GRUPO GRAÑA Y MONTERO 2007 ANNUAL REPORT OUTLOOK Liability Statement “This document contains true and sufficient information on the operations of Graña y Montero S.A.A. during the year 2007. Notwithstanding the liability of the issuer, the undersigned assume responsibility for its content in accordance with the applicable legal provisions”. Mario Alvarado Pflucker Corporate General Manager Gonzalo Rosado Solis Corporate General Accountant GRUPO GRAÑA Y MONTERO 2007 ANNUAL REPORT OUTLOOK 4 Key Figures Constant Values as of December 2007 Thousands of New Soles 2004 2005 2006 2007 Equivalent USD Thousands Activity Venta 840,974 915,217 1,320,849 1,529,818 510,450 833,731 894,005 1,188,813 1,439,974 480,472 Gross Income 141,991 174,599 272,755 299,027 99,775 Income 47,460 71,465 174,373 207,199 69,136 before Taxes Net Income 17,515 32,724 104,918 129,900 43,343 OIBDA 147,502 173,611 275,451 286,607 95,631 Professionals 984 1,286 1,380 1,705 Activity by sector OIBDA OIBDA Thousands of New Soles 5 350,000 300,000 250,000 200,000 150,000 100,000 50,000 0 2004 2005 2006 2007 Energy and Petroleum 33% GyM 53% 2004 Infrastructure 24% GMP 29% 2005 Mining 19% Larcomar Construction and Industry 16% GMD Technology 6% Concar Other 2% Other 2006 2007 4% 4% 3% 3% 147,502 180,408 275,451 286,607 Net Income Thousands of New Soles Professionals Backlog Thousands of US Dolars 175,000 150,000 125,000 100,000 75,000 50,000 25,000 1750 1500 1250 1000 750 500 250 700 600 500 400 300 200 100 0 2004 2005 2006 2007 2004 2005 2006 2007 2004 2005 2006 2007 2004 2005 2006 2007 17,515 2004 984 2004 31,591 2005 1,286 2005 104,918 2006 1,380 2006 129,900 2007 1,705 2007 278 539 592 720 6 Letter to Shareholders Dear Shareholders: With only a few months remaining before we celebrate the 75th anniversary of the founding of the company, it is our pleasure to present the Annual Report for the year 2007 for your consideration. These 75 years are the best proof of our Quality, Reliability, This will surely bring a large increase in private investment in the Responsibility and Efficiency commitment to our clients and country, expand the demand for housing exponentially and require our history of strategic success that has enabled the original an enormous investment in infrastructure, especially through construction company to grow into an Engineering Services public-private mechanisms. These are precisely the activities for Group with over 1,700 professionals that has diversified into which we have prepared and in which we have obtained clear other activities such as Petroleum, Information Systems and leadership and valuable experience in recent years. Infrastructure Concessions. With these promising possibilities, at the beginning of the year The results for the year are the best we have ever had in this a new Strategic Plan 2007-2011 was approved that can be long history. The Group’s activity amounted to US$ 510 summarized with three Objectives. Firstly, there is the creation million, which is 23% growth calculated in dollars (16% in of value, mainly through investment in new projects, for which soles due to the revaluation effect), and net profit was US$ the shareholders approved the reinvestment of 80% of the 43.3 million, which is 32% more than for the preceding year profits. Secondly, the structural stability of the Group is sought (24% in soles). by directing these new investments toward the reinforcement of its main pillars: The Hydrocarbon Sector with new possibilities This last year Peru obtained the approval of a Free Trade of gas development, the Infrastructure that new highway Agreement with the United States and maintained concessions and other infrastructure works will require, and the macroeconomic stability with over 6% growth, which means Construction Sector with the enormous unsatisfied demand for that the country will likely attain an investment grade rating in housing. The third objective is to build our capacities and the coming months. prestige, taking strict adherence to our values to the highest 7 7 José Graña Miró Quesada President 8 8 Mario Alvarado Pflucker General Manager 9 international standards and focusing on knowledge With regard to our Social Responsibility commitment to the management in order to build the Group’s professional communities where we work, in 2007, 18,879 persons benefited capacities and enable us to assume the greater challenges from the different plans, among which actions related to presented by the growth we are planning. education and Job Training Workshops aimed at fostering employability among local populations stand out. It should be In 2007 we have made noteworthy progress on this strategic noted that this year we initiated a new CSR program aimed at plan. providing technical assistance to communities that are interested in carrying out investment projects with resources The value of the company has increased 90% during the year from mining “canon” royalties, but lack the technical skills to on the Lima Stock Exchange and we have made investments execute them. This program has begun by supporting the totaling over US$61 million, mainly in the three strategic sectors execution of Drinking Water and Sewer Service projects in the we have determined. The 41 MMPCD Talara Gas Fractionation communities of Orcopampa, Miraflores and Mariano Melgar in Plant is being completed and work has begun on the 3,400-unit the deparment of Arequipa. Los Parques de El Agustino housing project, which is the first MiVivienda Fund mega-project. Additionally, we have been This strategic plan has enabled us to position ourselves in a awarded the concession for Section 1 of the 750-Km situation where high expectations of leadership exist in order to Interoceanic Highway. participate in the development of the infrastructure that the country will need, which is reflected in our contract backlog This year we have also made progress on building our capacities totaling over US$720 million to date, an amount that is 22% and prestige. We obtained ISO 9001:2000 certification on the higher than in the preceding year. project management system, Level 3 CMMI certification on the GMD Software Factory and, for the tenth year in a row, the Lastly, we would like to thank our clients and workers for KPMG Certificate of Compliance with Contract Deadlines making these successes and this promising outlook possible. (Debe tener un nombre preciso en ingles). A total of 107,300 man hours of training was provided, including the new internal program “Developing Project Managers”, and 612,000 man hours were invested in training on Risk Prevention and Environmental Management. José Graña Miró Quesada President Mario Alvarado Pflucker General Manager 1010 11 1. WAYS OF LOOKING INTO THE FUTURE 1. WAYS OF LOOKING INTO THE FUTURE 10 11 11 1. WAYS OF LOOKING INTO THE FUTURE 1. WAYS OF LOOKING INTO THE FUTURE 12 Diversification Over 20 years ago, we adopted a diversification strategy in order to increase the stability of our business without distancing ourselves from our basic knowledge; so we focused our efforts on turning the company into an Engineering and Infrastructure Services Group. Today, what was once a construction company has become a group of 16 companies grouped in 6 operating companies, thereby achieving the objective of having the new companies generate over half of the operating profits of the Group. GMD, the Information Technology Services company that has a Technological Operations Center for outsourcing systems services GMP, which is the Petroleum Services company that drills oil wells for third parties, operates two petroleum fields in northern Peru and has formed Consorcio Terminales, a consortium with Oiltanking of Germany for the operation of fuel terminals in Peru and Bolivia. Recently, a Natural Gas Fraction- ation Plant, which is being expanded, was acquired in Talara GMI, the Engineering Consulting company that has a subsidiary specializing in Environmental Engineering called ECOTEC 13 GyM, the original construction company, which has four divisions: Electromechanics, Civil Works, Buildings and Real Estate Concar, the company specializing in the operation and maintenance of highways under concession concar Larcomar, the company that operates Larcomar Entertainment Center in the Lima district of Miraflores that was recently expanded to include an important commercial area, which became the company Fashion Center S.A. 14 Concessions In recent years we have been successful in attaining our objective of ensuring the stability of the Group by achieving the development of knowledge and skills in design, construction, finance and the operation of Infrastructure Concessions, which is clearly the way that large projects will be carried out in the future. The Builder-Concessionaire model generates extensive synergies between the different business lines of the Group. In the economic aspect, the cycles of concessions are long-term, sometimes 60 years, in comparison with 1 or 2-year construction contracts. Concessions produce very stable margins, although they are capital intensive, while construction companies require less capital and generate cash flow. In operations, the two areas strengthen and complement each other in execution and maintenance work. Currently, we own shares in the concession companies listed below. Larcomar Concessionaire of the Larcomar Entertainment Center and Fashion Center in Miraflores CLHB Compañía Logística de Hidrocarburos de Bolivia (Hydrocarbon Logistics Company of Bolivia), is also operated by Consorcio Terminales. This company is included in Bolivia’s TGP Nationalization of Hydrocarbons (Transportadora de Gas del Decree, which has not yet Perú), the company that was been implemented. awarded the contract for the construction of a transportation and distribution system for gas from Camisea. Norvial Concessionaire for Road Network No. 5, the Northern Lima highway from Ancón to Pativilca Consorcio Terminales In association with Oiltanking of Germany, which operates fuel storage terminals in Peru, the Camisea Loading Dock in Pisco, and NASH Storage and Dispatch facilities at the Matarani Port 15 Concar Concesionaria Norvial Concession for the IIRSA Norte S.A. Arequipa - Matarani Highway a company that has the until December 2007 concession contract for the 980 Km Paita-Yurimaguas Highway. Concesionaria IIRSA Sur A company that is building the 2nd and 3rd sections of the Interoceanic Highway to Brazil Canchaque Survial the concessionaire for the The company that toward the Buenos Aires-Canchaque end of 2007 won the Highway, to be built starting concession contract for the 750 in early 2008 km first phase of the Interoceanic Highway between Cuzco and Nazca 16 International Development During the year, our Group has had contracts in three other countries as a consequence of a decision we took some years ago to develop business outside of Peru, due to the need to be competitive internationally rather than only in one market. República Dominicana GMI completed its work of supervising the expansion of Hotel Paradisus for the Sol Meliá Group and is now supervising the 1800-room Hotel Moon Palace Project in Punta Cana. 17 Bolivia At the beginning of the year, GyM finished work on the Construction and Assembly of equipment for the San Cristóbal Polymetallic Mining Project in the Potosí area. Through CLHB, in association with Oiltanking, we operate the fuel Transport and Storage system in Bolivia. Argentina GMI is in charge of Detail Engineering for the San José Mining Project in the province of Patagonia, Argentina. 