Corporación GEO, S.A.B. De C.V. 9.25% Senior Guaranteed Notes Due 2020 Interest Payable on December 30 and June 30 Corporación GEO, S.A.B

OFFERING MEMORANDUM U.S.$250,000,000

Corporación GEO, S.A.B. de C.V. 9.25% Senior Guaranteed Notes due 2020 Interest payable on December 30 and June 30 Corporación GEO, S.A.B. de C.V. is offering U.S.$250,000,000 aggregate principal amount of 9.25% senior guaranteed notes due 2020. The notes will mature on June 30, 2020. Interest will accrue from June 30, 2010 and will be payable on December 30 and June 30 of each year, beginning on December 30, 2010. Prior to June 30, 2015, we may redeem the notes, in whole or in part, by paying the principal amount of the notes plus the applicable “make whole” premium and accrued interest. On or after June 30, 2015, we may redeem the notes, in whole or in part, at the fixed redemption prices and subject to the conditions set forth in this offering memorandum. On or prior to June 30, 2013, we may also redeem up to 35% of the notes with the net proceeds of certain equity offerings. In addition, in the event of certain changes in the Mexican withholding tax treatment relating to payments on the notes, we may redeem all (but not less than all) of the notes at 100% of their principal amount, plus accrued and unpaid interest. There is no sinking fund for the notes. See “Description of Notes.” The notes will be unconditionally and irrevocably guaranteed by: GEO Baja California, S.A. de C.V., GEO del Noroeste, S.A. de C.V., GEO D.F., S.A. de C.V., GEO Edificaciones, S.A. de C.V., GEO Urbanizadora Valle de las Palmas, S.A. de C.V., GEO Guerrero, S.A. de C.V., GEO Hogares Ideales, S.A. de C.V., GEO Jalisco, S.A. de C.V., GEO Laguna, S.A. de C.V., GEO Monterrey, S.A. de C.V., GEO Morelos, S.A. de C.V., GEO Puebla, S.A. de C.V., GEO Casas del Bajío, S.A. de C.V., GEO Tamaulipas, S.A. de C.V., GEO Veracruz, S.A. de C.V. and Promotora Turística Playa Vela, S.A. de C.V. The notes will rank equally with our existing and future senior unsecured indebtedness. The subsidiary guarantors set forth above, as well as any future subsidiaries meeting certain criteria, will fully and unconditionally guarantee the notes on a senior basis. Each guarantee will be unsecured and rank equally with all existing and future senior unsecured indebtedness of the subsidiary guarantors. The notes will also be effectively subordinated to our and our subsidiary guarantors’ secured indebtedness to the extent of the value of the assets securing such indebtedness. The notes will be structurally subordinated to indebtedness and other obligations of our non-guarantor subsidiaries. As of March 31, 2010, after giving pro forma effect to this offering, we would have had Ps.6,039.2 million (U.S.$489.8 million) of consolidated senior unsecured indebtedness and Ps.2,093.3 million (U.S.$169.8 million) of consolidated secured indebtedness. For a more detailed description of the notes, see “Description of Notes” beginning on page 86. Application has been made to the Luxembourg Stock Exchange for the notes to be admitted to listing on the Official List and to be admitted to trading on the Euro MTF market. This offering memorandum constitutes a prospectus for the purposes of the Luxembourg law on prospectuses for securities, dated July 10, 2005. Investing in the notes involves risks. See “Risk Factors” on page 14 of this offering memorandum. PRICE 98.409% AND ACCRUED INTEREST, IF ANY The notes have not been registered under the U.S. Securities Act of 1933, as amended (the “Securities Act”), or the securities laws of any other jurisdiction. Unless they are registered, the notes may be offered only in transactions that are exempt from registration under the Securities Act, as amended, or the securities laws of any other jurisdiction. Accordingly, we are offering the notes only to qualified institutional buyers and persons outside the United States. For further details about eligible offerees and resale restrictions, see “Transfer Restrictions” beginning on page 144. The information contained in this offering memorandum is exclusively the responsibility of Corporación GEO, S.A.B. de C.V., and has not been reviewed or authorized by the Mexican National Banking and Securities Commission (Comisión Nacional Bancaria y de Valores, or “CNBV”). The notes may not be publicly offered or traded in Mexico unless they are offered or traded pursuant to the provisions of the Mexican Securities Market Law (Ley del Mercado de Valores) and the regulations issued thereunder. As required under the Mexican Securities Market Law, we will notify the CNBV of the offering of the notes outside of Mexico. Such notice will be delivered to the CNBV to comply with a legal requirement and for information purposes only; therefore, the delivery to and the receipt by the CNBV of such notice does not and will not imply any certification as to the investment quality of the notes, our solvency, liquidity or credit quality or the accuracy or completeness of the information included in this offering memorandum. The information contained in this offering memorandum is exclusively our responsibility and has not been reviewed or authorized by the CNBV. In making an investment decision, all investors, including any Mexican investors who may acquire notes from time to time, must rely on their own review and examination of Corporación GEO, S.A.B. de C.V. The acquisition of the notes by an investor who is a resident of Mexico will be made under its own responsibility. The notes will be ready for delivery in book-entry form only through The Depository Trust Company, the Euroclear Bank S.A./N.V., and Clearstream Banking, société anonyme, Luxembourg, on or about June 30, 2010. Joint Book-Running Managers MORGAN STANLEY CITI SANTANDER June 25, 2010

Las Garzas, Morelos Las Garzas, Morelos

Hacienda del Jardín, Edo. de Méx. Villas del Campo, Edo. de Méx. TABLE OF CONTENTS

