2006 annual report cimpor - sistema de difusão...

2006 ANNUAL REPORT

CIMPOR – CIMENTOS DE PORTUGAL, SGPS, S.A.

PROFILE OF THE CIMPOR GROUP

CIMPOR is an international cement Group, ranked 10th in the world with an installed capacity of 24.1 million tonnes/year (cement with own clinker) at the end of 2006. CIMPOR operates in nine countries, but its decision centre is in Portugal. CIMPOR is the national market leader in Portugal, Cape Verde and Mozambique, and regional leader in Morocco (Rabat), Egypt (Alexandria) and South Africa (KwaZulu-Natal). It holds 2nd, 3rd and 5th positions in the Tunisia, Brazil and Spain markets, respectively. Cement is the Group’s core business. Concrete, aggregates and mortars are produced and sold in a vertical business integration process, through which a turnover of 1,639 million euros was achieved in 2006.

STRATEGIC VISION The CIMPOR Group, as a pioneer in the concept of sustainable development and one of the world’s main players in the movement towards consolidation of the sector, aims to pursue a path of growth and internationalization, remaining loyal to that concept whilst maintaining its independence from other large cement producers and keeping its decision centre in Portugal.

VALUES • Shareholders – To defend their legitimate interests through the intrinsic appreciation of the capital

invested in the company and adequate remuneration. • Clients – Focus on full satisfaction of clients’ expectations, in accordance with the ethical principles of

integrity and compliance with the applicable standards. • Personnel – Fair remuneration for their work, with career advancement opportunities and fair

treatment by fostering an active policy of respect for good standards of hygiene, health and safety at in the workplace.

• Organization – Constantly striving for excellence by setting ambitious goals and selecting leaders, at all levels of the organization, who are able to shoulder responsibility and meet these goals.

• Quality – Compliance with national and international standards, with particular reference to product certification and the smooth running of the Quality Management System.

• Environment – Harmonious integration into the social and cultural surroundings, based on an active policy of environmental protection and cooperation with local communities.

• Innovation – Pursuit of a policy of innovation and the development of technologies, products and services in collaboration with the academic and scientific community, clients and suppliers.

STRATEGY

• To consolidate current positions through internal growth (increased efficiency and capacity) and greater

penetration in markets where the Group already operates, through expansion into businesses related to the cement line (e.g. ready mix concrete and operation of quarries).

• To make new acquisitions within the Group’s financial capacity, while maintaining a balance between operations focused on emerging markets, maintaining the Group’s presence in consolidated and mature markets, where the lower potential for growth is offset by lower risk.

• To optimize operations by taking advantage of synergies, cost cutting (particularly energy costs), increase employee productivity and investing in R&D.

• To develop trading between the Group’s companies so as to balance demand peaks in certain markets with excess supply in others.

Unit 2006 2005 Change 2004

Installed Capacity (Cement) (1) 103 ton 24,115 23,885 1.0 % 23,355 Group SalesCement and Clinker 103 ton 20,445 19,806 3.2 % 18,641 Concrete 103 m3 6,943 7,058 -1.6 % 6,673 Aggregates 103 ton 12,966 13,228 -2.0 % 11,897 Mortar 103 ton 485 477 1.8 % 490

Turnover 106 euros 1,638.9 1,534.9 6.8 % 1,365.6 Payroll Expenses 106 euros 173.2 169.0 2.5 % 159.6 Operating Cash Flow (EBITDA) 106 euros 563.0 495.8 13.6 % 451.9 Operating Income (EBIT) 106 euros 408.1 355.4 14.8 % 323.4 Financial Income (net) 106 euros -42.3 -3.3 s.s. -6.7 Current Income 106 euros 365.8 352.2 3.9 % 316.7 Net Income after Minority Interests 106 euros 291.9 266.2 9.7 % 256.1

Total Assets 106 euros 3,857.8 3,805.4 1.4 % 3,411.5 Shareholders' Equity 106 euros 1,579.7 1,519.1 4.0 % 1,159.2 Minority Interests 106 euros 74.1 65.5 13.1 % 63.7 Net Financial Debt (2) 106 euros 865.6 1,079.4 -19.8 % 1,312.3 Capital Employed 106 euros 2,547.1 2,600.9 -2.1 % 2,335.3

Employees (31 Dec.) units 5,924 5,827 1.7 % 5,706 Turnover / Employee 103 euros 279.7 266.1 5.1 % 242.1 Value Added / Employee 103 euros 125.6 115.2 9.0 % 108.4

Net Investment Goodwill (Subsidiaries) 106 euros 14.5 11.2 29.5 % 20.0 Tangible Fixed Assets 106 euros 166.1 149.0 11.5 % 173.3

Operating CF / Turnover (EBITDA Margin) 34.4% 32.3% 33.1%Operating Income / Turnover (EBIT Margin) 24.9% 23.2% 23.7%Return on Equity (ROE) 18.9% 19.7% 23.0%Return on Equity Employed (ROCE) 13.1% 12.1% 12.2%Net Financial Debt / Capital Employed 34.0% 41.5% 56.2%

Market Capitalization (31 Dec.) 106 euros 4,227 3,125 35.3 % 2,789 Earnings per Share (EPS) euros 0.44 0.40 9.5 % 0.38 Quotation (31 Dec.) / Price Earnings Ratio (PER) 14.4 11.7 10.8

(1) Annual capacity of cement production with own clinker (31 Dec.)(2) Loans granted (including Leasings and Added Costs resulting from Financial Debt) - Liquid assets,Tradeable Shares andother Financial Investments(3) Corrected Operating Income (net of Taxes) / Capital Employed

KEY FINANCIALS

Consolidated Data

Turnover

1,639

1,366 1,535

0

200

400

600

800

1,000

1,200

1,400

1,600

1,800

2,000

2004 2005 2006

106 euros

Net Financial Debt

866

1,312

1,079

0

250

500

750

1,000

1,250

1,500

2004 2005 2006

106 euros

Return on Capital Employed (ROCE)

0.122 0.121 0.131

0

0.02

0.04

0.06

0.08

0.1

0.12

0.14

0.16

2004 2005 2006

EBITDA / EBITDA Margin

496 563

452

0.3440.3230.331

0

100

200

300

400

500

600

700

800

2004 2005 2006

106 euros

0

0.1

0.2

0.3

0.4

Net Income after Minority Interests

256 292

266

0

50

100

150

200

250

300

350

2004 2005 2006

106 euros

Capital Employed

2,601 2,547 2,335

0

500

1,000

1,500

2,000

2,500

3,000

2004 2005 2006

106 euros

Return on Equity (ROE)

0.197

0.23

0.189

0

0.05

0.1

0.15

0.2

0.25

0.3

2004 2005 2006

Operating Income (EBIT) / EBIT Margin

323

408 355

0.237 0.2320.249

0

100

200

300

400

500

600

2004 2005 2006

106 euros

0

0.1

0.2

0.3

CIMPOR – Cimentos de Portugal, SGPS, S.A. – GROUP

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CORPORATE HIGHLIGHTS IN 2006

• The CIMPOR – Cimentos de Portugal, SGPS, S.A., Annual General Meeting was held on 4 May 2006. All proposals submitted by the Board were approved, viz. the proposed allocation of the income for the 2006 financial year, which implied the payment of a gross dividend of 0.19 euros per share.

• Sale of the the CIMPOR Group’s entire (49%) shareholding in the Angolan cement

plant Nova Cimangola, S.A., for USD 74 million. • Setting up of the Cimpor Chengtong Cement Corporation, Limited (CCCC) – a joint

venture between the CIMPOR Group (80%) and the China Chengtong Cement Group (20%) – based in Hong Kong and having a capital of HKD 10 thousand, and the subsequent signing of a binding contract (subject to approval by the local authorities) for the CCCC to acquire 60% of the capital of the Chinese cement plant Shandong Liuyuan Cement Company, Limited.

• The signing of another binding contract – subject to various prior conditions, among which is non-opposition from the local market regulator – for the acquisition, based on an enterprise value of EUR 533.56 million, of direct and indirect shareholdings representing about 99.7% of the capital of the Turkish cement producer Yibitas Lafarge Orta Anadolu Çimento Sanayi ve Ticaret A.S. (YLOAÇ).

PORTUGAL

• Obtaining EMAS – Ecomanagment and Audit Scheme registration (Community Ecomanagement and Auditing System) for the Souselas Production Plant.

• Undertaking a series of investments intended to provide the Alhandra Production

Plant with the resources needed to receive and burn animal biomasses. • Assignment of shareholdings amounting to the whole of the capital of Vilaje –

Vigas e Lajes Pré-Esforçadas, Lda., and Veirocir – Comércio de Cimentos, S.A..

• Cimpor Portugal, SGPS, S.A’s sale of 50% holding in the capital of Ecoresíduos – Centro de Tratamento de Resíduos, Lda..

• Incorporation of Precadar – Pontes e Viadutos Pré-Fabricados, Lda., into Cimpor

Portugal, SGPS, S.A..

Spain

• Acquisition of all the shares comprising the capital of Áridos del Cantábrico, S.A. for a sum of nearly EUR 7.7 million by Corporación Noroeste de Hormigones y Áridos, S.L., which were subsequently sold to Canteras Prebetong, S.L..

• Several mergers undertaken in the Spain Business Area: incorporation by merger of Prebetong Noroeste de Canteras, S.L., Brañas de Brins, S.A., and later on, Áridos del Cantábrico, S.A., into Canteras Prebetong, S.L.; and of Morteros Noroeste, S.L., into Morteros de Galícia. S.L.; and incorporation by merger of Silos de Galícia, S.L., into Cementos Cosmos, S.A..


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• Sale by Corporación Noroeste, S.A., for a sum of around EUR 69 million, of its

(19.3%) holding in the capital of the Spanish company Cementos Lemona, S.A., under a takeover bid for that company launched by Cementos Portland Valderrivas, S.A..

• Start-up of a new mortar factory near Santiago de Compostela belonging to

Morteros de Galícia, S.L .

• Award of contract for work related to expansion of clinker production capacity in the Córdoba and Niebla plants.

• Capital increase in Tabanque, S.L., and Sociedad Industrial y Financiera

Gallega, S.L., by EUR 5 thousand and 2 million, respectively.

• Reduction in the capital of Hormigones Hércules, S.L., by EUR 400 thousand through amortization of shareholdings.

• Reduction (offsetting losses in previous years) and subsequent increase in capital of Materiales del Atlántico, S.A..

• Acquisition through Corporación Noroeste de Hormigones y Áridos, S.L., of

shareholdings representing 80% of the capital of Firmes y Hormigones SANI, S.L., in two phases for a total of nearly EUR 7.1 million.

• Subscription for 9,890 shares in Cementos Antequera, S.A., at a price of 60.1

euros/share in a new operation to increase share capital. Morocco

• Joint celebration of 30 years of operations for the Asment de Témera plant and 10 years as part of the CIMPOR Group.

• Launch of an environmental impact study, in anticipation of the start of the project

for co-incineration of waste products.

• Feasibility studies started on the installation of a wind farm to provide energy for the Asment de Témara plant.

• Two new ready-mix concrete plants started production (Betocim).

Tunisia

• Increase in the share capital of the Ciments de Jbel Oust (CJO) from TND 90,834,600 to TND 95,652,500 through incorporation of the special investment reserve, and its subsequent reduction to TND 90,082,400, by the amortization of 55,701 shares held by Cimpor Inversiones, S.A..

• Preliminary audit undertaken to integrate the safety procedures of ISO 14001

standard with ISO 9001:2000 standard, to obtain certification. • Feasibility studies started on the installation of a wind farm in the Zaghouan

region designed to supply power to the CJO plant.

• Start up of ERP SAP and inclusion of CJO in the Group’s computer network.


3

Egypt

• Increase in the share capital of Cimpor Sacs Manufacture Company (Cimpsac), S.A.E., by EGP 60 million, with a view to financing the construction (since completed) of a paper bag factory for the company.

• Award of contracts for work for the rehabilitation project on one of the Amreyah

Cement Company, S.A.E. (AMCC)’s production lines to be carried out in 2007. • Stock market acquisition for the sum of around EGP 50.9 million of shares in the

Egyptian cement plant Misr Cement Company (Qena), S.A.E., representing approximately 2.82% of its capital.

• Sale of Group’s minority holding in Ascom, Express Ready Mix Concrete and United Company for Foundries for a total of EGP 11,659 thousand.

Brazil

• Merger of Cimento Atol, Ltda., Cimepar – Cimento da Paraíba, Ltda., and CCB – Cimpor Cimentos do Brasil, Ltda., by incorporation of the first two into the last.

• Acquisition of three more ready-mix concrete plants in the São Paulo region

(Brazil), with a total production capacity of about 133,000 thousand m3/year. • Quality certification obtained under ISO 9001:2000 in all cement and mortar

plants and in the São Paulo and Recife offices, and renewal of Environmental Management certification ISO 14001:2004 in the João Pessoa factory.

• Conclusion of the first phase of investment in expanding clinker production

capacity of one of the Cezarina plant lines from 1,550 to 2,000 tonnes/day.

• Partnership contracts signed for the treatment of waste in the Cezarina and Candiota plants and expansion of the Nordeste Rodando Limpo (Northeast Running Clean) scheme, which began in Recife and João Pessoa in 2005), to Maceió.

Mozambique

• Acquisition by Cimentos de Moçambique, S.A.R.L., of another block of shares in the capital of Premap – Prefabricados de Maputo, S.A.R.L., which raised its holding from 81.20% to 86.1%.

• Submission of the Environmental Impact Study undertaken on the Matola factory to the authorities, after which substantial investments were made in the clinker production line, leading to its stoppage for two months.

• Installation by Cimbetão of a new ready-mix concrete plant in the Chokwé region.


4

South Africa

• Signature of a series of agreements to take effect from 1 January 2007, with a view to restructuring the Natal Portland Cement Company’s (Pty) Limited (NPC) operations, to comply with South Africa’s law on Black Economic Empowerment (BEE).

• Acquisition through NPC of all the capital of the South African firm Sterkspruit

Aggregates (Pty) Limited for the sum of ZAR 53 million. The assets were allocated to National Asphalt (Pty) Limited’s production and marketing of concrete and aggregates.

• Conclusion of work to install a cement grinding mill (600 thousand tonnes/year),

including packaging and shipping equipment, in the Simuma plant. • Start of building work, also in Simuma, of a new clinker production line (1,500

tonnes/day).

• Maintenance of the ‘5-star’ classification in the three NPC factories (Durban, Simuma and Newcastle), awarded by the National Occupational Safety Association (NOSA) for Safety and Hygiene in the Workplace.

Cape Verde

• Formalization of the acquisition of another block of shares amounting to 12% of the capital of Cimentos de Cabo Verde, S.A. (CCV) through Nordicave Trading Industrial, Lda, which raised the Group’s holding to 98.65%.

• Acquisition by CCV of all the shares in the capital of the aggregates company

ITP- Indústria de Transformação de Pedras, Lda..

• Participation in the setting up of a new company producing ready-mix concrete and selling aggregates - Cabo Verde Betões e Inertes, S.A. – with a capital of 10 million ECV, 54% of which is held by CCV.


5

GOVERNING BODIES

Board of Directors Chairman: Ricardo Manuel Simões Bayão Horta Members: Luís Eduardo da Silva Barbosa Jacques Lefèvre Jean Carlos Angulo* Jorge Manuel Tavares Salavessa Moura * Luís Filipe Sequeira Martins * Manuel Luís Barata de Faria Blanc * Pedro Maria Calaínho Teixeira Duarte * Vicente Árias Mosquera José Manuel Baptista Fino José Enrique Freire Arteta * Executive committee Audit Board Chairman: Ricardo José Minotti da Cruz Filipe Members: José Conceição Silva Gaspar

Deloitte & Associados, SROC, S.A., represented by Carlos Manuel Pereira Freire

Alternate Member: José Martins Rovisco Alternate Auditor: António Marques Dias General Meeting Chairman: Miguel António Monteiro Galvão Teles Vice-chairman: José António Cobra Ferreira Secretary: Jorge Manuel da Costa Félix Oom

COMPANY SECRETARY Secretary in Office Jorge Manuel da Costa Félix Oom Alternate Secretary Armindo Oliveira das Neves


6

CONTENTS CONSOLIDATED REPORT AND ACCOUNTS FOR 2006 • Profile of the CIMPOR Group • Key Financials • Corporate Highlights in 2006 • Governing Bodies

I – CORPORATE GOVERNANCE

0. Declaration of Compliance

1. Disclosure of Information 1.1. Organizational Structure

1.1.1. CIMPOR Group 1.1.2. CIMPOR Holding 1.1.3. Shared Services 1.1.4. CIMPOR TEC

1.2. Board of Directors’ In-house Corporate Governance and Social Responsibility Advisory Committee

1.3. Risk Control System 1.4. CIMPOR in the Stock Market

1.4.1. Capital and Shareholder Structure 1.4.2. Share Performance on the Stock Exchange 1.4.3. Treasury Shares

1.5. Dividend Distribution Policy 1.6. Stock Purchase and Stock Option Plans 1.7. Business and Operations between the Company and Members of its

Management and Auditing Bodies, Holders of Qualified holdings or Controlled or Group Companies

1.8. Investor Relations Office 1.9. Remuneration Committee 1.10. Auditor’s Fees

2. Exercise of Voting Rights and Shareholder Representation 3. Corporate Rules

3.1. Codes of Conduct of the Corporate Bodies 3.2. Risk Control in the Company’s Business 3.3. Measures Liable to Interfere in the Success of Takeover Bids

4. Management

4.1. Characterization of Management 4.2. Executive committee 4.3. Method of Functioning of the Management Body 4.4. Remuneration 4.5. Policy on the Reporting of Irregularities

15

9

10

131313141516

1718191920222323

26272828

30

31313132

333340414243


7

II - GROUP ACTIVITY IN 2006

1. Macroeconomic and Sectoral Background 1.1 Evolution of World Economy 1.2 Economic Environment in the Countries where the Group operates

1.2.1. Portugal 1.2.2. Spain 1.2.3. Morocco 1.2.4. Tunisia 1.2.5. Egypt 1.2.6. Brazil 1.2.7. Mozambique 1.2.8. South Africa 1.2.9. Cape Verde

1.3. Evolution of the Cement Sector

2. Internationalization 2.1 China 2.2 Turkey 2.3 Angola

3. Review of the Group’s Results 3.1. Summary of the Overall Business 3.2. Portugal 3.3. Spain 3.4. Morocco 3.5. Tunisia 3.6. Egypt 3.7. Brazil 3.8. Mozambique 3.9. South Africa 3.10. Cape Verde

4. CIMPOR TEC’s Business 5. Sustainability and Social Responsibility

6. Human Resources 7. Financial and Risk Management Policy

7.1. Financial Debt Management 7.2. Risk Management Policy

7.2.1. Financial Risk Management 7.2.2. Asset Risk Management

8. Information Technology 9. Outlook for 2007

10. Post Balance Sheet Events

III – CONSOLIDATED FINANCIAL STATEMENTS

• Consolidated Statements of Profit and Loss for the Years Ended 31 December 2006 and 2005

• Consolidated Balance Sheets as of 31 December 2006 and 2005

45

46464646464747474748484848

50505051

5353616264656667686971

72

74

75

7777797980

81

83

86

89

9091


8

• Consolidated Cash Flow Statements for the Years Ended 31 December

2006 and 2005 • Consolidated Statements of Recognised Income and Expense for the

Years Ended 31 December 2006 and 2005 • Notes to the Consolidated Financial Statements at 31 December 2006 • Qualifying Shareholdings • CIMPOR Shares held by the Members of the Governing Bodies • Report and Opinion of the Audit Board • Statutory Auditor’s Report and Auditor’s Report

REPORT AND ACCOUNTS FOR 2006 (HOLDING COMPANY) I – DIRECTORS’ REPORT

1. Summary of the Business 2. Legal Information 3. Post Balance Sheet Events 4. Outlook for 2007 5. Proposed Appropriation of Profits

II – ACCOUNTING DOCUMENTS OF THE HOLDING COMPANY • Balance Sheets as of 31 December 2006 and 2005 • Statements of Profit and Loss for the Years Ended 31 December 2006 and

2005 • Statements of Cash Flows for the Years Ended 31 December 2006 and

2005 • Statements of Changes in Shareholder’s Equity for the years Ended 31

December 2006 and 2005 • Notes to the Financial Statements at 31 December 2006 • Report and Opinion of the Audit Board • Legal Certification of Accounts and Auditor’s Report • Minutes of the Shareholder’s Annual General Meeting

92

9394

175177182186

188

189

190190191191191

193

194

195

196

198199224226229


9

I

CORPORATE GOVERNANCE


10

CIMPOR has always been committed to dealing appropriately with questions related to corporate governance as well as with the periodic disclosure of the positions and solutions the Group adopts in this area to its stakeholders, the wider financial community, the authorities and the market in general. As in previous years, the Board of Directors is presenting in this Chapter of its annual report the more significant aspects of Corporate Governance and the Group. This simultaneously complies with information disclosure duties established in the new Article 245-A of the Portuguese Securities Market Commission (Comissão do Mercado de Valores Mobiliários (CMVM) no. 7/2001), as amended by CMVM Regulations 11/2003 and 10/2005. 0. Declaration of Compliance CIMPOR has always attached special importance to the adoption of the best organizational models and practices, and the most suitable guidelines in terms of Corporate Governance. In doing so, it tries to follow the main international trends and encourage critical reflection within the company. This reflection has in fact resulted in a series of contributions to the public debate started in 2005 by the CMVM on some proposed amendments to their Regulations 7/2001 and 4/2004, and to the respective Recommendations on the Corporate Governance of Listed Companies, the most important of which would be included in the new normative text. Given the importance ascribed to these matters, CIMPOR is currently one of the companies listed on Euronext Lisbon that complies most closely with these Recommendations. Therefore, in relation to the new Recommendations published by the CMVM, after the public consultation process (November 2005), CIMPOR follows all the recommendations on:

1. Disclosure of Information; 2. Absence of restrictions on voting rights and shareholder representation; 3. Existence of an internal control system; 4. Absence of defensive measures designed to prevent the success of takeover

bids; 5. Composition of the board of directors; 5-A. Existence of enough non-executive members of the Board; 6. Existence of enough independent non-executive members of the Board; 7. Existence of an internal audit committee with powers to assess the corporate

structure and governance; 10. Approval of plans to allot shares and/or options to purchase shares to

members of the Board and/or other employees; 10-A. Adoption for a reporting irregularities policy.

Recommendation no. 8, on the remuneration of members of the Board is complied with in full in terms of the structure of this remuneration, enabling the interests of the Board members to be in line with those of the Company. But this is not the case as regards the respective annual disclosure in individual terms. The final part of Recommendation no. 8 has not been adopted. This is mostly because it is understood that the shareholders, by opting, pursuant to Article 399 item 1 of the Companies Code (Código das Sociedades Comerciais) and Article 17 item 2 of the Articles of Association, to appoint a committee to set the remuneration of the Board members, instead of this being established by the shareholders’ general meeting, did so


11

with an objective which, implying some reservation, is not compatible with public disclosure of the individual remuneration. Furthermore, since Portuguese law holds that shareholders are sovereign in this matter, they can always decide otherwise if they deem that not enough information is being made available, and apply the provisions of Chapter IV item 5 of the Appendix to CMVM Regulation 7/2001. The understanding that the shareholders, by entrusting the task of defining the remuneration policy for the corporate bodies to a duly empowered Remuneration Committee, will have given it full autonomy in this matter also explains the non-submission of a statement on this policy for the appraisal of the Annual General Meeting, and the resulting non-compliance with Recommendation no. 8-A. Finally, in relation to Recommendation no. 9 that all the members of the Remuneration Committee should be independent with respect to the members of the Board of Directors, this has not been fully complied with because, in accordance with item 9 in Chapter I of the Appendix to CMVM Regulation 7/2001, one member of that Committee is held to be not independent of one of the Board members. But it is understood that any conflict of interest that might arise is adequately safeguarded, since this person is in a minority within this Committee.


13

1. Disclosure of Information 1.1. Organizational Structure 1.1.1. CIMPOR Group The CIMPOR Group is organized into business areas which correspond to the countries where the Group operates. These business areas are in turn grouped in major regions, viz.: (i) the Iberian Peninsula; (ii) the Mediterranean Basin; (iii) Latin America and West Africa; and (iv) Southern Africa. The various activities in each Business Area are grouped by product, and the core business is the production and sale of cement. As the holding company for the Group, CIMPOR - Cimentos de Portugal, SGPS, S.A. is responsible for its strategic development – as regards the whole internationalization process – and for overall management of the different business areas, ensuring coordination of the financial, technical, human and other resources in line with the criteria and guidelines laid down in the five-year strategic plan, which is revised and approved annually by the Board of Directors in accordance with the Group’s main goals. More thorough monitoring of the management of the different business areas is ensured by CIMPOR Portugal, SGPS, S.A., for activities in Portugal, and by CIMPOR Inversiones, S.A., a subsidiary based in Spain, for all the others. This company was set up in 2002 to be the Group’s launch-pad for expansion abroad. Each of the abovementioned regions has a “zone manager”, except for the Iberian Peninsula (because of the size and diversity of its operations, it does not have such a position), who is on the Board of Directors of the companies in the respective business areas and reports directly to the Board of Directors of CIMPOR Inversiones, S.A.. The Board of Directors of CIMPOR Inversiones, S.A is made up of three of the five members of the Executive Committee of the Board of Directors of the holding company - Jorge Manuel Tavares Salavessa Moura, Luís Filipe Sequeira Martins and Manuel Luís Barata de Faria Blanc - who are also on the boards of the sub-holdings companies responsible for coordinating the Group's activities in Portugal and Spain- CIMPOR Portugal, SGPS, S.A., and Corporación Noroeste, S.A., respectively. These three members of the board also have special responsibility, without prejudice to the collective work delegated to the said Executive Committee, for monitoring the different Functional Areas of the Group:

• External Relations and Communication, Legal Matters, Human Resources and Internal Auditing - Jorge Salavessa Moura, replaced when necessary by Luís Filipe Sequeira Martins;

• Engineering and Technical Support Services to the Group - Luís Filipe Sequeira Martins, replaced when necessary by Jorge Salavessa Moura;

• Corporate Centre, Accounting, Consolidation and Tax and Planning, Control and Information Systems - Manuel de Faria Blanc, replaced when necessary by Jorge Salavessa Moura.


14

The corporate organisation of each business area corresponds to the model considered best suited to each case given the characteristics and conditions of the business and the country's legal system, so as to take advantage of possible synergies and benefit from more favourable financial and tax frameworks. Each business area works on an autonomous management basis, notably in day-to-day and operational management matters, within a plan and control system directed by the holding company in which the strategic guidelines, business and investment plans and targets and annual budgets are defined through participation and interaction, and are subject to periodic review and control. Each business area is expected to be managed by both local nationals and other Group personnel so as to provide multicultural management. In companies that are directly or indirectly dependent on CIMPOR - Cimentos de Portugal, SGPS, S.A., the most important decisions - e.g., those that exceed specific amounts or that have greater impact on profits or on the Group's strategic development - must be approved or ratified by the board of the holding company. This also applies to decisions or actions that, when dealt with at Group level, enable significant synergies to be generated. 1.1.2. CIMPOR Holding In order to perform its role properly, CIMPOR - Cimentos de Portugal, SGPS, S.A. has functional structures supporting the Group's management and in each business area, as shown in the following diagram.

Board of Directors

Executive Committee

Corporate Centre

External Relations & Communication João Salgado

Raúl Caldeira

Investor Relations

Filipa S. Mendes

Internal Auditing

Pascoal Machado Financial Operations

Jorge Saraiva

Health and safety Insurance Management

Teixeira de Freitas Mendes Marques


15

The Corporate Centre has the following main functions: (i) to contribute to the achievement of the Group's international development strategy, ensuring the procedures leading to the acquisition of companies in the different markets to which the group intends to expand its operations; (ii) to ensure, through the Investor Relations Office, regular communication with players in the capital market, namely shareholders, supervisors and other public authorities, financial analysts and fund managers and other collective investment bodies; (iii) in the Financial Operations area, to ensure, access to the financial resources necessary for the Group's expansion and its day-to-day operation under the best conditions; and (iv) to ensure, through its Insurance Management Department, the management and control of the Group's asset risks. The External Relations and Communication Department ensures implementation of the Group's communication and image policies. The Internal Audit Department is responsible for conducting and coordinating financial, asset and operational audits throughout the Group by examining and assessing the adequacy and effectiveness of the internal control systems and the quality of their performance. Set up once occupational health and safety became one of the CIMPOR Group’s critical business values and one of the priority targets of its operational strategy, the mission of the Health and Safety Advisory Office embraces: (i) proposing guidelines that the policy adopted should follow, the goals to be achieved and the management system to be used; (ii) galvanizing its implementation; (iii) coordinating the activities in question in functional terms, throughout the Group; and (iv) supervising its implementation and assessing the results. 1.1.3. Shared Services Harmonization and standardization of processes and practices which enable Group culture to be enhanced and the quality, flow and reliability of decision making information to be improved have long been an important pillar in the overall policy of the CIMPOR Group. At the start of 2004, after the “Shared Services” company - “CIMPOR - Serviços de Apoio à Gestão de Empresas, S.A. (CIMPOR Serviços) - was founded, a series of non core processes/functions, which had until then been scattered throughout the Group holding company, CIMPOR Portugal sub-holding and the operating companies themselves, were transferred to it. CIMPOR Services provides management, consultancy and advisory services to all companies in the Group, in particular those with head offices in Portugal. Its current organizational structure is shown in the diagram below. The Planning, Control and Information Systems Department coordinates and executes the whole process of preparing and controlling the plans and budgets of the different business areas and companies with head offices in Portugal, as well as the management and development of the Group's information systems and technology. The Accounting, Consolidation and Tax Department is responsible for: (i) promoting and carrying out the entire financial consolidation process; (ii) defining the Group's accounting principles and policies, and coordinating and supporting their implementation; (iii) preparing and performing the accounting functions of the companies with head


16

offices in Portugal; and (iv) carrying out the Group's tax planning and ensuring that these companies comply fully with their tax obligations. The Personnel Department implements the Group's human resources policy in Portugal, with the objective of making best use of the skills available and developing these resources so as to maximize employee performance and contribute to the employee’s personal and professional fulfilment. This department is also responsible for managing personnel matters in the case of provision of service contracts with Group companies with head offices in Portugal.

Board of Directors

Finance Customer Support

Luiz Pessoa Jorge César

Accounting, Consolidation and Tax Planning, Control and Information

Systems

Sérgio Almeida Eugénio Paupério

Personnel Logistics

Manuela Machado Caldas Oliveira

Also under these contracts, the Financial Department provides the companies with services relating to their respective receivables, payables and treasury processes and monitors and controls their financial management. The Logistics Department manages the physical spaces of companies belonging to the Group with head offices in Lisbon (Rua Alexandre Herculano and Prior Velho), provides them with administrative support in purchasing and stationery, travel and accommodation, communications and filing. It also offers advisory services on organizational development and administrative support for vehicle management and occupational health and safety (except, in the last case, to CIMPOR – Indústria de Cimentos, S.A.). The mission of the Customer Support Department is to ensure liaison between the various elements of the Shared Services Centre and the companies it serves - furthering continued improvement in the quality of services rendered and increased satisfaction on the part of the client companies - as well as providing the corporate bodies with the necessary support in legal matters. 1.1.4. CIMPOR TEC The need to strengthen the Group's technical and technological culture led to the decision of the Board of Directors, at the end of 2004, to transfer the Technical and Industrial Development Centre of the holding company and the Central Laboratory of CIMPOR - Indústria de Cimentos, S.A., to CIMPOR TEC - Engenharia e Serviços Técnicos de Apoio ao Grupo, S.A., which was founded on 1 January 2005, with the following mission:


17

• To provide technical and technological assistance to the different Group

companies, especially those in the cement sector, with a view to improving their operating performance with regard to the principles of Sustainable Development;

• To ensure the technical and financial excellence of the Group's industrial investments in that sector;

• To promote new initiatives common to all the Group companies, especially personnel training, with a view to achieving technical progress in the production and sale of cement;

• To provide technical advice on assessing the financial aspects and opportunities of acquiring cement producing assets and defining the targets to be achieved;

• To ensure that all the Group's companies are aware of, and use, the know-how available in each company or that which may be accessed externally.

The Company’s organization is broken down into three major segments of activity, as shown in the diagram below:

• CIMPOR Performance Program for developing and implementing performance management tools in the operational, process engineering, environmental, geological and raw material fields;

• Investments, Engineering, Equipment and Safety, covering investment and project management, automation and control, equipment and maintenance management and occupational health and safety; and

• Products & Quality / Technical Training, which, in addition to these areas, includes the Central Laboratory and R&D.

Board of Directors

Managing Director

Valter Albuquerque

CIMPOR Performance Programme Investments, Engineering,

Equipment and Safety Products & Quality / / Technical Training

Nunes Pereira Neto Cordeiro Sandra Lebreiro

1.2. Board of Directors’ In-house Corporate Governance and Social Responsbility

Advisory Committee In response to international corporate governance best practices, at the start of 2002 an Internal Consultative Commission was formed within the Board of Directors with the mission of studying, drafting reports and advising the Board on in-house standards and procedures covering the development and improvement of principles and practices of company conduct and governance, including aspects related to the internal functioning and relationship of the Board itself, the prevention of conflicts of interest and management of information.


18

In 2005, the Board of Directors decided to broaden the scope of the matters to be covered to include those relating to the Group's social responsibility, and the committee's name was changed to the “Board of Directors’ In-house Corporate Governance and Social Responsibility Advisory Committee”. The Committee made up of at least three directors (a majority of whom must be non-executive and independent) and currently comprises:

– Ricardo Manuel Simões Bayão Horta – Luís Eduardo da Silva Barbosa – Jorge Manuel Tavares Salavessa Moura.

The first two of these are independent, non-executive directors (pursuant to item 2, Article 1 of CMVM Regulation 7/2001). The Committee meets whenever necessary and, in principle, at least once every six months and it has permanent access to external consultants in different areas of expertise at the company's expense. In 2006, the Committee met five times. It analysed the implications for CIMPOR of the changes made to the Companies Code (Código das Sociedades Comerciais) with respect to corporate governance models, and to the Securities Code (Código dos Valores Mobiliários) regarding reporting duties vis-à-vis the CMVM. It was responsible for producing a Code of Ethics and Internal Regulations for Reporting Irregularities (both of which were approved and published by the Board of Directors in 2006). The Committee also established the general guidelines to be followed in drawing up the Group’s Sustainability Report and studied the question of the risk that could arise in the event of a bird ‘flu pandemic. 1.3. Risk Control System Risk management in the CIMPOR Group begins with the main operating companies by identifying, measuring and analysing the different risks to which they are subject. Particular emphasis is given to operating and market risk (business-volume risk), with estimates being made of the probability of the occurrence of the various factors underlying the risks and their potential impact on the Company's business or on the activity in question. The operating managers are also responsible for designing and implementing the most suitable risk control mechanisms. The efficiency of the mechanisms is assessed periodically by the holding company, through the Internal Audit Office under its annual audit plan, covering financial audit, information systems, processes and conformity with the approved procedures The main goal of the holding company is to obtain an overall picture of the risks faced by the Group in each of its different activities and business areas and to ensure that the resulting risk profile is consistent with the Group's global strategy, especially as regards the acceptable level of risk given its capital structure. That is, in accordance with the policy defined by the Board of Directors: to reconcile the constant search for business opportunities that can make a positive contribution to the value creation process with a risk level that, in terms of long-term rating, does not jeopardize CIMPOR's current investment grade rating.


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The Directors' Report includes a chapter describing the policies, in terms of financial and asset risk management, followed by the Corporate Centre with regard to the holding company (see paragraph 7.2. of Chapter II in this Report). As regards the more general financial risks not subject to specific coverage, the Group's policy is directed towards geographical diversification of its expansion investments, so as to balance CIMPOR's presence in mature and emerging markets with maintaining business operations at different levels of development. This means that not only are potential acquisition targets defined, taking into account the need to maintain a balanced and geographically diverse business portfolio, but also the assets to be acquired are assessed individually, incorporating risk premiums appropriate to the situation of each business and each country.

1.4. CIMPOR in the Stock Market 1.4.1. Capital and Shareholder Structure The capital of CIMPOR – Cimentos de Portugal, SGPS, S.A., currently stands at 672 million euros, and is fully paid up. (Registered) shares number 672 million, (each with a par value of one euro), and are traded on Lisbon Euronext.

Characteristics of CIMPOR Securities

Name: CIMPOR – Cimentos de Portugal, SGPS, S.A.

Share Trading: Euronext Lisbon

Futures trading: Euronext Lisbon

Codes: LISBON TRADING: CPR REUTERS: CMPR.IN BLOOMBERG: CIMP PL

Number of shares (with a par value of 1 euro): Total – 672,000,000 Admitted for trading – 672,000,000

According to the Information from Qualified Holdings received by the Company by 31 December 2006, and in compliance with the rules of imputation defined by the CMVM, the holders of these shareholdings were, on that date, the following (see the full list in the Appendix to this Report):


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Number %

Shareholder of Capital Voting Shares rights

Teixeira Duarte, SGPS, S.A. 151,112,489 22.49 22.58 Grupo Credit Suisse (1) 85,538,586 12.73 12.78 Grupo Lafarge 84,908,825 12.64 12.69 Manuel Fino, SGPS, S.A. (2) 75,825,000 11.28 11.33 Banco Comercial Português, S.A. (3) 67,474,186 10.04 10.08 HSBC Holdings plc (4) 20,119,288 2.99 3.01 Bipadosa, S.A. 16,047,380 2.39 2.40 Caixa Geral de Depósitos, S.A. (3) 13,977,706 2.08 2.09 (1) Including shares that may be converted from bonds (2) According to information reported for the purposes of Article 447 of the CSC, the present shareholding indirectly held by this shareholder corresponds to 19.02% of the company’s capital. (3) Including Pension Fund (4) According to the latest information received, 4.39% of the voting rights are imputable to it.

1.4.2. Share Performance on the Stock Exchange In 2006 the European markets, including the Euronext Lisbon, again performed well, largely because of an important series of mergers, acquisitions and IPOs. Despite the poor performance of Portugal's economy, the various privatization operations that took place, along with the Takeover Bids announced, led to a record number of transactions on the Lisbon Stock Market: the number of shares traded exceeded 50 billion euros, up almost 67% on the previous year.

Evolution of the CIMPOR share price

In Portugal the main stock market index (PSI20) saw a double-digit rise for the fourth year in a row, reaching 29.9% (the biggest rise since 1997, and the fourth best ever). It easily outperformed the increase of 18.8% achieved on the main European reference index (Euronext 100).

4.4

4.6

4.8

5.0

5.2

5.4

5.6

5.8

6.0

6.2

6.4

J F M A M J J A S O N D

CIMPOR

N100

PSI20


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CIMPOR fluctuated between a low of 4.58 euros and a high of 6.34 euros most of the year, finally closing at 6.29 euros, with an impressive 35.5% increase in share price - even though a dividend of 0.19 euros/share was paid out in the meantime. Overall, almost 190 million shares were traded, with transactions totalling very nearly two billion euros – a 2.8% higher value than in 2005 - which puts CIMPOR in eighth place in the ranking of this indicator on Euronext Lisbon (with a share of 1.9%). The dividends for 2005 were paid on 2 June. The gross dividend amounted to 0.19% euros/share (0.171 euros in net terms) representing an increase of 5.6% on the dividend declared in the previous year, with gross earnings per share of around 3.4% on the dividend payment date. Taking into account the share price increase and the total dividends paid since 1994, when the shares were first listed, the average annual return on CIMPOR shares reached nearly 14.9% at the end of 2006.

2006 2005 Share Capital (103 euros) 672,000 672,000 Number of shares (1) Total 672,000,000 672,000,000 Own Shares 2,766,810 3,867,300 Share price (euros) Maximum 6.34 4.66 Minimum 4.58 4.11 Year end 6.29 4.65 Market capitalization (103 euros) (1) 4,226,880 3,124,800 Gross dividend / share (euros) (2) 0.215 0.190 Dividend yield (2) (3) 3.42% 4.09% Net income after M.I. (103 euros) 291,915 266,159 Payout ratio (2) 49.5% 48.0% Transactions By volume (1.000 acções) 189,037 229,331 By value (106 euros) 999 1.028 Market share 1.9% 3.3% Annual Evolution Euronext 100 + 18.8% + 23.7% PSI 20 + 29.9% + 13.4% CIMPOR share + 35.3% + 12.0% (1) At 31 December (2) In 2006: according to the proposal to be subbmitted to the General Meeting (3) Relative to share price at year end.

With the intrinsic increases in the value of the capital invested in the Company, plus the due return on it, one of the Group’s most important strategic vectors, it was with particular satisfaction that CIMPOR saw its strong commitment to its ultimate goal of creating value for shareholders recognized in 2006 when it came second in the third edition of the Stock Awards – promoted jointly by the Jornal de Negócios and Deloitte & Touche. This award is for the best companies listed on the Euronext Lisbon’s continuous market on the basis of criteria related to share yield, market liquidity and the company' own profitability.


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Corporate Highlights in 2006 • 26 January – Disclosure of the main points of the legal action involving CIMPOR and

the Angolan government relating to the Group’s holding in Nova Cimangola, S.A.. • 7 February – Disclosure of the current situation in the above case. • 9 February – Corporación Noroeste de Hormigones y Áridos, S.L., acquires all the

shares in Áridos del Cantábrico, S.A. (Spain). • 22 February – Corporación Noroeste, S.A. sells its 19.31% holding in the capital of

Cementos Lemona, S.A. (Spain) under a takeover bid launched by Cementos Portland Valderrivas, S.A.

• 16 March – Publication of the results for 2005. • 27 March – Sale, under the implementation of CIMPOR’s Stock Purchase and Stock

Option Plans, of shares amounting to 0.11% of its share capital. • 27 March – Signing of a protocol with the Angolan government to resolve the legal

dispute relating to the Group’s holding in Nova Cimangola, S.A.. • 4 May – Annual General Meeting. • 29 May – Corporación Noroeste de Hormigones y Áridos, S.L., acquires a 40% stake in

the share capital of Firmes y Hormigones SANI, S.L., and signs an option to buy a further 50% in the same company (Spain).

• 30 May – Publication of 1st quarter results. • 2 June – Payment of dividends. • 30 June – Publication of Annual Information Consolidation Document. • 28 August – Publication of results for 1st half of the year. • 6 October – Scanang, SGPS, Unipessoal, Lda., sells its holding (49.0%) in the share

capital of Nova Cimangola, S.A., thereby closing the legal action mentioned above. • 16 October – Cimpor Chengtong Cement Corporation, Limited, signs a binding contract

to purchase 60% of the share capital of the Shandong Liuyuan Cement Company, Limited

• 13 November – Publication of 3rd quarter results. • 14 December – Announcement of advanced stage of negotiations to acquire Yibitas

Lafarge Orta Anadolu Cimento Sanayi ve Ticaret A.S. (YLOAÇ). • 15 December – Signing of a binding contract to acquire a block of direct and indirect

holdings amounting to 99.7% of YLOAÇ (Turkey). • 28 December – Signing of a series of a series of agreements, taking effect on 1 January

2007, designed to restructure the Natal Portland Cement (Pty) Limited operations in compliance with South Africa’s legislation on Black Economic Empowerment (BEE).

1.4.3. Treasury Shares At 31st December 2006, CIMPOR - Cimentos de Portugal, SGPS, S.A., had a portfolio of 3,867,300 treasury shares. During the first six months of the year it sold 1,100,490 shares to its employees at an average price of approximately 3.16 euros, under the stock purchase and stock option plans referred to in paragraph 1.6. below. As no shares were purchased, there were 2,766,810 treasury shares in the portfolio at the end of 2006, which corresponds to 0.41% of the Company's share capital.


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1.5. Dividend Distribution Policy The Board of Directors of CIMPOR – Cimentos de Portugal, SGPS, S.A., intends to maintain a divided distribution policy that takes into account:

• the desirable stability of the payout ratio;

• the competitiveness of the dividend yield in the context of the Portuguese market and the international cement sector; and

• the Group's future investment prospects, analyzed in the light of the respective financing needs with equity and the capacity of the various operations to generate cash flow.

The proposed allocation of the profits declared in the management report relating to the individual activity of CIMPOR follows the policy guidelines set forth above, and the proposed dividend of 0.215 euros amounts to around 49.5% of the Group’s net profit.

Gross Dividend / Share (euros)

(1) In accordance with the proposal to be submitted to the General Meeting

1.6. Stock Purchase and Stock Option Plans As part of the Group's employee remuneration and incentive policy, and with a view to better alignment of the employees' interests with the goal of creating shareholder value, the Annual General meeting of CIMPOR - Cimentos de Portugal, SGPS, S.A., held on 4 May 2006 decided, as in previous years and as proposed by the Board of Directors, to give employees the opportunity to invest in the company under favourable terms. Such investment may help employees to identify better with the long term goals of the Company and its shareholders. Therefore, approval was given for the sale of treasury shares to employees and board members of the company and subsidiaries, under a new Employee Stock Purchase Plan and under the “2006 Series” of the Stock Option Plan for the Group's directors and personnel, regulated in 2002 (with minor changes introduced in March 2004) by the Remuneration Committee.

0.160

2002

0.170

2003

0.180

2004

0.190

2005

0.215 (1)

2006

7.7% / Year


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As in previous years, this approval by the Shareholders' General Meeting made explicit reference to the justification for adopting the plans, the decision accompanied by a summary of the essential characteristics of the approved plans, including the prerequisites for attributing the options, the criteria for setting the price of the shares or for exercising the options, to be determined in relation to the listed share price at specific moments, the periods in which the options may be exercised, and the granting of powers to the Board to execute or modify the plans. EMPLOYEE STOCK PURCHASE PLAN FOR 2006 This Plan is aimed at the directors and personnel with a stable binding relationship with CIMPOR - Cimentos de Portugal, SGPS, S.A., or with companies with head offices in the Iberian Peninsula controlled directly or indirectly by CIMPOR - Cimentos de Portugal, SGPS, S.A., the directors and managers of the other Group companies (proposed by managers of the respective areas for that purpose) and other personnel (indicated for that purpose by the Executive Committee), contracted by companies in which the holding company or any company controlled by it has a shareholding. The Employee Stock Purchase Plan (2006) consisted of awarding each beneficiary - as decided by the Remuneration Committee with regard to the Directors of the holding company, and as decided by the Executive Committee in the remaining cases - the right to acquire a specific number of CIMPOR treasury shares at 75% of the closing stock market price on the transaction date, (rounded to the highest number) defined as follows:

Gross base monthly salary / 2 Maximum number of shares to be acquired =

75% of closing market share price on transaction date rounded down to a multiple of five or ten shares, depending on whether the above formula results in fewer or more than 100 shares, respectively. Of the 2,330 employees eligible to purchase CIMPOR shares according to this rule, 389 employees responded positively (352 in Portugal and 37 in Spain) within the given time period (17 to 28 April), by acquiring a total of 138,070 shares at a price of 4.20 euros per share. CIMPOR STOCK OPTION PLAN FOR THE GROUP’S DIRECTORS AND PERSONNEL – 2006 SERIES The Stock Option Plan - 2006 Series applied to the Directors of the holding company who the Remuneration Committee decided to name as beneficiaries and the members of the Boards of Directors of subsidiaries and other Group personnel designated for that purpose by the Executive Committee. As mentioned in the decision of the Shareholders' Annual General Meeting of 4 May 2006, the essential features of this plan (with the changes introduced by the Remuneration Committee in March 2004) are as follows:

• Every year each beneficiary is granted the right to acquire a specific number of CIMPOR shares (initial options) at a price determined by the Remuneration Committee (within thirty days of the Shareholders' Annual General Meeting that approves the accounts), the price being not less than seventy-five percent of the average closing price of the shares on the sixty stock market sessions immediately prior to that date;


25

• For each share acquired through the exercise of an initial option, the beneficiary is granted the option to acquire a share (derivative option) for the same unit price in each of the following three years. The shares acquired by exercising the initial options and the corresponding derivative options comprise a “series”;

• The number of initial options assigned to each beneficiary is determined by the Remuneration Committee for members of CIMPOR's Board of Directors and by the Executive Committee in the other cases;

• The number of derivative options each beneficiary can exercise each year cannot exceed in total the number of shares held by the beneficiary on 28 February of that year, regardless of whether or not they were acquired under this Plan;

• The period during which the initial options can be exercised is determined by the Executive Committee, while derivative options are exercised in March of each year;

• The shares thus acquired are not subject to any clause restricting their sale, contrary to the options, which cannot be transferred through a transaction between living persons (should the beneficiary die, only the right to release the respective options is transferred to the heirs, which means the right to receive the amount of the difference between the respective exercise price and the market price of the shares on the date of death);

• The plan and respective regulations may be revoked or changed at any time, by decision of the Remuneration Committee, without loss of the right to maintain the options already acquired.

