to subsidiaries, net		-			-			-			-			-			-			-			(19,080	)		19,080			-
Cash flows from investing activities		(210,156	)		(100,595	)		(33,339	)		(8,265	)		-			(39,444	)		(53,198	)		(151,852	)		50,892			(545,957	)
Debt repayment		(1,480,390	)		(33,879	)		(54,733	)		(604,894	)		(18,400	)		(39,046	)		(253,978	)		(842	)		386,329			(2,099,833	)
Dividend distribution		(123,427	)		(35,848	)		(30,755	)		-			-			(28,022	)		(585	)		(112,351	)		154,871			(176,117	)
Contribution of non-controlling shareholders		-			-			-			-			-			48,793			-			-			(1,417	)		47,376
Acquisiton of interest in non-controlling subsidiary		(72,821	)		-			-			-			-			-			-			-			(103,003	)		(175,824	)
Sale of interest in non-controlling subsidiary		1,627			-			-			-			-			-			-			-			(1,627	)		-
Other payments		1,749,831			83,776			114,576			620,467			12,300			55,985			286,199			(1,438	)		(69,425	)		2,852,271
Loans reveiced from subsidiaries, net		-			-			-			-			-			-			-			(19,017	)		19,017			-
Cash flows from financing activities		74,820			14,049			29,088			15,573			(6,100	)		37,710			31,636			(133,648	)		384,745			447,873
Cash increase (decrease)		22,193			36,321			(27,473	)		28,204			7,962			11,242			89,625			(305,058	)		(1,578	)		(138,562	)
Cash decrease in deconsolidation		(2,614	)		-			-			-			-			-			(1,415	)		-			1,578			(2,451	)
Cash at the beginning of the year		265,788			17,764			80,785			23,318			445			43,026			46,469			481,820			-			959,415
Cash at the end of the year		285,367			54,085			53,312			51,522			8,407			54,268			134,679			176,762			-			818,402

- 54 -

(All amounts are expressed in thousands of S/. unless otherwise stated)

Segments by geographical area
	2012		2013		2014
Revenue:
- Peru		4,326,471		5,072,251		5,611,844
- Chile		660,152		631,883		1,011,822
- Colombia		114,757		112,573		125,929
- Guyana		-		-		49,525
- Brazil		92,899		74,399		68,045
- Bolivia		-		-		1,849
- Dominican Republic		37,606		-		-
- Panama		-		76,394		139,666
		5,231,885		5,967,500		7,008,680
Non-current assets:
- Peru				1,895,217		2,461,288
- Chile				499,580		359,686
- Colombia				8,987		259,915
- Guyana				-		2,974
- Brazil				8,717		8,398
- Bolivia				-		1,890
- Panama				124		-
				2,412,625		3,094,151
Liabilities:
- Peru				1,999,143		2,220,982
- Chile				431,119		521,299
- Colombia				23,039		227,511
- Guyana				-		11,697
- Brazil				9,435		8,073
- Bolivia				-		9,741
- Dominican Republic				34		31
- Panama				-		49,061
Total allocated				2,462,770		3,048,395
Unallocated
- Borrowings (excluding finance leases)				514,228		1,419,428
- Derivative financial instruments				3,911		2,999
- Deferred income tax liability				138,554		79,155
Total liabilities				3,119,463		4,549,977

Comprises the Group’s financial debt, excluding finance leases and derivative finance liabilities; liabilities from the segment that should be reported to the Executive Committee were not taken into consideration because they are managed by the Group’s Corporate Finance department.

- 55 -

(All amounts are expressed in thousands of S/. Uless otherwise stated)

7              FINANCIAL INSTRUMENTS

7.1  Financial instruments by category -

The classification of financial assets and liabilities per category is as follows:

	December 31,
	2013		2014
Assets according to the statement of financial position
Loans and accounts receivable:
- Cash and cash equivalents		959,415		818,402
- Trade and other accounts receivable
not including advances to suppliers		669,134		1,225,690
- Unbilled work in progress		971,743		1,188,761
- Financial assets related to concession agreements (1)		620,943		702,531
- Accounts receivable from related parties		87,328		99,061
		3,308,563		4,034,445
Available-for-sale financial assets (Note 9)		88,333		93,144
Financial asset at fair value thorough profit and loss		-		7,105
(1) Financial assets related to concession agreements are recorded in the statement of financial position within the line items of other short-term accounts receivable and other long-term accounts receivable.

	December 31,
	2013		2014
Liabilities according to the statement of financial position
Other financial liabilities at amortized cost
- Borrowings		514,228		1,419,428
- Finance leases		281,594		332,151
- Trade and other accounts payable
(excluding non-financial liabilities)		1,242,235		1,566,004
- Accounts payable to related parties		25,585		83,027
- Derivative financial instruments (a)		348		-
		2,063,990		3,400,610
Hedging derivatives:
- Derivative financial instruments (b)		3,911		2,999

(a)  In seeking to mitigate the exposure resulting from the expenditures incurred in Euros to a foreign supplier for the purchase of the infrastructure required under the concession agreement signed between a subsidiary, GyM Ferrovías S.A., and the Peruvian Government, this subsidiary entered into a cross currency swap contract by which the purchase of Euros at a future date is secured at a fixed exchange rate up-to January 2014. This contract was accounted for as a fair value hedge by the Group and it recognized the fair value of the financial instrument (cross currency swap) in profit or loss and, as a counterpart, it recognized the fair value of the firm commitment associated with the contract with the foreign supplier. At December 31, 2013, the change in fair value amounted to S/.14 million which is presented in “Financial income and expenses" (Note 26). The cross currency swap matured in January 2014.

(b)  In seeking to mitigate the exposure resulting from the borrowings obtained from Citibank in variable rate (see Note 18), GMP S.A. entered into a cross interest rate swap contract by which it established a fixed rate. This contract is accounted for as a cash flow hedge by the Group and it recognizes the changes in fair value of the financial instrument in other comprehensive income. At December 31, 2014, the changes in fair value amounted to S/.568, net of deferred income tax of S/.221  (S/.2,433 plus tax effect of S/.731 at December 31, 2013).  The fluctuation observed in deferred income tax in 2013 includes the effect of the revision of the tax effect that was not calculated for 2012 which amounts to S/.569.

- 56 -

(All amounts are expressed in thousands of S/. Uless otherwise stated)

7.2  Credit quality of financial assets -

The credit quality of financial assets that are neither past due nor impaired can be assessed by reference to external risk ratings (if available) or to historical information about counterparty default rates.

The credit quality of financial assets is presented as follows:

	December 31,
	2013		2014
Cash and cash equivalents (*)
Banco de Crédito del Perú (A+)		558,540		453,942
Banco Continental (A+)		254,439		76,408
Banco Bogotá (A)		-		67,959
Banco Interbank (A)		9,360		64,962
Banco de la Nación (A)		45,782		56,028
Banco Santander - Chile (A)		7,544		40,577
Banco Scotiabank (A+)		2,401		11,611
Banco Continental Chile (A)		-		7,396
ITAU - Chile (A)		-		7,391
Banco de Crédito e Inversiones - Chile (A)		25,568		10,597
Banco de Chile (A)		-		5,328
Banco Interamericano de Finanzas (A)		652		1,855
Citibank (A)		850		677
Banco Santander - Perú (A)		-		183
Banco GNB Peru (A)		42,102		115
Other lesser amounts		10,771		4,962
		958,009		809,991

The ratings in the above table “A and A+” represent high quality credit ratings. For banks located in Peru, the ratings were derived from risk rating agencies authorized by the Peruvian banking and insurance regulator (“Superintendencia de Banca, Seguros y AFP – SBS”). For banks located in Chile, the ratings were derived from risk rating agencies authorized by the Chilean stock and insurance regulator (“Superintendencia de Valores y Seguros – SVS”).

(*)  The difference between the balances shown above with the balances shown in the statement of financial position corresponds to cash on hand (Note 8).

The credit quality of customers is assessed in three categories (internal classification):

A:  new customers/related parties (less than 6 months),

B:  existing customers/related parties (with more than 6 months of trade relationship) with no previous default history; and

C:  existing customers/related parties (with more than 6 months of trade relationship) with previous default history.

- 57 -

(All amounts are expressed in thousands of S/. unless otherwise stated)

	2013		2014
	S/.000		S/.000
Trade accounts receivable (Note 10 and Note 11)
Counterparties with no external risk rating
A		44,474		51,844
B		2,040,541		2,700,295
C		517		125,787
		2,085,532		2,877,926
Receivable to related parties (Note 12)
B		87,328		99,061

The total number of accounts in compliance with contract terms and conditions, none of them have been re-negotiated.

With respect to available-for-sale financial assets, the counterparty held an external credit rating of AAA at December 31, 2013 and 2014.

8              CASH AND CASH EQUIVALENTS

This account comprises:
	December 31,
	2013		2014
Cash on hand		1,406		8,411
Checking accounts		548,630		530,246
Time deposits (a)		407,763		259,035
In-transit remittances		1,616		1,986
Mutual funds (b)		-		18,724
		959,415		818,402

(a)  At December 31, 2014, this balance mostly comprises the Company’s short-term deposits for S/.168 million; GyM S.A. for S/.29 million, GyM Ferrovías S.A. for S/. 29 million and ViVa GyM S.A. for S/.18 million. Interest rates range between 0.10% and 3.97% (mainly comprises GyM’s short-term bank deposits for S/.127 maintained in  Banco de Credito del Peru - Chile for S/.58 million, local banks for S/.69 million and  the Company’s short-term deposits  for S/.269 million maintained in  Banco de Credito at December 31, 2013).

(b)  This balance comprises mutual funds for S/.7.4 million, S/.7.4 million and S/.3.9 million which are maintained by the subsidiary VyV – DSD S.A. in Itaú, BBVA Banco Continental and Santander banks, respectively, at rates ranging from 0.29% to 0.32%.

9              AVAILABLE-FOR-SALE FINANCIAL ASSETS

This account comprises the investment held by the Company, directly and indirectly, in Transportadora de Gas del Perú S.A. (TGP), a Peruvian entity engaged in providing gas transportation services.

In December 2013, the Group acquired from one of the TGP’s shareholders, Pluspetrol Resources Corporation (hereinafter Pluspetrol), an additional 1.04% interest in TGP paying a consideration of US$20 million (equivalent to S/.56.1 million) obtaining a total interest of 1.64% at December 31, 2013.  At December 31, 2013, the fair value of the Group´s interest in TGP equals S/.88.3 million, based on the price paid in one recent arm's length transaction which occurred in December 2013 among knowledgeable willing parties. The fluctuation in the fair value of this investment in 2013 amounts to S/.19.1 million, net of its income tax effect amounting to for S/.8.2 million. The net amount has been recognized in the statement of other comprehensive income.

- 58 -

(All amounts are expressed in thousands of S/. unless otherwise stated)

Together with the acquisition of the 1.04% interest, the Company acquired from Pluspetrol on behalf of the Canada Pension Plan Investment Board (CPPIB) an additional indirect interest of 11.34% in TGP. The investment for US$217 million was funded entirely by CPPIB. The risk and rewards of the entire investment are assumed by CPPIB.

Given the features of the transaction, it has been treated as an off-balance-sheet transaction because, in substance, the Company is acting as an agent to CPPIB. Therefore, the Company did not recognized either the investment in TGP nor any obligation to CPPIB.

This acquisition is part of an investment agreement entered into with CPPIB, whereby both parties commit themselves to initiate and develop projects in the oil and gas industry.

On December 27, 2013 the Company announced its intention to transfer the previously acquired interest of 11.34% in TGP to CPPIB (10.43%) and to Corporación Financiera de Inversiones – CFI (0.91%), if none of the existing TGP shareholders exercise their first option of share acquisition rights.

On February 27, 2014, the Company transferred the shares to the above indicated entities, retaining in TGP an interest equivalent to 1.64%, for this transaction the Group obtained a commission fee of S/.7.5 million which is included in ‘other income and expenses’.

At December 31, 2014, the fair value of the Group´s interest in TGP equals S/.93.14 million the base on the discounted cash flow method. The information used in the calculation is as follows:

-   Discounted cash flows from operating activities of TGP net of cash flows from investment activities (CAPEX).

-   Cash flows were estimated for a 30 year term.

-   The discount rate used is 8% corresponding to the Company’s WACC.

-   The interest of the Company in TGP is 1.64% as of December 31, 2014

The fluctuation in the fair value of this investment in 2014 amounts to S/.3.56 million, net of its income tax effect amounting to  S/.1.25 million, plus the adjustment for changes in rate of income tax amounting to S/.1.09 million (see note 28-b), which has been recognized in the statement of other comprehensive income.

10            TRADE ACCOUNTS RECEIVABLE

This account comprises:

	December 31,
	2013			2014
Invoices receivable		1,058,078			1,414,185
Collection rights from concession agreements		58,528			277,547
		1,116,606			1,691,732
Impaired accounts		(2,817	)		(2,567	)
		1,113,789			1,689,165
Less: non-current portion
Invoices receivable		(545,736	)		(529,201	)
Collection rights from concession agreements		(46,181	)		(50,755	)
Total non-current		(591,917	)		(579,956	)
Total current		521,872			1,109,209

Invoices receivable are related to work progress approved by clients.

The fair value of current receivables is similar to their carrying amount since their average collection turnover is less than 60 days. These current receivables do not bear interest and have no specific guarantees.

- 59 -

(All amounts are expressed in thousands of S/. Uless otherwise stated)

The non-current portion of the trade accounts receivable is related to GyM Ferrovías S.A.; the balance at December 31, 2013 and 2014 is the account receivable from the expenses incurred in the electric train Project (acquistion of the Alstrom trains) and the construction of the Patio – Taller.

Collection rights as of December 31, 2014 comprises GyM Ferrovías S.A., CAM Holding S.p.A,GMD S.A., GMI S.A., Concar S.A., Viva GyM S.A. and Concesion Canchaque S.A.C. for S/.116 million, S/.51 million, S/.31 million, S/.37 million, S/.35 million, S/.6 million and S/.2 million respectively (GyM Ferrovías S.A., Survial S.A. and Canchaque for S/.46,181, S/.7,617 and S/.4,730 respectively in 2013).

The collection rights that arise from GyM Ferrovías S.A., a concession signed with the Peruvian Government comprising Line 1 of the Lima Metro (train line), by which this entity has to acquire, on the Government’s behalf, certain infrastructure needed for the implementation of the transport system that will be operated by the GyM Ferrovías S.A once completed (Note 5-b-iv). This account will be collected through the cash flows determined at the inception of the concession under the "price per kilometer traveled" method (PKT). For this purpose, the subsidiary has applied certain criteria to determine the amount of the interest to be accrued on the outstanding balances and the beginning of the collection of the amounts pending. These balances bear interest at a 7.7% rate and their collection began in 2014 jointly with the beginning of operation.

Aging of trade accounts receivable is as follows:

	December 31,
	2013		2014
Current		937,932		1,402,635
Past due up to 30 days		117,985		174,633
Past due over 30 days		60,689		114,464
		1,116,606		1,691,732

As of December 31, 2014, trade accounts receivables totaling S/.289.1 million (S/.178.7 million in 2013) are past due but not impaired. The related customers do not have a historical record of default.

The maximum exposure to credit risk at the reporting date is the carrying amount of the accounts receivable and of unbilled work in progress (note 11).

The movement of the account receivables reserve is as follows:

	2013		2014
Initial balance		2,707		2,817
Additions		110		71
Write-offs		-		(321	)
Final balance		2,817		2,567

11            UNBILLED WORK IN PROGRESS

This account comprises:

	December 31,
	2013		2014
Unbilled rights receivable		748,376		957,916
Deferred costs of work in progress		223,367		230,845
		971,743		1,188,761
Less: Non - current portion
Deferred costs of work in progress		-		35,971
Total current		971,743		1,152,790

- 60 -

(All amounts are expressed in thousands of S/. unless otherwise stated)

Rights receivable correspond to the unbilled rights for services rendered by the Engineering and Construction Segment. Each month, under the percentage of completion method, the Company estimates the work completetd to date. Based on its monthly estimates, the Company recognizes the corresponding revenue. Until such revenue is billed, it is recorded in the account, rights receivable.

At December 31, 2014 and 2013, rights receivable are presented net of advances received for S/.334 million and S/.273 million, respectively the terms of which vary based on each contract.  These advances  substantially correspond to those received by subsidiary GyM S.A.

At December 31, 2014, advances amounting to S/.305 million, correspond to a scheme by mean of which certain customers agree to grant revolving monthly advances which are settled with the amount billed the month following the reception of the advance. Other advances received from customers are recognized netting the corresponding receivables and are offset following the pattern of actual services provided. In these cases, if the contract is terminated, the amount received in advance is offset against any receivable balance determined by the work progress at termination date.

Deferred costs of work in progress include all those expenditures incurred by the Group that relate to future activities to be performed under current construction contracts.  At December 31, 2014, the balance mainly comprises costs incurred in the following projects: i) Concentrating Plant Cerro Verde, ii) Las Bambas, iii) Machu Picchu, iv) Servicios Cerro del Águila and v) Chile Spa for S/.53.8 million, S/.32.9 million, S/.31.4 million, S/.22.3 million and S/.12.7 million, respectively.

Other smaller projects for which certain cost amounting to S/.52 million have been deferred are: Red Gas Contugas, Preliminary work Aurora Gold, Pad I FASE III Cerro Verde.

The non-current portion mainly comprises the expenditures incurred by Concesionaria Vía Expresa Sur S.A. for S/.10 million that related to future activities to be performed under the construction contract(implementation of the 4km extension of Vía Expresa Sur connecting the district of “San Juan de Miraflores”). This Project is expected to be completed in August 2018.

Additionally the non-current portion comprises the expenditures incurred by the subsidiary GMP S.A. for for S/.25.39 million (work in progress related to Transportadora de Gas Natural Comprimido Andino Concession). This Concession is in a pre-operative stage.