Page Page Notice to New Hampshire Residents...... iv Management’s Discussion and Analysis of Notice to Prospective Investors in the United Financial Condition and Results of Operations...... 33 Kingdom ...... iv The Mexican Housing Industry...... 47 Notice to Prospective Investors in European Our Business ...... 57 Economic Area ...... iv Management...... 78 Available Information...... v Principal Shareholders ...... 84 Service of Process and Enforcement of Civil Related Party Transactions...... 86 Liabilities...... v Description of Notes ...... 87 Disclosure Regarding Forward-Looking Taxation ...... 139 Statements...... vii Transfer Restrictions...... 145 Presentation of Financial and Other Information.....viii Plan of Distribution...... 148 Terms Used in this Offering Memorandum...... xi General Information...... 152 Summary...... 1 Legal Matters ...... 153 Risk Factors...... 14 Independent Auditors...... 154 Use of Proceeds ...... 25 Description of Certain Differences between Exchange Rates ...... 26 Mexican FRS and U.S. GAAP...... 155 Short-Term Debt and Capitalization...... 27 Index to Consolidated Financial Statements ...... F-1 Selected Consolidated Financial and Other Information ...... 28

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In this offering memorandum, “Corporación GEO,” “GEO,” “we,” “us,” “our” and “our company” refer to Corporación GEO, S.A.B. de C.V., and its consolidated subsidiaries, unless the context otherwise requires or unless specified otherwise. References to the “Issuer” or the “Company” mean, unless the context otherwise requires, Corporación GEO, S.A.B. de C.V.

You should only rely on the information contained in this offering memorandum. We have not authorized anyone to provide you with different information. Neither we nor the initial purchasers are making an offer of the notes in any jurisdiction where the offer is not permitted.

We, having made all reasonable inquiries, confirm that the information contained in this offering memorandum with regards to our company is true and accurate in all material respects, that the opinions and intentions we express in this offering memorandum are honestly held, and that there are no other facts the omission of which would make this offering memorandum as a whole or any of such information or the expression of any such opinions or intentions misleading in any material respect. We accept responsibility accordingly.

As required under the Mexican Securities Market Law, Corporación GEO, S.A.B. de C.V. will notify the CNBV of the offering of the notes outside of Mexico. Such notice will be delivered to the CNBV to comply with a legal requirement and for information purposes only; therefore, the delivery to and the receipt by the CNBV of such notice does not and will not imply any certification as to the investment quality of the notes, the solvency of Corporación GEO, S.A.B. de C.V. or the accuracy or completeness of the information included in this offering memorandum.

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This offering memorandum does not constitute an offer to sell, or a solicitation of an offer to buy, any notes offered hereby by any person in any jurisdiction in which it is unlawful for such person to make an offer or solicitation. Neither the delivery of this offering memorandum nor any sale made hereunder shall under any circumstances imply that there has been no change in our affairs or the affairs of our subsidiaries or that the information set forth in this offering memorandum is correct as of any date subsequent to the date of this offering memorandum.

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This offering memorandum has been prepared by us solely for use in connection with the proposed offering of the notes. We reserve the right to reject any offer to purchase, in whole or in part, for any reason, or to sell less than all of the notes offered by this offering memorandum. Morgan Stanley & Co. Incorporated, Citigroup Global Markets Inc. and Santander Investment Securities Inc. will act as initial purchasers with respect to the offering of the notes. This offering memorandum is personal to you and does not constitute an offer to any other person or to the public in general to subscribe for or otherwise acquire the notes.

Distribution of this offering memorandum by you to any person other than those persons retained to advise you is unauthorized, and any disclosure of any of the contents of this offering memorandum without our prior written consent is prohibited. By accepting delivery of this offering memorandum, you agree to the foregoing and to make no photocopies of this offering memorandum, and, if you do not purchase the notes or the offering is terminated for any reason, to return this offering memorandum to: Morgan Stanley & Co. Incorporated, 1585 Broadway, New York, NY 10036, Attention: Global Capital Markets, Citigroup Global Markets Inc., 390 Greenwich Street, New York, NY 10013, or Santander Investment Securities Inc., 45 East 53rd Street, New York, NY 10022, Attention: Debt Capital Markets.

You must (1) comply with all applicable laws and regulations in force in any jurisdiction in connection with the possession or distribution of this offering memorandum and the purchase, offer or sale of the notes, and (2) obtain any required consent, approval or permission for the purchase, offer or sale by you of the notes under the laws and regulations applicable to you in force in any jurisdiction to which you are subject or in which you make

ii such purchases, offers or sales, and neither we nor the initial purchasers or their agents have any responsibility therefor. See “Plan of Distribution—Selling Restrictions” for information concerning some of the transfer restrictions applicable to the notes.

You acknowledge that:

• you have been afforded an opportunity to request from us, and to review, all additional information considered by you to be necessary to verify the accuracy of, or to supplement, the information contained in this offering memorandum;

• you have not relied on the initial purchasers or their agents or any person affiliated with the initial purchasers or their agents in connection with your investigation of the accuracy of such information or your investment decision; and

• no person has been authorized to give any information or to make any representation concerning us or the notes other than those as set forth in this offering memorandum. If given or made, any such other information or representation should not be relied upon as having been authorized by us, the initial purchasers or their agents.

In making an investment decision, you must rely on your own examination of our business and the terms of this offering, including the merits and risks involved. The notes have not been recommended by the Securities and Exchange Commission, the CNBV or any state or foreign securities commission or regulatory authority. Furthermore, these authorities have not confirmed the accuracy or determined the adequacy of this offering memorandum. Any representation to the contrary is a criminal offense.