In 2006, under this Plan, 268,600 initial options were granted to 202 Group Directors and personnel during an exercise period that took place from 10 to 17 May. Of these, 171 exercised part or all of their option rights, at the price of 4.05 euros per share, with a total of 251,350 shares being acquired. Therefore, after deducting the extinguished options (totalling 3,600, due to voluntary resignation of one employee), a maximum of 750,450 derivative options can be exercised from 2007 to 2009, inclusive, under this series. OPTIONS GRANTED, EXERCISED AND EXTINGUISHED Under the 2003, 2004 and 2005 Series, of the 744,410 derivative options that could be exercised in 2006 (last year of this series), a total of 707,270 options were exercised, and the remaining 37,140 were extinguished. Of the last two Series, and at the request of some employees who had retired in the meantime, more than 3,800 derivative options were exercised early, as provided for in the Plan’s Regulations (maturing in 2007 and 2008). In these two Series, the death of an employee and the voluntary resignation of two others led to 4,800 options also being exercised (likewise exercisable in 2007 and 2008).


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To summarize the situation for 2006: Series 2003 2004 2005 2006

Total

Exercise price (euros) 2.84 3.20 3.30 4.05 - Options Granted Initial Options 268,600 268,600 Derived Options 805,800 805,800 Total 1,074,400 1,074,400Exercisable Options 191,010 265,600 287,800 268,600 1,013,010

Exercised Options Exercisable in 2006 183,450 252,050 271,770 251,350 958,620 Exercisable in 2007 1,600 1,100 2,700 Exercisable in 2008 1,100 1,100 Total 183,450 253,650 273,970 251,350 962,420

Extinguished Options Exercisable in 2006 For non-exercise of Init. Op. 17,250 17,250 For non-exercise of Deriv. Op. 7,560 13,550 16,030 37,140 Exercisable from 2007 to 2009 For non-exercise of Init. Op. 51,750 51,750 For other reasons 2,000 2,800 3,600 8,400 Total 7,560 15,550 18,830 72,600 114,540

Therefore, while the number of shares needed at the beginning of the year to meet the exercise of options granted up to 2005, inclusive, rose to 1,585,610, of which 744,410 could be exercised in 2006, the number of shares needed at the end of the year to meet the exercise of all the options granted was 1,583,050, distributed as follows:

Options Exercisable in:

Series 2007 2008 2009

Total

2004 262,000 --- --- 262,000 2005 285,300 285,300 --- 570,600 2006 250,150 250,150 250,150 750,450 Total 797,450 535,450 250,150 1,583,050

1.7. Business and Operations between the Company and Members of its

Management and Auditing Bodies, Holders of Qualified holdings or Controlled or Group Companies

At the end of 2006, CIMPOR – Cimentos de Portugal, SGPS, S.A., signed a binding contract with a group of shareholders (direct and indirect) from the Turkish cement company Yibitas Lafarge Orta Anadolu Çimento Sanayi ve Ticaret A.S. (YLOAÇ), among which were some companies in the Lafarge Group (which holds a qualifying stake in CIMPOR’s capital), to acquire around 99.7% of the firm’s share capital.


27

This operation was undertaken under a process of open sale to any interested parties and will be concluded in 2007 with the acquisition of, among others, the 50% stake held directly by the Lafarge Group in YLOAÇ's share capital for the price of about 266.5 million euros. Apart from this transaction, neither CIMPOR – Cimentos de Portugal SGPS, S.A., nor any of the companies it controls has undertaken any business or operation with any of its management and auditing bodies, holders of qualified shareholdings or controlled companies, with the exception of some transactions of no financial significance to either of the parties involved, conducted under normal market conditions for similar operations and executed as part of the Group’s regular activity. 1.8. Investor Relations Office In order to maintain a close relationship with the stock market, CIMPOR has had an Investor Relations Office since it was first listed in 1994. This office is responsible for informing the financial community about the evolution of the Group's business and for supporting current and potential shareholders in CIMPOR – Cimentos de Portugal, SGPS, S.A., in their relations with the Company. In addition to information which might influence the price of shares, available on the CMVM site (www.cmvm.pt), contacts by this office with private and institutional investors, fund managers and other collective investment bodies, analysts and other stock market operators are maintained through presentations (live or on the Internet), meetings and replies to requests for information by telephone, email or regular post.

Ways of contacting the Investor Relations Office:

Address:

Gabinete de Relações com Investidores CIMPOR – Cimentos de Portugal, SGPS, S.A. Rua Alexandre Herculano, 35 1250-009 Lisboa PORTUGAL

Personal Contacts:

Filipa S. Mendes

Telephones Fax E-Mail Internet 21 311 81 00 21 311 88 89 21 311 88 67 [email protected] www.cimpor.pt

In addition, press releases with significant facts and other information of interest related to the Group’s activity, notices convening general meetings and on how to take part in them, annual reports and accounts, a brief description of the shareholder structure and the evolution of CIMPOR’s share price are also posted on the www.cimpor.pt site. In addition to the above items and information, required under Article 3-A of CMVM Regulation 7/2001, the site also includes the following:

• A detailed report on the structure and corporate governance practices;

• The Group’s Code of Ethics;

• CIMPOR’s Sustainability Report; and

• Information on the Group’s environmental and R&D policies.


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The site also enables any interested party to immediately receive information published by CIMPOR via a mailing list created for the purpose. Filipa Saraiva Mendes has served as representative for relations with the stock market and the CMVM pursuant to and for the purposes of the Securities Market Code since 1 October 2004. 1.9. Remuneration Committee The General Meeting of Shareholders held on 27 April 2005 unanimously elected the following members of the Remuneration Committee for the four-year term 2005 to 2008, as provided for in Article 16 of the Articles of Association:

− Pedro Pereira Coutinho Teixeira Duarte − Banco Comercial Português, S.A., represented by its Director, Filipe de

Jesus Pinhal − António Carlos Calaínho de Azevedo Teixeira Duarte

Only the first of these is not independent, under the provisions of item 9, Chapter I of the Appendix to CMVM Regulation 7/2001, as he is directly related to the director, Pedro Maria Calaínho Teixeira Duarte. The Company affords this committee permanent access to outside consultants in several spheres of expertise, at its own expense. 1.10. Auditor’s Fees In 2006, the total cost of services rendered to the CIMPOR Group by its external auditors (Deloitte & Touche), including all the individuals and entities belonging to its network, amounted to 1,380,183.32 euros, broken down as follows:

a) legal certification of accounts 80.49 % b) other assurance services 3.93 % c) tax consultancy services 6.03 % e) services other than legal certification of accounts 9.54 %

To safeguard the independence of these entities, the acquisition from them of any type of service that may jeopardize such independence is expressly forbidden, specifically:

• Accounting and administrative services, such as book-keeping, the preparation of financial statements and reports, the processing of salaries and the preparation of tax returns;

• Conception, design and implementation of management information systems;

• Assessment of assets and liabilities that may be included in the Group’s financial statements;

• Internal auditing services;

• Legal consultancy services requiring the entities in question to represent any of the Group’s companies to resolve litigation and disputes with third parties;

• Recruitment and selection of senior staff.


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In addition, the acquisition of services from the external auditor or entities belonging to its network, both in Portugal and in the countries where the Group operates, is subject to a number of rules set forth by the holding company and transmitted to all the Group’s companies. And so, besides prohibiting the contracting of the aforementioned services:

• The entities in question must, without fail, demonstrate the ability, credentials, resources and comparative advantages in relation to third parties, with respect to the provision of the services in question;

• Proposals to render services submitted by those entities are analyzed and assessed, and compared (whenever possible) to the market, by the person in charge of the area (or company) requiring the service, and subsequently, depending on the amount of the proposal, by the director of the respective department or the Executive Committee responsible for deciding whether or not to award the contract.


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2. Exercise of Voting Rights and Shareholder Representation CIMPOR's policy has always been to motivate shareholders to exercise their voting rights by allowing them to vote by post and by encouraging them to participate in shareholders' general meetings. With regard to voting by post, CIMPOR has provided a draft ballot form on the Internet for voting purposes, although it will accept any ballot form that clearly and unmistakably expresses the shareholder's wishes. For this purpose, all notices convening shareholders' general meeting clearly set out the procedures to be adopted and the deadlines which must be met - the declaration must be received by the Chairman of the Meeting by the second working day prior to the General Meeting. In order to motivate shareholder participation in shareholders' general meetings, the notices convening the meetings also set out the rules under the law and in the articles of association regarding this participation and the exercise of voting rights. More specifically, and considering the amendments to the Articles of Association approved at the shareholders' general meeting on 27th April 2005:

• Shareholders with voting rights may attend the shareholders' general meeting, and one vote is granted for every five hundred shares.

• Shareholders may be represented, for which they must deliver the necessary instruments of representation to the Meeting Chairman by 5.00 pm on the third working day prior to the respective General Meeting.

• Shareholders may take part in the general meeting and vote by post provided that they hold at least five hundred shares which must be registered in their name no later than five working days prior to date of the General Meeting and remain so until the Meeting is closed. For this purpose the shareholders shall send the declaration issued by the respective financial intermediary to the Chairman of the General Meeting, at least three working days before the date of the meeting.

The holding of a minimum of five hundred shares, with the possibility allowed by law of shareholders having fewer than this number forming a group, and compliance with the deadlines specified above are the only restrictions imposed on the exercise of the right to vote by the Company’s Articles of Association. In the fifteen days prior to the shareholders' general meeting, shareholders may consult the information indicated in Article 289 of the Commercial Companies Code at the Company’s registered office during business hours, the shareholders also being informed of this in the notice convening the meeting. Given the current concentration of CIMPOR’s shareholder structure, the use of electronic means for voting at Shareholders’ General Meetings, other than those provided by the Internet, has not been deemed necessary.


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3. Corporate Rules 3.1. Codes of Conduct of the Corporate Bodies In addition to the legal provisions applicable to companies, to corporations open to investment by the public and to the stock markets, the Company’s culture and practice stresses the rules of good conduct in the event of a conflict of interest arising between members of the governing bodies and the Company, and the principal obligations resulting from the duties of diligence, loyalty and confidentiality of the members of the governing body, with special reference to the improper use of Company property and business opportunities. Even though the Board of Directors has always taken care to apply these principles in all of the Group’s companies, it was deemed useful to codify a set of rules on these and other matters that are especially relevant to the Group's business. A Code of Ethics was therefore approved and published internally (available on www.cimpor.pt) so as to specifically regulate these matters and formalize the observance by all the Group’s employees of high standards of conduct in their respective functions. 3.2. Risk Control in the Company’s Business At holding company level, in addition to the Corporate Centre – whose responsibilities include financial and asset risk management (described in paragraph 6.2 of Chapter II of this report) – the Group also has an internal Audit Department which oversees the adequacy and effectiveness of the internal control systems in all the Group’s areas, and ensures the good performance of those systems. The functions of this Department are:

• To carry out financial, administrative and asset audits, • certifying the results in relation to the established strategy and goals; • examining and ensuring compliance with established policies and plans and

the applicable procedures, laws and regulations; • verifying the powers and responsibilities established within the Group and

their level of formalization; • monitoring the development of or changes in operations, programmes,

systems and controls; and • verifying the custody, physical existence and valuation criteria of assets;

• To carry out operational audit tasks (in particular in the areas of marketing, production, investment, conservation and personnel), • evaluating the level of the respective management control; • recommending any corrective measures deemed necessary; and • ascertaining whether previously reported deficiencies have been duly

corrected;

• To audit the computer system, • assessing the reliability and integrity of the information and the various means

used to identify, process and disclose it; and • analyzing the existing information systems in terms of their security, basic

programmed controls and how up to date the user manuals are.


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3.3. Measures Liable to Interfere in the Success of Takeover Bids There are no measures whatsoever, in the Articles of Association or elsewhere, liable to interfere with the success of a takeover bid. Specifically: no shareholder holds any special right; all CIMPOR's shares can be freely traded on the stock exchange; and no extra-company agreements are known of. Nor are there any agreements between the Company and the members of its management body, or employees that envisage the payment of compensation in the event of notice of resignation, dismissal without just cause or work severance in the wake of a takeover bid. Nor is there any agreement to which the Company is a party which, in the event of control of the Company changing hands after a takeover, would come into force, be amended or cease to be in effect.


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4. Management

4.1. Characterization of Management In accordance with the Articles of the Association, the Board of Directors consists of five to fifteen members, one of whom is chairman and the others members. The Board of Directors is elected by the Shareholders' General Meeting, which also appoints the chairman. As with other corporate bodies, the Board of Directors is elected for a four-year term and may be re-elected. The Board of Directors is elected by list (the vote is solely for the lists) and one member may be elected from persons proposed on lists. The list must contain at least the name of the persons eligible for the post. Each list is endorsed and submitted by groups of shareholders representing at least 10% and no more than 20% of the share capital. A shareholder may only endorse one list. Should there be such a proposal, the director in question is elected separately and prior to the election of the others. If more than one group submits a list, they will be voted on jointly. There are no specific rules regarding the replacement of members of the Board of Directors, the Company’s Articles of Association only provide that, during a period of office, their number may be altered (within statutory limits). If an extra election is held, the period of office of the member(s) thus elected shall coincide with that of the other directors. The present Board of Directors, elected unanimously at the general meeting of shareholders on 27 April 2005, for the four-year period 2005-2008, is composed as follows individuals:

– Ricardo Manuel Simões Bayão Horta - Chairman – Luís Eduardo da Silva Barbosa – Jacques Lefèvre – Jean Carlos Angulo – Jorge Manuel Tavares Salavessa Moura – Luís Filipe Sequeira Martins – Manuel Luís Barata de Faria Blanc – Pedro Maria Calaínho Teixeira Duarte – Vicente Árias Mosquera – José Manuel Baptista Fino – José Enrique Freire Arteta

As recommended by modern international corporate governance guidelines, the majority of the current members of the Board of Directors (six out of a total of eleven), including the Chairman, are non-executive directors. These are :

– Ricardo Manuel Simões Bayão Horta - Chairman – Luís Eduardo da Silva Barbosa – Jacques Lefèvre – Vicente Árias Mosquera – José Manuel Baptista Fino – José Enrique Freire Arteta


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In accordance with the provision in item 2, article 1 of CMVM Regulation 7/2001, with the wording given in CMVM Regulation 10/2005, although the directors Jacques Lefèvre and José Manuel Baptista Fino were proposed and elected by the shareholders' general meeting on an individual basis and do not exercise their administrative duties representing any particular shareholder, they are not considered to be “independent non-executive directors”, in both cases because they have administrative positions in companies with holdings exceeding 10% in CIMPOR (Lafarge and Investifino - Investimentos e Participações, SGPS, S.A., respectively).

All the other non-executive directors - Ricardo Manuel Simões Bayão Horta, Luís Eduardo da Silva Barbosa, Vicente Árias Mosquera and José Enrique Freire Arteta - are independent by any criterion. Therefore, a clear majority of the six non-executive members is independent.

Members of the Board of Directors

(End of mandate: 2008) Ricardo Manuel Simões Bayão Horta Chairman of the Board of Directors ( since August 2001) Born in Lisbon, Portugal, on 19 November 1936. Graduated in Industrial Chemical Engineering from the Instituto Superior Técnico - IST (1959), Master of Science (1966) and Doctor of Philosophy (1968), from Birmingham University, Ph.D. in Engineering (1973) from IST and Full Professor (1979) at IST. Professional activities in the last 5 years:

• Chairman of the Audit Committee of Banco Comercial Português, S.A. • Those listed below

Positions in other companies, at 31 December 2006:

• Member of the Senior Board of Banco Comercial Português, S.A. • Vice-Chairman of the General and Supervisory Board of Banco Comercial Português, S.A. • Chairman of the Audit Committee of Banco Millennium BCP Investimento, S.A. • Chairman of the Board of Directors

• Companhia Industrial de Resinas Sintéticas (CIRES), S.A. • Atlansider, SGPS, S.A.

Number of shares held in CIMPOR – Cimentos de Portugal, SGPS, S.A., at 31 December 2006: 102,380 Luís Eduardo da Silva Barbosa Member of the Board of Directors (since August 2001) Born in Lisbon, Portugal, on 7 July 1933. Graduated in Finance from the Instituto Superior de Ciências Económicas e Fnanceiras. Professional activities in last 5 years:

• Director • Parque EXPO 98, S.A. • Parque EXPO Serviços, S.A. • Parque EXPO Serviços, S.A. • Expodomus – Promoção Imobiliária, S.A.

• Consultant for Banco BNP Paribas • Director of APA – Associação Parque Atlântico • General Agent for the Branch, in Portugal, of Aviva Vie – Société Anonyme d’Assurances Vie et

Capitalisation • Those listed below


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Positions in other companies, at 31 December 2006:

• Chairman of the Board of the Shareholders’ General Meeting • Bayer Portugal, S.A. • APA – Associação Parque Atlântico

• President do Conselho de Administração • Eurovida – Companhia de Seguros de Vida, S.A. • ADI – Administração de Investimentos, S.A. • Popular-Seguros, Companhia de Seguros, S.A.

• President of the Humanism and Development Institute • National President of the Portuguese Red Cross • Director

• Oliveira Martins Foundation • Portugal-África Foundation

• Manager of Silva & Barbosa – Consultores Internacionais de Gestão, Lda. • Director of the Fundação Amélia da Silva de Mello • Consultant for the Somelos – Indústrias Têxteis Group • Member of the Advisory Committee of the Portuguese Insurance Institute • Shareholders’ representative of Banco Português de Investimentos • Chairman of the Remuneration Committee of Montepio Geral

Number of shares held in CIMPOR – Cimentos de Portugal, SGPS, S.A., at 31 December 2006: 3,100 Jacques Lefèvre Member of the Board of Directors (since August 2001) Born in Paris, France, on 15 April 1938. Diploma from Paris Institute of Political Studies (1958) and Degree in Law (1959). Diploma of Further Studies in Public Law (1961). National School of Administration (1962-64). Professional activities in last 5 years:

• President of Lafarge Ciments • Non-executive Vice-President of Lafarge Group • Director

• Lafarge North América (USA) • Cementia Holding, A.G. (Switzerland) • Cementos Molins, S.A. (Spain) • Petrokazakhstan Inc. (Canada)

• Those listed below Positions in other companies at 31 December 2006:

• President of the Supervisory Board • Compagnie de Fives-Lille (France) • Consolis (France)

• Co-President • France – Philippines Business Council • France – Morocco Business Council

• Director • Lafarge Group • Lafarge Asland, S.A. • Société Nationale d’Investissements (Maroc)

Number of shares held in CIMPOR – Cimentos de Portugal, SGPS, S.A., at 31 December 2006: 2,600 Jean Carlos Angulo Member of the Board of Directors and the Excutive Committee ( since August 2001) Born in Bayonne, France, on 13 April 1949. Graduated from the School of Civil Mining Engineering (Nancy). INSEAD International Executive Program (Fontainebleau).


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Professional activities in last 5 years:

• Various positions in the Management and on the Board of the Lafarge group, in companies with head offices in France, England, Spain, Italy and Morocco

• Director CEMBUREAU – European Cement Association

Positions held in other companies, at 31 December 2006:

• Assistant General Manager of the Lafarge Group • President of the Lafarge Technical Centre (TCEA) • Lafarge Cementos (Spain) • Vice-President

• Lafarge Ciments (France) • Lafarge Maroc (Morocco)

• Director • Lafarge Adriasebina (Itália) • CEMBUREAU – European Cement Association

Number of shares held in CIMPOR – Cimentos de Portugal, SGPS, S.A., at 31 December 2006: 2,500 Jorge Manuel Tavares Salavessa Moura Member of the Board of Directors and Executive Committee (since August 2001) Born in Lisbon, Portugal, on 4 December 1950. Graduated in Civil Engineering from the Instituto Superior Técnico of the Universidade Técnica de Lisboa. Professional activities in last 5 years:

• Executive Director of CIMPOR and member of the Board of Directors of several Group Companies, in Portugal and abroad

• Chairman of the Executive Committee of ATIC – Associação Técnica da Indústria do Cimento Positions held in other companies, at 31 December 2006:

• Chairman of the Board of Directors • Cimpor Portugal, SGPS, S.A. (Portugal) • Cimpor Inversiones, S.A. (Spain) • Cimpor Internacional, SGPS, S.A. (Portugal) • Cimpor Investimentos, SGPS, S.A. (Portugal) • Cimpor – Indústria de Cimentos, S.A. (Portugal) • Cimpor – Serviços de Apoio à Gestão de Empresas, S.A. (Portugal) • Cimpship – Transportes Marítimos, S.A. (Portugal) • Geofer – Produção e Comercialização de Bens e Equipamentos, S.A. (Portugal) • Cimpor Imobiliária, S.A. (Portugal) • Estabelecimentos Scial do Norte, S.A. (Portugal) • Sacopor – Sociedade de Embalagens de Sacos de Papel, S.A. (Portugal) • Prediana – Sociedade de Pré-Esforçados, S.A. (Portugal) • CTA – Comércio Internacional, S.A. (Portugal) • Scanang Trading Activities - España, S.A. (Spain) • Asment de Témara, S.A. (Morocco) • Asment du Centre, S.A. (Morocco) • Betocim, S.A. (Morocco) • Cimpor Chengtong Cement Corporation, Limited (China)

• Director • Corporación Noroeste, S.A. (Spain) • CJO – Société Les Ciments de Jbel Oust, S.A. (Tunisia) • Amreyah Cement Company, S.A.E. (Egypt) • Amreyah Cimpor Cement Company, S.A.E. (Egypt) • Amreyah Dekheila Terminal Company, S.A.E. (Egypt) • Cement Services Company, S.A.E. (Egypt) • Cimpor Sacs Manufacture Company, S.A.E. (Egypt) • Natal Portland Cement Company (Pty) Limited (South Africa) • NPC – Cimpor (Pty) Limited (South Africa)

• Manager • Kandmad, SGPS, Lda. (Portugal)


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• Mecan – Manufactura de Elementos de Casas de Construção Normalizada, Lda. (Portugal) • Scanang, SGPS, Unipessoal, Lda. (Portugal) • Nordicave Trading Industrial, Sociedade Unipessoal, Lda. (Cabo Verde)

All the above companies belong to the CIMPOR Group

• Chairman of the Executive Committee of ATIC – Associação Técnica da Indústria do Cimento • Manager of Caxalp, SGPS, Lda

Number of shares held in CIMPOR – Cimentos de Portugal, SGPS, S.A., at 31 December 2006: 124,000

Luís Filipe Sequeira Martins Member of the Board of Directors and the Executive Committee (since January 1997). Between February 1987 and January 1987 he was also director of the companies which, after a series of trnasformations, resulted in the present CIMPOR – Cimentos de Portugal, SGPS, S.A. Born in Lisbon, Portugal, on 4 June 1947. Graduated in Chemical Engineering from the Instituto Superior Técnico of the Universidade Técnica de Lisboa. Professional activities in last 5 years:

• Executive Director of CIMPOR and member of the Board of Directors of various companies in the Group, in Portugal and abroad

• Vice-President of the CEMBUREAU – European Cement Association Comité de Liaison Positions held in other companies, at 31 December 2006:

• Chairman of the Board of Directors • Betão Liz, S.A. (Portugal) • Cimpor Betão, SGPS, S.A. (Portugal) • Cimpor Tec – Engenharia e Serviços Técnicos de Apoio ao Grupo, S.A. (Portugal) • Amreyah Cement Company, S.A.E. (Egypt) • Amreyah Cimpor Cement Company, S.A.E. (Egypt) • Amreyah Dekheila Terminal Company, S.A.E. (Egypt) • Cement Services Company, S.A.E. (Egypt) • Cimpor Sacs Manufacture Company, S.A.E. (Egypt)

• Vice-Chairman of the Board of Directors of Cimpor Inversiones, S.A. (Spain) • Director and Chairman of the Executive Committee of Corporación Noroeste, S.A. (Spain) • Director

• Cimpor Portugal, SGPS, S.A. (Portugal) • Cimpor Internacional, SGPS, S.A. (Portugal) • Cimpor Investimentos, SGPS, S.A. (Portugal) • Cimpor – Indústria de Cimentos, S.A. (Portugal) • Asment de Témara, S.A. (Morocco) • Asment du Centre, S.A. (Morocco) • CJO – Sociéte Les Ciments de Jbel Oust, S.A. (Tunisia) • Natal Portland Cement Company (Pty) Limited (South Africa) • NPC – Cimpor (Pty) Limited (South Africa) • Cimpor Chengtong Cement Corporation, Limited (China)

• Manager • Kandmad, SGPS, Lda. (Portugal) • Scanang, SGPS, Unipessoal, Lda. (Portugal) • Nordicave Trading Industrial, Sociedade Unipessoal, Lda. (Cape Verde)

All the above companies belong to the CIMPOR Group.

• President of CEMBUREAU – European Cement Assocation Comité de Liaison


Manuel Luís Barata de Faria Blanc Member of the Board of Directors and the Executive Committee (since August 2001) Born in Lisbon, Portugal, on 24 February 1955. Graduated in Business Administration from the Universidade Católica Portuguesa.


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Professional activities in last 5 years:

• Executive Director of CIMPOR and member of the Board of Directors of various companies in the Group, in Portugal and abroad.


• Chairman of the Board of Directors • CJO – Société Les Ciments de Jbel Oust, S.A. (Tunisia) • CEC – Cimpor Egypt for Cement, S.A.E. (Egypt) • Imopar – Imobiliária de Moçambique, S.A.R.L. (Mozambique) • Natal Portland Cement Company (Pty) Limited (South Africa) • NPC – Cimpor (Pty) Limited (South Africa) • Cimpor Reinsurance, S.A. (Luxemburg)

• Vice–Chairman of the Board of Directors of Cimpor Inversiones, S.A. (Spain) • Director

• Cimpor Portugal, SGPS, S.A. (Portugal) • Cimpor Internacional, SGPS, S.A. (Portugal) • Cimpor Investimentos, SGPS, S.A. (Portugal) • Cimpor – Serviços de Apoio à Gestão de Empresas, S.A. (Portugal) • Corporación Noroeste, S.A. (Spain) • Asment de Témara, S.A. (Morocco) • Asment du Centre, S.A. (Morocco) • Amreyah Cement Company, S.A.E. (Egypt) • Amreyah Cimpor Cement Company, S.A.E. (Egypt) • Amreyah Dekheila Terminal Company, S.A.E. (Egypt) • Cement Services Company, S.A.E. (Egypt) • Cimpor Sacs Manufacture Company, S.A.E. (Egypt) • Cimpor Chengtong Cement Corporation, Limited (China) • Cimpor Finance, Ltd. (Ireland)

• Manager • Kandmad, SGPS, Lda. (Portugal) • Scanang, SGPS, Unipessoal, Lda. (Portugal) • Nordicave Trading Industrial, Sociedade Unipessoal, Lda. (Cape Verde)

All the above companies belong to the CIMPOR Group.


Pedro Maria Calaínho Teixeira Duarte Member of the Board of Directors and Executive Committee (since August 2001) Born in Lisbon, Portugal, on 6 May 1954. Graduated in Business Administration from the Universidade Católica Portuguesa. Professional activities in last 5 years:

• Managing Director of Teixeira Duarte – Engenharia e Construções, S.A., and member of the Board of Directors and Management or a number of family companies and companies in the Teixeira Duarte Group.

• Member of the Senior Board of Banco Comercial Português, S.A. • Member of the General Board of EIA – Ensino, Investigação e Administração, S.A.

Position held in other companies, at 31 December 2006:

• Member of the Senior Board of Banco Comercial Português, S.A. • Member of the Supervisory Board of Miilennium Bank, S.A. (Poland) • Chairman of the Board of Directors of PASIM – Sociedade Imobiliária, S.A. • Managing Director of Teixeira Duarte – Engenharia e Construções, S.A. • Director of Teixeira Duarte – Engenharia e Construções (Macau), Lda.



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Vicente Árias Mosquera Member of the Board of Directors (since August 2003) Born in Santiago de Compostela, Spain, on 11 February 1947. Graduated in Law from the Universidade de Santiago de Compostela. Professional activities in last 5 years:

• Director of the Patronato da Fundación Camilo José Cela • Those listed below


• Chairman of the Board of Directors • Inversiones Ibersuizas, S.A. • Centro Galego de Arte Contemporânea • Patronato da Escuela de Enseñanza Social de Galicia

• Vice-Chairman of the Board of Directors • Banco Pastor, S.A. • Fundación Galicia-Europa

• Director • Soluzona, S.A. • Patronato da Fundación Juana de Veja

• General Secretary of the Fundación Pedro Barrie de la Maza, Conde de Fenosa Number of shares held in CIMPOR – Cimentos de Portugal, SGPS, S.A., at 31 December 2006: 1,480 José Manuel Baptista Fino Member of the Board of Directors (April 2005) Born in Portalegre, on 10 January 1954. Supplementary High School Course (1971) and North East London Polytechnic (Business Studies), in London (1972-74). Professional activities in last 5 years:

• Chairman of the Board of Directors of Mothercare (Portugal) Confecções, S.A. • Those listed below


• Chairman of the Board of Directors • Área Infinitas – Design de Interiores, S.A. • SGFI – Sociedade Gestora de Fundos de Investimento Imobiliário, S.A. • J.M. Fino, S.A. • Ramada Holdings, SGPS, S.A.

• Director • Speciality Minerals Portugal – Especialidades Minerais, S.A. • Manuel Fino, SGPS, S.A. • Investifino – Investimento e Participações, SGPS, S.A. • Carfino, SGPS, S.A. • Ethnica, SGPS, S.A. • Block – Imobiliária, S.A.

• Manager of Dorfino – Imobiliária, Lda. Number of shares held in CIMPOR – Cimentos de Portugal, SGPS, S.A., at 31 December 2006: 330

José Enrique Freire Arteta Member of the Board of Directors (April 2005) Born in La Coruña, Spain, on 17 July 1948. Graduated in Economics from the Faculty of Barcelona. Professional activities in last 5 years:

• Executive of the Megasa Group (Bipadosa), with operations in the metallurgy (Portugal and Spain), real estate, transport and electricity sectors.


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• Member of the Board of Directors and Management in various companies in the Megasa Group


• Chairman of the Board of Directors • Bipadosa, S.A. (Spain) • Metalúrgica Galaica, S.A. (Spain) • Megasider, S.L. (Spain) • Megasa Siderúrgica, S.L. (Spain) • Megamalla, S.L. (Spain) • LAF 98, S.L. (Spain) • Frepon, S.A. (Spain) • Hidroeléctrica de Forcadas, S.A. (Spain) • Siderurgia Nacional, Empresa de Produtos Longos, S.A. (Portugal) • SN Maia, Siderurgia Nacional, S.A. (Portugal) • SN Seixal, Siderurgia Nacional, S.A. (Portugal)

• Managing Director • Transportes Almacenes Transitários, S.A. (Spain) • Multimodal de Transportes Agrupados, S.L. (Spain) • LAF 2000, S.L. (Spain)

• Director • Freire Hermanos, S.A. (Spain) • Freire, Productos Siderúrgicos, S.A. (Spain) • Bipadosa Distribución y Transformación, S.L. (Spain) • Megaço, Productos Siderúrgicos, S.A. (Spain) • Feragueda, Productos Siderúrgicos, S.A. (Spain) • Comercial Galaica de Metales, S.L. (Spain) • Atlansider, SGPS, S.A. (Portugal) • Inver Seixal Industrial, S.A. (Portugal)

• Manager da Megasa, Comércio de Produtos Siderúrgicos, Lda (Portugal) • Secretário da Lesir, S.A. (Spain)

Number of shares held in CIMPOR – Cimentos de Portugal, SGPS, S.A., at 31 December 2006: 410

4.2. Executive committee At its meeting on 27 April 2005, the newly elected Board of Directors decided, as in previous mandates and as provided for in Article 13 item 1 of the Articles of Association, to form an Executive Committee composed of five of its members. The powers of the Company's day-to-day management were to be delegated to this Committee, with the exception of decisions that cannot legally be delegated, as set forth in paragraph 4.3. below. The Executive Committee has the same membership as in the previous mandate, viz.:

– Pedro Maria Calaínho Teixeira Duarte – Jean Carlos Angulo – Jorge Manuel Tavares Salavessa Moura – Luís Filipe Sequeira Martins – Manuel Luís Barata de Faria Blanc.

The decisions of the Executive Committee, chaired by Pedro Teixeira Duarte who, when necessary, is replaced by Jorge Salavessa Moura, are taken by a majority of those present or represented, and decisions cannot be taken without a majority of members being present or represented. The Executive Committee met 43 times in 2006.


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Without prejudice to the collective exercise of duties delegated to the Executive Committee, each of its members has been entrusted with the responsibilitiy of supervising certain Functional Areas, as indicated in paragraph 1.1.1. above. The following distribution for liaison with external entities was established:

• Technical Cement Industry Association (ATIC) and other Sectoral Associations – Jorge Salavessa Moura, replaced when necessary, by Luís Filipe Sequeira Martins;

• CEMBUREAU, “World Business Council for Sustainable Development” (WBCSD) and the Portuguese Association of Ready-mix Concrete Companis (APEB) – Luís Filipe Sequeira Martins, replaced when necessary by Jorge Salavessa Moura;

• Securities and Exchange Commission (CMVM), Euronext Lisbon and the Supervisory Board – Manuel de Faria Blan, replaced when necessary by Jorge Salavessa Moura.

4.3. Method of Functioning of the Management Body The board of directors must meet at least once quarterly, without prejudice to other interim meetings which may be deemed necessary. No decision can be taken unless a majority of its members is present or represented, and each director may only represent one other member of the board of directors. The board met 8 times in 2006. The powers of the board of directors are those granted by the Companies Code (Código das Sociedade Comerciais), plus the following powers, pursuant to Articles 4 and 5 of the Articles of Association: to increase the share capital with the entry of cash up to the limit of one billion euros; to issue autonomous warrants on its own securities (which may grant the right to subscribe or acquire shares in the Company, up to the aforementioned limit of one billion euros); and to issue bonds or other debt securities of any kind or form permitted by law. As mentioned above, the Board of Directors has delegated all its powers for the day-to-day running of the Company to an Executive Committee composed of five of its members, which cannot decide on matters legally established by law as non-delegable. These are, pursuant to Article 407, item 4 of the Commercial Companies Code:

• Selection of the chairman of the board of directors, when applicable;

• Co-option of directors;

• Convening general meetings;

• Annual reports and accounts;

• The provision of bonds and personal or secured guarantees by the Company;

• Change of head office and share capital increases;

• Company merger, split and transformation operations. In addition to these matters, the Executive Committee decided on its own initiative at the start of its mandate, to reserve final decisions for the Board of Directors on any business, commitments, contracts, agreements and conventions to be signed with shareholders with 2% or more of the share capital of CIMPOR, whenever these issues are regarded as being of special relevance due to their nature or monetary value.


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The following procedures have been created to ensure that all members of the Board of Directors are aware of decisions taken by the Executive Committee:

• The minutes of Executive Committee meetings shall be distributed to members of the Board of Directors;

• At meetings of the Board of Directors, the Executive Committee shall regularly summarize significant actions taken since its previous meeting and shall provide the directors with any additional clarification and information that is requested;

• There are also regulations governing the possibility of directors requesting the Executive Committee to provide information outside the Board's meetings.

4.4. Remuneration Remuneration of the members of the Company’s board of directors, and its form and mode of payment as well as its respective supplementary retirement or disability pension scheme, are determined by the Remuneration Committee, which consists of shareholders elected by the shareholders’ general meeting. Such remuneration may include a variable component based on the year’s profit, but this may not in total exceed 5% of the profit, pursuant to Article 16 item 6. The fixed annual remuneration of the members of the Board of Directors is established by the Committee on the basis of the following principles:

a) Adequacy of the remuneration in relation to market demands; b) The value of the services rendered, the level of responsibility undertaken and the

degree of dedication expected; c) Award of a supplementary pension scheme (PPR) to directors with executive

duties, to which monthly contributions of 12.5% of their respective fixed remuneration are made.

In addition, all the directors benefit from the “Employee Stock Purchase Plan” (see paragraph 1.6. above), in accordance with the decision of the Remuneration Committee. The variable remuneration (including the granting of share options) is limited to members of the Executive Committee, and is determined annually on an individual basis by the Remuneration Committee in accordance with the Group’s results (complying with the statutory limits mentioned above), with the extent to which the defined strategic goals were met and the appraisal of each director’s performance in his specific area of operation. Share options are granted in accordance with the rules of the overall programme, as set forth in paragraph 1.6. above. In relation to the executive directors, the number of options granted, exercised and extinguished in 2006 was:


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Series 2003 2004 2005 2006

Total

Options Granted Initial Options - - - 127,500 127,500 Derived Options - - - 382,500 382,500Exercisable Options 66,500 128,000 146,000 127,500 468,000Exercised Options 66,500 128,000 146,000 125,000 465,500Extinguished Options * Exercisable in 2006 - - - 2,500 2,500 Exercisable from 2007 to 2009, inclusive - - - 7,500 7,500 * Due to not exercising Initial Options

In accordance with Article 16 item 3 of the Articles of Association a lifetime pension may also be granted to retiring directors, provided the following prerequisites are met:

a) They have been executive directors for more than ten years, continuously or with interruptions;

b) They have maintained an employment contract with or performed administrative duties for the Company or dependent companies for over twenty-five years, continuously or with interruptions.

The amount of the pension is determined on the basis of the time and the relevance of the services rendered and the beneficiary’s circumstances and may be reviewed annually. This amount, set in accordance with these criteria, may never exceed the highest value of the remuneration set at any time for the directors in office, is established by and may be subject to additional terms and conditions determined by the general meeting or the Remuneration Committee, if there is one, and may take the form of a contract. At 31 December 2006 the total amount of remuneration, contributions to the retirement or invalidity pension scheme and other incentives earned by members of the Company’s board of directors (including the difference between the purchase price of the shares acquired under the “Stock Purchase Plan” and the “Stock Option Plan” and their price on the date of purchase) was as follows:

(in euros) Fixed Remuneration

Variable Remuneration

Total Remuneration

Executive Directors 1,152,375.20 2,632,964.36 3,785,339.56 Non-executive Directors 536,662.80 - 536,662.80 Total 1,689,038.00 2,632,964.36 4,322,002.36 4.5. Policy on the Reporting of Irregularities In 2006 the board of directors approved and published a set of in-house rules and procedures on how communications of alleged irregularities occurring within CIMPOR Group companies are to be received, recorded and dealt with. These rules and procedures respect the legal and regulatory provisions, the recommendations that apply at any given time and the principles and rules in the Code of Ethics adopted by the Group.


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The new Regulations have established a system for such reporting which is designed to be effective, quick and capable of detecting, investigating and resolving situations, while respecting the highest ethical principles – in particular the principles of integrity and responsibility – as well as the rules of confidentiality and non-retaliation, thereby safeguarding relations with the persons involved. Pursuant to and for the purposes of these Regulations, in accordance with Article, 2 item 2, “irregularity” is taken to be “any fraudulent or negligent act or omission, contrary to legal or regulatory provisions, the Articles of Association or the rules or ethical principles of the Group”, which can be imputed to any member of the governing body or any other employee of the CIMPOR Group. The means by which reports are made, the persons to whom they should be addressed and way in which they are handled are duly set forth in the Regulations, and the Internal Audit Department of the holding company shall, without prejudice to the powers of the Board of Directors’ In-house Corporate Governance and Social Responsibility Advisory Committee, oversee and monitor the entire system, with special reference to levels of adequacy and effectiveness. Attention is drawn to the explicit guarantee in the Regulations that each and every communication made by an employee under the terms and conditions set forth therein shall be treated in confidence and anonymously, in particular in relation to the identity of the person reporting the irregularity (unless the latter expressly and unequivocally requests otherwise). Provided that he/she is acting in good faith, this person is also assured that he/she will not be subject to any kind of prejudicial treatment, retaliation, discrimination, threat or sanction by CIMPOR. But if the conduct of the person reporting fails to respect these principles, he/she may be held to have committed an offence which may be subject to disciplinary action appropriate and proportional to the offence, without prejudice to any civil and/or criminal liability which may arise from his/her conduct.


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II

GROUP ACTIVITY IN 2006


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1. Macroeconomic and Sectoral Background

1.1. Evolution of the World Economy In 2006 the world economy again took us by surprise by growing at rate estimated by the IMF to be in excess of 5.0%. Despite the impact of oil price rises and increases in European and US interest rates, world trade grew, and this was one of the factors which, as in the past few years, contributed most to this good performance. In geographic terms, the focus was still on the rate of expansion of some of the emerging economies, especially China and India, where real GDP growth remained close to 10%. In the USA, despite the slowdown in the second half of the year, largely due to problems in the real estate market and the tight monetary policy adopted by the FED, the rise in output was very much the same as in the previous year (just over 3.0%). In the Eurozone, where growth in 2005 was no more than 1.4%, last year saw the best highest of expansion in the past 6 years (2.7%). This was basically thanks to higher exports and increased investment. With private consumption not rising more than 1.8%, inflation, which was more than 2.0% the previous year, fell once again, on average, to a little below this limit set by the ECB. 1.2. Economic Environment in the Countries where the Group operates 1.2.1. Portugal. In Portugal, even though GDP clearly grew at a higher rate than in 2005 (estimated at 1.2%, compared with 0.4%) and than what was predicted at the start of the year (less than 1%), it was again well below the average rate for the Eurozone, for the fifth consecutive year. Stagnation in consumption and in private investment, plus the need to rein in the budget deficit, explain this weak behaviour. Even so, attention is drawn to the significant rise in exports (around 9.0%), due not only to very favourable evolution in foreign markets but also to particularly positive developments in the tradable goods sector. Less encouraging was the inflation trend, which rose from an average rate of 2.1% in 2005 to 3.1% last year. 1.2.2. Spain In 2006 the Spanish economy, benefiting from extraordinarily dynamic domestic demand, continued to perform strongly, recording the highest growth rate of the past six years: 3.8%. Despite some slowing, investment nonetheless grew again at a strong rate (6.3%), helping to maintain the downward trend in unemployment, which by December 2006 had fallen to 8.5% (from around 9.6% a year earlier).


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The main sources of concern remain the external sector, with another significant rise in imports (8.4%), and in inflation, which, far from keeping close to the European average, rose almost 20 bp, to nearly 3.6%. 1.2.3. Morocco In Morocco, an excellent year for agriculture and the dynamism of the textiles sector, stimulated by the removal of export quotas for multi-fibre goods to the Eurozone, meant that GDP grew 7% in 2007. Inflation, driven by fuel price rises, increased transport and communications costs and higher prices of some foods, rose to its highest level in ten years (3.3%). Activity in the construction and public works sector continued to develop at a steady rate, supported by the expansion and modernization of basic infrastructures, creation of new tourism and industrial zones, implementation of social housing projects and a national slum clearance programme. 1.2.4. Tunisia Increased foreign investment and good performance in the tourism and manufactured goods industries resulted in Tunisia’s GDP speeding up, likely reaching a rate of nearly 5.5% in 2007. As with Morocco, higher energy and food prices resulted in inflation at around 4.5%, considerably exceeding figures for the last few years. 1.2.5. Egypt After a period of moderate growth, and in the wake of a series of government measures aimed at creating a better environment for economic activity and attracting foreign investment, the Egyptian economy embarked on a cycle of strong expansion in 2005, which gained strength in 2006, with GDP growing by around 6.5%. Inflation continued to one of the chief worries, as it passed the 10% mark last year, thanks to increased domestic demand and cuts in government subsidies for some energy products, which led to rises in petrol prices of nearly 30% and fuel oil almost 70%. 1.2.6. Brazil In 2006 Brazil’s GDP grew at a disappointingly poor rate of 2.9%, in comparison with the rate of growth of other emerging countries and despite a clear acceleration at the end of the year. Investment was much better, however, and this is especially important since it could signify potential growth for the coming years. Benefiting from a more stable macroeconomic environment, a fall in interest rates and a rise in the local currency value, it grew by 6.3% (compared with a mere 1.6% in 2005).


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Despite the rate of inflation being at its lowest level in the past twenty years, private consumption did not rise more than 3.8%, as it continued to feel the effects of restrictions on the expansion of credit, viz. the fact that interest rates, even though they had fallen, were still relatively high in real terms. 1.2.7. Mozambique Mozambique’s economy should achieve a growth rate in 2007 very close to the previous year’s (almost 8%), mostly thanks to good results from agriculture, construction (driven by public investment) and transport and communications (facilitated by the ending of visa requirements between Mozambique and South Africa). Inflation remained high (probably above 8%), influenced in part by fuel price rises and the cost of some food products, and in part by depreciation of the metical. 1.2.8. South Africa In South Africa, too, GDP growth should not be very different from that in 2006 (almost 5%), benefiting from a notable increase in GFCF (11.5%) thanks to huge input from public investment in health and education infrastructures. This expansion in investment has resulted in a significant increase in imports, thus worsening the current account deficit and leading to a drop of around 10% in the value of the rand vis-à-vis the US dollar. This, together with the rise in fuel prices, has caused inflation to hit nearly 4.5%. 1.2.9. Cape Verde GDP in Cape Verde grew about 5.5%, a slight slowdown compared with 2005, mostly due to an easing of private consumption as the rate of inflation (practically zero in 2005) rose to almost 4.5%. 1.3. Evolution of the Cement Sector The latest estimates for world consumption of cement in 2006 indicate an increase of around 12%, driven by the strong growth of those economies whose progress largely depends on the prices of oil and commodities, by the implementation of major infrastructure programmes in emerging nations and by the recovery of the construction business in the non-housing segment in mature markets. Even without China (which accounts for almost half of world consumption), the increase in demand for cement should be around 5%, with prices rising by an average of 8.5%. This increase was the most marked in the past decade, reflecting both higher production costs (especially energy costs) and increased transport costs, as well as some limitations in terms of capacity, on the supply side.