12TRANSACTIONS WITH RELATED PARTIES

a)      Transactions with related parties -

Major transactions between the Company and its related parties are summarized as follows:

	2012		2013		2014
Revenue from sale of goods and services:
- Associates		49,252		4,915		6,040
- Joint operations		51,385		67,601		43,897
		100,637		72,516		49,937
Expenses from purchase of goods and services:
- Associates		5,818		5		42
- Joint operations		8,030		6,068		715
		13,848		6,073		757

- 61 -

(All amounts are expressed in thousands of S/. Uless otherwise stated)

Inter-company transactions are based on the price lists in force and terms that would be available to third parties.

b)  Key management compensation -

Key management includes directors (executives and non-executives), members of the Executive Committee and Internal Audit Management. The compensation paid or payable to key management in 2014 amounted to S/.100.4 million (S/.93.5 million as of December 31, 2013).

c)  Balances at the end of the year resulting from the sale/purchase of goods/services -

	December 31,
	2013				2014
	Receivable		Payable		Receivable		Payable
Joint operations:
Consorcio GyM Conciviles		33,405		-		48,581		-
Consorcio Peruano de Conservación		15,080		-		15,365
Consorcio Tren Electrico		2,499		-		7,380		-
Consorcio Terminales		4,294		-		6,837		-
Consorcio Rio Urubamba		2,798		-		5,107		3,796
Consorcio Sistemas SEC		-		-		4,349		-
Consorcio La Gloria		3,696		3,398		3,805		3,423
Consorcio Constructor Alto Cayma		566		4,881		1,424		-
Consorcio JV Panamá		1,323		-		1,043		-
Consorcio Lima		312		-		877		-
Consorcio Norte Pachacutec		556		952		531		1,068
Consorcio Huacho Pativilca		-		-		369		4,555
Consorcio Rios Pallca		3,903		-		187		282
Consorcio Constructor Chavimochic		-		-		141		2,896
Consorcio Alto Cayma		5,557		666		121		700
Consorcio Construcciones y Montajes		-		-		115		1,198
Consorcio Vial Quinua		37		1,315		116		-
Bechtel Vial y Vives Servicios Complementarios Ltda.		-				96		4,648
Consorcio Atocongo		712		-		-		915
Consorcio Brocal Pasco		1,913		41		-		-
Consorcio Ingenieria y Construcción Bechtel		-		3,924		-		5,140
Consorcio Rio Mantaro		3,822		-		-		-
Consorcio Vial Ipacal		283				-		-
Consorcio Vial Sullana		470				-		-
Consorcio Vial Sur		737		-		-		-
Consorcio EIM ISA		-				-		2,955
Ingeniería y Construcción Sigdo Koppers-Vial		-		-		-		35,302
Consorcio DSD Echevarría Izquierdo		3,478		-		-		-
Other		1,887		1,050		2,617		2,056
		87,328		16,227		99,061		68,934
Other related parties:
Ferrovias Argentina		-		8,771		-		14,093
Besco		-		587		-		-
		-		9,358		-		14,093
		87,328		25,585		99,061		83,027

Receivables and payables are of current maturity and do not have specific guarantees.

Accounts receivable from related parties mainly have maturity periods of 60 days and arise from sale of goods and services. These balances are non-interest-bearing due to their short-term maturities and are not impaired.

Accounts payable to related parties mainly have maturity periods of 60 days and arise from engineering, construction, maintenance and other sesvices received. These balances are not interest bearing due to their short-term maturities.

- 62 -

(All amounts are expressed in thousands of S/. unless otherwise stated)

Transactions with non-controlling interest are disclosed in Note 34.

13            OTHER ACCOUNTS RECEIVABLE

This account comprises:

	December 31,
	2013			2014
Advances to suppliers (a)		183,464			162,544
Guarantees deposits (b)		56,851			103,086
Income tax on-account payment (c)		95,488			96,026
Fiscal credit (d)		109,050			91,442
Accounts receivable from sale of investments		33,601			23,822
Temporary taxes on net assets		10,901			19,223
Claims to the tax administration (tax paid in advance)		7,913			14,572
Claims to third-parties		15,799			13,155
Account receivable from personnel		14,633			11,235
VyV Collahuasi - Guarantee deposit		10,745			9,938
Account receivable from Morelco´s non -controllng shareholders		-			7,768
Association agreement - Obrainsa (Red vial 1)		2,284			7,416
Overseas Bechtel Incorp. Suc.del Peru		5,107			4,287
Legal credits CAM Brasil		3,430			4,170
Loans provided to third parties		-			4,136
Consorcio Fábrica de Software		-			3,925
Petróleos del Perú S.A.- Petroperú S.A. (e)		18,087			2,518
Municipalidad de la Brea - Talara		-			2,298
Indemnification asset (note 31-d)		6,006			1,344
Compensation fund (f)		812			1,154
Loans receivable from employees		584			651
Right to recover taxes (Brasil and Colombia)		2,259			-
Others (g)		14,355			39,497
		591,369			624,207
Less non-current portion:
Fiscal credit		(34,071	)		(35,608	)
Legal credits CAM Brasil		(3,430	)		(4,170	)
Transportadora de Gas Natural Comprimido Andino		-			(4,449	)
Others		(650	)		(326	)
		(38,151	)		( 44,553	)
Current portion		553,218			579,654

Other non-current accounts receivable have maturities between 2 and 5 years. Company’s Management estimates that the fiscal credit will be applied against the credit balance of the corresponding tax over the medium term.

The following contains a description of major accounts receivable:

(a)   Advances to suppliers -

Mainly corresponds to advances amounting approximately to S/.146.5 million (S/.163.1 million in 2013) granted by the subsidiary GyM S.A. to import the equipment of the projects, detailed as follows:

- 63 -

(All amounts are expressed in thousands of S/. unless otherwise stated)

	December 31,
	2013		2014
Consorcio Río Mantaro		54,311		81,153
Panorama Plaza Negocios		1,312		17,270
EPC Planta Minera Inmaculada		7,207		9,387
Morelco Projects		-		5,681
GyM Chile SPA		1,888		4,042
ABB Inc.		-		3,487
Stracon GyM		1,655		2,771
Harvin Electric		-		2,007
Centro Empresarial Leuro		-		1,651
Consorcio constructor Chavimochic		-		1,368
ABB AB Importaciones		-		1,353
Consorcio Peruano de Conservación		4,708		1,350
Edificio Real 8		3,025		1,219
Nuevo Campus Universitario UTEC		-		1,104
GyM Operaciones Internacionales		-		1,064
Central Hidroeléctrica Machu Picchu		20,998		717
Consorcio GyM Conciviles		2,144		345
Consorcio Rio Urubamba		704		312
Consorcio Tren Eléctrico		64,567		-
Consorcios - Cam		2,800		-
Mantenimiento Periodico/Red Vial 1		2,439		-
Real State projects		2,379		-
Other smaller projects		13,327		26,263
		183,464		162,544

(b)  Guarantee deposits -

Guarantee deposits are the funds retained by customers for work contracts assumed basically by subsidiary GyM S.A. These deposits are retained by the customers in order to have a guarantee that the subsidiary will perform is obligations under the contracts. The amounts retained will be recoup once the work has been completed. Such deposits mainly correspond to the following projects:

- 64 -

(All amounts are expressed in thousands of S/. unless otherwise stated)

	December 31,
	2013		2014
Project:
Empresa Colombiana de Petróleos S.A.		-		38,100
Minera Antucoya		3,814		12,279
Proyecto Machupicchu		8,624		11,495
Construcción Planta de Cal Pachachaca		-		6,299
Minera los Pelambres		-		5,168
Nuevo Campus Universitario UTEC		-		3,735
Centro Empresarial Leuro		554		3,684
Panorama Plaza Negocios		-		3,104
Metapetroleum Corp		-		2,966
Garantías - arriendos CAM Chile		573		2,222
La Zanja		1,348		1,818
Maersk Container Industry San Antonio SPA		-		1,562
Colombiana S.A.		-		1,072
Planta Minera Inmaculada		881		1,069
Trabajos Electromecánicos llenado de agua Quellaveco		-		523
CC Interbank Valle Hermoso		-		488
Edificio Real 8		1,417		392
Consorcio HV		-		331
Conga Reticulation Camp		287		307
Proyecto Chancadora Caserones		5,473		151
Refineria Cartagena S.A.		-		200
Mansarovar Energy Colombia Ltda.		-		192
Agrocascadas SA		-		131
Stracon GyM		18,834		-
Pozas almacenamiento de agua		7,143		-
Pampa Verde		3,601		-
Garantías - Arriendos CAM Perú		605		-
Campamentos Congas		415		-
Others		3,282		5,798
		56,851		103,086

(c)   Income tax on-account payment –

Mainly comprises income tax payments in advance from the subsidiaries GyM S.A., the Holding, CAM Holding S.p.A., Concar S.A. and Viva GyM S.A. for S/ 41 million, S/. 30 million, S/.11 million, S/.5 million and S/.4 million respectively (S/.60 million, S/.3 million, S/.11 million, S/.6 million and S/.6 million respectively in 2013).

(d)  Fiscal credit -

Mainly corresponds to the subsidiaries Survial S.A., GyM  S.A. and GyM Ferrovias S.A. for S/.10 million, S/.28 million, S/.25 million respectively, (Survial S.A., GyM S.A., GyM Ferrovías S.A., Viva GyM S.A. and Concar S.A. for S/.17 million, S/.25 million and S/.27 million, S/.12 million and S/.9 million, respectively in 2013). Management estimates that this fiscal credit related to value added tax payments will be recovered during the ordinary course of the future operations of these subsidiaries.

(e)  Petróleos del Perú S.A. - Petroperú S.A. -

These balances are comprised of additional investments established in the operating agreement and completed by Consorcio Terminales (a joint venture of the subsidiary GMP S.A.) for the modernization and extension of 9 terminals subject to the agreement. These investments which are presently works in progress will be transferred to Petróleos del Perú S.A. - Petroperú S.A., once a technical audit has been completed and after obtaining the written approval and accreditation of said institution; the value thus determined will be considered for billing. During the fiscal year 2013, the consortium incurred additional investments of US$6.1 million.

- 65 -

(All amounts are expressed in thousands of S/. unless otherwise stated)

This agreement consists in the operation of the oil terminals of Petroleos del Peru to store and distribute the oil to the different customers of this State entity.

The effective period of the agreements with Consorcio Terminales ended on August 1, 2014; in this context, receivables from Petroperú S.A. were fully settled.  The outstanding balance of S/.2.5 million is related to current operations in the Southern terminals which contract was renewed to July 2015.

(f)  Compensation fund -

The balance receivable from the compensation fund corresponds to subsidiary GMP S.A. and relates to the Fund created by the Government to prevent the high volatility of the price of crude oil and its by-products from affecting the end users. In 2014 GMP S.A. received payments of S/.0.3 million (S/.1.7 million in 2013 and S/.9.3 million in 2012) and applications of contributions amounting to S/.1.6 million in 2013 (3.7 million in 2012).

(g)  Others -

Other receivables do not present past due amounts or impairment and the non-current balances are supported by contractual agreements with third-parties.

The fair value of other short - term accounts receivable is similar to their carrying amount due to the fact of short term maturity. The non – current portion is not significant to the financial statements for any period presented.

The maximum exposure to credit risk as of the date of the report is the carrying amount of each class of other accounts receivable mentioned. The Group does not request collaterals as guarantee.

14            INVENTORIES

This account comprises:

	December 31,
	2013			2014
Land		411,822			494,024
Work in progress - real estate		104,908			84,683
Construction materials		92,299			125,665
Materials and supplies		92,909			84,869
Finished properties		71,304			51,767
		773,242			841,008
Impairment of inventories		(10,445	)		(7,438	)
		762,797			833,570

- 66 -

(All amounts are expressed in thousands of S/. unless otherwise stated)

At December 31, 2013 and 2014, land comprises properties for the development of the followings projects:

	December 31,
	2013		2014
Lurín (a)		90,000		91,000
Comas (b)		57,000		61,000
Miraflores (c)		78,000		78,700
San Isidro (d)		48,000		52,000
Callao (e)		52,400		52,800
San Miguel (f)		-		67,300
Huancayo (g)		-		11,000
Others		86,422		80,224
		411,822		494,024

(a)   Plot of land of 812.8 hectares located in the district of Lurin, province Lima, for industrial development and public housing.

(b)   Plot of land located in the district of Comas, which will be used to develop the project of approximately 8,000 social housing projects called Los Parques de Comas.

(c)   Plot of land located in Av. El Ejército, Urbanizacion. Santa Cruz, Miraflores, development complex consisting of a 5-star hotel, convention, business, cultural, commercial and residential building center.

(d)   Plot of land located at Av. Pezet 583, San Isidro, development consisting of building with 32 apartments each of more than 300 m2 each.

(e)   Plot of land located at Av. Argentina 2430-Callao, for the project of approximately 984 housing in 3 phases called Los Parques del Callao.

(f)   Plot of land located in the district San Miguel of 1.4 hectares to develop a traditional mulit-family building of 1,004 apartments in 4 stages.

(g)   Plot of land located in the province Huancayo of 8.5 hectares, to develop a social housing Project of 900 housing units in 4 stages.

Work in progress - real estate -

As of December 31, 2014, this item mainly includes the 2nd stage of the green area project “Los Parques de San Martin” for S/.35 million that, such as in the 1st stage, comprises 20 multi-family buildings of 5, 10 and 12 stories located in the district San Martin de Porres; the project Rivera Navarrete for S/.22 million comprising 17 offices from 350 mts2 to 680 meters located in the district of San Isidro, the project Villa El Salvador 2 for S/.17 million comprising 280 apartments in 20 buildings, located in the district Villa El Salvador and the green area project “Parques de Piura” for S/.10 million.

As of December 31, 2013, this item mainly consists of project “Parque Central Club Residencial” (S/.17.6  million), comprising 22 multi-family buildings of 12 floors each, located in Cercado de Lima, and the housing project “Los Parques de Carabayllo” (S/.16.6 million) comprising 24 buildings of 4 floors each, located in Carabayllo. The housing project “Los Parques de San Martin” (S/.53.2 million) comprising 20 multi-family buildings of 5, 10 and 12 floors, located in San Martin de Porres; the housing project “Barranco” (S/.9.9 million) comprising a 16-storey building with 40 apartments; and the “Real 8-9” project (S/.21.4 million) where a 16-storey building will be built with 32 offices of 500m2 each.

- 67 -

(All amounts are expressed in thousands of S/. Uless otherwise stated)

During the year, the Company has capitalized financing costs for these construction projects amounting to S/.5.9 million (S/.6 million in 2013 and S/.4.3 million in 2012).

Construction materials -

In 2014, the Group opened new projects and acquired construction materials by S/.10.1 million, which mainly relate to the projects: Km 117 Montaje Electrico Concentradora by S/.2.9 million, the Chancadora Primavera project for S/.2.3 million, PAD project Phase 111 – Cero Verde for S/.1.5 million and other minor projects for S/.3.3 million. The balance at December 31, 2014 shows an increase compared to 2013 which mainly corresponds to the EPC projects “Immaculate Mining Plant” which increased S/.23 million and Consorcio Vial Quinua project which increase for S/.10.05 million. However, the Consorcio Rio Mantaro project decreased from 2013 for S/.10 million.

At December 31, 2014, projects in the closing process include Consorcio Tren Eléctrico Lima, Estación de Gas y Acometida Fénix – Calidda, Edificio Real 8 & 9, Oficina Rivera Navarrete, Consorcio Tormocho and other smaller projects.

The movement of the provision for impairment of inventories is as follows:

	2013			2014
Initial balance		10,981			10,445
Additions		2,239			62
Write off		(2,775	)		(3,069	)
Final balance		10,445			7,438

At December 31, 2014 borrowings are guaranteed with land and real state work in progress  of the followings projects: “Parque Central”, “Barranco”, “Parque de San Martín”, “Pezet” and “Parque del Agustino II”. The amount guaranteed amounts to S/.203.47 million (S/.509.57 million in 2013).

15            INVESTMENTS IN ASSOCIATES AND JOINT VENTURES

This account comprises:

	December 31,
	2013		2014
Associates		28,209		82,494
Joint ventures		59,758		147,069
		87,967		229,563

The amounts recognized in the income statement are as follows:

	2012		2013		2014
Associates		114		11,104		29,132
Joint ventures		490		22,458		24,313
		604		33,562		53,445

a)   Investment in associates

Set out below are the associates of the Group as at December 31, 2013 and 2014. The associates listed below have share capital solely consisting of common shares, which are held directly by the Group. None of the associates are listed companies; therefore there is no quoted market price available for their shares.

- 68 -

(All amounts are expressed in thousands of S/. unless otherwise stated)

						Carrying amount
	Class	Interest in capital				At December 31,
Entity	of share	2013		2014		2013		2014
		%		%
Asociación en Participación
Panorama Plaza de Negocios	Common		-		35.00		-		38,932
Promoción Inmobiliaria del Sur S.A.	Common		23.86		23.86		16,298		23,930
Concesionaria Chavimochic S.A.C.	Common		-		26.50		-		13,336
JV Panama	Common		15.00		15.00		2,755		2,755
Betchel Vial y Vives Servicios
Complementarios Ltda.	Common		-		40.00		-		2,345
Ingenieria y Construccion
Vial y Vives OGP-1 Ltda.	Common		40.00		40.00		8,450		286
Sierra Morena S.A.	Common		33.33		33.33		305		272
Others							401		638
							28,209		82,494

The most significant investments are described as follows:

i)  Asociación en Participación Panorama Plaza de Negocios –

An entity which owns a land property in the District of Santiago de Surco, on which a real estate Project is being developing which comprises a commercial area and two buildings.

ii)  Promoción Inmobiliaria del Sur S.A -

An entity with major asset in the form of land of 24,957,300 m2 located in Lurin, which will be used for real estate developments. Based on recent appraisals of the property, Management believes that the commercial value of this property is higher that its carrying amount.

iii)  Concesionaria Chavimochic S.A.C. -

An entity that was awarded with the implementation of the Chavimochic irrigation Project, including: a) design and construction of the work required for the third-phase of the Chavimochic irrigation project in the province of La Libertad; b) operation and maintenance of  works; and c) water supply to the Project users. Construction activities will start in 2015; the concession effective period is 25 years and the total entire investment amounts US$647 million.

iv)  JV Panama -

A limited company incorporated under the laws of Barbados, which provides engineering services to mining companies in Panama.

v)  Betchel Vial y Vives Servicios Complementarios Limitada –

An entity mainly engaged in providing engineering services, acquisitions, construction services and other related services, including sales and leases of machinery, tools and equipment.

vi)  Ingeniería y Construccion  Vial  y Vives OGP-1 Ltda –

This entity is mainly engaged in the execution of civil construction work, industrial assembly and engineering works at Escondida Mine in Chile; its business purpose is to expand the processing capacity of its client.