18 18 2. DIFFERENT ANGLES OF STABILITY 19 19 2. DIFFERENT ANGLES OF STABILITY 2020 21 GMD OUTLOOK: STRONG BASES In the year 2007, GMD increased its market share in the Help Desk and Technological Outsourcing business and consolidated its leading position in the Software Factory business. These results have enabled us to improve our financial position and lay the foundations for solid future growth. The total activity of the company for the year was US$ 32 million, and maintenance of software, as well as positioning the company which generated an EBITDA margin of 11.4%. During the year, as the first Information Technology company in Peru to obtain financial debt was reduced by US$2.3 million and significant this international certification. Following the strategy of investments were made in the amount of US$2.35 million for the consolidating processes and operations, the Project purpose of maintaining the growth of the Outsourcing business Management Office (PMO) was created for the purpose of and following the strategy of executing projects with stable flows. standardizing processes and the methodology for all of the company’s projects. Additionally, it reaffirmed its commitment The activity generated by the Help Desk and Technological to Quality Management by renewing the ISO 9001 certification Outsourcing business amounted to US$10.26 million, which of all of its processes for the third time in 9 years. represents 79% growth compared to the year 2006. The activity generated by the service business amounted to US$ 23.19 The Human Management strategy initiated in 2005 that was million, representing 6.32% growth compared to 2006 and 66% aimed at improving the workplace climate, identifying skills of the total activity of the company. This growth only validates by role, evaluating performance and recognizing adherence to our vision and further consolidates our leadership in this market our values, permitted a 15% improvement in the workplace segment. In the technology sales business, GMD had 11.39% climate and simplification of the organizational structure. During growth and increased profitability by 14.40% compared to the the year, a Manager and Project Supervisor training program previous year, in accordance with the commercial selectivity was initiated, as well as a Leadership Encounter program aimed strategy adopted. at transmitting and communicating the results, achievements and problems of each GMD business in order to align the efforts During the year 2007 GMD obtained SAP Hosting Partner of the company and our personnel. Additionally, communication certification and expanded 100% of the Outsourcing contracts, and recognition of our personnel were enhanced through in addition to being recognized once again by our partners – different means and events, being the most remarkable awards: Cisco Systems, Hewlett Packard and Microsoft – as their Internal Educator of the Year, GMD Values Award, and Circle principal partner in the country. of Excellence. GMD obtained level 3 CMMI certification in Software Factory, The following is a list of the main projects on which GMD thereby guaranteeing reliability and quality in the development has worked. 22 Industry and Commerce Sector Governmental Sector Repsol ONP Outsourcing of the billing and fuel dispatch service nationwide. Avícola San Fernando Renewal and extension of the contract through the year 2010. Comprehen- sive Outsourcing of Technology and Support of Oracle Suite systems. Romero Group Implementation of SAP Solution Manager 4.0 processes; support provided for SAP Service Desk; support provided in the implementation of SKIMO Ecuador roles and profiles. Backus (Oficina de Normalización Previsional / Pension Fund Normalization Office): DyM II Software Factory; outsourcing of DataCenters, user service and file. Osinergmin Outsourcing of Supervision of the Regulatory Application for Handling Claims, Field Supervision and Supervision of Regulatory Compliance. Consucode Integral System for the Peruvian electronic public procurement platform. Renewal of outsourcing of the communications system and of the Help Sunarp Desk service nationwide. Schlumberger User support contract; acquisition of database server for the Real Estate Management Department of ZR No. IX, Lima Office. Service contract for Technical Support and Operation; administration and operation of the database for Perupetro’s exploration and Banking and Finance production of hydrocarbons. Unique AFP Integra Expansion of the Help Desk service in relation with the number of users and Outsourcing of the Software Factory for the Development and countries (Guatemala, Ecuador, Bolivia); management of servers and help desk. Maintenance of Free Disaffiliation Systems, new account statements Saga Renewal of the Platform for the SAB System (Sistema Automático de Bodegas/Automatic Store System), Oracle Financial, Alpha Servers, network equipment for stores. Telecommunications Sector and creation of the AS/400 testing environment. AFP Horizonte Outsourcing of Application Maintenance: Pension Fund Management, Revenues, Administration, Human Resources, Development and Maintenance of the Free Disaffiliation System and new account statement, implementation of Sarbanes Oxley (SOX) processes. Telefónica Software Factory Systems ATIS: Customer Service, Billing, Collection and Integration, Maintenance of Legacy System, System Design, Testing and Integration. GeneralManagerJaime Dasso Botto 23 2424 25 GMI OUTLOOK: CONSOLIDATION LEADERSHIP The year 2007 was one of the greatest years in the history of GMI in terms of progress, as the company consolidated its clear position as one of the leaders in Engineering Consulting in Peru. Sales grew 136% compared to the preceding year, totaling US$22.6 MM, with EBITDA of US$ 3.6 MM and net income of US$ 1.8 MM. In addition, we made considerable progress in Organizational At the national level, the following projects were among the Development, promoting innovation and Knowledge Mana- most important. gement, attaining 16,962 hours of training, 37 discussion fo- rums and 19,117 inquiries in the information system, as part We see 2008 as a year of great opportunities for GMI. Our of the new Comprehensive Knowledge Management Plan. country and the region as a whole have macroeconomic indi- We also renewed our ISO 9001:2000 Quality Certification and cators that reflect continuous growth. The recently signed FTA expanded that certification to include Supervisory Consul- with the United States and the possibility that Peru will receive tancy Services. an investment grade rating in 2008 entail many opportunities in which GMI will undoubtedly play a prominent role. This will Regarding our international activity, we successfully completed demand intensive use of knowledge; therefore, Knowledge the expansion of Hotel Paradisus Punta Cana for Meliá. We Management and Organizational Development become key also supervised the Hotel Moon Palace project in the Domini- elements for our future development. We must instill a cul- can Republic for the Mexicana Palace Resorts chain and we ture of innovation and continuous improvement, building our provided engineering services for the expansion of a Gold Con- management capacities and continuously updating technical centrator Plant for Minera Santa Cruz in Argentina. knowledge. 26 Mining Sector Compañía Minera Antamina Under the Engineering Framework Contract, the following projects were carried out: • Construction Management for the Supervision of the Tuchsh Seepage Return Line project • Supervision of Microcell Sparger Mobi • Basic engineering for new building at Yanacancha Camp • New Yanacancha Camp facilities Sociedad Minera Cerro Verde S.A.A. Under the Engineering Framework Contract, the following projects were carried out: • Expansion EW Electro Mining facilities • Nash Concentrator Plant Warehouse • New Pad 1X • Drinking water plant upgrade at concentrator • Expansion of Jacking Header at the Tailings Dam Compañía Minera Volcán S.A.A. Doe Run Perú • Materials management for the new Lead Circuit Sulfuric Acid Plant • Feasibility study on New Rectifiers for the Lead and Copper Refinery Canper Exploraciones S.A.C. • Feasibility study on existing tailings • Pinaya Project Minera Quellaveco • Study on Alternatives for Access Roads Leading to the Quellaveco Project Facilities Minera Yanacocha S.R.L. • Detail engineering for new East Sector Acid Water Treatment Plant - Pampa Larga. Process, Basic Pipeline Plot P&IDS, Topography Construction and Industry Neptunia • Technical profile for Dock 5 Expansion, Port of Callao Cemento Andino S.A. • Service contract on Industrial Clean Up and Waste Management per- • Conceptual study on the expansion of the Victoria Plant to 5,000 MTPD formed by our subsidiary, Ecotec S.A. • Detail engineering and supervision of the Victoria Plant expansion GyM Río Tinto Minera Perú Limitada S.A.C. The following also merit mention: • Engineering for La Granja Camp • Project Management: La Granja Camp, health facilities and site prepa- ration for the Acid Water Treatment Plant • Management of Community Office Remodeling Project • Querocoto - La Granja Highway repair work • Supervision of the electrification in the communities neighboring the area of influence of La Granja project • Definitive engineering for the construction of La Granja – Northern Route Access Highway • La Granja Procurement and Construction Management Kvaerner Peru S.A. • Engineering for Pariñas Gas Plant Hydrocarbons Petroperú S.A. • Supervision of Environmental Remediation at La Pampilla Refinery and its sales plant Refinería La Pampilla Under the Engineering Framework Contract for Investment Projects, approxi- mately 40 projects were carried out, some of the most important of which were as follows: • Updating of P&ID Plans for La Pampilla Refinery • Flexibility study on the old 16” wastewater pipeline •Detail civil and structural engineering for the Doe Run Peru Copper • Regularization of municipal files Circuit Acid Plant GeneralManagerWalter Silva Santisteban 27 Pluspetrol Perú Corporation • Engineering and design of the Cashiriari 1 and 3 platforms • Engineering for improving the water recovery system of the tailings dam Barrett Resources LLC • Basic Engineering of the Dorado –Andoas oil pipeline Infrastructure and Transportation Provías Nacional • Project supervision: Improvement of the new Mojón-Chiquian-Aguia Highway interchange, Conococha-Huallanca Highway, Section1: Mojón Chiquian • Supervision of repair and improvement of the Tarapoto-Juanjui highway, section Km. 34+000- Km.