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China and India, whose respective growth rates are estimated to be around 19% and 12%, respectively, strengthened their positions as the largest world markets for cement, followed by the USA, where consumption stagnation in 2006 was set off by a price rise of almost 13%. In Western Europe, demand rose by nearly 4% (more than double the previous year), with special emphasis on Spain, which consumed nearly 56 million tonnes of cement (8% more than in 2005), and had an accumulated growth of around 20% over the last three years. Prices, rose an average of 5% to 6% (11% in Spain). In both Eastern Europe and the Middle East and Mediterranean Basin, consumption increased by about 10%, reaching as high as 15% in some countries (in Turkey, Poland and Bulgaria), and was accompanied by significant price rises. In Latin America, the market trend was strongly positive (8%), especially in Argentina, where growth was close to 20%. On average, it is estimated that the selling price of cement has not change much, with rises in most countries being offset by the (almost 18%) fall in Brazil. In Sub-Saharan Africa, the rise in both volume and price was about 9%, while in Asia (apart from China and India) the virtual stagnation in consumption contrasted with a rise in prices in most markets. With respect to cement trading, there was little change, and international trade accounted for about 7% of global consumption. The USA, which imported about 36 million tonnes – about 30% of demand – in 2006, remained the world’s largest cement importer. Mergers and acquisitions in the sector were not as significant as in 2005, though Holcim’s takeover of the Indian companies ACC and Gujarat Ambuja, and Lafarge's acquisition of the minority shareholdings in Lafarge North America, along with Cementos Portland’s purchase of 51% of the (also) Spanish company, Uniland, should be noted. Also worthy of note are the two binding contracts signed by CIMPOR to purchase New Liu Garden (China) and YLOAÇ (Turkey), and the acquisitions undertaken in Turkey by Cementir (Italy) and Orascom (Egypt), and in India by Italcementi/Ciments Français. Consolidation in the sector has also occurred through some vertical integrations, such as the bid recently made for Rinker (Australia) by the Cemex group.


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2. Internationalization In 2006 CIMPOR made important headway in developing its strategy for growth and internationalization. 2.1. China After setting up the joint venture in Hong Kong, called Cimpor Chengtong Cement Corporation, Limited (CCCC), between the CIMPOR Group, with an 80% stake (held by CIMPOR Inversiones, S.A.) and the China Chengtong Development Group, Limited – through its subsidiary, China Chengtong Cement Group, Limited (CCCG) – with the other 20%, the new company signed a binding contract to acquire 60% of a Chinese cement company, known (in short) as New Liuyuan. New Liuyuan, which is near the city of Zaozhuang in the south of Shandong province, currently has two clinker production lines (1.8 million tonnes/year) and a grinding capacity amounting to 1.2 million tonnes of cement. In addition to this, the company has a series of investments either in progress or under study which will, in the medium run, give it an annual production capacity of approximately 3.6 million tonnes of clinker and 4.5 million tonnes of cement. Its natural market covers the south of Shandong province and all of Jiangsu, including the Xangai region. The conclusion of this operation awaiting the approval of the Chinese authorities, will involve payment by the CCCC of CNY 20.7 million (nearly 2 million euros), which corresponds to a valuation of New Liuyuan’s assets of about USD 31 per tonne of installed capacity (clinker production). So as to enable both this payment and coverage of New Liuyuan's financing needs, the CCCC's share capital will be increased from the present HKD 10 thousand to approximately HKD 250 million. Of this, CIMPOR Inversiones’ part will be in cash and that of the CCCG will be through the apport of a majority financial shareholding (71%) in the Suzhou Nanda Cement Company Limited, which has a grinding plant just outside Xangai, with a cement production capacity of 600 thousand tonnes/year. When this operation is completed, which should be in the first half of 2007, CIMPOR Inversiones will transfer its holding in the capital of CCCC to a new company, based in Macau, which will be set up by CIMPOR Inversiones itself, C+PA – Cimentos e Produtos Associados, S.A. (an associate company of the Group) and the Sociedade de Investimento Predial Estrela Nova, Limitada, a Chinese company based in Macau. CIMPOR Inversiones will have 50% of the share capital of this new company (ensuring control of its management) and the other two partners will have 25% each. 2.2. Turkey Close to the end of the year, CIMPOR signed another binding contract – subject to various prior conditions, among which was non-opposition from the local market regulator – for the acquisition of direct and indirect shareholdings representing about 99.7% of the capital of


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the Turkish cement producer Yibitas Lafarge Orta Anadolu Çimento Sanayi ve Ticaret A.S. (YLOAÇ). Once the aforementioned conditions were met, the operation was concluded in February of this year, with a total investment of around 548 million euros in the purchase of several bocks of shares amounting to 99.4% of the capital of the Turkish company Yibitas Holding, A.S., which holds 49.8% of YLOAÇ, and shares representing the remaining 50.2% of the latter’s capital. YLOAÇ's registered office is in Ankara and, in conjunction with one of its subsidiaries (Yibitas Yozgat, A.S.), it has three cement plants, three clinker grinding plants, twelve ready-mix concrete plants and two aggregate producing plants, with a clinker production capacity of 1.6 million tonnes/year and an annual grinding capacity equivalent to 3.5 million tonnes of cement. With the investments already in progress, the above capacities will rise to 2.4 and 4.8 million tonnes, respectively, by the end of 2008. In 2007 output from YLOAÇ should reach 2.6 million tonnes of cement, 1.2 million cubic metres of concrete and 2.8 million tonnes of aggregates, amounting to a consolidated turnover of almost 175 million euros. In a market showing strong growth (averaging 14.5%/year for the past three years), sales of cement from YLOAÇ correspond to a share of around 6%, domestically, and approach 32% at the level of its main catchment areas (parts of Central and Eastern Anatolia and the Black Sea region). The Enterprise Value paid in this acquisition corresponds to a multiple of 9.0 on the estimated EBITDA for 2007 and, discounting the value for concrete and aggregates, to about 190 euros per tonne of cement sold in 2006. 2.3. Angola Not everything worked out in the Group’s internationalization process: in 2006, contrary to our goals of developing the Company, improving its performance and investing in increasing its production capacity, CIMPOR was forced to sell the holding (49%) it had through Scanang, SGPS, Unipessoal, Lda (Scanang), in the Angolan company Nova Cimangola, S.A.. When it acquired all the shares of Scanang in November 2004, and thus, indirectly, the holding in Nova Cimangola, the CIMPOR Group was given guarantees and evidence by the selling companies, which belong to the international cement producing groups Holcim and HeidelbergCement, such that it was confident that they had acted legally prior to this transaction. However, a few months later, the Angolan government’s Agency for Private Investment (ANIP), claiming that a prior transaction - the transfer of a shareholding of 24.5% in Nova Cimangola from Scancem International ANS (HeidelbergCement group) to Scanang (Holcim group) – had infringed Angolan law, applied for an injunction against these two firms with a view to annulling the deal they subsequently concluded with the CIMPOR Group.


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Despite all the ensuing dialogue, and despite CIMPOR and the Angolan government having meanwhile (July 2005) signed a Protocol that set out the basic terms of the relations between the parties in relation to Nova Cimangola – unilaterally and inexplicably cancelled four months later by the Angolan government, CIMPOR has been removed from the company's corporate bodies and put in a situation which leaves it no choice but to sell its stake to an entity named by it.


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3. Review of the Group’s Results 3.1. Summary of the Overall Business

In 2006 the CIMPOR Group’s consolidated net profit (after minority interests) amounted to 291.9 million euros, a 9.7% rise compared with the previous year. As a result of a concentrated effort to optimize operations, and despite the steep increase in energy costs (especially fuel), total operating cash costs evolved in line with the growth in turnover and did not rise more than 3.5%. Given an almost 7% increase in the Group’s Turnover, this not only allowed the operating cash flow to rise to an unprecedented 563 million euros (up 13.6% on the previous year), but also led to a rise in the EBITDA margin of over 2 pp: from 32.3% in 2005 to 34.4% (the highest level in the last three years) in 2006.

The Group’s Consolidated Results

(EUR M) 2006 2005 Chg. 2004 Turnover 1,638.9 1,534.9 6.8 % 1,365.6 Operating Cash Costs 1,075.8 1,039.0 3.5 % 913.7

Operating Cash Flow (EBITDA) 563.0 495.8 13.6 % 451.9 Depreciation and Provisions 155.0 140.4 10.4 % 128.5

Operating Income (EBIT) 408.1 355.4 14.8 % 323.4 Financial Income - 42.3 - 3.3 s,s, - 6.7

Pre-tax Income 365.8 352.2 3.9 % 316.7 Income Tax 60.1 75.7 - 20.5 % 52.9

Net Income 305.6 276.5 10.5 % 263.8 Assignable to: Holders of Capital 291.9 266.2 9.7 % 256.1 Minority Partners 13.7 10.3 32.5 % 7.7 Net Result / Share (euros) 0.44 0.40 9.5 % 0.38

With the exception of Portugal (where the construction market remained in a severe crisis) and Brazil (where the selling price of cement has not kept up with the sharp rise in production costs), all the Group’s business areas played their part to a greater or lesser extent in this noticeable improvement in its operating profitability. Spain and Egypt, with increases of EBITDA of 40.8 million euros (39.7%) and 14.9 million euros (30.7%), respectively, were the most important business areas here both in absolute value and in relative terms in 2006. The fairly general rise in EBITDA margins should be mentioned too, and in some cases (Spain, Morocco and Cape Verde) this was more than 3 pp. The only exception, for reasons already explained, was Brazil, where this margin fell by more than 5 pp. Even in Portugal, the EBITDA margin rose from 31.7% in 2005 to 32.7% in 2006.


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Operating Cash Flow (EBITDA)

(amounts in millions of euros)

Business 2006 2005 Change Areas Amount Margin Amount Margin Amount %

Portugal 173.9 32.7 % 183.0 31.7 % - 9.1 - 5.0 Spain 143.7 33.4 % 102.9 27.6 % 40.8 39.7 Morocco 33.5 46.5 % 26.2 43.3 % 7.3 27.8 Tunisia 17.5 29.4 % 14.6 27.3 % 2.9 19.8 Egypt 63.3 49.6 % 48.5 46.7 % 14.9 30.7 Brazil 60.6 22.4 % 62.9 27.7 % - 2.3 - 3.7 Mozambique 8.4 15.4 % 6.8 13.4 % 1.6 23.9 South Africa 47.9 40.1 % 41.9 39.8 % 6.0 14.4 Cape Verde 2.3 12.9 % 1.2 * 9.5 % 1.1 95.3 Trading / Shipping 9.3 8.6 % 8.1 6.8 % 1.2 15.2 Other Activities 2.5 - - 0.3 - 2.7 s.s. Total 563.0 34.4 % 495.8 32.3 % 67.2 13.6 * April – December

The increase in operating income of about 53 million euros (14.8%) was, however, mostly cancelled out by the poor financial income, of around 39 million euros. The decrease in income from associated companies, the accounting losses from the sale of the Group’s shareholding in Nova Cimangola, the provision of some financial investments and the effects of significant exchange rate losses largely explain this poor result.

Cement and Clinker Sales (thousand tonnes)

Business Areas 2006 2005 Change 2004

Portugal 5,849 6,106 - 4.2 % 5,946 Spain 4,235 4,157 1.9 % 4,209 Morocco 1,152 959 20.1 % 852 Tunisia 1,485 1,385 7.2 % 1,477 Egypt 3,090 2,898 6.6 % 2,275 Brazil 3,974 3,796 4.7 % 3,442 Mozambique 605 583 3.8 % 567 South Africa 1,292 1,160 11.4 % 1,100 Cape Verde 178 119 * 49.7 % -

Subtotal 21,860 21,162 3.3 % 19,868 (Intragroup Sales) (1,415) (1,356) (1,227) Consolidated Total 20,445 19,806 3.2 % 18,641 * April – December

In 2006 sales of cement and clinker by the CIMPOR Group totalled 20.4 million tonnes, a


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growth of 3.2%. With the sole exception of Portugal (where cement consumption fell for the fifth year in a row), all the Group’s business areas saw a rise in turnover, with special reference to Morocco (20.1% increase) and South Africa (11.4% increase).

Concrete, Aggregates and Mortar Sales

Product / Business Area 2006 2005 Chg. 2004

Concrete (1,000 m3) Portugal 3,137 3,721 - 15.7 % 3,646 Spain 2,798 2,618 6.9 % 2,516 Brazil 698 502 39.1 % 344 Other Business Areas 309 216 42.8 % 167 Total 6,943 7,058 - 1.6 % 6,673

Aggregates (1,000 tonne) Portugal 7,607 8,806 - 13.6 % 7,610 Spain 4,491 3,770 19.1 % 3,867 Other Business Areas 869 652 33.2 % 421 Total 12,966 13,228 - 2.0 % 11,897 Mortar (1,000 tonne) 485 477 1.8 % 490

The severe crisis in the Portuguese market also affected production and sales of concrete, aggregates and mortar, all of which fell significantly in the Portugal Business Area. But these drops were almost entirely offset, or even cancelled out, by growth in other markets where the Group has been investing (with a view to vertical integration). Worthy of special note are the increased sales of ready-mix concrete in the business areas of Brazil, Morocco and South Africa (by 39.1%, 74.4% and 32.0%, respectively), of aggregates and mortar in Spain (about 20%) and aggregates in South Africa (63.2%).

Contribution to Turnover * (amounts in millions of euros)

Business 2006 2005 Change Areas Amount % Amount % Amount %

Portugal 462.9 28.2 515.5 33.6 - 52.6 - 10.2 Spain 427.2 26.1 370.9 24.2 56.3 15.2 Morocco 70.2 4.3 58.8 3.8 11.4 19.4 Tunisia 59.6 3.6 53.4 3.5 6.2 11.6 Egypt 114.7 7.0 93.4 6.1 21.3 22.8 Brazil 267.9 16.3 227.1 14.8 40.8 18.0 Mozambique 54.5 3.3 50.5 3.3 4.0 7.8 South Africa 119.5 7.3 113.1 7.4 6.4 5.7 Cape Verde 18.0 1.1 12.5 ** 0.8 5.6 44.7 Trading / Shipping 44.1 2.7 39.3 2.6 4.8 12.3 Other Activities 0.2 0.0 0.3 0.0 - 0.1 - 28.7 Consolidated Total 1,638.9 100.0 1,534.9 100.0 104.0 6.8

* Excluding intragroup transactions ** April - December


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In 2006 the CIMPOR Group’s consolidated turnover amounted to 1,639 million euros, an increase of 100 million euros (6.8%) compared with the previous year. Excluding Intragroup transactions, attention is drawn to the significant increase in contributions from the business areas of Spain (56 million euros), Egypt (21 million euros) and Brazil (41 million euros), in the first two cases due to higher selling prices and in the last to a rise in the value of the local currency (in terms of the average annual exchange rate). The loss posted for the Portugal Business Area (more than 10%) is a clear reflection of the crisis in the Portuguese market. In relation to the end of 2005, and as a result of the fall in the value of local currencies (against the euro) in most countries where the group operates, the total capital employed fell nearly 54 million euros (2.1%). Given the significant improvement in operating income, the respective return (ROCE) rose 1 pp, to stand at 13.1%.

Capital Employed

(EUR M) 2006 2005 Chg. 2004

Working Capital (net) 256.9 246.6 4.1 % 216.8 Tangible Fixed Assets 1,422.3 1,471.4 - 3.3 % 1,334.5 Goodwill 910.0 940.6 - 3.3 % 821.0 Other Assets (net) (42.0) (57.8) s.s. (37.0)

Capital Employed 2,547.1 2,600.9 - 2.1 % 2,335.3 Current Investments 120.1 96.2 24.9 % 129.3 Financial Investments 171.1 215.8 - 20.7 % 274.0 Other Non-op. Assets (net) (75.3) (89.9) s.s. (78.4) Capital Employed 2,763.0 2,823.0 - 2.1 % 2,660.2

Net Financial Debt 865.6 1,079.4 - 19.8 % 1,312.3 (Financial Assets available for Sale) 0.0 (69.2) s.s. (52.3) Provisions 71.4 73.2 - 2.5 % 58.4 Financial Debt and Equivalents 937.0 1,083.3 - 13.5 % 1,318.3

Shareholder Equity 1,579.7 1,519.1 4.0 % 1,159.2 Minority Interests 74.1 65.5 13.1 % 63.7 Deferred Tax Liabilities 54.9 44,5 23.3 % 8.7 Provisions for Taxes and Others 117.4 110.6 6.2 % 110.2 Equity and Equivalents 1,826.0 1,739.7 5.0 % 1,341.8

Capital Employed 2,763.0 2,823.0 - 2.1 % 2,660.2

Return on Capital Employed 13.1 % 12.1 % 12.2 % Return on Equity 18.9 % 19.7 % 23.0 %

The exchange rate fluctuations mentioned above, associated with the payment of about 127 million euros in dividends, also meant that shareholder equity did not increase more than 61 million euros (4.0%), despite the results obtained in the meantime, and stood at around 1,580 million euros at the end of 2006. In terms of the annual average, the overall


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increase in equity was quite significant (215 million euros), and so the respective return (ROE) declined 0.8 pp, to around 19%. Net financial debt, including equivalent items, rose to 1,083 million euros in December 2005, had fallen by the end of 2006 to 937 million euros – a decline of 13.5%. This is explained both by the cash flow generated last year and by the divestiture of some minority holdings. As a result, its weight in the total capital Employed between these two dates fell from just over 38% to less than 34%. Despite the increase in funds generated by current operations, the rise in investments meant that the free cash flow fell nearly 11 million euros (4.0%) compared with the previous year. This, together with the release of fewer funds from the sale of assets not allocated to operations (abnormally high in 2005), led to a 19% reduction in cash flow available to service debt and adequately remunerate shareholders.

Free Cash Flow

(EUR M) 2006 2005 2004

Adjusted Operating Income 395.6 350.9 317.6 (Taxes on Adjusted Operating Income) (57.8) (53.0) (42.5)

Adjusted Operating Income net of Taxes 337.8 297.9 275.1 Amortizations and Depreciations 148.6 137.6 115.3 Change in Provisions 0.1 17.3 8.8 Gross Cash Flow 486.5 452.8 399.3

Increase/(Decrease) in Working Capital 10.2 29.8 27.0 Investment (net) in Goodwill 14.5 11.2 20.0 Investment (net) in Tangible Fixed Assets Through Acquisitions 15.1 4.5 44.6 Others 150.9 144.5 128.7 Inc./(Dec.) in Other Assets (net Other Liabilities) 24.0 (20.2) (27.2) Total Investment 214.8 169.9 247.5

Operating Free Cash Flow 271.7 282.9 151.8 Other Funds Released (net of Taxes) 54.8 121.1 (45.1) Free Cash Flow 326.5 404.1 106.7

Net Financial Costs (net of Taxes) 42.4 27.7 33.1 (Inc.)/Dec. Financial Debt and Equivalents 156.8 245.7 (40.5) Minority Interests 13.7 10.3 7.7 Distributed Income 127.2 120.3 113.5 Inc./(Dec.) Equity (3.7) (2.8) (1.9) Other Changes in Equity and Equivalents (9.9) 2.8 (5.0) Free Cash Flow 326.5 404.1 106.7

At the end of 2006, the CIMPOR Group’s total cement production capacity (with own clinker) was 24.1 million tonnes/year, without taking into account the agreed acquisitions (China and Turkey), which were, or will be, concluded only in 2007. Once these are completed, capacity will increase to around 28 million tonnes/year.


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3.2. Portugal Activity in the construction and public works sector In Portugal fell nearly 6% in 2006, raising the accumulated decrease in the production level of this sector to over 20% in the past five years. Cement consumption naturally followed the same trend, falling slightly more than 10%, which represents a slump in demand of 30% since 2001. CIMPOR’s domestic sales (not including cement produced in Spain and sold in Portugal) fell from just over 4.6 million tonnes in 2005 to less than 4.3 tonnes in 2006, a decrease of almost 7.7% (lower than the market average). The substantial drop in imports – estimated to be around 26% (including cement made from imported clinker) – is the main reason for this relatively improved performance by the Group, which saw its market share rise nearly 1.6 pp to 54%.

Portugal Business Area

Unit 2006 2005 Chg. 2004

Installed Capacity (1) 103 tonne 6,850 6,900 - 0.7% 7,000Use of Installed Capacity (2) 89.8% 91.7% 87.1%Cement and Clinker Sales 103 tonne 5,849 6,106 - 4.2% 5,946Market Share 53.8% 52.2% 51.1%

Concrete Sales 103 m3 3,137 3,721 - 15.7% 3,646Aggregates Sales 103 tonne 7,607 8,806 - 13.6% 7,610Mortar Sales 103 tonne 156 173 - 9.8% 184

Turnover 106 euros 531.6 576.5 - 7.8% 560.0Payroll Expenses 106 euros 57.8 61.6 - 6.2% 63.3Operating Cash Flow (EBITDA) 106 euros 173.9 183.0 - 5.0% 176.3Operating Income (EBIT) 106 euros 122.2 134.1 - 8.8% 131.1Net Income (3) 106 euros 104.1 126.3 - 17.6% 126.8

Capital Employed 106 euros 610.4 639.1 - 4.5% 572.7Industrial Investments 106 euros 28.2 53.4 - 47.2% 70.5

Employees (31 Dec) Units 1,572 1,662 - 5.4% 1,666Turnover/Employee 103 euros 328 345 - 5.0% 332 Value Added/Employee 103 euros 143 146 - 2.4% 142

EBITDA Margin 32.7% 31.7% 31.5%EBIT Margin 23.0% 23.3% 23.4%(1) Cement production capacity with own clinker (average over year) (2) Clinker production / Installed capacity (clinker) (3) Before Minority Interests

This fall in domestic sales was partly offset by a 7.9% rise in exports of cement and clinker, due to the Group’s efforts to find alternative markets. This increase is particularly significant because it is wholly due to an increase (more than 100 thousand tonnes) in sales to third parties.


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In the concrete, aggregates and mortar sectors, the effects of the crisis in the Portuguese market was even worse, with falls in sales of 15.7%, 13.6% and 9.8%, respectively. Even in this context Portugal remained the country with the greatest relative importance in the CIMPOR Group, although, as has been the case in previous years, this decreased markedly from 2005 to 2006: its input to consolidated turnover fell from 33.6% to 28.2%, and in operating cash flow, from 36.9% to 30.9%. Turnover stood at around 532 million euros, nearly 8% lower than the previous year. A concerted effort to contain costs and optimize operations – leading to a reduction in operating cash costs of about 9% - the EBITDA generated in Portugal (174 million euros) fell only 5.0%, while the respective margin rose from 31.7% (2005) to 32.7% in 2006. Investments totalled just over 28 million euros, decreasing almost 50% compared with 2005 (the year in which the new paper bag production line was installed and a coal silo was built at the Alhandra factory. Among the projects started in 2006, attention is drawn to the construction and assembly at the Alhandra and Souselas plants of the facilities needed to receive and burn animal biomasses, oil sludge and other alternative fuels. It should also be noted that the Souselas Production Plant has been registered with the EMAS (Ecomanagement and Audit Scheme), following in the footsteps of the Loulé and Alhandra Production Plants which registered the previous year. 3.3. Spain Spanish cement consumption benefited from the continuing dynamism of the construction and public works sector, which accounted for 16% of GDP, and consumption again hit record levels in 2006, with a total approaching 55.7 million tonnes (8.2% more than the previous year). But in the markets where the Group operates, growth in demand was not as marked: in the north it was about 7.7%, while in the south it was only 3.3%. Turnover in cement and clinker for the CIMPOR Group was about 4.2 million tonnes, a rise of only 1.9% on 2005. The nearly complete lack of exports (in contrast to the previous year) is the reason for this low level of growth, since sales rose by 4.3% in the domestic market alone. Even so, it was short of the national average, both because of less dynamic demand in the regions where the Group operates, and because of the substantial rise in imports of cement and clinker (more than 15%) by sea. As a result, CIMPOR’s market share for Spain as a whole fell from 7.8% in 2005 to 7.6% in 2006. Concrete sales reached nearly 2.8 million cubic metres (6.9% up on the previous year), while sales of aggregates amounted to almost 4.5 million tonnes (19.1% growth), thanks to the acquisition of a new quarry in Galicia and the resolution of problems that had been affecting one of the plants in Andalucia. But with the second of the Group’s mortar factories coming into production (near Santiago de Compostela), sales of this product rose to almost 200 thousand tonnes, a rise of 19.8%.


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Spain Business Area

Unit 2006 2005 Chg. 2004

Installed Capacity (1) 103 ton 2,700 2,700 0.0% 2,680 Use of Installed Capacity (2) 100.5% 96.4% 99.6% Cement and Clinker Sales 103 ton 4,235 4,157 1.9% 4,209 Market Share 7.6% 7.8% 8.5%

Concrete Sales 103 m3 2,798 2,618 6.9% 2,516 Aggregates Sales 103 ton. 4,491 3,770 19.1% 3,867 Mortar Sales 103 ton. 195 163 9.8% 169

Turnover 106 euros 430.5 373.1 15.4% 347.0 Payroll Expenses 106 euros 45.0 44.1 2.1% 43.4 Operating Cash Flow (EBITDA) 106 euros 143.7 102.9 39.7% 86.8 Operating Income (EBIT) 106 euros 109.5 70.0 56.4% 58.3 Net Income (3) 106 euros 83.5 45.6 83.3% 35.6

Capital Employed 106 euros 486.5 459.0 6.0% 460.3 Industrial Investments 106 euros 24.1 19.2 25.0% 29.1

Employees (31 Dec) units 1,011 987 2.4% 1,003 Turnover/Employee 103 euros 429 377 13.9% 358 Value Added/Employee 103 euros 188 148 26.7% 134

EBITDA Margin 33.4% 27.6% 25.0% EBIT Margin 25.4% 18.8% 16.8%(1) Cement production capacity with own clinker (average over year) (2) Clinker production / Installed capacity (clinker) (3) Before Minority Interests

This overall increase in sales, plus a marked improvement in prices – especially in cement and concrete (most notably in Andalucia, where they had been significantly below the national average) – meant that turnover exceeded 430 million euros, 15.4% up on the previous year. This in turn resulted in an operating cash flow increase to nearly 144 million euros (39.7% more than in 2005), with the respective margin rising 5.8 pp to its highest level in the last six years (33.4%). The main investments, which totalled about 24 million euros (excluding the acquisition of financial holdings), included work to modernize and expand clinker production capacity in the Córdoba and Niebla plants and install a new production line in the Rinconada quarry (Andalucia). In addition, 15 million euros were invested in the purchase of two companies, one of which provided a quarry and a concrete plant in Lugo (Galicia), with the other providing six concrete plants and two quarries in the Extremadura region.


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3.4. Morocco Cement consumption in Morocco increased in 2006 by around 10.4%, totalling over 11.3 million tonnes. This was driven, as in previous years, by investment in social housing, basic infrastructures and new tourism and industrial areas.

Morocco Business Area

Unit 2006 2005 Chg. 2004

Installed Capacity (1) 103 ton 1,290 1,245 3.6% 925

Use of Installed Capacity (2) 97.2% 73.7% 94.0%

Cement and Clinker Sales 103 ton 1,152 959 20.1% 852

Market Share 8.6% 8.8% 8.7%

Concrete Sales 103 m3 176.6 101.2 74.4% 91.8

Aggregates Sales 103 ton. 145.7 209.2 -30.3% 221.1

Turnover 106 euros 72.0 60.5 19.0% 54.5

Payroll Expenses 106 euros 4.4 4.5 -1.0% 4.1

Operating Cash Flow (EBITDA) 106 euros 33.5 26.2 27.8% 25.6

Operating Income (EBIT) 106 euros 25.9 19.2 35.0% 21.5

Net Income (3) 106 euros 18.7 13.6 37.9% 13.1(3)

Capital Employed 106 euros 62.2 69.9 -11.0% 41.1

Industrial Investments 106 euros 4.7 12.1 -61.1% 18.9

Employees (31 Dec) units 208 210 -1.0% 215

Turnover/Employee 103 euros 346 284 21.7% 251

Value Added/Employee 103 euros 182 144 26.5% 136

EBITDA Margin 46.5% 43.3% 46.9%

EBIT Margin 35.9% 31.7% 39.4%

a) (1) Cement production capacity with own clinker (average over year)b) (2) Clinker production / Installed capacity (clinker)c) (3) Before Minority Interests

Thanks to this growth in demand and taking advantage of a certain scarcity of clinker on the market, Asment de Témara achieved a global turnover of 1.15 million tonnes (20.1% up on 2005), of which almost 180 thousand (including exports) were clinker sales. Betocim saw its sales of aggregates fall around 30% and, at the same time, its ready-mix concrete sales rise nearly 75%, thanks to the opening of two new plants in June 2006. Morocco’s consolidated turnover was around 72 million euros, an increase of 19.0%. Even more significant was the rise in operating cash flow (27.8%), with the respective margin rising from 43.3% in 2005 to 46.5% in 2006, despite price increases being below inflation. Investment after the modification of the Asment de Témara production line (completed the previous year), included the doubling the number of Betocim’s plants with the installation of a new factory in Témara and another one in Casablanca. In addition to this, feasibility studies were begun in 2006 for the installation of a wind farm to supply power to the


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Asment de Témara factory, and an environmental impact study was undertaken on the possibility of co-incineration of waste products at this plant. 3.5. Tunisia Consumption of binders (cement and hydraulic lime) in Tunisia totalled approximately 5.94 million tonnes, an increase of 1.8% compared with the preceding year. Sales from Ciments de Jbel Oust (CJO), including a small amount exported to Libya, reached almost 1.5 million tonnes, which was a 7.2% increase, boosting its market share by 1 pp (from 23.7% in 2005 to 24.7% in 2006).

Tunisia Business Area

Unit 2006 2005 Chg. 2004

Installed Capacity (1) 103 ton 1,560 1,600 - 2.5% 1,600Use of Installed Capacity (2) 92.8% 80.0% 89.2%Cement and Clinker Sales 103 ton 1,485 1,385 7.2% 1,477Market Share 24.7% 23.7% 24.1%

Turnover 106 euros 59.6 53.4 11.6% 53.6Payroll Expenses 106 euros 3.5 3.4 5.7% 2.9 Operating Cash Flow (EBITDA) 106 euros 17.5 14.6 19.8% 16.1Operating Income (EBIT) 106 euros 9.7 7.1 35.8% 11.1Net Income 106 euros 9.8 7.0 40.2% 9.8

Capital Employed 106 euros 131.8 141.8 - 7.1% 126.5Industrial Investments 106 euros 1.9 3.8 - 49.7% 8.3

(3)

Employees (31 Dec) Units 231 240 - 3.8% 241 Turnover/Employee 103 euros 253 222 13.8% 221 Value Added/Employee 103 euros 89 75 19.6% 78

EBITDA Margin 29.4% 27.3% 30.0%EBIT Margin 16.2% 13.3% 20.8%

d) (1) Cement production capacity with own clinker (average over year)e) (2) Clinker production / Installed capacity (clinker)

The liberalization of prices was postponed yet again, as the government once more chose to set price rises. This amounted to an average annual increase of about 8%, which, together with better sales, led to turnover from CJO rising to almost 60 million euros (11.6% higher than the previous year). Although fuel costs rose considerably, as did those for electricity and transport, greater use of petroleum coke (instead of coal) and the fact that the kiln was more reliable (producing a record amount of clinker) meant that operating cash costs rose by no more than 8.5%. Along with the increased turnover, this helped to boost EBITDA to nearly 20% (around 17.5 million euros), a rise of more than 2 pp in the respective margin.


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In addition to current industrial and sustainability investments (totalling 1.9 million euros), attention is drawn to the start-up in 2006 of the ERP SAP system in this business area and its incorporation into the CIMPOR Group's computer network. Feasibility studies were started on the installation of a wind farm in the Zaghouan region to supply power to the CJO plant. 3.6. Egypt Cement consumption in Egypt in 2006 was over 30 million tonnes, a 6.7% rise compared with the previous year, thanks to increased building in rural areas and dynamic real estate investment. As in 2005, growth in the domestic market led to a noticeable drop in total exports of cement and clinker (about 12%) while simultaneously contributing to higher prices (which were nonetheless clearly below the average for the region).

Egypt Business Area

Unit 2006 2005 Chg. 2004

Installed Capacity (1) 103 ton 3 900 3 810 2.4% 3 660Use of Installed Capacity (2) 78.2% 78.6% 62.5%Cement and Clinker Sales 103 ton 3 090 2 898 6.6% 2 275Market Share 8.9% 8.8% 8.2%

Turnover 106 euros 127.8 103.9 23.0% 66.8Payroll Expenses 106 euros 3.3 2.6 24.9% 2.2 Operating Cash Flow (EBITDA) 106 euros 63.3 48.5 30.7% 30.0Operating Income (EBIT) 106 euros 50.6 37.3 35.7% 11.9Net Income (3) 106 euros 43.4 33.8 28.5% 7.7

Capital Employed 106 euros 225.3 255.8 - 11.9% 209.0Industrial Investments 106 euros 19.0 2.3 717.8% 7.7

(3)

Employees (31 Dec) Units 491 483 1.7% 471 Turnover/Employee 103 euros 265 222 19.6% 135 Value Added/Employee 103 euros 138 109 26.8% 65


(1) Cement production capacity with own clinker (average over year) (2) Clinker production / Installed capacity (clinker) (3) Before Minority Interests

Overall turnover for the CIMPOR Group was almost 3.1 million tonnes (6.6% up on the previous year), and this, plus the stabilization of exports (mostly clinker) at around 410 thousand tonnes, represented a rise of more than 7% in the sale of cement on the domestic market. Furthermore, and despite prices falling slightly during the third quarter (due to government intervention), they still rose by nearly 15% in terms of annual average. The combined effect of these two factors was that turnover for the Group rose by around


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23%, reaching nearly 128 million euros. Operating cash flow, which was 15 million euros more than the previous year, grew more than 30%, with the EBITDA margin rising from 46.7% in 2005 to 49.6% in 2006. Investments this year in the industrial area (a total of nearly 19 million euros) include the installation of a paper bag factory (with a production capacity of 45 million bags a year), to be operated by Cimpor Sacs Manufacture Company (Cimpsac) beginning in 2007, and the start of rehabilitation work on one of the Amreyah Cement Company (AMCC) production lines, including supplying it with natural gas. 3.7. Brazil After 2005, when growth in the civil construction and public works sector in Brazil was a mere 1.3%, last year saw a marked acceleration in this activity. This was thanks to a fall in interest rates along with an increase in employment and real household income, better access to credit and a package of government measures to stimulate construction, all of which helped the sector to grow by more than 5%.

Brazil Business Area

Unit 2006 2005 Chg. 2004

Installed Capacity (1) 103 ton 6 015 5 745 4.7% 5 625Use of Installed Capacity (2) 63.9% 63.9% 57.6%Cement Sales 103 ton 3 974 3 796 4.7% 3 442Market Share 9.3% 9.6% 9.4%

Concrete Sales 103 m3 698 502 39.1% 344 Mortar Sales 103 ton. 134 140 - 4.7% 136

Turnover 106 euros 270.3 227.1 19.0% 199.1Payroll Expenses 106 euros 29.8 24.0 24.1% 17.0Operating Cash Flow (EBITDA) 106 euros 60.6 62.9 - 3.7% 78.3Operating Income (EBIT) 106 euros 35.1 40.7 - 13.8% 63.9Net Income 106 euros 42.5 56.1 - 24.2% 65.6

(3)


Employees (31 Dec) Unites 1 272 1 180 7.8% 1 128Turnover/Employee 103 euros 224 201 11.5% 185 Value Added/Employee 103 euros 75 77 - 2.6% 89


(1) Cement production capacity with own clinker (average over year) (2) Clinker production / Installed capacity (clinker)


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Total consumption of cement in this context reached approximately 41 million tonnes, an increase of 9% compared with the preceding year. This increase was, however, not enough to reverse the trend of falling prices that started over three years ago, especially in the South and Centre West regions. In 2006, and specifically for CIMPOR, this represented an average annual drop of around 2.3% in local currency, dragging prices down to a level more than 30% lower than in 2003. Regional distribution meant that the Group’s domestic sales (about 3.8 million tonnes) grew a bit less than above, implying a loss of 0.3 pp in the respective share. With exports of 181 thousand tonnes slightly lower than for the previous year, overall growth in the sale of cement was kept to 4.7%. In the ready-mix segment, the increased number of plants – the five facilities acquired/set up in 2005 were joined by a further three plants in the São Paulo metropolitan region – once again meant a substantial growth (39.1%) in sales, rising to almost 700 thousand cubic metres. Consolidated turnover benefited from a stronger local currency and rose to 270 million euros, an increase of 19.0%. But the pressure of production costs and the fall in cement prices, mentioned above, caused operating cash flow to fall around 3.7% (to just over 60 million euros), with the respective margin likewise falling, from 27.7% in 2005 to only 22.4% in 2006. In addition to investments made in the purchase of new concrete plants and the rennovation of some movable equipment used in this segment, note should be taken of the work in progress in the Cezarina factory (which should be finished at the end of 2007, enabling clinker production capacity to rise to nearly 200 thousand tonnes/year) and the setting up of a new cement silo in the João Pessoa factory. 3.8. Mozambique Cement consumption in Mozambique was expected to grow slightly more than 10% in 2006, reaching nearly 780 thousand tonnes. With its production capacity still curtailed by operational problems, plus the need to shut down the kiln in the Matola plant (for the installation and repair of certain environmental protection equipment), Cimentos de Mozambique saw sales increase just 3.8% to a little over 600 thousand tonnes. As a result, its market share fell from 83.3% in 2005 to 78.1% in 2006. In terms of ready-mix concrete, stronger competition led to a decrease of around 3.6% in turnover, which was only 52.8 thousand cubic metres. The nearly 20% rise in prices, in local currency, meant that, in spite of its considerable devaluation against the euro, consolidated turnover increased to nearly 55 million euros, a growth rate of 7.8%. For the same reason, and the sharp increase in clinker imports notwithstanding (caused by the problems mentioned above), operating cash flow increased 1.6 million euros (23.9%), resulting in a slightly better margin.


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Mozambique Business Area

Unit 2006 2005 Chg. 2004

Installed Capacity (1) 103 ton 745 730 2.1% 725 Use of Installed Capacity (2) 20.9% 35.5% 41.1%Cement Sales 103 ton 605 583 3.8% 567 Market Share 78.1% 83.3% 85.8%

Concrete Sales 103 m3 52.8 54.7 - 3.6% 53.2

Turnover 106 euros 54.5 50.5 7.8% 47.3Payroll Expenses 106 euros 4.1 3.7 10.1% 3.8 Operating Cash Flow (EBITDA) 106 euros 8.4 6.8 23.9% 6.0 Operating Income (EBIT) 106 euros 7.5 6.2 21.5% 4.3 Net Income (3) 106 euros 5.0 4.4 14.0% - 0.2

(3)

Capital Employed 106 euros 23.1 21.2 9.0% 21.8Industrial Investments 106 euros 4.8 2.4 98.1% 1.9



(1) Cement production capacity with own clinker (average over year) (2) Clinker production / Installed capacity (clinker) (3) Before Minority Interests

Investments in 2006 (whose value doubled compared with the previous year) include works on the Matola plant, to replace the kiln shell and install a cloth tube filter for dust removal from the cooler. Technical studies were also carried out on the possibility of reactivating the clinker production line in the Dondo plant, or the construction of a new line in central Mozambique. 3.9. South Africa The civil construction and public works sector in South Africa continued to be very active, boosted by an expanding housing market and public investment in basic infrastructures. In these circumstances, cement consumption in 2006 grew by the same amount as in the previous year (about 11%) and reached around 12.7 million tonnes. In KwaZulu-Natal province, where most of the Group’s activity is concentrated through Natal Portland Cement (NPC), market growth, at 7.4%, fell a little short of the national average. To cope with the increased demand, the NPC, hampered by its production capacity, was forced to import cement, as it had done in 2005, and this enabled it to increase sales by over 11%, to reach a historic high of nearly 1.3 million tonnes.


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In the concrete and aggregate sector – thanks to the incorporation into the Group of firms operating in these areas which have then been acquired by the NPC – expansion of the business was even better: concrete sales reached nearly 80 thousand cubic metres (up 32%) and sales of aggregates surpassed 720 thousand tonnes (up 63%).

South Africa Business Area

Unit 2006 2005 Chg. 2004

Installed Capacity (1) 103 ton 1,055 1,020 3.4% 1,025Use of Installed Capacity (2) 98.7% 91.4% 96.6%Cement Sales 103 ton 1,292 1,160 11.4% 1,100Market Share 10.2% 10.1% 10.7%

Concrete Sales 103 m3 79.8 60.5 32.0% 21.7Aggregates Sales 103 ton. 723 443 63.2% 200

Turnover 106 euros 119.5 105.4 13.4% 87.5Payroll Expenses 106 euros 10.3 9.3 10.3% 7.5 Operating Cash Flow (EBITDA) 106 euros 47.9 41.9 14.4% 39.9Operating Income (EBIT) 106 euros 39.6 34.6 14.3% 33.4Net Income 106 euros 26.1 23.8 10.0% 23.3




(1) Cement production capacity with own clinker (average over year) (2) Clinker production / Installed capacity (clinker)

Although the local currency suffered some devaluation against the euro (about 7%, in terms of average annual exchange), consolidated turnover totalled nearly 120 million euros in 2006 (13.4% more than in 2005), while operating cash flow was almost 48 million euros, an increase of about 14.4%. This meant that the EBITDA margin saw a slight improvement, topping the 40% mark. In terms of investments, in addition to the acquisitions made in the concrete and aggregates sector, a cement grinding mill (including packaging and shipping equipment) was installed at the Simuma plant, and construction was started on a second clinker production line at the same plant. With the start-up of this last facility, planned for the last quarter of 2007, cement production capacity (with own clinker) of the CIMPOR Group in South Africa will rise to about 1.7 million tonnes/year, a 60% increase over current capacity.


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Meanwhile a series of agreements have been signed, taking effect on 1 January 2007, for the restructuring of the NPC’s operations to conform with South African law on Black Economic Empowerment (see point 10. below). This requires setting up a new company, to be called NPC-CIMPOR, to which all the Group's assets and liabilities allocated to the production and commercialization of cement will be transferred. 3.10. Cape Verde The CIMPOR Group has been operating in Cape Verde since April 2005, and 2006 was its first full year of activity. With sales of cement (imported from the Group's other business areas) that reached nearly 180 thousand tonnes (equivalent to a market share of almost 70%), Cimentos de Cape Verde (CCV) achieved a turnover of around 18 million euros in this year, with an EBITDA margin of 12.9% (well above the margin for the last nine months of the previous year).

Cape Verde Business Area

Unit 2006 2005 (1)

Cement Sales 103 ton 178 119 Market Share 69.2% 63.4%

Turnover 106 euros 18.0 12.5 Payroll Expenses 106 euros 0.7 0.5 Operating Cash Flow (EBITDA) 106 euros 2.3 1.2 Operating Results (EBIT) 106 euros 1.3 0.6 Net results 106 euros 0.7 0.4

Capital Employed 106 euros 11.6 10.8 Industrial Investments 106 euros 0.4 0.4

Employees (31 Dec) Units 62 64 Turnover/Employee 103 euros 388 194 Added Value/Employee 103 euros 65 26

EBITDA Margin 12.9% 9.5% EBIT Margin 7.4% 5.1%

(1) April to December Furthermore, in 2006 the Group started to expand into the concrete and aggregates sector, acquiring an aggregates firm on the island of Santiago and participating (with a 54% stake) in the creation of another company whose business operations (ready-mix concrete and sale of aggregates) will at first be developed on the islands of Sal and São Vicente.


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4. CIMPOR TEC’s Business This is the second year of operations for CIMPOR TEC – Engenharia e Serviços Técnicos de Apoio ao Grupo, S.A., and it has embarked on the process of certification under ISO standard 9001:2000. This is expected to be a strong impetus to improving its internal organization and providing a better framework for its partnerships with the Group’s manufacturing plants (cement business). The “Annual Benchmarking Programme”, under which about two hundred key indicators aimed at measuring the performance level of the various operating units are systematically compared, went ahead in 2006. Its managers, supported by CIMPOR TEC and in cooperation with the respective Industrial Departments (those that exist), were able to pinpoint priority lines of action for each unit and then define a series of measures for each of them to take in the next three years – the “Performance Improvement Plan”. The “Investments, Engineering, Equipment and Safety” area engaged in the following activities during the last year:

• Technical assistance for investment projects underway at the Simuma (South Africa) plant in the construction of a new clinker production line with a 1 500 tonne/day capacity (to be doubled as soon as the market growth warrants it), a cement grinding mill, a silo and bag packing and shipping facilities, at a total cost of 95 million euros;

• Complete coordination of projects to increase clinker production capacity at the Córdoba and Niebla (Spain) plants, with a total investment of about 45 million euros;

• Technical assistance for automation and mechanical and electrical rehabilitation work on one of the Amreyah Cement Company (Egypt) production lines, estimated at nearly 24 million euros;

• Complete coordination of the project to install a factory for cement bags in Cimpsac (Egypt), in the amount of about 24 million euros;

• Preparation of projects and contracting of equipment and construction work for the construction and assembly of the facilities needed to receive and burn animal biomasses, oil sludge and other alternative fuels at the Alhandra and Souselas (Portugal) plants;

• Preparation of the project for dust removal by means of a cloth tube filter for the cooler at the Matola (Mozambique) factory;

• Development of remodelling projects for the bagged cement shipping systems in the Asment de Témara (Morocco) and Ciments de Jbel Oust (Tunisia) plants.

• Monitoring, in cooperation with the Products & Quality / Technical Training Department, the implementation of an industrial maintenance scheme in the Asment de Témara (Morocco) factory, which will hopefully come to serve as a model for the entire Group.


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In addition to training programmes on this aspect, under the “Training of Technical Teams Plan” [Technical Team Training Plan?] launched in 2005, the same Products & Quality / Technical Training Department also organized the 1st CIMPOR Group Production Seminar, which brought 34 staff members to Lisbon, including Factory Managers and Production Chiefs from 6 countries. This Department was also responsible for extending the SiQual network, which has operated in the Iberian Peninsula for several years, to the Brazil and Egypt Business Areas. Its purpose was to provide and keep up to date a database of the results of tests conducted on all the products used in the Group's factories (raw materials, clinker, fuels and cements). CIMPOR TEC, seeking to encourage the spread of knowledge within the Group, was also keen to encourage internal discussion on various topics related to R&D, and to continue the monthly publication of a Technical Bulletin. This bulletin contains topical articles related to the cement business and provides information on investments made and the industrial statistics for the Group. It disseminates CIMPOR’s concerns and policies with respect to sustainable development and presents case studies with a view to sharing and spreading what are considered to be best practices within the Group.


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5. Sustainability and Social Responsibility As stressed in reports in previous years, CIMPOR firmly believes in the concept of sustainable development – as a way of ensuring that economic, environmental and social concerns underlying its operations are treated on an equal footing – having joined the WBCSD – World Business Council for Sustainable Development in 1997. In 1999 CIMPOR was one the group of ten of the world's biggest cement producers who launched the project known as CSI - Cement Sustainability Initiative, and it has played an active part in its development ever since. In fact, the launch in July 2000 of a five-year action plan, “Our Agenda for Action”, which identifies six key areas for this business sector in progressing towards a more sustainable society:

• Climate protection and management of CO2 emissions;

• Responsible use of raw materials and fuels;

• Worker safety and health;

• Emission monitoring and disclosure;

• Impacts in terms of land use, at the local community level;

• Reporting and communication. Two more key areas have meanwhile been held to deserve the attention of the CSI in coming years:

• Feasibility study of a sector agreement to limit CO2 emissions;

• Recycling of concrete. In 2006, the CIMPOR Group established a set of goals relating to these topics, and implemented several actions relating to them within the Group, notably an audit by an independent body on CO2 emissions at the Group level. The CIMPOR Group’s 3rd Sustainability Report, which will be published along with this one and likewise be made available online at the site www.cimpor.pt, discusses these issues at length, with special reference to the Group’s environmental and social performance. We encourage our shareholders to take the opportunity to read the report. Furthermore, in the second half of 2007, the CSI Full Report will be launched, announcing the results achieved during the first five years in which the “Our Agenda for Action” action plan has been in force, and the first CSI Forum will be held, with a view to deepening the discussion and sharing knowledge on sustainable development among the companies involved in the initiative.


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6. Human Resources The growth of CIMPOR, the geographic diversity of the countries where it operates and the underlying commitment to social responsibility to which the Group subscribes, require the development of management policy for Human Resources that is based not only on a series of strategic guidelines consistent with its global policy, but also on an effort to suit the respective practices to specific local cultures.

