GRAÑA Y MONTERO S.A.A. AND SUBSIDIARIES. Consolidated Financial Statements. As of December 31, 2008 and 2007

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1 Consolidated Financial Statements As of December 31, 2008 and 2007 (With the Independent Auditor s Report Thereon) (FREE TRANSLATION FROM SPANISH. THE ACCOUNTING PRINCIPLES REFERRED TO

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4 Consolidated Balance Sheet As of December 31, 2008 and 2007 (Stated in thousands of nuevos soles) Assets Liabilities and Stockholders Equity Current assets: Current liabilities: Cash and banks and restricted funds (note 4) 143, ,946 Bank loans (note 16) 108,359 21, Trade accounts payable 184, ,669 Accounts receivable: Related parties (note 6) 1,465 5,666 Trade (note 5) 377, ,564 Consortiums (note 7) 20,008 5,597 Related parties (note 6) 1, Other accounts payable (note 17) 212, ,767 Consortiums (note 7) 8,485 1,921 Commercial papers (note 18) 41,979 - Other accounts receivable (note 8) 80,168 81,256 Current portion of long-term debt (note 19) 90,123 66, , , Total current liabilities 658, ,227 Inventories, net (note 9) 158,623 79,257 Prepaid taxes and expenses (note 10) 54,747 44,386 Long-term debt (note 19) 236, ,469 Available-for-sale non-financial assets 1,997 2, Deferred income tax (note 23.e) 30,471 22,569 Total current assets 826, ,178 Deferred income 4,181 5, Long-term accounts receivable (note 11) 16,862 23,437 Total liabilities 930, , Deferred income tax (note 23.e) 6,641 2,314 Stockholders equity: Capital stock (note 20) 389, ,423 Investments (note 12) 126, ,980 Legal reserve (note 21) 26,503 13,514 Other reserves (note 21) 3,262 4,388 Property, plant, and equipment (note 13) 433, ,673 Retained earnings 146, ,012 Minority interest 44,380 33,874 Goodwill (note 14) 31,551 34, Total stockholders equity 610, ,211 Other assets, net (note 15) 99,125 71,975 Commitments and contingencies (note 24) Total assets 1,541,108 1,148,015 Total liabilities and stockholders equity 1,541,108 1,148,015 ======= ======= ======= ======= See the accompanying notes to the consolidated financial statements.

5 Consolidated Income Statement For the years ended December 31, 2008 and 2007 (Stated in thousands of nuevos soles) Valuation of works (note 25) 1,339,842 1,019,200 Income from services rendered 446, ,726 Sale of merchandise and other 41,466 36, Total revenue 1,827,710 1,439, Cost of works (note 25) ( 1,130,416) ( 865,549) Cost of rendered services ( 264,458) ( 245,514) Cost of sales of merchandise and property ( 33,346) ( 29,884) Total cost ( 1,428,220) ( 1,140,947) Gross profit 399, ,027 Operating, administrative and general expenses (note 26) ( 104,554) ( 79,014) Operating profit 294, , Other (expenses) income: Financial, net (note 27) ( 30,155) ( 22,744) Results attributable to associates 3,704 4,029 Various, net 8,643 ( 2,526) Exchange difference, net ( 44,143) 8, ( 61,951) ( 12,815) Profit before workers profit sharing and income tax 232, ,198 Workers profit sharing (note 22) ( 12,958) ( 9,721) Income tax (note 23) ( 65,994) ( 59,159) Profit before minority interest 154, ,318 Minority interest ( 6,844) ( 8,418) Net profit for the year 147, ,900 ======== ======== Earnings per basic share in S/. (note 28) ======== ======== See the accompanying notes to the consolidated financial statements.

6 Consolidated Statement of Changes in Stockholders Equity For the years ended December 31, 2008 and 2007 (Stated in thousands of nuevos soles) Capital Legal Other Total stock reserve reserves Retained Minority stockholders (note 20) (note 21) (note 21) earnings interest equity Balances as of December 31, ,787 3, ,386 25, ,002 Capitalization 63, ( 63,970) - - Transfer to legal reserve - 10,141 - ( 10,141) - - Adjustments Dividends paid ( 20,277) - ( 20,277) Recording of unrestricted reserves - 7,000 ( 7,000) - - Treasury shares ( 334) - ( 2,612) - - ( 2,946) Net profit for the year ,900 8, , Balances as of December 31, ,423 13,514 4, ,012 33, ,211 Capitalization 91, ( 91,042) - - Transfer to legal reserve - 12,989 - ( 12,989) - - Dividends paid ( 25,981) - ( 25,981) Adjustment ( 564) 3,662 3,098 Treasury shares (note 20) ( 667) - ( 1,126) - - ( 1,793) Net profit for the year ,189 6, , Balances as of December 31, ,798 26,503 3, ,625 44, ,568 ======== ======== ======== ======== ======== ======== See the accompanying notes to the consolidated financial statements.