The notes may not be transferred or resold except as permitted under the Securities Act of 1933, as amended, which we refer to in this offering memorandum as the “Securities Act,” and related regulations and applicable state securities laws. In making your purchase, you will be deemed to have made certain acknowledgements, representations and agreements set forth in this offering memorandum under the caption “Transfer Restrictions.” You should be aware that you may be required to bear the financial risks of this investment for an indefinite period of time.

This offering memorandum may only be used for the purpose for which it has been published. Neither the initial purchasers nor any of their agents is making any representation or warranty as to the accuracy or completeness of the information contained in this offering memorandum, and nothing contained in this offering memorandum is, or shall be relied upon as, a promise or representation, whether as to the past or the future. Neither the initial purchasers nor any of their agents has independently verified any of such information and assumes no responsibility for the accuracy or completeness of the information contained in this offering memorandum.

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See “Risk Factors,” following the “Summary,” for a description of certain factors relating to an investment in the notes, including information about our business. None of us, the initial purchasers or any of our or its representatives is making any representation to you regarding the legality of an investment by you under applicable legal investment or similar laws. You should consult with your own advisors as to legal, tax, business, financial and related aspects of a purchase of the notes.

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Notwithstanding anything in this offering memorandum to the contrary, each prospective investor (and each employee, representative or other agent of the prospective investor) may disclose to any and all persons, without limitation of any kind, the U.S. tax treatment and U.S. tax structure of any offering and all materials of any kind (including opinions or other tax analyses) that are provided to the prospective investor relating to such U.S. tax treatment and U.S. tax structure, other than any information for which nondisclosure is reasonably necessary in order to comply with applicable securities laws.

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To ensure compliance with Treasury Department Circular 230, holders of the notes are hereby notified that: (a) any discussion of federal tax issues in this document is not intended or written to be relied upon, and cannot be relied upon, by holders of the notes for the purpose of avoiding penalties that may be imposed on holders of the notes under the Internal Revenue Code; (b) such discussion is included herein by Corporación GEO, S.A.B. de C.V. in connection with the promotion or marketing (within the meaning of Circular 230) by the company of the transactions addressed herein; and (c) holders of the notes should seek advice based on their particular circumstances from an independent tax advisor.

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NOTICE TO NEW HAMPSHIRE RESIDENTS

NEITHER THE FACT THAT A REGISTRATION STATEMENT OR AN APPLICATION FOR A LICENSE HAS BEEN FILED UNDER RSA 421-B OF THE NEW HAMPSHIRE REVISED STATUTES (“RSA 421-B”) WITH THE STATE OF NEW HAMPSHIRE NOR THE FACT THAT A SECURITY IS EFFECTIVELY REGISTERED OR A PERSON IS LICENSED IN THE STATE OF NEW HAMPSHIRE CONSTITUTES A FINDING BY THE SECRETARY OF STATE THAT ANY DOCUMENT FILED UNDER RSA 421-B IS TRUE, COMPLETE AND NOT MISLEADING. NEITHER ANY SUCH FACT NOR THE FACT THAT AN EXEMPTION OR EXCEPTION IS AVAILABLE FOR A SECURITY OR A TRANSACTION MEANS THAT THE SECRETARY OF STATE OF NEW HAMPSHIRE HAS PASSED IN ANY WAY UPON THE MERITS OR QUALIFICATIONS OF, OR RECOMMENDED OR GIVEN APPROVAL TO, ANY PERSON, SECURITY OR TRANSACTION. IT IS UNLAWFUL TO MAKE, OR CAUSE TO BE MADE, TO ANY PROSPECTIVE PURCHASER, CUSTOMER OR CLIENT ANY REPRESENTATION INCONSISTENT WITH THE PROVISIONS OF THIS PARAGRAPH.

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The notes will be available initially only in book-entry form. We expect that the notes will be issued in the form of one or more registered global notes. The global notes will be deposited with, or on behalf of, DTC and registered in its name or in the name of Cede & Co., its nominee. Beneficial interests in the global notes will be shown on, and transfers of beneficial interests in the global notes will be effected through, records maintained by DTC and its participants. We expect the Regulation S global notes, if any, to be deposited with the trustee as custodian for DTC, and beneficial interests in them may be held through the Euroclear System, Clearstream Banking S.A. or other participants. After the initial issuance of the global notes, certificated notes may be issued in registered form, which shall be in minimum denominations of U.S.$100,000 and integral multiples of U.S.$1,000. See “Description of Notes—Principal, Maturity and Interest” for further discussion of these matters.

NOTICE TO PROSPECTIVE INVESTORS IN THE UNITED KINGDOM

This document is only being distributed to and is only directed (i) to persons who are outside the United Kingdom or (ii) to investment professionals falling within Article 19(5) of the Financial Services and Markets Act 2000 (the “FSMA”) (Financial Promotion) Order 2005 (the “Order”) or (iii) to high net worth entities, and other persons to whom it may lawfully be communicated, falling within Article 49(2)(a) to (d) of the Order (all such persons together being referred to as “Relevant Persons”). The notes are only available to, and any invitation, offer or agreement to subscribe, purchase or otherwise acquire such notes will be engaged in only with, Relevant Persons. Any person who is not a Relevant Person should not act or rely on this document or any of its contents.