-59+000 Survial • Inspection of the Ricardo Palma Bridge-Pucallpa Section, IIRSA Center project • Definitive Engineering Study for the reconstruction and repair of the Buenos Aires-Canchaque section of the old Piura-Huancabamba Highway Pan American Interchange 2828 29 GMP OUTLOOK: INVESTMENT INITIATIVE The year 2007 was exceptional for the petroleum industry due to the increase in the price of crude oil during the period; additionally, the country’s economy and a favorable investment climate contributed toward GMP’s record sales and net income, exceeding US$59 million and US$16 million respectively. In line with GMP’s development strategy, this year we initiated the purpose of transporting LPG. In addition, other hydrocar- operations at the new Matarani Chemical Terminal for sodium bon terminal projects in Chile and Central America are being sulfhydrate and, in the early part of the year, the new 41 MMP- evaluated, as well as some projects related to petrochemistry, CD Talara Gas Fractionation Plant will begin operations. biofuels and port development in the country. This is a good time to initiate investment projects in our sec- Our forecast for 2008 enables us to expect a year with a high tor. We have presented a private initiative to PROINVERSION level of activity and growth, as well as excellent results. to build and operate a poliduct between Pisco and Lurín for 30 Petroleum and Gas Production Nine successful development wells were drilled in lots I and V in the northeast, which increased our developed reserves by 1,000,000 barrels, and the production obtained during the year amounted to 369,372 barrels of petroleum, which was 12% higher than for 2006. A drilling campaign including 11 development wells is planned for the year 2008. Drilling During the year 2007, 38 wells were drilled with a total depth of 141,568 feet, which was 70% more than the number of feet drilled in the year 2006. Talara Gas Plant The quantity of natural gas processed in the existing plant was 9.7 BSCF, which is equivalent to 26 MMSCFD. The production of liquids amounted to 264,700 barrels.Regarding the new plant project, by the end of the year, the detail engineering designs and the acquisition of equipment had been completed, while progress on civil works was 52%. Plant start-up is programmed for the first semester of 2008. Consorcio Terminales During the year, Consorcio Terminales (GMP-Oiltanking) dispatched an average of 57,111 BPD of products from the country’s terminals, which accounted for a 10% increase over the previous year. The storage volume contracted by our users was 1.68 MMBLS on average, amounting to a 12% increase in relation with the year 2006. Regarding our operations at the Camisea Terminal in Pisco, 108 ships were loaded during the year with a volume of 11.4 million barrels. LQS Matarani In the month of June, LQS (Logística de Químicos del Sur / Southern Chemical Logistics) started up operations at the Port of Matarani and received 19,125 tons of sodium sulfhydrate (NaSH) for our mining clients. CLHB (Bolivia): Our operations in Bolivia through CLHB were carried out as usual. The volume of products transported through the pipelines was 6.28 MM barrels and the volume dispatched from the plants was 12.36 MM barrels. Regarding the nationalization process in which CLHB is included, no major events occurred. GeneralManagerFrancisco Dulanto Swayne 31 3232 33 GyM OUTLOOK: NEW RECORD In the year 2007, GyM’s steady growth in the construction market continued; a new sales record of US$ 372 million was attained, with after tax profits of US$ 23 million. It should be noted that the company has a backlog of US$ 405 million, which guarantees its growth and continuity in the coming years. Graña y Montero S.A.A. obtained the Marcona-Nazca-Puquio- graduated from several universities in Peru who have received Abancay-Cuzco-Urcos (Survial) and Buenos Aires-Canchaque on-going training through our Corporate Learning Center. In (Piura) highway concessions, for which GyM will roll out the year 2007, 121 engineers with diverse specialties were projects in the approximate amount of US$ 75 million and US$ incorporated. 15 million, respectively, beginning in 2008. In line with its strategy of decisive participation in the professionals, a skill-perfecting program called “Developing construction of economical housing, in the month of May, GyM Project Managers” was designed in association with the Senior was the contract award winner in the first major contest held Management Program run by the Universidad de Piura, which by MiVivienda fund for the execution of the project Los Parques has been training the company’s future Project Managers since It should be noted that continuing with the development of these del Agustino, on a 228,000 m2 piece of land pertaining to the August of 2007. former military base, La Pólvora, located in the district of El Agustino, where we will build 3,400 homes, commercial areas The main projects in which we have participated during the and an area dedicated to education. year 2007 are listed below. As a result of our internal project to improve processes, this year the Project Management Control Department was created within the organization. In the month of November, it obtained ISO 9001 certification by Bureau Veritas. The significant growth achieved by the company in recent years has been based on hiring the best young professionals 34 Mining Sector Minas Buenaventura 14,573 m of ramps and crossings and 729 m of stacks in Orcopampa and 940 m of crossings in Poracota. Minera El Brocal 9 years working together in the open pit mine, moving 6,255,442 m3 of earth and 712,684 m3 of mineral in 2007. Minera Goldfield La Cima Civil works and mechanical assembly in the Cerro Corona Project. Minera Yanacocha Goldmill civil works Votorantin Metais, Cajamarquilla S.A. Structural and electromechanical assembly, Indio Plant Minera Río Tinto Exploratory tunnel in La Granja mine Milpo El Porvenir dam Energy Sector Pluspetrol Norte Reinjection of production waters. Environmental improvement program Highway maintenance LNG Pampa Melchorita Liquefaction Plant Camps – preparatory work and main civil works Pluspetrol Corporation Expansion of the gas compression plant in Malvinas GMP Expansion and modernization of the Pariñas gas plant Ministerio de Energía y Minas San Gabán Mazuco - Puerto Maldonado transmission line Infrastructure Sector IIRSA Sur – Section 2: 300 Km Urcos-Inambari Highway - 86 kms paved during the year IIRSA Sur- Section 3: 403.20 Km Inambari-Iñapari Highway - 115 kms paved during the year IIRSA Norte 57 kms. of the Tarapoto-Yurimaguas Highway paved during the year 64 kms of Highway Piura-Olmos paved during the year Sedapal Lots 6, 7 and 10. 712,684 m3 of water connections to households and 20,345 of sewer connections to households made during the year Norvial 88 kms paved and 547 kms with surface treatment during the year. Construction of the Huaura and Pativilca Bridges Municipality of Metropolitan Lima Paseo de los Héroes Navales Interchange Construction and Real Estate Development Sector Double Tree Hilton 124-guest room Hotel Paracas Novotel 210-room hotel in San Isidro Clínica Ricardo Palma New office building INSERFINSA Santo Toribio office building Ferreyros New institutional headquarters Minera Hochschild New institutional building Graña y Montero S.A.A. Expansion of institutional headquarters Inmobiliaria Viena S.A. Golf Millennium Project Residential Building Balta 1070 Miraflores Residential Building Golf Los Inkas Monterrico Telecommunications Sector Telefónica del Perú Transmission and radio work. Work on switching. Work on transmission- installation of Huwei Metro 1000 equipment. Installation of Microlink radio equipment. Minilink radio links. Work on relocation of lines and ISDNI. Radio frequency and switching optimization work. EMSA Structured cabling of the fire detection system and CATV GyM Fiber optic and copper campus backbone at the Pampa Melchorita project GeneralManagerJuan Manuel Lámbarri Hierro 35 36 36 concar 37 CONCAR OUTLOOK: MORE KILOMETERS Continuing with the growth plan initiated in 2006, in 2007 CONCAR consolidated its leading position gained by winning the contract for the operation of Section 1 of the Interoceanic Highway (from Nazca to Cuzco) with over 750 Km and the contract for periodic and routine maintenance of 400 Km of highway located near the city of Tacna in relation with the Peru Project (Proyecto Perú). With these 2 new contracts, CONCAR attains over 2,400 Kms of fulfilling every single part of the schedule and making it the first highways in operation, and an increase in the number of kilometers highway concession in the country to be completed and handed of highway for which it is responsible is forecasted for 2008. For over to the State to be then granted in concession again. this purpose, CONCAR plans to continue participating in the Peru Project, in which the Peruvian government plans to hold Additionally, in line with the objective of specializing in highways, a call for tenders for over 7,000 Kms of highway asphalting and the equity corresponding to the concession for the Ovalo Gutiérrez road grading during the year, as well as to continue participating parking garage was split off and sold to a specialized company. in the highway concession contracts in which our group has obtained a clear leadership position in recent years. The results were quite satisfactory; sales grew 30% to US$14.6 million and profits amounted to US$1.5 million. Another achievement in 2007 that should be noted is the completion of the Arequipa-Matarani Highway concession, The following are the concession projects that were in operation which we operated efficiently for over 12 consecutive years, during 2007: 38 concar Arequipa – Matarani Highway Concession Following