7 Consolidated Statement of Cash Flows For the years ended December 31, 2008 and 2007 (Stated in thousands of nuevos soles) Operating activities: Net profit for the year 147, ,900 Adjustment to net result that do not affect the cash flow of operating activities Depreciation 61,346 58,528 Deterioration of intangible assets 2,907 2,904 Amortization of other assets 12,757 5,161 Profit attributable to associates and subsidiaries ( 12,955) ( 19,418) Loss on sale of assets 2,295 7,955 Net variations in assets and liabilities: Trade accounts receivable ( 137,341) ( 44,759) Other accounts receivable 28,282 ( 23,847) Inventories ( 79,366) ( 41,974) Prepaid expenses and taxes and other assets ( 10,361) ( 30,771) Available-for-sale non-financial assets Trade accounts payable ( 1,306) 48,842 Other accounts payable 68,314 31, Net cash provided by operating activities 81, , Investing activities: Sale of property, plant, and equipment 10,385 8,630 Acquisition of minority interest - ( 4,865) Purchase of intangible assets ( 21,117) ( 12,092) Purchase of investments ( 6,607) ( 3,874) Purchase of fixed assets ( 183,693) ( 149,537) Net cash used in investing activities ( 201,032) ( 161,738)

8 Consolidated Statement of Cash Flows, (cont.) Financing activities: Loans received, net of amortizations 122,993 78,140 Securitization bonds, net of amortization ( 16,455) ( 25,140) Dividends paid ( 25,981) ( 20,277) Commercial papers 41,979 - Repurchase of own shares ( 1,793) ( 2,946) Net cash provided by investing activities 120,743 29,777 Net increase (decrease) in cash 1,682 ( 8,141) Cash and cash equivalents at the beginning of the year 123, ,647 Variation in restricted funds 1,622 ( 5,780) Cash at end of year 127, ,726 ========= ========= See the accompanying notes to the consolidated financial statements.

9 December 31, 2008 and 2007 (1) Business Activity Graña y Montero S.A.A. (hereinafter the Group) was incorporated on August 12, 1996 as the holding company of Grupo Graña y Montero. Its main activity is to invest in subsidiaries and related parties. Additionally, as from September 2005, it renders services of general management, financial management, commercial management, legal advisory and human resources management (prior to that date, it rendered business advisory services) to said companies. The Company s legal domicile is located at Av. Paseo de la República Nº 4675, Surquillo. Likewise, as from year 2006, Graña y Montero S.A.A. has been engaged in the leasing of offices to the Group companies and to third parties. Year 2008 consolidated financial statements will be submitted to Board of Directors and General Stockholders Meeting within the terms established by law for the separate financial statements of Graña y Montero S.A.A. (a) Subsidiaries: The consolidated financial statements of the Group include assets, liabilities, revenues and expenses of the following subsidiaries: GyM S.A. is engaged in the business of civil construction, electromechanical assembly, buildings, management and development of real property projects and other related services. GMP S.A. is engaged in the exploitation, production, treatment, and trading of oil, natural gas and its derivatives, as well as the storage and delivery of fuels. GMD S.A. is engaged in providing IT solutions in the Peruvian corporate market. GMI S.A. Ingenieros Constructores is engaged in providing services of advisory and engineering consultancy, execution of surveys and projects, project management and works supervision. Concar S.A. is engaged in the operation and maintenance of highways on concession. Fashion Center S.A. is engaged in developing and operating the conditioning and fitting out project for commercial and recreational use of the area of Parque Salazar of the District of Miraflores. Until June 30, 2007, Larcomar S.A. was engaged in the operation of the project that is currently operated by Fashion Center S.A. Survial S.A., is engaged in the execution of the concession agreement of phase 1 of Southern Inter-oceanic highway. Concesión Canchaque S.A., is engaged in the execution of the concession agreement of the Buenos Aires Canchaque highway.

10 . 2. (b) Consortiums: Additionally, the consolidated financial statements of the Group include assets, liabilities, revenue and expenses of the consortiums in which it participates as venturer, through its subsidiaries, and where there is jointly control, being the most important the following: Consortiums Percentage of interest GyM S.A. s GYM S.A. - Skanska del Perú S.A GYM S.A. JJC Contratistas Generales S.A. Chinecas Constructores Transmantaro Consorcio La Quinua Consorcio Héroes Navales Consorcio Collique GyM besco Consorcio Constructor IIRSA Norte Consorcio GyM -Eyvisac Consorcio Pasco Consorcio GyM Concar Consorcio BAC Consorcio Vial Ayahuaylas 5.00 GMD S.A. s Consorcio Ransa Comercial S.A. - GMD S.A Consorcio Telefónica del Perú SAA- GMD S.A Consorcio Corporación TX Consorcio Cosapi Data GMD GMI S.A. s GMI OIST Mot Lima Pariacoto GMP S.A. s Consorcio Terminales CONCAR S.A. s Consorcio GYM Concar Consorcio Vial Ayahuaylas Graña y Montero S.A.A. s Joint Torre Siglo XXI Asociación T