“Investment in the appropriate development of all employees’ skills, paying heed to and respecting cultural diversity, motivating and recognizing excellence in each individual’s professional performance and integrity, honesty, and transparency of action”

In Ethics Code – II. Vision and Development Strategy “Remuneration appropriate to the job, creation of conditions for professional enhancement and equal treatment, with no discrimination by reason of nationality, ethnicity, sex, physical impairment, religious belief, political persuasion or trade union membership”

In Ethics Code – II. Values

Regarding its workers as its main asset, CIMPOR has always seen the development and maintenance of a corporate and organizational climate of well-being for everyone as a strategic goal. It aims to ensure that each worker, without exception, revisits their personal and professional project in the Group's project - promoting mutual trust, providing a stimulating working environment that is healthy and based on respect for the dignity of the human being, paying a fair wage and encouraging excellent performance.

Number of Employees per Business Area (31 Dec.) (1)

2006 2005 Chg. 2004

Central Services (2) 110 113 - 2.7 % 86Trading 3 2 50.0 % 3Portugal 1,572 1,662 - 5.4 % 1,666Spain 1,011 987 2.4 % 1,003Morocco 208 210 - 1.0 % 215Tunisia 231 240 - 3.8 % 241Egypt 491 483 1.7 % 471Brazil 1,272 1,180 7.8 % 1,128Mozambique 497 470 5.7 % 487South Africa 467 416 12.3 % 406Cape Verde 62 64 - 3.1 % -Total 5 924 5 827 1.7 % 5 706

(1) In firms included in the consolidation (including casual/term contract employees) (2) Holding Company, CIMPOR Inversiones, CIMPOR Internacional and CIMPOR TEC

As a result especially of the Group’s expansion into concrete and aggregate production and marketing (in the business areas of Spain, Brazil and South Africa), and the need to bolster and rejuvenate the workforce of Cimentos de Moçambique, the number of


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CIMPOR employees rose in 2006 by around 1.7%, to a total at the end of the year of 5 924 (including casual and term contract workers), which is 97 more than at 31 December 2005. In the Portugal Business Area, the unexpected decline in business activity of Geofer (producer of railway ties) and continued efforts to centralize certain functional activities and to implement best practices at Group level, along with the automation of a number of administrative processes, with the resulting gains in productivity, have led to the reduction of employees by 90.

Number of Employees by Activity (31 Dec) 2006 2005

Number % Number % Chg.

Operational Activities Cement 3 637 61.4 3 665 62.9 - 0.8 % Concrete and Aggregates 1 661 28.0 1 493 25.6 11.3 % Mortar 68 1.1 63 1.1 7.9 % Other Activities 149 2.5 208 3.6 - 28.4 % Common Services 409 6.9 398 6.8 2.8 %

Total 5 924 100.0 5 827 100.0 1.7 % The need to rejuvenate the workforce was a particular point of focus in 2006, and the methodology followed in Portugal for several years – Grant to Technical Personnel – has been recently extended to the business areas of Spain, Egypt, Brazil and Mozambique. In 2006, about 60 young engineers were recruited under this training programme, which lasts from two to three years. Another component that continues to attract special attention is the implementation of the “Succession and Career Management Plan”. Its aim is to give the CIMPOR Group solutions to help it manage Human Resource needs that arise either naturally due to attrition or from a desire for mobility (particularly in international terms), reconciling these with the goal of offering employees in general an attractive and challenging career. It should be noted here that a job appraisal project, carried out at Group level, was completed in 2006. This has made it possible to establish a common denominator for management of individual talents and skills. In the sphere of training – and apart from the actions carried out in relation to “Occupational Health and Safety”, defined as a strategic priority – 2006 was important to put in practice the “Technical Teams Training Plan” concerned with cement production and covering the whole Group. In order to organize and standardize CIMPOR's technical know-how in this area, with a view to disseminating and sharing of information afterwards to ensure success - the Plan saw the organization and holding of 22 training sessions, each lasting an average of 5 days. This represented around 700 training hours and involved 95 staff from various countries. Also in 2006, the corporate and organizational audit was extended (at three-year intervals) to all the Group's activities, and in this year it was applied to the business areas of Portugal, Tunisia and Mozambique.


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7. Financial and Risk Management Policy 7.1. Financial Debt Management As in the previous year, and since there were no new acquisitions of any substantial value, the Group's financial debt management basically focused on restructuring some previously contracted operations in an attempt to benefit from the favourable evolution of some credit spreads. In the management of short term debt, of note are the renegotiations of the Commercial Paper Programmes of CIMPOR Indústria and the holding company (totalling 300 million euros) and the increase to 200 million euros of the overall ceiling of credit lines in Spain at the disposal of Cimpor Inversiones and Corporación Noroeste. These two instruments, together with the cash-pooling system, continue to represent an important source of funds to meet short term financial commitments and for the current financing of Group companies based in Iberia. The divestiture of some minority holdings and cash surpluses released for operating purposes made it possible to reduce net consolidated financial debt by almost 214 million euros, leaving about 866 million euros at the end of 2006. In gross terms, the amount of debt (1,494 million euros) barely changed, and it is essentially held in three markets: a Eurobond issue (EUR 600 M) launched in 2004, a bilateral bank loan (EUR 392.5 M) taken out in 2005 and two US Private Placements issues (USD 404 M) placed in 2003.

The credit conditions underlying these transactions allowed the Group to contain its financial charges within reasonable limits. This, combined with the Group’s good operating performance, enabled all the financial covenants established in the contracts to be met and Standard & Poor’s long-term rating of the holding company to be maintained (BBB with stable outlook).

40%

24%

35% 1%

Eurobond USPP Bank Loans Other


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Below is a table summarizing the Group’s main financial operations included its consolidated liabilities:

Financial Debt at 31 December 2006

Financing Curr. Amt (103) Start Maturity Interest Rate

Holding Bilateral Loan EUR 5,000 Mar 2005 Jun 2008 Euribor + 0.275%

Overdrafts EUR 21,782 - - - Total EUR 26,782 CIMPOR Inversiones Bilateral Loan EUR 387,500 Mar 2005 Jun 2008 Euribor + 0.275%CIMPOR B.V. Eurobonds EUR 600,000 May 2004 May 2011 4.500% US PP 10y USD 150,000 Jun 2003 Jun 2013 4.900% US PP 12y USD 254,000 Jun 2003 Jun 2015 4.750% Effect IAS 39 EUR 16,414 Total EUR 961,124 Portugal CIMPOR Indústria EIB Financing EUR 60,000 Sept 2003 Sept 2015 EIB Basic Rate Subsidised Financing EUR 7,333 Oct 2001 Oct 2007 0.000% Subtotal EUR 67,333 Other Companies Miscell. Financing EUR 1,050 - - - Total EUR 68,383 Spain Overdrafts EUR 6,098 - - - Brazil Miscell. Financing BRL 57,243 - - - Total EUR 20,358 Morocco Bilateral Loans MAD 31,072 Jul 2006 Sept 2013 TMP 5y + 1.500% Overdrafts MAD 33,491 - - - Total EUR 5,818 Egypt Bilateral Loans EGP 98,181 Dec 2002 Dec 2009 Caibor + 0.300%Bilateral Loans EUR 3,125 Sept 2003 Jan 2008 Euribor + 1.100%

Total EUR 16,178 Mozambique Bond Debt (Loan) MZN 39,675 Dec 2004 Jun 2007 TAM + 5.250% Total EUR 1,151 South Africa Overdrafts ZAR 1,410 - - - Total EUR 153 Sundry Operational Leasing EUR 747 - - - Total Group EUR 1,494,292


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7.2. Risk Management Policy 7.2.1. Financial Risk Management As part of its normal operations, the CIMPOR Group is faced with various financial risks as a result of exposure to fluctuations in the local currency exchange rates in countries in which it operates, and to euro and US dollar interest rate changes, the main currencies in which its financial debt is held. To mitigate the potential impact of any unfavourable changes in these factors, management policy is based on the following principles:

• Centralization of all risk management in the holding company, which analyses and approves transactions (Executive Committee) and carries them out and monitors them (Financial Operations Area of the Corporate Centre);

• Analysis of the Group's global exposure to different types of financial risk, and identification of potential new sources of uncertainty arising from the normal process of growth and internationalization;

• Search for and development of solutions to cover identified risks, and never, as a rule, merely for trading purposes, without there being underlying assets or liabilities;

• Selection of hedging instruments based on careful analysis and assessment of the risk/return ratio of the various alternatives available on the market for the type of risk in question;

• Search, whenever possible, for natural hedging by contracting financing in the local currency of the various countries where the Group operates;

• Regular monitoring of the risks and costs relating to the different operations contracted, in particular by calculating their market value and analysing market value sensitivity to changes in the main variables.

With respect to this last point, attention is drawn to the use of a particularly relevant statistical measure for derivative portfolio management, known as Earnings-at-Risk. This indicator forecasts the portfolio’s maximum negative impact in terms of results for a three-month time frame, with 95% accuracy. It provides an ongoing analysis for the portfolio and assesses the extent to which this impact may or may not be lessened by contracting certain operations. Regarding exchange risk management, it was decided to keep the two cross-currency swaps (USD/EUR) associated with the private placements issued in June 2003 on the US market. In the area of interest rate risk, the Group continued its dynamic management of the derivatives portfolio to maintain a comfortable split of debt between fixed and variable interest rates, minimization of its global cost and a balanced cash flow / market value ratio. To this end, with the aim of reducing the volatility implicit in their respective market values, three hedging operations in the (notional) sum of 516 million euros were restructured.


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7.2.2. Asset Risk Management The operating risk management policy of the Group was not significantly changed in 2006, with self-insurance being kept at the same level as in previous years and "major risks" being insured with international insurance companies. When renegotiating insurance policies within the CIMPOR Group’s global programmes, and despite the fact that the main companies involved continued to make very demanding conditions for their renewal, substantial reductions in the premiums for material damage and third party liability policies were once again obtained. The Group’s “captive” reinsurance company – CIMPOR Reinsurance, based in Luxembourg – continued to directly assume material damage and machine breakdown risks, with compensation limits up to two million euros. It also handled third party liability and product liability, with compensation limits up to two hundred and fifty thousand euros. Above these sums, cover remained with international reinsurance companies. This “captive” company has enabled the CIMPOR Group to not only streamline its operational and asset risk management and minimize the respective charges, but also to enjoy certain financial benefits by investing the premiums received from the various business areas, in particular by making these funds available for financing Group companies. In 2006 the global third party liability insurance of CIMPOR’s directors and managers was renegotiated, and even with the difficult market conditions the same cover was maintained as in previous years, but for a lower premium. Personal, vehicle and other miscellaneous insurance cover required by the different business areas was kept with local firms, in accordance with the specific laws of each country and the contractual conditions of employees. The Corporate Centre undertook measures to optimize the Group’s operating and asset risk management and control, particularly with regard to identifying material, technical and human resources subject to risk, analysing and assessing their level of exposure to risks, appraising foreseeable losses in the event of accident and weighing the various alternatives which, at any given time, are regarded as the most suitable for risk coverage.


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8. Information Technology As in previous years, the investments made and measures taken in 2006 in relation to information systems followed the strategic plan defined some time ago by CIMPOR for IT, keeping pace with the Group’s growth. Among the biggest investments were the installation of SAP (ERP2005) in the Tunisia Business Area (the only one not yet to have this system) and installation of the module for consolidating accounts, also a SAP solution (BCS/BW), throughout the Group. Other projects launched or completed in 2006 include:

• Upgrading to the latest version of the Business Intelligence environment (SAP BIW) and starting up the Corporate Portal (CimporNet);

• Development of the SAP/CimporNet integration project (construction of interfaces for automatic data transfer;

• Start-up of electronic order approval projects in the Portugal and Spain Business Areas, enabling full automation of these flows and elimination of the paper system, and the digitalization and automatic checking of invoices;

• Development and implementation of self-billing processes in SAP of transport services subcontracted through Transviária provided to the Group’s companies based in Portugal. This allowed full automation of all tasks related to receiving, entering, checking and accounting of transporters’ invoices;

• Full reformulation and reconstruction of Transviária’s SD processes (Sales);

• Implementation of the IM module (Fixed assets) in all companies in the Spain Business Area and the inter-company processes in the cement and concrete operations;

• Start-up of the project to install BW (Business Warehouse) in the cement operations in the Spain Business Area;

• Completion of the SAP system project and its entry into operation in the concrete and aggregate companies in South Africa;

• Implementation of SAP in Cimpsac (Egypt); The work carried out by the Systems Technology and Administration Area was also significant, and included:

• Implementation of the Live Communication Server in all the Group’s business areas, the Help Desk software in Egypt and Tunisia and the Disaster & Recovery solution at the Vigo data centre (Spain);

• Installation of the new Storage & Backup infrastructure and renovation of servers in the Lisbon data centre, with the adoption of the Blades format, using a virtualization solution (VMware);

• Installation of the corporate solution “Product Quality System” in the business areas of Spain, Brazil and Egypt.


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As in previous years, implementation of these projects has led the Group as a whole to take great advantage of synergies and has helped it to harmonize solutions which increasingly optimize information infrastructure and management costs, in terms of both investment and their daily operation.


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9. Outlook for 2007 In 2007 world GDP, even though it may slow down somewhat due to a likely slowdown of the Euro-zone, Japanese and, especially, US economies, is expected to continue to grow at a relatively good rate in historic terms, backed by strong growth in the emerging economies. Inflation should also be reasonable, benefiting from a predicted cooling of demand and more moderate evolution of oil prices. The main risks in this scenario lie in the possibility of a more abrupt slowing of the North American economy than expected if the real estate crisis lasts longer than anticipated, which would affect private consumption through its impact on employment. 2007 should be a good year for the cement sector, in terms of both volume and price, except in the US. Although the expected increases in capacity may be a threat to prices, it is unlikely that they will be affected in the short run, at least while merchant shipping costs remain high and if the recent trend for Chinese exports to fall continues. PORTUGAL In 2007 Portugal’s economy should grow, this will be very much influenced by the need to balance the public accounts. Some investment projects that have been announced by the government may be undertaken, and this would help to improve the behaviour of this variable. In terms of households, no significant growth in private consumption is expected, if only because the rise in short term interest rates will be a strong disincentive to its expansion, in a context of high indebtedness. The main sources of risk will continue to be a sudden cooling of external economies, with serious consequences for exports, and any postponement of the reforms essential to improving the public accounts, which would prejudice the recovery of confidence levels in investment in the private sector. In the construction sector, after five consecutive years of decline, it is still unlikely that there will be much by way of recovery in 2007. In the public works sector, the number of public tenders awarded and put out is not expected to increase, while in the housing sector the downward adjustment of supply to demand will continue. Therefore, a further drop in cement consumption (of around 2%) is expected, and this, aggravated by the presence of a new operator on the domestic market, will force CIMPOR to try even harder to place the product in other markets. SPAIN There is some consensus on the forecast for 2007, that it will be a turning point in the strong expansion recently enjoyed by the Spanish economy. Its vulnerability to new increases in interest rates, despite being offset by announced tax cuts, and the rise in the price of raw materials will probably lead to a slowing in the rate of GDP growth, which should in any case remain above 3%. Signs that the real estate market is easing, especially in confidence indexes for the construction sector and expectations in relation to prices, are already apparent and so a


84

slowing in this activity would not be surprising. In terms of cement consumption, the indications are that this will be much the same as 2006, with Galicia growing about 4% and Andalucia and Extremadura falling slightly. In this business area, and given the periods of stoppage in the Córdoba and Niebla plants while important environmental investments were undertaken and clinker production capacity was increased (at a cost of around 45 million euros), CIMPOR's growth in 2007 will be mostly in the concrete and aggregate operations, because of increased demand and the Group’s enhanced ability to meet it, due to the various acquisitions and other investments made in the meantime. NORTH AFRICA The countries in North Africa where the Group operates should enjoy high levels of GDP growth and see inflation rates ease somewhat. Cement consumption is expected to rise by 1.5% in Tunisia, 3% in Egypt and 7% in Morocco. Despite the expected increase in the Moroccan market, a lower domestic demand for clinker will mean that total sales from Asment de Témara will see little change. In terms of concrete, however, indications are that growth should rise about 40%, driven by the development of the market and by the opening of new plants. In Tunisia, solving certain operations problems that have been affecting operations in the Ciments de Jbel Oust plant should obviate the need to import clinker and thereby lead to a substantial improvement in the respective EBITDA. Continued growth is expected for the Egypt Business Area, albeit at a slower rate than in the last two years, especially since its three production lines will be stopped for quite a long period so that important rehabilitation work can be carried out. TURKEY The assets acquired in Turkey at the start of 2007 will enable the CIMPOR Group to increase turnover and EBITDA by around 10%. Sales should rise to about 2.6 million tonnes of cement, 1.2 million cubic metres of concrete and 2.8 million tonnes of aggregates. BRAZIL Benefiting from increases in investment, which is set to rise 8.5%, and the expected response of private consumption as inflation and interest rates fall, Brazil's GDP should grow about 4% in 2007. In addition, the recently approved “Programme for Faster Growth” will, by encouraging investment in infrastructures as an essential condition for the pursuit of this goal, offer excellent prospects for the whole construction sector, and thus for the cement industry. However, and despite the increases that have occurred in production costs, it is unlikely that, after the huge drop in the last few years, there will be any meaningful rise in the selling price of cement in 2007.


85

Even so, the foreseeable increase in demand and the Group’s growth in the concrete area will allow CIMPOR Brazil to at least keep the same levels of turnover and EBITDA recorded in 2006. SOUTH AFRICA In 2007 the Mozambican and South African economies should see GDP grow by around 7.3% and 4.5%, respectively, (driven in both cases by investment), with inflation rates (in Mozambique) tending to fall, and (in South Africa) stabilizing or rising slightly. In South Africa, increased public investment in infrastructures and social areas will definitely help the construction sector and, by extension, cement consumption. With the conclusion of the new NPC-CIMPOR clinker production line at the end of the third quarter, this plant will be much better able to respond to increased demand, obviating the need to import clinker, so its profits should also rise. They will also benefit from a significant increase in concrete and aggregates’ sales in this business area, due to growth in the sector and thanks to the acquisitions made in the meantime. In Mozambique, the strengthening of the workforce with expatriate technicians and the big investment the Group has been making should finally solve most of the operational problems that have been hampering CIMPOR's plants, making it possible to meet market needs. And in this case, there should be an appreciable improvement in the respective EBITDA. CAPE VERDE In macroeconomic terms, it is estimated that 2007 will see GDP rise, stimulated by the development of tourism and increased construction activity and a return to near zero inflation rates. In these circumstances, cement consumption will see double-digit increases and lead to a substantial rise in income from this business area, which will also benefit from the investments in concrete and aggregates made at the end of 2006.


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10. Post Balance Sheet Events The following significant events took place after the end of the 2006 financial year:

• Launch by Cimpor Inversiones, S.A. of an unsuccessful takeover bid for all the share capital of the Egyptian cement company Misr Cement (Qena) S.A.E..

• Conclusion of the acquisition of direct and indirect shareholdings corresponding to 99.68% of the share capital of the Turkish company Yibitas Lafarge Orta Anadolu Çimento Sanayi ve Ticaret A.S. (YLOAÇ), for the sum of approximately 548 million euros.

• Filing of an administrative lawsuit against several cement companies in Brazil, including CIMPOR, to look into potential channels enabling offences of an economic nature in the cement and ready-mix concrete markets by examining documents seized in the course of a preliminary inquiry. To the best of CIMPOR’s knowledge, no offence has occurred.

• Signing of a contract to sell the CIMPOR Group’s holding (42.86%) in the share capital of Cimentos Madeira, Lda., to Secil – Companhia Geral de Cal e Cimento, S.A., and the acquisition from the former of its minority holdings in Betão Liz, S.A. (33.37%) and Cimentaçor – Cimentos dos Açores, Lda. (25,0%).

• Increasing the CIMPOR Group’s holding in Cement Trading Activities, S.A., to 100% through Kandmad SGPS Lda's purchase of a block of shares corresponding to 11% of its capital.

• Reduction of the share capital of the Société Les Ciments de Jbel Oust (Tunísia) from TND 90 082 400 to TND 82 297 400 through the amortization of 77,850 shares held by Cimpor Inversiones, S.A..

• Start of restoration work on one of the production lines of Amreyah Cement Company, S.A.E., and the start of production of paper sacks for cement by Cimpor Sacs Manufacture Company, S.A.E. (Egypt).

• Sale, for EGP 3,990,000, of the minority holding owned by Amreyah Cement Company, S.A.E. in Asenpro (Egypt).

• Acquisition of three more ready-mix concrete plants in the São Paulo region (Brazil), with a production capacity of about 120 thousand cubic metres/year.

• Strengthening the Group’s holding in the share capital of Cimentos de Moçambique, S.A.R.L., from 71.7% to almost 82.5%.

• Sale of the entire holding of Cimentos de Moçambique in the capital of Premap – Prefabricados de Maputo, S.A.R.L..

• Start-up of NPC–CIMPOR (Pty) Limited – in which the CIMPOR Group has a 74% shareholding, the company’s employee fund owns 5.5% and Siyaka Cement Investment Holdings (Pty) has a 20.5% holding – in the wake of the transfer of all the Group’s cement production and marketing assets and liabilities to this new company, under South Africa’s Black Economic Empowerment (BEE) laws.


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Lisbon, 18 April 2007

THE BOARD OF DIRECTORS

Ricardo Manuel Simões Bayão Horta

Luís Eduardo da Silva Barbosa Jacques Lefèvre

Jean Carlos Angulo Jorge Manuel Tavares Salavessa Moura

Luís Filipe Sequeira Martins Manuel Luís Barata de Faria Blanc

Pedro Maria Calaínho Teixeira Duarte Vicente Árias Mosquera

José Manuel Baptista Fino

José Enrique Freire Arteta


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89

III

CONSOLIDATED FINANCIAL STATEMENTS

CIMPOR - CIMENTOS DE PORTUGAL, S.A.

CONSOLIDATED STATEMENTS OF PROFIT AND LOSS FOR THE YEARS ENDED

31 DECEMBER 2006 AND 2005

Notes 2006 2005

Operating income:Sales 7 1,565,695 1,467,299 Services rendered 7 73,197 67,552 Other operating income 8 38,595 24,369

Total operating income 1,677,487 1,559,220

Operating expenses:Cost of goods sold and material used in production 9 (392,845) (366,757)Changes in inventories of finished goods and work in progress 3,744 545 Outside supplies and services (533,001) (506,638)Payroll 10 (173,239) (168,975)Depreciation and amortisation 7,17 and 18 (148,641) (137,602)Provisions and impairment losses 7 and 35 (6,352) (2,766)Other operating expenses 11 (19,103) (21,583)

Total operating expenses (1,269,436) (1,203,776)

Net operating income 7 408,050 355,444

Financial expenses 7 and 12 (167,628) (152,972)Financial income 7 and 12 94,147 112,749 Share of results of associates 7,12 and 19 19,146 35,211 Other investment income 7 and 12 12,035 1,756

Profit before income tax 365,750 352,188

Income tax 7 and 13 (60,140) (75,695)Net profit for the year 7 305,610 276,493

Attributable to:Equity holders of the parent 291,915 266,159 Minority interest 7 and 32 13,695 10,334

305,610 276,493

Earnings per share:Basic 15 0.44 0.40Diluted 15 0.44 0.40

José Manuel Baptista Fino José Enrique Freire Arteta




Pedro Maria Calaínho Teixeira Duarte Vicente Arias Mosquera

(Amounts stated in thousands of euros)

The accompanying notes form an integral part of the consolidated financial statements for the year ended 31 December 2006.

The Board of Directors


(Translation from the Portugueses original - Note 47)

CIMPOR - CIMENTOS DE PORTUGAL, SGPS, S.A.

CONSOLIDATED BALANCE SHEETS AS OF 31 DECEMBER 2006 AND 2005



Notes 2006 2005

Non-current assets:Goodwill 16 and 35 909,971 940,648 Intangible assets 17 10,720 12,169 Tangible assets 18 1,541,774 1,567,539 Investments in associates 19 156,955 204,955 Other investments 20 153,338 10,859 Available-for-sale financial assets 20 - 69,220 Accounts receivable-other 21 6,307 2,348 Taxes recoverable 22 3,528 2,594 Other non-current assets 23 3,036 1,220 Deferred tax assets 24 81,159 91,138

Total non-current assets 2,866,789 2,902,690

Current assets:Inventories 25 177,019 173,618 Accounts receivable-trade 26 263,795 258,654 Accounts receivable-other 21 19,043 16,968 Taxes recoverable 22 36,952 34,319 Cash and cash equivalents 42 489,441 416,124 Other current assets 23 4,772 3,011

Total current assets 991,022 902,694 Total assets 7 3,857,811 3,805,384

Shareholders' equity:Share capital 27 672,000 672,000 Treasury shares 28 (9,294) (12,796)Currency translation adjustments 29 121,274 212,486 Reserves 30 255,606 262,855 Retained earnings 31 248,177 118,392 Net profit for the year 15 291,915 266,159

Equity before minority interest 1,579,677 1,519,097 Minority interest 32 74,059 65,488

Total shareholders' equity 1,653,736 1,584,585

Non-current liabilities:Deferred tax liabilities 24 136,055 135,650 Employee benefits 33 and 35 24,872 27,377 Provisions 35 156,209 147,606 Loans 36 1,357,405 1,417,015 Obligations under finance leases 37 290 687 Accounts payable-others 39 19,841 19,849 Taxes payable 22 2,262 4,095 Other non-current liabilities 40 152,542 123,865

Total non-current liabilities 1,849,476 1,876,144

Current liabilities:Employee benefits 33 and 35 3,291 6,027 Provisions 35 1,486 2,017 Current liabilities-trade 41 149,556 145,298 Accounts payable-others 39 49,928 57,354 Taxes payable 22 41,101 45,354 Loans 36 60,256 36,541 Obligations under finance leases 37 457 1,632 Other current liabilities 40 48,525 50,432

Total current liabilities 354,599 344,655 Total liabilities 7 2,204,076 2,220,799

Total liabilities and shareholders' equity 3,857,811 3,805,384










CONSOLIDATED CASH FLOW STATEMENTS FOR THE YEARS ENDED 31 DECEMBER 2006 AND 2005



Notes 2006 2005

Operating activities: Receipts from clients 1,904,327 1,793,515 Payments to suppliers (1,047,573) (1,001,992) Payments to employees (169,322) (164,205) Cash flows generated by operations 687,432 627,318

Income tax recovered/(paid) (47,204) (27,439) Other payments relating to operating activities (167,262) (162,287) Cash flows from operating activities (1) 472,966 437,592

Investing activities: Receipts relating to: Changes in consolidation perimeter 5 64,958 146,212 Investments 42 71,733 805 Tangible assets 8,110 4,251 Investment subsidies 3,490 2,957 Interest and similar income 30,824 27,701 Dividends 1,385 5,211 Others 208 1,887

180,708 189,024 Payments relating to: Changes in consolidation perimeter 5 (25,553) (16,220) Investments 42 (151,603) (51,696) Tangible assets (162,062) (145,160) Intangible assets (740) (476) Others (10,015) (3,687)

(349,973) (217,239) Cash flows from investing activities (2) (169,265) (28,215)

Financing activities: Receipts relating to: Loans obtained 12,176 556,153 Subsidies and donations - 298 Sale of treasury shares 3,835 2,797 Others 71 2,879

16,082 562,127 Payments relating to: Loans obtained (34,727) (591,723) Interest and similar costs (91,793) (81,449) Dividends 14 (127,191) (120,299) Others (4,600) (9,903)

(258,311) (803,374) Cash flows from financing activities (3) (242,229) (241,247)Variation in cash and cash equivalents (4) = (1) + (2) + (3) 61,472 168,130 Effect of currency translation and other non monetary transactions (5,182) 34,932 Cash and cash equivalents at the beginning of the year 42 408,196 205,134 Cash and cash equivalents at the end of the year 42 464,486 408,196









Notes 2006 2005

Variation in fair value of cash flow hedging financial instruments 30 1,148 746

Variation in fair value of available-for-sale financial assets 30 - 14,442

Actuarial gain and loss on employee benefit plans 30 (2,772) (11,185)

Variation in currency translation adjustments 29 and 32 (92,934) 206,231

Adjustments in investments in associates and others 30 and 31 (536) 2,112

Net income recognised directly in shareholders' equity (95,095) 212,346

Transfers:Transfer from shareholders' equity to gain and losses of

non-current asset held for sale 30 (3,032) - Transfer from shareholders' equity to gain and losses of

variation in fair value of available-for-sale financial assets 30 (12,907) -

Consolidated net profit for the year 305,610 276,493

Total recognised income and expense for the year 194,576 488,839

Attributable to: Equity holders of the parent 182,852 476,111 Minority interest 11,724 12,728

194,576 488,839

Luís Eduardo da Silva Barbosa

Jean Carlos Angulo

Luís Filipe Sequeira Martins

Pedro Maria Calaínho Teixeira Duarte







CONSOLIDATED STATEMENTS OF RECOGNISED INCOME AND EXPENSE

FOR THE YEARS ENDED 31 DECEMBER 2006 AND 2005



Jacques Lefèvre

Jorge Manuel Tavares Salavessa Moura

Manuel Luís Barata de Faria Blanc

Vicente Arias Mosquera

CIMPOR – CIMENTOS DE PORTUGAL, SGPS, S.A. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2006 (Amounts stated in thousands of euros) (Translation of notes originally issued in Portuguese– Note 47)

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INDEX 1. Introduction........................................................................................................................................96 2. Summary of significant accounting policies.....................................................................................96

2.1. Basis of presentation......................................................................................................................... 96 2.2. Adoption of new or revised International Financial Reporting Standards ................................. 96 2.3. Critical accounting judgements/estimates ...................................................................................... 97 2.4. Consolidation principles................................................................................................................... 97 2.5. Non-current assets held for sale .....................................................................................................100 2.6. Intangible assets...............................................................................................................................101 2.7. Tangible assets .................................................................................................................................101 2.8. Leases................................................................................................................................................102 2.9. Impairment of non-current assets, excluding goodwill ................................................................103 2.10. Foreign currency assets, liabilities and transactions ..................................................................103 2.11. Borrowing costs .............................................................................................................................104 2.12. Government grants........................................................................................................................104 2.13. Inventories......................................................................................................................................105 2.14. Net operating income.....................................................................................................................105 2.15. Provisions .......................................................................................................................................105 2.16. Financial instruments....................................................................................................................106 2.17. Retirement benefits........................................................................................................................109 2.18. Healthcare benefits ........................................................................................................................110 2.19. Share-based payments...................................................................................................................110 2.20. Contingent assets and liabilities ...................................................................................................110 2.21. Revenue recognition and accruals basis ......................................................................................110 2.22. Income tax ......................................................................................................................................111 2.23. Earnings per share ........................................................................................................................111 2.24. Subsequent events..........................................................................................................................112 2.25. CO2 emission licences – Emissions market ..................................................................................112

3. Changes in policies, estimates and errors ......................................................................................112 4. Companies included in the consolidation.......................................................................................113

4.1. Companies consolidated in accordance with the full consolidation method ......................113 4.2. Associated companies ..............................................................................................................127 4.3. Companies consolidated in accordance with the proportional method ..............................129

5. Changes in the companies included in the consolidation..............................................................130 6. Exchange rates used.........................................................................................................................132 7. Segment reporting............................................................................................................................132 8. Other operating income...................................................................................................................135 9. Cost of goods sold and material used in production .....................................................................135 10. Payroll ...............................................................................................................................................136 11. Other operating expenses ................................................................................................................137 12. Net financial expenses......................................................................................................................138 13. Income tax ........................................................................................................................................139 14. Dividends ..........................................................................................................................................140 15. Earnings per Share ..........................................................................................................................141 16. Goodwill ............................................................................................................................................142 17. Intangible assets ...............................................................................................................................143 18. Tangible assets..................................................................................................................................144 19. Investments in associates .................................................................................................................145 20. Available-for-sale financial assets and other investments ............................................................146 21. Accounts receivable - other .............................................................................................................147

CIMPOR – CIMENTOS DE PORTUGAL, SGPS, S.A. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2006 (Amounts stated in thousands of euros) (Translation of notes originally issued in Portuguese – Note 47)

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22. Taxes recoverable and taxes payable .............................................................................................147 23. Other current and non-current assets............................................................................................148 24. Deferred taxes ..................................................................................................................................149 25. Inventories ........................................................................................................................................150 26. Accounts receivable – trade ............................................................................................................150 27. Share Capital....................................................................................................................................151 28. Treasury shares ................................................................................................................................151 29. Currency translation adjustments..................................................................................................151 30. Reserves ............................................................................................................................................152 31. Retained earnings.............................................................................................................................152 32. Minority interest ..............................................................................................................................153 33. Employee benefits ............................................................................................................................153 34. Incentive plan ...................................................................................................................................156 35. Provisions and accumulated impairment losses ............................................................................158

Provisions .................................................................................................................................................158 Impairment losses.....................................................................................................................................159

36. Loans .................................................................................................................................................161 Bonds........................................................................................................................................................161 Bank loans ................................................................................................................................................162 Rating .......................................................................................................................................................163 Control of the subsidiary companies ........................................................................................................163 Financial covenants ..................................................................................................................................164 Negative pledge ........................................................................................................................................164 Cross default.............................................................................................................................................164

37. Obligations under leases..................................................................................................................164 Finance leases...........................................................................................................................................164 Operating leases .......................................................................................................................................165

38. Derivative financial instruments.....................................................................................................165 39. Accounts payable - others................................................................................................................168 40. Other current and non-current liabilities ......................................................................................168 41. Accounts payable - trade .................................................................................................................169 42. Notes to the consolidated cash flow statements .............................................................................169

Cash and cash equivalents ........................................................................................................................169 Receipts relating to investments ...............................................................................................................170 Payments relating to investments .............................................................................................................170 Unused credit lines ...................................................................................................................................170

43. Related parties..................................................................................................................................170 44. Contingent liabilities, guarantees and commitments ....................................................................171 45. Subsequent events ............................................................................................................................173 46. Financial statements approval ........................................................................................................174 47. Note added for translation ..............................................................................................................174


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1. Introduction Cimpor - Cimentos de Portugal, SGPS, S.A. (“the Company”) was incorporated on 26 March 1976, with the name Cimpor - Cimentos de Portugal, E.P.. The Company has undergone several structural and legal changes, that have resulted in it becoming the parent company of a Business Group with operations in Portugal, Spain, Morocco, Mozambique, Brazil, Tunisia, Egypt, South Africa and Cape Verde (the “Cimpor Group"). Cimpor Group’s core business is the production and sale of cement. The Group also produces and sells aggregates and mortar in a vertical integration of its businesses. The Cimpor Group’s investments are held essentially through two sub-holding companies; (i) Cimpor Portugal, SGPS, S.A., which holds the investments in companies dedicated to the production of cement, mortar, concrete parts and related activities in Portugal; and (ii) Cimpor Inversiones, S.A., which holds the investments in companies operating abroad.

2. Summary of significant accounting policies 2.1. Basis of presentation The accompanying financial statements were prepared on a going concern basis from the books and accounting records of the companies included in the consolidation (Note 4), restated in the consolidation process to the International Financial Reporting Standards, effective for the years beginning 1 January 2006. Such standards include the International Financial Reporting Standards (“IFRS”) issued by the International Accounting Standards Board (“IASB”), the International Accounting Standards (“IAS”) issued by the Accounting Standards Committee (“IASC”) and the SIC and IFRIC interpretations issued by the International Financial Reporting Interpretation Committee (“IFRIC”) and Standing Interpretation Committee (“SIC”). These standards and interpretations are hereinafter referred to collectively as “IFRS”. The financial statements were prepared in accordance with the historical cost convention, except as regards financial instruments. Following is a summary of the main accounting policies adopted. 2.2. Adoption of new or revised International Financial Reporting Standards In the year ended 31 December 2006, the Group has not adopted any new or revised International Financial Reporting Standards comparing to prior year. As at the approval date of these financial statements, the following standards were already issued but effective only in subsequent years and have not been adopted by the Group:


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Standard Effective

• IFRS 7 – Financial instruments disclosure of information Annual periods beginning on or after 1 January 2007

• IFRS 8 – Operating Segments Annual periods beginning on or after 1 January 2009

• IFRIC 7 – Financial reporting in hyperinflationary economies Annual periods beginning on or after 1 March 2006

• IFRIC 8 – Scope of IFRS 2 Annual periods beginning on or after 1 May 2006

• IFRIC 9 – Reassessment of embedded derivatives Annual periods beginning on or after 1 June 2006

• IFRIC 10 – Interim financial reporting and impairment Annual periods beginning on or after 1 November

2006

• IFRIC 11 – Treasury share transactions Annual periods beginning on or after 1 March 2007

• IFRIC 12 – Concession contracts Annual periods beginning on or after 1 January 2008

2.3. Critical accounting judgements/estimates The preparation of financial statements in conformity with IFRS recognition and measurement principles requires the Board of Directors to make judgements, estimates and assumptions that can affect the amount of assets and liabilities presented, especially amortisation and depreciation and provisions, the disclosure of contingent assets and liabilities as of the date of the financial statements, as well as of income and expenses. These estimates are based on the best knowledge existing at each moment and the planned actions, and are regularly reviewed based on the information available. Changes in facts and circumstances can lead to a revision of the estimates and so actual results may differ from these estimates. The significant estimates and assumptions made by the Board of Directors in preparing these financial statements include assumptions used in estimating pension and healthcare responsibilities, deferred taxes, useful life of tangible assets, investments and impairment tests. 2.4. Consolidation principles a) Controlled companies Controlled companies have been consolidated in each period using the full consolidation method. Control is considered to exist where the Group holds, directly or indirectly, a majority of the voting rights at Shareholders’ General Meetings, or has the power to determine the companies’ financial and operating policies.


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Third party participation in shareholders’ equity and net profit of such companies is presented separately in the consolidated balance sheet and consolidated statement of profit and loss under the caption “Minority interest”. Where losses attributed to minority shareholders exceed the minority interest in shareholders’ equity of controlled companies, the Group absorbs such excess and any additional losses, except where the minority shareholders are required and are able to cover such losses. Where the subsidiary subsequently reports profits, the Group appropriates them up to the amount of the losses absorbed by the Group. The results of controlled companies acquired or sold during the period are included in the statement of profit and loss from the date of their acquisition to the date of their sale. Significant balances and transactions between controlled companies are eliminated in the consolidation process. Capital gains within the Group on the sale of subsidiary and associated companies are also eliminated. Whenever necessary, adjustments are made to the financial statements of subsidiary and associated companies to conform to the Group’s accounting policies. Where the Group has, in substance, control over other entities created for a specific purpose, even though it does not have direct participations in them, they are consolidated by the full integration method. b) Jointly controlled companies Investments in jointly controlled companies are consolidated in accordance with the proportional consolidation method as from the date joint control is acquired. Under this method, assets, liabilities, income and expenses of these entities are included in the accompanying consolidated financial statements, caption by caption, in proportion to the Group’s control. The excess of cost over the fair value of the identifiable assets and liabilities of jointly controlled companies as of the acquisition date is recognised as Goodwill. If the difference between cost and the fair value of the net assets acquired is negative, it is recognised as income for the period. Transactions, balances and dividends distributed between these companies are eliminated in proportion to the Group’s control. Classification as a jointly controlled investment is determined by the contractual arrangements undertake on the economic activity that is subject to joint control. c) Business combinations Business combinations, namely the acquisition of controlled and subsidiary companies are recorded in accordance with the purchase method. Cost corresponds to the sum of the fair values of the assets acquired less the liabilities incurred or assumed and the equity instruments issued in


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exchange for the control acquired as of the transaction date plus any costs directly attributable to the purchase process. The identifiable assets, liabilities and contingent liabilities of a subsidiary that meet the criteria to be recognised in accordance with IFRS 3 - Business Combinations, are measured by their fair value as of the purchase date, except for non current assets (or groups of assets) that are identified as held for sale in accordance with IFRS 5 – Non-current Assets Held for Sale and Discontinued Operations, which are recognised and measured by their respective fair values less costs to sell. Any excess of cost over the fair value of the identifiable net assets acquired as of the purchase date is recorded as Goodwill. Where cost is lower than the fair value of the net assets identified, the difference is recorded as a gain in the statement of profit and loss for the period in which the acquisition is made. Minority shareholders’ interest is reflected in proportion to the fair value of the assets and liabilities identified. d) Investments in associates An associated company is one over which the Group exercises significant influence, but does not have control or joint control, through participation in decisions relating to its financial and operating policies. Investments in the majority of associated companies (Note 19) are recorded in accordance with the equity method, except where they are classified as held for sale. Investments are initially recorded at cost which is then increased or decreased by the difference between cost and the proportional value of the equity of such companies as of the purchase date or the date the equity method was first used. In accordance with the equity method investments are adjusted periodically by the amount corresponding to participation in the net results of associated companies by corresponding entry to share of profit of associates (Note 12) and by other changes in shareholders’ equity by corresponding entry to adjustments in investments, reflected as Reserves, as well by recognition of impairment losses. Losses in associated companies in excess of the investment in them are not recognised, unless the Group has assumed commitments to the companies. Any excess of cost over the fair value of the identifiable net assets is recorded as Goodwill. Where cost is less than the fair value of the net assets identified, the difference is recorded as a gain in the statement of profit and loss for the period in which the acquisition is made. In addition, dividends received from these companies are recorded as decreases in the amount of the investments.


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Unrealised gains on transactions with associated companies are eliminated in proportion to the Group’s interest in such companies, by corresponding entry to the amount of the corresponding investment. Unrealised losses are also eliminated, but only up to the point in which the loss does not show that the asset transferred is in a situation of impairment. e) Goodwill Goodwill represents the excess of cost over the fair value of the identifiable assets and liabilities of a controlled, associated company or jointly controlled entity, as of the date of acquisition. Goodwill is recorded as an asset and is not amortised, being reflected in a separate balance sheet caption or in the caption Investments in associates (Notes 16 and 19). Periodically, or whenever there are indications of a possible loss in value, goodwill is subjected to impairment tests. Any impairment loss is immediately recorded as a cost in the statement of profit and loss for the period and is not subject to subsequent reversal. Goodwill is included in determining the gain or loss on the sale of a subsidiary, associated company or jointly controlled entity. As a result of the exception established in IFRS 1, the Group applied the provisions of IFRS 3 – Business Combinations, to acquisitions after 31 December 1998. Goodwill on acquisitions after that date is restated to the currency of the subsidiary and translated to the Group’s reporting currency (euros) at the rate of exchange on the balance sheet date. Exchange differences arising on that translation are recorded in the caption Exchange translation adjustments. Exchange differences generated prior to 1 January 2004 were recorded directly in Retained earnings, in accordance with IFRS 1. Goodwill on acquisitions prior to 1 January 1999 was maintained at the former amount, being subject to annual impairment tests as from that date. Where cost is less than the fair value of the net assets identified, the difference is recorded as a gain in the statement of profit and loss for the period in which the acquisition takes place. 2.5. Non-current assets held for sale Non current assets (or discontinued operations) are classified as held for sale if the amount is realisable through sale, as opposed to through continued use. This is considered to be the case where: (i) the sale is probable and the asset is available for immediate sale in its current condition; (ii) management is committed to a sales plan; and (iii) the sale is expected to take place in a period of twelve months. Non current assets (or discontinued operations) classified as held for sale are stated at the lower of book value or fair value less costs to sell.


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2.6. Intangible assets Intangible assets, which comprise essentially contractual rights and costs incurred on specific projects with future economic value, are stated at cost less accumulated amortisation and impairment losses. Intangible assets are only recognised if it is probable that they will produce future economic benefits for the Group, they are controllable by the Group and their value can be determined reliably. Internally generated intangible assets, namely current research and development costs, are recognised as costs when incurred. Internal costs relating to the maintenance and development of software are recorded as costs in the statement of profit and loss when incurred, except where such costs relate directly to projects which will probably generate future economic benefits. In such cases these costs are capitalised as intangible assets. Amortisation of such assets is provided on a straight-line basis as from the date the assets start being used, in accordance with their estimated useful life. Intangible assets which are expected to generate future economic benefits for an unlimited period are known as intangible assets of undefined useful life. Such assets are not amortised but are subject to periodical impairment tests. 2.7. Tangible assets Tangible assets used in production, rendering services or for administrative use are stated at cost, including expenses incurred with their purchase, less accumulated depreciation and, where applicable, impairment losses. Assets relating to the cement operations on 1 January 2004 were revalued as permitted by the transition provisions of IFRS 1, the resulting amount being considered as the new cost. Depreciation of tangible fixed assets is provided on a straight-line basis over their estimated useful lives, as from the date the assets become available for their intended use, in accordance with the following estimated periods of useful life:


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Average useful life

Buildings and other constructions 10 – 50Basic equipment 7 – 30Transportation equipment 4 – 8Tools and dies 2 – 8Administrative equipment 2 – 14Other tangible fixed assets 2 – 10

The amount subject to depreciation does not include the estimated residual value of the assets at the end of their useful lives. Additionally, the assets stop being depreciated when they are classified as assets held for sale. Land used for quarries is depreciated over its estimated period of operation. Improvements are only recognised as assets when they increase the useful life or efficiency of the assets, resulting in increased future financial benefits. Tangible assets in progress correspond to tangible assets under construction/promotion and are recorded at cost less possible impairment losses. These assets are depreciated as from the date they become available for their intended use. Gains and losses arising from the sale or write-off of tangible assets, which are determined by the difference between the proceeds of the sale of the assets and their net book value at the date of sale/write-off, are recognised in the statement of profit and loss caption Other operating income or Other operating expenses. 2.8. Leases Lease contracts are classified as: (i) finance leases, if substantially all the risks and benefits of ownership are transferred under them; and (ii) operating leases, if substantially all the risks and benefits of ownership are not transferred under them. Leases are classified as finance or operating leases based on the substance and not form of the contract. Fixed assets acquired under finance lease contracts, as well as the corresponding liabilities are recorded in accordance with the financial method. In accordance with this method the fixed assets are recorded as tangible assets, the corresponding liability is recognised and the interest included in the lease instalments and depreciation of the assets, calculated as explained above, are recognised in the statement of profit and loss for the period to which they relate.


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In the case of operating leases, the lease instalments are recognised, on a straight- basis, in the statement of profit and loss over the period of the lease contracts. 2.9. Impairment of non-current assets, excluding goodwill Impairment valuations are made whenever an event or change in circumstances is identified that indicates that the book value of an asset may not be recovered. Where such indications exist, the Group determines the recoverable value of the asset, so as to determine the possible extent of the impairment loss. In situations in which the individual asset does not generate cash flows independently of other assets, the recoverable value is estimated for the cash generating unit to which the asset belongs. Intangible assets of undefined useful life are subject to impairment tests annually or whenever there are indications that impairment losses exist. Whenever the book value of an asset exceeds its recoverable amount, an impairment loss is recognised by charge to the statement of profit and loss caption Provisions and impairment losses. The recoverable amount is the higher between the net selling price (selling price, less costs to sell) and the usable value of the asset. Net selling price is the amount that would be obtained from selling the asset in a transaction between knowledgeable independent entities, less the costs directly attributable to the sale. Usable value is the present value of the estimated future cash flows resulting from the continued use of the asset and sale thereof at the end of its useful life. The recoverable amount is estimated for each asset individually or, where this is not possible, for the unit generating the cash flows to which the asset belongs. Impairment losses recognised in prior periods are reversed when there are indications that such losses no longer exist or have decreased. Impairment losses are reversed by credit to the statement of profit and loss caption Provisions and impairment losses. However, the impairment loss is reversed up to the amount that would have been recognised (net of amortisation or depreciation) if the impairment loss had not been recorded in prior periods. 2.10. Foreign currency assets, liabilities and transactions Transactions in currencies other than euro are recorded at the rates of exchange in force on the date of the transaction. Foreign currency monetary assets and liabilities at the balance sheet dates are translated to euros at the rates of exchange in force on that dates. Non monetary assets and liabilities recorded at their fair value in foreign currencies are translated to euros using the rate of exchange in force on the date the fair value was determined. Exchange gains and losses resulting from differences between the exchange rates in force on the dates of the transactions and those in force on the dates of collection, payment or the balance sheet date are recognised as income or costs in the consolidated statement of profit and loss, except for those relating to non monetary items where the change in fair value is recognised directly in shareholders’ equity (Exchange translation adjustments), in particular:


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- Exchange differences resulting from the translation of medium and long term foreign currency intra Group balances, which in practice are extensions of investments;

- Exchange differences on financial operations to hedge exchange risk on foreign currency

investments as established in IAS 21 - The Effects of Changes in Foreign Exchange Rates, provided that they comply with the efficiency criteria established in IAS 39.