NOTICE TO PROSPECTIVE INVESTORS IN EUROPEAN ECONOMIC AREA

To the extent that the offer of the notes is made in any European Economic Area (“EEA”) member state that has implemented Directive 2003/71/EC (together with any applicable implementing measures in any member

iv state, the “Prospectus Directive”) before the date of publication of a prospectus in relation to the notes that has been approved by the competent authority in that member state in accordance with the Prospectus Directive (or, where appropriate, published in accordance with the Prospectus Directive and notified to the competent authority in that member state in accordance with the Prospectus Directive), the offer (including any offer pursuant to this document) is only addressed to qualified investors in that member state within the meaning of the Prospectus Directive or has been or will be made otherwise in circumstances that do not require the Issuer to publish a prospectus pursuant to the Prospectus Directive.

AVAILABLE INFORMATION

To permit compliance with Rule 144A under the Securities Act in connection with resales of notes, we will be required under the Indenture under which the notes are issued (the “Indenture”), upon the request of a holder of Rule 144A notes or Regulation S notes (during the Distribution Compliance Period, as defined in the legend included under “Transfer Restrictions”), to furnish to such holder and any prospective purchaser designated by such holder the information required to be delivered under Rule 144A(d)(4) under the Securities Act if at the time of the request we are neither a reporting company under Section 13 or Section 15(d) of the United States Securities Exchange Act of 1934, as amended (the “Exchange Act”), nor exempt from reporting pursuant to Rule 12g3-2(b) under the Exchange Act (“Rule 12g3-2(b)”). As long as we maintain this exemption, we will not be required under the Indenture to deliver information otherwise required to be delivered under Rule 144A(d)(4) under the Securities Act. We have also furnished, and will be required periodically to furnish, certain information, including quarterly and annual reports, to the CNBV and to the BMV. We publish our financial statements in Spanish on the website of the BMV at http://www.bmv.com.mx. Such information does not form a part of this offering memorandum.

The Indenture further requires that we furnish to the Trustee (as defined herein) all notices of meetings of the holders of notes and other reports and communications that are generally made available to holders of the notes. At our request, the Trustee will be required under the Indenture to mail these notices, reports and communications received by it from us to all record holders of the notes promptly upon receipt. See “Description of Notes.”

We will make available to the holders of the notes, at the corporate trust office of the Trustee at no cost, copies of the Indenture as well as of our offering memorandum, including a review of our operations, and our annual consolidated financial statements prepared in accordance with Mexican Financial Reporting Standards (“Mexican FRS”). For so long as the notes are listed on the Official List of the Luxembourg Stock Exchange and to trading on the Luxembourg Stock Exchange’s Euro MTF market, you can also obtain a copy of the Indenture at the office of the paying agent in Luxembourg. We will also make available at the office of the Trustee our unaudited quarterly condensed consolidated financial statements in English prepared in accordance with Mexican FRS.

SERVICE OF PROCESS AND ENFORCEMENT OF CIVIL LIABILITIES

We and the subsidiary guarantors set forth on the cover page are corporations organized under the laws of Mexico. All of our directors and executive officers, and the directors and executive officers of all subsidiary guarantors, reside outside the United States. As a result, it may not be possible for investors to effect service of process outside Mexico upon us or upon our subsidiary guarantors, directors or executive officers, or to enforce against such parties judgments of courts located outside Mexico predicated upon civil liabilities under the laws of jurisdictions other than Mexico, including judgments predicated upon the civil liability provisions of the U.S. federal securities laws or other laws of the United States.

We have been advised by Santamarina y Steta, S.C., our special Mexican counsel, that no treaty exists between the United States and Mexico for the reciprocal enforcement of judgments issued in the other country. Generally, Mexican courts would enforce final judgments rendered in the United States if certain requirements were met, including the review in Mexico of the U.S. judgment to ascertain compliance with certain basic principles of due process and the non-violation of Mexican law or public policy, provided that U.S. courts would grant reciprocal treatment to Mexican judgments. Additionally, we have been advised by Santamarina y Steta, S.C., that there is doubt as to the enforceability, in original actions in Mexican courts, of liabilities predicated in whole or in part on U.S. federal securities laws and as to the enforceability in Mexican courts of judgments of U.S. courts obtained in actions predicated upon the civil liability provisions of U.S. federal securities laws.

In the event that proceedings are brought in Mexico seeking to enforce our or our subsidiary guarantors’ obligations under the outstanding debt, we would not be required to discharge such obligations in a currency other than Mexican currency. Pursuant to Mexican law, an obligation in a currency other than Mexican currency, which is payable in Mexico, may be satisfied in Mexican currency at the rate of exchange in effect on the date on which payment is made. Such rate of exchange is currently determined by Banco de México every business day in Mexico and published the following business banking day in the Official Gazette. Upon declaration of insolvency (concurso mercantil), payment obligations under our outstanding debt (i) would be converted to pesos at the exchange rate prevailing at the time of such declaration and subsequently converted into UDIs (Unidades de Inversión) other than secured debt, (ii) would cease accruing interest to the extent such debt is not secured, (iii) would be paid at the time claims of creditors are satisfied, (iv) would be dependent upon the outcome of insolvency proceedings and (v) would not be adjusted to consider the depreciation of the peso against the dollar occurring after such declaration of insolvency. UDIs are instruments denominated in pesos that automatically adjust the principal amount of an obligation to the inflation rate officially recognized by Banco de México.

DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS

This offering memorandum contains forward-looking statements. Words such as “believe,” “anticipate,” “plan,” “expect,” “intend,” “target,” “estimate,” “project,” “predict,” “forecast,” “guideline,” “should,” “aim,” “continue,” “could,” “guidance,” “may,” “potential,” “will,” similar expressions and the negative of such expressions are intended to identify forward-looking statements, but are not the exclusive means of identifying these statements. Examples of forward-looking statements include:

• projections of revenues, net income (loss), earnings per share, capital expenditures, dividends, capital structure, other financial items or ratios, taxes, and projections related to our business and results of operations;

• statements of our plans, objectives or goals, including those relating to anticipated trends, competition, regulation (including building and zoning regulations and environmental laws), financing, warranties, labor and construction materials, key management personnel, subsidiaries and subcontractors, government housing policy, land availability and rates;

• statements about anticipated changes to our accounting policies;

• statements about exchange controls and fluctuations in interest rates;

• statements about the risks associated with the notes, such as the effects of our level of debt, the Indenture, payments of any judgments against us, and any bankruptcy of our company or our subsidiaries;

• explanations about the transferability of the notes and any trading market for the notes;

• explanations about the subordination of the notes and guarantees;

• statements about our future economic performance or that of Mexico (including any depreciation or appreciation of the peso) or other countries;

• statements about anticipated political events in Mexico;

• statements about changes in Mexican federal governmental policies, legislation or regulation; and

• statements of assumptions underlying these statements.

You should not place undue reliance on forward-looking statements, which are based on current expectations. Forward-looking statements are not guarantees of performance. They involve risks, uncertainties and assumptions. Our future results may differ materially from those expressed in forward-looking statements. Many of the factors that will determine these results and values are beyond our ability to control or predict. All forward- looking statements and risk factors included in this offering memorandum are made as of the date on the front cover of this offering memorandum, based on information available to us as of such date, and we assume no obligation to update any forward-looking statement or risk factor.

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PRESENTATION OF FINANCIAL AND OTHER INFORMATION

Financial Information

This offering memorandum includes our audited consolidated financial statements and related auditors’ reports and notes as of and for the years ended December 31, 2007, 2008 and 2009, and our unaudited condensed consolidated financial statements as of and for the three-month periods ended March 31, 2009 and 2010 (the “Consolidated Financial Statements”).

Our Consolidated Financial Statements have been prepared in accordance with Mexican FRS, issued by the Mexican Board for Research and Development of Financial Reporting Standards (Consejo Mexicano para la Investigación de Normas de Información Financiera, or “CINIF”), which differs in certain significant respects from accounting principles generally accepted in the United States of America (“U.S. GAAP”). See “Description of Certain Differences between Mexican FRS and U.S. GAAP.” No reconciliation to U.S. GAAP of the Consolidated Financial Statements or of any other financial information presented herein has been prepared. There can be no assurance that a reconciliation would not identify material quantitative differences between such financial statements or information prepared on the basis of Mexican FRS and as prepared on the basis of U.S. GAAP.

The determination of EBITDA throughout this offering memorandum differs from the determination of EBITDA for purposes of the covenants contained in “Description of Notes.” Throughout this offering memorandum (other than in “Description of Notes”), EBITDA represents income from operations before income tax, depreciation and amortization, plus the amount of interest expense capitalized in inventory and expensed through costs related to real estate development activities upon the sale of such inventory in the respective period. For purposes of compliance with the covenants under the notes, EBITDA is determined as described in “Description of Notes.”

Significant Changes in Mexican FRS

Through December 31, 2007, Mexican FRS required that the effects of inflation be recorded in the financial statements, as well as the restatement of financial information from prior periods to constant pesos as of the end of the most recent period. In order to recognize the effects of inflation, we applied Bulletin B-10, “Recognition of Effects of Inflation on Financial Information,” and Bulletin B-15, “Foreign Currency Transactions and the Translation of Financial Statements of Foreign Operations,” whereby non-monetary assets were restated at current replacement cost, stockholders’ equity was restated using the NCPI and gains and losses in purchasing power from holding monetary liabilities and assets were recognized in results.

Beginning January 1, 2008, we adopted new financial reporting standard (“NIF”) B-10, “Effects of Inflation,” whereby the effects of inflation are not recognized unless the economic environment in which the entity operates is considered inflationary, as established within the standard. An environment is considered inflationary when cumulative inflation over the preceding three-year period is 26% or more. Given the low level of inflation in Mexico in the three-year period preceding December 31, 2008, we discontinued the recognition of the effects of inflation on our financial information. The cumulative inflation rates for the three fiscal years preceding December 31, 2008 and 2009 were 15.0% and 14.5%, respectively, and consequently those periods are considered non- inflationary. The inflation rates for the years ended December 31, 2008 and 2009 were 6.5% and 3.6%, respectively. Accordingly, data in the Consolidated Financial Statements and “Summary Consolidated Financial Information” as of and for the year ended December 31, 2007 have been restated in constant pesos as of December 31, 2007, unless otherwise noted, and no further restatement to constant pesos has been made after that date. Our financial statements as of and for the years ended December 31, 2008 and 2009, and as of and for the three-month periods ended March 31, 2009 and 2010, report information in nominal pesos.

Additionally, during 2008, we adopted NIF B-2, “Statement of Cash Flows”, which superseded Bulletin B-12, “Statement of Changes in Financial Position.” NIF B-2 requires the presentation of a statement of cash flows using either the direct or indirect method; we elected to use the indirect method. As adoption of this NIF is prospective, we present a statement of cash flows for 2009 and 2008 and a statement of changes in financial position for 2007.

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As disclosed in our Consolidated Financial Statements effective January 1, 2010 we adopted the provisions established by INIF 14, “Construction Contracts, Sale of Real Estate and Rendering of Related Services,” an interpretation of NIF D-7, “Construction and Manufacturing Contracts for Certain Capital Assets.” INIF 14 changed the method according to which we recognize our revenues from the “percentage-of-completion” method to recognizing revenues when the contract for sale of a housing unit is notarized and actual, legal title passes to the buyer.