11 . 3. In this regard, the consolidated financial statements include the following amounts coming from consortiums and joint ventures: Assets 105,345 88,134 ======== ======== Liabilities 94,489 57,956 ======== ======== Revenues 219, ,097 ======== ======== Expenses 186, ,730 ======== ======== The Group operates its divisions and/or business segments as described in note 29. (2) Main Accounting Principles and Practices Main accounting principles applied in the preparation of consolidated financial statements are detailed below. These principles and practices have been applied consistently to all years presented in these financial statements; unless otherwise indicated. (a) Basis for the Preparation of Financial Statements The consolidated financial statements are prepared and presented in accordance with Accounting Principles Generally Accepted in Peru, which comprise the International Financial Reporting Standards (IFRS) authorized through resolutions issued by the Consejo Normativo de Contabilidad - CNC (Peruvian Accounting Board). The IFRSs include the International Accounting Standards (IAS) and the pronouncements of the Standing Interpretations Committee (SIC). In Peru, the CNC authorized as of December 31, 2008, current IAS 1 to 41, IFRSs 1 to 8, SICs 1 to 32, and all the pronouncements from 1 to 14 issued by the current Interpretations Committee (IFRIC). The consolidated financial statements have been prepared in conformity with the historical cost principle. The preparation of the consolidated financial statements in conformity with accounting principles requires the use of certain critical accounting estimates. It also requires from Management the use of its judgment in the process for the application of the Group s accounting policies. Critical estimates and accounting criteria are described in note 2.d.

12 . 4. (b) Consolidated Financial Statements The consolidated financial statements comprise the financial statements of Graña y Montero S.A.A., and the financial statements of the subsidiaries and consortiums detailed in note 1. Subsidiaries The subsidiaries are all entities over which the Company has authority to govern their operating and financial policies generally for being holder of more than half of voting shares. Subsidiaries are consolidated from the date on which their control is transferred to the Company. They are de-consolidated from the date the control ceases. The Company uses the purchase method to record the acquisition of subsidiaries. The cost of acquisition is measured as the fair value of assets delivered, equity instruments issued, and liabilities incurred or assumed at the date of the exchange, plus costs directly attributable to the acquisition. Identifiable assets acquired and liabilities assumed in a business combination are initially measured at fair value at the acquisition date. The excess of the purchase price over the fair value of the Company s interest in identifiable net assets acquired is recorded as goodwill in the assets. If the cost is lower than the subsidiary s fair value of net asets (badwil), the difference is recognized directly in the income statement. Transactions, balances and unrealized gains among the companies that the Group controls are eliminated. Also, unrealized losses are eliminated unless the transaction provides evidence of impairment in the value of the assets transferred. Consortiums The Company s interest in jointly controlled entities is recorded by the proportionate consolidation method, through which the Company includes in the relevant components of its consolidated financial statements the proportionate shareholding of its interest in revenue and expenses, assets and liabilities and individual cash flows of the joint venture. Significant transactions between the Company and joint ventures have been eliminated. Minority Interest Interests from third parties, that are not part of the Group, are shown as minority interests under the equity in the consolidated balance sheet and in the consolidated income statement.

13 . 5. (c) Functional Currency and Foreign Currency Transactions i) Functional and presentation currency The items included in the financial statements of each of the Group s entities are stated in the currency of the primary economic environment in which the entity operates (functional currency). The consolidated financial statements are presented in nuevos soles which is the Group s functional and presentation currency. ii) Foreign currency transactions and balances Foreign currency transactions are translated into functional currency using exchange rates ruling at the dates of the transactions. Gains or losses on exchange differences resulting from the collection and/or payment of such transactions and from translating monetary assets and liabilities stated in foreign currency at exchange rates ruling at year-end closing are recognized in the income statement. (d) Critical Accounting Estimates and Criteria The estimates and criteria used are continuously evaluated and are based on historical experience and other factors, including the reasonable expectation of occurrence of future events depending on the circumstances. i) Critical Accounting Estimates and Criteria The Group makes estimates and assumptions regarding the future. By nature, resulting accounting estimates, very rarely will be the same as the respective actual results. However, it is the opinion of Management that estimates and assumptions applied by the Group do not have significant risk as to produce a material adjustment to the balances of assets and liabilities for next year. Review of carrying amount and provision for impairment The Group applies the guidelines stated in IAS 36 to determine whether a permanent asset requires from a provision for impairment. This determination requires the use of professional judgment by Management to analyze the indicators that might present impairment as well as the determination of value in use. In this last case, it is required to apply judgment in the preparation of future cash flows that include the projection of the level of future operations of the Group, projection of economic factors that affect income and costs, as well as the election of the discount rate to be applied in this flow.