The foreign currency financial statements of subsidiary and associated companies are translated as follows: assets and liabilities at the exchange rates in force on the balance sheet dates; shareholders’ equity captions at the historical exchange rates; and statement of profit and loss and statement of cash-flow captions at the average exchange rates. The exchange effect of such translations after 1 January 2004 is reflected in the shareholders’ equity caption Exchange translation adjustments in the case of subsidiary companies and in the shareholders’ equity caption Reserves in the case of investments in associated companies, and is transferred to the statement of profit and loss caption Financial expenses or Financial income when the corresponding investments are sold. In accordance with IAS 21 goodwill and fair value corrections determined on the acquisition of foreign entities are considered in the reporting currency of such entities, and are translated to euros at the exchange rate in force on the balance sheet date. Exchange differences arising from these translations are reflected in the caption Exchange translation adjustments. The Group contracts financial derivative hedging instruments when it wishes to reduce its exposure to exchange rate risk. 2.11. Borrowing costs Borrowing costs are recognised in the statement of profit and loss for the period to which they relate. 2.12. Government grants Subsidies are recognised based on their fair value, when there is reasonable certainty that they will be received and that the Group will comply with the conditions required for them to be granted. Operating subsidies, namely those for employee training, are recognised in the statement of profit and loss in accordance with the costs incurred. Investment subsidies relating to the acquisition of fixed assets are recorded in the caption Other non-current liabilities and are credited to the statement of profit and loss on a consistent straight-line basis in proportion to depreciation of the subsidised fixed assets.


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2.13. Inventories Merchandise and raw, subsidiary and consumable materials are stated at average cost. Finished and semi-finished products and work in progress are stated at production cost, which includes the cost of the raw materials incorporated, labour and production overheads (considering depreciation of production equipment based on normal utilisation levels). Inventories are reduced in value where market value is lower than book value, the reduction being reversed when the reasons that gave rise to it cease to exist. 2.14. Net operating income Net operating income includes operating income and expenses, whether recurring or not, including restructuring costs and operating income and expenses associated to operating assets (tangible assets and other intangible assets). Also comprise, gains or losses on the sale of companies consolidated using the full or proportional integration method. The net financial expenses, share of results of associates, other financial investment (Notes 12 and 19) and income tax, are excluded. 2.15. Provisions Provisions are recognised when exists an obligation (legal or implicit) resulting from a past event, under which it is probable that it will have an outflow of resources to resolve the obligation, and the amount of the obligation can be reasonably estimated. At each balance sheet date provisions are reviewed and adjusted to reflect the best estimate as of that date. a) Provisions for restructuring costs Provisions for restructuring costs are recognised by the Group whenever there is a formal detailed restructuring plan which has been communicated to the parties involved. b) Environmental rehabilitation In accordance with current legislation and practices in force in several business areas in which the Group operates, land used for quarries must be environmentally rehabilitated. In this respect, provisions are recorded to cover the estimated cost of environmentally recovering and rehabilitating the land used for quarries, whenever this can be reasonably determined. Such provisions are recorded together with a corresponding increase in the amount of the underlying assets, based on the conclusions of landscape rehabilitation studies, being recognised in the statement of profit and loss as the corresponding assets are depreciated. In addition, the Group has the procedure of progressively rehabilitating the areas freed up by the quarries, using the provisions recorded.


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2.16. Financial instruments Financial assets and liabilities are recognised when the Group becomes a party to the contractual relationship. a) Cash and cash equivalents The caption Cash and cash equivalents includes cash, bank deposits, term deposits and other treasury applications which mature in less than three months, and are repayable on demanded with insignificant risk of change in value. The caption Cash and cash equivalents in the statement of cash flows also includes bank overdrafts, which are included in the balance sheet in the caption Loans. b) Accounts receivable Accounts receivable are measured at fair value when they are initially recognised and are subsequently stated at amortised cost in accordance with the effective interest rate method. When there is evidence that the accounts receivable are impaired, the corresponding adjustment is recorded by corresponding charge to the statement of profit and loss. The adjustment is recognised and measured by the difference between the book value of the accounts receivable and the present value of the cash flows discounted at the effective interest rate determined upon initial recognition of the accounts receivable. c) Investments Investments are recognised (and derecognised) as of substantially all the risks and benefits of ownership are transferred under them, irrespective of the settlement date. Investments are initially recognised at cost, which is the fair value of the price paid, including transaction costs. Investments are classified as follows: - Held-to-maturity investments; - Assets at fair value through the statement of profit and loss; - Available-for-sale financial assets. Held-to-maturity investments are classified as non current assets, except if they mature in less than twelve months from the balance sheet date, investments with a defined maturity date which the Group intends and has the capacity to hold up to that date being recorded in this caption. These investments are recognised at amortised cost, using the effective interest rate, net of capital repayments and interest received. Impairment losses are recognised in the statement of profit and loss when the recorded amount of the investment is lower than the estimated value of the cash flows discounted at the effective interest rate determined at the time of initial recognition. Impairment losses can only be reversed subsequently when there is an increase in the recoverable


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amount of the investment can be objectively related to an event occurring after the date in which the impairment loss was recognised. In any case the recognised amount of the investment cannot exceed the amount corresponding to amortised cost of the investment had the impairment loss not been recognised. Assets measured at fair value through profit and loss are classified as current investments. After initial recognition, assets measured at fair value through profit and loss and available-for-sale financial assets are revalued to fair value by reference to their market value as of the balance sheet date with no deduction for transaction costs that could arise up to the date their sale. Investments in equity instruments not listed on regulated markets, where it is not possible to estimate their fair value on a reliable basis, are maintained at cost less possible impairment losses. Available-for-sale financial assets are classified as non current assets. Gains and losses due to changes in the fair value of available-for-sale financial assets are reflected in the shareholders’ equity caption “Fair value reserve” until the instrument is sold, collected or in any other way realised, or where impairment losses are believed to exist, in which case the accumulated gain or loss is recorded in the statement of profit and loss. d) Financial liabilities and equity instruments Financial liabilities and equity instruments issued by the Group are classified in accordance with the substance of the contract independently of its legal form. Equity instruments are contracts that have a residual interest in the Group’s assets after deduction of the liabilities. Equity instruments issued are recorded at the amount received net of costs incurred to issue them. e) Bank loans Loans are initially recorded as liabilities at the amount received, net of loan issuing costs, which corresponds to their fair value on that date. Loans are subsequently measured at amortised cost, the corresponding financial costs being calculated at the effective interest rate, except as follows: - Loans that form part of a relationship qualified as a fair value hedge, which are measured at

fair value as regards the part attributed to the risk hedged. Variations in fair value are recognised in the statement of profit and loss for the period and compensated by the variation in fair value of the hedging instrument, as regards the corresponding effective component;

- Loans designated as financial liabilities, measured at fair value through profit and loss as

explained in Note 2.2. f) Accounts payable Accounts payable are initially recognised at fair value and subsequently measured at amortised cost in accordance with the effective interest rate method.


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g) Derivative financial instruments and hedge accounting The Group has the policy of resorting to financial derivative instruments to hedge the financial risks to which it is exposed as a result of changes in interest rates and exchange rates. In this respect the Group does not contract derivative financial instruments for speculation purposes. The Group resorts to financial derivative instruments in accordance with internal policies set and approved by the Board of Directors. Financial derivative instruments are measured at fair value. The method of recognising this depends on the nature and purpose of the transaction. Hedge accounting Derivative financial instruments are designated as hedging instruments in accordance with the provisions of IAS 39, as regards their documentation and effectiveness. Variations in the fair value of derivative instruments designated as fair value hedges are recognised as financial income or expense for the period, together with changes in the fair value the asset or liability subject to the risk. Variations in the fair value of derivative financial instruments designated as cash flow hedging instruments are recorded in the caption Hedging adjustments as regards their effective component and in financial income or expense for the period as regards their non effective component. The amounts recorded under Hedging adjustments are transferred to the statement of profit and loss in the period in which the effect on the item covered is also reflected in the statement of profit and loss. Variations in the value of derivative financial instruments hedging net investments in a foreign entity, are recorded in the caption Exchange translation adjustments as regards their effective component. The non effective component of such variations is recognised immediately as financial income or expense for the period. If the hedging instrument is not a derivative, the corresponding variations resulting from changes in the exchange rate are recorded in the caption Exchange translation adjustments. Hedge accounting is discontinued when the hedging instrument matures, is sold or exercised, or when the hedging relationship ceases to comply with the requirements of IAS 39. Trading instruments Variations in the fair value of derivative financial instruments which are contracted for financial hedging purposes in accordance with the Group’s risk management policies, but do not comply with all the requirements of IAS 39 to qualify for hedge accounting, are recorded in the statement of profit and loss for the period in which they occur.


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h) Treasury shares Treasury shares are recorded at cost, as a decrease in shareholders’ equity. Gains and losses on the sale of treasury shares are recorded in the caption Reserves. i) Fair value of financial instruments

The fair value of financial assets and financial liabilities is determined as follows: - The fair value of financial assets and financial liabilities with standard terms and conditions

and traded on active liquid markets is determined with reference to quoted market prices; - The fair value of other financial assets and financial liabilities (excluding derivative

instruments) is determined in accordance with generally accepted pricing models based on discounted cash flows analysis using prices from observable current market transactions.

- The fair value of derivative financial instruments is calculated using market prices. Where

such prices are not available, fair value is determined based on discounted cash flow, which includes some assumptions that are supportable by observable market prices or rates.

2.17. Retirement benefits Retirement benefits are recorded in accordance with IAS 19 - Employee Benefits. Defined benefit plans Costs of these benefits are recognised as the services are rendered by the beneficiary employees. Therefore, at the end of each accounting period actuarial valuations are obtained from independent entities to determine the amount of the liability as of that date and the pension cost to be recognised in the period, in accordance with the projected unit credit method. The liability thus estimated is compared with the market value of the pension fund, so as to determine the amount of the difference to be recorded in the balance sheet. As established in the above mentioned standard, pension costs are recognised in the caption Payroll, based on the amounts determined on an actuarial basis, and include current service costs (increase in the liability), which corresponds to the additional benefits accrued to the employees during the period and interest costs, which result from updating the past service liability. These amounts are reduced by the estimated return on the assets relating to the plan. Actuarial gains and losses are recorded directly in Reserves. Past service costs are recognised immediately, as the related benefits have already been recognised or, alternatively, recognised on a straight-line basis over the estimated period in which they are obtained.


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Defined contribution plans Contributions made by the Group to defined contribution plans are recorded as costs when they are due. 2.18. Healthcare benefits Some Group companies provide supplementary healthcare benefits to their employees in addition to those provided by the Public Social Security, extensive to their families, early retired and retired personnel. The liability resulting from these benefits is recorded in a similar manner to the retirement pension liability, in the caption Payroll – healthcare benefits, except for the part relating to actuarial gains and losses, which is recorded in Reserves.

As in the case of retirement benefits, actuarial valuations made by an independent entity are obtained at the end of each accounting period, so as to determine the amount of the liability as of that date. 2.19. Share-based payments Share-based payments to employees, according to incentive share purchase plan and share option plan, are recorded in accordance with IFRS 2 - Share-based payment. In accordance with IFRS 2, equity settled payment transactions are recognised at their fair value on the date they are granted. Fair value as of the date the benefits are granted is recognised as cost on a straight-line basis over the vesting period as a result of services rendered. On the other hand, cash settled payment transactions based on shares are recognised as a liability at their fair value as of the balance sheet date.

2.20. Contingent assets and liabilities Contingent liabilities are not recognised in the consolidated financial statements but are disclosed in the notes to the financial statements, unless the possibility of an outflow of funds affecting future economic benefits is remote, in which case they are not subject to disclosure. Contingent assets are not recognised in the consolidated financial statements, but are disclosed in the notes to the financial statements when a future economic benefit is probable. 2.21. Revenue recognition and accruals basis Income resulting from sales is recognised in the consolidated statement of profit and loss when the risks and benefits of ownership of assets are transferred to the purchaser and the amount of income can be reasonably quantified. Sales are recognised at the fair amount received or


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receivable, net of taxes, discounts and other costs incurred to realise them, by the fair value of the amount received or receivable. Income from services rendered is recognised in the consolidated statement of profit and loss in the period in which they are rendered. Interest and financial income are recognised on an accruals basis in accordance with the effective interest rate. Costs and income are recognised in the period to which they relate independently of when they are paid or received. Costs and income, the amount of which is not known, are estimated. Costs and income attributable to the current period which will only be paid or received in future periods, as well as amounts paid and received in the current period that relate to future periods and will be attributed to each of the periods by the amount corresponding to them, are recorded in the captions Other current assets and Other current liabilities. 2.22. Income tax Tax on income for the period is calculated based on the taxable results of the companies included in the consolidation and takes into consideration deferred taxation. Current income tax is calculated based on the taxable results (which differ from the accounting results) of the companies included in the consolidation, in accordance with the tax rules applicable to the area in which the head office of each Group company is located. Deferred taxes refer to temporary differences between the amounts of assets and liabilities for accounting purposes and the corresponding amounts for tax purposes, as well as those resulting from tax benefits obtained. Deferred tax assets and liabilities are calculated and assessed periodically using the tax rates expected to be in force when the temporary differences reverse, and are not subject to discounting. Deferred tax assets are only recognised when there is reasonable expectation that there will be sufficient future taxable income to utilise them. Temporary differences underlying the deferred tax assets are reappraised annually in order to recognise or adjust the deferred tax assets based on the current expectation of their future recovery. 2.23. Earnings per share Earnings per share are calculated dividing the result attributable to the ordinary shareholders of the parent company, by the weighted average number of shares in circulation during the period.


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The diluted earnings per share are calculated dividing the result attributable to the ordinary shareholders of the parent company, by the weighted average number of shares in circulation during the period, adjusted by potential ordinary diluting shares. Potential ordinary diluting shares can result from options over shares and other financial instruments issued by the Group, convertible to shares of the Parent company. 2.24. Subsequent events Events that occur after the date of the balance sheet that provide additional information on conditions that existed as of the balance sheet date are reflected in the consolidated financial statements. Events that occur after the date of the balance sheet, that provide information on conditions that exist after the balance sheet date, if material, are disclosed in the notes to the consolidated financial statements.

2.25. CO2 emission licences – Emissions market Some of the Group’s production units in Portugal and Spain are covered by the European greenhouse effect gas emissions market. While the IASB does not issue accounting policies covering the granting and trading of emission licences, the Group adopts the following policy: - Emission licences granted at no cost, as well the corresponding emissions covered by that

licences, do not give rise to the recognition of any asset or liability; - Gains from the sale of emission rights are recognised as decreases in other operating

expenses; - When it is estimated that annual CO2 emissions will exceed the licences granted annually, a

liability, measured in accordance with the price at the end of the year, is recognised by corresponding charge to Other operating expenses;

- Licences acquired are recognised at cost, in a specific intangible assets account under the

Industrial property and other rights caption. 3. Changes in policies, estimates and errors The significant changes in estimates in the years ended 31 December 2006 and 2005 relate to changes in the actuarial assumptions used to determine the liability due to employee benefits, disclosed in Note 33. There were no changes in accounting policies or corrections of errors identified in these years.


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4. Companies included in the consolidation 4.1. Companies consolidated in accordance with the full consolidation method The parent company, CIMPOR - Cimentos de Portugal, SGPS, S.A., and the following subsidiaries, in which it has a majority participation (control), have been consolidated using the full consolidation method:

Effective Name Full name/headquarters participation

HOLDING AND SUB-HOLDING COMPANIES CIMPOR SGPS CIMPOR - CIMENTOS DE PORTUGAL, SGPS, S.A. -

Rua Alexandre Herculano, 35 1250 - 009 Lisbon CIMPOR PORTUGAL CIMPOR PORTUGAL, SGPS, S.A. 100.00

Rua Alexandre Herculano, 35 1250 - 009 Lisbon

CIMPOR INTERNACIONAL CIMPOR INTERNACIONAL, SGPS, S.A. 100.00


CIMPOR INVESTIMENTOS CIMPOR INVESTIMENTOS, SGPS, S.A. 100.00


CIMPOR INVERSIONES CIMPOR INVERSIONES, S.A. 100.00 Calle Brasil, 56 36204 Vigo

CEMENT AREA (Portugal) CIMPOR INDÚSTRIA CIMPOR – INDÚSTRIA DE CIMENTOS, S.A. 100.00


SCIAL ESTABELECIMENTOS SCIAL DO NORTE, S.A. 100.00 Av. Américo Duarte – S. Pedro Fins – Maia 4425 - 504 Maia

CECISA CECISA - COMÉRCIO INTERNACIONAL, S.A. 100.00 Rua Alexandre Herculano, 35

1250 - 009 Lisbon


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CTA CEMENT TRADING ACTIVITIES - COMÉRCIO 88.95 INTERNACIONAL, S.A. Rua Alexandre Herculano, 35 1250 – 009 Lisbon

MOSSINES MOSSINES – CIMENTOS DE SINES, S.A. 100.00

Rua Alexandre Herculano, 35 1250-009 Lisbon

CIMENTAÇOR CIMENTAÇOR - CIMENTOS DOS AÇORES, LDA. 75.00

Canada das Murtas, Pico da Pedra, Ribeira Grande

9500 - 618 Ponta Delgada

READY MIX CONCRETE AND AGGREGATES AREA (Portugal) CIMPOR BETÃO SGPS CIMPOR BETÃO - SOCIEDADE GESTORA DE 100.00

PARTICIPAÇÕES SOCIAIS, S.A. Rua Alexandre Herculano, 35 1250 - 009 Lisbon

CIMPOR BETÃO CIMPOR BETÃO - INDÚSTRIA DE BETÃO PRONTO, S.A. 100.00

Av. Almirante Gago Coutinho, Portela de Sintra 2710 - 418 Sintra

BETAÇOR BETAÇOR - FABRICO DE BETÃO E ARTEFACTOS DE 75.00

CIMENTO, S.A. Rua dos Pastos – Beljardim

9760 – 511 Praia da Victória AGREPOR AGREPOR AGREGADOS - EXTRACÇÃO DE 100.00

INERTES, S.A. Sangardão – Furadouro

3150 – 999 Condeixa-a-Nova INERGRANITOS INERGRANITOS, S.A. 100.00 Lugar e Freguesia de Canas de Senhorim - Nelas 3525 – 044 Canas de Senhorim


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JOMATEL JOMATEL - EMPRESA DE MATERIAIS DE 90.00 CONSTRUÇÃO, S.A. Tapada da Quinta de Cima – Est. de Albarraque – Linhó 2714 Sintra BETABEIRAS BETABEIRAS - BETÕES DA BEIRA, S.A. 88.95

Rua Alexandre Herculano, 35 1250 – 009 Lisbon BETÃO LIZ BETÃO LIZ, S.A. 66.44 Rua Qtª Paizinho – Edifício Bepor, Bloco 2–1º Esq. 2790 – 237 Carnaxide VERMOFEIRA VERMOFEIRA - EXTRACÇÃO E COMÉRCIO 100.00 AREIAS, LDA. Rua Qtª Paizinho – Edifício Bepor, Bloco 2–1º Esq. 2790 – 237 Carnaxide FORNECEDORA FORNECEDORA DE BRITAS DO CARREGADO, S.A. 100.00 Rua Vaz Monteiro, 192 – r/c Esq. 2580 - 505 Carregado M.C.D. M.C.D. - MATERIAIS CONSTRUÇÃO DRAGADOS E 66.44 BETÃO PRONTO, S.A. Rua Qtª Paizinho – Edifício Bepor, Bloco 2–1º Esq. 2790 – 237 Carnaxide BETRANS BETRANS - SOCIEDADE PRODUTORA E 100.00 DISTRIBUIDORA DE BETÃO TRANSMONTANO, S.A. Zona Industrial das Cantarias, Lt 189/190 5300 - 212 Bragança IBERA IBERA - INDÚSTRIA DE BETÃO, S.A. 50.00 Qtª da Madeira, Estrada Nac. 114, km 85 7002 - 505 Évora BEPRONOR BEPRONOR - SOCIEDADE DE BETÃO PRONTO DO 100.00 NORDESTE, S.A. R. Alexandre Herculano, 35 1250 - 009 Lisbon


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Effective

Name Full name/headquarters participation

PRECAST AREA (Portugal) PREDIANA PREDIANA - SOCIEDADE DE PRÉ-ESFORÇADOS, S.A. 100.00 Zona Industrial de Adua 7050 – 001 Montemor-o-Novo GEOFER GEOFER - PRODUÇÃO E COMERCIALIZAÇÃO DE BENS 100.00 E EQUIPAMENTOS, S.A. Rua Alexandre Herculano, 35 1250-009 Lisbon OTHER RELATED ACTIVITIES (Portugal) SACOPOR SACOPOR - SOCIEDADE DE EMBALAGENS E SACOS 100.00

DE PAPEL, S.A. Rua Alexandre Herculano, 35

1250 - 009 Lisbon CIMPOR TEC CIMPOR TEC – ENGENHARIA E SERVIÇOS TÉNICOS 100.00 DE APOIO AO GRUPO, S.A. Rua Alexandre Herculano, 35 1250 – 009 Lisbon CIARGA CIARGA - ARGAMASSAS SECAS, S.A. 100.00

Rua Alexandre Herculano, 35 1250 - 009 Lisbon TRANSVIÁRIA TRANSVIÁRIA - GESTÃO DE TRANSPORTES, S.A. 100.00



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Effective Name Full name/headquarters participation ALEMPEDRAS ALEMPEDRAS - SOCIEDADE DE BRITAS, LDA. 100.00

Casal da Luz – Bairro – Santa Maria 2510 Óbidos

CIMADJUVANTES CIMADJUVANTES - COMERCIALIZAÇÃO E PRODUÇÃO 100.00 DE ADJUVANTES PARA CIMENTO, LDA. Av. Severiano Falcão, 8 – Edifício Cimpor 2685 - 378 Prior Velho CELFA CELFA – SOCIEDADE INDUSTRIAL DE 100.00 TRANSFORMAÇÃO DE GESSOS, S.A. Zona Industrial de Soure, Lt. 26 and 27 3130 – 551 Soure SCORECO SCORECO - VALORIZAÇÃO DE RESÍDUOS, LDA. 100.00 Av. Severiano Falcão, 8 – Edifício Cimpor 2685 - 378 Prior Velho

KANDMAD KANDMAD – SOCIEDADE GESTORA DE 99.93 PARTICIPAÇÕES SOCIAIS, LDA. Av. Arriaga, 77, Edifício Marina Fórum, 1º, sala 103, Sé 9000 – 060 Funchal

INTERNATIONAL AREA SPAIN CORPORACIÓN NOROESTE CORPORACIÓN NOROESTE, S.A. 99.54

Brasil, 56 36 204 Vigo

C.N. HORMIGONES Y ÁRIDOS CORPORACIÓN NOROESTE DE HORMIGONES Y 99.54 ÁRIDOS, S.L. Brasil, 56 36 204 Vigo


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Effective


S.C.M.C. ANDALUCÍA SOCIEDAD DE CEMENTOS Y MATERIALES DE 99.54 CONSTRUCCIÓN DE ANDALUCÍA, S.A. Av. de la Agrupacíon de Córdoba, 15 14 014 Córdoba CEMENTOS ANDALUCÍA CEMENTOS DE ANDALUCÍA, S.L. 99.54 Av. de la Agrupación de Córdoba, 15 14 014 Córdoba OCCIDENTAL HORMIGONES OCCIDENTAL DE HORMIGONES, S.L. 99.54 Calle la Viela Polígono Industrial el Nevero 06006 Badajoz CEMENTOS EL MONTE CEMENTOS EL MONTE, S.A. 99.54 21810 – Palos de la Frontera (Huelva) Puerto Exterior de Huelva Muelle Ingeniero Juan Gonzalo s/n CEMENTOS NOROESTE CEMENTOS NOROESTE, S.L. 99.54

Brasil, 56 36 204 Vigo SERMACONSA SERVICIOS Y MATERIALES PARA LA 99.54

CONSTRUCCIÓN, S.A. Brasil, 56

36 204 Vigo MORTEROS GALICIA MORTEROS DE GALICIA, S.L. 99.54 Brasil, 56 36 204 Vigo HORMIGONES HÉRCULES HORMIGONES HÉRCULES, S.L. 99.54 Polígono Industrial – El Prado – 40 – Mérida 06800 – Badajoz


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Effective


S.I.F. GALLEGA SOCIEDAD INDUSTRIAL Y FINANCEIRA GALLEGA, S.L. 99.54 Brasil, 56 36 204 Vigo TABANQUE, S.L. TABANQUE, S.L. 99.54 Brasil, 56 36 204 Vigo HORMIGONES MIÑO HORMIGONES MIÑO, S.L. 99.52 Brasil, 56 36 204 Vigo CEMENTOS COSMOS CEMENTOS COSMOS, S.A. 99.29

Brasil, 56 36 204 Vigo PREBETONG GALICIA PREBETONG GALICIA, S.A. 98.41

Brasil, 56 36 204 Vigo CANTERAS PREBETONG CANTERAS PREBETONG, S.L. 98.41

Brasil, 56 36 204 Vigo BOMTRAHOR BOMBEO Y TRANSPORTE DE HORMIGON, S.A. 92.80 Brasil, 56 36 204 Vigo PREBETONG LUGO PREBETONG LUGO, S.A. 81.57

Av. Benigno Rivera s/n Polígono Industrial del Ceao 27 003 Lugo PREBETONG LUGO PREBETONG LUGO HORMIGONES, S.A. 81.57 HORMIGONES Av. Benigno Rivera s/n Polígono Industrial del Ceao 27 003 Lugo


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F.Y.H. SANI FIRMES Y HORMIGONES SANI, S.L. 79.63 CARRETERA NACIONAL – 630 Gijón – Sevilha, Km 308 06200 ALMENDRALEJO (BADAJOZ) MATERIALES ATLÁNTICO MATERIALES DEL ATLÁNTICO, S.A. 69.02 Polígono Industrial Lagoas – Carretera Cedeira Km. 1,5 15 570 Narón (La Coruña) HORMINGONES LA BARCA HORMIGONES Y ÁRIDOS LA BARCA, S.A. 49.77 Calle La Barca, nº 14 36 002 Pontevedra ARICOSA ÁRIDOS DE LA CORUÑA, S.A. 49.21

Candame 15 142 Arteixo La Coruña CANPESA CANTEIRA DO PENEDO, S.A. 40.77

Reina, 1 – 3º 27 001 Lugo MOROCCO ASMENT DE TEMARA ASMENT DE TEMARA, S.A. 62.62

Ain Attig – Route de Casablanca Témara BETOCIM BETOCIM, S.A. 100.00

Ain Attig – Route de Casablanca Témara

ASMENT DU CENTRE ASMENT DU CENTRE, S.A. 100.00 Ain Attig – Route de Casablanca Témara GRABEMA GRABEMA, S.A. 100.00 Ain Attig – Route de Casablanca Témara


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TUNISIA C.J.O. SOCIÉTÉ DES CIMENTS DE JBEL OUST 100.00

3, Rue de Touraine, Cité Jardins 1002 Tunis – Belvédère, Tunisie

BRAZIL C.C.B. CIMPOR - CIMENTOS DO BRASIL, LTDA. 100.00

Avª Maria Coelho Aguiar, 215 – Bloco E – 8º J. São Luís – São Paulo/SP – Brazil

C.B. CIMPOR BRASIL, PARTICIPAÇÕES, LTDA. 100.00

Av. Mª Coelho Aguiar, 215 Bl E – 8º J. São Luís – São Paulo/SP – Brazil MOZAMBIQUE CIM. MOÇAMBIQUE CIMENTOS DE MOÇAMBIQUE, S.A.R.L. 71.69

Av. Fernão de Magalhães, 34 – 2º, nº1 Maputo – Caixa Postal 270

CIMBETÃO CIMPOR BETÃO MOÇAMBIQUE, S.A.R.L. 71.69

Estrada de Lingamo Matola PREMAP PREFABRICADOS DE MAPUTO, S.A.R.L. 62.09

Avª 24 de Julho, 2096, 4º Andar Maputo


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EGYPT

AMCC AMREYAH CEMENT COMPANY, S.A.E. 96.39 El Gharbaneyat – Borg El Arab City P. O. Box 21511 Alexandria CEC CIMPOR EGYPT FOR CEMENT COMPANY, S.A.E. 100.00 El Gharbaneyat – Borg El Arab City P.O. Box 21511 Alexandria AMREYAH CIMPOR AMREYAH CIMPOR CEMENT COMPANY, S.A.E. 97.29 El Gharbaneyat – Borg El Arab City P.O. Box 21511 Alexandria CSC CEMENT SERVICES COMPANY, S.A.E. 98.38

El Gharbaneyat – Borg El Arab City

P.O. Box 21511 Alexandria

CIMPSAC CIMPOR SACS MANUFACTURE COMPANY, S.A.E. 99.59

El Gharbaneyat – Borg El Arab City

P.O. Box 21511 Alexandria

AMREYAH DEKHEILA AMREYAH DEKHEILA TERMINAL COMPANY – S.A.E. 97.35

Trade City Center – Down Town

Desert Road

International Garden

Alexandria

SOUTH AFRICA NPC NPC – CIMPOR (PTY) LIMITED 100.00 199 Coedmore Road Bellair 4094 Durban South Africa


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NPCC NATAL PORTLAND CEMENT COMPANY (PTY) LTD. 100.00 199 Coedmore Road Bellair 4094 Durban South Africa DC DURBAN CEMENT LTD. 100.00 199 Coedmore Road Bellair 4094 Durban South Africa SRT SIMUMA REHABILITATION TRUST 100.00 1 Wedgelink Road Bryanstone South Africa NPC - CELL “A7” NATAL PORTLAND CEMENT (PTY) – CELL A7 100.00 5 th Floor Sa Eagle House 70 Fox Street Johannesburg South Africa CONCRETE CONCRETE MIX (PTY) LTD. 100.00 199 Coedmore Road Bellair 4094 Durban South Africa S C STONE SOUTH COAST STONE CRUSHERS (PTY) LTD. 100.00 199 Coedmore Road Bellair 4094 Durban South Africa S C MINING SOUTH COAST MINING (PTY) LTD. 100.00 199 Coedmore Road Bellair 4094 Durban South Africa EEDESWOLD EEDESWOLD HIGHLANDS (PTY) LTD. 100.00 199 Coedmore Road Bellair 4094 Durban South Africa


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STERKSPRUIT QUARRIES STERKSPRUIT QUARRIES (PTY) LTD. 100.00 199 Coedmore Road Bellair 4094 Durban South Africa STERKSPRUIT CONCRETE STERKSPRUIT CONCRETE (PTY) LTD. 100.00 199 Coedmore Road Bellair 4094 Durban South Africa STERKSPRUIT INVESTMENTS STERKSPRUIT INVESTMENTS (PTY) LTD. 100.00 199 Coedmore Road Bellair 4094 Durban South Africa CAPE VERDE

NORDICAVE TRADING NORDICAVE TRADING INDUSTRIAL, LIMITADA. 100.00 Estrada de Tira Chapéu, Praia, Santiago 14/A Cape Verde CIMENTOS CABO VERDE CIMENTOS CABO VERDE, S.A. 98.65 Estrada de Tira Chapéu Praia, Santiago 14/A Cape Verde CABO VERDE BETÕES E INERTES

CABO VERDE BETÕES E INERTES, S.A. 53.27

Estrada de Tira Chapéu Praia, Santiago 14/A Cabo Verde ITP INDÚSTRIA DE TRANSFORMAÇÃO DE PEDRAS, LDA. 98.65 Estrada de Tira Chapéu Praia, Santiago 14/A Cabo Verde


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CHINA

CIMPOR CHENGTONG CEMENT CORPORATION

CIMPOR CHENGTONG CEMENT CORPORATION LTD. 100.00

Suites 2904-2907 29/F One International Finance Ctr 1 Harbour View St Central Hong Kong

UNRELATED ACTIVITIES

CIMPOR SERVIÇOS CIMPOR – SERVIÇOS DE APOIO À GESTÃO DE 100.00 EMPRESAS, S.A. Rua Alexandre Herculano, 35 1250 - 009 Lisbon CIMPOR SAGESA CIMPOR SERVICIOS DE APOIO À LA GESTION DE 100.00 EMPRESAS, S.A. Brasil, 56 36 204 Vigo CIMPOR FINANCE CIMPOR FINANCE LIMITED 100.00 2 Harbourmaster Place Custom House Dock Dublin 1 CIMPOR B.V. CIMPOR FINANCIAL OPERATIONS, B.V. 100.00 Teleportboulevard 140 1043 EJ Amesterdam SCANANG SGPS SCANANG SGPS, UNIPESSOAL, LDA. 100.00 Av. Arriaga, 77, Edifício Marina Fórum, 1º, Sala 103 9000-060 Funchal


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CIMPOR IMOBILIÁRIA CIMPOR IMOBILIÁRIA, S.A. 100.00

Rua Alexandre Herculano, 35 1250 - 009 Lisbon MECAN MECAN - MANUFACTURA DE ELEMENTOS DE CASAS

DE CONSTRUÇÃO NORMALIZADA, LDA. 100.00

Rua Alexandre Herculano, 35 1250 – 009 Lisbon

RETONOBA RETONOBA, S.A. 100.00 Brasil, 56 36 204 Vigo SCANANG TRADING SCANANG TRADING ACTIVITIES-ESPAÑA, S.A. 100.00 Brasil, 56 36204 Vigo CIMPSHIP CIMPSHIP - TRANSPORTES MARÍTIMOS, S.A. 60.00 Rua Dr. Brito da Câmara, 20 – 1º Freguesia da Sé 9000-039 Funchal CIMPOR REINSURANCE CIMPOR REINSURANCE, S.A. 100.00

65, Avenue de la Gare L 1611 – Luxemburg


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4.2. Associated companies Investments in associated companies, recorded in accordance with the equity method (Note 19) are as follows:


CEMENT AREA (Portugal) CIMENTOS MADEIRA CIMENTOS MADEIRA, LDA. 42.86

Estrada Monumental, 433 – São Martinho 9000 - 236 Funchal

C + P.A. C + P.A. – CIMENTO E PRODUTOS ASSOCIADOS, S.A. 48.00 Av. Eng.º Duarte Pacheco, Torre Um, 15º Piso 1070-101 Lisbon

CECIME CECIME – CIMENTOS, S.A. 20.00 R. Cintura do Porto de Lisbon, Armazém, 21 Topo Norte 1900 – 649 Lisbon

OTHER RELATED ACTIVITIES (Portugal) SETEFRETE SETEFRETE, SGPS, S.A. 25.00 Av. Luísa Todi, 1 – 1º 2900 – 459 Setúbal


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INTERNATIONAL AREA - SPAIN CEMENTOS ANTEQUERA CEMENTOS ANTEQUERA, S.A. 21.25 Carretera del Polvorín km 2, margen izquierdo 29 540 Bobadilla, Estacíon. Málaga ARENOR ARENOR, S.L. 28.44 Calle Montecarmelo, 1 – 5º C Sevilla AUXILIAR DE ÁRIDOS AUXILIAR DE ÁRIDOS, S.L. 28.32 Calle Montecarmelo, 1 – 5º C Sevilla UNRELATED ACTIVITIES KEEFERS KEEFERS FINANCE, S.A. 23.13 Pasea Estate, Road Town-P.O.Box 3149 – Tórtola British Virgin Islands Cimentos Madeira has investments in the following subsidiary companies, recorded in accordance with the equity method, that operate in the ready mix concrete and aggregates area:


BETO MADEIRA BETO MADEIRA - BETÕES E BRITAS DA MADEIRA, S.A. 42.86

Fundoa de Cima – S. Roque 9000 - 801 Funchal

BRIMADE BRIMADE - SOCIEDADE DE BRITAS DA MADEIRA, S.A. 42.86 Fundoa de Cima – S. Roque

9000 - 801 Funchal MADEBRITAS MADEBRITAS - SOCIEDADE DE BRITAS DA 21.86

MADEIRA, LDA. Fundoa de Cima – S. Roque 9000 - 801 Funchal


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PROMADEIRA PROMADEIRA - SOCIEDADE TÉCNICA DE CONSTRUÇÃO

DA ILHA DA MADEIRA, LDA. 42.86

Sítio da Cancela, São Gonçalo 9050 - 299 Funchal

PEDRA REGIONAL PEDRA REGIONAL – INDÚSTRIA TRANSFORMADORA 21.86 DE PEDRAS ORNAMENTAIS, LDA. Estrada Monumental, 433 São Martinho 9000 – 236 Funchal J.M.J. HENRIQUES J.M.J. HENRIQUES, LDA. 21.43 Caminho do Ribeiro Real, 10 Câmara dos Lobos 9300 – 006 Câmara dos Lobos SANIMAR – MADEIRA SANIMAR - MADEIRA, SOCIEDADE DE MATERIAIS DE 42.86

CONSTRUÇÃO, LDA. Sítio da Cancela, São Gonçalo 9050 - 299 Funchal

4.3. Companies consolidated in accordance with the proportional method The following companies were consolidated in accordance with the proportional method as they are jointly controlled with the other shareholder: INTERNACIONAL AREA – BRAZIL ECO-PROCESSA ECO-PROCESSA – TRATAMENTO DE RESÍDUOS LTDA. 50.00 Av. Rio Branco, 110 – 39º - parte Cidade do Rio de Janeiro Estado do Rio de Janeiro


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5. Changes in the companies included in the consolidation

The more significant changes in the year ended 31 December 2006, in the companies included in the consolidation were as follows: Purchases: - In Spain, the purchase of the total share capital of Áridos del Cantábrido, S.A., which was

merged in Canteras Prebetong, S.L. in the year ended 31 December 2006, and 80% of the share capital of F.y H. Sani, S.L.;

- In Brazil, the purchase of concrete pre-mix businesses; - In South Africa, the purchase of concrete and aggregate companies, such as Sterkspruit

Concrete (PTY) Ltd., Sterkspruit Quarries (PTY) Ltd. and Sterkspruit Investments (PTY) Ltd.;

- In Cape Verde, the purchase of all of the share capital of ITP – Indústria de Transformação de

Pedras, Lda.. Sales: - In Portugal, the sale of the following companies: Vilaje – Vigas e Lages Pré-esforçadas, Lda.,

Ecoresíduos – Centro de Tratamento e Valorização de Resíduos, Lda. and Veirocir – Comércio de Cimentos, S.A.;

- In Angola, the sale of the participation in Nova Cimangola, S.A., which was classified, since

the first half 2006, as non-current asset held for sale.


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The impact of these changes in the consolidated balance sheet for the year ended 31 December 2006 was as follows:

Captions Spain BrazilSouth Africa

Cape Verde

Subtotal of

the acquisitions Portugal Angola

Subtotal of the sales Total

Intangible assets (Note 17) 40 - - - 40 - - - 40 Tangible assets (Note 18) 9,567 3,430 4,097 395 17,489 (2,345) - (2,345) 15,144 Investments in associates (Note 19) - - - - - (325) (60,948) (61,273) (61,273)Other investments (Note 20) 11 - - - 11 - - - 11 Deferred tax assets (Note 24) - - - 74 74 (327) - (327) (253)Inventories 964 - 127 200 1,291 (160) - (160) 1,131 Accounts receivable-trade - - - - - (213) - (213) (213)Accounts receivable - other 6,705 - 3 112 6,820 (242) - (242) 6,578 Taxes recoverable 86 - - - 86 (289) - (289) (203)Other current assets 22 - - - 22 (109) - (109) (87)Current liabilities-trade - - - - - 229 - 229 229 Provisions for risks and charges (Note 35) (218) - - - (218) 7 - 7 (211)Deferred tax liabilities (Note 24) - - - - - (1) - (1) (1)Accounts payable - other (13,060) - (19) (1,464) (14,543) 1,835 - 1,835 (12,708)Other current liabilities - - - - - 43 - 43 43 Net amount 4,117 3,430 4,209 (683) 11,072 (1,895) (60,948) (62,844) (51,772)Goodwill (Note 16) 9,338 1,441 2,681 1,021 14,481 - - - 14,481 Adjustment in equity investments (Note 30) - - - - - - 3,032 3,032 3,032 Exchange translation adjustments - - - - - - (4,732) (4,732) (4,732)Capital gain/loss - - - - - (4,630) 4,215 (414) (414)Net amount paid/(received) 13,455 4,871 6,889 338 25,553 (6,525) (58,433) (64,958) (39,405)Cash and cash equivalents 1,333 - - 7 1,340 (968) - (968) 371 Net assets acquired/(sold) 14,788 4,871 6,889 344 26,892 (7,493) (58,433) (65,926) (39,034)

The impact in the consolidated statement of profit and loss for the year ended 31 December 2006, as result of the above referred acquisitions, was as follows:

South CapeCaptions Spain Brazil Africa Verde Total

Operating income 1,907 2,321 5,194 309 9,731 Operating expenses 1,078 2,727 4,333 289 8,427

Net operating income 829 (407) 861 19 1,303 Net financial income 48 - (292) (7) (250)

Profit before income tax 877 (407) 570 13 1,053 Income tax (307) - (166) (4) (477)

Net profit for the year 570 (407) 404 9 576


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6. Exchange rates used The exchange rates used to translate, to euros, the foreign currency assets and liabilities at 31 December 2006 and 2005, as well the results for the years then ended were as follows:

Currency Segment 2006 2005 Var.% 2006 2005 Var.%

USD Others 1.317 1.1797 11.6 1.25622 1.2454 0.9 MAD Morocco 11.1354 10.9097 2.1 11.18273 11.1373 0.4 BRL Brazil 2.8118 2.7440 2.5 2.73826 3.0400 (9.9)TND Tunisia 1.7078 1.6082 6.2 1.68586 1.6241 3.8 MZM Others 34,470.0 28,024.4 23.0 32,797.0 28,502.2 15.1 CVE Others 110.265 110.265 - 110.265 110.265 -EGP Egypt 7.5217 6.7700 11.1 7.30872 7.2658 0.6 ZAR South Africa 9.2124 7.4642 23.4 8.53141 7.9294 7.6 HKD Others 10.2409 - s.s. 10.14265 * - s.s.

Closing exchange rate Average exchange rate

* Average exchange rate between 1 November and 31 December 2006. 7. Segment reporting The main profit and loss information, by geographical segment, for years ended 31 December 2006 and 2005, is as follows: 2006

Portugal Spain Brazil Egypt Tunisia MoroccoSouth Africa Others Unallocated Eliminations Consolidated

Sales and services rendered:External sales 462,852 427,227 267,880 114,709 59,615 70,227 119,511 72,530 44,342 - 1,638,892 Inter segment sales 68,735 3,283 2,468 13,109 - 1,813 - - 85,674 (175,082) - Total 531,586 430,510 270,348 127,818 59,615 72,040 119,511 72,530 130,015 (175,082) 1,638,892

Operating results 122,245 109,511 35,092 50,625 9,650 25,889 39,561 9,018 6,460 - 408,050

Financial expenses (167,628)Financial income 94,147 Share of results of associates 19,146 Other investment income 12,035

Profit before income tax 365,750 Income tax (60,140)

Net profit for the year 305,610

All inter segment transactions were made at market value. The above net income includes the full amount of the segments, without considering the following amounts attributable to minority shareholders:

Portugal Spain Brazil Egypt Tunisia MoroccoSouth Africa Others Unallocated Consolidated

Profit for the year attributable to minority interests 2,197 2,019 - 1,326 - 6,910 - 1,425 (182) 13,695


133

Other information:

Portugal Spain Brazil Egypt Tunisia MoroccoSouth Africa Others Unallocated Consolidated

Fixed capital expenditure 28,464 32,368 30,431 20,469 3,704 4,679 43,878 7,880 75 171,949Depreciation and amortisation 52,151 32,033 25,506 11,730 7,841 7,664 7,742 1,729 2,244 148,641Provisions and impairment losses (456) 2,146 - 987 20 (28) 619 172 2,892 6,352

In addition, assets and liabilities, by reportable segment, reconciled to the total consolidated amounts at 31 December 2006, are as follows:

Portugal Spain Brazil Egypt Tunisia MoroccoSouth Africa Others Unallocated Eliminations Consolidated

AssetsSegment assets 837,020 659,662 1,068,510 295,130 158,088 105,607 229,700 125,563 721,822 (500,247) 3,700,856

Investments in associates 156,955

Total consolidated assets 3,857,811

LiabilitesSegment liabilities 304,150 344,153 236,757 56,885 15,332 30,244 46,337 27,393 1,643,073 (500,247) 2,204,076

Total consolidated liabilities 2,204,076

Following is a break-down of the information for the year ended 31 December 2006, by business segment:

Sales and services rendered Net assets

Fixed capital expenditure

Cement 1,154,086 2,990,083 130,340Ready-mix and pre-cast concrete 411,472 407,158 32,588Others 73,334 460,570 9,021

1,638,892 3,857,811 171,949

2005 South

Portugal Spain Brazil Egypt Tunisia Morroco Africa Others Unallocated Eliminations ConsolidatedSales and services rendered:External sales 515,487 370,887 227,109 93,388 53,432 58,817 113,119 63,311 39,301 - 1,534,851Inter segment sales 61,059 2,197 - 10,498 - 1,731 2,674 - 88,420 (166,579) -

Total 576,546 373,084 227,109 103,886 53,432 60,548 115,793 63,311 127,721 (166,579) 1,534,851

Operating results 134,096 70,031 40,732 37,303 7,107 19,184 34,600 7,100 5,291 - 355,444

Financial expenses (152,972)Financial income 112,749Share of results of associates 35,211Other investment income 1,756

Profit before income tax 352,188Income tax (75,695)

Net profit for the year 276,493


134

All inter segment transactions were made at market values. The above net income includes the full amount of the segments, without considering the following amounts attributable to minority shareholders: South

Portugal Spain Brazil Egypt Tunisia Morroco Africa Others Unallocated Consolidated

Profit for the year attributable to minority interests 2,221 258 - 807 - 5,117 - 1,354 577 10,334

Other information:

SouthPortugal Spain Brazil Egypt Tunisia Morroco Africa Others Unallocated Consolidated

Fixed capital expenditure 39,656 19,133 25,751 3,984 4,564 12,888 35,706 10,896 9,512 162,089Depreciation and amortisation 48,547 30,740 21,674 11,666 7,506 7,041 7,226 1,185 2,016 137,602Provisions and impairment losses 378 2,117 507 (507) - - 68 (18) 220 2,766 In addition, assets and liabilities, by reportable segment, reconciled to the total consolidated amounts at 31 December 2005, are as follows:

South

Portugal Spain Brazil Egypt Tunisia Morroco Africa Others Unallocated Eliminations ConsolidatedAssetsSegment assets 839,752 647,178 1,041,839 289,583 158,444 88,344 249,174 59,368 919,303 (692,556) 3,600,430

Investments in associates 204,955

Total consolidated assets 3,805,384

LiabilitesSegment liabilities 318,206 403,021 430,079 71,557 16,640 29,759 52,875 23,725 1,567,494 (692,556) 2,220,799

Total consolidated liabilities 2,220,799

Following is a break-down of the information for the year ended 31 December 2005, by business segment:

Sales and services rendered Net assets

Fixed capital expenditure

Cement 1,087,417 3,041,079 123,569Ready-mix and pre-cast concrete 392,782 334,259 13,710Others 54,652 430,047 24,809

1,534,851 3,805,385 162,089


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8. Other operating income Other operating income for the years ended 31 December 2006 and 2005 is made up as follows:

2006 2005Supplementary income 13,174 14,205Gain on the sale of assets (a) 10,641 2,307Reversal of receivables adjustments 5,472 1,615Own work for the company 1,933 432Investment subsidies 1,216 952Other operating income (b) 6,159 4,858

38,595 24,369

(a) These gains correspond, essentially, to gains on the sale of participations in the Portugal business area, totalling 4,630 thousands of euros, and to gains on the sale of tangible fixed assets, totalling 6,011 thousands of euros. (b) Other operating income includes indemnities for damages, fiscal benefits and reversal of inventory adjustments. 9. Cost of goods sold and material used in production The cost of goods sold and material used in production for the years ended 31 December 2006 and 2006 is made up as follows:

2006 2005

Goods sold 68,704 79,553Material used in production 324,159 286,901Gain/(loss) on inventories (19) 304

392,845 366,757


136

10. Payroll The average number of employees of the companies included in the consolidation in the years ended 31 December 2006 and 2005, by business and geographical segment, was as follows:

2006 2005

Cement operations 3,620 3,695Portugal 701 728Spain 520 537Brazil 719 763Egypt 482 469Tunisia 236 241Morocco 187 194South Africa 321 321Others 455 444

Ready-mix concrete and aggregates 1,585 1,421Portugal 604 610Spain 420 397Brazil 381 279Morocco 21 20South Africa 139 94Others 20 22

Other activities 251 269Common functions 404 406

5,861 5,790

Payroll expenses for the years ended 31 December 2006 and 2005 are made up as follows:

2006 2005

Remuneration 124,586 120,113Charges on remuneration 27,396 25,909Social action and other 19,978 15,181Indemnities 3,483 4,317Incentive plan (Note 34) 1,310 1,242Healthcare benefits (Note 33) (3,084) 1,065Insurance 691 821Retirement benefits (Note 33) (1,121) 327

173,239 168,975

The caption “Social action and other” includes occupational health, healthcare assistance, professional training and meal allowance costs.