INIF 14 requires separating the different components of contractual agreements in order to identify whether the components pertain to construction of real estate, sale of real estate or the rendering of related services and establishes the rules for recognizing revenue and related costs and expenses in each instance. For real estate sales agreements, according to the criterion established by INIF 14, revenues are recognized when the entity has transferred ownership to the buyer.

INIF 14 is effective for all entities that enter into construction and related real estate sale agreements beginning January 1, 2010. The accounting changes arising from the initial application of this INIF, if any, are required to be recognized retrospectively as required by NIF B-1, “Accounting Changes and Correction of Errors.” As we adopted INIF 14 on January 1, 2010, we have retrospectively applied INIF 14 to our previously issued consolidated financial statements as of and for the years ended December 31, 2007, 2008 and 2009 and as of and for the three-month period ended March 31, 2009 for the purpose of comparability, and, unless otherwise indicated, we have retrospectively applied INIF 14 to the financial data for all periods presented in this offering memorandum. The effects of this retrospective application of INIF 14 on the financial information as of and for the years ended December 31, 2009, 2008 and 2007 are presented in note 30 of our audited consolidated financial statements. The effects of this retrospective application of INIF 14 on the financial information as of and for the three-month period ended March 31, 2009 are presented in note 3(a) of our unaudited condensed consolidated financial statements as of and for the three-month periods ended March 31, 2009 and 2010.

Effective January 1, 2012, we will be required under applicable CNBV regulations to adopt International Financial Reporting Standards (“IFRS”) in place of Mexican FRS, which may result in different accounting and presentation with respect to our consolidated financial position, results of operations and cash flows.

Currency Information

Unless otherwise indicated, financial information appearing in this offering memorandum is presented in Mexican pesos. In this offering memorandum, references to “pesos” or “Ps.” are to Mexican pesos and references to “U.S. dollars,” “dollars,” “U.S.$” or “$” are to United States dollars. References to “UDI” in this offering memorandum mean the account unit denominated Unidad de Inversión, units of account whose value in pesos is indexed to inflation on a daily basis by Banco de México and is published periodically by Banco de México in the Official Gazette, as referred to in the Decree which Sets Forth the Obligations That May Be Denominated in Unidades de Inversión and Amends Several Provisions of the Mexican Federal Tax Code and the Mexican Income Tax Law (Decreto por el que se Establecen las Obligaciones que Podrán Denominarse en Unidades de Inversión y Reforma y Adiciona Diversas Disposiciones del Código Fiscal de la Federación y de la Ley del Impuesto Sobre la Renta), published in the Official Gazette on April 4 and April 5, 1995.

This offering memorandum contains translations of certain peso amounts into U.S. dollars at specified rates solely for the convenience of the reader. These translations should not be construed as representations that the peso amounts actually represent such U.S. dollar amounts or could be converted into U.S. dollars at the rate indicated. Unless otherwise indicated, U.S. dollar amounts have been translated from pesos at an exchange rate of Ps.12.3306 per U.S. dollar, the rate calculated by Banco de México on March 31, 2010 and published in the Official Gazette on April 5, 2010, for the payment of obligations denominated in currencies other than pesos and payable within Mexico. As of March 31, 2010, the noon buying rate in New York City for cable transfers in pesos per U.S. dollar as certified for customs purposes by the Federal Reserve Bank of New York was Ps.12.3005 per U.S. dollar. See “Exchange Rates” for information regarding the rates of exchange between the peso and the U.S. dollar for the periods specified therein.

Certain percentages and amounts in this offering memorandum may not sum due to rounding.

Industry and Market Data

Market data and other statistical information used throughout this offering memorandum are based on independent industry publications, government publications, reports by market research firms or other published independent sources. Some data are also based on our estimates, which are derived from our review of internal surveys, as well as independent sources. Although we believe these sources are reliable, we have not independently verified the information and cannot guarantee its accuracy or completeness.

In addition, in many cases, we have based certain statements contained in this offering memorandum regarding our industry and our position in the industry on certain assumptions concerning our customers and competitors. These assumptions are based on our experience in the industry, conversations with our principal vendors and our own investigation of market conditions. We cannot assure you as to the accuracy of any such assumptions, and such assumptions may not be indicative of our position in our industry.

Other Information Presented

The standard measure of area in the real estate market in Mexico is the square meter (m2), while in the United States the standard measure is the square foot (sq. ft.). Unless otherwise specified, all units of area shown in this offering memorandum are expressed in terms of square meters, acres or hectares. One square meter is equal to approximately 10.764 square feet, one acre is equal to approximately 4,047 square meters (or 43,560 square feet) and one hectare is equal to 10,000 square meters (or approximately 2.5 acres).

Additional Information

As of and for the periods presented in this offering memorandum, our guarantor subsidiaries accounted for substantially all of our consolidated total assets and operations, including our income from operations, consolidated net income and EBITDA, while our non-guarantor subsidiaries did not constitute a material portion of our consolidated total assets and did not make a material contribution to our consolidated income from operations, consolidated net income or EBITDA. Accordingly, we have not presented separate financial information in this offering memorandum in respect of either our guarantor subsidiaries or our non-guarantor subsidiaries.

Certain terms used in this offering memorandum, if not already defined, are defined in “Terms used in this Offering Memorandum.”

TERMS USED IN THIS OFFERING MEMORANDUM

Unless the context otherwise indicates, the following terms used in this offering memorandum have the meanings specified below.