the tendency of recent years, in 2007 revenue from traffic increased by more than 15% in comparison with the previous year. After a little over 12 years, this 100.7 Km highway concession was returned to the state on December 7. Operation and Maintenance of the Ancon – Huacho – Pativilca Highway CONCAR satisfactorily carried out the operation and maintenance of the highway and also assisted Norvial S.A. in developing procedures for technical solutions to specific problems along the 280 Km highway. Operation and Maintenance of the Northern IIRSA Highway between Paita and Yurimag Since April of 2006, CONCAR has satisfactorily handled the operation and maintenance of the Northern IIRSA highway, which is approximately 1000 Km long. Operation and maintenance of Section 1 of the Interoceanic Highway On December 06, the operation and maintenance work began on 755 Kms of highway between Puerto de San Juan de Marcona in Ica and the city of Urcos in Cuzco. Contract on Routine and Periodic Highway Maintenance on 400 kms of road Tacna – Camiara Bridge, Tacna – Tarata, Tacna Palca, Tacna – La Concordia and Tacna – Ilo, in association with GyM. Maintenance work began on December 5. GeneralManagerJaime Targarona Arata 39 4040 41 LARCOMAR OUTLOOK: SURPASSING EXPECTATIONS During the year 2007, Larcomar surpassed growth expectations, conso- lidating its new commercial offering with the expansion that opened in December 2006, restructuring the company administratively and finan- cially, and reaffirming its leading position in the tourism, commercial and entertainment industry. Financially, Larcomar has completely reprofiled its debt, Due to the drills and professionalism of its personnel, Larcomar extending the payment period to 14 years and reducing the has been considered an example in terms of security by the effective interest rate through a leasing arrangement. The most important media. amount of this financial engineering was US$ 25.3 million and included the sale of all of its assets and liabilities, as well as the Organizationally, the 200-member Larcomar staff has gained transfer of its equity to a related company, Fashion Center S.A., considerable experience, which has been reinforced with 49 which is the current owner of the business. hours of training and leadership programs annually. We have also grown with regard to our CSR activities. We actively Commercially, Larcomar has successfully changed its image, participate in Miraflores City Hall’s “Adopt a School” program, replacing its former logo with an up-to-date logo that represents through which we donated a computer laboratory for students at the growth and changes it is undergoing. The commercial the Juana Alarco de Dammert primary school, as well as in the activity, which goes hand-in-hand with the economic growth of activities of the Miraflores Safe Tourism Association (known by the country and is aimed at offering a pleasant experience in an its Spanish acronym: Asetumi), in which we facilitated the atmosphere of quality and security, has attracted 5.75 million installation of a Tourism Police Station in the district. visitors, including 600 thousand tourists. This is 12% more than in 2006 and has enabled our operators to invoice a total of US$ In the year 2007, the result of these strategies has been an 47 million dollars, 57% more than for the preceding year. occupation rate of 98% of the leasable area and total billing of Additionally, 95% of our visitors stated that they were satisfied or US$ 8.8 million, generating EBITDA of US$ 4.2 million, amounts very satisfied with the experience they had in Larcomar. that are 45 % and 46 % higher , respectively, than those of Continuing with the strategy of inserting Larcomar in the tourism 2006. circuit in the city of Lima and enhancing its cultural offering, the The growth attained, together with the last 4 years’ results, a Gold Museum of Peru Salon, an important effort containing a team of committed professionals, and the support of our high-level display of 200 Pre-Colombian pieces, was opened. shareholders, will enable us to take advantage of the significant Our concept of being part of the modern facet of the city has opportunities arising in our country with a great chance of been reinforced with the cultural offering, which is widely success, thereby contributing toward the generation of value for recognized now by the sector through major travel agencies, our shareholders, clients, employees and society in general. hotels and public institutions, and publicized at international fairs and in the principal tourism forums. 42 Real Estate Area Burger King Main operators, advertisers and franchises Alpaca 111 Nike Air Sport Club by Nike Liliana Castellanos GMO NU Íbero Giuliana Testino Tatoo Hush Puppies Florsheim Swatch Timberland Pizza Hut KFC Bembos Starbucks Tony Romas Laritza Café Café Mangos Makoto Aura Gótica UVK La Dama Juana Backus Phillip Morris Telefónica Claro GeneralManagerAntonio Rodríguez Canales 43 4444 3. INWARD LOOK 4545 3. INWARD LOOK 46 Social Responsibility Continuous commitment to our corporate values of Quality, Dependability, Reliability and Efficiency not only determines our actions and supports our growth; it also upholds the recognition of socially responsible behavior toward our clients, shareholders, workers and the communities with which we relate in carrying out our operations. During the year 2007, not only have we continued developing qualifications and skills that can be used in community work Social Responsibility Plans for the different projects we lead; but projects and sustainable development of their communities. we have expanded our outreach to the community, developing pilot projects to provide technical assistance to communities During the year 2007, in accordance with our corporate policy interested in carrying out their own social investment projects, of transparency and as members of the Global Compact which in many cases have resources from mining or petroleum promoted by the United Nations, we reported to the UN on “canon” royalties. However, they lack the technical skills that social responsibilities fulfilled, thereby making them public would enable them to use resources efficiently. This program’s knowledge. Additionally, the annual audit of our projects first project was helping the community of Orcopampa, required by the IDB and performed by the company Walsh Peru located 4,500 meters above sea level, with the engineering and S.A. verified our adherence to good social practices in relation technical file elaboration for a drinking water and sewer project with the projects. in that town. Sharing our technical knowledge to benefit society strengthens our social commitment. Within our organization, we have put the highest-priority commitment to our workers into practice by implementing With education as a key element in our project’s Social human resource management policies aimed at their personal Responsibility Plans, we have increased our line of action aimed and professional development, as well as providing them with at broadening the job skills of the residents of the communities safe working conditions. where we operate through Job Skills Workshops that enable them to work in civil construction. These qualifications not only facilitate their access to the job market; they provide them with 4747 48 Human Resource Management The economic growth of the Group has resulted in a substantial increase in the total number of workers, which is now 11,880. The group of employees has increased to 3,508, 37% of whom have been with the company less than 30 years. Among our professionals, 80% are engineers with different specialties. In view of this growth, and in order to support efficient human ved, with emphasis on content related to leadership and resource management aimed at the development and welfare teamwork. of our workers, Meta 4 human resource software has been acquired and installed. The year 2007 has also been one of progress in internal com- munication, with the development of electronic bulletins and Because we are an organization mainly composed of engi- magazines issued by the different companies that enable us neering professionals, and with knowledge management as a to know each other better through the work we perform each central element, training activities have been given priority in day as individuals and team members. The sporting events coordination with our Corporate Learning Center. The basic, and social activities held by the different companies, as well intermediate and advanced training programs aimed at deve- as within their projects, merit special mention. Many of them loping professional skills, as well as identification with our va- were organized by the workers themselves with support from lues and corporate personality, have not only had a greater the company. number of participants; they are continuously being impro- Distribution by age As of 12/31/07 No. of Employees Under 20 From 20 to 30 From 31 to 40 From 41 to 50 From 51 to 60 From 61 to 65 Over 65 Total Population Statistics As of 12/31/07 No. of Persons Organization Head offices Projects Total Gender Masculine Feminine Total Hierarchy Senior Management Employees Interns Independent professionals Laborers Total 49 Holding GyM GMD GMP GMI CONCAR Larcomar Total 0 9 14 11 8 1 1 3 398 326 196 110 18 10 0 317 363 96 16 1 1 0 45 78 107 105 14 9 0 179 173 57 43 4 4 10 325 271 99 30 4 2 0 14 18 13 5 0 0 13 1,287 1,243 579 317 42 27 44 1,061 794 358 460 741 50 3,508 Holding GyM GMD GMP GMI CONCAR Larcomar Total 44 0 44 30 14 44 22 22 0 1 0 163 898 1,061 870 191 1,061 6 1,055 82 8 8,016 330 464 794 552 242 794 28 766 31 0 0 57 301 358 330 28 358 14 344 4 3 0 45 9,167 825 365 207 253 460 368 92 460 5 455 0 166 64 690 11 730 741 665 76 741 4 737 2 0 0 50 0 50 37 13 50 3 47 2 2 0 862 2,646 3,508 2,852 656 3,508 82 3,426 121 180 8,080 743 54 11,889 50 Educational Statistics As of 12/31/07 No. of Persons Employees on subsidiary payrolls Engineers/architects with post graduate degrees Other professionals with post graduate degrees Engineering/architecture professionals Other professionals Total Professionals Technicians Total employees on subsidiary payrolls Laborers Specialized laborers Unskilled laborers Laborers with subcontractors Total Total Personal Interns Independent professionals Total Grand total Holding GyM GMD GMP GMI CONCAR Larcomar Total 13 5 4 18 40 4 44 0 0 0 0 52 5 563 155 775 286 1,061 2,786 4,139 1,091 8,016 16 0 319 54 389 405 794 0 0 0 0 16 2 56 21 95 263 358 0 0 0 0 44 9,077 794 358 0 1 1 82 8 90 31 0 31 4 3 7 45 9,167 825 365 6 3 274 40 323 137 460 0 64 0 64 524 0 166 166 690 4 24 38 0 66 675 741 0 0 0 0 0 4 3 10 17 33 50 0 0 0 0 107 43 1,257 298 1,705 1,803 3,508 2,786 4,203 1,091 8,080 741 50 11,588 2 0 2 2 2 4 121 180 301 743 54 11,889 51 Hiring Arrangement Statistics 2006-2007 12/31/06 vs. 2/31/07 No. of Persons Holding GyM GMD GMP GMI CONCAR Larcomar Total 6 0 . 