137

11. Other operating expenses Other operations expenses for the years ended 31 December 2006 and 2005 are made up as follows:

2006 2005

Receivables adjustments 6,609 9,031Taxes 5,360 5,009Subscriptions 1,937 2,031Inventory adjustments 1,508 701Uncollectible debts 987 145Loss on the sale of assets (a) 879 1,572Donations 351 1,141Other operating expenses 1,804 1,066CO2 emission licences (b) (331) 887

19,103 21,583

(a) The above loss was incurred, essentially, on the sale of tangible fixed assets. (b) This amount corresponds to changes on the liability related to the level of CO2 emission in excess to the licences granted at no cost, under the European greenhouse gas emissions market (Note 40).


138

12. Net financial expenses Net financial expenses for the years ended 31 December 2006 and 2005 are made up as follows:

2006 2005Financial expenses:Interest expense: Derivative financial instruments 12,738 10,040 Others 75,687 71,043Foreign exchange loss: Derivative financial instruments 40,277 47,912 Others 13,120 11,163Financial discount allowed 3,317 3,132Other financial expenses 22,488 9,683

167,628 152,972

Financial income:Interest income: Derivative financial instruments 13,385 13,284 Others 33,120 25,283Foreign exchange gain: Derivative financial instruments 40,277 45,859 Others 3,758 17,627Cash discount received 696 711Gain on the sale of other financial assets 305 183Other financial income 2,606 9,803

94,147 112,749

Share of results of associates:Loss in associated companies (Note 35) (a) (242) (161)Gain in associated companies (Note 19) (b) 19,388 35,372

19,146 35,211

Investment income:Dividends 241 1,756Gains/(losses) on the sale of investments (c) 11,794 -

12,035 1,756

(a) Other financial expenses include adjustments to credits granted to associated companies and to other financial investments in the amount of, approximately, 11,000 thousand euros. (b) On the year ended 31 December 2005, the gain in associated companies includes the effect of the equity method on investments in associated companies in the amount of 14,484 thousand euros (Note 19), the effect of applying the equity method to the investment in Semapa up to the date of its sale, in the amount of 9,051 thousand euros, and the gain on the sale of Semapa, in the amount of 11,676 thousand euros.


139

(c) Gains and losses in the sale of investments includes, essentially, the gain on the sale of the participation in Cementos Lemona, classified as available for sale financial asset, in the amount of 15,351 thousand euros, and the loss on the sale of the participation in Nova Cimangola in the amount of 4,215 thousand euros, which was classified as non-current asset held for sale with book value of 60,948 thousand euros. 13. Income tax Income tax expense for the years ended 31 December 2006 and 2005 is made up as follows:

2006 2005

Current tax 49,243 43,931 Deferred tax (Note 24) 11,940 33,819 Tax contingencies (Note 35) (1,024) 749 Corrections related to prior years (19) (2,804)Income tax for the year 60,140 75,695

The Company and the majority of its subsidiaries in Portugal are subject to Corporate Income Tax, currently at the rate of 25%, plus a Municipal surcharge up to a maximum of 10%, totalling 27.5%.

Tax on income relating to the other geographic segments is calculated at respective rates in force.

Temporary differences between the book value of assets and liabilities and their corresponding value for tax purposes are recognised in accordance with IAS 12 – Income taxes.


140

The income tax charge for the years ended 31 December 2006 and 2005 in relation to profit before income tax is as follows:

Tax base Income tax Tax base Income tax

Profit before income tax 365,750 352,188

Permanent differences: Equity method (19,146) (35,211) Non taxable results (28,542) (35,133) Other deductions (a) (54,477) (28,617)

263,586 253,227

Normal charge (27.5%) 72,486 69,638

Tax benefits (7,887) (2,785)Rate differences and others (3,416) 10,897 Tax contingencies (1,024) 749 Prior year adjustments (19) (2,804)Charge for the year 60,140 75,695

20052006

(a) Other deductions include amortizations of goodwill accepted for tax purposes, non deductible provisions and impairment losses. In addition to the income tax charge for the year, in the years ended 31 December 2006 and 2005, deferred taxes of 2,709 thousand euros and (6,398) thousand euros, respectively, were recorded directly in reserves (Note 24). 14. Dividends In the year ended 31 December 2006 a dividend of 19 cents per share (18 cents per share in 2005), totalling 127,191 thousand euros (120,299 thousand euros in 2005), was paid as decided by the Shareholders’ Annual General Meeting held on 4 May 2006.


141

15. Earnings per Share Basic and diluted earnings per share for the years ended 31 December 2006 and 2005 were computed as follows:

2006 2005Basic earnings per share

Net income considered in the computation of basic earnings per share 291,915 266,159

Weighted average number of ordinary shares used to calculate the basic earnings per share (thousands) 668,985 667,908

Basic earnings per share 0.44 0.40

Diluted earnings per share

Net income considered in the computation of basic earnings per share 291,915 266,159

Weighted average number of ordinary shares used to calculate the basic earnings per share (thousands) 668,985 667,908

Effect of the options granted under the Share Option Plan (thousands) (Note 34) 1,583 1,586

Weighted average number of ordinary shares used to calculate the diluted earnings per share (thousands) 670,568 669,493

Diluted earnings per share 0.44 0.40


142

16. Goodwill The changes in goodwill and related impairment losses in the years ended 31 December 2006 and 2005, were as follows:

South Cape Portugal Spain Brazil Egypt Tunisia Morocco Africa Verde Others Total

Gross assets:Balances at 1 January 2005 23,087 63,360 458,102 69,699 71,546 27,254 132,025 - - 845 073Changes in the consolidation perimeter ( 784) 330 1,032 - - - - 7,721 - 8 299Exchange translation adjustments - - 88,944 15,421 - - 3,989 - 37 108 391Additions 22 1,399 - - - - - - 1,495 2 916

Balances at 1 January 2006 22 325 65 089 548 077 85 121 71 546 27 254 136 014 7 721 1 532 964 679Changes in the consolidation perimeter (Note 5) - 9,338 1,441 - - - 2,681 1,021 - 14,481 Exchange translation adjustments - - (8,906) (8,507) - - (26,256) - (163) (43,832)Additions - - - - - - - - 40 40

Balances at 31 December 2006 22,325 74,427 540,613 76,614 71,546 27,254 112,438 8,742 1,409 935,368

Accumulated impairment losses:Balances at 1 January 2005 - - - - - 24,031 - - - 24,031

Balances at 1 January 2006 (Nota 35) - - - - - 24,031 - - - 24,031 Increases (Nota 35) 601 765 - - - - - - - 1,366

Balances at 31 December 2006 601 765 - - - 24,031 - - - 25,397

Carrying amount:

As at 31 December 2005 22,325 65,089 548,077 85,121 71,546 3,223 136,014 7,721 1,532 940,648

As at 31 December 2006 21,724 73,662 540,613 76,614 71,546 3,223 112,438 8,742 1,409 909,971

Goodwill is subject to impairment tests annually and whenever there are indications of possible impairment. The impairment tests are made based on the discounted cash flow of each of the affected business segments, based on the most recent financial projections approved by the respective Boards of Directors (Note 35).


143

17. Intangible assets The changes in intangible assets and corresponding accumulated amortisation and impairment losses in the years ended 31 December 2006 and 2005 are as follows:

Industrial Intangible property and assets other rights in progress Total

Gross assets:Balances at 1 January 2005 11,631 7,040 18,671 Changes in the consolidation perimeter 18 - 18 Exchange translation adjustments 1,157 - 1,157 Additions 6,312 424 6,736 Write-offs (543) - (543)Transfers (1,744) (7,464) (9,207)

Balances at 1 January 2006 16,832 - 16,832 Changes in the consolidation perimeter (Note 5) 52 - 52 Exchange translation adjustments (306) (8) (314)Additions 57 658 715 Sales (390) - (390)Write-offs (642) - (642)Transfers 160 - 160

Balance at 31 December 2006 15,765 650 16,415

Accumulated amortisation andimpairment losses:

Balances at 1 January 2005 4,449 - 4,449 Changes in the consolidation perimeter 9 - 9 Exchange translation adjustments 431 - 431 Increases 1,357 - 1,357 Decreases - - -Write-offs (543) - (543)Transfers (1,040) - (1,040)

Balances at 1 January 2006 4,663 - 4,663 Changes in the consolidation perimeter (Note 5) 12 - 12 Exchange translation adjustments (136) - (136)Increases 1,605 - 1,605 Decreases (390) - (390)Write-offs (50) - (50)Transfers (10) - (10)

Balance at 31 December 2006 5,695 - 5,695

Carrying amount:

As at 31 December 2005 12,169 - 12,169

As at 31 December 2006 10,070 650 10,720


144

The caption Industrial property and other rights includes, essentially, surface rights over land and software utilisation licences. 18. Tangible assets The changes in tangible assets and corresponding depreciation in the years ended 31 December 2006 and 2005 are as follows:

Land

Buildings and other

cons tructionsBas ic

equipm entTransportation

equipm entAdm inis trative

equipm entTools and

dies

Other tangible assets

Tangible assets in progress

Advance to suppliers of

tangible assets TotalGross assets:

Balances at 1 January 2005 268,082 505,122 2,232,547 73,099 46,433 6,627 8,920 117,653 4,597 3,263,079 Changes in the consolidation perim eter (2,716) 476 5,185 3,946 145 45 6 44 0 7,131 Exchange trans lation adjus tm ents 17,607 16,715 170,745 3,458 2,548 371 137 4,963 2,083 218,626 Additions 3,678 15,403 27,468 11,199 750 435 320 60,589 28,363 148,204 Sales (513) (1,807) (7,931) (1,857) (177) (104) (283) (245) (55) (12,972)Write-offs 0 (11) (3,048) (578) (1,259) 0 0 0 0 (4,897)Transfers 1,099 32,785 82,167 324 3,971 209 1,047 (118,471) (3,369) (238)

Balances at 1 January 2006 287,237 568,683 2,507,133 89,591 52,410 7,582 10,146 64,533 31,618 3,618,933 Changes in the consolidation perim eter (Note 5) 8,033 (3,358) 6,140 5,997 133 52 77 6 - 17,080 Exchange trans lation adjus tm ents (5,098) (6,169) (93,495) (2,256) (1,389) (201) (81) (6,154) (3,227) (118,072)Additions 2,266 3,624 16,751 1,411 971 87 376 122,243 8,321 156,049 Sales (326) (1,305) (11,676) (6,326) (481) (90) (215) (35) (18) (20,472)Write-offs (30) (45) (122) (446) - - - - - (642)Transfers 614 25,250 66,535 2,738 831 359 1,215 (68,670) (29,136) (265)

Balances at 31 Decem ber 2006 292,696 586,681 2,491,266 90,707 52,476 7,787 11,516 111,924 7,557 3,652,611

Accumulated depreciation and impairment losses:

Balances at 1 January 2005 30,826 231,723 1,442,537 53,191 37,024 5,806 5,218 - - 1,806,324 Changes in the consolidation perim eter (380) (96) 2,932 109 82 16 4 - - 2,669 Exchange trans lation adjus tm ents 312 4,938 109,968 3,255 1,721 314 77 - - 120,585 Increases 3,283 21,991 100,935 5,348 3,375 495 818 - - 136,245 Decreases (218) (1,700) (6,329) (1,773) (203) (140) (55) - - (10,418)Write-offs - (9) (2,782) (578) (1,258) - - - - (4,626)Transfers 172 191 591 (179) (3) (2) (155) - - 615

Balances at 1 January 2006 33,996 257,040 1,647,852 59,373 40,737 6,489 5,907 - - 2,051,394 Changes in the consolidation perim eter (Note 5) - (2,765) 3,160 1,361 65 51 65 - - 1,937 Exchange trans lation adjus tm ents (192) (2,158) (68,241) (1,653) (795) (163) (57) - - (73,259)Increases 3,675 33,979 98,680 6,214 3,108 495 885 - - 147,036 Decreases () (651) (8,449) (5,952) (430) (84) (77) - - (15,645)Write-offs - (14) - (122) (431) - - - - (567)Transfers (19) (129) (184) 234 (14) (1) 53 - - (59)

Balances at 31 Decem ber 2006 37,460 285,301 1,672,817 59,456 42,240 6,786 6,778 - - 2,110,837

Carrying amount:

As at 31 Decem ber 2005 253,241 311,643 859,281 30,218 11,673 1,092 4,239 64,533 31,618 1,567,539

As at 31 Decem ber 2006 255,237 301,380 818,449 31,252 10,236 1,001 4,739 111,924 7,557 1,541,774

The value of the operating land was increased to reflect the estimated future cost of environmental recovery and rehabilitation of the land, which also increased liabilities.

Tangible assets in progress and advances to suppliers of tangible assets in the year ended 31 December 2006 include the construction and improvement of installations and equipment of the cement sector of several production units, essentially in the South Africa, Brazil, Egypt, Spain and Portugal business areas.


145

19. Investments in associates The changes in investments in associates in the years ended 31 December 2006 and 2005, are as follows:

Investment Goodwill Total

Balance at 1 January 2005 179,647 86,758 266,405Changes in the consolidation perimeter (82,256) (49,900) (132,156)Exchange translation adjustments 5,184 3,443 8,627Equity method effect: -

On profit (Note 12) 23,535 - 23,535On shareholders' equity (5,866) - (5,866)Dividends received (3,892) - (3,892)

Aquisitions and increases 48,074 229 48,303

Balance at 1 January 2006 164,425 40,530 204,955Changes in the consolidation perimeter (Note 5) (37,412) (23,861) (61,273)Exchange translation adjustments (2,880) (1,853) (4,732)Equity method effect:

On profit (Note 12) 19,388 - 19,388On shareholders' equity 67 - 67Dividends received (1,817) - (1,817)

Aquisitions and increases 372 - 372Sales and write-offs (4) - (4)

Balance at 31 December 2006 142,139 14,816 156,955

Acquisitions and increases in the year ended 31 December 2005 correspond essentially to the Group’s participation in the capital increase of C+PA, in which the amount subscribed amounted to 48,000 thousand euros. Financial information on associates as of 31 December 2006 and 2005 is as follows:

2006 2005

Total assets 459,732 504,307 Total liabilities (125,839) (122,713)Total shareholders' equity 333,894 381,594

Group's share of shareholder's equity 156,955 204,955

Sales and services rendered 89,181 166,217

Net profit for the year 41,907 31,444

Group's share of net profit for the year 19,146 14,484


146

20. Available-for-sale financial assets and other investments The changes in the available-for-sale financial assets and other investments in the years ended 31 December 2006 and 2005 are as follows:

Other investments

Available-for-sale financial assets

Gross investment:Balances at 1 January 2005 17,685 52,334Exchange translation adjustments 840 -Revaluation/adjustments - 16,886Increases 763 -Transfers 5,525 -Sales and write-offs (535) -

Balances at 1 January 2006 24,278 69,220Changes in the consolidation perimeter (Note 5) 11 -Exchange translation adjustments (4,469) -Increases 152,326 -Sales and write-offs (2,212) (69,220)

Balances at 31 December 2006 169,933 -

Impairment losses:Balances at 1 January 2005 10,107 -Exchange translation adjustments 252 -Transfers 3,060 -

Balances at 1 January 2006 13,419 -Exchange translation adjustments (25) -Increases 3,314 -Sales and write-offs (112) -

Balances at 31 December 2006 16,595 -

Carrying amount:

As at 31 December 2005 10,859 69,220

As at 31 December 2006 153,338 -

Available-for-sale financial assets at 31 December 2005 correspond to the investment in Cementos Lemona, which was stated at market value, with corresponding changes registered in Reserves. In the year ended 31 December 2006, the Group sold the above mentioned investment by the amount of 69,220 thousand euros. Additionally, the accumulated amount in reserves was transferred to profit and loss (Note 30), totalising a profit of 12,907 thousand euros net of income tax charge (Note 12).


147

The caption Other investments includes non-current financial assets stated at cost, adjusted for estimated impairment losses. 21. Accounts receivable - other The caption Accounts receivable – other at 31 December 2006 and 2005 is made up as follows:

Current Non-current Current Non-current

Associates - - 725 -Participated and participating companies 1,445 - 612 -Other shareholders - - 182 -Advances to suppliers of fixed assets 257 - 145 -Other debtors 17,341 6,307 15,304 2,348

19,043 6,307 16,968 2,348

2006 2005

The caption Other debtors includes balances receivable from several entities on transactions not related to the Group’s core operations. 22. Taxes recoverable and taxes payable Taxes recoverable and taxes payable at 31 December 2006 and 2005 are made up as follows:

Current Non-current Current Non-currentTaxes recoverable:

Corporate income tax 14,109 - 19,896 -Personal income tax 9,190 - 4,939 -Value added tax 11,707 - 8,364 -Social security contributions 3 - 1 -Others 1,943 3,528 1,120 2,594

36,952 3,528 34,319 2,594

2006 2005


148

Current Non-current Current Non-currentTaxes payable:

Corporate income tax 17,392 - 19,106 -Personal income tax 3,060 - 2,686 -Value added tax 13,298 2,186 14,512 4,095Social security contributions 3,299 77 3,351 -Others 4,053 - 5,699 -

41,101 2,262 45,354 4,095

2006 2005

23. Other current and non-current assets Other current and non-current assets at 31 December 2006 and 2005 are made up as follows:


Accrued interest 833 - 325 -Derivative financial instruments (Note 38) 788 3,036 - 1,220Leases 743 - 162 -Employee benefits (Note 33) 519 - - -Insurances 472 - 126 -Other deferred costs and accrued income 1,417 - 2,397 -

4,772 3,036 3,011 1,220

2006 2005


149

24. Deferred taxes The changes in deferred taxes in the years ended 31 December 2006 and 2005 were as follows:

Intangible assets Goodwill

Tangible assets

Tax losses carried forward

Provisions for risks

and charges

Cash and cash

equivalents Doubtful accounts Inventories Investment

Available-for-sale financial assets Others Total

Deferred tax assets:Balances at 1 January 2005 2,034 5,248 10,976 39,667 14,217 - 1,679 1,833 1,461 - 25,809 102,924 Changes in the consolidation perimeter - - (14) - - - (20) - - - - (34)Exchange translation adjustments 152 2,603 2,674 126 2,569 - (31) 78 4 - (344) 7,831 Income tax (Note 13) (389) 10,376 (1,266) (22,188) 480 - 438 (87) (433) - (2,672) (15,740)Shareholders' equity (Note 13) - - - (7,756) 4,136 - - - - - (223) (3,842)

Balances at 1 January 2006 1,797 18,227 12,370 9,850 21,403 - 2,067 1,824 1,031 - 22,570 91,138 Changes in the consolidation perimeter (Note 5) (2) - (6) (245) - - - - - - - (253)Exchange translation adjustments (13) (556) (760) (1,710) (322) - (44) (49) (0) - (6) (3,460)Income tax (Note 13) (422) 4,384 199 (3,014) (5,754) - (321) 211 784 - (3,219) (7,151)Shareholders' equity (Note 13) - - - - 1,279 - - - - - (395) 885

Balances at 31 December 2006 1,359 22,056 11,803 4,881 16,607 - 1,702 1,986 1,815 - 18,950 81,159

Intangible assets Goodwill

Tangible assets

Tax losses carried forward

Provisions for risks

and charges

Cash and cash

equivalents Doubtful accounts Inventories Investment

Available-for-sale financial assets Others Total

Deferred tax liabilities:Balances at 1 January 2005 - - 104,243 - 2,520 - - - - - 4,872 111,635 Changes in the consolidation perimeter - - (9) - - - - - - - - (9)Exchange translation adjustments - - 1,904 - - - - - - - 1,486 3,390 Income tax (Note 13) - - 2,086 - 484 - - - 12,956 - 2,553 18,079 Shareholders' equity (Note 13) - - - - - - - - - 2,376 181 2,556

Balances at 1 January 2006 - - 108,223 - 3,004 - - - 12,956 2,376 9,092 135,650 Changes in the consolidation perimeter (Note 5) - - 1 - - - - - - - (0) 1 Exchange translation adjustments - - (2,239) - (2) - - - - - (320) (2,561)Income tax (Note 13) - 12,250 (5,109) - 212 233 - - (456) (2,342) 4,789 Shareholders' equity (Note 13) - - - - 392 - - - - (2,376) 160 (1,824)

Balances at 31 December 2006 - 12,250 100,877 - 3,606 233 - - 12,500 - 6,589 136,055

Carrying amount:

As at 31 December 2005 1,797 18,227 (95,853) 9,850 18,399 - 2,067 1,824 (11,925) (2,376) 13,478 (44,512)

As at 31 December 2006 1,359 9,806 (89,074) 4,881 13,001 (233) 1,702 1,986 (10,686) - 12,361 (54,895)

The deferred tax assets are recorded directly on shareholder’s equity when the situations that have originated them have similar impact, namely: - The deferred tax assets related to tax losses recognized in shareholder’s equity, resulted essentially from exchange losses originated in the conversion of loans which are considered as extensions of financial investments (Note 2.10.), recorded on Exchange translation adjustments (Note 29); - The deferred tax assets recorded on Reserves related to provisions, resulted from the tax effect associated to the actuarial gains and losses recorded directly on Reserves (Note 2.17.); - The deferred tax liabilities related to Available-for-sale financial assets, resulted from its valuations to market values, which are recorded on Fair value reserve. The caption Other deferred tax assets includes essentially the effect of recording derivative financial instruments (Note 38). At 31 December 2006 the Group had tax losses carried forward of 89,568 thousand euros (2005: 109,988 thousand euros) for deduction from future profits, a deferred tax asset of 4,881 thousand


150

euros having been recognised (2005: 9,850 thousand euros). Deferred tax assets of 69,745 thousand euros (2005: 81,146 thousand euros) have not been recognised due to the uncertainty as to their recovery, of which 63,942 thousand euros (2005: 71,704 thousand euros) expire in 2010. 25. Inventories Inventories at 31 December 2006 and 2005 are made up as follows:

2006 2005

Raw, subsidiary and consumable materials 134,599 123,319Work in process 33,164 32,142Subproducts and waste 229 130Finished and semi-finished products 14,091 14,238Merchandise 6,261 13,914Advances on purchases 655 1,033

188,998 184,777Accumulated inventory adjustments (11,979) (11,159)

177,019 173,618

26. Accounts receivable – trade The caption Accounts receivable – trade at 31 December 2006 and 2005 is made up as follows:

2006 2005

Trade 252,502 249,452Notes receivable - trade 3,403 2,925Doubtful trade accounts receivable 2,957 2,182Advances to suppliers 4,933 4,095

263,795 258,654

These amounts are net of accumulated impairment losses on doubtful trade accounts receivable, which were estimated based on experience and assessment of the financial environment. The book value of the accounts receivable is close to its fair value. The Group does not have a significant concentration of credit risk, as the risk is spread over a broad range of trade and other debtors.


151

27. Share Capital The Company’s fully subscribed and paid up capital at 31 December 2006 consisted of 672,000,000 privatised shares, listed with a nominal value of one euro each. 28. Treasury shares Commercial legislation relating to treasury shares requires that a free reserve in an amount equal to the cost of treasury shares be frozen while the shares are not sold. In addition, the applicable accounting rules require that gains and losses on the sale of treasury shares be recorded in reserves. At 31 December 2006 and 2005 Cimpor had 2,766,810 and 3,867,300 treasury shares, respectively. The changes in treasury shares in the years ended 31 December 2006 and 2005 were as follows:

Quantity Value

Balance at 1 January 2005 4,751,960 (15,535)Treasury shares sale (884,660) 2,738

Balance at 1 January 2006 3,867,300 (12,796)Treasury shares sale (1,100,490) 3,502

Balance at 31 December 2006 2,766,810 (9,294)

29. Currency translation adjustments Exchange translation adjustments result from the translation to euro of the foreign currency financial statements of subsidiaries included in the consolidation. In addition, this caption includes the effect of derivative financial instruments contracted to hedge investments in foreign entities (Note 38), to the extent that they comply with the criteria defined in IAS 39, as regards formalisation and efficiency of the hedge. The changes in this caption in the years ended 31 December 2006 and 2005 were as follows:

Total

Balance at 1 January 2005 13,399 (4,751) 8,649 Exchange translation adjustments 209,241 - 209,241 Hedging of financial investments - (5,404) (5,404)

Balance at 1 January 2006 222,641 (10,155) 212,486 Changes in the consolidation perimeter (Note 5) (4,732) - (4,732)Exchange translation adjustments (86,480) - (86,480)

Balance at 31 December 2006 131,428 (10,155) 121,274

Currency translation

adjustmentsHedging

operations


152

30. Reserves The changes in these captions in the year ended 31 December 2006 and 2005 were as follows:

Legal reserve

Free reserves

Fair value reserve

Hedging operations Total

Balances at 1 January 2005 76,500 166,288 (1,535) (1,043) 240,211 Appropriation of consolidated profit 9,300 - - - 9,300 Purchase/(sale) of treasury shares - 60 - - 60 Employee bonuses and share purchase options (Note 34) - 1,242 - - 1,242 Actuarial gain and loss on employee benefit plans - (11,185) - - (11,185)Adjustments in equity investments in associates and others - 8,042 - - 8,042 Variation in fair value of hedging financial instruments - - - 746 746 Variation in fair value of available-for-sale investments - - 14,442 - 14,442

Balances at 1 January 2006 85,800 164,445 12,907 (297) 262,855 Appropriation of consolidated profit 9,400 - - - 9,400 Purchase/(sale) of treasury shares (Note 28) - 241 - - 241 Employee bonuses and share purchase options (Note 34) - 728 - - 728 Actuarial gain and loss on employee benefit plans (Note 33) - (2,872) - - (2,872)Adjustments in equity investments in associates and others (Note19) - (2,987) - - (2,987)Variation in fair value of hedging financial instruments - - - 1,148 1,148 Variation in fair value of available-for-sale investments - - (12,907) - (12,907)

Balances at 31 December 2006 95,200 159,555 - 851 255,606

Commercial legislation establishes that at least 5% of annual net profit must be appropriated to a legal reserve until the reserve equals at least 20% of share capital. This reserve is not available for distribution except upon liquidation of the company, but can be used to absorb losses once the other reserves have been exhausted, or to increase capital. 31. Retained earnings The changes in retained earnings in the years ended 31 December 2006 and 2005 were as follows: Balances at 1 January 2005 (2,228)

Appropriation of consolidated profit 126,550 Adjustments in equity investments in associates and others (5,930)

Balances at 1 January 2006 118,392 Appropriation of consolidated profit 129,568 Adjustments in equity investments in associates and others (365)Employee bonuses and share purchase options 582

Balances at 31 December 2006 248,177


153

32. Minority interest The changes in this caption in the years ended 31 December 2006 and 2005 were as follows: Balances at 1 January 2005 63,672

Changes in consolidation perimeter (115)Change resulting from exchange translation 2,394 Dividends (11,139)Supplementary capital contributions 760 Increase in investments (480)Other changes in shareholders' equity of subsidiary companies 62 Results for the year attributable to minority interests 10,334

Balances at 1 January 2006 65,488 Change resulting from exchange translation (1,722)Dividends (3,219)Increase in investments 66 Other changes in shareholders' equity of subsidiary companies (249)Results for the year attributable to minority interests 13,695

Balances at 31 December 2006 74,059

33. Employee benefits Defined benefit plan The Group has defined benefit retirement pension plans and healthcare plans, for which the liability is determined annually based on actuarial valuations made by independent entities, the cost determined by these valuations being recognised in the year. Most of the liability for the retirement benefit plans has been transferred to pension funds managed by specialised independent entities.


154

The valuations as of 31 December 2006 and 2005 were made using the Projected Unit Credit method and the following assumptions and technical bases:

2006 2005

Actuarial technical rate Portugal 4.75% 4.20%Spain 4.75% 4.00%South Africa 8.00% 7.80%

Annual pension growth rate Portugal 2.25% 2.25%Spain 2.25% 2.25%

Annual fund income rate Portugal 4.75% 4.50%Spain 4.90% 4.50%

Annual salary growth rate Portugal 2.50% 2.50%Spain 3.25% 3.25%

Mortality tables Portugal TV88/90 TV88/90Spain PERMF 2000 PERMF 2000South Africa SA 85-90 SA 85-90

Nominal growth rate of medical costs Portugal

Growth rate of medical costs N/A 5.00%Medical infation rate 4% till 2011, 2,5% after 2011 N/AGrowth rate of medical costs by age 1,5% till 60, N/A

2,5% between 60 e 85, N/A-1,5 after os 85 years old N/A

South Africa 6.00% 5.80%

In accordance with the actuarial valuations the supplementary retirement pension and healthcare costs for the years ended 31 December 2006 and 2005 were as follows:

Pension plans Total2006 2005 2006 2005 2006 2005

Current service cost 1,763 1,471 459 316 2,221 1,788

Interest cost 3,914 3,710 927 748 4,840 4,458

Curtailments/settlements (3,386) (1,937) (4,469) - (7,855) (1,937)

Expected return of the plans' assets (4,330) (3,758) - - (4,330) (3,758)

Total cost/(income) of the defined benefit plans (Note 10) (2,040) (513) (3,084) 1,065 (5,123) 551

Healthcare plans (Note 10)


155

The difference between the present value of the benefit plan liability and the market value of the funds’ assets at 31 December 2006 and 2005 is as follows:

Pension plans Healthcare plans Total2006 2005 2006 2005 2006 2005

Liability 88,592 91,598 20,833 21,452 109,425 113,051

Value of the pension funds - 1 January (81,781) (79,646) - - (81,781) (79,646)Deficit 6,812 11,952 20,833 21,452 27,644 33,404

Liability for employee benefits (Note 35):Current liability 2,324 5,288 967 739 3,291 6,027 Non-current liability 5,006 6,663 19,866 20,714 24,872 27,377

7,330 11,952 20,833 21,452 28,163 33,404 Asset for employee benefits (Nota 23) (519) - - - (519) - Total 6,812 11,952 20,833 21,452 27,644 33,404

The changes in the amount of the defined benefit plans and fund assets in the years ended 31 December 2006 and 2005 were as follows:

Pension plans Healthcare plans Total2006 2005 2006 2005 2006 2005

Defined benefit liability - 1 January 91,598 80,023 21,452 15,052 113,051 95,075

Benefiits and bonuses paid (5,236) (5,288) (967) (739) (6,202) (6,027)

Current service cost 1,763 1,471 459 316 2,221 1,788

Curtailments/settlements (a) (3,386) (1,937) (4,469) - (7,855) (1,937)

Interest cost 3,914 3,710 927 748 4,840 4,458

Actuarial gains and losses (b) (61) 13,619 3,730 6,144 3,669 19,763

Exchange differences - - (299) (69) (299) (69)Defined benefit liability - 31 December 88,592 91,598 20,833 21,452 109,425 113,051

Value of the pension funds - 1 January 79,646 72,178 - - 79,646 72,178

Contributions 3,031 4,557 - - 3,031 4,557

Benefits and bonuses paid (5,236) (5,288) - - (5,236) (5,288)

Expected income of the funds' assets 4,330 3,758 - - 4,330 3,758

Actuarial gain in income from the funds' assets (b) 9 4,442 - - 9 4,442 Value of the pension funds - 31 December 81,781 79,646 - - 81,781 79,646

(a) Corresponds to changes on long term benefits structures, which affect actuarial valuations of future responsibilities, for past services. (b) As from the date of transition to IFRS the Group has applied the new provisions of IAS 19 – Employee benefits, in which actuarial gains and losses are recognised directly in reserves.


156

The main assets of the funds at 31 December 2006 and 2005 are as follows:

2006 2005

Shares 21.6% 21.1%Fixed rate bonds 40.2% 44.3%Variable rate bonds 26.2% 25.5%Real estate investment funds, hedge funds and cash 12.0% 9.1%

100.0% 100.0%

Defined contribution plan In the years ended 31 December 2006 and 2005 the Group incurred costs of 918 thousand euros and 840 thousand euros, respectively, with defined contribution plans. 34. Incentive plan

A Share Purchase Plan for Employees and a Cimpor Share Purchase Option Plan were approved by the Shareholders’ General Meeting held on 4 May 2006. The Board of Directors of Cimpor – Cimentos de Portugal, SGPS, S.A. decides on who is to be a beneficiary of the Share Purchase Plan for Employees, except for members of the Board, in which case the decision is made by the Remuneration Determination Commission. The beneficiaries have the right to purchase shares at a price equal to seventy-five percent of the closing listed price on the transaction day, up to an overall amount not exceeding half of their gross monthly remuneration. The entities referred to above also decide on who is to be a beneficiary of the Cimpor Share Purchase Option Plan, the beneficiaries being granted the right to purchase Cimpor shares (initial options) at a price not less than seventy-five percent of the average closing listed prices on the sixty Stock Exchange sessions immediately preceding that date. For each option exercised the beneficiary is given the option to acquire one share in each of the following three years (derived options) at the same price.


157

The options exercised and shares purchased in the years ended 31 December 2006 and 2005 under these incentive plans, as well as the derived options exercised under the earlier plans were as follows:

2006 2005

PLANNº of

shares exercised

Unit price DateNº of

shares exercised

Unit price Date

Share purchase options - derived options - Série 2002 - - - 4,750 3.70 23 March- Série 2003 183,450 2.84 27 March 184,330 2.84 23 March- Série 2004 253,650 3.20 27 March 243,880 3.20 23 March- Série 2005 273,970 3.30 27 March - - -

Shares purchased options granted 251,350 4.05 23 May 288,200 3.30 19 May962,420 721,160

Shares purchased by employees 138,070 4.20 12 May 163,500 3.21 11 May1,100,490 884,660

The changes in this liability in the years ended 31 December 2006 and 2005 were as follows:

2006 2005Changes in the year:Outstanding at the beginning of the year 1,585,610 1,202,945 Issued during the year 1,074,400 1,254,800 Exercised during the year 962,420 721,160 Lapsed during the year and not exercised 114,540 150,975 Outstanding at the end of the year 1,583,050 1,585,610

Details of options issued during the year:

Maturity dateMay 2006

March 2007, 2008, 2009May 2005

March 2006, 2007, 2008

Exercise price 4.05 3.30 Total value exercised 4,351 4,141 Cost for the year included in personnel costs 680 749

Details of options exercised during the year:Average exercise price 3.38 3.15 Total value exercised 3,255 2,273

The fair value of the share options granted, reflected in Payroll, was calculated based on the Black-Scholes-Merton Model, and it was recognised costs of 1,310 thousand euros in 2006 (1,242 thousand euros in 2005) relating to equity settled payment plans, as follows:

2006 2005

Share purchase option plans issued during the year 680 749Share purchase option plans issued in prior years 438 319Shares purchased by employees 192 173Cost of the exercise (Notes 10 and 30) 1,310 1,242


158

The following assumptions were used in the valuations as of 31 December 2006 and 2005:

2006 2005Price per share 5.25 4.50Exercise price 4.05 3.30Volatility 24.0% 12.3%Dividend yeld 3.62% 3.75%

35. Provisions and accumulated impairment losses Provisions The changes in the provisions in the years ended 31 December 2006 and 2005 were as follows:

Provisions for legal and tax

risksEnvironmental rehabilitation

Provision for employee benefits

(Note 33)

Indemnities and other employees

matters Legal processes

Other provisions for risks and

charges Total

Balances at 1 January 2005 98,917 32,309 22,897 3,280 2,135 6,804 166,342 Changes in the consolidation perimeter - (73) - - 163 - 91 Exchange translation adjustments 2,348 3,660 55 449 382 32 6,926 Increases 14,521 2,170 15,010 2,121 204 8,600 42,626 Decreases (21,850) (655) - (154) - (441) (23,100)Utilisation - (268) (4,557) (3,072) (780) (1,182) (9,859)

Balances at 1 January 2006 93,937 37,144 33,404 2,624 2,104 13,813 183,027 Changes in the consolidation perimeter (Note 5) - - - 218 (7) - 211 Exchange translation adjustments (1,272) (742) (299) (16) (165) (29) (2,524)Increases 7,057 2,552 3,431 3,520 529 271 17,361 Decreases - (642) (4,895) - (82) (223) (5,842)Utilisation - - (3,997) (974) (371) (1,551) (6,893)Transfers - 15 519 28 - (43) 519

Balances at 31 December 2006 99,722 38,327 28,163 5,401 2,007 12,237 185,858

The provision for Environmental rehabilitation represents the Group’s legal or implicit obligation to rehabilitate land used for quarries. Payment of this liability depends on the period of operation and the beginning of the related work. The other provisions for risks and charges are to cover specific business risks resulting from the Group’s normal operations.


159

The increases and decreases in the provisions in the years ended 31 December 2006 and 2005 were recorded by corresponding entry to the following accounts:

2005Tangible assets:

Land 677 (21)Profit and loss for the year:

Outside supplies and services (526) (1,501)Payroll (3,106) 551Provisions 4,986 2,766Financial expenses (Note 12) 6,553 1,574Share of results of associates 242 87Income tax (Note 13) (1,024) 749

Shareholder's equity:Adjustment in equity investments 57 -Free reserves (Note 33) 3,660 15,321

11,519 19,526

2006

The amounts recorded in free reserves corresponds the amount of actuarial gains and losses relating to benefits attributed to employees. Impairment losses The changes in accumulated impairment losses in the years ended 31 December 2006 and 2005 were as follows:

Investments in associates (Note

19)Goodwill (Note 16) Total

Balance at 1 January 2005 23,437 24,031 47,468 Reductions (23,437) - (23,437)

Balance at 1 January 2006 - 24,031 24,031 Increases - 1,366 1,366

Balance at 31 December 2006 - 25,397 25,397

In the year ended 31 December 2006, the decrease in impairment losses relating to investments in associates resulted from the sale of the participation in Semapa. In the year ended 31 December 2006, impairment losses had been recognised, related to goodwill on Celfa – Sociedade Industrial de Transformação de Gessos and Retonoba, S.A., in the amount of 601 thousand euros and 765 thousand euros, respectively.


160

For impairment test purposes, considering the financial statement structure adopted for management purposes, goodwill is distributed by groups of cash generating units corresponding to each geographic segment, due to the existence of synergies between the units of each segment. In the tests performed, the recoverable value of each group of cash generating units, determined based on the value for use, is compared with the book value. An impairment loss is only recognised if the book value exceeds the recoverable value. Future cash flows are discounted based on the weighted average cost of capital (wacc) adjusted by the specific risks of each market. The cash flow projections are based on the medium and long term business plans approved by the Board of Directors, plus a perpetuity using a growth rate which does not exceed growth of the respective market. The main assumptions used to determine the value for use of goodwill are as follows:

Discount Long term Discount Long termGeographic area Currency Goodwill rate (a) rate (a) Goodwill rate (a) rate (a)

Brazil BRL 540,613 12.7% 4.2% 548,077 14.5% 5.5%Egypt EGP 76,614 13.7% 4.6% 85,121 14.8% 7.5%Spain EUR 73,662 6.7% 0,1 % - 0,7% 65,089 6.1% 0.0%South Africa ZAR 112,438 11.6% 3,4% - 4% 136,014 11.1% 4.1%Morocco MAD 3,223 9.5% 0.7% 3,223 9.0% 1.8%Tunisia TND 71,546 9.2% 1.1% 71,546 9.4% 2.5%Portugal EUR 21,724 7.4% 1,6% - 3,9% 22,325 7.0% 2.5%Cape Verde CVE 8,742 10.7% 1.8% 7,721 11.0% 2.3%Mozambique MZM 1,409 17.5% 7.8% 1,532 19.8% 7.0%

909,971 940,648

2006 2005

(a) Local currency


161

36. Loans Loans at 31 December 2006 and 2005 are made up as follows:

2006 2005Non-currents liabilities:

Bonds 885,239 921,678Bank loans 471,536 489,540Other loans 630 5,797

1,357,405 1,417,015Currents liabilities:

Bonds 1,151 2,831Bank loans 51,427 31,060Other loans 7,678 2,650

60,256 36,5411,417,661 1,453,556

Bonds Non-convertible bonds at 31 December 2006 and 2005 are made up as follows:

2006 2005

Issuer Financial instrument Issue Interest rateConditions / repayment Current

Non-current Current

Non-current

Cimpor Financial Operations BV Eurobonds 27 May 2004 Fixed rate of 4.50% 27 May 2011 - 596,903 - 596,202Cimpor Financial Operations BV US Private Placement 10Y 27 June 2003 Fixed rate of 4.75% 27 June 2013 - 106,073 - 118,977Cimpor Financial Operations BV US Private Placement 12Y 27 June 2003 Fixed rate of 4.90% 27 June 2015 - 182,263 - 205,084Cimentos de Moçambique SARL Bonds 13 December 2004 TAM + 5,25% (i) 1,151 - 2,831 1,415

1,151 885,239 2,831 921,678

(i) Five payments starting at June 2005 till June 2007

The above US Private Placements are designated as fair value liabilities through profit and loss, in the year ended in 31 December 2005, as a result of applying the transitory disposals of IAS 39. The variations in fair value incorporated in the book value of the US Private Placements at 31 December 2006 amounted to 56,374 thousand euros (20,649 thousand euros in 31 December 2005).


162

Bank loans Bank loans at 31 December 2006 and 2005 are made up as follows:

Type Currency Interest rate 2006 2005

Bilateral EUR Euribor + 0.275% 392,500 392,500 EIB Loan EUR EIB basic rate 53,334 60,000 Bilateral EGP Caibor + 1.125% 8,702 14,502 Bilaterals BRL Several 16,636 11,178 Bilateral EUR Euribor + 1.5% - 9,375 Bilaterals EUR Several 364 1,985

471,536 489,540

Non-current

Type Currency Interest rate 2006 2005

EIB Loan EUR EIB Basic Rate 6,666 -Bilateral EGP Caibor + 1.125% 4,351 4,411 Bilateral EGP 11.7% - 76 Bilateral EUR Euribor + 1.5% 3,125 6,250 Bilaterals BRL Several 3,722 3,608 Bilateral MAD TMP BDT 5a+1.5% 2,798 -Others EUR Several 5,810 8,787 Overdrafts MAD Several 3,020 7,528 Overdrafts CVE Several - 129 Overdrafts ZAR Several 153 271 Overdrafts EUR Several 21,782 -

51,427 31,061

Current


163

The non-current portion of loans at 31 December 2006 and 2005 is repayable as follows: 2006 2005

2007 - 19,5142008 407,945 417,3822009 15,445 15,3992010 15,445 11,7102011 603,570 602,8692011 and following years 315,000 350,142

1,357,405 1,417,015

The loans at 31 December 2006 and 2005 are expressed in the following currencies: 2006 2005

Currency Currency Euros Currency Euros

EUR - 1,070,363 - 1,083,529 USD 404,000 306,765 404,000 324,068 EGP 98,181 13,053 128,554 18,989 MZM 39,675 1,151 118,999,980 4,246 BRL 57,243 20,358 40,575 14,787 ZAR 1,410 153 2,024 271 MAD 64,563 5,818 82,132 7,538 CVE - - 14,164 128

1,417,661 1,453,556

The foreign currency loans bear interest at market rates and were translated to euros at the rates of exchange on the balance sheet date. Rating

The larger bilateral loan (Euribor + 0.275%) establish that the spread must be indexed to the Standard & Poor’s rating, therefore reflecting the assessment of risk of these operations.

Control of the subsidiary companies

The majority of the loan operations of the operating and sub-holding companies do not establish the need for CIMPOR – Cimentos de Portugal, SGPS, S.A. to maintain majority control of the companies. However, the comfort letters requested from the holding company, for purposes of contracting the loans, usually contain a commitment for it not to sell its direct or indirect control of these companies.