14 . 6. Taxes Interpretations of applicable tax legislation are required when determining obligations and tax expenses. The Group looks for professional counseling in tax matters before taking any decision on it. Although Management considers that its estimates are prudent and appropriate, interpretation differences may arise with tax authorities affecting the charges for taxes in the future. ii) Critical Judgment in the Application of Accounting Policies Management has exercised its critical judgment when applying accounting policies for the preparation of the accompanying financial statements, as explained in the corresponding accounting policies. (e) (f) Cash and Cash Equivalents Cash and cash equivalents comprise cash in hands, overnight, time and sight deposits held at banks with original maturities between two and three months. Financial Instruments A financial instrument is as any contract that gives rise to both a financial asset in one entity and a financial liability, or equity instrument in another. In the case of the Group, financial instruments correspond to primary instruments such as accounts receivable, accounts payable, and shares representing capital share in other companies. Financial instruments are classified as asset, liability or equity according to the substance of the contract. The interest, dividends, gains, and losses generated by a financial instrument, and classified as liability, are recorded as income or expense in the income statement. The payment to holders of financial instruments classified as equity is recorded directly against equity. The financial instruments are compensated when the Group has the legal right to compensate them, and Management has the intention of paying them on a net basis or negotiating the asset, and paying the liability simultaneously. Fair value is the amount for which an asset could be exchanged between knowledgeable, purchaser and a seller, or a liability settled between a debtor and a creditor in an arm s length transaction. In Management s opinion, the carrying amount of financial instruments as of December 31, 2008 and 2007, is substantially similar to their fair values due to their short period of realization and/or maturity. The recognition and valuation criteria of those accounts are disclosed in the accounting policies related to those notes.

15 . 7. (g) Trade Accounts Receivable and Provision for Doubtful Accounts Accounts receivable are initially recorded at their fair value and are subsequently valued at amortized cost, less the provision for deterioration. The provision for deterioration of trade accounts receivable is determined when there is objective evidence that the Group will not collect all the amounts overdue according to terms originally established. Management considers that the balances of trade accounts receivable as of December 31, 2008 and 2007 do not present uncollectibility risks. Trade accounts receivable are presented net of the advances received from clients provided that they are related with the same work agreement and said agreement establishes the possibility of compensation. (h) (i) Inventories Inventories are valued at construction, acquisition and/or contribution costs, which do not exceed the net realizable value. The cost of construction materials is determined through the weighted average method, except in the case of inventories in transit, determined by the specific identification method. The net realizable value is the estimated selling price in the ordinary course of business, less cost to sale, and the commercialization costs. For the reductions of inventory carrying amounts at realizable value, a provision for inventory impairment is recorded in the results of the period when those reductions occur. Financial Assets The Group classifies its investments in the following categories: i) marketable financial assets, ii) loans and accounts receivable, iii) Held-to-maturity investments, and iv) available-for-sale financial assets. The classification depends on the purpose for which investments were acquired. Management determines the classification of its investments as of the date of their initial recognition and reassesses this classification as of every closing date. Financial assets at fair value through profit or loss A financial asset is classified in this category if it was mainly acquired in order to be sold in the short term or if it is so assigned by Management. Derivative financial instruments are also classified as marketable unless they are designated as hedges. Assets in this category are classified as current assets if they are held-for-trading or available-for-sale within 12 months as from the balance sheet date. During 2008 and 2007, the Group did not hold any investment under this category.

16 . 8. Loans and accounts receivable Loans and accounts receivable are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They arise when the Group provides with money, goods or services directly to a debtor, with no intention to trading the account receivable. They are included in current assets, except for those with maturities exceeding 12 months after balance sheet date. These ones are classified as non-current assets. Loans and accounts receivable are included in accounts receivable from commercial affiliates and various accounts receivable in the balance sheet (note 2.g). Held-to-maturity investments Held-to-maturity investments are non-derivative financial assets with fixed or determinable payments and fixed maturities acquired with the intention and ability to hold them to maturity. During 2008 and 2007, the Group did not hold any investment under this category. Available-for-sale financial assets Available-for-sale financial assets are non-derivative financial assets designated in this category or that do not classify in any of the other categories. These assets are shown as non-current assets unless Management has express intention to sell the investment within 12 months after the date of the balance sheet. During 2008 and 2007, the Group did not hold any investment under this category. Recognition and Measurement Investment purchases and sales are recognized as of the trade date, date on which the Group commits to purchase or sale the asset. Transaction costs related to financial assets recorded at fair value through profit and losses are recognized in the income statement. Financial assets are derecognized when the rights to receive cash flows from investments have expired or have been transferred, and the Group has substantially transferred all risks and rewards derived from ownership. Available-for-sale financial assets and held-for-trading assets are subsequently recognized at fair value. Loans, accounts receivable, and held-tomaturity investments are measured at their amortized cost using the effective interest method. Realized and unrealized gains and losses arising from changes in the fair value of the held-for-trading category are included in the income statement, in the period they are originated. Unrealized gains and losses arising from changes in the fair value of non-monetary securities, classified as available-for-sale, are recognized in equity. When securities classified as available-for-sale are sold or