2 1 . 1 3 7 0 . 2 1 . 1 3 6 0 . 2 1 . 1 3 7 0 . 2 1 . 1 3 6 0 . 2 1 . 1 3 7 0 . 2 1 . 1 3 6 0 . 2 1 . 1 3 7 0 . 2 1 . 1 3 6 0 . 2 1 . 1 3 7 0 . 2 1 . 1 3 6 0 . 2 1 . 1 3 7 0 . 2 1 . 1 3 6 0 . 2 1 . 1 3 7 0 . 2 1 . 1 3 6 0 . 2 1 . 1 3 7 0 . 2 1 . 1 3 Type of labor contract Employees With permanent labor relationship 37 44 194 199 175 160 144 190 21 29 27 27 53 47 651 696 With temporary labor relationship 0 0 496 862 660 634 30 168 141 431 385 710 0 3 1,712 2,808 Total Employees 37 44 690 1,061 835 794 174 358 162 460 412 737 53 50 2,363 3,504 Laborers, Common System With permanent labor relationship With temporary labor relationship Special civil construction system (temporary relationship) Total laborers 0 0 0 0 0 0 0 0 608 891 0 4,707 7,125 0 5,312 8,016 0 0 0 0 0 0 0 0 149 0 0 149 0 0 0 0 0 0 73 64 0 0 73 64 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 830 959 0 4,704 7,125 0 5,534 8,080 Total employees and laborers 37 44 6,002 9,077 835 794 323 358 235 524 412 737 53 50 7,897 11,584 52 52 Risk Prevention and Environment Maintaining responsible conduct regarding the environment and the health of the workers while carrying out their activities is a distinctive practice among all Graña y Montero employees. It is a principle upon which our Risk Prevention and Environmental Policies are based. This good practice is an ineluctable commitment to our clients mental accidents and an accident frequency rate of 0.86. and to society, as well as a source of value. The investment that our organization makes to guarantee the In order to guarantee adherence to this commitment, our orga- health and safety of its workers is evident in the growth of a nization has an integrated risk prevention and environmental preventive culture and continuous protection of its workers management system developed according to the guidelines of from work-related risks. In this regard, during the year 2007, no OHSAS 18001 and ISO 14001, which is audited annually by the less than 612 thousand hours were invested in instruction and IDB, thereby enabling us to show evidence of effective, efficient awareness-raising among our personnel on work-related risks, implementation for the benefit of our clients and everyone who and approximately US$3.5 million was spent on the acquisition works on the projects under our responsibility, as well as the of personal and collective protection equipment. environmental setting in the vicinity of our projects. During the year 2007, the Graña y Montero Corporation gene- from our clients who, in virtue of our effort, have renewed their rated no less than 28 million man hours of work, with the efforts confidence in us and given us new projects that strengthen and of approximately 11,800 workers who gave their all in order to prolong our commercial ties. Throughout the year 2007, these results merited recognition carry out their activities adhering to fundamental safety proce- dures integrated in their work and respect for the environment. The commitment of our personnel to the policies of the corpo- ration has enabled us to end the year 2007 with no environ- 5353 54 Knowledge Management The “Learn to Grow” strategy launched in 2006 has been a boost to professional knowledge management in the companies that compose the Group. They set and achieved goals, according to the nature of the company’s activities and its priorities, in each of four strategic action areas: Learning, Being, Sharing and Growing. In this way, the ratio of training hours per employee increased It should also be noted that during the year 2007, 121 young 33% compared to 2006 and, more importantly, the results of professionals participated in the “Developing the GyM Style” surveys and measurements related to satisfaction and impact training program. confirm that this achievement contributes toward our identifi- cation as “a learning organization”. The Board of Directors of the Corporate Learning Center (known by its Spanish acronym, CCA), which is composed of In 2007, 107,354 hours of training were provided, of which 75% the general managers of all the companies and the corporate were taught by our personnel in accordance with the policy of management, was enhanced operationally with the support of developing Internal Educators. a special working group composed of the Human Resources managers of all the companies. This organization has permit- The effort made in the organization and development of the ted better coordination and corporate alignment, as well as a new internal program called “Developing Project Engineers”, fruitful exchange of experiences. in association with the Senior Management School at Universi- dad de Piura, merits special mention. The program is aimed at The progress achieved in 2007 in structuring and sharing perfecting the management skills of our young engineers who knowledge enables us to begin the year 2008 with greater will assume executive management positions in the diverse experience and growing commitment to the “Learn to Grow” projects carried out by companies pertaining to the Group. program. Training Statistics As of 12/31/07 Man hours Description 55 GyM GMD GMI GMP CONCAR Larcomar Total Basic Program – Young Engineers 9,258 2,895 1,362 515 452 Professional Development 29,321 7,671 12,861 10,035 1,980 Collective Memory External Training 924 206 104 93 64 9,371 6,756 2,635 5,992 1,438 1,841 28,033 623 929 28 15,105 62,797 1,419 Grand Total 48,874 17,528 16,962 16,635 3,934 3,421 107,354 Monthly Average Employees 894 817 290 336 48 46 2,431 Training Hours/Employees 54.7 21.5 58.5 49.5 82.0 74.4 44.2 Risk Prevention and Environmental Management - Laborers 566,976 0 775 35,000 8,499 0 611,250 56 Community Relations In carrying out our activities, especially in the execution of projects, we relate with the communities in the surrounding areas permanently showing respect for them and our willingness to contribute toward their sustainable development. In line with our Social Responsibility Policy, priority is given to Our special Corporate Social Responsibility (CSR) projects educational activities. However, they are expanded to include carried out in Arequipa are worth mentioning. Through these activities related to health and the environment, among others. projects, we provided technical assistance to communities that receive mining or petroleum “canon” royalties, but lacked Therefore, the Job Training Workshops held for the local adequate technical skills for managing them. populations where we execute projects is an important activity. These workshops are held in rural, urban and marginal urban On the following table a summary of the different actions carried settings in different parts of the country. out in relation with these special projects is presented, followed by a list of the different CSR actions carried out in the areas of During the year 2007, through the execution of the different Social influence of our operations. Responsibility Plans in relation with our projects, approximately 8,389 persons benefited from educational activities and 1,836 persons took advantage of other activities related to the environment or other topics for the benefit of the community. 5757 58 Special CSR Projects Initiative Current Status Target Group- Direct Beneficiary Location Special CSR Project - Arequipa Technical assistance in the following phases of a project’s life cycle: 1. Phase I: Technical assistance in the formulation of the technical file for the implementation of trunk Phase I, in which assistance was provided in the 6,000 persons in Orcopampa, formulation of the technical file for the Orcopampa Arequipa installation of trunk lines (completed in one month in coordination with the company Minas water pipelines and sewer system for the district Buenaventura and the local government of of Orcopampa 2. Phase II: Assistance in the management of the call for tenders for the technical file, and in the supervision of the works Orcopampa) Technical assistance in the following phases of a Phase I (one a half months), in which assistance 29,600 persons in Mariano Melgar, project’s life cycle: 1. Phase I:Technical assistance in the formulation of a pre-investment study within the parameters was provided in the formulation of a pre- the upper areas Arequipa investment profile study including the scope of of the district of feasibility that was completed for the Mariano Melgar of the National Public Investment Program improvement of the drinking water and sewer (population living in (known by its Spanish acronym (SNIP) and systems in the district of Mariano Melgar in the hills) registration in the SNIP project bank 2. Phase II: Assistance in the management of road works for the project, preparation of technical files, Arequipa, in coordination with the local government of Mariano Melgar and the regional government of Arequipa and calls for tenders Technical assistance in the following phases of a Phase I (01 month), in which assistance was 16,976 persons in Miraflores, project’s life cycle: 1. Phase I: Technical assistance in the formulation of a pre-investment study within the provided in the formulation of a pre-investment the upper areas Arequipa profile study including the scope of feasibility of the district that was completed for the improvement of the of Miraflores parameters of the National Public Investment drinking water and sewer systems in the district (population living in Program (known by its Spanish acronym (SNIP) of Miraflores in Arequipa, in coordination with the hills) and registration in the SNIP project bank 2. Phase II: Assistance in the management of road works for the project, preparation of technical files, and calls for tenders the local government of Miraflores and the regional government of Arequipa. 