- 69 -

(All amounts are expressed in thousands of S/. unless otherwise stated)

The following table shows financial information of the principal associates:

Summarized financial information for associates -

											Asociación en
	Promoción Inmobiliaria				Ingeniería y Construcción						participación Panorama
	del Sur S.A				Vial y Vives OGP-1 Ltda.				Chavimochic S.A.C.		Plaza de Negocios(*)
	At December 31,		At December 31,		At December 31,				At December 31,		At December 31,
	2013		2014		2013		2014		2014		2014
Current
Cash and cash equivalents		937		48,545		572		3,238		5,200		52,748
Other current assets (excluding cash)		146		25,806		156,328		43,380		81,324		216,296
Total current assets		1,083		74,351		156,900		46,618		86,524		269,044
Financial liabilities (excluding trade payables)		187				-		27,229		30,288		2,385
Other current liabilities
(including trade payables)		102		34,351		135,761		18,674		14,834		200,590
Total current liabilities		289		34,351		135,761		45,903		45,122		202,975
Non-current
Assets		156,749		49,365		-		-		8,980		61,945
Financial liabilities		-		-		-		-		-		16,418
Other liabilities		89,237		-		-		-		57		247
Net assets		68,306		89,365		21,139		715		50,325		111,349

																						Asociación en
	Promoción Inmobiliaria									Ingeniería y Construcción												participación Panorama
	del Sur S.A									Vial y Vives OGP-1 Ltda									Chavimochic S.A.C			Plaza de Negocios
	At December 31,									At December 31,									At December 31,			At December 31,
	2012			2013			2014			2012			2013			2014			2014			2014
Revenue		20,560			44,552			88,870			6,437			127,528			220,701			67,473			9
Depreciation and amortization		(79	)		(69	)		(73	)		(5,562	)		(101,320	)		-			(216	)		(489	)
Interest income		63			52			29			-			-			-			61			10,918
Interest expenses		(2	)		(2	)		(3	)		-			-			-			(126	)		(7,420	)
Profit or loss from continuing
operations		11,183			43,234			82,080			875			26,208			27,828			175			955
Income tax expense		(2,601	)		(13,365	)		(24,521	)		(175	)		(5,398	)		(5,694	)		(57	)		(654	)
Post-tax profit from continuing
operations		7,009			29,971			61,402			700			20,810			22,134			118			301
Other comprehensive income		-			-						-			-						-
Total comprehensive income		7,009			29,971			61,402			700			20,810			22,134			118			301
(*) Asociación en Participación Panorama Plaza de Negocios financial statements are presented to November 30, 2014.

- 70 -

(All amounts are expressed in thousands of S/. unless otherwise stated)

The movement of the investments in associates is as follows:

	2012			2013			2014
Opening balance		25,953			24,719			28,209
Acquisition through business
combinations (Note 31)		2,891			346			-
Contributions		-			-			51,244
Equity interest in results		114			11,104			29,132
Dividends received		-			(2,980	)		(25,191	)
Return of capital		(2,057	)		-			-
Sale of investments		-			(6,684	)		-
Conversion adjustment		(2,182	)		1,704			(900	)
Final balance		24,719			28,209			82,494

In 2012, 2013 and 2014 the following significant movements were carried out:

- In March 2014, Constructora Norberto Odebrecht S.A. and Odebrecht Partipacoes e Investimentos S.A. formed Concesionaria Chavimochic S.A.C., in which the Company has a 26.5% interest by means of a capital contribution of S/.13.3 million in March 2014.

- In June 2014, the Company acquired 35% interest in the share capital of Asociación Panorama Plaza de Negocios, through its subsidiary Viva GyM for S/.37.8 million.

- During the course of 2014, the Group received dividends mainly from its associates Promoción Inmobiliaria del Sur S.A., Ingeniería y Construcción Vial y Vives OGP -1 Limitada and from Betchel Vial y Vives Servicios Complementarios Ltda. totaling S/.3.4 million, S/.16.6 million and S/.4.9 million, respectively.

- In December 2013, the Group sold its interest in Inmobiliaria San Silvestre S.A. The principal underlying asset of this associate is a plot of land located in San Isidro. The price was determined in function of the fair value of the land which amounted to S/.5.6 million, giving rise a gain of S/.3.2 million which has been recognized in the income statement.

- In December 2013, the Group sold 4,123,783 shares of Inversiones Real Once S.A. The sale price was S/.6.8 million and profit generated from the transaction was S/.2.5 million which has been recognized in the income statement.

- In October 2012, as a result of the acquisition of 74% of shares capital in Ingeniería y Construcción Vial y Vives (Vial y Vives) (Note 31-b), the Group recognized its investments in the associate maintained by Vial y Vives. Such investments mainly consist of investments in Ingeniería y Construccion Bechtel, Vial y Vives Limitada for S/.2.6 million. Additionally, these investments also include Ingeniería y Construcción Bechtel Vial y Vives OGP-1 Ltda.

- 71 -

(All amounts are expressed in thousands of S/. unless otherwise stated)

b) Investment in Joint Ventures

Set out below are the joint ventures of the Group as of December 31, 2013 and 2014.

						Carrying amount
		Interest in capital				At December 31,
Entity	Class	2013		2014		2013		2014
		%		%
Tecgas N.V.	Common		-		51.00		-		75,836
Constructora SK-VyV Ltda.	Common		50.00		50.00		37,542		42,175
Sistemas SEC	Common		49.00		49.00		10,452		10,057
G.S.J.V. SCC	Common		-		50.00		-		8,121
Logistica Químicos del Sur S.A.C.	Common		50.00		50.00		7,287		7,316
Consorcio DSD Echeverria Izquierdo	Common		50.00		50.00		4,284		3,388
Consorcio Vial y Vives Mena y Ovalle Ltda.	Common		50.00		50.00		193		176
							59,758		147,069

i) Tecgas N.V.

This entity provides services of operations and maintenance of oil pipelines and related activities. Currently its activities are focused in the service agreement of operations and maintenance of oil pipelines of the concession of Transportadora de Gas del Perú S.A.A. - TGP (its largest customer). The acquisition of an additional interest in the latter company will enable the Company to extend its services in to order to bring operating and maintaining services to the Southern gas pipeline (“gasoducto del sur”).

ii) Constructora SK - VyV Ltda -

This entity is mainly engaged in the execution of civil construction work and industrial assembly, construction, buildings and carrying out engineering projects, in general, and any other business agreed upon by the partners for the project “Caserones” of the client Minera Lumina Cooper.

iii) Sistemas SEC -

The company’s activities include the renovation and automation of the electrical system and signaling of railways and communications within Santiago - Chillán - Bulnes - Caravans and Conception areas. The contract was awarded to SEC in 2005 for a period of 16 years.

iv) G.S.J.V. SCC -

An entity engaged in designing, acquiring and building the gold-processing plant for Sedgman S.A. its partner in the implementation the Aurora Project of Guyana Goldfields.

v) Logistica de Quimicos del Sur S.A.C. -

The business purpose of Logistica de Quimicos del Sur S.A.C. (LQS) is to provide services of receiving, storing, shipping, and transport of sodium hydrosulfide to Sociedad Minera Cerro Verde S.A.A.

vi) Consorcio DSD Echeverria Izquierdo Limited -

The purpose of this company is exclusively the execution of civil works and electromechanical assemblies for mining project Ministro Hales, which is owned by Codelco. It was made part of the Group through the acquisition of DSD Construcciones y Montajes S.A. (see Note 31-c).

- 72 -

(All amounts are expressed in thousands of S/. unless otherwise stated)

The following table shows financial information of the principal joint ventures:

Summarized financial information for joint ventures -

	Constructora SK-VyV Ltda.						Sistemas SEC						Tecgas N.V.
	At December 31,						At December 31,						At December 31,
	2013			2014			2013			2014			2013		2014
Current
Cash and cash equivalents		871			692			181			68			-		35,009
Other current assets (excluding cash)		153,019			91,606			22,248			18,329			-		53,370
Total current assets		153,890			92,298			22,429			18,397			-		88,379
Financial liabilities (excluding trade payables)		-			68			1,935			42			-		-
Other current liabilities
(including trade payables)		78,782			7,921			17,487			8,867			-		81,917
Total current liabilities		78,782			7,989			19,422			8,909			-		81,917
Non-current
Assets		-			103			24,618			16,239			-		201,362
Financial liabilities		-						-						-		-
Other liabilities		-			91			6,296			5,198			-		59,126
Total non-current liabilities		-			91			6,296			5,198			-		59,126
Net assets		75,108			84,321			21,329			20,529			-		148,698
Revenue		593,258			298,156			37,912			362			-		-
Depreciation and amortization		(68	)		(426	)		(236	)		(2,069	)		-		-
Interest income		-			83			-			1,409			-		-
Interest expenses		-			-			(582	)		(1,065	)		-		-
Profit or loss from continuing operations		63,266			46,916			2,835			2,474			-		-
Income tax expense		(12,164	)		(8,964	)		(684	)		(1,305	)		-		-
Post-tax profit from continuing operations		51,102			37,952			2,151			(1,169	)		-		-
Other comprehensive income		-			-			-			-			-		-
Total comprehensive income		51,102			37,952			2,151			(1,169	)		-		-

- 73 -

(All amounts are expressed in thousands of S/. unless otherwise stated)

The movement of the investments in joint ventures is as follows:

	2012		2013			2014
Opening balance		-		12,727			59,758
Acquisition through business
combination (v) (Note 31)		12,237		2,262			-
Contributions		-		-			78,615
Debt capitalization		-		7,989			-
Equity interests in results		490		22,458			24,313
Dividends received		-		(1,708	)		(11,527	)
Adjustment SEC (iv)		-		9,379			-
Adjustment LQS (iv)		-		7,408			-
Conversion adjustment		-		(757	)		(4,090	)
Final balance		12,727		59,758			147,069

In 2014, 2013 and 2012 the following significant movements were carried out:

i) In December 2014, the Company acquired 51% of the share capital of Tecgas N.C. (current strategic partner of Transportadora de Gas del Perú), which holds 100% the share capital of Compañía Operadora de Gas del Amazonas (hereinafter COGA) for a total of S/.75.8 million. This investment includes goodwill resulting from the purchase amounting to S/.37 million.

ii) In July 2014, the Company acquired 50% interest in the share capital of G.S.J.V. SCC, through a subsidiary of GyM S.A. for S/.2.78 million.

iii) The Group received dividends in 2014 from Constructora SK – VyV Ltda., for S/.11.5 million.

iv) In 2013, the Company reassessed the nature of the rights attributed to its partners based on the provisions of IFRS 10 and concluded that the parties have joint control instead of being subsidiaries; therefore, Logística de Químicos del Sur S.A.C. (LQS) and Sistemas SEC SA (hereinafter SEC) were de-consolidated from the Group and recorded under the equity method of accounting. The effect of this reassessment on total assets and total shareholders’ equity is not significant to the financial statements for any of the periods presented.

v) In October 2012, as a result of the acquisition of 74% of shares capital in Ingeniería y Construcción Vial y Vives (Vial y Vives), the Group recognized its investments in joint ventures maintained by Vial y Vives which corresponds to mainly Constructora SK-VyV Ltda. for S/.12.2 million. Additionally, these investments also include Consorcios Vial y Vives and Mena y Ovalle Ltda.

- 74 -

(All amounts are expressed in thousands of S/. unless otherwise stated)

16            PROPERTY, PLANT AND EQUIPMENT

The movement in property, plant and equipment accounts and its corresponding accumulated depreciation for the year ended December 31, 2014, 2013 and 2012 is as follows:

			Own occupied									Furniture and			Other			Replacement			In-transit			Assets under
	Land		buildings			Machinery			Vehicles			fixtures			equipment			units			units			construction			Total
At January 1, 2012
Cost		17,674		86,265			629,163			222,227			28,501			91,542			9,071			6,922			65,712			1,157,077
Accumulated depreciation		-		(15,624	)		(288,659	)		(89,600	)		(16,530	)		(59,751	)		-			-			-			(470,164	)
Net cost		17,674		70,641			340,504			132,627			11,971			31,791	)		9,071			6,922			65,712			686,913
Net initial cost		17,674		70,641			340,504			132,627			11,971			31,791			9,071			6,922			65,712			686,913
Additions		3,713		17,955			136,853			82,363			7,161			29,962			784			28,033			97,393			404,217
Acquisition of subsidiary - Vial y Vives		5,128		-			32,055			75			1,547			379			-			-			-			39,184
Acquisition of subsidiary - Stracon GyM		-		-			24,504			47,233			31			-			-			-			-			71,768
Reclassifications		-		(608	)		(21,555	)		20,459			(216	)		22,045			1,218			(15,609	)		(5,734	)		-
Transfers to intangibles (Note 17)		-		-			-			-			-			-			-			-			(59,755	)		(59,755	)
Deduction for sale of assets		-		(5,790	)		(45,868	)		(16,284	)		(633	)		(6,281	)		(63	)		-			-			(74,919	)
Adjustments and/or reclassifications for
cost – asset disposal		-		1,791			(3,216	)		1,994			1,675			(1,729	)		(806	)		(23	)		683			369
Depreciation charge		-		(6,664	)		(81,798	)		(53,306	)		(8,738	)		(21,642	)		(47	)		-			-			(172,195	)
Depreciation for sales deductions		-		1,198			34,234			10,987			537			5,704			-			-			-			52,660
Adjustments and/or reclassifications for
asset depreciation		-		-			1,821			(1,185	)		5,248			644			5			-			-			6,533
Depreciation for transfers		-		362			22,427			(2,565	)		236			(20,449	)		(11	)		-			-			-
Foreign currency translation effect		-		-			-			-			-			-			-			-			(1,244	)		(1,244	)
Net final cost		26,515		78,885			439,961			222,398	)		18,819			40,424			10,151			19,323			97,055			953,531
At December 31, 2012
Cost		26,515		99,613			751,936			358,067			38,066			135,918			10,204			19,323			97,055			1,536,697
Accumulated depreciation		-		(20,728	)		(311,975	)		(135,669	)		(19,247	)		(95,494	)		(53	)		-			-			(583,166	)
Net cost		26,515		78,885			439,961			222,398			18,819			40,424			10,151			19,323			97,055			953,531

- 75 -

(All amounts are expressed in thousands of S/. unless otherwise stated)

				Own occupied									Furniture and			Other			Replacement			In-transit			Assets under
	Land			buildings			Machinery			Vehicles			fixtures			equipment			units			units			construction			Total
At January 1, 2013
Cost		26,515			99,613			751,936			358,067			38,066			135,918			10,204			19,323			97,055			1,536,697
Accumulated depreciation		-			(20,728	)		(311,975	)		(135,669	)		(19,247	)		(95,494	)		(53	)		-			-			(583,166	)
Net cost		26,515			78,885			439,961			222,398			18,819			40,424			10,151			19,323			97,055			953,531
Net initial cost		26,515			78,885			439,961			222,398			18,819			40,424			10,151			19,323			97,055			953,531
Additions					6,713			63,155			31,445			3,419			22,061			3,537			19,585			91,450			241,365
Acquisition of subsidiary – DSD (Note 31)		2,965			624			44,493			2,973			94			1,773			-			-			-			52,922
Desconsolidation SEC y LQS		-			(1,555	)		(5,187	)		(119	)		(382	)		(158	)		-			-			(19,108	)		(26,509	)
Reclassifications		147			10,184			35,627			6,193			1,108			(4,417	)		(2,494	)		(15,823	)		(30,525	)		-
Transfers to intangibles (Note 17)		-			-			(948	)		-			-			-			-			-			(38,656	)		(39,604	)
Deduction for sale of assets		-			(2,467	)		(20,432	)		(19,213	)		(2,579	)		(2,676	)		-			-			-			(47,367	)
Transfer to held for sale assets		-			-			(5,706	)		(15,767	)		-			-			-			-			-			(21,473	)
Adjustments and/or reclassifications for
cost – assets disposal		-			(2,641	)		(5,752	)		(1,592	)		(2,074	)		(3,004	)		(601	)		(1,256	)		(2,173	)		(19,093	)
Depreciation charge		-			(7,387	)		(84,454	)		(59,126	)		(9,247	)		(19,235	)		(38	)		-			-			(179,487	)
Depreciation for transfers		-			(144	)		(2,623	)		1,746			(12	)		1,010			23			-			-			-
Depreciation for sales deductions		-			1,587			14,984			11,961			2,432			1,276			-			-			-			32,240
Adjustments and/or reclassification for
cost – asset depreciation		-			542			3,787			295			2,168			2,138			-			-			-			8,930
Foreign currency translations effect		(285	)		( 15	)		(2,102	)		(111	)		23			(59	)		-			-			-			(2,549	)
Net final cost		29,342			84,326			474,803			181,083			13,769			39,133			10,578			21,829			98,043			952,906
At December 31, 2013
Cost		29,342			110,456			855,084			361,876			37,675			149,438			10,646			21,829			98,043			1,674,389
Accumulated depreciation		-			(26,130	)		(380,281	)		(180,793	)		(23,906	)		(110,305	)		(68	)		-			-			(721,483	)
Net cost		29,342			84,326			474,803			181,083			13,769			39,133			10,578			21,829			98,043			952,906

- 76 -

(All amounts are expressed in thousands of S/. unless otherwise stated)

				Own occupied									Furniture and			Other			Replacement			In-transit			Assets under
	Land			buildings			Machinery			Vehicles			fixtures			equipment			units			units			construction			Total
At January 1, 2014
Cost		29,342			110,456			855,084			361,876			37,675			149,438			10,646			21,829			98,043			1,674,389
Accumulated depreciation		-			(26,130	)		(380,281	)		(180,793	)		(23,906	)		(110,305	)		(68	)		-			-			(721,483	)
Net cost		29,342			84,326			474,803			181,083			13,769			39,133			10,578			21,829			98,043			952,906
Net initial cost		29,342			84,326			474,803			181,083			13,769			39,133			10,578			21,829			98,043			952,906
Additions		17			19,349			133,230			87,958			8,434			40,125			98			19,982			119,773			428,966
Acquisition of subsidiary - Morelco (Note 31 a)		794			1,370			61,212			1,844			332			1,829			-			-			3,375			70,756
Acquisition of subsidiary - Coasin (Note 31 b)		-			-			-			-			-			711			-			-			-			711
Reclassifications					67,454			24,523			(3,048	)		468			(3,316	)		(2,043	)		(31,415	)		(52,623	)		-
Transfers to intangibles (Note 17)		-			-			-									-			-			-			(66,604	)		(66,604	)
Deduction for sale of assets		-			(3,066	)		(61,508	)		(52,364	)		(2,514	)		(3,087	)		(851	)		(830	)		-			(124,220	)
Adjustments and/or reclassification for
cost – assets disposal		-			(2,327	)		(10,404	)		(1,402	)		(585	)		(8,319	)		(605	)		-			801			(22,841	)
Depreciation charge		-			(11,996	)		(89,462	)		(52,697	)		(6,896	)		(22,100	)		(7	)		-			-			(183,158	)
Depreciation for transfers		-			(2,222	)		375			(3,036	)		958			3,925						-			-			-
Depreciation for sale deductions		-			2,959			45,001			33,458			2,214			2,394			71			-			-			86,097
Adjustments and/or reclassification for
cost – asset depreciation		-			1,910			8,339			1,253			351			5,753			-			-			-			17,606
Foreign currency translations effect		(677	)		(285	)		(8,424	)		(787	)		(585	)		(335	)		-			(389	)		(86	)		(11,568	)
Net final cost		29,476			157,472			577,685			192,262			15,946			56,173			7,241			9,177			102,679			1,148,651
At December 31, 2014
Cost		29,476			192,951			993,713			394,077			43,225			177,046			7,245			9,177			102,679			1,949,589
Accumulated depreciation		-			(35,479	)		(416,028	)		(201,815	)		(27,279	)		(120,333	)		(4	)		-			-			(800,938	)
Net cost		29,476			157,472			577,685			192,262			15,946			56,713			7,241			9,177			102,679			1,148,651

- 77 -

(All amounts are expressed in thousands of S/. unless otherwise stated)

In 2014 and 2013, additions to cost correspond to the acquisition of fixed assets under finance leases and by direct acquisition.