164

The comfort letters provided by the Parent company and other subsidiary companies at 31 December 2006 and 2005 totalled 454,138 and 480,682 thousand euros, respectively. Financial covenants In the larger financial operations the loan contracts also contain financial covenants for certain financial ratios to be maintained at previously agreed levels. The financial ratios are: - Net debt / EBITDA - EBITDA / (Financial expenses – Financial income) At 31 December 2006 and 2005 these ratios were within the commitments established. Negative pledge The majority of the financing instruments have Negative Pledge clauses. The larger loans (those exceeding 50 million euros) normally establish a maximum level of pledges over assets, which must not be exceeded without prior notice to the financial institutions. Cross default Cross default clauses, which are current practice in loan contracts, are also present in the large majority of the referred financial instruments. 37. Obligations under leases Finance leases

Present value Future value Present value Future valueUp to 1 year 457 491 1,632 1,704 From 1 to 5 years 290 314 687 733

2006 2005


165

Operating leases The Cimpor Group’s current operating lease contracts relate essentially to transport and office equipment. Future commitments under the current operating lease contracts are as follows (minimum lease payments):

2006 2005Up to 1 year 4,625 2,595 From 1 to 5 years 6,431 2,951 More than 5 years 90 -

Future value

Total operating lease costs recognised in the consolidated statement of profit and loss for the year ended 31 December 2006 amounted to 4,712 thousand euros (2,671 thousand euros in 2005). 38. Derivative financial instruments Under the risk management policy of the Cimpor Group, a range of derivative financial instruments have been contracted at 31 December 2006 and 2005 to hedge interest and exchange rate risk. The Group contracts such instruments after evaluating the risks to which its assets and liabilities are exposed and assessing which instruments available in the market are the most adequate to hedge the risks. These operations are subject to prior approval by the Executive Committee and are permanently monitored by the Financial Operations Area. Several indicators relating to the instruments are periodically determined, namely their market value and sensitivity of the projected cash flows and market value to changes in key variables, with the aim of assessing their financial effect. The recognition of financial instruments and their classification as hedging or trading instruments, is based on the provisions of IAS 39. Hedge accounting is applicable to financial derivative instruments that are effective as regards the elimination of variations in the fair value or cash flows of the underlying assets/liabilities. The effectiveness of such operations is verified on a regular quarterly basis. Hedge accounting covers three types of operations: - Fair value hedging - Cash flow hedging - Hedging of net investments in foreign entities


166

Fair value hedging instruments are financial derivative instruments that hedge exchange rate and/or interest rate risk. Changes in the fair value of such instruments are reflected in the statement of profit and loss. The underlying asset/liability is also valued at fair value as regards the part corresponding to the risk that is being hedged, the respective changes being reflected in the statement of profit and loss. Cash flow hedging instruments are financial derivative instruments that hedge the exchange rate risk on future purchases and sales of certain assets as well as cash flows subject to interest rate risk. The effective part of the changes in fair value of the cash flow hedging instruments is recognised in shareholders’ equity, while the non effective part is reflected immediately in the statement of profit and loss. Instruments hedging net investment in foreign entities are exchange rate financial derivative instruments that hedge the effect, on shareholders’ equity, of the risks on translation of the financial statements of foreign entities. Changes in the fair value of these hedging operations are recorded in the shareholders’ equity caption Hedging adjustments until the hedged investment is sold or liquidated. Instruments held for trading purposes are financial derivative instruments contracted in accordance with the Group’s risk management policies but where hedge accounting is not applicable, because they were not formally designated for that purpose or because they are not effective hedging instruments in accordance with the requirements of IAS 39. Fair value of derivative financial instruments

The fair value of derivative financial instruments at 31 December 2006 and 2005 is as follows:

Current assets assets Current assets Non-current assets2006 2005 2006 2005 2006 2005 2006 2005

Fair value hedgesExchange and interest rate swaps - - 2,623 - - - - 1,991

Cash flow hedgesInterest rate swaps 788 - 413 516 - - - 982

TradingExchange and interest rate derivatives - - - 704 3,501 6,986 72,383 39,641Interest rate derivatives - - - - 902 - 55,926 58,106

788 - 3,036 1,220 4,404 6,986 128,309 100,721

Other assets (Note 23) Other liabilities (Note 40)

Some derivatives, although in compliance with the Group’s risk management policies as regards the management of financial market volatility risks, do not qualify for hedge accounting, and so are classified as trading instruments.


167

The following schedule shows the operations at 31 December 2006 that qualify as fair value and cash flow hedging instruments: Type of

hedgeNotional Type of

operationMaturity Financial purpose MtM

Fair value EUR 22.325.000 Cross-Currency Swap

Oct-12 Principal and interest hedge on intercompany loan from C. Inversiones

2,623

Cash-Flow EUR 50.000.000 Fixed rate Jun. 08 Hedge of 17% of the 2003-2008 Syndicated Loan

139

Cash-Flow EUR 50.000.000 Fixed rate Jun. 08 Hedge of 15% of the 332.5 MM EUR bilateral loan from Totta

1,063

3,824

In addition, the portfolio of derivative financial instruments at 31 December 2006 that do not qualify as hedging instruments is made up as follows: Notional Type of operation Maturity Financial purpose MtM

USD 150.000.000 Cross-Currency Swap Jun. 13 Hedge of 100% of the principle and interest10Y tranche of the US Private Placements

(23,402)

USD 254.000.000 Cross-Currency Swap Jun. 15 Hedge of 100% of the principle and interest12Y tranche of the US Private Placements

(52,483)

EUR 150.000.000 Conditioned variable rate Dec. 09

EUR 100.000.000Conditioned interest rate sulap Dec. 09

EUR 50.000.000 Fixed rate with option for variable rate

Dec. 09 Hedge of 17% of the ABN/BNP Paribas2003-2008 Syndicated Loan

(535)

EUR 216.723.549 Conditioned variable rate Jun. 15

EUR 150.000.000 Floor sale over Spread 10y USD CMS - 2y USD CMS

Jun. 15

(132,712)

Hedge of 53% of the EUR tranche of the 2000-2005 Syndicated Loan liquidated on 30 June 2004 and subsequently allocated to reduce exposure to the variable rate of the Group's overall debt portfolio

(12,719)

Hedge of 100% of part of the floating cross-currency swap hedging the 12Y tranche of

the US Private Placement (43,574)


168

39. Accounts payable - others Accounts payable – others at 31 December 2006 and 2005 are made up as follows:


Associates - - 386 -Participated and participant companies 111 - 93 -Other shareholders 6,433 191 6,226 191Suppliers of fixed assets 26,221 19,616 22,430 19,590Other creditors 17,162 34 28,219 68

49,928 19,841 57,354 19,849

2006 2005

Other creditors include amounts payable to several entities on transactions not related to the Group’s core operations. 40. Other current and non-current liabilities These captions at 31 December 2006 and 2005 are made up as follows:


Accrued interest 17,808 - 18,196 -Increased tax assessment (a) - 17,672 - 16,637Accrued payroll 16,689 - 16,019 -Derivative financial instruments (Nota 38) 4,404 128,309 6,986 100,721Investment subsidies - 6,561 - (6,509)CO2 emission licences (Note 11) (b) 23 - 887 -Other accrued costs and deferred income 9,601 - 8,344 -

48,525 152,542 50,432 123,865

2006 2005

(a) Tax legislation in Brazil includes taxes based on income generated in each period. One of the subsidiaries in Brazil is questioning, in the courts, the rate of those taxes as well as the basis on which it is calculated. The increased tax assessment corresponds to the amount claimed by the Brazilian tax authorities, which is being questioned by the subsidiary. (b) In transposing European Union and Council Directive 2003/87/CE to internal legal orders, lists of the installations of participants in the trading of emissions and the respective emission licences granted for the 2005 to 2007 period have been approved by the Portuguese and Spanish governments.


169

Eight manufacturing plants of Group companies, four in Portugal (Fábrica de Cal Hidráulica do Cabo Mondego and Alhandra, Loulé and Souselas Production Centres) and four in Spain (Oural, Toral de los Vados, Córdoba and Niebla Production Centres) received licences corresponding to emissions rights of 4,015,279 tons and 1,773,890 tons of CO2, per annum, respectively. The Group’s estimated emissions of these plants in the year ended 31 December 2006 amount to 5,794,237 tons of CO2, which are still subject to external validation, resulting in a deficit of 5,068 emission licences (3,566 emission licences, accumulated). As of 31 December 2006 this deficit was measured at market value, being recognized a liability of 23 thousand euros. 41. Accounts payable - trade The caption Accounts payable – trade at 31 December 2006 and 2005 is made up as follows:

2006 2005

Trade 101,823 101,712Suppliers - invoices for approval 12,770 10,204Notes payable - trade 32,847 30,781Advances from clients 2,117 2,601

149,556 145,298

42. Notes to the consolidated cash flow statements Cash and cash equivalents Cash and cash equivalents at 31 December 2006 and 2005 is made up as follows:

2006 2005

Cash 474 558Bank deposits 318,514 278,379Marketable securities 170,452 137,187

489,441 416,124

Bank overdrafts (Note 36) (24,955) (7,928)464,486 408,196

The caption cash and cash equivalents includes cash, deposits repayable on demand, treasury applications and term deposits maturing in less that three months with insignificant risk of change in value. Bank overdrafts includes amounts drawn from current accounts with financial institutions.


170

Receipts relating to investments Receipts relating to investments in the year ended 31 December 2006, relates, mainly, to the sale of the investment in Cementos Lemona, by the amount of 69.22 million euros, owned by Corporacion Noroeste Group, and the investments in the following companies: Ascom, Asempro, UCF and Ready Mix, by the amount of 2.05 million euros, owned by Amreyah. Payments relating to investments Payments relating to investments in the year ended 31 December 2006, relates, essentially, to an exterior application, denominated Euro Medium Term Note, in the amount of 141.91 million euros, to the purchase of 2.82% of share capital of Misr Cement Qena (Egypt), amounting to 6.96 million euros, and to an application in Luso Carbon Fund of 1.5 million euros. Unused credit lines Unused credit lines at 31 December 2006 and 2005 amounted to 668 million euros and 680 million euros, respectively. 43. Related parties Transactions and balances between Cimpor – Cimentos de Portugal, SGPS, S.A. and Group companies were eliminated in the consolidation process and so are not disclosed in this note. Balances and transactions between the Group and associated, related, jointly controlled companies and individuals with significant voting power with their own are detailed below. The terms and conditions of the transactions between the Group companies and related parties are substantially similar to those contracted, accepted and practiced in similar operations with independent entities, the more significant being as follows. 2006

Trade Other debtors Trade Suppliers of

fixed assets Supply of fixed

assets

External supplies and

services

Inventories purchases

Sales and services rendered

7,001 1,125 515 17,339 289 4,213 3,269 51,186

Receivables Payables Transactions


171

2005

Trade Other debtors Trade Suppliers of

fixed assets Supply of fixed

assets

External supplies and

services

Inventories purchases

Sales and services rendered

7,427 647 1,863 26,990 3,174 3,033 10,482 40,505

Receivables Payables Transactions

The caption External supplies and services include the costs with the Contract of Industrial and Technical Cooperation signed with Lafarge S.A., which invoices on the years ended 31 December 2006 and 2005 amounted to 1,150 and 1,430 thousand euros, respectively. This contract was signed, in 12 July 2002 and had two addendums, the last one in April 2005, end on 31 March 2009. Benefits of the members of the Company’s corporate boards and executive seniors Benefits of the members of the Company’s corporate boards and executive seniors in the years ended 31 December 2006 and 2005 was as follows:

2006 2005

Board of directors 4,066 4,199Senior executives 5,539 5,216

9,605 9,415

Short-term benefits 8,543 8,420Post employment benefits 260 256Share bases payments 802 740

9,605 9,415

44. Contingent liabilities, guarantees and commitments Contingent liabilities In the normal course of its business the Group is involved in several legal processes and complaints relating to its products and services as well as of an environmental nature and labour processes. Considering the nature the legal processes and the provisions made up, the expected outcome is not expected to have a significant impact on the Group’s operations, financial position or results of operations. The Group operates in markets in which political, economic, social and legal developments can affect its operations. The effect of the risks resulting from the Group’s normal operations cannot


172

be determined and, consequently, are not reflected in the consolidated financial statements as of 31 December 2005. Guarantees At 31 December 2006 the Group companies had guarantees totalling 129,515 thousand euros given to third parties. Of these, 22,820 thousand euros correspond to guarantees given to the tax authorities to cover additional tax assessments for the years 1990 to 2003, the liability being provided for under the caption Provisions for legal and tax risks (Note 35). At 31 December 2006 and 2005 the companies included in the consolidation had the following bank guarantees given to third parties:

2006 2005

Guarantees given:For tax processes in progress 22,820 59,909To suppliers 37,974 33,321Others 68,720 22,905

129,515 116,135

a) Includes a guarantee given to Yibitas Lafarge Orta, amounting to 51,696 thousand euros, for accomplishment of the share purchase agreement (Note 45). Other commitments In the normal course of its business the Group assumes commitments relating essentially to the acquisition of equipment, under its investment operations in progress and for the purchase and sale of investments, associated companies and subsidiaries. On 1 April 2005 NPC agreed to sell 26% of the capital of S. C. Stone (Note 4) to the National Africans Women Alliance (NAWA). In compliance with IAS 17, this transaction was not recognised at 31 December 2006 because the significant risks and benefits relating to that investment had not been transferred to the buyer. In accordance with the terms agreed there are no losses to be recognised as a result of the transaction. At 31 December 2006 the Group had commitments relating to contracts to purchase tangible fixed assets and inventories as well for operating on third parties installations, totalling 43,730 thousand euros, the more significant amounts being 14,491 thousand euros relating to the Egypt business area, 11,551 thousand euros relating to the Portugal business area, 9,285 thousand euros relating to the Spain business area and 4,910 thousand euros relating to the Morocco business area. In accordance with the Commercial Company Code (“Código das Sociedades Comerciais”), the parent company Cimpor – Cimentos de Portugal, SGPS, S.A. is jointly responsible for the obligations of its subsidiaries.


173

45. Subsequent events The following significant events took place after the end of the 2006 financial year: - Launch by Cimpor Inversiones, S.A. of an unsuccessful takeover bid for all the share capital

of the Egyptian cement company Misr Cement (Qena) S.A.E.; - Conclusion of the acquisition of a set of, direct and indirect participations corresponding to

99.68% of the share capital of the Turkish company Yibitas Lafarge Orta Anadolu Çimento Sanayi ve Ticaret A.S. (YLOAÇ), for the sum of approximately 548 million euros.

- Filing of an administrative lawsuit against several cement companies in Brazil, including

CIMPOR, to look into potential channels enabling offences of an economic nature in the cement and ready-mix concrete markets by examining documents seized in the course of a preliminary inquiry. To the best of CIMPOR’s knowledge, no offence has occurred.

- Signing of a contract to sell the CIMPOR Group’s participation (42.86%) in the share capital

of Cimentos Madeira, Lda., to Secil – Companhia Geral de Cal e Cimento, S.A., and the acquisition from the former of its minority participations in Betão Liz, S.A. (33.37%) and Cimentaçor – Cimentos dos Açores, Lda. (25.0%).

- Increasing the CIMPOR Group’s participation in Cement Trading Activities, S.A., to 100%

through Kandmad SGPS Lda's purchase of a set of shares corresponding to 11% of its capital. - Reduction of the share capital of the Société Les Ciments de Jbel Oust (Tunísia) from TND

90,082,400 to TND 82,297,400 through the amortization of 77,850 shares held by Cimpor Inversiones, S.A..

- Start of restoration work on one of the production lines of Amreyah Cement Company,

S.A.E., and the start of production of cement paper bags by Cimpor Sacs Manufacture Company, S.A.E. (Egypt).

- Sale, for EGP 3,990,000, of the minority participation owned by Amreyah Cement Company,

S.A.E. in Asenpro (Egypt). - Acquisition of three more ready-mix concrete plants in the São Paulo region (Brazil), with a

production capacity of about 120 thousand cubic metres/year. - Strengthening the Group’s participation in the share capital of Cimentos de Moçambique,

S.A.R.L., from 71.7% to almost 82.5%. - Sale of the entire participation of Cimentos de Moçambique in the capital of Premap –

Prefabricados de Maputo, S.A.R.L.. - Start-up of NPC–CIMPOR (Pty) Limited – owned by Cimpor Group in 74%, by the

company’s employee fund in 5.5% and by Siyaka Cement Investment Holdings (Pty) in


174

20.5% – as a consequence of the transfer, to this new society, of all assets and liabilities of the Group related to cement production and marketing, under South Africa’s Black Economic Empowerment (BEE) laws.

46. Financial statements approval The financial statements for the year ended 31 December 2006 were approved by the Board of Directors on 18 April 2007. However, they are still subject to approval by the Shareholders’ General Meeting in accordance with commercial legislation in force in Portugal, set to 11 May 2007. 47. Note added for translation These consolidated financial statements are a translation of financial statements originally issued in Portuguese. In the event of discrepancies, the Portuguese language version prevails.

CIMPOR - Cimentos de Portugal, SGPS, S.A. – GROUP

175

Qualifying Shareholdings (1)

(Translated from the Portuguese original)

Shareholders No. of Shares

Share Capital %

Voting Rights %(2)

Teixeira Duarte, SGPS,S.A.(3) 151,112,489 22.49% 22.58% Through members of its board of directors and audit committee 166,755 0.02% 0.02% Through Teixeira Duarte - Engenharia e Construções, S.A., which it controls 150,866,795 22.45% 22.54% On its own account 64,000,000 9.52% 9.56% Through members of its board of directors and audit committee 561,795 0.08% 0.08% Through Teixeira Duarte - Gestão de Participações e Investimentos Imobiliários, S.A., which

it fully controls 86,305,000 12.84% 12.90% Through Tedal, SGPS, S.A., which it fully controls 67,205,000 10.00% 10.04% Through TDCIM, SGPS, S.A., which it fully controls 19,100,000 2.84% 2.85% Through members of the board of directors and audit committee of TDG, SGPS, S.A., in which

it has a direct shareholding 78,939 0.01% 0.01%

Credit Suisse Group 85,538,586 12.73% 12.78% Through Credit Suisse First Boston International, under the direct control of Credit Suisse,

which, in turn, belongs to the above mentioned group (4) 76,399,370 11.37% 11.42% Through Credit Suisse First Boston (Europe) Limited, under the direct control of Credit Suisse

First Boston (UK) (International Holdings), which, in turn, belongs to the above mentioned group(5) 9,128,253 1.36% 1.36%

Through Credit Suisse First Boston LLC, under the direct control of Credit Suisse First Boston (USA) Inc., which, in turn, belongs to the above mentioned group 10,963 0.00% 0.00%

Lafarge 84,908,825 12.64% 12.69% Through members of its board of directors and audit committee 1,120 0.00% 0.00% Through Ladelis, SGPS, Lda., controlled by Lafarge Asland, S.A., which it controls 84,907,705 12.64% 12.69%

Manuel Fino, SGPS, S.A. 75,825,000 11.28% 11.33% Through Someria Enterprises, Inc., which it fully controls 75,825,000 11.28% 11.33% Through Investifino - Investimentos e Participações, SGPS. S.A., which it controls.(6) 75,825,000 11.28% 11.33%

Banco Comercial Português, S.A. and Fundo de Pensões do Banco Comercial Português, S.A. 64,474,186 10.04% 10.08% Banco Comercial Português, S.A. and entities related to it (7) 274,186 0.04% 0.04% Banco Comercial Português, S.A. 500 0.00% 0.00% Banco Millennium BCP Investimento, S.A. 261,586 0.04% 0.04% Fundação Banco Comercial Português 12,100 0.00% 0.00% Fundo de Pensões do Banco Comercial Português, S.A. 67,200,000 10.00% 10.04%

HSBC Holdings plc 20,119,288 2.99% 3.01% Through HSBC Financial Products (France) SNC, fully owned by HSBC France, S.A. (directly and indirectly, through HSBC Securities (France), S.A. which it owns), while HSBC France, S.A. is fully owned by HSBC Bank plc (Paris Branch), which is fully owned by HSBC Bank plc, which, in turn, is fully owned by HSBC Holdings plc(8) 20,119,288 2.99% 3.01%

Bipadosa, S.A. 16,047,380 2.39% 2.40% Through Metalúrgica Galaica, S.A., which it fully owns 16,047,380 2.39% 2.40% Through Atlansider, SGPS, S.A., 50% owned by LAF 98, S.L., which it fully owns 16,047,380 2.39% 2.40% On its own account 15,632,290 2.33% 2.34% Through members of its board of directors and audit committee 102,790 0.02% 0.02% Through Megasa - Comércio de Produtos Siderúrgicos, Lda., which it fully owns 312,300 0.05% 0.05% Through Atlansider, SGPS, S.A., of which it owns 50% (9) 16,047,380 2.39% 2.40% On its own account 15,632,290 2.33% 2.34% Through members of its board of directors and audit committee 102,790 0.02% 0.02% Through Megasa - Comércio de Produtos Siderúrgicos, Lda., which it fully owns 312,300 0.05% 0.05%

Caixa Geral de Depósitos, S.A. and Fundo de Pensões da Caixa Geral de Depósitos, S.A. 13,977,706 2.08% 2.09% Caixa Geral de Depósitos, S.A. 13,700,706 2.04% 2.05% On its own account 13,322,548 1.98% 1.99% Through Caixa Seguros, SGPS, S.A., which it fully owns 378,158 0.06% 0.06% Through Companhia de Seguros Fidelidade Mundial, S.A., which it fully owns 370,403 0.06% 0.06% Through Império Bonança – Companhia de Seguros, S.A., fully owned by Império Bonança, SGPS, S.A. which it controls 7,755 0.00% 0.00% Fundo de Pensões da Caixa Geral de Depósitos, S.A. 277,000 0.04% 0.04%


176

(1) As per notifications of official qualifying shareholdings received by the company by December 31, 2006. (2) Considering 2,766,810 own shares as at December 31, 2006. (3) Qualifying shareholding disclosed as officially communicated to the company (including shares owned by members of the board of directors and audit committee of Teixeira Duarte - Engenharia e Construções, S.A. and TDG, SGPS, S.A., as considered by the Portuguese Securities and Exchange Commission (CMVM)). (4) Includes 11,482,758 shares that may come from the conversion of bonds. (5) Includes 3,195,632 shares that may come from the conversion of bonds. (6) Company fully controlled by Manuel Fino, SGPS, S.A.. According to the obligations settled in article 447 of the Portuguese Commercial Code, the number of shares held as at December 31, 2006 corresponds to a shareholding of 19.02%, hereby reported since considered a material change. (7) As foreseen in article 20 of the Portuguese Securities Code. (8) According to the notification of official qualifying shareholdings received by the company in accordance with Article 20 of the Portuguese Securities Code, on December 2, 2005, 4.39% of the voting rights in CIMPOR were imputable to HSBC Financial Products (France) SNC. (9) Shares only imputed once in the calculation of the position of Metalúrgica Galaica, S.A..


177

CIMPOR shares held by the members of the Governing Bodies

Board of Directors

2006 Trading Shareholders Shares Nº.of Shares

31-12-05 Nº.of Shares

31-12-06 Acquisitions Sales Prices Date

Ricardo Manuel Simões Bayão Horta Cimpor 25,240

40,000 4.80 13-Jan-06

34,760 4.94 9-Feb-06

2,380 4.20 12-Mayi-06

102,380

Luis Eduardo da Silva Barbosa Cimpor 2,690

410 4.20 12-May-06

3,100

Jacques Lefèvre Cimpor 2,190

410 4.20 12-May-06

2,600

Jean Carlos Angulo Cimpor 9,310

8,000 4.93 09-Feb-06

1,190 4.20 12-May-06

2,500

Jorge Manuel Tavares Salavessa Moura Cimpor 94,300

17,500 2.84 27-Mar-06

34,000 3.20 27-Mar-06

40,000 3.30 27-Mar-06

51,500 5.50 27-Mar-06

2,140 4.20 12-May-06

40,000 4.05 23-May-06

52,440 5.09 23-May-06

124,000

Luís Filipe Sequeira Martins Cimpor 80,000

5,360 4.65 5-Jan-06

14,000 2.84 27-Mar-06

27,000 3.20 27-Mar-06

31,000 3.30 27-Mar-06

1,200 5.58 3-Apr-06

27,248 5.57 3-Apr-06

6,049 5.55 3-Apr-06

6,503 5.51 3-Apr-06

2,020 4.20 12-May-06

20,000 4.05 23-May-06

33,640 5.22 7-Jul-06

94,020


178

Manuel Luis Barata de Faria Blanc Cimpor 137,400

14,000 2.84 27-Mar-06

27,000 3.20 27-Mar-06

31,000 3.30 27-Mar-06

2,020 4.20 12-May-06

25,000 4.05 23-May-06

236,420

Pedro Maria Calainho Teixeira Duarte Cimpor 231,940

21,000 2.84 27-Mar-06

40,000 3.20 27-Mar-06

44,000 3.30 27-Mar-06

2,200 4.20 12-May-06

40,000 4.05 23-May-06

379,140

Vicente Arias Mosquera Cimpor 1,070

410 4.20 12-May-06

1,480

José Manuel Baptista Fino Cimpor 0

330 4.20 12-May-06

330

José Enrique Freire Arteta Cimpor 0

410 4.20 12-May-06

410


179

Companies under Article 447, no. 2 d) of the Portuguese Commercial Code

Acquisition and sale of shares:

Nº. of Shares 31-12-2005

Nº. of Shares 31-12-2006 Acquisitions Sales Price Date

Teixeira Duarte Engenharia e Construções, S.A. (1) 56,000,000 2,400,000 4.64 06-01-2006 20,000 4.83 12-01-2006 40,000 4.81 13-01-2006 20,000 4.82 16-01-2006 20,000 4.79 17-01-2006 60,000 4.78 20-01-2006 20,000 4.77 23-01-2006 13,609 4.78 26-01-2006 120,000 4.78 27-01-2006 286,391 4.98 03-02-2006 19,283 4.99 06-02-2006 6,204 4.99 07-02-2006 12,462 4.98 08-02-2006 62,051 4.94 09-02-2006 90,000 4.93 13-02-2006 70,000 4.92 14-02-2006 180,000 4.93 15-02-2006 127,538 4.98 17-02-2006 62,898 4.99 17-02-2006 60,000 4.97 20-02-2006 9,564 4.97 21-02-2006 150,000 5.00 27-02-2006 75,000 5.10 02-03-2006 230,000 5.12 06-03-2006 295,000 5.18 07-03-2006 50,000 5.42 21-03-2006 50,000 5.50 24-03-2006 100,000 5.56 03-04-2006 350,000 5.58 05-04-2006 5,000 5.31 30-05-2006 45,000 5.31 31-05-2006 50,000 5.30 06-06-2006 5,000 5.24 13-06-2006 50,000 5.30 15-06-2006 15,000 5.24 20-06-2006 20,000 5.25 21-06-2006 7,503 5.25 29-06-2006 12,497 5.25 30-06-2006 13,000 5.14 17-07-2006 50,000 5.15 19-07-2006 27,000 5.21 21-07-2006 9,367 5.25 26-07-2006 39,718 5.25 27-07-2006 50,915 5.25 31-07-2006 30,000 5.26 02-08-2006 100,000 5.30 04-08-2006 50,000 5.30 17-08-2006 10,000 5.30 25-08-2006 40,000 5.30 28-08-2006 677 5.32 29-08-2006 8,420 5.30 31-08-2006 15,903 5.30 01-09-2006 30,000 5.31 04-09-2006 100,000 5.40 06-09-2006 20,476 5.37 08-09-2006 20,210 5.34 12-09-2006 85,000 5.38 13-09-2006 250,000 5.44 14-09-2006 4,107 5.50 19-09-2006 100,000 5.53 20-09-2006 200,000 5.60 21-09-2006 9,314 5.60 21-09-2006 57,721 5.60 26-09-2006 46,000 5.56 28-09-2006 23,843 5.60 29-09-2006 76,157 5.63 29-09-2006 60,000 5.67 02-10-2006 50,000 5.65 02-10-2006 170,000 5.70 03-10-2006 100,604 5.79 04-10-2006 7,509 5.80 05-10-2006 14,095 5.78 06-10-2006 60,000 5.69 10-10-2006 175,000 5.64 11-10-2006


180

97,735 5.63 12-10-2006 66,793 5.61 13-10-2006 160,038 5.57 16-10-2006 201,446 5.56 17-10-2006 165,664 5.55 18-10-2006 73,250 5.55 19-10-2006 65,775 5.50 24-10-2006 112,500 5.52 25-10-2006 80,892 5.53 26-10-2006 31,137 5.52 27-10-2006 172,000 5.53 30-10-2006 39,058 5.55 31-10-2006 36,164 5.53 01-11-2006 66,000 5.52 02-11-2006 4,000,000 5.60 02-11-2006 36,512 5.56 03-11-2006 50,000 5.58 06-11-2006 100,000 5.60 07-11-2006 34 5.81 20-11-2006 55,000 5.81 21-11-2006 444,966 5.87 22-11-2006 118,651 5.80 23-11-2006 4 5.80 24-11-2006 11,345 5.85 01-12-2006 42,500,000 Atlansider, SGPS, S.A. (2) 13,146,245 10,000 5.21 06-06-2006 33,999 5.20 08-06-2006 10,000 5.21 09-06-2006 200,000 5.20 13-06-2006 179,500 5.12 14-06-2006 100,000 5.20 20-06-2006 181,000 5.20 21-06-2006 14,334 5.20 22-06-2006 87,336 5.20 23-06-2006 109,872 5.20 26-06-2006 73,967 5.20 27-06-2006 100,000 5.20 28-06-2006 55,205 5.20 29-06-2006 100,000 5.20 03-07-2006 45,000 5.20 04-07-2006 49,596 5.20 05-07-2006 100,000 5.20 06-07-2006 10,028 5.19 07-07-2006 45,000 5.20 10-07-2006 56,561 5.20 11-07-2006 32,471 5.20 12-07-2006 100,000 5.19 13-07-2006 120,000 5.13 14-07-2006 100,000 5.12 17-07-2006 100,000 5.10 18-07-2006 180,000 5.10 19-07-2006 100,000 5.17 20-07-2006 85,000 5.17 21-07-2006 37,176 5.20 24-07-2006 65,000 5.19 25-07-2006 5,000 5.20 27-07-2006 4,000,000 5.60 02-11-2006 19,632,290 Megasa - Comércio de Produtos Siderúrgicos, Lda. (3) 312,000 312,000 Investifino - Investimentos e Participações, SGPS, S.A. (4) 97,825,000 30,000,000 4.80 06-02-2006 127,825,000 Caxalp, SGPS, Lda. (5) 211,490 9,000 4.59 03-01-2006 51,500 5.50 28-03-2006 1,500 5.23 25-05-2006 15,000 5.55 29-05-2006 31,510 5.57 29-05-2006 5,000 5.56 29-05-2006 37,000 5.05 14-06-2006 362,000


181

Encumbrance and unencumbrance of shares:

Nº. of Shares 31-12-2005

Nº. of Shares 31-12-06 Unemcumbrance Encumbrance Date

Teixeira Duarte Engenharia e Construções, S.A. (1) 55,000,000 2,400,000 06-01-2006 300,000 17-02-2006 1,550,000 23-02-2006 5,750,000 07-06-2006 630,000 07-09-2006 12,587,770 02-11-2006 33,042,230 Investifino - Investimentos e Participações, SGPS, S.A.(4) 97,825,000 30,000,000 08-02-2006 2,543,000 23-10-2006 125,282,000

Notes:

(1) Pedro Maria Calaínho Teixeira Duarte, as a member of the Board of Directors. (2) Ricardo Bayão Horta, e José Enrique Freire Arteta, as members of the Board of Directors. (3) José Enrique Freire Arteta, as manager. (4) José Manuel Baptista Fino, as a member of the Board of Directors. (5) Jorge Manuel Tavares Salavessa Moura, as managing partner.

REPORT AND OPINION OF THE AUDIT BOARD ON THE CONSOLIDATED FINANCIAL STATEMENTS FOR 2006

To the Shareholders, In compliance with current legislation, the articles of association of CIMPOR – Cimentos de Portugal, SGPS, S.A. (“the Company”) and our mandate, the Audit Board submits its report on the procedures performed and its opinion on the consolidated documents of account for the year 2006, that has been presented for review to the Board of Directors. 1. Procedures performed by the Audit Board

The Audit Board accompanied the operations and business of the Company and its main subsidiaries, this consisting mainly of a review of documents and accounting records, review of the minutes of meetings of the Board of Directors and its Executive Commission and review and analysis of other documentation in order to assess compliance with current legislation and the articles of association. The Audit Board also performed tests and other procedures to the extent that it considered necessary in the circumstances. In the course of its work the Audit Board maintained regular contact with the Executive Council of the Board of Directors, as well as with Company personnel, having obtained the information and explanations considered necessary. As required by the articles of association, the Audit Board held monthly meetings and met on other occasions whenever the circumstances justified this, independently of the work performed by each of its members in their review of the documentation provided and accompaniment of the financial position, especially as regards evolution of the operations by geographic market and business sector. We accompanied the process of preparation of the consolidated financial statements, having verified the respective consolidation perimeter. We reviewed the reports and opinions issued by the audit boards of the companies in Portugal included in the consolidation and their compliance with the applicable legal requirements and articles of association. We reviewed the reports of the auditors of the foreign companies as regards the audit work performed and conclusions.

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2. Consolidated Directors’ Report

The Directors’ Report, for which the Board of Directors is responsible, covers the more significant occurrences in 2006 and main subsequent events of significance to obtain an understanding of the current situation of the Company and its subsidiaries (“the Cimpor Group”), in compliance with the requirements of the Commercial Company Code (Código das Sociedades Comerciais). The Group’s operations, which focus on the production and sale of cement in nine countries, despite the unfavourable evolution of some markets and the increased energy costs, resulted in a net profit for the year ended 31 December 2006 exceeding that for the preceding year. The positive evolution referred to above was even greater as regards operating results. The geographic segments that contributed most to the improved operating results were Egypt and Spain. By contrast, Brazil and Portugal contributed most to a decrease in operating results due to a drop in sales prices and fall in internal demand. Indebtedness decreased by 214 million Euros in relation to the preceding year. Stock Exchange capitalisation increased 35% in relation to the end of the preceding year. As regards the prospects for 2007, the Board of Directors expects the market to grow in overall terms in relation to 2006, albeit with differences in the various geographic markets, driven essentially by the emerging markets. We wish to point out the continued effort made to improve the Company’s organisation and its recent rationalisation, as well as its commitment to a policy of sustainable development.

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3. Consolidated Financial Statements

In performing its work the Audit Board reviewed the consolidated financial statements, which comprise the consolidated balance sheet as of 31 December 2006, consolidated statement of profit and loss, consolidated statement of recognised income and expense, consolidated statement of cash flows and corresponding notes prepared by the Board of Directors. In our review we noted that the accounting principles used to prepare and present the consolidated financial statements were in compliance with the International Financial Reporting Standards as adopted by the European Union, as well as adherence to the law and current articles of association.

4. Conclusions

The Audit Board reviewed the Legal Certification of Accounts and Audit Report issued by the Statutory Auditor, also member of this board, relating to the Consolidated Financial Statements, with which it is in agreement. In performing our work we did not detect any matters that violate legislation or the articles of association, nor that significantly affect the true and fair view of the financial position, results of operations and cash flows of the companies included in the consolidation. The Audit Board wishes to thank the Board of Directors, especially the Executive Commission, and personnel of the Company that it had the opportunity of contacting, for their cooperation.

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Considering the above, in the opinion of the Audit Board: The Consolidated Directors’ Report, Consolidated Balance Sheet, Consolidated Statement of Profit and Loss, Consolidated Statement of Recognised Income and Expense, Consolidated Statement of Cash Flows and corresponding Notes for 2006 are in accordance with the applicable accounting, legal and articles of association requirements and so can be approved by the Shareholders’ General Meeting.


______________________________ Ricardo José Minotti da Cruz Filipe

President

___________________________________ DELOITTE & ASSOCIADOS, SROC S.A.

Represented by Carlos Pereira Freire Member

____________________________ José da Conceição da Silva Gaspar

Member

STATUTORY AUDITOR’S REPORT AND AUDITOR’S REPORT

CONSOLIDATED FINANCIAL STATEMENTS

(Translation of a report originally issued in Portuguese)

Introduction 1. In compliance with the applicable legislation we hereby present our Legal Certification of

Accounts and Auditors’ Report on the consolidated financial information contained in the Directors’ Report and the accompanying consolidated financial statements of Cimpor – Cimentos de Portugal, SGPS, S.A. (“the Company”) for the year ended 31 December 2006, which comprise the consolidated balance sheet as of 31 December 2006, which reflects a total of 3,857,811 thousand Euros and shareholders’ equity of 1,653,736 thousand Euros, including a net profit of 291,915 thousand Euros, the consolidated statements of profit and loss and recognised income and expense, the consolidated statement of cash flows for the year then ended and the corresponding notes.

Responsibilities 2. The Company’s Board of Directors is responsible for: (i) the preparation of consolidated

financial statements which present a true and fair view of the financial position of the Company and its subsidiaries, the results of their operations and their cash flows; (ii) the preparation of historical financial information in accordance with International Financial Reporting Standards endorsed by the European Union (“IAS/IFRS”) and that is complete, true, up-to-date, clear, objective and licit, as required by the Securities Market Code; (iii) the adoption of adequate accounting policies and criteria, as well as the maintenance of appropriate systems of internal control; and (iv) the disclosure of any significant facts that have influenced the operations, financial position or results of operations of the companies included in the consolidation.

3. Our responsibility is to examine the financial information contained in the accounting

documents referred to above, including verification that, in all material respects, the information is complete, true, up-to-date, clear, objective and licit, as required by the Securities Market Code, and to issue a professional and independent report based on our work.

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Scope 4. Our examination was performed in accordance with the Auditing Standards (Normas Técnicas

e Directrizes de Revisão/Auditoria) issued by the Portuguese Institute of Statutory Auditors (Ordem dos Revisores Oficiais de Contas), which require that the examination be planned and performed with the objective of obtaining reasonable assurance about whether the consolidated financial statements are free of material misstatement. Our examination included verifying, on a test basis, evidence supporting the amounts and disclosures in the financial statements and assessing the significant estimates, based on judgements and criteria defined by the Company’s Board of Directors, used in their preparation. Our examination also included: verification of the consolidation procedures; verification of the application of the equity method and that the financial statements of the companies included in the consolidation have been appropriately examined; assessment of the adequacy of the accounting principles used, their uniform application and their disclosure, taking into consideration the circumstances; verification of the applicability of the going concern concept; verification of the adequacy of the overall presentation of the consolidated financial statements and; assessment that, in all material respects, the financial information is complete, true, up-to-date, clear, objective and licit. Our examination also included verifying that the consolidated financial information included in the Directors’ Report is consistent with the other consolidated accounting documents. We believe that our examination provides a reasonable basis for expressing our opinion.

Opinion 5. In our opinion, the consolidated financial statements referred to in paragraph 1 above, present

fairly, in all material respects, the consolidated financial position of Cimpor – Cimentos de Portugal, SGPS, S.A. as of 31 December 2006 and the consolidated results of its operations and its consolidated cash flows for the year then ended, in conformity with International Financial Reporting Standards endorsed by the European Union and the information included therein is, in terms of the definitions included in the auditing standards referred to in paragraph 4 above, complete, true, up-to-date, clear, objective and licit.

Lisbon, 19 April 2007 ___________________________________ DELOITTE & ASSOCIADOS, SROC S.A. Represented by Carlos Pereira Freire

CIMPOR – Cimentos de Portugal, SGPS, S.A. – HOLDING COMPANY

188

ANNUAL REPORT AND ACCOUNTS

FOR THE

2006 FINANCIAL YEAR

(HOLDING COMPANY)


189

I

DIRECTORS’ REPORT


190

The Management Report on the consolidated operations of CIMPOR – Cimentos de Portugal, SGPS, S.A., covers all aspects related to both the Governance of the Company and the development of the different business activities of the Group’s companies. Shareholders are therefore advised to read this report for further information on these matters. 1. Summary of the Business The Company’s Turnover in individual terms is derived exclusively from providing management services to the Group companies. In 2006 this turnover was approximately 4.9 million euros (4.6% down from the previous year). But operating costs, before amortizations and provisions were nearly 6.6% lower, amounting to less than 11 million euros. Given the nature of its business operations, the main source of the Holding Company’s earnings are revenues from the Group and associated companies (recorded using the equity method). In 2006 these rose to over 238 million euros (net), representing an increase of 17.4% compared with 2005. Mostly as a result of this increase, net income for the financial year was almost 25% better than for the previous year, standing at around 233.2 million euros. 2. Legal Information The following information is provided in compliance with the current legal requirements:

• No payments to Social Security are outstanding;

• At the start of 2006, CIMPOR held a portfolio of 3,867,300 own shares. During the year, it sold a total of 1,100,490 shares to various Group employees under the stock purchase option plans described in Chapter I point 1.6. of the Annual Report on consolidated activities, at the following unit prices:

Number of Shares Price (euros)

183,450 2.84 253,650 3.20 273,970 3.30 138,070 4.20 251,350 4.05

As CIMPOR did not acquire any shares during the financial year, at the end of 2006 it held 2,766,810 own shares, representing 0.41% of its share capital;

• No transactions took place between the Company and its directors.


191

3. Post Balance Sheet Events No events of special significance took place after the end of 2006, other than those already described in the Management Report on the consolidated operations of the CIMPOR Group. 4. Outlook for 2007 As was the case a year ago, expectations for the Portuguese market, with respect to cement consumption, and for the Brazilian market, in terms of any significant recovery in selling prices, are not particularly encouraging. Nonetheless, the growth expected in the markets of North and South Africa where the Group operates, and our recent entry into Turkey, mean that we can look forward to 2007 with some optimism. 5. Proposed Appropriation of Profits As reflected in the Financial Statements, net profit for 2006 amounted to 233,170,503.68 euros in individual terms. In accordance with the parameters defined in the Articles of Association and the Company's dividend distribution policy described in the Management Report on the Group's consolidated operations, it is proposed that the net income be appropriated as follows:

• The sum of 11,700,000.00 euros, amounting to 5% of the net profits, to reinforce the Legal Reserve;

• Payment of Bonuses to the directors and other personnel who working for CIMPOR - Cimentos de Portugal, SGPS, S.A., at the end of December 2006, in the sum of no more than 3,000,000 euros;

• Payment of a gross dividend to shareholders of 0.215 euros per share (13.2% more than the previous year);

• Transfer of the remaining balance to Retained Earnings.


192


THE BOARD OF DIRECTORS





Pedro Maria Calaínho Teixeira Duarte Vicente Árias Mosquera




193

II

ACCOUNTING DOCUMENTS OF THE

HOLDING COMPANY

Notes 2006 2005

Non-current assets:Investments, net 5 1,267,049 1,226,885 Fixed assets, net 6 6,508 6,687 Intangible assets, net - Other non-current assets, net 4 7 5 Deferred tax assets 14 333 493

Total non-current assets 1,273,897 1,234,070

Current assets:Cash and cash equivalents 130,252 916 Accounts receivable-trade, net 3 24 24 Accounts receivable-other, net 3 33,055 36,459 Prepaid expenses and other current assets 9 and 11 56,034 58,113

Total current assets 219,364 95,512 Total assets 1,493,261 1,329,582

Non-current liabilities:Loans 7 5,000 5,000 Deferred tax liabilities 14 301 326

Total liabilities 293,252 163,037

Current liabilities:Loans 7 21,782 249 Accounts payable-trade 8 408 464 Accounts payable-other 8 108,139 360 Accrued expenses 10 56,914 58,959 Taxes payable 12 9,151 14,221 Provision for other risks and costs 13 91,558 83,458

Total current liabilities 287,952 157,711

Shareholders' equity:Share capital 17 672,000 672,000 Treasury shares 17 (9,295) (12,796)Revaluation reserve 17 1,853 1,895 Legal reserve 17 95,200 85,800

Adjustment in equity investments other reserves and retained earnings 17 207,080 231,928 Net income for the year 17 233,171 187,718

Total shareholders' equity 1,200,010 1,166,545 Total liabilities and shareholders' equity 1,493,261 1,329,582









BALANCE SHEETS AS OF 31 DECEMBER 2006 AND 2005


(Translated and reformatted from the Portuguese original - Note 27)

The accompanying notes form an integral part of the financial statements for the year ended 31 December 2006.

Notes 2006 2005

Operating income:Sales and services rendered 15 and 18 4,879 5,113 Other income and costs 15 1,473 1,554 Amortisations and adjustments reversial 156 143

Total operating income 6,508 6,810

Operating expenses:Outside supplies and services (4,015) (4,089)Payroll 19 (6,833) (7,518)Depreciation and amortisation (242) (268)Provisions 13 (7,371) (11,995)Other operating expenses (87) (105)

Total operating expenses (18,549) (23,975)

Operating loss (12,041) (17,166)

Financial income, net 20 238,273 200,574 Extraordinary items, net 21 (13) (413)

Income before income tax 226,219 182,995

Income tax 14 6,952 4,723 Income before minority interest 233,171 187,718

Net profit for the year 233,171 187,718








The accompanying notes form an integral part of the financial statements for the year ended 31 December 2006.



STATEMENTS OF PROFIT AND LOSS FOR THE YEARS ENDED

31 DECEMBER 2006 AND 2005


CIMPOR – CIMENTOS DE PORTUGAL, SGPS, S.A.

STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED 31 DECEMBER 2006 AND 2005


(Translated and reformatted from the Portuguese original – Note 27)

Notes 2006 2005Operating activities:Receipts from clients 144 443 Payments to suppliers (4,596) (4,387)Paid to personnel (10,024) (9,926) Flows generated by operations (14,476) (13,870)Income tax recovered / paid 15,177 32,273 Other 6,052 8,350 Cash flow before extraordinary items 6,753 26,752 Receipts relating to extraordinary items 1 30 Payments relating to extraordinary items (50) (55) Cash flows from operating activities (1) 6,703 26,728

Investing activities:Receipts relating to: Investments - 59,734 Property, plant and equipment 11 115 Interest and similar income 3,646 14,499 Dividends 1 124,770 111,255 Total receipts 128,427 185,603 Payments relating to: Investments 2 (6) (90,636) Property, plant and equipment (68) - Total payments (74) (90,636) Cash flows from investing activities (2) 128,353 94,967

Financing activities:Receipts relating to: Loans 21,782 5,000 Sale of treasury shares 3,835 2,785 Other 3 108,900 64,000 Total receipts 134,517 71,785 Payments relating to: Loans 4 (249) (249) Interest and related expenses (322) (16,358) Dividends (127,191) (120,299) Other 3 (12,500) (64,000) Total payments (140,263) (200,907) Cash flows from financing activities (3) (5,746) (129,122)

Net change in cash and cash equivalents (4) = (1)+(2)+(3) 129,310 (7,427)Net cash and cash equivalents at the beginning of period 916 8,428 Foreign exchange effect 26 (84)Net cash and cash equivalents at the end of period 130,252 916

The accompanying notes form an integral part of the financial statements for the year ended 31 de

December 2006.


Ricardo Manuel Simões Bayão Horta Luís Eduardo da Silva Barbosa Jacques Lefèvre Jean Carlos Ângulo Jorge Manuel Tavares Salavessa Moura Luís Filipe Sequeira Martins Manuel Luís Barata de Faria Blanc Pedro Maria Calaínho Teixeira Duarte Vicente Arias Mosquera José Manuel Baptista Fino José Enrique Freire Arteta

The accompanying notes form an integral part of the financial statements for the year ended 31 de December 2006.


STATEMENTS OF CASH FLOWS (continued)


(Translated and reformatted from the Portuguese original – Note 27)

1. Dividends received

2. Payments relating to investments

Acquisitions and capital increases in subsidiaries and other investments:

Amounts paidCimpor Egypt for Cement 6

3. Loans to and from Group companies

4. Loans

Amounts received

Cimpor Portugal, SGPS, S.A. 72.500 Cimpor Inversiones, S.A. 52.270

124.770

Amounts paidduring the year

Amounts receivedduring the year

Cimpor - Indústria de Cimentos, S.A. 12.500 1.000 Cimpor Internacional, SGPS, S.A. - 54.300 Cimpor Portugal, SGPS, S. A. - 53.600

12.500 108.900

Loans paid during the year

ICEP 249

Other NetAdjustment reserves income

Share Treasury Revaluation Legal in equity and retained for thecapital shares reserve reserve investments earnings year Total

Balances as of 31 December 2004 672,000 (15,534) 1,937 76,500 18,408 31,132 185,909 970,352

Earnings allocated to reserves - - - 9,300 - 53,149 (62,449) - Dividends paid - - - - - 661 (120,960) (120,299)Distribution of profits to employees - - - - - - (2,500) (2,500)Acquisiton/sale of treasury shares - 2,738 - - - 60 - 2,798 Other adjustments - - (42) - 177,599 (49,081) - 128,476 Net profit for the year - - - - - - 187,718 187,718 Balances as of 31 December 2005 672,000 (12,796) 1,895 85,800 196,007 35,921 187,718 1,166,545

Earnings allocated to reserves - - - 9,400 - 47,888 (57,288) - Dividends paid - - - - - 490 (127,680) (127,190)Distribution of profits to employees - - - - - - (2,750) (2,750)Acquisiton/sale of treasury shares - 3,501 - - - 241 - 3,742 Other adjustments - - (42) - 14,908 (88,374) - (73,508)Net profit for the year - - - - - - 233,171 233,171 Balances as of 31 December 2006 672,000 (9,295) 1,853 95,200 210,914 (3,834) 233,171 1,200,010








STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY

FOR THE YEARS ENDED 31 DECEMBER 2006 AND 2005



The accompanying notes form an integral part of financial statements for the year ended 31 de December 2006.