59 Special CSR Projects Initiative Target Group-Direct Beneficiary Location Opportunities for Basic Temporary Work for the female population of Population of Comas, Independen- Comas , Independencia, San Juan low-income areas cia and San Juan de Lurigancho de Lurigancho, Lima (Mariátegui, Saúl Cantoral, Ganí- medes) Formation of small and medium-size businesses (PYMES) - “Workshop Population of Ganímedes in San San Juan de Lurigancho - Lima on Making Tape Holders”, including training on organization, production Juan de Lurigancho and distribution of the product in formally established family or neigh- borhood businesses Improvements and repairs in bathrooms and infrastructure in schools, Population of San Juan de San Juan de Lurigancho - Lima soup kitchens and PRONOEI, in relation with the apprenticeship for Lurigancho “Job Training Workshops” Plastering and finishing of benches at the Juan Velasco Alvarado public Primary through high school stu- San Juan de Lurigancho, Lima school stadium dents at Juan Velasco Alvarado School in Juan Pablo II, S.J.L Leveling of false floor at the “El Maná del Cielo” soup kitchen Residents of Juan Pablo II, S.J.L. San Juan de Lurigancho - Lima Installation of sewer service for bathrooms, false floor repair, plastering Residents of Canada Housing As- San Juan de Lurigancho - Lima of floors, connection of meter box, and construction of dividing walls sociation in Ganímedes between men’s and women’s restrooms at the Canada Housing Asso- ciation community center Donation of 7 truckloads of rock for the construction of a wall around Students of the Toribio de Luzur- San Juan de Lurigancho - Lima the “Toribio de Luzuriaga y Mejía” school, with manual labor provided iaga y Mejía school in Ganímedes by the urban work program, “A Trabajar Urbano” Construction of 100mt2 floor in the altar and atrium area of the Residents of Fundo El Taro Puente Piedra - Lima Fundo El Taro parish church Construction of 100mt2 floor at PRONOEI La Ensenada Students of PRONOEI “La Ensenada” Puente Piedra - Lima Construction of athletic track at the Kumamoto I School Primary through high school Puente Piedra - Lima students at Kumamoto I School in La Ensenada. Guided visit to the Gold Museum at Larcomar provided for schoolgirls Juana Alarco de Dammert School Miraflores - Lima and teachers Professional talk on the “Preparation of Balanced Meals”, in order to Members of the “Sol Radiante” San Juan de Miraflores - Lima disseminate the importance of the value of vitamins and calories in soup kitchen and mothers of the foods, balanced diets, health and growth Mirador II community in Pamplona Alta, San Juan de Miraflores. Experiential workshop called “Mi Proyecto de Vida y Mi Bandera Per- Adult and adolescent female San Juan de Miraflores - Lima sonal” (My Life Project and My Personal Flag) aimed at fostering an population of the Mirador II enterprising spirit for the achievement of individual and family goals community in Pamplona Alta, San Juan de Miraflores 60 Special CSR Projects Initiative Target Group-Direct Beneficiary Location Gender workshop: “Así soy Yo” (That’s the Way I Am), in which issues Adult and adolescent female San Juan de Miraflores - Lima related to sex, gender, masculinity, femininity, equal opportunities, population of the Mirador II community abilities and skills were discussed as key elements in educating children in Pamplona Alta, San Juan de and understanding male chauvinism in the family and community Miraflores Workshops on “Rights and Child Abuse” and “Awareness and Defense Boys and girls from 8 to 12 years of San Juan de Miraflores - Lima against Physical, Psychological and Sexual Abuse” age of the Mirador II community in Pamplona Alta, San Juan de Miraflores Drawing contest with the theme “What do I want to be when I grow up?”, Boys and girls from 5 to 6 years of age San Juan de Miraflores - Lima including contest organization, announcement and judging, as well as from the Mirador II community in presentation of the awards, in coordination with the Fe y Alegría school Pamplona Alta, San Juan de Miraflores Essay contest on the theme “How can I achieve my goals?”, including Boys and girls from 8 to 12 years of San Juan de Miraflores - Lima contest organization, announcement and judging, as well as age from the Mirador II community in presentation of the awards, in coordination with the Fe y Alegría school Pamplona Alta, San Juan de Miraflores Contest “Popular dishes” at soup kitchens, in coordination with Boys and girls from 8 to 12 years of San Juan de Miraflores - Lima neighborhood leaders age from the Mirador II community in Pamplona Alta, San Juan de Miraflores Donation of banner to women at the Surco soup kitchen to Members of the Surco soup kitchen Santiago de Surco - Lima commemorate the anniversary of its founding Donation of balls and sweets at Christmas time Boys and girls participating in the Santiago de Surco - Lima Donation of a banner to publicize the national vaccination campaign against rubella and chicken pox Healthy Children Program at Las Flores health center in Surco Boys and girls participating in the vaccination program at the health center in Jesus Maria Jesus María - Lima Talk on leadership for the purpose of promoting group work, identification of leaders and guidelines for positive leadership Members of the health center in Jesus Maria Jesus María - Lima Donation of balls and sweets for children in the tuberculosis program at Christmas time Boys and girls in the tuberculosis program at the Miraflores and San Isidro health centers Miraflores y San Isidro - Lima Donation of baskets with a variety of products for Mother’s Day and the anniversary of the “Glass of Milk” program Grassroots organizations (Glass of Milk program and Soup kitchens) Downtown Lima Educational workshops on the rights and responsibilities of children and adolescents Students at the Sebastian Barranca and Simón Bolivar schools Downtown Lima Dance contest for senior citizens for the purpose of bolstering their self-esteem Senior citizens’ center in downtown Lima Downtown Lima Technical advice and support for the reconstruction of a building damaged by earthquake Simón Bolivar school Downtown Lima Donation of balls at Christmas time Grassroots organizations (Glass of Milk program and Soup kitchens) Downtown Lima 61 Special CSR Projects Initiative Target Group-Direct Beneficiary Location Road safety workshop with audiovisual aids and safety charts High school sophomores and Huaral - Lima juniors at José Carlos Mariategui School, Km 73,588 Road safety workshop with audiovisual aids and safety charts High school sophomores and Huaral - Lima juniors at Juan Pascual Pringles School, Km. 79 Road safety workshop with audiovisual aids and safety charts High school sophomores and Huaral - Lima juniors at Alejandro López Durand School, Km. 75.5 Road safety workshop with audiovisual aids and safety charts High school sophomores and Huaral - Lima juniors at Daniel Alcides Carrión School, Km. 91.5 Expansion of soup kitchen – 2nd phase, including construction of stor- Residents of the community of Orcopampa - Arequipa age room and bathrooms, with a view to its alternative use as a touristic Chilcaymarca – Mothers involved in restaurant, whose profits would benefit the segment of the local popula- the Nueva Esperanza soup kitchen tion with the greatest needs Expansion of the training capacity of a traditional weaving workshop, Residents of the Vista Alegre Orcopampa - Arequipa with the installation of two traditional weaving machines for the Vista association Alegre association Donation of 80 Guinea pig studs in order to improve the existing line of Guinea pigs Guinea pig farm pertaining to the community of Umachulco Orcopampa - Arequipa Donation of 250 jackets due to inclement weather in the different communities surrounding the Orcopampa mine Support in organizing a novena to the Virgin of the Immaculate Conception, Mass and reception with hot chocolate afterward at the Orcopampa parish church Children and parents from the communities of Chilcaymarca, Umachulco, Chapacoco and Huancarama Orcopampa - Arequipa Population of Orcopampa Orcopampa - Arequipa Professional counseling talk on the problem of child abuse, in coordination with the health center pertaining to the Ministry of Health Population of the Umachulco annex Poracota - Arequipa Talk on the prevention of sexually transmitted diseases, in coordination with the Ministry of Health in Cañete High school juniors and seniors at the “John Wesley” school in Cañete Cañete - Lima Talk on conflict resolution Remodeling of library and primary school classroom Construction of a sidewalk in the high school section of a school Community of Lomas Nuevo Imperial in Cañete Cañete - Lima “Mater Cristi” school in the district of San Vicente Cañete - Lima “Lorenzo Canepa Pachas” school in the settlement of Nuevo Ayacucho Cañete - Lima Construction of a court on the university campus “Universidad Ada Byron” in the district of Chincha Alta Cañete - Lima 62 Special CSR Projects Initiative Target Group-Direct Beneficiary Location Construction of a court at primary school “Jose B. Sepulveda Fernandez” Cañete - Lima school in the district of San Vicente Construction of a court in the school yard “Nuestra Señora de la Concepcion” Cañete - Lima school in the district of San Vicente Remodeling of a primary school classroom “Cerro Candela” school in the Cañete - Lima district of Nuevo Imperial Construction of a court outside the façade of the Mental Health Center Mental health center in the district Chincha - Ica of Chincha Alta Construction of courts and sidewalks at a school “John Wesley” school in Cañete Chincha - Ica Guinea pig breeding project initiated in the year 2006 in order to Mothers in Colquijirca Cerro de Pasco generate additional income for families in the area, with the participation of 20 women who continue receiving advice Donation of 2 computers to the Colquijirca settlement Residents of the Colquijirca Cerro de Pasco Donation of school supplies settlement School children in the communities of Smelter, Santa Rosa, Huaraucaca, Villa de Pasco, Racracancha and the Colquijrca settlement Cerro de Pasco Responsible Motherhood Week campaign, in coordination with the local health center, including informative talks given at schools, as well as a march down the main streets of Colquijrca Residents of the Colquijirca settlement Cerro de Pasco Remodeling of bathrooms at the “El Tigre” nursery school in the community of Huaraucaca Children at the “El Tigre” nursery school in Huaraucaca Cerro de Pasco Donation of baskets with a variety of products for Mother’s Day Mothers in the communities of Tinyahuarco Cerro de Pasco Organization of children’s celebration at Christmas time in the district of Tinyahuarco Children in the communities of Tinyahuarco Cerro de Pasco Solidarity campaign called “Un Niño Feliz” (A Happy Child), including a donation of toys and organization of a children’s party for the purpose of sharing and bringing joy to the children living in the area Children in the Condorcocha settlement, as well as the Cari Limapuquio and Pomacocha annexes Preventive promotional program on psychological and social health directed toward mothers, using experiential