The balance of assets under construction at December 31, 2014, relate mainly to investments made by the subsidiary GMP SA for S/.47.4 million (S/.37.6 million at December 31, 2013) for  the activities of oil drilling in order to increase exploitation of oil and gas (25 wells in 2014 and 16 wells in the 2013).

Additionally, the balance includes the construction work of the offices in the new administrative headquarters of the Company in Petit Thouars avenue, amounting to S/.28.9 million (S/.26.8 million in 2013 and S/.25.3 million by remodeling the administrative headquarters in Surquillo in 2013) and the subsidiary GyM S.A. maintains a balance of S/.12 million relating to the construction of a corrective preventive maintenance at the Constancia mine.

In 2014 the sale of fixed assets amounted to S/.43.1 million (S/.20.4 million and S/.22.2 million in 2013 and 2012, respectively), resulting in a profit of S/.4.9 million (a profit of S/.0.7 million and S/.1.2 million in 2013 and 2012, respectively), which is shown in the income statement under “other income and expenses”.

The amount of S/.21.5 million transferred to held-for-sale assets in 2013 consisted of certain machinery and furniture owned by the Chilean subsidiary of GyM S.A., for the execution of a project in Chile. Management approved their sale. Most of these assets could not be sold in 2014 due to unfavorable market conditions. As a consequence, Management performed an assessment of their fair value which resulted in the recognition of an impairment loss of S/.11.96 million (S/.10.34 million which is included in  “other income and expenses” and S/.1.6 million of translation adjustment included in other  comprenhensive income. Management expects to recoup this amount through the sale of the assets in 2015.

Depreciation of fixed assets and investment properties for the year is broken down in the income statement as follows:

	2012			2013		2014
Cost of services and goods		159,526			166,098		168,633
Administrative expenses		11,980			13,389		14,525
Capitalization to inventories		689			-		-
Total depreciation related to property, plant and equipment		172,195			179,487		183,158
(+) Depreciation related to investment property		1,512			1,992		2,151
(-) Capitalization to inventories		(689	)		-		-
Total depreciation charged to expenses		173,018			181,479		185,309

The net carrying amount of machinery and equipment, vehicles and furniture and fixtures acquired under finance lease agreements is broken down as follows:

	December 31,
	2013			2014
Cost		480,099			643,498
Accumulated depreciation		(201,999	)		(264,343	)
Net cost		278,100			379,155

Property, plant and equipment amounting to S/.95.6 million (S/.240.5 million in 2013) have been pledged granted as guarantee of certain borrowings.

- 78 -

(All amounts are expressed in thousands of S/. unless otherwise stated)

17            INTANGIBLE ASSETS

The movement of intangible assets and that of their corresponding accumulated amortization, as of December 31, 2014, 2013 and 2012, is as follows:

	Goodwill		Trade- marks		Concession rights		Contractual relations with clients		Internally generated software and development costs		Costs of development of  wells		Develop ment costs		Land use right	Other assets		Totals
At January 1, 2012
Cost	46,904		-		390,039		17,518		26,771		114,327		3,623		13,288	21,376		633,846
Accumulated amortization and impairment	(21,995	)	-		(207,649	)	(4,907	)	(12,240	)	(65,548	)	(3,623	)	-	(87	)	316,049	)
Net cost	24,909		-		182,390		12,611		14,531		48,779				13,288	21,289		(317,797	)
Net initial cost	24,909				182,390		12,611		14,531		48,779		-		13,288	21,289		317,797
Additions	-		-		28,406		-		3,998		4,897		-		-	1,956		39,257
Acquisition of subsidiary - Vial y Vives (Note 31)	28,944		75,845		-		23,024		-		-		-		-	-		127,813
Acquisition of subsidiary - Stracon GyM (Note 31)	13,366		-		-		9,976		-		-		-		-	-		23,342
Deductions	-		-		(263	)	-		(20	)	-		-		-	(13,962	)	(14,245	)
Transfers from assets under construction (Note 16)	-		-		-		-		-		59,686		-		-	69		59,755
Disposals - cost	-		-		(537	)	-		(7,654	)	-		-		-	(38	)	(8,229	)
Amortization charge	-		(410	)	(31,413	)	(7,147	)	(10,427	)	21,828		-		-	(260	)	(71,485	)
Disposals - amortization	-		-		29		-		6,307		-		-		-	57		6,393
Net final cost	67,219		75,435		178,612		38,464		6,735		91 ,534				13,288	9,111		480,398
At December 31, 2012
Cost	89,214		75,845		417,645		50,518		23,095		178,910		3,623		13,288	9,401		861,539
Accumulated amortization and impairment	(21,995	)	(410	)	(239,033	)	(12,054	)	(16,360	)	(87,376	)	(3,623	)	-	(290	)	(381 ,141	)
Net cost	67,219		75,435		178,612		38,464		6,735		91,534				13,288	9,111		480,398

- 79 -

(All amounts are expressed in thousands of S/. unless otherwise stated)

	Goodwil			Trade- marks			Concession rights			Contractual relations with clients			Internally generated software and development costs			Costs of development of wells			Development costs			Other assets		Other assets			Totals
At January 1, 2013
Cost		89,214			75,845			417,645			50,518			23,095			178,910			3,623	)		13,288		9,401			861,539
Accumulated amortization
and impairment		(21,995	)		(410	)		(239,033	)		(12,054	)		(16,360	)		(87,376	)		(3,623	)		-		(290	)		(381,141	)
Net cost		67,219			75,435			178,612			38,464			6,735			91,534			-			13,288		9,111			480,398
Net initial cost		67,219			75,435			178,612			38,464			6,735			91,534			-			13,288		9,111			480,398
Additions		-			-			14,622			-			5,106	)		-			-			-		4,976	)		24,704
Acquisition of subsidiary - DSD (Note 31)		6,128			-			218			7,373			-			-			-			-		-			13,719
Desconsolidation SEC y LQS		-			-			1,203			-			902			-			-			-		(5	)		(2,110	)
Transfers from assets under construction (Note 16)		-			-			2,122			-			290			38,621			-			-		1,429			39,604
Disposals - cost		-			( 33	)		(1,965	)		( 100	)		(42	)		( 317	)		-			-		( 1,307	)		(3,764	)
Amortization charge		-			( 2,458	)		(18,816	)		( 16,202	)		(7,084	)		( 31,236	)		-			-		( 2,591	)		(78,387	)
Disposals - amortization		-			-			(323	)		-			(6	)		-			--					(322	)		(7	)
Foreign currency translations effect		-			-			(6,728	)		-			-			-			-			-		-			(6,728	)
Net final cost		73,347			72,944			179,995			29,535			4,097			98,602			-			13,288		9,077			480,885
At December 31, 2013
Cost		95,342			75,812			438,167			57,791			27,547			217,214			3,623			13,288		11,636			940,420
Accumulated amortization and impairment		(21,995	)		(2,868	)		(258,172	)		(28,256	)		(23,450	)		(  118,612	)		(3,623	)		-		(2,559	)		(459,535	)
Net cost		73,347			72,944			179,995			29,535			4,097			98,602			-			13,288		9,077			480,885

- 80 -

(All amounts are expressed in thousands of S/. unless otherwise stated)

	Goodwill			Trade- marks			Concession rights			Contractu relations with clien			Internally generated software and development costs			Costs of development of wells			Development costs			Land use right		Other assets			Totals
At January 1,2014
Cost		95,342			75,812			438,167			57,791			27,547			217,214			3,623			13,288		11,636			940,420
Accumulated amortization
and impairment		(21,995	)		(2,868	)		(58,172	)		(28,256	)		(23,450	)		(118,612	)		(3,623	)		-		(2,559	)		(459,535	)
Net cost		73,347			72,944			179,995			29,535			4,097			98,602						13,288		9,077			480,885
Net initial cost		73,347			72,944			179,995			29,535			4,097			98,602			-			13,288		9,077			480,885
Additions		-			-			135,502			-			2,804			-			-			-		5,238			143,544
Acquisition of subsidiary – Morelco (Note 31 a)		105,764			33,326			847			30,318			-			-			-			-		-			170,255
Acquisition of subsidiary – Coasin (Note 31 b)		5,743			-			6			-			1,371			-			-			-		-			7,120
Transfers from assets under construction (Note 16)		-			-			1,845			-			1,677			64,759			-			-		(1,677	)		66,604
Reclassifications		-			-			920			-			180			(251	)		-			-		(849	)		-
Disposals - cost		-			-			(16,016	)		-			(29	)		-			-			-		(91	)		(16,136	)
Amortization charge		-			-			(26,823	)		(14,987	)		(3,013	)		(31,780	)		-			-		(778	)		(77,381	)
Disposals - amortization		-			-			15,491						1			-			-			-		-			(15,492	)
Amortization reversal (Vial y Vives)		-			2,651			-			-			-			-			-			-		-			(2,651	)
Foreign currency translations effect		(2,597	)		(6,370	)		(88	)		(1,876	)		(1,319	)		-			-			-		-			(12,250	)
Net final cost		182,257			102,551			291,679			42,990			5,769			131,330						13,288		10,920			780,784
At December 31, 2014
Cost		204,252			102,768			561,183			86,233			32,231			281,722			3,623			13,288		14,257			1,299,557
Accumulated amortization
and impairment		(21,995	)		(217	)		(269,504	)		(43,243	)		(26,462	)		(150,392	)		(3,623	)		-		(3,337	)		(518,773	)
Net cost		182,257			102,551			291,679			42,990			5,769			131,330			-			13,288		10,920			780,784

- 81 -

(All amounts are expressed in thousands of S/. unless otherwise stated)

a) Goodwill -

Management reviews the results of its businesses based on the type of economic activity carried out. Economic activities which have given rise to goodwill in the Group are construction, electro-mechanical, engineering services and the sale of IT equipment and services and Telecommunications services.

Goodwill fromcash-generating units is allocated to the following segments:

	December 31,
	2013		2014
Construction - Engineering (Note 31 a, c y d)		35,072		138,239
Construction - Mining services (Note 31-e)		13,366		13,366
Construction - Electromechanical		20,737		20,737
Information technology services		4,172		4,172
Telecommunications services (Note 31-b)		-		5,743
		73,347		182,257

Goodwill from information technology services arose from the previous acquisition in prior years of subsidiary Gestión de Servicios Digitales S.A.

Goodwill from the electromechanical engineering business corresponds to the previous acquisition in prior years of subsidiary GMA S.A., which was later merged with subsidiary GyM S.A.

As a result of the impairment testing on goodwill performed by Management on an annual basis the recoverable amount of the related cash-generating unit (CGU) is determined based on its value in use. Value in use is determined based on the future cash flows expected to be generated by the assessed CGU. As a result of these assessments no provisions for impairment were required.

The main criteria used by the Group to determine the value in use are as follows:

	Mining
	construction			Engineering			Electro-			IT equipment			Telecommunication
	services			construction			mechanical			and services			services
2013 -
Gross margin		17.00	%		12.99	%		10.80	%		31.89	%		-
Growth rate		3.00	%		3.00	%		3.00	%		3.00	%		-
Discount rate		12.00	%		9.80	%		9.80	%		22.40	%		-
2014 -
Gross margin		12.60	%		10.70	%		8.73	%		41.16	%		11.10	%
Growth rate		2.00	%		3.00	%		2.00	%		0.00	%		5.00	%
Discount rate		13.00	%		8.36	%		13.00	%		13.00	%		10.76	%

These assumptions have been used for the analysis of each cash-generating unit (CGU) included in the operating segments for a period of 5 years and considering a recoverable residual value with no growth.

Management determines the budgeted gross margins based on past results and market development expectations. Average growth rates are consistent with those prevailing in the industry. Discount rates used are pre-tax and reflect the specific risk related to the assessed CGUs.

- 82 -

(All amounts are expressed in thousands of S/. unless otherwise stated)

b) Trademarks -

The Group acquired trademarks in business combination processes of  Vial y Vives S.A.C. (S/.75.4 million) in October 2012 and  of Morelco  (S/.33.32 million) in December 2014. The total carrying amount of these assets amount to S/.102.5 million at December 31, 2014 (S/.72.9 million in  2013). In 2014, the Group determined that trademarks arising from business combinations have an indefinite life; accordingly these assets are tested for impairment annually as explained in a) above. In this regard, the amortization previously recorded in 2013 and 2012 amounted to S/.2.5 million has been reverse against profit and loss in 2014.

As a result of these assessments, no provision for impairment was considered necessary to be made.

Major assumptions used by the Group to determine the value in use are as follows:

2014 -	Engineering construction
Gross margin	10.70	%
Growth rate	3.00	%
Discount rate	8.36	%

c) Concessions -

This intangible asset  includes the value attributable to the concession for the Ancón-Huacho-Pativilca road section of the Panamericana Norte highway. Intangibles arising from this concession as of December 31, 2014 mainly comprise the EPC contract for S/.101.39 million; highway improvement for S/.21.5 million; and initial capitalized expenses for S/. 12.2 million (S/.109.2 million, S/.20.2 million and S/.12.2 million respectively in 2013. Under those contracts the Concessionaire has to construct, improve and rehabilitate the road infrastructure over the effective period of the concession.

During 2014, the following transactions took place: i) subsidiary GMP S.A. acquired the right of subscription in Terminales del Perú for the operation of the northern freight platforms for a period of 20 years for an amount of S/.12.2 million and the acquisition of the rights to subscription in the renewal of the operational agreement of the Consorcio Terminales del Sur (1 year) for S/.1.2 million; ii) Subsidiary Norvial S.A. invested S/.82.70 million in the construction of the second tranche of the highway  “Ancón - Huacho - Pativilca”; iii) Subsidiary GMD S.A. invested an amount of S/.15.2 million that comprises projects of technology for the Oficina de Normalización Previsional for S/. 9.5 million, in the project of Superintendencia Nacional de Registros Públicos (SUNARP) for S/.1.2 million, in the project of ISO Infraestructura for  S/.1.1 million en el proyecto de ISO Infraestructura and  S/.3.4 million in licenses and other tools; investments of the concession Vía expresa Sur for S/.15.85 related to the extension of vía expresa Sur in conection with San Juan de Miraflores district, which accounts for 53% of the non-guaranteed revenue by the concessionaire (bifurcated model) and othe minor projects for an amount of S/.7.6 million (That correspond to the subsidiaries   GyM S.A., Concar S.A. y Viva GyM S.A.

d) Costs of development of wells -

Through one of its subsidiaries, the Group operates and extracts oil from two fields (Block I and Block V) located in the province of Talara in northern Peru. Both oil fields are operated under long-term service agreements by which the Group provides hydrocarbon extraction services to Perupetro, the government-run oil company. Hydrocarbons extracted from each field belong to Perupetro, which in turn pays the Group a variable fee per barrel of lifted hydrocarbons, which is based on a basket of international crude prices and the level of production. The fee is paid on a monthly basis. The Group’s activities are focused on development and production of proved reserves and are conducted in mature oil fields, which have been producing oil for over 100 years (in the case of Block I) and over 50 years (in the case of Block V).  Such service contracts do not qualify as public service concessions, as defined by IFRIC 12. The extraction services that the Group provides and the infrastructure that it maintains are not a service that is provided to the public. Such infrastructure is not designed for public use and the services provided are exclusively for Perupetro.

- 83 -

(All amounts are expressed in thousands of S/. unless otherwise stated)

As part of the Group’s obligations under the service contracts, it is required to invest in certain costs to prepare the wells located in Block I and Block V for providing oil and hydrocarbon exploitations services, which are capitalized as part of the intangible asset with a carrying amount on December 31, 2014 of S/.128.2 million and S/.5 million, respectively (S/.91.8 million and S/.6.9 million at December 31, 2013, respectively). These blocks are amortized along the concession terms, which set maturity in 2021 for Block I and in 2023 for Block V.

Amortization of intangible assets -

The amortization of intangibles is distributed in the income statement as follows:

	2012		2013		2014
Cost of sales (Note 25)		60,517		67,254		68,089
Administrative expenses (Note 25)		10,968		11,133		6,641
		71,485		78,387		74,730

On December 10, 2014, the subsidiary GMP S.A. was awarded by the Peruvian Government the right to exploit for 30 years Oil Blocks III and IV (owned by the estate company Perupetro) located within the Talara basin, in the city of Piura, in the northern region of Peru.