CIMPOR - CIMENTOS DE PORTUGAL, SGPS, S.A. NOTES TO THE FINANCIAL STATEMENTS FOR THE YEARS ENDED 31 DECEMBER 2006 AND 2005 (Amounts stated in thousands of euros) (Translated and reformatted from the Portuguese original – Note 27)

199

1. Introduction

Cimpor - Cimentos de Portugal, SGPS, S.A. (“Company” or “Cimpor”) was incorporated on 26 March 1976, as a wholly owned Portuguese Government company. After several privatisation phases, Cimpor is now a public company listed on the Lisbon stock exchange. The Company operates in Portugal, Spain, Morocco, Mozambique, Brazil, Tunisia, Egypt, South Africa and Cape Verde (the “Cimpor Group”).

The Company`s investments are held essentially through two sub-holding companies; (i) Cimpor Portugal, SGPS, S.A., which holds the investments in companies dedicated to the production of cement, ready mix concrete, concrete parts and related activities in Portugal; and (ii) Cimpor Inversiones, S.L., which holds the investments in companies with head offices abroad.

2. Summary of significant accounting policies

The attached financial statements were prepared in a going concern basis from the Company’s accounting records.

The financial statements are stated in thousands of euros and were prepared in accordance with generally accepted accounting principles in Portugal (“Portuguese GAAP”), which may be different from generally accepted accounting principles in other countries. The attached financial statements also include certain reclassifications in order to conform more closely to the form and content of financial statements presented in international financial markets.

The preparation of financial statements requires management to make estimates and

assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the financial statements and the reported amounts of revenue and expenses during the report period. Actual results could differ from those estimates.

These financial statements refer to the company on an individual non-consolidated basis,

investments being recorded in accordance with the equity method as described below. The principal accounting policies used in the preparation of the non-consolidated financial

statements are: Investments Investments in group and associated companies are recorded using the equity method of accounting. Such investments being initially recorded at cost which is then increased or reduced to the amount corresponding to the proportion owned of the book equity of these companies as of the date of acquisition of the investment or the date the equity method was first applied.


200

Whenever necessary in order to conform the financial statements of group and associated companies to the Group’s accounting policies, adjustments and reclassifications are made to them. In accordance with the equity method of accounting, investments are adjusted by the amount corresponding to the Company’s share in the net results of the group companies, by corresponding entry to the statement of profit and loss for the year (Note 20), and by other variations in the equity of subsidiary companies, by corresponding entry to the caption “Adjustments in equity investments” (Note 17). In addition, dividends received from these companies are recorded as deductions from the investments. Other investments are stated at cost less, when applicable, adjustments for estimated losses on realisation, except quoted securities measured at fair value, in accordance with the requirements of IAS 39. Goodwill Goodwill arises from the difference between the cost of the investments in subsidiary companies and the related fair value of the subsidiaries’ net assets as of the date of acquisition. Goodwill resulting from increases in previously investments are amortized on a straight-line basis over the remain useful live period defined on the first aquisition. Goodwill is capitalised and amortised on a straight-line basis over its estimated realisation period, which varies from five to twenty years.

Property, plant and equipment Property, plant and equipment is stated at cost, which includes acquisition expenses or, in the case of certain fixed assets acquired up to 31 December 1992, at restated value computed in accordance with the revaluation criteria established by the applicable Portuguese legislation. Depreciation is provided on a straight-line basis over the estimated useful lives which correspond to the following estimated average useful lives:

Years

Buildings and other constructions 10 - 50 Basic equipment 7 - 16 Transportation equipment 4 - 5 Administrative equipment 3 - 14

Provisions and adjustments The provisions and adjustments are stated at the amount considered necessary to cover potential risks in the collection of overdue accounts receivable balances.


201

Other provisions and adjustments are recorded at the amounts considered necessary to cover estimated losses. Foreign currency transactions and balances Foreign currency assets and liabilities for which there is no fixed exchange rate agreement are translated to euros at the rates of exchange prevailing at the balance sheet date. Exchange differences are credited or charged to the statement of profit and loss in the year in which they arise, except for the following, which are recorded in the balance sheet in the caption “Adjustments in equity investments”:

- Exchange differences arising on the translation of medium and long term foreign

currency inter group balances which, in practice, correspond to an extension of investments;

- Exchange differences arising on financial operations hedging exchange risk on foreign

currency investments, as established in International Accounting Standard (“IAS”) 21, provided that they comply with the efficiency criteria established in IAS 39.

Cash and cash equivalents Cash represents immediately available funds and cash equivalents include liquid investments readily convertible to cash with an original maturity of three months or less.

Retirement benefits Certain subsidiary companies have assumed the responsibility for paying additional pensions to those paid by the Portuguese Social Security, under two different schemes: a defined benefit plan and a defined contribution plan. The related liabilities are recorded in accordance with Portuguese Accounting Directive 19. In accordance with this directive, payments made to the defined contribution plan are expensed in the year to which they relate. In the case of the defined benefit plan, costs are expensed over the normal active service life of the employees. An actuarial valuation is performed at the end of each period in order to calculate the present value of the past service liability and the cost to be recorded in the period. The present value of the past service liability is compared with the market value of the plan’s assets in order to determine differences to be recorded in the balance sheet. The costs incurred in the year are recorded as payroll costs, based on the actuarial data.


202

Healthcare benefits

Certain subsidiary companies have supplementary healthcare benefits for their employees to those provided by the Public Social Security. The liabilities and costs resulting from these benefits are recorded in a similar manner to the retirement pension liabilities and costs referred to above. Specific provisions to cover these liabilities are recorded in accordance with the criteria established by Portuguese Accounting Directive 19. The actuarially determined cost of healthcare to be provided as from retirement age is recorded in the balance sheet caption “Provisions for risks and charges”. The effects of those accounting records on these subsidiary companies are reflected on the Company’s financial statements by the application of the equity method. Additionally, the Company has at its service, employees with contractual bond with Cimpor – Indústria de Cimentos, S.A. (“Cimpor Indústria”), which are beneficiary of retirement and healthcare benefits. The corresponding costs are supported by the Company and recorded as Payroll. Income tax

Tax on income for the period is calculated based on the taxable results and takes into consideration deferred taxation. The Cimpor Group has adopted the tax consolidation regime presently in force in Portugal since 2001. In accordance with this regime the provision for income tax is determined based on the estimated consolidated taxable profit of all the companies covered by this regime (all the 90% or more owned subsidiaries located in Portugal). The remaining group companies not covered by the tax consolidation regime are taxed individually, based on their respective taxable profits, computed in accordance with the tax legislation, at the applicable tax rates. Deferred tax assets and liabilities are calculated and assessed periodically attending to the temporary differences between the assets and liabilities book values and the corresponding values valid for tax purposes, using the rates expected to be in force when the timing differences reverse and are not subject to discounting. Deferred tax assets are only recognised when there is reasonable expectation that sufficient taxable profits will exist to use them. A reappraisal of the timing differences underlying the deferred tax assets is made at the balance sheet date, so as to recognise or adjust them based on the current expectation of their future recovery.


203

Revaluation reserve Amounts recorded in this caption, resulting from the net increase in property, plant and equipment through revaluations made in accordance with the defined criteria, are transferred to retained earnings when realised through sale, write-off or depreciation of the related items. In general these amounts are not available for distribution and can only be used to increase share capital or to cover losses incurred up to the end of the period to which the revaluation relates. Accruals basis The company records income and expenses on an accruals basis. Under this basis, income and expenses are recorded in the period to which they relate independently of when the corresponding amounts are received or paid. Differences between the amounts received and paid and the related income and expenses are recorded in accrual and deferral captions.

Current classification

Assets to be realised and liabilities to be settled within one year of the balance sheet date are classified as current. Derivative financial instruments and hedge accounting

The Group has the policy of resorting to financial derivative instruments to hedge the financial risks to which it is exposed as a result of changes in interest rates and exchange rates. In this respect the Group does not contract derivative financial instruments for speculation purposes. The Group contract financial derivative instruments in accordance with internal policies set and approved by the Board of Directors. Financial derivative instruments are measured at fair value. The method of recognising this depends on the nature and purpose of the transaction. Hedge accounting Derivative financial instruments are designated as hedging instruments in accordance with the provisions of IAS 39, as regards their documentation and effectiveness. Changes in the fair value of derivative instruments designated as fair value hedges are recognised as financial income or expense for the period, together with changes in the fair value the asset or liability subject to the risk.


204

Changes in the fair value of derivative financial instruments designated as cash flow hedging instruments are recorded in the caption Hedging adjustments as regards their effective component and in financial income or expense for the period as regards their non effective component. The amounts recorded under Hedging adjustments are transferred to the statement of profit and loss in the period in which the effect on the item covered is also reflected in the statement of profit and loss. Changes in the value of derivative financial instruments hedging net investments in a foreign entity, are recorded in the caption Exchange translation adjustments as regards their effective component. The non effective component of such variations is recognised immediately as financial income or expense for the period. If the hedging instrument is not a derivative, the corresponding variations resulting from changes in the exchange rate are recorded in the caption Exchange translation adjustments. Hedge accounting is discontinued when the hedging instrument matures, is sold or exercised, or when the hedging relationship ceases to comply with the requirements of IAS 39. Trading instruments Changes in the fair value of derivative financial instruments which are contracted for financial hedging purposes in accordance with the Group’s risk management policies, but do not comply with all the requirements of IAS 39 to qualify for hedge accounting, are recorded in the statement of profit and loss for the period in which they occur.

3. Accounts receivable, net

This caption consists of:

2006 2005

Accounts receivable from affiliated companies (Note 15) 30,943 35,017 Accounts receivable from public entities 1,365 1,365 Other receivables 771 101

33,079 36,483


205

4. Other non-current assets, net


2006 2005

Doubtful accounts receivable 3,898 5,661 Other receivables 615 615

4,513 6,276 Adjustments for doubtful accounts receivable (Note 16) (4,506) (6,272)

7 5

The Company classifies, as doubtful, specific overdue accounts receivable balances from customers. As these balances, together with other balances classified under the caption other receivables are not fully collectible, the Company records an adjustment for doubtful accounts receivable to cover the estimated loss on their realisation.


206

5. Investments, net

This caption consists of :2006 2005

Affiliated companies:Cimpor Inversiones, S.L. 810,321 790,667 Cimpor Portugal, SGPS, S.A. 437,151 421,771 Cimpor Reinsurance, S.A. 8,881 7,678 Kandmad, SGPS, Lda 6,879 4,433 Cimpor Financial Operations, B.V. 3,229 2,084 Cimpor Tec - Engenharia e Serviços Técnicos de Apoio ao Grupo, S.A. 429 129 Cement Services Company 81 47 Cimpor Egypt For Cement 4 4

1,266,975 1,226,812

Securities and other investments:Companhia de Cimentos de Moçambique, S.A. 4,050 4,050 Others 74 74

4,124 4,124

Adjustments for investments (4,051) (4,051)

1,267,049 1,226,885

The investments in affiliated companies are recorded in accordance with the equity method

of accounting after any adjustment or reclassification to conform the affiliated companies financial statements with the Company’s accounting policies. Other participations are stated at cost less, when applicable, adjustments for estimated losses on realisation.

Application of the equity method to investments in affiliated companies had the following effect on the year ended 31 December 2006:


207

Profit/(loss) in group

companies(Note 20)

Adjustment inequity investments Dividends Total

Cement Services Company 40 (6) - 34 Cimpor Egypt for Cement 1 - - 1 Cimpor Financial Operations, B.V. 1,145 - - 1,145 Cimpor Inversiones, S.A. 145,904 (73,980) (52,270) 19,654 Cimpor Portugal, SGPS, S.A. 93,224 (5,345) (72,500) 15,379 Cimpor Reinsurance, S.A. 1,203 - - 1,203 Cimpor Tec, S.A. 301 - - 301 Kandmad, SGPS, Lda. (3,376) 5,822 - 2,446

238,441 (73,508) (124,770) 40,163

The adjustments in equity investments relating to Cimpor Inversiones include: (i) the effect of adopting the provisions of IAS 39 relating to hedge accounting and the recording of financial derivatives; and (ii) the effect of translating the foreign currency financial statements of affiliated companies.


208

6. Property, plant and equipment, net This caption comprises the following, at net book value:

Cost: 2006 2005Land 2.409 2.409 Buildings and other constructions 8.845 8.846 Basic equipment 3.095 3.095 Transportation equipment 279 230 Administrative equipment 5.357 5.358 Fixed assets in progress 8 -

19.993 19.938 Accumulated depreciation:Buildings and other constructions (5.161) (4.982)Basic equipment (3.058) (3.019)Transportation equipment (229) (214)Administrative equipment (5.038) (5.035)

(13.485) (13.250)

Net book values:Land 2.409 2.409 Buildings and other constructions 3.684 3.863 Basic equipment 37 76 Transportation equipment 51 16 Administrative equipment 319 323 Fixed assets in progress 8 -

6.508 6.687

Property, plant and equipment has been revalued in accordance with Decree Laws 126/77,

219/82, 399-G/84, 118-B/86, 111/88, 36/91, 49/91, 22/92 and 264/92 using price indices established by that legislation.


209

The effect of the revaluations on net book value is as follows:

Historical Revaluedcost Revaluation amounts

Land 359 2.050 2.409Buildings and other constructions 866 2.818 3.684Basic equipment 37 - 37Transportation equipment 51 - 51Administrative equipment 298 20 319

1.612 4.888 6.500

A portion (40%) of the additional depreciation arising from the revaluations is not deductible for income tax purposes, originating a deferred tax liability of 301 thousand euros (Note 14).

7. Loans



Bank loans 21,782 5,000 - 5,000 Other loans - - 249 -

21,782 5,000 249 5,000

2006 2005

The non-current loan supports interest at market rates and will by paid up in 2008.

8. Accounts payable This caption consists of:

2006 2005

Accounts payable to related companies (Note 15) 108,250 224 Accounts payable to suppliers 274 465 Other creditors 23 136

108,547 825


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9. Accrued income


2006 2005

Interests receivable 85 -

10. Accrued expenses


2006 2005

Derivative instruments (Note 25) 55,627 57,869 Vacation pay and vacation bonus 912 944 Interests payable 249 - Other 126 146

56,914 58,959

11. Prepaid expenses


2006 2005

Derivative instruments (Notes 15 and 25) 55,627 57,869Insurance 100 -Other 223 244

55,949 58,113


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12. Taxes payable


2006 2005

Income tax 8,902 13,987 Withholding tax 94 103 Value added tax 74 46 Social Security contributions 81 85

9,151 14,221

The income tax payable value, in the year ended 31 December 2006 is a result of the special regime for taxation of groups of companies that Cimpor Group has been subject.

13. Movement in the provisions

During the year ended 31 December 2006, the movement in the provision account balances, was as follows:

Beginningbalance Increases

Endingbalance

Provisions for other risks and charges: Tax contingencies (Note 14) 79,786 8,100 87,887

Other risks and charges 3,672 - 3,672 83,458 8,100 91,558

The increase in the provision for tax contingencies was recorded by corresponding entry to the following captions:

14. Income tax The Company is subject to corporate income tax at the rate of 25%, and municipal surcharge of 10%. Gains and losses in associated companies recorded under the equity method are not relevant for tax purposes. The same applies to dividends received from affiliated companies.

Provisions 7,371 Tax contingencies 729

8,100


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As from 2001 the Company and its 90% or more owned subsidiaries in Portugal, have been subject to the special regime for taxation of groups of companies. This regime consists of applying, to the consolidated taxable results of the companies included in the consolidation, less dividends distributed, the corporate income tax rate plus the municipal surcharge. In accordance with current legislation the tax returns of the Company and its subsidiaries are subject to review and correction by the tax authorities during a period of four years and, for Social Security, during a period of five years (ten years up to 2001, inclusive), except where there are tax losses, tax benefits have been granted or inspections, claims or appeals are in progress, in which case the periods can be extended or suspended. Consequently, the tax returns of the Company and its subsidiaries for the years 2003 to 2006 are still subject to review and correction.

As a result of a review made by the tax authorities of the corporate income tax returns for the years 1996 to 2002, additional assessments were received, which were determined in accordance with the tax consolidation regime, the most significant item being the increase in depreciation resulting from the revaluation of property, plant and equipment. The Board of Directors believes, based on technical opinions of its consultants, that the above mentioned corrections have no legal grounds and, accordingly, they have been legally contested.

In addition, as the above mentioned notifications were received after the last phase of re-privatisation of the Company, the Board of Directors believes that any payment of the above tax is the responsibility of the Government body, “Fundo de Regularização da Dívida Pública”. In order to recognise this situation, the Company has recorded a provision of 87,887 thousand euros (Note 13), including an estimate for the years 2003 to 2006 not yet reviewed and to other corrections and interest.

Timing differences between the recognition of income and expenses for accounting and tax purpose are considered in computing the income tax charge for the year.


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Reconciliation of the provision for income tax at the statutory Portuguese income tax rate, for the year ended 31 December 2006 and the effective income tax rate, was as follows:

Tax base Income taxIncome before income tax 226,218 Temporary differences (487)Permanent differences (233,696)

(7,965)Normal charge (2,190)Autonomous taxation 11

(2,180)

Deferred tax on temporary differences reversed in the period 135 Tax contingencies (Note 13) 729 Prior year adjustments (1,150)Adjustments to the consolidated Group's tax and others (4,479)Double taxation (7)Charge for the period (6,952)

Permanent differences include mainly elimination of the effect of applying the equity method and the increase on provisions.

The movement in deferred taxes in the year ended 31 December 2006 is as follows:

Beginning Rate reduction Endingbalance Reversal effect balance

Deferred tax assets: Adjustments for doubtful debts 472 (147) (12) 313 Provision for other risks and charges 21 - (1) 20

493 (147) (13) 333

Deferred tax liabilities: Revaluation of tangible fixed assets (Note 6) 326 (14) (11) 301

According to changes to municipal surcharge for the year 2007, deferred taxes were adjusted at the rate of 26,5%.


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15. Related parties

The principal balances at 31 December 2006 and transactions in the year then ended with Group companies are as follows:

Accounts Deferal and Accounts Financial Financial Services Otherreceivable accruals payable expenses income rendered income

Agrepor Agregados, S.A. 82 - - - - - 82 Alempedras, Sociedade de Britas, Lda. 2 - - - - - 2 Betaçor-Fab. Bet. Artef. Cimento, S.A. 3 - - - - - 3 Betão Liz, S.A. 175 - - - - - 175 Cecisa - Comércio Internacional, S.A. 13 - - - - - 21 Celfa, S.A. 4 - - - - - 4 Cement Trading Activities, S.A. 13 - - - - - - Ciarga - Argamassas Secas, S.A. 30 - - - - - 30 Cimadjuvantes, Lda. 1 - - - - - 1 Cimentaçor - Cimentos dos Açores, Lda. 50 - - - - - 50 Cimpor - Indústria Cimentos, S.A. 12,513 - 141 - 47 4,650 23 Cimpor Betão -Indústria Betão Pronto, S.A. 182 - - - - - 182 Cimpor Finance Limited 43 - - - - - - Cimpor Imobiliária, S.A. 14 - - - - - 13 Cimpor Internacional, SGPS, S.A. 12 30 54,300 30 - 60 - Cimpor Inversiones, S.A. 218 55,627 - 1,393 7,953 139 9 Cimpor Investimentos, SGPS, S.A. 3 - 53,628 28 - 30 - Cimpor Portugal, SGPS, S.A. 17,164 - - - - - 2 Cimpor - Serviços Apoio à Gestão Empresas, S.A. 68 - 177 - - - 520 Cimpor Tec, S.A. 5 - 4 - - - 3 CTA - Comércio Internacional, S.A. - - - - - - 13 Fornecedora de Britas do Carregado, S.A. 12 - - - - - 12 Geofer - Prod.Com.de Bens Equip., S.A. 171 - - - - - 171 Ibera, S.A. 7 - - - - - 7 Imopar, SARL 10 - - - - - - Jomatel - Emp. Mat. Construção, S.A. 27 - - - - - 27 Mossines, S.A. 66 - - - - - 66 Sacopor - Soc Emb e Sacos de Papel, S.A. 34 - - - - - 34 Scanang Trading Activities 2 - - - - - 4 Transviária - Gestão de Transpores, S.A. 19 - - - - - 19

30,943 55,657 108,250 1,451 8,000 4,879 1,473

Balances Transactions

The balance receivable from Cimpor Portugal, SGPS is due to tax income according to the

special regime for taxation of groups of companies (Note 14).

The balance receivable from Cimpor Indústria de Cimentos, S.A. includes 11,500 thousand euros relating to treasury support, which earns interest at normal market rates.

The balance payable to Cimpor Investimentos, SGPS, S.A. includes 53,600 thousand euros relating to treasury support, which earns interest at normal market rates. The balance payable to Cimpor Internacional, SGPS, S.A. is relating to treasury support, which earns interest at normal market rates.


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16. Movements occurred in the caption of asset adjustments

During the year ended 31 December 2006, the movement in adjustments, was as follows:

Beginning Endingbalance Utilization Reversal balance

Adjustments for: Doubtful accounts receivable 5,661 (1,610) (156) 3,895 Other debtors/ shareholders 611 - - 611

6,272 (1,610) (156) 4,506

17. Share capital and reserves

At 31 December 2006, Cimpor’s fully subscribed and paid up share capital consisted of 672 million shares with a nominal value of one euro each.

The last known capital structure of the Company, as per notifications of official qualifying shareholdings received by the company until 31 December 2006. was as follows (Includes shares owned by its related companies and its corporate board members):

%Number of

shares

Teixeira Duarte, SGPS, S.A. 22.49 151,112,489Grupo Credit Suisse First Bóston 12.73 85,538,586Financiére Lafarge, S.A. 12.64 84,908,825Manuel Fino, SGPS, S.A. 11.28 75,825,000Fundo de Pensões do Banco Comercial Português 10.04 67,474,186HSBC Holdings plc 2.99 20,119,288Bipadosa, S.A. 2.39 16,047,380Caixa Geral de Depósitos, S.A. (CGD) e Fundo de Pensões da CGD 2.08 13,977,706Others 23.36 156,996,540

100.00 672,000,000

Revaluation reserve This caption results from the revaluation of property, plant and equipment in accordance with the applicable legislation (Note 6). In accordance with current legislation and the accounting practices followed in Portugal this reserve can only be used, when realised, to cover losses or to increase share capital.


216

Legal reserve In accordance with current legislation the Company must appropriate, to the legal reserve, 5% of its annual net profit until the reserve equals a minimum of 20% of capital. This reserve cannot be distributed to the shareholders but can be used to absorb losses once all the other reserves have been used, up or to increase capital. Adjustment in equity investments This caption, in the year ended 31 December 2006, relate mainly to: (i) transfer from “Retained earnings” to “Adjustments in equity investments” of the results not distributed by subsidiary companies recorded in accordance with the equity method; (ii) adjustment of investments resulting from changes in the equity of subsidiary companies (Note 5), which, in practice, correspond to extensions of the investments.

Net income application

The net profit for 2005 was appropriated as follows, in accordance with a decision of the Shareholders’ Annual General Meeting held on 4 May 2006: Dividends 127,680 Employees’ bonus 2,750 Retained earnings 47,888 Legal reserve 9,400

187,718

Undistributed dividends attributed to own shares, in the mount of 490 thousand euros, are included on the caption “Other reserves and retained earnings”. Treasury shares Commercial legislation relating to treasury shares requires the existence of a free reserve equal to the amount of the cost of such shares, which is not available for distribution while the shares are not sold. In addition, the applicable accounting rules require gains and losses on the sale of own shares to be recorded in reserves. The movement in treasury shares corresponds to the sale of 1,100,490 shares to several employees of the Group for a total of 3,835 thousand euros, which resulted in an increase of 241 thousand euros in Other reserves. At 31 December 2006 Cimpor held 2,766,810 treasury shares (Note 24).


217

18. Sales and services rendered

Sales and services rendered for the year ended 31 December 2006 result from contracts to render administrative services entered into with affiliated companies (Note 15).

19. Payroll costs


2006 2005

Salaries 5,292 5,769 Social charges: Pensions 130 130 Others 1,411 1,619

6,833 7,518

20. Financial income, net


2006 2005Income:Interest income 22,342 2,234 Gain in group companies (Note 5) 241,817 203,186 Foreign exchange gains 5 67

264,164 205,487 Expenses:Interest expense 22,299 1,084 Loss in group companies (Note 5) 3,376 5 Foreign exchange loss 29 3,416 Other financial expenses 187 407

25,891 4,913 Net financial income 238,273 200,574


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21. Extraordinary items, net

This caption consist of:

2006 2005Extraordinary income:Debt recovery 15 10 Gain on the sale of fixed assets - 7 Prior year adjustments 2 - Other extraordinary income 179 36

196 53 Extraordinary expenses:Donations 72 80 Uncollectible debts 3 - Loss on the disposal of fixed assets 2 366 Other extraordinary expenses 133 20

209 466 Net extraordinary items (13) (413)

The caption Other extraordinary expenses includes 133 thousand euros relating to contract compensations, paid to employees.

22. Guarantees

At 31 December 2006 the Company had outstanding letters of guarantee and bank guarantees given to third parties totalling 73,648 thousand of euros, relate mainly to a guarantee of 51,696 thousand of euros given to Yibitas Lafarge Orta, to accomplish the share purchase agreement related to the acquisition of a participation in Yibitas Lafarge Orta Anadolu Cimento Sanyi ve Ticarest, A.S. (“YLOAÇ”) and in Yibitas Holding A.S. (“Yibitas”) and guarantees related to additional tax assessments received, totalling 21,952 thousand of euros, which responsibility is considered on the caption of tax contingencies on Provisions for other risks and charges (Note 13).

23. Commitments

Retirement pension benefits and medical benefits As explained in Note 2, some Group companies have supplementary retirement and healthcare plans for their employees. The liability under these plans is reflected in the


219

financial statements as of 31 December 2006 in accordance with the applicable accounting standards. The past service liability relating to current and retired employees as of 31 December 2006 amounted to 109,425 thousand euros, of which 81,781 thousand euros was covered by pension funds established for the purpose. The unfunded amount of 27,644 thousand euros is recorded as a liability by the respective companies. As a result of applying the equity method of accounting, the effect of these plans is reflected in the Company’s financial statements in the captions financial income, net, and investments. Other commitments – investments and services

At 31 December 2006 some of the Group companies had commitments relating to contracts to purchase tangible fixed assets and inventories as well for operating on third parties installations, totalling 43,730 thousand euros, the more significant amounts being 14,491 thousand euros relating to the Egypt business area, 11,551 thousand euros relating to the Portugal business area, 9,285 thousand euros relating to the Spain business area and 4,910 thousand euros relating to the Morocco business area. On 1 January 2004 a contract to render administrative, financial, accounting and human resources services was entered into between the Company and Cimpor – Serviços de Apoio à Gestão de Empresas, S.A.. The contract involves an annual commitment of 1,254 thousand euros. In accordance with the Commercial Company Code (“Código das Sociedades Comerciais”), the company Cimpor – Cimentos de Portugal, SGPS, S.A. is jointly responsible for the obligations of its subsidiaries.


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Other commitments – comfort letters Comfort letters relating to group companies, given to third parties, are as follows: Cimpor Inversiones, S.A. 344,710Cimpor Indústria de Cimentos, S.A. 60,000Amreyah Cement Company, S.A.E. 13,144Amreyah Cimpor Cement Company, S.A.E. 3,631Cimpor Cimentos do Brasil, LTDA 8,228Cimentos de Moçambique, S.A.R.L. 2,476Imopar, S.A.R.L. 855

433,043

24. Stock option plans

At the Shareholders’ General Meeting held on 4 May 2006 an Employee Stock Acquisition Plan and a Cimpor Shares Stock Option Plan were approved. The Board of Directors of CIMPOR – Cimentos de Portugal, SGPS, S.A., is responsible for granting the benefits under the Employee Stock Acquisition Plan, other than to its own members, in which case the benefits are granted by the Remuneration Committee. The beneficiaries are granted the right to acquire shares at a price equal to seventy-five percent of the closing price on the day the transaction is carried out, up to a maximum not exceed half of his/her monthly gross base remuneration. In the case of the Cimpor Shares Stock Option Plan the options, which are granted by the Bodies referred to in the preceding paragraph, consist of the right to acquire Cimpor shares (initial options), at a price not lower than seventy-five percent of the average of the closing prices on the sixty stock market sessions preceding that date. For each option exercised, the beneficiary is granted the option to acquire one new share (derived options), at the same price, in each of the following three years.


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The options exercised during the year ended 31 December 2006 were as follows:

PLAN Number of Shares Unit price Date

Stock Option Plan - derived options - series 2003 183.450 2,84 27 March



Stock Option Plan - series 2006 251.350 4,05 23 May

Stock Option Plan - series 2004 – Derived 2007 1.100 3,20 27 March

Stock Option Plan - series 2004 – Derived 2007 500 3,20 16 February



Employee Stock Acquisition Plan - year 2006 138.070 4,20 12 May

1.100.490

As at 31 December 2006, the Company held sufficient treasury stock to face the responsibilities inherent to the above mentioned stock options plans.

25. Financial instruments

In accordance with the Cimpor Group`s risk management policies, Cimpor Holding contract a group of financial derivative instruments destined to minimize the exhibition risks to variations of interest and exchange rates, the one that is exposed through yours affiliated Cimpor Inversiones. For the effect, Cimpor Holding and Cimpor Inversiones signed a contract ISDA (International Swaps and Derivatives Association), that regulates the operations of derivative instruments contracted among both. In this sense, the existent hedging positions between Cimpor Holding and the formal parts (financial institutions) are replied, to Cimpor Inversiones which becomes the holder of rights and obligations related to contracted positions. In this way, assets/liabilities accounted in Cimpor Holding, are the reflex of symmetrical positions in Cimpor Inversiones. Cimpor Holding contracts this type of instruments after analyzing the risks that affects the assets and liabilities of the Group and to verify which of the existent instruments in the market revealed more appropriate to cover those risks. Under the risk management policy of the Cimpor Group, a wide range of derivative financial instruments have been contracted to hedge interest and exchange rate risk.


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The Group contracts such instruments after evaluating the risks to which its assets and liabilities are exposed and assessing which instruments available in the market are the most adequate to hedge the risks.

These instruments are subject to prior approval by the Executive Committee and are permanently monitored by the Financial Operations Area. Several indicators relating to the instruments are periodically determined, namely market value and sensitivity of both the projected cash flows and market value to changes in key variables, with the aim of assessing their financial effect. The recognition of financial instruments and its classification as instruments held for hedging or trading purposes, is based on the instructions of IAS 39. Hedge accounting is applicable to financial derivative instruments that are effective as regards the elimination of variations in the fair value or cash flows of the underlying assets/liabilities. The effectiveness of such operations is verified on a regular quarterly basis. Hedge accounting covers three types of operations: - Fair value hedging - Cash flow hedging - Net investment hedging in foreign entities Fair value hedging instruments are financial derivative instruments that hedge exchange rate and/or interest rate risk. Changes in the fair value of such instruments are reflected in the statement of profit and loss. The underlying asset/liability is also valued at fair value as regards the part corresponding to the risk that is being hedged, the respective changes being reflected in the statement of profit and loss. Cash flow hedging instruments are financial derivative instruments that hedge the exchange rate risk on future purchases and sales of certain assets as well as cash flows subject to interest rate risk. The effective part of the changes in fair value of the cash flow hedging instruments is recognised in shareholders’ equity, while the non effective part is reflected immediately in the statement of profit and loss. Instruments hedging net investment in foreign entities are exchange rate financial derivative instruments that hedge the effect, on shareholders’ equity, of the risks on translation of the financial statements of foreign entities. Changes in the fair value of these hedging operations are recorded in the shareholders’ equity caption “Hedging adjustments” until the hedged investment is sold or liquidated. Instruments held for trading purposes are financial derivative instruments contracted in accordance with the Group’s risk management policies but where hedge accounting is not applicable, because they were not formally designated for that purpose or because they are not effective hedging instruments in accordance with the requirements of IAS 39.


223

The effects recognized in Cimpor Inversiones's financial statements are reflected in the Company`s financial statements through the application of the equity method of accounting.

Fair value of financial instruments On 31 December 2006 and 31 December 2005, the fair value of derivative financial instruments was as follows:

2006 2005

Cash-flow hedgesInterest rate swaps - 466

TradingInterest rate swaps 55,627 57,403

55,627 57,869

26. Subsequent events

The more significant events that occurred after 31 December 2006 are described in the Directors’ Report.

27. Note added for translation The accompanying financial statements are a reformatted translation of financial statements

originally issued in Portuguese in accordance with generally accepted accounting principles in Portugal and the disclosures required by the Portuguese Official Chart of Accounts, some of which may not conform with or be required by generally accepted accounting principles in other countries. In the event of discrepancies the Portuguese language version prevails.

REPORT AND OPINION OF THE AUDIT BOARD ON THE NON-CONSOLIDATED FINANCIAL STATEMENTS FOR 2006


To the Shareholders, In compliance with current legislation, the articles of association of CIMPOR – Cimentos de Portugal, SGPS, S.A. (“the Company”) and our mandate, the Audit Board submits its report on the procedures performed and its opinion on the documents of account for the year 2006, presented to it for review by the Board of Directors. The Audit Board accompanied the operations and business of the Company, comprising mainly a review of the documents and accounting records, review of the minutes of meetings of the Board of Directors and Executive Commission and review and analysis of other documentation in order to assess compliance with current legislation and the articles of association. The Audit Board also performed tests and other procedures to the extent that it considered necessary in the circumstances, and maintained regular contact with the Board of Directors and other management personnel, having requested and obtained all the information and explanations considered necessary. In the course of our work we reviewed the Directors’ Report prepared by the Board of Directors and concluded that it is in compliance with the legal requirements. We also reviewed the financial statements for the year ended 31 December 2006, which comprise the balance sheet, statement of profit and loss by nature and by functions, statement of cash flows and corresponding notes prepared by the Board of Directors, as regards the accounting principles used to prepare them and their compliance with generally accepted accounting principles in Portugal, as well as compliance with the legal and articles of association requirements. The proposed appropriation of results, presented by the Board of Directors, is in accordance with the legal and articles of association requirements and shows the amount available for distribution. The Audit Board reviewed the Legal Certification of Accounts and Audit Report issued by the Statutory Auditor, with which it is in agreement. Consequently, in our opinion, the above mentioned documents of account, as well as the proposed appropriation of results, are in accordance with the accounting, legal and articles of association requirements, and so can be approved by the Shareholders.

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The Audit Board expresses its thanks to the Board of Directors and personnel of CIMPOR – Cimentos de Portugal, SGPS, S.A., for their cooperation. Lisbon, 19 April 2007

______________________________ Ricardo José Minotti da Cruz Filipe

President

____________________________________ DELOITTE & ASSOCIADOS, SROC S.A.

Represented by Carlos Pereira Freire Member

____________________________ José da Conceição da Silva Gaspar

Member

LEGAL CERTIFICATION OF ACCOUNTS AND AUDITORS’ REPORT


Introduction 1. In compliance with the applicable legislation, we hereby present our Legal Certification of

Accounts and Auditors’ Report on the financial information contained in the Directors’ Report and the accompanying financial statements of Cimpor – Cimentos de Portugal, SGPS, S.A (“the Company”) for the year ended 31 December 2006, which comprise the balance sheet as of 31 December 2006, which reflects a total of 1,493,261 thousand Euros and shareholders’ equity of 1,200,010 thousand Euros, including a net profit of 233,171 thousand Euros, the statements of profit and loss by nature and by functions and the statement of cash flows for the year then ended and the corresponding notes.

Responsibilities 2. The Company’s Board of Directors is responsible for: (i) the preparation of financial

statements which present a true and fair view of the financial position of the Company, the results of its operations and its cash flows; (ii) the preparation of historical financial information in accordance with generally accepted accounting principles and that is complete, true, up-to-date, clear, objective and licit, as required by the Securities Market Code; (iii) the adoption of adequate accounting policies and criteria and maintenance of an appropriate system of internal control; and (iv) the disclosure of any significant facts that have influenced the Company’s operations, financial position or results of operations.

3. Our responsibility is to examine the financial information contained in the accounting

documents referred to above, including verification that, in all material respects, the information is complete, true, up-to-date, clear, objective and licit, as required by the Securities Market Code, and to issue a professional and independent report based on our work.

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Scope 4. Our examination was performed in accordance with the Auditing Standards (Normas Técnicas

e Directrizes de Revisão/Auditoria) issued by the Portuguese Institute of Statutory Auditors (Ordem dos Revisores Oficiais de Contas), which require that the examination be planned and performed with the objective of obtaining reasonable assurance about whether the financial statements are free of material misstatement. Our examination included verifying, on a test basis, evidence supporting the amounts and disclosures in the financial statements and assessing the significant estimates, based on judgements and criteria defined by the Company’s Board of Directors, used in their preparation. Our examination also included: assessing the adequacy of the accounting principles used and their disclosure, taking into consideration the circumstances, verifying the applicability of the going concern concept; assessing the adequacy of the overall presentation of the financial statements, and assessing that, in all material respects, the information is complete, true, up-to-date, clear, objective and licit. Our examination also included verifying that the information included in the Directors’ Report is consistent with the other accounting documents. We believe that our examination provides a reasonable basis for expressing our opinion.

Opinion 5. In our opinion, the financial statements referred to in paragraph 1 above, present fairly, in all

material respects for the purposes referred to in paragraph 6 below, the financial position of Cimpor – Cimentos de Portugal, SGPS, S.A as of 31 December 2006 and the results of its operations and its cash flows for the year then ended, in conformity with generally accepted accounting principles in Portugal, which have been applied on a basis consistent with that of the preceding year, and the financial information contained therein is, in terms of the definitions included in the auditing standards referred to in paragraph 4 above, complete, true, up-to-date, clear, objective and licit.

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Emphasis 6. The financial statements mentioned in paragraph 1 above refer to the Company on an

individual non-consolidated basis and were prepared for approval and publication in compliance with current legislation. As explained in Note 3 to the financial statements, the investments in subsidiary and associated companies are recorded in accordance with the equity method of accounting. The Company has prepared separate consolidated financial statements de in conformity with International Financial Reporting Standards endorsed by the European Union for separately publication.

Lisbon, 19 April 2007 ___________________________________ DELOITTE & ASSOCIADOS, SROC S.A. Represented by Carlos Pereira Freire

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MINUTES OF MEETING NUMBER 34

CIMPOR – Cimentos de Portugal, SGPS, S.A., a public limited company, with sole tax and Lisbon

Companies Registry number 500 722 900 and with a share capital of six hundred and seventy-two

million euros, held a General Meeting on the eleventh of May of the year two thousand and seven, at

ten hours and thirty minutes, at the Lisbon Congress Centre, at Praça das Indústrias (Junqueira). --------

The meeting was presided by Miguel António Monteiro Galvão Teles, Chairman of the Meeting

Board, who was assisted by the Meeting Board Secretary Jorge Manuel da Costa Félix Oom.------------

For justified reasons, the Vice Chairman of the Meeting Board ending his mandate, José António

Cobra Ferreira, was not at the meeting. ----------------------------------------------------------------------------

The meeting was attended by members of the Board of Directors Ricardo Manuel Simões Bayão Horta

(Chairman), Luís Eduardo da Silva Barbosa, Jacques Lefèvre, Jean Carlos Angulo, Jorge Manuel

Tavares Salavessa Moura, Luís Filipe Sequeira Martins, Manuel Luís Barata de Faria Blanc, Pedro

Maria Calaínho Teixeira Duarte, Vicente Arias Mosquera, José Manuel Baptista Fino and José

Enrique Freire Arteta. -------------------------------------------------------------------------------------------------

The meeting was also attended by members of the Audit Committee Ricardo José Minotti da Cruz

Filipe (President), Carlos Manuel Pereira Freire, representing Deloitte & Associados, SROC, S.A., and

the member José da Conceição da Silva Gaspar. -----------------------------------------------------------------

After having greeted all shareholders in attendance and the members of the Board of Directors and of

the Audit Committee, Miguel António Monteiro Galvão Teles stated that this meeting had been

convoked within the terms of the law and the company’s statutes and that the respective convocation

had been properly publicised. He therefore believed that all the conditions had been met to hold the

meeting and to validly decide on the respective issues. Consequently, he declared the meeting open

and stated that shareholders were present or represented holding 457,374,520 shares, representing

68.06% of the share capital, corresponding to 914,723 votes, according to the properly prepared

attendance list that will be archived at the company.-------------------------------------------------------------

Next, Miguel Galvão Teles pointed out that the meeting convocation listed the following agenda

items: -------------------------------------------------------------------------------------------------------------------

“ITEM ONE: To elect a new Vice Chairman for the General Meeting Board for the remainder of the

four-year period in progress (2005/2008) and who will take office immediately;

ITEM TWO: To decide on the annual report, the balance sheet and the accounts for 2006;

230

ITEM THREE: To decide on the consolidated annual report, the balance sheet and the consolidated

accounts for 2006;---------------------------------------------------------------------------------------------------

ITEM FOUR: To decide on the application of profits; -------------------------------------------------------

ITEM FIVE: To generally evaluate the company’s management and auditing;---------------------------

ITEM SIX: To decide on the sale of own shares to employees and to members of governing bodies

of the company or of subsidiaries, in accordance with the 2007 Employee Stock Purchase

Regulations;

ITEM SEVEN: To decide on the sale of own shares to the Group’s staff and to members of the

governing bodies of the company and of subsidiary companies, in accordance with the Stock

Purchase and Option Plans; ---------------------------------------------------------------------------------------

ITEM EIGHT: To decide on the acquisition and sale of own shares; --------------------------------------

ITEM NINE: To decide on the authorisation to be granted to members of the company’s Board of

Directors to act as Directors in other competing companies and to define the policy on access to

sensitive information by these directors; ------------------------------------------------------------------------

ITEM TEN: To decide on the partial alteration of the Memorandum of Association in order to

update it and adapt it to modifications imposed by the new legislation applicable to companies;-------

ITEM ELEVEN: To alter the company’s audit bodies in compliance with the new approved

structure, within the terms of the previous item, and elect new persons to fill those positions until the

end of the mandate in progress (2005/2008).” ------------------------------------------------------------------

(…)

Next, Miguel Galvão Teles, after having obtained consent from the meeting’s participants to discuss

items TWO and THREE jointly, without loss to a separate vote, asked the Chairman of the Board of

Directors to speak if he wished to do so. --------------------------------------------------------------------------

(…)

After having thanked Jorge Salavessa Moura for his intervention, the Meeting Chairman invited

anyone who wished to speak to do so. -----------------------------------------------------------------------------

These items on the agenda were commented on by the shareholders Domingos José Luís de Sá, José

Tomás de Sousa, António Alberto Pimenta França de Oliveira and Reinaldo Vasconcelos Gonçalves,

who praised the submitted Accounts and the corresponding Annual Reports and requested some

clarifications that were promptly provided by members of the company’s Board of Directors. ----------

(…)

231

Since no one else wished to speak, the documents indicated in ITEM TWO of the Agenda were

subject to a vote, whereby the shareholder THE NORTHERN TRUST COMPANY, which holds 59

votes, voted against and whereby the following shareholders, holding 859 votes, abstained from

voting: ------------------------------------------------------------------------------------------------------------------

NAMES VOTES LUCENT TECHNOLOGIES INC 17BNY-PUB EMPLOYEES RETIREM S MISSISSIPI - THE BANK OF NY 33JP MORGAN CHASE BANK TREATY LENDING ACCOUNT 2JP MORGAN CHASE BANK AUSTRALIAN LENDING ACCOUNT 19INVESTOR BK & TRUST CY - WEST NON TREATY 775STATE FARM VARIABLE PRODUCT TRUST INTERNATIONAL EQUITY INDEX 13 859

As such, and considering the remaining votes as votes in favour, the Chairman declared that the

Annual Report and the Balance Sheet and Accounts for 2006 were approved by 99.90% of cast votes,

with 59 votes against, 914,774 in favour and an abstention of 859 votes. ------------------------------------

Next, when votes were cast regarding the documents indicated in item THREE of the Agenda, it was

found that the same shareholders who had voted against or abstained from voting repeated their

intentions, such that the Chairman declared the approval of the Consolidated Annual Report, the

Consolidated Balance Sheet and the Consolidated Accounts for 2006, once again by 99.90% of the

cast votes. --------------------------------------------------------------------------------------------------------------

On discussing the fourth item of the Agenda, Miguel Galvão Teles read the following proposal by the

Board of Directors for Applying the 2006 Profit, which is included in the Cimpor Holding’s Annual

Report and already familiar to all shareholders in attendance: -------------------------------------------------

“As stated in the financial statements, the individual net profit for 2006 was of 233,170,503.68 euros. -

Therefore, in accordance with the parameters defined by the Memorandum of Association, and

according to the dividend payment policy announced in the Annual Report for the consolidated

activities of CIMPOR – Cimentos de Portugal, SGPS, S.A., it is proposed that the net profit be

applied as follows (in reference to the various paragraphs of no. 1 of article 20 of the Statutes): ------

• Allocation of 11,700,000.00 euros, corresponding to 5% of the net profit, to reinforce the

Mandatory Reserve (paragraph c)); -----------------------------------------------------------------------

• Allocation for bonuses paid to the directors and other personnel who, at the end of December

2006, were in the service of CIMPOR – Cimentos de Portugal, SGPS, S.A., in the maximum

amount of 3,000,000 euros (paragraph d)); --------------------------------------------------------------

232

• Payment to shareholders of a gross dividend of 0.215 euros per share (13.2% more than in the

previous year) (paragraph f)); ------------------------------------------------------------------------------

• Transfer of the remaining amount to Retained Income (paragraph g)).” -----------------------------

Manuel de Faria Blanc requested to speak, after which he explained that the profit distribution was

based on the Individual Profit and not on the Consolidated Profit. The maximum amount proposed for

paying bonuses to the directors and other personnel who, at the end of 2006, were in the service of the

Company, corresponded to about 1% of the Consolidated Profit. Dividends increased 13.2% over

2005, and in the last five years the dividend rate had increased 7.7% per year on average; the amount

now proposed by the Board of Directors corresponded to 49.5% of the Consolidated Profit (compared

with 48% in 2005) and to 62% of the Profit on an individual basis. ------------------------------------------

After a brief intervention by the shareholder Domingos José Luís de Sá, Manuel de Faria Blanc, in

reply to a question about the application of the dividends for the shares held by the company, proposed

that this amount be entered in Retained Income and requested that the proposal below be submitted to

evaluation by the General Meeting: --------------------------------------------------------------------------------

“That the dividend that would be paid to shares owned by the company, on the dividend payment date,

be included in retained income; consequently, the value of the dividend assigned to each share not

held by the company is of € 0.215.” --------------------------------------------------------------------------------

After Miguel Galvão Teles had obtained unanimous consent from the General Meeting to

simultaneously assess the initial proposal and the complementary proposal now presented, since they

are interconnected and complementary, they were subject to a joint vote that did not result in any

abstention or votes against. ------------------------------------------------------------------------------------------

Consequently, the proposals presented under this item were unanimously approved. ----------------------

(…)

With nothing else to be decided, Miguel Galvão Teles – after having thanked the shareholder

Domingos José Luís de Sá for his praise on how the meeting had been conducted – declared the

meeting closed. Accordingly, these minutes of meeting were drafted and will be signed by the

Chairman of the Meeting Board and the Company Secretary. -------------------------------------------------

When the meeting terminated, at thirteen hours and thirty minutes, shareholders were present or

represented holding 457,414,468 shares representing 68.7% of the share capital, which corresponded

to 914,802 votes. ------------------------------------------------------------------------------------------------------

2006 annual report cimpor - sistema de difusão...

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