17 . 9. impaired, accumulated fair value adjustments are included in the income statement as gains or losses on investment in securities. Fair value of quoted investments is based on current bid prices. If market is not active (or securities are not listed), the Company establishes the fair value by using valuation techniques. The Group evaluates at each balance sheet date, if there is objective evidence of the impairment of a financial asset or group of financial assets. (j) (k) (l) Available-for-Sale Non-Financial Assets Assets are classified as available for sale when their carrying amount is expected to be recovered through their sale, when there is a plan for such a sale, and it is highly probable that their sale occurs in the short-term. These assets are valued at the lower of their cost or at their realizable value, less cost to sell. Investments in Subsidiaries, Associates and Consortiums These investments are recorded at equity method of accounting, crediting the cash dividends at carrying amount. Property, Plant, and Equipment Property, plant, and equipment are recorded at cost, less accumulated depreciation (note 13). Historical cost includes disbursements directly attributable to the acquisition of these items. Subsequent costs attributable to the goods of the fixed asset improving their original performance are capitalized; other costs are recognized in the results. Lands are not depreciated. Depreciation of plant and equipment and vehicles recognized as Large Equipment is calculated based on their use hours, in relation to the estimated useful hours of these assets. The depreciation of other asets that do not qualify as Large Equipment is calculated by straight line method to assign its cost less its residual value during the estimated useful life, as follows: Years Buildings and premises Between 5 and 33 Plant and equipment Between 5 and 10 Vehicles Between 5 and 10 Furniture and fixtures Between 4 and 10 Various equipment Between 4 and 10

18 . 10. The residual value and the useful life of an asset is reviewed and adjusted, if necessary, as of the date of each balance sheet. The carrying amount of an asset is written off immediately at its recoverable amount when the carrying amount of the asset exceeds its recoverable value. Gains and losses for sale of fixed assets correspond to the difference between the income from the transaction and the asset carrying amount. Those are included in the income statement. Assets under construction are capitalized as a separate component of property, plant and equipment. At completion, the cost is transferred to the appropriate category. Work-in-progress is not depreciated. (m) (n) Finance Lease Agreements Lease and/or sale agreements with a leaseback agreement on plant and equipment, through which the Group substantially assumes all risks and rewards related to the property of leased assets, are classified as finance lease and are capitalized at the inception of the lease terms, at an amount equal to the fair value of leased property, or if lower, to the present value of the minimum lease payments. Lease payments are apportioned between the reduction of the outstanding liability and the finance charge so as to produce a constant periodic rate of interest on the remaining balance of the liability. Obligations for finance and/or sale leases with finance leaseback agreements, net of financial charges, are included in the Longterm Debt account in the balance sheet. The financial cost is charged to results over the lease period. The cost of assets acquired through finance lease and/or sale with finance leaseback agreement is depreciated over their estimated useful life. Public Service Concession Arrangements In conformity with IFRIC 12 Service Concession Arrangements, officially approved for application in Peru since 2008, disbursements incurred in relation to public service concession arrangements operated by Consorcio Terminales, a consortium in which subsidiary Graña y Montero Petrolera S.A. has a 50% interest, are recorded as intangible assets because cash flows are conditional on usage levels of public service by users. Revenue and costs relating to construction of public infrastructure works are recognized by reference to the stage of completion, while revenue and expenses related to rendering of public services are recognized on an accrual basis. Until 2007, disbursements related to infrastructure upgrade of the terminals of the Consortium were recorded as fixed assets. As a result of this adoption, as of December 31, 2008, Consorcio Terminales has reclassified its Premises, Plant, and Equipment account to Intangible Assets account at a net cost of S/ million (S/ million as of December 31, 2007 for comparative purposes) corresponding to improvements made on terminals (note 15). This change of accounting policy has not resulted in

19 . 11. modification of useful life periods of intangible assets previously shown as fixed assets because the criteria used is still the maturity of concession arrangement. (o) Goodwill Goodwill represents the excess of the cost of an acquisition over the fair value of the Group s interest of the identifiable net asets of a subsidiary as of the acquisition date. Likewise, the goodwill arising during the acquisition of minority interest in a subsidiary represents the excess of cost of the additional investment over fair value of net identifiable assets as of the date of acquisition. Goodwill is reviewed to determine whether a recognition of provisions for impairment is required. It is recorded at cost less accumulated provisions for impairment. Impairment losses are recognized in the income statement and are not reversed. Gains and losses from the sale of subsidiaries or associates include the carrying amount of goodwill related to the sold entity. Goodwill is allocated to cash-generating units to conduct impairment tests. Each of those cash-generating units represents the Group s investment in every place where it operates per primary reporting segment (note 14). (p) Other Assets Concessions included in Other Assets item of the balance sheet are recognized as such based on the forecast that these will generate future economic benefits for the Group. Concessions are recorded at cost. These fees are amortized at straight-line method based on the remaining maturity of concession agreements. Repairs of highways and works in parking lots are capitalized, and regular maintenance of highways and parking lots are recognized in expenses when they are incurred. Investments in exploration, development and subscription rights of concession agreements are amortized as from the period when income from its exploitation is obtained until the maturity of the respective agreements. On the other hand, if it were the case, investments in exploration and exploitation, referred to those exploration agreements in which it has been determined that results are not successful, are charged to the results in the period when this situation is determined, after the compensation attributable to the interests of third parties in said investments. Costs related to the development or maintenance of software are recognized in results when incurred. However, costs that are directly related to single and identifiable software, that are controlled by the Group and that will provide future economic benefits higher than their cost in more than one year, are recognized as intangible assets. Direct costs related to the development of software include personnel costs and an aliquot part of general expenses. Development costs of capitalized software are amortized by straight-line method in the estimate of its useful life, without exceeding five years.