GMP’s winning technical-economic bid engages it to drill 230 development wells in Block III and 330 development wells in Block IV for 10 years. The total expected investments in both wells amount to US$560 million. Operations are expected to start in April 2015 in both Blocks, with a production of 1,700bpd while the drilling obligation is engaged to become effective one year after the beginning of operations.

18 BORROWINGS

This item comprises:

	Total				Current				Non- current
	As of December 31,				As of December 31,				As of December 31,
	2013		2014		2013		2014		2013		2014
Bank loans		514,228		1,419,428		381,005		1,300,636		133,223		118,792
Finance leases		281,594		332,151		105,114		124,819		176,480		207,332
Total debt		795,822		1,751,579		486,119		1,425,455		309,703		326,124

a)      Bank loans -

At December 31, 2014 and 2013 this item comprises bank borrowings contracted in local and foreign currency intended for working capital. These obligations are subject to fixed interest rates ranging between 1% and 9% in 2014 and between 2% and 9% in 2013.

At December 2014, subsidiary GyM S.A. received loans for a total amount of S/.434 million from  BBVA Continental, Scotiabank and Banco Santander; those borrowings mature  between January and March 2015 and bear interest at an annual rate that range between 1% and 5.90%.

In June 2014, the subsidiary GyM Ferrovías signed a short term loan with BBVA Continental of S/.200 million at an interest rate of 5.75%, due on December 2014.  In December 2014, the short term loan with BBVA Continental was refinanced through a short term loan provided by BCP, due in February 2015. In August 2014, another short term loan with Banco de Crédito del Perú-BCP of S/.200 million at an interest rate of 5.90%, due on January 2015.  Both loans will be cancelled with an international bond issuance under the Regulation S, to be placed in February 2015.  This issuance will consist of 25-year corporate bonds, at inflation adjusted (VAC) interest rate, to be place mainly to insurance companies and pension funds.

- 84 -

(All amounts are expressed in thousands of S/. unless otherwise stated)

In January 2014, subsidiary Norvial S.A. signed a short-term loan agreement with  Banco de Crédito del Perú (BCP) for a total S/.120 million and US$12 million. On the same date, under such credit facility, S/.50 million was disbursed at an annual effective rate of 6.32% and during 2014 a total of S/.85 million have been disbursed. This loan will be settled with the issuance of bonds to be placed in the Peruvian capital market to finance the construction of the second phase of “Ancón - Huacho Pativilca” highway.

During 2014, Viva GyM S.A. maintained bank borrowings and promissory notes equivalent to S/.140.4 million (S/.109.3 million in December 2013) with local financial institutions at interest rates ranging between 3% and 8%. Proceeds were used to purchase land properties (Note 14) and working capital.

During 2014, CAM Chile S.A., a subsidiary of  CAM Holding Sp.A., maintained bank borrowings and promissory notes equivalent to S/.45.6 million, with local financial institutions at interest rates ranging between 4.02% and 7.92%, with maturity between January and October 2015, and in May 2018. The proceeds were used for working capital.

During 2014, GMD S.A. maintained promissory notes equivalent to S/.13.6 million with local financial institutions at interest rates ranging between 4.9% and 5.76%, with maturity in March 2015; the proceeds were used for working capital.

In April 2005, subsidiary Norvial S.A. signed two “Loan Agreements”; one with IFC and one with IDB; these multilateral financing organizations granted funding for the engineering, construction and acceptance of works relating to the first phase of the Concession Agreement totaling US$36 million (S/.123.5 million) with maturity in January 2014.

Between November and December 2013, subsidiary Concar S.A. contracted local currency bank borrowings for S/.51.2 million at December 31, 2013 to be used as working capital. These loans earn fixed interest rates ranging between 5.6% and 6%. These borrowings expired and were cancelled in June 2014 and have no specific guarantees.

In December 2013, the subsidiary GMI S.A. signed bank borrowings with local financial institutions, totaling S/.3.2 million and US$4.7 million (equivalent to S/.13.2 million), bearing fixed interest rates ranging between 5.45% and 7.5%.  Acquired loans were used for working capital and they do not have collaterals. These loans borrowings expired and were cancelled in March 2014.

In September 2013, subsidiary GMP S.A. obtained a loan from Banco Continental of $8 million (equivalent to S/.21 million); the proceeds were used for working capital. This loan bears an annual interest of 4.34% and is secured by future cash flows of Block I Project (Note 17-d).

Additionally, the subsidiary GMP maintains a loan with Citibank N.A. as per the loan agreement signed on September 19, 2008 (amended on August 29, 2012), which was applied to the financing of the construction, equipment and operating the new Gas Pariñas Plant of the subsidiary. The major amendments to the original agreement include: an increase in the financed amount to US$28 million (S/.72 million), an extension of the repayment period and a reduction of accrued interest. The guarantees given to secure this obligation are: a mortgage on the land on which the Gas Pariñas Plant has been constructed; a pledge on the equipment and assignment of the cash flows to be obtained from sales to customers (Repsol, Llama Gas, Zeta Gas and Herco). Said loan reaches maturity in August 2020, as per the new conditions agreed upon. This debt bears interest at Libor (3m) + 1.75%, if the exchange rate, at the installment payment date, remains within the range from S/.2.60 to S/.2.75 per US$1 or (ii) 1.95%, if the stated range is not maintained. In order to reduce the exposure to Libor variation, the Company signed an interest rate swap with Citibank N.A., which establishes a fixed rate of 4.80% or 5.05%, based on each of the above cases.  At December 31, 2014 the balance of this borrowing is S/.60.4 million (S/.66.4 million at December 31, 2013).

- 85 -

(All amounts are expressed in thousands of S/. unless otherwise stated)

At December 31, 2014 and 2013, the Company has renewable lines of credit totaling S/.2,459 million (S/.2,626 million 2013).

b)      Finance lease obligations -

The minimum payments to be made by maturity and present value of the finance lease obligations are as follows:

	December 31,
	2013			2014
Up to 1 year		115,698			138,988
From 1 to 5 years		193,233			225,844
		308,931			364,832
Future financial charges on finance leases		(27,337	)		(32,681	)
Present value of the obligations for finance lease contracts		281,594			332,151

 The present value of finance lease obligations is as follows:

	December 31,
	2013		2014
Up to 1 year		115,114		124,819
From 1 to 5 years		166,480		207,332
		281,594		332,151

c)      Fair value of borrowings -

The carrying amount and fair value of borrowings are broken down as follows:

	Carrying amount current and
	non-current portion				Fair value
	As of December 31,				As of December 3,
	2013		2014		2013		2014
Loans from multilateral organizations		42,599		-	44,384			-
Other loans		753,223		1,751,579		642,842		1,705,843
		795,822		1,751,579		687,226		1,705,843

\

Fair values are determined based on discounted cash flows using borrowing rates of 4.4% and 8.0% (4.1% and 8.1% in 2013) information that corresponds to level 2 of the fair value hierarchy.

19 TRADE ACCOUNTS PAYABLE

	December 31,
	2013			2014
Invoices payable		993,050			1,182,607
Notes payable		504			21
Total		993,554			1,182,628
Non-current
Invoices payable		(2,157	)		(3,779	)
Total current		991,397			1,178,849

- 86 -

(All amounts are expressed in thousands of S/. unless otherwise stated)

This item comprises:

20 OTHER ACCOUNTS PAYABLE

This item comprises:

	December 31,
	2013			2014
Advances received from customers		701,813			684,256
Salaries and profit sharing payable		156,455			220,212
Put option liability - acquisition of Morelco (*)		-			113,829
Account payable - acquisition of Morelco (Note 31-a)		-			45,684
Other taxes payable		63,802			71,876
Loans from third-parties		29,771			56,025
IVA payable		28,787			45,043
Deposits in guarantee		17,342			14,599
Post-retirement benefits		8,995			9,850
Unbilled services		3,807			6,743
Account payable for the purchase of fixed assets		5,159			6,546
Deferred income		4,356			4,249
Other accounts payables		22,792			23,717
		1,043,079			1,302,629
Less non-current portion:
Put option liability – acquisition of Morelco		-			(113,829	)
Account payable - acquisition of Morelco (Note 31-a)		-			(45,684	)
Advances received from customers - GyM S.A.		(124,344	)		(54,949	)
Advances received from customers - Concar S.A.		(51,938	)		(30,869	)
Advances received from customers - GMD S.A.		-			(19,603	)
Advances received from customers – GyM Ferrovías S.A.		-			(4,820	)
Advances received from customers – Viva GyM S.A.		(9,723	)		(4,679	)
Post-retirement benefits - CAM Holding Spa		(18,000	)		(16,272	)
Others		(1,391	)		(4,181	)
		(205,396	)		(294,886	)
Current portion		837,683			1,007,743

(*) The balance of put option liability correspond to the agreement signed by the subsidiary GyM S.A. associated with the purchase of Morelco (Note 31 a).

The amortized cost of the other short – term accounts payable is similar to their carrying amounts due the fact to the short maturity.

Advances received from customers are discounted from billing, in accordance with the terms of the agreements. These advances mainly comprise:

- 87 -

(All amounts are expressed in thousands of S/. unless otherwise stated)

	2013		2014
Projects:
Consorcio Rio Mantaro		162,926		102,780
Proyecto HidroÑuble - Chile		-		84,488
Central Hidroeléctrica Machu Picchu		46,678		46,274
Stracon GyM		45,670		34,871
EPC Planta Minera Inmaculada		60,331		32,330
Consorcio Vial La Quinua		21,078		27,013
Proyecto Kelar - Chile		-		24,940
Advances - Proyecto Navarrete		4,678		24,447
Planta Concentradora Cerro Verde 2 Fase 1		9,800		22,675
Chilectra S.A.		3,819		22,167
Consorcio Construcciones y Montajes – CCM		8,005		21,844
Pad I Fase III - Sociedad Minera Cerro Verde		-		21,318
Panorama Plaza Negocios 2		19,552		16,143
Proyecto Antucoya		-		16,009
Túnel Santa Rosa II		12,016		15,967
Cora Cora		32,168		13,104
CER- Consorcio Menegua		-		11,974
Construcción Planta de Cal.		7,228		11,710
G&M Construcciones y Montajes - Bolivia		-		11,474
6-SK Refineria Esmeraldas-Ecuador		-		11,376
Chancadora Primaria CV2		-		9,806
K117 Montaje Eléctrico  - Sociedad Minera Cerro Verde		-		7,989
Nuevo Campus Universitario UTEC		-		7,614
Oficinas Navarrete 2		-		7,381
Neo 10 y Real 8-9		6,535		7,259
Saga Centro Cívico		-		6,685
Shougan Hierro Perú SAA		7,545		5,172
Los Parques San Martín y Piura		9,671		4,397
Parque Central Club Residencial		8,468		2,897
Anticipos - Proyecto Barranco		10,108		2,892
Centro Empresarial Leuro 2do Etapa		13,531		1,954
Advances - Consorcio Peruano de Conservación		4,494		1,756
Consorcio Vial Ipacal		4,012		558
Los Parques de Comas		-		146
Los Parques del Agustino		-		173
GyM Chile SPA		51,387		-
Consorcio Rio Urubamba		8,166		-
Pezet 961		16,323		-
Consorcio GyM Conciviles		6,882		-
Proyecto Especial de Transporte Nacional		39,125		-
Consorcio Tren Eléctrico Lima		28,441		-
Contrato Red Vial 1		14,368		-
Consorcio HV		4,452		-
Edelnor		3,389		-
Other projects		30,967		44,673
		701,813		684,256

- 88 -

21 PROVISIONS

This item comprises:

	December 31,
	2013			2014
Legal claims		12,217			13,056
Contingent liabilities from the acquisition of DSD (Note 31-c)		3,846			3,846
Contingent liabilities from the acquisition of Vial y Vives (Note 31-d)		6,006			1,890
Contingent liabilities from the acquisition of Morelco (Note 31-a)		-			17,533
Contingent liabilities from the acquisition of Coasin (Note 31-b)		-			2,658
Contingent liabilities from CAM acquisition		21,546			12,152
Provision for well closure		4,852			7,210
Provision for maintenance obligations in concession contracts		3,846			-
		52,313			58,345
Less:
Non-current portion		(43,418	)		(46,904	)
Current portion		8,895			11,441

Legal claims

Legal claims maintained at December 31, 2014 mainly comprise provisions for labor liabilities and tax claims recorded by subsidiaries GyM S.A., GMP S.A. and CAM Chile for S/.5 million, S/.6.8 million and S/.1.7 million, respectively (S/.5 million, S/.4 million and S/.3 million at December 31, 2013, respectively).

Provisions related to GyM S.A. comprise claims from the tax authority which have been accounted for based on management estimates of the amounts the Company would most likely be required to pay for these cases. Regarding tax claims, due to the fact those amounts depend on the tax authority, the Group does not have an estimated timing of when these outflows will take place.

With respect to GMP, legal claims consists of court actions brought against the Company by the Peruvian energy regulator (OSINERGMIN) resulting from the storage of hydrocarbons and the applicable environmental laws and regulations.

With respect to CAM Chile, provisions comprises claims from the tax authority which have been accounted for based on management estimates of the amounts the Company would most likely be required to pay for these cases.

Contingent liabilities DSD

Comprising the fair value of contingent fiscal obligations of S/.3,813 and employees’ contingent obligation of S/.33 of the DSD (Note 31-c).

Contingent liabilities Vial y Vives

As a result of the due diligence process, certain labor contingent liabilities were recorded for the acquisition of 74% of the outstanding shares of Vial y Vives. Each of these contingencies was assigned a probability of occurrence based on management and attorney assessments. Management  had provisioned S/.6 million  in 2013, as it expected such outflows to take place in 2014.  However, during 2014, a total of S/.4.1 million expired, and were therefore offset against the balance of other accounts receivable (assets subject to indemnities, Note 31-d)

- 89 -

Contingent liabilities CAM

In 2014 the Company recognized a reversal of approximately S/.9.4 million (S/.13.6 million in 2013 and S/.68 million in 2012) in provisions that were accounted for in the acquisition of CAM Chile and affiliates in 2011 that related to labor and tax contingencies which related liabilities expired during the year.

Contingent liabilities COASIN

In 2014, the Group’s subsidiary CAM Chile S.A. acquired control of Coasin Instalaciones Ltda. by purchasing 100% of its capital shares. As a result of the acquisition, labor contingencies were recorded for S/.2.5 million and legal contingencies for S/.0.2 million.

Contingent liabilities MORELCO

At the end of December 2014, the Group’s subsidiary, GyM S.A. acquired control of Morelco S.A.S. by purchasing 70.00% of its equity shares.  As a result of the acquisition, tax contingencies were recorded for S/.10.24 million, labor contingencies for S/.5.7 million and legal contingencies for S/.1.59 million.

Provision for maintenance obligations in concession contracts

These provisions relate to Norvial S.A., a subsidiary which has agreed to perform conservation and maintenance activities on the infrastructure during the effective period of the Contract. This contractual obligation to maintain the infrastructure up to a specified service capacity have been recognized and measured in accordance with IAS 37, 'Provisions, contingent assets and liabilities.

These periodic maintenance obligations depend on the use of the infrastructure, so the level of use of the road is the factor that determines the amount of the obligation and this provision is accounted for over the contract length (a 25 year term). At December 31, 2014, the Group used 100% of its provisions made for 2013 (S/.3.8 million at December 31, 2013).

Provision for well closure

In 1994 and 1995 GMP S.A. (“GMP”) contracted with Perupetro to provide hydrocarbon extraction services in Block I and Block V located in northwestern Peru. The contract states that GMP is responsible for the abandonment of the following wells:

(i) wells drilled by GMP that have not been productive; and

(ii) old wells that have been productive during the term of the contracts but that have  mechanical problems or that no longer have oil reserves.

As per a preliminary estimate, 70 wells of Block I and 15 wells of Block V should be closed.  The closure process for both blocks started in 2013 and is expected to be completed in 2021 and 2023, respectively.  In 2013, one well of each block has been fully closed.  During the course of 2014, 4 wells in Block I and 1 well in Block V have been closed.

At December 31, 2014 the amount discounted from the provision for plug-back costs relating to the remaining 78 wells (83 wells in 2013) amounts to S/.7.2 million (S/.4.85 million in 2013) at a discount rate of 2.17% (2.74% in 2013).

- 90 -

(All amounts are expressed in thousands of S/. unless otherwise stated)

The gross movement of other provisions is broken down as follows:

Other provisions	Legal claims			Contingent liabilities from acquisitions		Provisions for the of for the acquisition CAM			Provision for well closure			Provisions for periodic maintenance			Total
At January 1, 2013		11,380			6,006		35,220			4,897			-			57,503
Additions		2,039			-		-			154			12,868			15,061
Transfer from intangibles													6,728			6,728
Additions from business combinations		-			3,846		-			-			-			3,846
Reversals		( 882	)		-		( 13,674	)		-			-			(14,556	)
Payments		( 320	)		-		-			( 199	)		( 15,750	)		( 16,269	)
At December 31, 2013		12,217			9,852		21,546			4,852			3,846			52,313

At January 1, 2014	12,217		9,852		21,546		4,852		3,846		52,313
Additions	1,376		-		-		2,696		2,487		6,559
Additions from business combinations
Morelco (Note 31-a)	-		17,533		-		-		-		17,533
Additions from business combinations
Coasin (Note 31-b)	-		2,658		-		-		-		2,658
Reversals	-		(4,116	)	(9,394	)	-		-		(13,510	)
Payments	( 537	)	-		-		( 338	)	( 6,333	)	(7,208	)
At December 31, 2014	13,056		25,927		12,152		7,210		-		58,345

22 EQUITY

a) Capital -

As of December 30, 2014 and 2013, the authorized, subscribed and paid-in capital, according to the Company’s bylaws, as amended, comprises 660,053,790 common shares at S/.1.00 par value each.

At the General Shareholders’ Meeting held on March 30, 2012, the decision was made to capitalize retained earnings, which increased capital from S/.390,799 to S/.558,284. As a consequence of this transaction the nominal value of shares increased from S/.0.7 to S/.1.00 per share.