“Affordable Housing,” as we define it for purposes of our business, means housing units with sales prices lower than Ps.655,044 (U.S.$53,123). The Affordable Housing segment, as defined by us, can be further divided into four categories: (i) economic (with sales prices up to Ps.217,934 (U.S.$17,674)), (ii) lower affordable (with sales prices between Ps.217,935 (U.S.$17,674) and Ps.275,992 (U.S.$22,383)), (iii) affordable (with sales prices between Ps.275,993 (U.S.$22,383) and Ps.401,760 (U.S.$32,582)) and (iv) affordable plus (with sales prices between Ps.401,761 (U.S.$32,582) and Ps.655,044 (U.S.$53,123)). The sales price ranges may change on an annual basis, as they are adjusted based on VSM (as defined below).

As described above, we define “Affordable Housing” to include the economic, lower affordable, affordable and affordable plus categories. We update our criteria for these categories from time to time to reflect changes in the Mexican housing market, inflation and other factors related to our business. In our regular reports, we include separate line items for each of the economic, lower affordable, affordable and affordable plus categories, and distinguish between “affordable plus” and the other classes of affordable housing. For ease of reference throughout this offering memorandum, we have combined these four categories. The tables below illustrate the break down of our results in each of these four sub-categories.

Number of Homes Sold in the Affordable Housing Sector

Three Months Ended March 31, Year Ended December 31, 2009 2010 2007 2008 2009 Economic...... 664 1,840 6,275 3,219 4,196 Lower Affordable...... 3,978 4,045 10,226 15,804 20,010 Affordable...... 1,329 2,073 4,540 6,229 11,617 Sub-total...... 5,971 7,958 21,041 25,252 35,823 Affordable Plus...... 2,981 1,516 9,598 9,198 10,747 Total...... 8,952 9,474 30,639 34,450 46,570

Percentage of Our Total Homes Sold in the Affordable Housing Sector

Three Months Ended March 31, Year Ended December 31, 2009 2010 2007 2008 2009

Economic...... 6.8% 18.2% 17.0% 7.7% 8.2% Lower Affordable...... 40.7% 40.0% 27.7% 37.8% 39.1% Affordable...... 13.6% 20.5% 12.3% 14.9% 22.7% Sub-total...... 61.1% 78.7% 57.0% 60.4% 70.0% Affordable Plus...... 30.5% 15.0% 26.0% 22.0% 21.0% Total...... 91.6% 93.7% 83.0% 82.4% 91.0%

Other homebuilders in Mexico use different thresholds and terminology in defining the components of the developer housing market; specifically, they may define “Affordable Housing” to include only the economic, lower affordable and affordable categories. While each company uses different criteria, we believe that our definitions are reasonably consistent with comparable companies in our industry.

“BMV” means the Bolsa Mexicana de Valores, S.A.B. de C.V., the Mexican Stock Exchange.

“CNBV” means the Comisión Nacional Bancaria y de Valores, the Mexican National Banking and Securities Commission.

“CONAFOVI” means the Comisión Nacional de Fomento a la Vivienda, the Mexican Housing Development Agency.

“CONAPO” means Consejo Nacional de Población, the Mexican Population Council.

“CONAVI” means Comisión Nacional de la Vivienda, the Mexican National Housing Board.

“FONHAPO” means Fideicomiso Fondo Nacional de Habitaciones Populares, the Mexican Fund for Popular Housing.

“FOVI” means Fondo de Operación y Financiamiento Bancario a la Vivienda, the Mexican Housing Operation and Bank Financing Fund, the predecessor of SHF.

“FOVISSSTE” means the Fondo de la Vivienda del Instituto de Seguridad y Servicios Sociales de los Trabajadores del Estado, the Mexican Social Security and Services Institute of the Public-Sector Workers’ Housing Fund.

“IETU” means Impuesto Empresarial a Tasa Única, the Single Rate Corporate Tax.

“INEGI” means the Instituto Nacional de Estadística, Geografía e Informática, the Mexican Institute of Statistics, Geography and Computer Sciences.

“INIF 14” means the Interpretation of Financial Information Standards 14 (Interpretación a las Normas de Información Financiera, or “INIF”), “Construction Contracts, Sale of Real Estate and Rendering of Related Services.”

“INFONAVIT” means the Instituto del Fondo Nacional de la Vivienda para los Trabajadores, the Mexican National Workers’ Housing Fund Institute.

“LTM EBITDA” means EBITDA calculated for the twelve months ended as of the date indicated.

“Middle Income Housing,” as we define it for purposes of our business, means housing units with sales prices that range from Ps.655,045 (U.S.$53,124) to Ps.1,290,873 (U.S.$104,689). The sales price range may change on an annual basis, as it is adjusted based on VSM.

“NAFTA” means the North America Free Trade Agreement.

“NCPI” means the Indice Nacional de Precios al Consumidor, the Mexican National Consumer Price Index.

“Official Gazette” means Diario Oficial de la Federación.

“PROVIVAC” means Federación Nacional de Promotores Industriales de la Vivienda, the Mexican Federation of Industrial Housing Promoters.

“Residential Housing,” as we define it for purposes of our business, means housing units with sales prices above Ps.1,290,873 (U.S.$104,689). The sales price range may change on an annual basis, as it is adjusted based on VSM.

“SEDESOL” means the Secretaría de Desarrollo Social, the Mexican Ministry of Social Development.

“SHF” means the Sociedad Hipotecaria Federal, S.N.C., Institución de Banca de Desarrollo, the Mexican Federal Mortgage Bank, the successor of FOVI.