workshops and video forums, as well as advice on developing children’s self-esteem as a preventive measure Mothers living in the province of Tarma in the district of Unión Leticia and the Condorcocha settlement Tarma - Junín Tarma - Junín 63 Special CSR Projects Initiative Target Group-Direct Beneficiary Location Preventive promotional program on psychological and social health directed toward mothers, using experiential workshops and video forums, as well as advice on developing children’s self-esteem Mothers living in the province of Tarma and the Carpapata settlement Tarma - Junín Talk on “Human Sexuality, Adolescence and Teenage Pregnancy” based on group dynamics Two-hour preventive promotional talk on family violence with video- forum methodology Road safety workshops with children, adolescents and teachers at schools located along the highway High school juniors and seniors from C.E. “Coronel Francisco Bolognesi” in Chiquian Mothers in the Glass of Milk program in the province of Coronel Francisco Bolognesi in Chiquian Students from various schools located along the 810 Km. Paita - Yurimaguas highway Coronel Bolognesi - Ancash Coronel Bolognesi - Ancash Paita - Yurimaguas IIRSA NORTE Donation of two libraries stocked with a variety of books Community: Negritos - Túpac Amaru Cultural Nucleus Talara - Piura 64 Corporate Governance Graña y Montero considers the implementation of standards of good corporate governance to be an on-going process of changes and improvements, always with the objective of maintaining the transparency of information and equitable treatment of the shareholders as fundamental management tools. In this regard, since we were listed on the Lima Stock Exchan- the committee have been incorporated in the Board of Directors’ ge in the year 1997, we have progressed in the implementation Regulations, placing emphasis on Social Responsibility as a fun- of improvements and in the enhancement of practices that we damental mission of the company that must be achieved with consider to be adequate and efficient in the management of the active participation of the Board of Directors. As part of this our business. process, the position of Human Resources and Social Respon- sibility Manager has been created. During the year 2007 we made some important changes. The name of the former Human Resources and Remunerations For the second time, we underwent the Self Evaluation of the Committee has been changed to the Human Resources Mana- Board of Directors process in Graña y Montero S.A.A., as well as gement and Social Responsibility Committee. New functions of our subsidiaries, from which we obtained important conclusions José Graña Miró Quesada PresidentMario Alvarado PfluckerInternal Director / General Manager 65 and improvements, among them the delivery of information to shareholders compared to 40 in the year 2006. Lastly, the COM- be reviewed by the Board 3 days before the session and the PANY continues working to improve the quality of information on strengthening of relations among Project Directors as part of the our institutional website. business knowledge process in the field. Along this line, in 2007 we organized two visits to work projects, the Ancón-Huacho- Currently we have 971 shareholders, of which approximately Pativilca Highway was the first project visited, where the Project 12% own less than 1% of the capital stock and nearly 36% hold Directors not only saw the progress made on the construction of from 1% to 5%. On our Board of Directors, we have 4 Inter- the highway; they also saw how the business of charging tolls nal Directors and a majority of 5 External Directors, who are not functions; the second one, Pluspetrol, Camisea Lot 8. company executives, 3 of whom are also independent; that is, they do not own shares in the company. They were chosen due The frequency of meetings held by the Board of Directors’ com- to their professional prestige. mittees was increased in relation with the prior year. The Auditing and Process Committee held 3 meetings during the year, the In- vestment and Risk Committee held 6 meetings, and the Human Resources and Social Responsibility Committee, 3 meetings in 2007. The Shareholder Service Office handled 63 inquiries from José Chlimper AckermanIndependentExternalDirector Jean-Louis DupoirieuxExternalDirector Roberto Abusada SalahIndependentExternalDirector Teodoro E. Harmsen Gómez de la TorreExternal DirectorHernando Graña AcuñaInternalDirector Augusto Baertl MontoriIndependentExternalDirector Carlos Montero GrañaVice Chairman 66 Board of Directors composing President of the Board of Directors of Corporación Drokasa and José Graña Miró Quesada Sociedad Agrícola Drokasa, where he is also the CEO. Director of Ace Home Center, Banco Central de Reserva del Perú, Consorcio President of the Board of Directors since August 1996 and an Exportador S.A. Additionally he is a director of GMD. architect by profession. Additionally he is the President of the Board of Directors of the subsidiaries GyM, GMP, GMD, CON- Jean-Louis Dupoirieux CAR, and LARCOMAR, as well as Vice President of the Board Director since March of 2005 and a civil engineer by profession. of Directors of GMI. He is also a director at Empresa Editora El He is a Project Director at Vinci-Construction Grands Projets Comercio S.A. and Relapasa. (France) and also a director of GyM and Sociedad Concesiona- ria Puente de Chiloe (Chile). Carlos Montero Graña Vice President of the Board of Directors since August 1996 and a Teodoro E. Harmsen Gómez de la Torre civil engineer by profession. Additionally, he is the Vice President Director since August of 1996. He is a civil engineer with a of the Board of Directors of GyM, Vice President of the Board of master’s degree in Structures. President of GMI S.A. and a Directors of GMP and a director of GMD, GMI and CONCAR. director of MDI. Professor emeritus at the PUCP School of Roberto Abusada Salah Science and Engineering. He is also an honorary member of the American Concrete Institute, the College of Engineers, and Director since March 1998, who has a PhD in Economics (Cornell, the Peruvian Academy of Engineering. Recipient of the ACI Joe U.S.A.). He is a director of GMD, CONCAR, Mauricio Hothschild y Kelly Award, among other distinctions. Cía. Ltda. S.A.C. and the Peruvian Institute of Economics (IPE). Mario Alvarado Pflucker Augusto Baertl Montori Director since April 2003 and General Manager. Civil Engineer Director since March of 2005 and a mining engineer by profes- with a master’s degree in Business Administration from George sion. He is the Executive President of Gestora de Negocios e Washington University, U.S.A. Currently, he is also a direc- Inversiones S.A. and IMA Latin America Inc. Additionally, he is tor of GMD, GMI, GyM, GMP, CONCAR, Larcomar, Norvial and the President of the Board of Directors of Agrícola Chapi S.A. América Leasing. and a director of Alturas Minerals, Norsemont, Interbank, GMP and FIMA. Hernando Graña Acuña José Chlimper Ackerman Director since August of 1996 and an industrial engineer with a post graduate degree in Mining Engineering from the Univer- Director since March of 2006 and an engineer by profession. He sity of Minnesota, U.S.A.. He is a director of GyM, GMI, GMP, has a master’s degree in Economics and Business Administra- Ecotec S.A. and CONCAR. President of Norvial S.A. He is also tion from North Carolina State University and holds the position of a director of CAPECO and TGP. Committees As of December 31, 2007, the Board of Directors’ Committees are composed as follows: Auditing and Processes Committee Composed of Human Resources Management and Social Responsibility Committee Composed of Investment and Risk Committee Composed of José Graña Miró Quesada Augusto Baertl Montori José Graña Miró Quesada Roberto Abusada Salah José Chlimper Ackerman Hernando Graña Acuña Jean Louis Dupoirieux Carlos Montero Graña Teodoro Harmsen Gómez de la Torre Steering Committee The Steering Committee responsible for the Group’s coordination is composed of 4 Executive Directors and 6 General Managers of companies in the Group. 67 José Graña Miró Quesada Carlos Montero Graña Hernando Graña Acuña Mario Alvarado Pflucker Juan Manuel Lámbarri Hierro Francisco Dulanto Swayne Jaime Dasso Botto Walter Silva Santisteban Requejo Jaime Targarona Arata Antonio Rodríguez Canales President Vice President Director Managing Director General Manager of GyM General Manager GMP General Manager GMD General Manager GMI General Manager CONCAR General Manager LARCOMAR Senior Executives Francisco Dulanto Swayne Mario Alvarado Pflucker General Manager of GMP S.A. since it was founded in 1984, and a director since 1988. Studies at Universidad Nacional de Ingenie- Corporate General Manager from 1997 up to date. Obtained a ría (National Engineering University), ESAN, PAD Universidad de bachelor’s degree in Civil Engineering Civil from Universidad Ri- Piura. He has been working for the Graña y Montero Group since cardo Palma and a master’s degree in Engineering Administration, 1974. He is also a director of Consorcio Terminales and CLHB specializing in Construction Management, from George Washing- (Bolivia). He was the President of SPE (Society of Petroleum Engi- ton University, U.S.A. Currently, he is also a director of GMD, GMI, neers), Lima Section, in 1991 and Director of the Sociedad Nacio- GyM, GMP, CONCAR, Larcomar, Norvial and América Leasing. nal de Minería, Petróleo y Energía (the National Society of Mining, Petroleum and Energy) in 1993-1994 and 2005-2006. Juan Manuel Lámbarri Hierro General Manager of GyM from 2001 up to date. Civil Engineer Jaime Dasso Botto graduated from Pontificia Universidad Católica del Perú and General Manager of GMD from 2000 up to date. He obtained Senior Management Program (Spanish acronym: PAD) at Uni- a bachelor’s degree in Electronic Engineering and a master’s versidad de Piura. He began working for Graña y Montero in degree in Software Development from Stevens Institute of Te- 1982 and currently, he is also a director of GyM. chnology, U.S.A. He was the Commercial Manager of GMD from 1994 to1999. Currently, he is also a director of GMD. Hernando Graña Acuña GyM director and executive. Industrial Engineer with a post Walter Silva Santisteban Requejo graduate degree in Mining Engineering from the University of General Manager of GMI from 1998 to 2005 and Managing Minnesota, U.S.A.. He is a director of GyM, GMI, GMP, Eco- Director from 2006 to the present. He obtained a bachelor’s tec S.A. and CONCAR. President of Norvial S.A. He is also a degree in Civil Engineering Civil from Universidad Nacional de director of CAPECO and TGP. He has been with the Graña y Ingeniería (National Engineering University). Currently, he is Montero Group since the year 1977. also a director of ECOTEC. 