Subsequently, a decision made at the General Shareholders’ Meeting on March 26, 2013, as well as agreements adopted at meetings of the Board on May 30, July 23 and August 22 of 2013, mandated the issuance of common stock through a public offering of "American Depositary Shares" (ADS´s) registered in the Securities and Exchange Commission (SEC) and NYSE, increasing the capital sum from S/.558,284 to S/.660,054.

This capital increase was carried out in two tranches as follows:

(i) The first tranche for the amount of S/.97,674 (representing the issuance of 97,674,420 common shares issued and 19,534,884 ADS’s, therefore, at 5 shares per ADS), and,

(ii) A second tranche for the amount of S/.4,095 representing the issuance of 4,095,180 common shares and ADS’s 819,036 (issued at 5 shares per ADS rate).

As of December 31, 2014 the Company’s capital structure is as follows:

			Total
Percentage of individual	Number of		percentage of
interest in capital	shareholders		interest
Up to 1.00		1,841		15.23	%
From 1.01 to 5.00		10		23.38	%
From 5.01 to 10.00		1		5.12	%
Over 10		2		56.27	%
		1,854		100.00	%

- 91 -

(All amounts are expressed in thousands of S/. unless otherwise stated)

As of December 31, 2014 the year-end quoted price of the Company’s shares was S/.7.26 per share, with a trading frequency of 90.48% (quoted price of S/.11.90 per share and a trading frequency of 95.24% at December 31, 2013).

b) Legal reserve -

In accordance with Peruvian Company Law, the Company’s legal reserve is formed by the transfer of 10% of the annual net profit, up to a maximum of 20% of the paid-in capital. In the absence of profits or freely available reserves, this legal reserve can be applied to offset losses but it has to be replenished with the profits to be obtained in subsequent years. This reserve can also be capitalized but its subsequent replenishment is equally mandatory.

c) Share premium  -

At the General Shareholders’ Meeting held on March 26, 2013, and the subsequent Board of Directors’ meetings held on May 30, July 23 and August 22, 2013, the Board decided to issue common shares through a public offering of American Depositary Shares (ADS) registered with the Securities and Exchange Commission (SEC) and listed on the New York Stock Exchange (NYSE).

In July and August 2013, the Company issued 101,769,600 new common shares, equivalent to 20,353,920 ADS in two tranches (note 22-a).

The excess of the total proceeds obtained by this transaction in comparison with the nominal value of these shares was S/.1,055,488 (net of commissions and other related costs for S/.48,375 and net of tax effects for S/.9,840). This amount was recorded in the premium for issuance of shares in the consolidated statement of changes in shareholders’ equity.

At December 31, 2013 a total of 265,877,310 shares were represented by ADS (equivalent to 53,175,462 ADS).

At December 31, 2014 and 2013, a total of 253,635,480 shares were represented by ADSs (equivalent to 50,727,096 ADSs at 5 shares per one ADS).

In addition, in this account is recognized the difference between nominal and transaction value on additional acquisitions of shares from non-controlling interest. Detail of these transactions in 2012, 2013 and 2014 are disclosed in note 34.

23 DEFERRED INCOME TAX

Deferred income tax is broken down by its estimated reversal period as follows:

	December 31,
	2013			2014
Deferred income tax asset:
Reversal expected in the following 12 months		87,635			116,699
Reversal expected after 12 months		47,886			19,107
Total deferred tax asset		135,521			135,807
Deferred income tax liability:
Reversal expected in the following 12 months		(98,401	)		(50,733	)
Reversal expected after 12 months		(40,152	)		(28,422	)
Total deferred tax liability		(138,554	)		(79,155	)
Deferred income tax (liability) asset, net		(3,033	)		56,652

- 92 -

(All amounts are expressed in thousands of S/. unless otherwise stated)

The gross movement of the deferred income tax item is as follows:

	2012			2013			2014
Deferred income tax asset (liability), net as of January 1		19,908			(17,364	)		( 3,033	)
Credit (charge) to income statement (Note 28)		(8,666	)		5,704			66,373
Tax charged to other comprehensive income		(1,158	)		(8,159	)		(1,328	)
Tax charged to equity		-			9,840			-
Acquisition of subsidiary (Morelco)		-			-			4,230
Acquisition of subsidiary (Coasin)		-			-			(178	)
Acquisition of subsidiary (DSD)		-			(2,499	)		-
Acquisition of subsidiary (Stracon GyM)		(6,653	)		-			-
Acquisition of subsidiary (Vial y Vives)		(20,458	)		-			-
Recovery PPUA charged to account receivable		-			-			(5,938	)
Deconsolidation of SEC and LQS		-			835			-
Other (decreases) increases		(337	)		8,610			(3,474	)
Total as of December 31		(17,364	)		(3,033	)		(56,652	)

The provisional payment on absorbed profits (hereinafter PPUA) comprises the recovery of the first-category income tax (Chilean corporate tax) on own profits and profits obtained from other entities in which the entity has an interest (third party attributable profits) and which have been partially or fully absorbed against tax losses. As a result of the reorganization of the Chilean entities, VyV-DSD S.A. has recognized PPUA on the tax losses absorbed from Ingeniería y Construcción Vial y Vives S.A.

VyV – DSD S.A. has a tax goodwill credit balance ( higher acquisition valued paid over the acquiree’s own tax capital) which arose from the reorganization of entities that took place in 2014, which, under Chilean applicable tax laws and regulations is not considered a loss in the period in which it is generated but has to be proportionally allocated to the non-monetary assets received from the  acquiree up to the market price of those assets, increasing the tax cost of those assets; any reversals will affect profit or loss. The unallocated portion will be considered as deferred expenses and will be deducted as a tax expenses over a period of 10 years. The allocation performed was as follows: S/.8,560 investments, S/.2,114 fixed assets and S/.9,768 deferred expenses (non-attributable portion).

- 93 -

(All amounts are expressed in thousands of S/. unless otherwise stated)

The movement of deferred tax assets and liabilities in the year, without taking into account the offsetting of balances, is as follows:

			Difference			Fair			Outstanding			in depreciation
Deferred income tax	Non-taxable		in depreciation			value			work in			rates of assets
liability	income		rates			gains			progress			leased			Others			Total
At January 1, 2012		-		13,056			(357	)		2,774		10,266				3,397			29,136
Charge (credit) to results		4,236		(2,054	)		-			22,346			(1,221	)		7,120			30,427
Charge (credit) to OCI		-		-			-						-			(612	)		(612	)
Acquisition of Stracon GyM (Note 30-c)		-		2,181			-			4,472			-			-			6,653
Acquisition of Vial y Vives (Note 30-b)		-		236			17,152			-			-			3,605			20,993
Other increases		-		-			-			-			-			1,568			1,568
At December 31, 2012		4,236		13,419			16,795			29,592			9,045			15,078			88,165
Charge (credit) to results		9,954		(270	)		34			38,448			(50	)		4,461			52,577
Charge (credit) to OCI		-		-			8,169			-			-			1,520			9,689
Acquisition of DSD (Note 30-a)		-		1,148			4,269			-			-			(834	)		4,583
Other increases		-		(1,176	)		(1,410	)		18,734			1,505			(16,596	)		1,057
At December 31, 2013		14,190		13,121			27,857			86,774			10,500			3,629			156,071
Charge (credit) to results		-		9,936			(8,585	)		(72,488	)		219			5,754			(65,164
Charge (credit) to OCI		-		-			-			-						1,328			1,328
Reclassification of prior years		-		13,458			(5,540	)		82			(274	)		7,777			15,503
Other increases		-		-			-			-			-			3,049			3,049
At December 31, 2014		14,190		36,515			13,732			14,36			10,445			21,537			110,787

- 94 -

(All amounts are expressed in thousands of S/. unless otherwise stated)

Deferred income tax asset	Provisions			Accelerated tax depreciation			Tax losses		Outstanding work in progress			Provision for vacations unpaid		Investments in subsidiaries		Others			Total
At January  1, 2012		22,714			6,178			4,000		737			1,375		-		14,040			49,044
Credit (charge) to results		(6,656	)		6,529			13,936		13,456			1,506		-		(7,010	)		21,761
Credit (charge) to OCI		-			-			-		-			-		-		(1,768	)		(1,768	)
Acquisition of  Vial y Vives (Note 30-b)		535			-			-		-			-		-		-			535
Other increases		134			299			-		-			55				741			1,229
At December 31, 2012		16,727			13,006			17,936		14,193			2,936		-		6003			70,801
Credit (charge) to results		3,788			(6,499	)		23,544		33,242			1,984		-		2115			58,174
Charge (credit) to OCI		1,530			-			-		-			-		-		-			1,530
Credit (charge) to equity (Note 21-c)		-			-			9,840		-			-		-		-			9,840
Acquisition of DSD (Note 30-a)		-						-		966			684				542			2,192
Other increases		1,842			1,836			1,560		3,244			1,690		-		330			10,502
At December 31, 2013		23,887			8,343			52,880		51,645			7,294		-		8,990			153,039
Credit (charge) to results		1,579			9,054			2,492		( 24,886	)		4,083		5,613		3,274			1,209
Acquisition of Coasin (Note 31-a)		(178	)		-			-		-			-		-		-			(178	)
Acquisition of Morelco (Note 31-b)		-			-			-		-			-		4,230		-			4,230
PPUA,charged to accounts receivable		-			-			-		-			-		-		(5,938	)		(5,938	)
Other increases		-			-			-		-			-		-		( 425	)		(425	)
Reclassification of prior years		324			5,953			3,664		(2,818	)		5,596		-		2,783			15,502
At December 31, 2014		25,612			23,350			59,036		23,941			16,973		9,843		8,684			167,439

- 95 -

(All amounts are expressed in thousands of S/. unless otherwise stated)

As of December 31, 2014, total tax losses amounted to S/.231 million which S/.36 million are expected to be applied in 2015, S/.92 million in 2016 and the remaining balance in the following periods (S/.213 million in 2013, of which S/.57.4 million are expected to be applied in 2014, S/.65.4 million in 2015 and the remaining balance in the following periods.

24 WORKERS’ PROFIT SHARING

As established under current legislation, profit sharing plans of Graña y Montero S.A.A., consortiums and local subsidiaries is 5% of the net income. This profit sharing is deductible for the purposes of income tax calculation.

With respect to the Dominican Republic, the profit sharing plan rate is 10%. In the specific case of Chile, profit sharing plans are a component of remuneration and not a determined percentage of profit. In Brazil and Colombia profit sharing plans are not required by law.

In 2014, profit sharing plans amounted to S/.37 million (S/.16 million and S/.22.7 million in 2013 and 2012, respectively).

The distribution of profit sharing plans in the income statement as of December 31 is as follows:

	2012		2013		2014
Cost of sales		18,633		12,990		27,396
Administrative expenses		4,088		3,060		9,541
Total at December 31		22,721		16,050		36,937

25 EXPENSES BY NATURE

For the years ending December 31, this item is made up of the following:

	Cost of		Adminis-
	services		trative
	and goods		expenses
2012:
Purchase of goods		252,186		-
Personnel charges		1,458,715		125,558
Services provided by third-parties		1,389,371		51,378
Taxes		7,238		863
Other management charges		292,740		52,425
Depreciation		159,526		13,492
Amortization		60,517		10,968
Impairment (inventories and accounts receivable)		11,192		2,496
Variation of inventories		888,334		-
		4,519,819		257,180
2013:
Purchase of goods		212,819		-
Personnel charges		1,527,146		169,469
Services provided by third-parties		1,520,254		93,666
Taxes		8,930		614
Other management charges		533,544		72,413
Depreciation		168,090		13,389
Amortization		67,254		11,133
Impairment of inventories and accounts receivables		2,349		764
Change in inventories		922,992		344
		4,963,378		361,792

- 96 -

(All amounts are expressed in thousands of S/. unless otherwise stated)

	Cost of			Adminis-
	services			trative
	and goods			expenses
2014:
Purchase of goods		1,218,522			836
Personnel charges		1,864,053			210,028
Services provided by third-parties		2,105,226			120,714
Taxes		11,356			6,212
Other management charges		686,593			63,124
Depreciation		170,784			14,525
Amortization		68,089			6,641
Impairment of inventories and accounts receivables		2,477			71
Change in inventories		(69,989	)		(784	)
		6,057,111			421,367

26 FINANCIAL INCOME AND EXPENSES

For the years ending December 31 these items included the following:

	2012			2013			2014
Financial income:
Interest on loans granted to related parties		3,005			113			-
Interest on short-term bank deposits		2,007			5,230			8,010
Interest on loans		14,644			15,497			62
Income from reimbursement of performance bond		968			783			377
Commissions and guarantees		290			2,053			969
Interest on third-party loans		350			874			837
Exchange difference gains, net		21,126			-			-
Derivative financial instruments		12,745			13,972			-
Other		2,711			1,831			1,207
		57,846			40,353			11,462
Financial expenses:
Interest expense:
- Interests to related parties		-			500			3,026
- Bank loans		25,897			40,000			21,307
- Finance lease		19,119			14,164			12,872
- Multilateral loans		6,422			4,975			5,022
- Commissions and guarantees		-			5,155			4,927
- Third party loans		1,333			895			2,432
Derivative financial instruments)		14,763			15,903			1,819
Exchange difference losses, net		-			70,418			44,282
Other financial expenses		5,375			6,840			9,992
Less capitalized interest		(4,780	)		(6,048	)		(2,863	)
		68,129			152,802			102,816

27 OTHER INCOME AND EXPENSES

At the acquisition date of CAM in 2011 (Note 31-d), as part of the purchase price allocation process and based on external lawyers reports, the Company accounted for a provision amounting to S/.102.7 million for contingent liabilities mainly related to labor and tax issues considered as possible and probable as stated by IAS 37, which have expiration dates according to legal requirements between 2012 and 2016. Most of the amount shown in this account corresponds to the reversal of this provision.

- 97 -

(All amounts are expressed in thousands of S/. unless otherwise stated)

The amount recognized as other income and expenses mainly corresponds to the reversal of such original registry amounted to S/.9.4 million in 2014(S/.13.6 million and S/.68 million in 2013 and 2012, respectively); and primarily reflects the liabilities that expired under the laws of each country during year 2012, 2013 and 2014.

During 2014, this item amounted to S/.9.4 million relating to tax and labor-related contingencies of Brazil, Colombia and Peru for S/.8.6 million, S/.0.6 million and S/.0.2 million, respectively. In 2013 this item amounted to S/.13.6 million relating to tax and labor-related contingencies of Brazil, Chile and Peru for S/.9 million S/.4 million and S/.0.6 million, respectively.

In 2012 it amounted to S/.68 million, related to labor-related and tax contingencies for S/.40 million (from Brazil and Colombia for S/.32 million and S/.8 million, respectively) and trade liabilities amounting to S/.28 million. The probability of payment became remote throughout the course of the years 2012 and 2013, as the statute of limitations for such issues expired.

During 2014 the Group received dividends from its investment in Transportadora de Gas del Perú S.A. (TGP) classified as available for sale financial assets for S/.9.35 million and recognised a commission fee for S/.7.5 million (Note 9). In addition, an impairment loss related to fixed asset was recorded for S/.10.34 million (Note 16).

28 INCOME TAX EXPENSES

a) In accordance with current legislation in Perú, Chile, Brasil, Colombia, Panamá and Dominican Republic, each Company in the Group is individually subject to the applicable taxes. Management considers that it has determined the taxable income under general income tax laws in accordance with the current tax legislation of each country.

b) Changes in the Peruvian Income Tax Law -

By means of Law No.30296 enacted on December 31, 2014 amendments to Income Tax Law have been made, which are effective starting in fiscal year 2015 onwards.

Among these amendments, it should be noted the progressive reduction in the corporate income tax rate (on the Peruvian third-category income earners) from 30% to 28% for fiscal years 2015 and 2016; then a reduction to 27%  for fiscal years 2017 and 2018; and a final reduction to 26% from fiscal year 2019 onwards. Tax on dividends and other forms of profit distribution, agreed on by any legal entities to non-domiciled individuals and legal persons is to be progressively increased from 4.1% to 6.8% for distributions that are agreed on or made available in cash or in kind during fiscal years 2015 and 2016; then an increase to 8.8% for fiscal years 2017 and 2018 will be effective; and a final increase to 9.3% will be effective from fiscal year 2019 onwards. The distribution of retained earnings until December 31, 2014 will continue to be subject to a 4.1% tax even when the distribution is to be made in the subsequent years.

c) On September 29, 2014, Law No 20780 was enacted by which certain changes are made to the Chilean tax system, such as: changes in the Income Tax Law, VAT Law and Tax Code. With respect to income tax, two systems have been established:

i) Attributable income system: the tax rate applicable on entities will be progressively increased, 21% in 2014, 22.5% in 2015, 24% in 2016, up to 25% in 2017. This system levies the shareholders of Chilean entities with taxes on an annual basis regardless of any effective distribution of profits from the local entity; and entitles them to use the total taxes paid as income tax fiscal credit.

ii) Partially integrated system. the tax rate applicable on entities will be progressively increased, 21% in 2014, 22.5% in 2015, 24% in 2016, 25.5% in 2017, up to 27% in 2018. This system levies the shareholders of Chilean entities that distribute dividends and entitle them to use such distribution as a fiscal credit at a 65% of the total taxes paid.  This limit does not apply to investors with whom Chile had signed double taxation agreements, such as Peru.

- 98 -

(All amounts are expressed in thousands of S/. unless otherwise stated)

Companies will be able to choose the system they will apply in 2017 until June and December 2016.