20 . 12. (q) Impairment of Non-Financial Assets Assets that have an indefinite useful life and are not subject to amortization, are tested annually for impairment. Assets that are subject to depreciation or amortization are reviewed for impairment whenever events or circumstances indicate that the carrying amount may not be recoverable. Impairment losses are the amount by which the asset carrying amount exceeds its recoverable amount. The recoverable amount of assets corresponds to the higher net amount obtainable from its sale or its value in use. In order to assess the impairment, assets are grouped into the lowest levels for which identifiable cash flows are generated (cash-generating units). (r) Loans Loans are initially recognized at their fair value, net of transaction costs incurred. These loans are subsequently recorded at their amortized cost, and any resulting difference between the funds received (net of transaction costs) and the redemption value is recognized in the income statement over the period of the loan using the effective interest method. Loans are classified as current liability unless the Group has the unconditional right to differ settlement of the liability for at least twelve months after the balance sheet date. (s) Provisions Provisions are recognized when the Company has a present legal obligation, either legal or constructive, as a result of past events, and when it is probable that an outflow of resources will be required to settle the obligation, and it is possible to reliably estimate its amount. Restructuring cost provisions comprise lease termination penalties and employee termination payment. Provisions for future operating losses are not recognized. When there are a number of similar obligations, the probability that an outflow of resources will be required in settlement is determined by considering the class of obligations as a whole. A provision is recognized although the likelihood of outflow for any specific item included in the same class of obligations may be small. Provisions are recognized at present value of expenditures expected to be required to settle the obligation using pre-tax rates that reflect the current market assessment of the time value of money and the risks specific to the obligation. The increase in the provision due to the passage of time is recognized as interest expense in the income statement.

21 . 13. (t) (u) Share of the Profits The Group recognizes a liability and an expense for workers profit sharing in profits equivalent to 5% and 10% of taxable base determined according to the current tax legislation for each subsidiary. Income Tax Current income tax is determined according to current tax provisions (note 23). Deferred income tax is recorded using the liability method, recognizing the effect of temporary differences that arise between the tax base of assets and liabilities and its balance in the financial statements. Deferred tax assets are only recognized as it is probable to have taxable benefits in the future against the credits that can be used. The effect of these temporary differences is also considered in the calculation of workers profit sharing. (v) Capital Stock Common shares are classified as equity. Treasury Shares When the capital stock recognized as equity is repurchased (treasury shares) in conformity with the IFRSs, the payment made including any cost directly related (net of taxes) is deducted from the Group s equity until shares are amortized, reissued or sold (this repurchase has a different connotation under article 105 of Companies Act). When such shares are subsequently reissued or sold, any payment received, net of incremental costs directly attributable to the transaction and effects corresponding to income tax, is included in the equity (note 20). (w) (x) Dividend Distribution Dividend distribution to stockholders is recognized as liability in the financial statements in the period when dividends are approved by General Stockholders Meeting. Contingent Liabilities and Contingent Assets Contingent liabilities are not recognized in financial statements. They are only disclosed in the notes to financial statements unless the possibility of an outflow of economic resources is remote. Contingent assets are not recognized in financial statements, and they are only disclosed when an inflow of economic benefits is probable.

22 . 14. (y) Revenue Recognition The Group recognizes revenues when the amount can be reliably measured, it is probable that future economic benefits will flow to the Group, and specific criteria are met per type of revenue as described below. Revenues are recognized in the results as follows: Income from work valuations Income from work valuations and their respective costs are recognized as such when executing them, according to work progress. Additionally, such income and costs are adjusted to recognize the final projected profit margin of works which is monthly reviewed. Income is invoiced prior approval of works owners. Sale of goods Ordinary revenues from sale of goods are recognized and recorded when the products are delivered and the significant risks and rewards of ownership of the goods are transferred to the buyer, and the collection of corresponding accounts receivable is fairly certain. Rendering of services Revenues from rendered services are recognized in the accounting periods in which the services are rendered, by reference to the stage of completion of the service, determined based on the services performed to date as a percentage of total services to be performed. Revenue and costs for services rendered are recognized as such when the services are rendered. Interest and dividends Interest income is recognized on a time proportion basis, using the effective interest method. Revenues from dividends are recognized when the right to receive the payment has been established. (z) New Accounting Pronouncements Certain standards and interpretations have been issued and are effective internationally. In Peru, the CNC, through Resolution EF/94, dated March 14, 2008, has officially approved the application of the following standards and interpretations as from year 2009:

23 IAS 32 Financial Instruments Presentation (revised 2006). This standard has been modified to incorporate the IFRS 7 requirements. - IFRS 7 Financial Instruments: Disclosures. This standard adds certain new disclosures to improve the information contained in financial statements and replaces the disclosure requirements of IAS 32 Financial Instruments: Disclosure and Presentation. - IFRS 8 Operating Segments. This standard requires that an entity shall disclose information to enable users of its financial statements to evaluate the nature and financial effects of the business activities in which it engages and the economic environments in which the Company operates. - IFRIC 13 Customer Loyalty Programs. - IFRIC 14 IAS 19 The Limit on a Defined Benefit Asset, Minimum Funding Requirements and their Interaction. Likewise, as from January 1, 2009, various revisions to current IFRS and IAS are effective internationally as well as the new interpretations of issued standards (IFRIC 15 Agreements for the Construction of Real Estate, IFRIC 16 Hedges of a Net Investment in a Foreign Operation, IFRIC 17 Distributions of Non-cash Assets to Owners); CNC has not yet approved them. - IFRIC 10 Interim Financial Reporting and Impairment (effective for periods beginning on or after January 1, 2007). - IFRIC 11 IFRS 2: Group and Treasury Share Transactions (effective for periods beginning on or after March 1, 2007). - Review of IFRS 3 Business Combinations and IAS 27 Consolidated and Separate Financial Statements (modifications effective for periods beginning on or after July 1, 2009). Management estimates that the adoption of these standards, as from effectiveness date, wil not have significant efects on the Group s financial statements. (3) Financial Risk Management The Group s activities may expose it to a variety of financial risks related to the efects of fluctuations in the debt and equity market prices, fluctuations in foreign exchange rates, interest rates, and fair values of financial asets and financial liabilities. The Group s general program for the administration of risks is mainly focused on financial market unpredictability, and seeks to minimize potential adverse efects on the Group s financial behavior.

24 . 16. Administration and Finance Management is in charge of the administration of risk following the policies approved by the Board of Directors. The Administration and Finance Management identifies, evaluates, and covers the financial risks in close cooperation with operating units. (i) Currency risk The Group's activities and indebtedness in foreign currency exposes it to exchange rate fluctuation risk, especially concerning the U.S. dollar. In order to reduce the Group s exposure, it conducts eforts to keep an appropriate balancing between assets and liabilities and between income and expenses in foreign currency. Balances in U.S. dollars (US$) as of December 31 are summarized as follows: In thousands of US$ Assets: Cash and banks 18,372) 32,065) Trade accounts receivable 107,353)98 38,680) Other accounts receivable ) 51,728 45,232) ) 177, ,977) Liabilities: Bank loans ( 36,884) ( 14,805) Trade accounts payable ( 41,524) ( 35,908) Other accounts payable ( 79,727) ( 29,073) Long-term debts (including current portion) ( 73,804) ( 67,559) ( 231,939) ( 147,345) Net liability position ( 54,486)) ( 31,368) ======== ======== These balances have been stated in nuevos soles (S/.) at the following exchange rates established by the SBS (Superintendency of Banking, Insurance, and Private Pension Fund Administrators) ruling as of December 31: In S/ US$ - Buy rate (assets) US$ - Sell rate (liabilities) As of December 31, 2008 and 2007, the Group and its subsidiaries recorded gains on exchange for S/ million and S/ million, and losses on exchange for S/ million and S/ million, respectively.

25 . 17. (ii) Interest rate risk The Group s income and operating cash flows are independent from the changes in the market interest rate because the Group s debt is substantially subject to fixed rate. Only the short-term debt corresponding to bank loans that finance working capital are subject to fluctuation of interest rates. The Group has taken a mediumand long-term debt at variable rate that subsequently was fixed using hedging transactions (Swaps). (iii) Credit risk The Group does not have significant credit concentration risk. Concerning the loans to its related parties, the Company has established measures aimed at assuring recoverability of such loans. The Group s certificates of time deposits are limited to four sound financial entities in order to avoid risk concentration. (iv) Liquidity risk Prudent management of liquidity risk implies keeping enough cash and marketable securities, financing available through a proper number of credit sources, and the capacity of closing positions in the market. The Company maintains an average debt maturity greater than the DEBT/ EBITDA ratio; additionally, the Group holds overnight deposits and certificates of time deposits for an approximate amount of US$ 6.7 million destined to face cash demands that new projects or investments may require. Finally, the program of commercial papers obtained during 2006 was renewed in year 2008 for 2 additional years, enabling lines amounting to US$ 20 million that contribute to reduce the dependence on lines granted by the financial system, to diversify financing sources. (4) Cash and Banks and Restricted Funds They comprise the following: Cash and checking accounts 88,494 51,861 Overnight and time deposits 38,536 71, , ,726 Collateral account - 4,743 Restricted funds 16,598 13, , ,946 ======== ========