68 Jaime Targarona Arata Kinship General Manager of CONCAR since August of 2005. Civil Engi- neer graduated from Universidad Autónoma de Guadalajara, with Mr. José Graña Miró Quesada, President of the Board of Direc- an MBA from Universidad San Ignacio de Loyola. Since joining the tors, has first degree kinship with Mr. Miguel Valentín Ghezzi, a Group in 1996, he has also held the position of Civil Engineer on di- director of Concar and Larcomar and Business Development fferent projects, Commercial Manager of the GyM Special Projects Manager at Graña y Montero, third degree kinship with Ms. Division and General Manager of Graña y Montero Mexico. Yamile Brahim Graña, shareholder of the company, and fourth Luis Díaz Olivero degree kinship with the director, Mr. Hernando Graña Acuña. Lastly, Mr. Teodoro Hans Harmsen Andress, a director of GMP, Corporate Finance Manager since December 15, 2004. Indus- has first degree kinship with Mr. Teodoro Harmsen Gomez De trial Engineer with an MBA from the University of Pittsburgh. La Torre, a director of the company. Since joining the Group in 1993, he has also been the Finance Manager of GMP S.A (1998 to 2000) and the Finance Manager of GyM (2001 to 2004). Miguel Valentín Ghezzi Business Development Manager since October of 2006. He has a degree in Business Administration from Universidad del Pacífico and an MBA from Harvard Business School. He has been with the Company Name In a corporate split-off from Inversiones Graña y Montero S.A., Graña y Montero S.A.A. was incorporated by public deed on August 12, 1996 and registered on card 131617 and electronic record 11028652 in the Registry of Legal Entities of Lima. Group since November of 2004. He is a director of CONCAR and Larcomar. He has also been the General Manager of CONCAR Capital S.A. (2004 to 2005). Subsequently, he was placed in charge of the financing of the Northern Section of IIRSA from 2005 to 2006. Previously, he worked for Citibank in the Corporate Finance Area. César Neyra Rodriguez The capital of the company as of December 31, 2007 amoun- ted to S/.299,756,683.10, represented by 428,223,830 paid up shares with a nominal value of S/. 0.70 each as a result of an increase in capital stock agreed upon by the General Assembly Manager of Internal Auditing and Management Processes since of Shareholders on March 29, 2007. Principal Shareholders The principal shareholders are: Graña Holdings, represented by José Graña Miró Quesada, President of the Board of Direc- tors, and Vinci Construction, the French company that pertains to the largest construction company in the world. the year 2003. He has a bachelor’s degree in Accounting from Universidad Nacional Federico Villarreal and a master’s degree in Business Administration and Finance from Universidad del Pacífico. He has also studied Quality Improvement Systems and graduated from the Six Sigma Methodology program at Caterpillar University in Mexico and the U.S.A. Claudia Drago Morante Corporate Legal Manager from 2000 up to date. Attorney graduated from the University of Lima. PADE in Finance and Corporate Law from ESAN. She was the Legal Advisor to GMD from 1997 to 2000. Juan José Arrieta Ocampo Manager of Human Resources Management and Social Responsibility since November of 2007. Bachelor’s degree in Sociology from Pontificia Universidad Católica. PADE in Business Administration from ESAN. He was the Human Re- sources Manager at GyM from 1999 through October 2007. 69 List of Principal Shareholders as of 12/31/2007 Shareholder Shares Percentage Nationality Graña Holdings S.A. 90,156,002.00 Vinci Construction (Grupo Vinci) 68,370,420 Prima AFP (Grupo Crédito)* 44,020,299 AFP Integra (ING Group)* 38,427,356 Bethel Enterprises 26,068,490 AFP Horizonte (Grupo BBVA)* 23,650,212 Byron Development 18,440,049 Profuturo AFP (Grupo Citibank)* 18,148,371 Genesis Smaller Companies SICAV 17,094,067 Subtotal 344,375,266 Other Shareholders 83,48,567 Total 428,223,833 *Sum of funds 1, 2 and 3 21.05% 15.97% 10.28% 8.97% 6.09% 5.52% 4.31% 4.24% 3.99% 80.42% 19.58% 100.00% Panama Francia Peru Peru Panama Peru Panama Peru Luxenburgo Shareholding Number of Shareholders Ownership Interest as of 12/31/07 Less than 1% Between 1% - 5% Between 5% - 10% Over 10% Total 954 13 2 2 971 13.98% 36.03% 12.97% 37.02% 100.00% Corporate purpose CIIU - 6719 The company’s main objective is to dedicate its efforts toward Duration of the Company investments and business operations in general, as well as en- gineering services, management consultancy, real estate inves- Graña y Montero S.A.A. was incorporated for an indefinite tments, and the acquisition, transfer and negotiation of shares of period of time. companies, and other securities. 70 Changes in Shares During the year 2007, the profitability of the shares reached 90% including the effect of the issuance of fully paid-in shares in May. The stock market quotation was S/.4.00 per share in January and S/.6.00 per share at year-end closing. The average liquidity dur- ing the period was 97.60 % and the volume traded during the year totaled S /. 333,089,700.27. Monthly Quotation on Shares ISIN Code Mnemonic Year-Month 2007 Quotations Avg. Price S/. Opening S/. Closing S/. Max. S/. Min. S/. PEP736581005 GRAMONC1 2007-1 PEP736581006 GRAMONC1 2007-2 PEP736581007 GRAMONC1 2007-3 PEP736581008 GRAMONC1 2007-4 PEP736581009 GRAMONC1 2007-5 PEP736581010 GRAMONC1 2007-6 PEP736581011 GRAMONC1 2007-7 PEP736581012 GRAMONC1 2007-8 PEP736581013 GRAMONC1 2007-9 PEP736581014 GRAMONC1 2007-10 PEP736581015 GRAMONC1 2007-11 PEP736581016 GRAMONC1 2007-12 Volume Traded GRAMONC1 Vol Neg. US$ Closing Price 30,000,000 25,000,000 20,000,000 15,000,000 10,000,000 5,000,000 0 4.00 4.52 5.56 6.20 7.50 6.51 7.25 6.33 5.55 6.45 6.52 6.30 4.55 5.55 6.20 7.20 6.15 7.25 6.33 5.55 6.23 6.54 6.29 6.00 4.62 5.65 6.20 7.25 8.90 7.55 7.25 6.33 6.25 6.60 6.54 6.50 4.00 4.52 5.55 6.20 6.10 6.18 6.30 5.30 4.99 6.30 5.40 6.00 4.35 5.30 5.84 6.62 7.89 6.80 6.87 5.72 5.55 6.49 5.96 6.16 8.00 7.00 6.00 5.00 4.00 3.00 2.00 1.00 0.00 Jan Feb Mar Abr May Jun Jul Ago Sep Oct Nov Dec 71 Securitization Bonds In October 2003 the company and its main subsidiaries placed Securitization Bonds on the market with a partial guarantee from the IDB and the FMO in the amount of US$ 50 million, with semi-annual interest payments and a maturity date in September 2011. At the end of December 2006, the balance of these bonds was S/. 91,371,000 (US$ 30.6 MM). During the year 2006, the company obtained the approval of the Assembly of Bondholders and the Guarantors to reduce the levels of the IDB and FMO guarantees, release the reserve account and relax certain conditions on the structure of the Bonds that generated operating and tax inefficien- cies. These modifications do not affect the classification of the bonds, which continue to have an AAA rating. Monthly Quotation on Bonds Isin Code Mnemomic Short-Term Instrument 2007 Quotations Avg. Price % Opening % Closing % Max. % Min. % PEP80070F083 INTEOBTG1U Securitization Bonds 102.23% 102.23% 102.23% 102.23% 102.23% Short-term Instruments In November 2006 the company obtained approval from CONASEV to offer a line of short-term instruments on the capital market in the amount of US$ 20 million for a period of two years. As of December 31, 2007, the company had paid the amounts corresponding to both issues outstanding during the year. 72 Historical Summary of the Graña y Montero Group The Group was founded by the engineers Carlos Graña Elizalde, Alejandro Graña Garland and Carlos Montero Bernales 75 years ago in the city of Lima on June 22, 1933, under the name GRAMONVEL. It was a construction company until the year 1949 when it merged Subsequently, the company focused its growth on large, private with Morris y Montero to acquire the capacity to execute projects projects such as the Cuajone and Cerro Verde mines, petroleum involving paving and earth movement under the new name, Graña projects for Shell, Mobil and Occidental, and the Chavimochic y Montero. and Chinecas irrigation projects. In those days, the company participated in the country’s major Following its 50th anniversary celebration in 1983, the company infrastructure works, such as the South Pan-American Highway, launched a Strategic Diversification Plan that led to the formation the Pato Air Base for the government of the United States and the of GMP, the petroleum service company, GMD, the information te- city of Talara, as well as landmark buildings in Lima such as the chnology service company, and GMI, the engineering consulting Ministry of the Economy and the Ministry of Labor. company that together were the origin of what is now the Graña In the nineteen fifties, Consorcio de Ingenieros Contratistas Gene- y Montero Group. rales S.A. was formed to carry out complex projects such as the In the nineties, Graña y Montero actively participated in the Peru- Cañón del Pato Hydroelectric Plant, the Chimbote Steel Mill and vian privatization process as the local partner of Telefónica in Tele- the runway at Lima’s Jorge Chávez Airport, as well as the Ministry fónica del Perú, of ENDESA in the Electrical Generation Company of Education. of Lima, and of REPSOL in its La Pampilla Refinery. 73 In recent years, Graña y Montero has been the first company to Graña y Montero S.A.A. participate in the infrastructure concession program. The com- pany has been involved in the majority of the contracts and is cu- In the year 1996, the company Graña y Montero split into two rrently in charge of the operation of over 2,400 Kms of highways. companies: (i) Inversiones Graña y Montero, and (ii) Graña y Similarly, it has recently started work on the construction of 3,300 Montero S.A. economical housing units, which is the first project of this type in In the year 1997 Graña y Montero increased its capital stock Peru and the groundwork for an ambitious plan to participate in through a public offering of shares, thereby making the com- this market. pany an open corporation traded on the stock exchange. Currently, the Group has 1,364 engineers, is the only company of Graña y Montero S.A.A. is the holding company for the Graña its kind listed on the Lima Stock Exchange, and is clearly the lea- y Montero Group, which owns the shares of its main subsidia- der in the country’s engineering and infrastructure sector. ries: (i) GyM S.A., (ii) GMP S.A.; (iii) GMI S.A.; (iv) GMD S.A.; (v) CONCAR S.A.; and (vi) LARCOMAR S.A., among others. GRUPO GRAÑA Y MONTERO 2007 ANNUAL REPORT OUTLOOK