Based on the above, the Group has assessed the future realization of its temporary items underlying its deferred income tax based on the application of the new tax rates and is determining the required adjustments that will result from the expected changes in tax rates.

e) The income tax expense shown in the consolidated income statement comprises:

	2012		2013			2014
Current tax:
- Current tax on profit of the year		145,909		188,027			212,570
Deferred tax:
- Generation and reversal of
temporary differences (Note 23)		8,666		(5,704	)		(66,373	)
Income tax expense		154,575		182,323			146,196

f) The Group’s income tax on profit before taxes differs from the theoretical amount that would have resulted from applying the weighted-average income tax rate applicable to the profit of the consolidated companies, as follows:

	2012			2013			2014
Profit before income tax		520,826			594,467			507,429
Income tax by applying local applicable tax rates
on profit generated in the respective countries		156,248			211,234			236,114
Tax effect on:
- Non-taxable income		(11,550	)		(39,494	)		(104,421	)
- Associates net profit		-			(9,348	)		1,790
- Non-deductible expenses		19,756			24,160			25,967
- Unrecognized deferred tax
asset income		-			-			13,922
- Adjustment for changes in rates of income  tax		-			-			(2,746	)
- Tax goodwill		-			-			(20,542	)
- PPUA		-			-			(5,938	)
- Prior year adjustment		(7,432	)		104			3,891
- Others		(2,447	)		(4,333	)		(1,841	)
Income tax charge		154,575			182,323			146,196

f) Peruvian tax authorities have the right to examine, and, if necessary, amend the income tax determined by the Company in the last four years - from January 1 of the year after the date when the tax returns are filed (years subject to examination). Therefore, years 2010 through 2014 are subject to examination by the tax authorities. Since differences may arise over the interpretation by the tax authorities of the regulations applicable to the Company, it is not possible at present to estimate if any additional tax liabilities will arise as a result of any eventual examinations. Any additional tax, fines and interest, if they occur, will be recognized in the results of the period when such differences with the tax authorities are resolved. Management considers that no significant liabilities will arise as a result of these possible tax examinations. Additionally, income tax returns for fiscal years 2011 to 2013 and those to be filed for fiscal year 2014 remain open for examination by the Chilean tax authorities who have the right to carry out said examination within the three years following the date the income tax returns have been filed.

- 99 -

(All amounts are expressed in thousands of S/. unless otherwise stated)

g) As established under regulations in force in Peru, for purposes of determining income tax and the general sales tax, transfer pricing must be taken into account for operations with related parties and/or tax havens, which must have documentation and information supporting the methods and valuation criteria applied in their determination. Peruvian tax authorities are entitled to request such information from the taxpayer.

h) Temporary tax on net assets -

The temporary tax on net assets is applied by the companies which operate in Peru, to third category income generators subject to the Peruvian Income Tax General Regime. Effective in the year 2012, the tax rate is 0.4%, applicable to the amount of the net assets exceeding S/.1 million.

The amount effectively paid may be used as a credit against payments on account of income tax under the General Regime or against the provisional tax payment of the income tax of the related period.

i) The weighted-average tax rate was 29.30% (30.70% in 2013). The decrease in the effective tax rate in relation with the prior year’s rate primarily resulted from the addition of tax credits arising from the reorganization of the Chilean entities.

29 ACCUMULATED OTHER COMPRENHENSIVE INCOME

Accumulated other comprehensive income consisted of the fair value of the variable-fixed interest rate hedge signed by GMP S.A., a foreign currency translation adjustment related to foreign subsidiaries fair value of available for sale assets and the exchange difference resulting from permanent investment overseas.  These movements are shown net of income tax, except for the translation adjustment.

The analysis of the movement is as follows:

										Exchange
							Increase in			difference from
	Cash						fair value of			net investment
	flow			Translation			available-for			in a foreign
	hedge			adjustment			sale assets			operation (a)			Total
At January 1, 2012		(3,448	)		(4,322	)		7,460			-			(310	)
Additions (*)		(3,216	)		(1,155	)		-			-			(4,371	)
Tax effects (*)		965			-			-			-			965
Other comprenhensive income
of the year		(2,251	)		(1,155	)		-			-			(3,406	)
At December 31, 2012		(5,699	)		(5,477	)		7,460						(3,716	)
Additions (*)		5,066			(467	)		27,229			-			31,828
Tax effects (*)		(1,520	)		-			(8,169	)		-			(9,689	)
Other comprenhensive income
of the year		3,546			(467	)		19,060			-			22,139
At December 31, 2013		(2,153	)		(5,944	)		26,520			-			18,423
Additions (*)		750			(13,086	)		4,811			( 17,030	)		(24,555	)
Tax effects (*)		(210	)		-			( 1,251	)		4,428			2,967
Adjustment for changes
In rates of income tax		-			-			1,089			-			1,089
Other comprenhensive income
of the year		540			(13,086	)		4,649			( 12,602	)		(20,499	)
At December 31, 2014		(1,613	)		(19,030	)		31,169			( 12,602	)		(2,076	)

- 100 -

(All amounts are expressed in thousands of S/. unless otherwise stated)

(*) Amounts in the table above represent only amounts attributable to the Company’s controlling interest net of taxes. Below is the movement in Other Comprehensive Income for each year:

	2012			2013			2014
Controlling interest		(3,406	)		22,139			(20,499	)
Non-controlling interest		(982	)		(1,947	)		(8,563	)
Adjustment for actuarial gains and losses, net of tax		(3,678	)		(4,591	)		(1,332	)
Total value in OCI		(8,066	)		15,601			(30,394	)

(a) At December 31, 2014 the balance comprises the effect of exchange difference of S/.10.6 million resulting from a loan denominated in foreign currency granted by GyM S.A. to its subsidiary GyM Chile S.p.A for the acquisition of VyV – DSD S.A and an exchange difference of S/.1.9 million  resulting from a loan granted by the Company to CAM Holding S.p.A. for a total effect of S/.10.9 million.

The effect of the exchange difference is recognized initially in Other comprehensive income as required under International Financial Reporting Standards since this exchange difference meets the qualifying criteria to be considered a net investment in a foreign operation. GyM S.A. does not plan repay such borrowing in the foreseeable future since no payment schedule has been agreed at the date of the statement of financial position.

The exchange difference recognized in Other comprehensive income will be reclassified to the statement of income upon sale of the foreign operation.

30 CONTINGENCIES, COMMITTMENTS AND GUARANTEES

a)      Tax contingencies -

During the course of 2013 and 2014, Graña y Montero S.A.A.  was audited by the Peruvian Tax Authorities (SUNAT) for fiscal years 2010, 2011 and 2012. Before the date of issue of the financial statements, SUNAT issued tax determination and tax penalties against the Company as a result of the 2010 tax audit; the Company filed a challenge against those resolutions. Also, decisions remain to be issued on claims filed against tax resolutions issued in 2012 and 2013 for fiscal 2007, 2008 and 2009. Management and its legal advisors consider that the outcome of these tax legal actions will be favorable to the Company.

As a result of the tax audits of fiscal 1999, 2001 and 2010 on subsidiary GyM S.A., SUNAT issued tax determination and tax penalties resolutions amounting to approximately S/.16 million (S/.29 million as of December 31,2013).

During the year 2014, Joint Operations where GyM SA participates as an investor and GMD S.A., were audited by the Peruvian Tax Authorities (SUNAT) for fiscal year 2012 and 2011 respectively and issued tax determination and tax penalties against these entities, the maximum amount of exposure is S/.2.2 million and S/.2.3 million respectively.

Management expects the outcome of the other court actions will be favorable to the Company considering their nature and characteristics as well as the opinion of its legal advisor.

b)      Other contingencies -

Year 2014 -

i) Civil court actions mainly involving damages and contract terminations as well as work accidents  amounting to  S/.5.8 million (S/. 3.0 million for GyM S.A., S/.2.5 million for GMI SA. and S/.0.27 million for Viva GyM).

ii) Arbitration processes amounting to S/.110.59 million related to an action brought by Contugas S.A.C. against the court action brought by GyM S.A. involving recognition of expenses and indemnification for costs and damages.

- 101 -

(All amounts are expressed in thousands of S/. unless otherwise stated)

iii) Challenge administrative actions amounting to S/.1.1 million (S/. 0.8 million comprising an action brought by he Peruvian mining and energy regulator (OSINERMIN) for the alleged noncompliance of  GMP S.A. and Consorcio Terminales  and S/.0.2 million comprising an action brought by  the Peruvian Labor Ministry.against  GyM S.A.

iv) Administrative actions amounting to S/.1.8 million (S/.0.9  comprising an action brought by the Peruvian agency for the protection of the consumer ("Instituto Nacional de Defensa de la Competencia y de la Protección de la Propiedad Intelectual- INDECOPI)  against  Viva GyM S.A. for the alleged lack of adequate construction techniques and finishings implemented in housing developments).

v) Labor-related processes amounting to S/.2.8 million (S/.2.5 million were actions against GMP S.A., S/. 0.12 million against Cam Peru S.A. and S/. 0.14 million against GyM S.A.).

Management considers that the above-described actions brought against Group companies will be found baseless given their nature

Year 2013 -

i) As of December 31, 2013, civil court actions have been brought against the Company mainly relating to claims of Municipalities in respect of work execution with no municipal authorization and failure to pay municipal rights for S/.2.7 million (S/.4.7 million in 2012).

ii) Also, similar actions have been brought against jointly-controlled businesses in which the Company has an interest, mainly relating to work executed without the respective municipal authorization; these actions total approximately S/.0.7 million (S/.0.8 million in 2012).

iii) Management believes that the court actions mentioned above will be declared will be declared without merit, and therefore, no liabilities will arise in addition to those already paid as of December 31, 2013.

iv) In February 2003 the Company was served notice of General Management Resolution No.004-2003-GG-OSITRAN issued by the Peruvian regulator of infrastructure and public transport investment - (OSITRAN) by which payment of S/.250 plus interest was ordered on the grounds of alleged withholdings of the Transport Fund (Fondo Vial) by the Company. To date, the Company has challenged the decision and the hearing date remains to be set by the Administrative Court. Management considers that the outcome of this claim will be favorable to the Company and will not affect future financial results.

c)      Commitments and Guarantees

As of December 31, 2014, the Group had guarantee commitments with different financial institutions securing transactions for a total US$21.6 million and S7.535.5 million (US$83 million and S/.3.8 million as of December 31, 2013).

31 BUSINESS COMBINATIONS

a) Acquisition of Morelco S.A.S.

In December 23, 2014, through subsidiary GyM S.A. the Company obtained control of Morelco S.A.S. (Morelco) by acquiring 70.00% of its capital shares.  Morelco is an entity domiciled in Colombia that is mainly engaged in providing construction and assembly services.  This acquisition is part of the Group’s plan to increase its presence in markets that present high growth potential as in Colombia, and in attractive industries, such as mining and energy.

- 102 -

(All amounts are expressed in thousands of S/. unless otherwise stated)

The acquisition value of the investment in Morelco amounted to US$93.7 million (equivalent to S/.277.1 million) which is comprised of cash payments of US$78.5 million (equivalent to S/.231.5 million), a balance payable of US$15.3 (equivalent to S/.45.7 million), and resulted in the recognition of goodwill for US$36.1 million (equivalent to S/.105.8 million) at the acquisition date.

The following tables summarize the consideration paid for Morelco and the provisional determination of fair value of assets acquired, liabilities assumed and the non-controlling interest at the acquisition date:

	S/.000		US$000
Cash and cash equivalents	69,930			23,514
Trade receivables	92,138			30,981
Outstanding work accounts
in progress – receivables from clients	101,533			34,140
Other receivables	63,949			21,503
Inventories	18,037			6,065
Prepaid expenses	2,132			717
Investments held for sale	7,291			2,452
Property, plant and equipment	70,756			23,792
Intangibles	64,491			21,685
Deferred income tax assets	8,031			2,700
Short-term borrowings	(31,204	)		(10,492	)
Long-term borrowings	(9,315	)		(3,132	)
Trade accounts payables	(103,739	)		(34,882	)
Other accounts payables	(87,863	)		(29,544	)
Contingent liabilities	(17,533	)		(5,895	)
Deferred income tax liability	(3,801	)		(1,278	)
Fair value of net assets (provisional)	244,833			82,325
Non-controlling interest (30.00%)	(73,450	)		(24,697	)
Goodwill (Note 17)	105,765			36,118
Initial purchase consideration	277,148			93,746
Cash payment for acquisition	231,464			78,462
Cash and cash equivalents of the acquired subsidiary	(69,930	)		(23,514	)
Direct cash outflow during the year for the acquisition	161,534			54,948

At December 31, 2014, GyM S.A. has an estimated balance payable related to this purchase amounting to US$15.3 million (equivalent to S/.45.7 million), to be discussed and confirmed after the revision is completed by the buyer and the seller.  This amount  is presented  in the item “Other accounts payables” and comprises the portion of consolidation that will be subject to a balance adjustment at the acquisition date, following the procedure below:

a) On April 30, 2015, GyM S.A. will provide to the selling party with a certificate (“Closing Certificate”) that will include: i) audited balance sheet at December 31, 2014 and ii) determination of calculation of balance adjustment and adjustment for work contracted remaining to be completed (backlog) under the purchase-sale share agreement.

b) On April 30, 2016, GyM S.A. will provide  to the selling party with a certificate (“EBITDA 2015 Certificate”) which will include: i) audited balance sheet at December 31, 2015 and ii) EBITDA adjustment calculation determination.

The amount referred above as balance adjustment, although has been considered in the financial statements, has not yet been accepted by the buyer and the seller as the final adjustment.

Acquisition related costs of S/.4.5 million have been charged to administrative expenses in the income statement of 2014.

- 103 -

(All amounts are expressed in thousands of S/. unless otherwise stated)

If Morelco had been consolidated from January 1, 2014, the revenue and profit generated would have been S/.722.57 million and S/.80.75 million, respectively.

Provided that the distribution of the consideration is divided between the fair values on a provisional basis for the 2014 financial statements, the Group will complete the distribution process in a period that should not exceed one year as of the acquisition date of Morelco. During such review period, additional assets and liabilities will be recognized that may arise from updated data that may be obtained regarding existing information at the acquisition date and that does not comprise to new incidents occurred after the acquisition date; that is, if the Group were to adjust initial amounts recognized at the business combination dates.

Pursuant to the Shareholder Agreement associated with the purchase of Morelco, GyM S.A. also entered into a put and call option agreement in relation to the ordinary shares retained by the

non-controlling interest, which provided sellers with the right to sell its retained interest to GyM S.A (put option). As per this agreement, GyM S.A. has the obligation to purchase shares owned by the sellers since the second anniversary of the initial purchase whenever the non-controlling shareholder requests it, for an amount based on a factor applied on an average measure of EBITDA of the last 12 months, limited to a floor equivalent to the price applied for the initial shares purchase. According to the contract the put option expires between month 51 and 63 as from the date of the agreement.

On the other hand, GyM S.A. has the right to buy all the shares (call option) of the non-controlling interest at everytime during the validity period of the Shareholder Agreement (from the date of the contract until month 63) for an amount determined in the same way as applied for the put option.

Under IFRS the put option represents an obligation (Note 20) to purchase shares from the non-controlling interest, and accordingly, the Group recognised a put option liability at its fair value with a corresponding reduction in equity decreasing the retained earnings.

b) Acquisition of Coasin Instalaciones Ltda.

In March 2014, through the subsidiaries CAM Chile S.A. and Inversiones y Construcciones Ltda., the Group acquired control of Coasin Instalaciones Limited with the purchase of 100.00% of its capital shares.  Coasin is an entity incorporated in Chile and is mainly engaged in providing installation and maintenance services for networks and equipment related to the telecommunications industry.

This acquisition is part of the Group’s plan to increase its presence in markets that present high growth potential as in Chile, and in other attractive industries, such as utilities.

The acquisition value of the investment in CAM Chile S.A. amounted to US$2.1 million (equivalent to S/.6.4 million) and resulted in the recognition of goodwill for US$ 1.9 million (equivalent to S/.5.7 million) at the acquisition date.

The following tables summarize the consideration paid for Coasin and the provisional determination of fair value of assets acquired, liabilities assumed and the non-controlling interest at the acquisition date:

- 104 -

(All amounts are expressed in thousands of S/. unless otherwise stated)

	S/.000		US$000
Cash and cash equivalents	3			1
Trade accounts receivables	4,675			1,564
Inventories	276			92
Prepaid expenses	33			11
Property, plant and equipment	711			238
Intangibles	1,377			461
Deferred income tax liability	(178	)		(60	)
Tradeaccounts payables	(3,592	)		(1,202	)
Contingent liabilities	(2,658	)		(889	)
Fair value of net assets (provisional)	647			216
Goodwill (Note 17)	5,743			1,921
Consideration provided for the acquisition	6,390			2,137
Payment for the acquisition settled in cash	6,390			2,137
Cash and cash equivalents of the subsidiary acquired	(3	)		(1	)
Direct outflow of cash for the acquisition	6,387			2,136

Revenue and profit resulting for the period between the date of acquisition and December 31, 2014 amounted to S/.66.3 million and S/.0.7 million, respectively.

Provided that the distribution of the consideration is divided between the fair values on a provisional basis for the 2014 financial statements, the Group will complete the distribution process in a period that should not exceed one year as of the acquisition date of Coasin.  During such review period, additional assets and liabilities would be recognized that may arise from updated data that may be obtained regarding existing information at the acquisition date and that does not comprise to new incidents occurred after the acquisition date; that is, if the Group were to adjust initial amounts recognized at the business combination dates.

c) Acquisition of DSD Construcciones y Montajes S.A. (DSD)

In August 2013, through the subsidiaries GyM Minería S.A., Ingeniería y Construcción Vial y Vives S.A. and GyM Chile S.p.A., the Group acquired control of DSD with the purchase of 85.95% of its equity shares. DSD is an entity domiciled in Chile whose main economic activity is the execution of electromechanical works and assemblies in construction projects of oil refineries, pulp and paper, power plants and mining plants.

This acquisition is part of the Group’s plan to increase its presence in markets that present high growth potential as in Chile, and in attractive industries, such as mining and energy.

During the twelve-month period after the acquisition date, the Group reviewed the allocation of the purchase price for the acquisition of DSD Construcciones y Montajes S.A. carried out in August 2013 and modified goodwill for a net decrease of S/.1.7 million (net of tax impact of S/.0.5 million and non-controlling interest of S/.0.3 million) adjusting the values of fixed assets, intangibles, trade receivables, other receivables and contingent liabilities for S/.0.4 million, S/.1.9 million, S/.0.2 million, S/.3.5 million and S/.3 million, respectively.