26 . 18. As of December 31, 2008, the Group holds checking accounts and time deposits at local banks in local and foreign currency for approximately S/ million and US$ million, respectively (S/ million and US$ 21.6 million, respectively, as of December 31, 2007). As of December 31, 2007, the Collateral Account amounting to S/. 4.7 million, (equivalent to US$ 1.6 million) corresponded to a fund held at Banco de Crédito del Perú as a collateral for the compliance bond of the Concesion Agreement of Eje Multimodal Sur Tramo 3 (IRSA Sur Tramo 3). The Company recovered this colateral during As of December 31, 2008, restricted funds mainly includes US$ 4 million (US$ 4.5 million as of December 31, 2007) from subsidiary GMP S.A. held at Banco de Crédito del Perú, to guarantee obligations of a related party. (5) Trade Accounts Receivable Trade accounts receivable comprise invoices receivable and provisions pending invoicing mainly related to income from work valuations, income from rendered services, and sale of merchandise and property. As of December 31, 2008 and 2007, trade accounts receivable are shown net of advances from clients for S/ million and S/ million, respectively. Those invoices receivable have current maturity, do not accrue interest, and do not have specific collaterals. Aging of accounts receivable is as follows: Current 341, , days past due 29,665 1,390 Past due over 30 days 5,879 2, Total 377,480 ======== 233,564 ======== As of December 31, 2008, trade accounts receivable mainly increased due to balances related to stage of completion of contract of Concesión Canchaque S.A. for S/ million and Survial S.A. S/ million. Those balances are guaranteed by the Peruvian government once OSITRAN issue the corresponding Certificados de Avance de Obra - CAO (work completion certificates).

27 . 19. (6) Related Parties The movement of accounts receivable and payable with related parties for the year ended December 31, 2008, is as follows: Balances as of Balances as of Additions Deductions Receivable: GME S.A Norvial S.A ,316 ( 8,844) 834 Other minor ( 275) ,054 ( 9,119) 1,576 ======= ======= ======= ======= Payable: GME S.A. 5,647 - ( 5,646) 1 Norvial S.A. 7 7 (( 7) - Other minor 12 1,544 ( 92) 1, ,666 1,551 ( 5,745) 1,465 ======= ======= ======= ======= Accounts receivable and payable have current maturity and do not have specific guarantees. (7) Consortiums As of December 31, this item comprises: Receivable Payable Receivable Payable Consorcio Constructor IIRSA-Norte - 14,526-3,742 Consorcio Héroes Navales 7, Consorcio La Quinua Constructora Uyuni S.A GyM JJC Contratistas Generales S.A GyM S.A. Skanska del Perú S.A GyM S.A. (Constructores Transmantaro) - 3,299-1,689 Consorcio GyM EVISAC Consorcio Pasco 1,030-1,643 - Consorcio GYM Concar Consorcio Terminales Consorcio Chinecas GYM-JJC Consorcio BAC Consorcio proyecto Chinquitirca - 1, Consorcio Vial Ayahuaylas ,485 20,008 1,921 5,597 ======= ======= ======= =======

28 . 20. Accounts receivable and payable to consortiums are mainly related to loans for working capital and lease of equipment. (8) Other Accounts Receivable They comprise the following: Guaranty deposits for agreements (a) 16,977 16,046) Advances to suppliers (b) 24,304) 26,772) Current portion of long-term account receivable 4,625) 2,825) Various (c) 34,262 35,613) ,168) 81,256) ======== ======== (a) Guarantee deposits as of December 31, 2008, are related to the following works: Edificio Casa de Celda for S/. 2.6 million, Edificio Capital Nivel Superior for S/. 2.1 million, Hotel Libertador for S/. 2.1 million, C1 EPC11 Malvinas for S/. 1.8 million, Main Civil Work LNG and Cashiriari civil works for S/ million, Túnel La Granja for S/. 1.0 millions, Main Civil Works for S/. 1.0 million, Minera Yanacocha for S/ million, Rio Tinto Minera Limitada SAC for S/ million, Doe Run Perú for S/ million (Sedapal Blocks 6, 7 and 10 for S/. 6.5 million, LNG camps for S/. 2.8 million, LNG Underground for S/. 1.7 million, LG tank foundations for S/. 1.3 million, Malvinas EPC 11 Extension for S/. 1.2 million as of December 31, 2007). (b) Advances given to suppliers correspond to Consorcio Constructor del Sur for S/. 4.5 million, JJC S.A. for S/ million, Golf Millenium for S/. 3.7 million, Buildings LNG for S/. 1.5 million, Lease of Block 58 for S/. 1.4 million, Edificio Oficinas Capital for S/. 1.0 million, Topping Plant Huayuri for S/. 1.0 million, Parques de Riva Agüero for S/. 1.1 million, and advances for imports and their corresponding procedures for S/. 2.9 million (Golf Millenium for S/. 6.2 million, San Gabán Transmission Line for S/. 0.8 million, Edificio Santo Toribio for S/. 1.1 million, Novotel Hotel for S/. 0.9 million, Clinica Ricardo Palma for S/ million, Ministry of Transportation and Communications for S/. 5.1 million, and advances for imports and their corresponding procedures for S/. 7.2 million as of December 31, 2007). (c) Various accounts receivable as of December 31, 2008, include the balance with Intertítulos, resulting from the regular withholding of Securitization Bonds for S/ million, the balance receivable corresponds to Compensation Fund for S/. 4.0 million related to the regulatory framework of the Hydrocarbons Act and lease of equipment and reimbursable expenses receivable from CONIRSA for S/. 4.6 million (regular withholding of securitized bonds for S/ million with Intertítulos, and leases of equipment and reimbursable expenses receivable from CONIRSA for S/ million as of December 31, 2007).