The consideration provided by GyM to purchase DSD Construcciones y Montajes S.A. amounted to US$37.2 million (equivalent to S/.103.9 million).  The final attribution of the price paid between fair values after the review period resulted in the recognition of goodwill for S/.6.1 million which is illustrated below:

- 105 -

All amounts are expressed in thousands of S/. unless otherwise stated)

	Previously stated						Revised
		S/.000		US$000				S/.000		US$000
Cash and cash equivalents		15,530			5,562			15,530			5,562
Trade accounts receivables		74,502			26,684			74,317			26,618
Receivables from related parties		6,605			2,366			10,083			3,611
Prepaid expenses		1,032			369			1,032			369
Investments		2,608			935			2,608			935
Property, plant and equipment		52,504			18,805			52,922			18,955
Intangibles		5,741			2,056			7,591			2,719
Deferred income tax assets		2,192			785			2,192			785
Trade accounts payables		(5,328	)		(1,908	)		(5,328	)		(1,908	)
Other accounts payables		(38,679	)		(13,854	)		(38,679	)		(13,854	)
Contingent liabilities		(815	)		(292	)		(3,846	)		(1,378	)
Deferred income tax liability		(4,187	)		(1,500	)		(4,692	)		(1,681	)
Fair value of net assets		111,705			40,008			113,730			40,733
Non-controlling interest (14.05%)		(15,701	)		(5,624	)		(15,986	)		(5,725	)
Goodwill (Note 17)		7,868			2,802			6,128			2,178
Total paid for the purchase		103,872			37,186			103,872			37,186
Cash payment for acquisition		103,872			37,186			103,872			37,186
Cash and cash equivalents of the
acquired subsidiary		(15,530	)		(5,562	)		(15,530	)		(5,562	)
Direct outflow of cash flows for the acquisition		88,342			31,624			88,342			31,624

Acquisition related costs of S/.0.65 million have been charged to administrative expenses in the consolidated income statement for the year ended 31 December 2013.

Revenue and profit generated for the period between the date of acquisition to December 31, 2013 were S/.82.97 million and S/.8.3 million, respectively.

If DSD Construcciones y Montajes S.A. would have been consolidated since January 1, 2013, the revenue and profit generated would have been S/.182.68 million and S/.10.15 million, respectively.

d)      Acquisition of Vial y Vives

In October 2012, the Group’s subsidiary GyM S.A. acquired 74% of equity shares in Vial y Vives S.A.C., an entity based in Chile, which is mainly engaged in carrying out activities related to construction, engineering works, civil work projects and electromechanical assemblies, architecture, installations. This acquisition is part of the Group’s plan to increase its presence in markets that present high growth potential as in Chile, and in attractive industries, such as mining and energy.

During the period of twelve months after the acquisition date the Group reassessed the purchase price allocation from the acquisition of Vial y Vives S.A.C. which was made in October, 2012 and reallocated the amount of S/.24.7 million from goodwill (net of tax impact of S/.6.3 million and non-controlling interest of S/.6.4 million) to fixed assets, other accounts receivable and contingent liabilities in the amounts of S/.15.4 million, S/.16.8 million and S/.5.1 million respectively. This effect corresponds to the measurement period adjustment of the preliminary fair value assigned to the assets and liabilities acquired.

- 106 -

(All amounts are expressed in thousands of S/. unless otherwise stated)

The price paid by GyM for the acquisition of Vial y Vives amounted to US$55.6 million (equivalent to S/.142 million) and resulted in the recognition of goodwill for S/.28.9 million, at the acquisition date, which is detailed as follows:

	Reported in 2012						Revised
		S/.000		US$000				S/.000		US$000
Cash and cash equivalents		10,445			4,094			10,445			4,094
Marketable securities		61,664			24,172			61,664			24,173
Trade accounts receivable, net		10,862			4,258			10,862			4,258
Other accounts receivable		4,002			1,569			20,765			8,140
Inventories		2,182			855			2,182			855
Prepaid expenses		1,020			400			1,020			400
Property, plant and equipment		23,746			9,309			39,184			15,360
Intangibles (“Order Backlog” and Brand)		98,869			38,757			98,869			38,757
Investments		15,128			5,930			15,128			5,930
Deferred income tax		535			210			535			210
Accounts payable from related parties		(9,550	)		(3,744	)		(9,550	)		(3,744	)
Trade accounts payable		(3,806	)		(1,492	)		(3,806	)		(1,492	)
Other accounts payable		(17,115	)		(6,709	)		(17,115	)		(6,709	)
Provisions		(4,965	)		(1,946	)		(4,965	)		(1,946	)
Advances from clients		(47,085	)		(18,457	)		(47,086	)		(18,457	)
Contingent liabilities		(11,130	)		(4,363	)		(6,006	)		(2,355	)
Deferred income tax liability		(14,730	)		(5,774	)		(20,993	)		(8,229	)
Fair value of net assets		(120,072	)		47,069			151,133			59,245
Non-controlling interest (26.42%)		(31,757	)		(12,449	)		(38,108	)		(14,792	)
Goodwill (Note 17)		53,654			21,033			28,944			11,200
Total paid for acquisition		141,969			55,653			141,969			55,653
Cash payment for the acquisition		141,969			55,653			141,969			55,653
Cash and cash equivalent of the acquired subsidiary		(10,445	)		(4,094	)		(10,445	)		(4,094	)
Direct cash outflow from acquisition		131,524			51,559			131,524			51,559

The cash payment for the acquisition comprises an indemnification asset of S/.6,006 which was deposited in an escrow account to compensate any future disbursements related to contingent liabilities acquired with the business combination.

The income and the profit generated for the period from the acquisition date to December 31, 2012 amounted to S/.23.9 million and S/.1.7 million, respectively.

If Vial y Vives had been consolidated from January 1, 2012, the income generated would have been S/.59.6 million and S/.7.9 million, respectively.

e)      Acquisition of Stracon GyM -

On March 1, 2012 GyM obtained control over certain business which it had jointly with an entity called Stracon S.A.C. (hereinafter Stracon), as well as the control over certain interests owned by Stracon both individually and with other partners.

This acquisition was made effective through an entity that GyM and Stracon formed for this purpose. In fact, both entities established Stracon GyM S.A. (hereinafter Stracon-GyM), over which GyM exercises control and to which both the above-mentioned companies contributed with equity packages comprising various assets and liabilities associated with the mining industry.

This acquisition is part of the Group's strategy to group in one single entity all businesses related to the mining industry, including existing businesses that were conducted jointly with Stracon, own business, and businesses owned by Stracon conducted with third parties. This strategy is intended to generate synergies, economies of scale and tax efficiencies from the integration of the mining-related businesses and taking advantage of the individual experience of both entities now conducting this restructured business.

- 107 -

(All amounts are expressed in thousands of S/. unless otherwise stated)

The structure of this transaction consisted of transactions made by both entities to obtain a certain percentage of interest in Stracon-GyM, and an additional contribution of GyM. As a result of the several contributions that each party engages to make, the share capital structure of Stracon-GyM was attributed to shareholders as follows: 74.15% to GyM and 25.85% to Stracon. GyM has control over the overall operation and it applies IFRS 3 to account for this transaction.

The consideration paid by GyM for the purchase of Stracon - GyM is comprised of the book value of net assets transferred for a total S/.24.9 million plus a cash amount for a total of US$16.4 million (in aggregate equivalent to S/.42 million; see Note 5-d) and resulting in the recognition of goodwill for S/.13.4 million at the acquisition date, is as follows:

	S/.000		US$000
Cash and cash equivalents	885			347
Trade accounts receivable, net	120,184			47,131
Other accounts receivable	3,862			1,515
Inventories	16,674			6,539
Prepaid expenses	24			9
Property, plant and equipment	206,153			80,844
Intangibles (“Order Backlog” and customer relationships)	9,976			3,912
Deferred income tax assets	674			264
Other assets	36			14
Financial obligations	(64,058	)		(25,121	)
Trade accounts payable	(39,267	)		(15,399	)
Accounts payable to related parties	(81,820	)		(32,086	)
Other accounts payable	(1,316	)		(516	)
long-term liabilities	(126,202	)		(49,491	)
Deferred income tax liability	(7,327	)		(2,873	)
Fair value of net assets	38,478			15,089
Non-controlling interest (25.85%)	(9,947	)		(3,901	)
Goodwill (Note 17)	13,366			5,242
Consideration given for the acquisition)	41,897			16,430
Net assets transferred	(24,994	)		(9,802	)
	16,903			6,628
Cash paid in 2011	(13,894	)		(5,448	)
Cash paid in 2012	3,009			1,180
Cash and cash equivalent of the acquired subsidiary	(885	)		(347	)
Direct cash outflow from acquisition	2,124			833

The following table provides a breakdown of the book value of assets and liabilities transferred in connection with the acquisition of Stracon-GyM:

	S/.000
Trade accounts receivable	55,545
Accounts receivable from related parties	27,880
Inventories	12,318
Machinery and equipment	139,248
Other accounts receivable	19,155
Total assets	254,146
Trade accounts payable	28,564
Accounts payable to related parties	56,063
Borrowings	141,430
Other accounts payable	3,095
Total liabilities	229,152
Book value of net assets transferred	24,994

- 108 -

(All amounts are expressed in thousands of S/. unless otherwise stated)

32 DIVIDENDS

At the General Shareholders’ meeting held on March 28, 2014 the decision was made to distribute dividends for S/.112,127 (S/.0.169 per share), which correspond to 2013 earnings.

At the General Shareholders’ meeting held on March 26, 2013, the decision was made to distribute dividends amounting to S/.86,986.2 (S/.0.156 per share), corresponding to 2012 earnings.

At the General Shareholders’ meeting held on March 30, 2012, the decision was made to distribute dividends amounting to S/.86,722.4 (S/.0.156 per share), corresponding to 2011 earnings.

A dividend of S/.0.159 per share, amounting to S/.104,910 will be proposed at the Annual General Shareholders’ meeting which will be held on March 28, 2015. The financial statements do not reflect these dividends payable.

33 EARNINGS PER SHARE

Basic earnings per share are calculated by dividing the net profit of the period attributable to common shareholders of the Group by the weighted average number of common shares outstanding during the year. No diluted earnings per common share were calculated because there are no common or investment shares with potential dilutive effects (i.e., financial instruments or agreements that give the right to obtain common or investment shares); therefore, it is equal to basic earnings per share. The basic earnings per share are broken down as follows:

	2012		2013		2014
Profit attributable to the controlling interest in the Company		289,954		320,016		299,744
Weighted average number of shares in issue at
S/.1.00   each, at December 31, 2012, 2013 and 2014)		558,284,190		600,346,925		660,053,790
Basic and diluted earnings per share (in S/.)		0.519		0.533		0.454

34 TRANSACTIONS WITH NON-CONTROLLING INTERESTS

a) Additional acquisition of non-controlling interest

i) In July 2014, GyM S.A. acquired 13.49% of additional shares in Stracon GyM at a price of US$24.96 million (equivalent to S/.72.82 million).  The carrying amount of non-controlling interest at the acquisition date was S/.22.15 million.  The Group eliminated the non-controlling interest and recognized a decrease in equity attributable to the parent owners of S/.50.67 million.

ii) In August, November and December 2014, the Company acquired 4.567% (2.25%, 1.95% and 0.367% respectively) additional shares in GyM S.A. at a total purchase price of S/.93.16 million.  The carrying amount of the non-controlling interest at the acquisition date was S/.24.61.  The Group eliminated non-controlling interest and recognized a decrease in equity attributable to the owners of the parent for S/.71.52 million.

iii) In August 2014, the Company acquired 1.37% additional shares in Viva GyM S.A. at a price of S/.9.38 million.  The carrying amount of the non-controlling interest at the acquisition date was S/.3.35.  The Group eliminated non-controlling interest and recorded a decrease in equity attributable to the parent owners of S/.6.03 million.

- 109 -

(All amounts are expressed in thousands of S/. unless otherwise stated)

iv) In 2013, the Company acquired additional shares of Ingeniería y Contrucción Vial y Vives S.A., GMD S.A., Viva GyM S.A., and Concar S.A. representing the 6.4%;0.47%;0.13% and 0.18% of their corresponding issued shares. The carrying amount of the non-controlling interests in such subsidiaries was S/.9,528 and the purchase consideration was S/.12,433. The Group derecognized non-controlling interest and accounted a decrease in equity attributable to owners of the Parent of S/.2,905.

v) In 2013, the Company acquired an additional 16.9% of the outstanding shares of Norvial S.A from the former shareholder Besco S.A. at the purchase consideration of S/.51,435. The carrying amount of the no-controlling interests at the acquisition date was S/.19,729. The Group derecognized its non-controlling interest and recorded a decrease in equity attributable to owners of the Parent of S/.31,706.

vi) In May 2012, the Company acquired the remaining 26.99% of the shares issued of Survial S.A. at a sales price of S/.4,393. The Group now holds 99.99% of the total share capital of Survial S.A. The carrying amount of the Group’s non-controlling interests at the acquisition date was S/.4,757. The Group derecognized these non-controlling interests for S/.4,757 and recorded a decrease in capital attributable to parent owners of S/.364.

The effect of these changes is broken down as follows:

	2012			2013			2014
Carrying amount of non-controlling interest acquired		4,757			29,257			50,109
Consideration provided for non-controlling interest		(4,393	)		(63,868	)		(178,331	)
Lower (higher) payment attributable to the Company’s
controlling interest		364			(34,611	)		( 128,222	)

b) Disposal of interests in subsidiary without loss of control

i) In November 2014, GyM Chile Spa sold 1.01% (S/.1.6 million) of its total interest of 82.04% in Vial y Vives – DSD for US$0.582 million (equivalent to S/.1.6 million).  The carrying amount of the non-controlling interest in Vial y Vives – DSD at the disposal date was S/.1.6 million.

ii) In January 2012, the Company sold 0.17% (S/.708) of its total interest of 93.84% held in GyM S.A. for S/.555. The carrying amount of the non-controlling interest in GyM S.A. at the disposal date was S/.25.6 million (that is, 6.16% interest).

iii) In January 2012, the Company sold 0.40% (S/.194) of its total interest of 99.97% held in Concar S.A. for S/.638. The carrying amount of the non-controlling interest in Concar S.A. at the disposal date was S/.14.5 (that is, 0.03% interest).

The effect of these changes at December 31 is summarized as follows:

	2012			2014
Carrying amount of non-controlling interest sold		(902	)		(1,627	)
Consideration received for non-controlling interest		1,193			1,627
Increase in equity of the Company’s controlling interest		291			-

There were no transactions with non-controlling interest in 2013.

- 110 -

(All amounts are expressed in thousands of S/. unless otherwise stated)

c) Effects of transactions with non-controlling interests on equity attributable to Parent owners for the year ended December 31:

	2012		2013			2014
Changes in equity attributable to the Company’s
controlling interest arising from:
Acquisition of additional interest in subsidiary		364		(34,611	)		128,222
Disposal of interest in subsidiary without losing control		291		-			-
Decrease in equity of the Company’s controlling interest		655		(34,611	)		128,222

d) Contributions of non-controlling shareholders

Mainly correspond to the contributions made by the partners of subsidiary Viva GyM S.A. for their real estate projects. At December 31 the amounts contributed were the following:

	2012			2013			2014
Contributions from Viva GyM S.A.		30,224			59,387			48,793
Contributions from GyM Ferrrovías S.A.		-			- -			2,823
Returns of contributions		(4,128	)		(24,613	)		(4,240	)
Increase in equity of non-controlling interest		26,096			34,774			47,376

Contribution returns mainly correspond to profit attributable to the party for the housing project El Agustino I, which has been completed and most of the apartments have been delivered to the customers.

e) Deconsolidation of subsidiaries

In 2014 the Group assessed its interest in the joint venture “Red Vial 1 – Cusco”, which was considered and reported as a subsidiary at December 31, 2013.  As a result of this assessment, the Group concluded that the rights entitled in such business do not grant control, joint control or significant influence. In addition Management´s conclusion is that Company´s interest in this business is that of a financial asset (receivable).  Assets and liabilities of “Red Víal 1 – Cusco” previously consolidated and the non-controlling interest amounted to S/.2,284 which was eliminated in 2014.

In 2013 the Group assessed its interests in Concessión La Chira S.A. and Logistica Quimica del Sur S.A.C (LQS). The interests in these concessions were accounted for as if they were under control of the Group (subsidiaries). Subsequent that assessment it was determined that the interests correspond to a joint operation and joint venture, respectively under the provisions of IFRS 11. The amounts, consolidated as of December 31, 2013 of assets and liabilities non-controlling interest amounted to S/.12,535 for La Chira and S/.6,842 for LQS.

f) Debt capitalization -

Corresponds to the capitalization of debt arising from obligations contracted by Stracon GyM with its investors, GyM and Stracon S.A.C., and amounted to S/.12.2 million in 2012.

g) Dividends

At December 31, 2014, 2013 and 2012 dividends were distributed for S/.68.1 million, S/.51.8 million and S/.37.5 million, respectively.

- 111 -

(All amounts are expressed in thousands of S/. unless otherwise stated)

35 EVENTS AFTER THE DATE OF THE STATEMENT OF FINANCIAL POSITION

a) On October 3, 2014 we reported that the joint operation formed by our Company and our subsidiary GMD were awarded with the concession for the operation of road tolls called: “Operación de la Unidad de Recaudo del Sistema Integrado de Transporte de Lima – SIT”. We were waiting for the respective notice specifying the starting date of the agreement when a communication was served to us “Oficio 007-2015-MML/IMPL/GG” from the Metropolitan Lima Municipality dated January 20, 2015 stating the annulment of the concession that was previously awarded to us; as a result, the Public Bid process went back to the stage before the publication of the proforma agreement indicated in the original Bid time schedule; the reason for this was primarily the report issued by the Peruvian Ministry of Economy and Finance indicating that, as established by law, that Ministry has to issue an opinion on the concession agreement prior the award date; and the Lima Municipality failed to reach the respective agreement to the Ministry before the bid award date.

It should be noted that the Group Backlog does not contain any amount related to the above-mentioned concession agreement.

The Company is presently evaluating its legal situation as to the decision made by the Municipality and will decide what measures to take.

b) On February 03, 2015 the Company placed S/.629 million in “Series A Senior Secured VAC – Indexed Notes due 2039”, corresponding to notes issued by GyM Ferrovías S.A.

The Notes sale took place on February 3, 2015 and the issuance date was set at February 10, 2015. Notes will be redeemed on November 25, 2039. Interest rate is 4.75% annually (with no inflation adjustment on Series A) for a period of 24.8 years. Interest payments dates are February 25, May 25, August 25, and November 25, each year, starting May 25, 2015.

112