“Sofoles” means Sociedades Financieras de Objeto Limitado or limited purpose financial companies.

“Sofomes” means Sociedades Financieras de Objeto Múltiple or multi-purpose financial companies.

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“Softec” means Softec, S.C.

“TIIE” refers to the 28-day Mexican interbank equilibrium rate (Tasa de Interés Interbancaria de Equilibrio), which was 4.9150% as of March 31, 2010.

“UDIs” means Unidades de Inversión, a unit of account the value of which in pesos is indexed to inflation on a daily basis, as measured by the change in the NCPI. One UDI was equal to 4.439870 pesos as of March 31, 2010.

“VSM” means Veces Salarios Mínimos, and is the amount in pesos corresponding to one day of the general minimum wage in the Federal District of Mexico, as determined from time to time by the Comisión Nacional de los Salarios Mínimos, the National Minimum Wage Commission, multiplied by 30.4 days. As of March 31, 2010, the daily minimum wage was Ps.57.46 in metropolitan areas and Ps.54.47 in rural areas.

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SUMMARY

This summary highlights selected information from this offering memorandum and is qualified in its entirety by, and is subject to, the more detailed information and Consolidated Financial Statements appearing elsewhere in this offering memorandum. You should read this entire offering memorandum carefully, including the risk factors and Consolidated Financial Statements contained herein, before making an investment decision.

Our Company

Founded in 1973, we are the largest homebuilder in Mexico based on revenues for the first quarter of 2010. We believe we are the leader in the Affordable Housing market segment, based on the number of our clients who receive INFONAVIT and FOVISSSTE mortgages, according to publicly available information and internal estimates. To a lesser extent, we also participate in the Middle Income Housing and Residential Housing segments. We are a vertically integrated homebuilder engaged in the design, development, construction and marketing of single-family housing. Since our founding, we have built and sold more than 510,000 homes, and we estimate that over 2.0 million people currently live in houses built by us. In 1994, we became the first Mexican homebuilding company to be publicly listed in Mexico (under the ticker GEOB-MX). As of June 24, 2010, we had a market capitalization value of Ps.18,805 million (U.S.$1,477 million).

Despite the 6.5% contraction of the Mexican economy in 2009, a 29% decrease in housing starts in 2009 compared to 2008, as well as the economic disruption caused by the A-H1N1 influenza virus, our sales during 2009 and the first three months of 2010 continued to grow. We believe this growth was primarily a result of our continued focus on affordable housing. Our total number of homes sold and revenues grew by 22.4% and 21.2%, respectively, in 2009 compared to 2008, and by 3.4% and 16.1%, respectively, during the first three months of 2010 when compared to the first three months of 2009. Similarly, our EBITDA and net income increased by 26.1% and 41.5%, respectively, in 2009 compared to 2008 and by 25.7% and 60.3%, respectively, for the first three months of 2010 when compared to the first three months of 2009. We believe this growth was facilitated by our ability to gain market share from smaller competitors, as construction financing for smaller homebuilders was substantially reduced during this time, and our execution capability, which stems in large part from our experienced management team. In addition, our scale also affords us greater access to capital and long-term funding opportunities (including this offering of notes and our September 2009 offering) and allows us to build larger blocks of houses at a lower cost.

The following table summarizes our number of homes sold, revenues, EBITDA and consolidated net income for the periods indicated.

For the three months ended March 31, For the year ended December 31, 2009 2010 % Increase 2007 2008 2009 CAGR(1) (millions of Ps., except (millions of Ps., except Number of Homes Sold) Number of Homes Sold) Total Number of Homes Sold.... 9,776 10,113 3.4 36,917 41,811 51,177 17.7% Revenues ...... 3,241.3 3,762.8 16.1 12,731.5 14,613.7 17,713.2 18.0% EBITDA ...... 687.6 864.0 25.7 2,897.1 3,140.8 3,959.9 16.9% Consolidated Net Income ...... 225.6 361.6 60.3 1,073.1 1,025.5 1,450.8 16.3%

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(1) Compound Annual Growth Rate (“CAGR”) from December 31, 2007 to December 31, 2009. CAGR is calculated by taking the nth root of the total percentage growth rate, where n is the number of years in the period being considered.

We believe that we have a prudent financial capital structure, with a total debt to LTM EBITDA ratio of 2.0 as of March 31, 2010, and a net debt (total debt less cash, cash equivalents and restricted cash) to LTM EBITDA ratio of 1.7 as of March 31, 2010. We have maintained 55 consecutive quarters of positive net income. Furthermore, we believe that we have strong operational and financial controls.

The Mexican Housing Industry

The Mexican housing industry is highly fragmented with some 3,000 homebuilders, out of which more than 800 are established developers registered with INFONAVIT. The following table lists our key competitors that are publicly listed.

Revenue for the three-month Market Share for the three- period ended March 31, 2010 Number of States with month period ended March 31, Competitor (in millions of Ps.)(1) Operations Sector 2010 (%)(1)(2)

GEO...... 3,762.8 17 A, MI, R 7.9 HOMEX ...... 3,593.4 21 A, MI, R 7.6 URBI ...... 2,418.5 16 A, MI, R 5.0 ARA...... 1,625.3 19 A, MI, R 3.0 SARE...... 565.6 10 A, MI, R 0.8 A: Affordable; MI: Middle Income; R: Residential Source: Based on the Q1 2010 reports of each of the companies listed above. ______(1) Data for the year ended December 31, 2009 are not included because INIF 14 was not adopted by all of the companies listed in this table, and therefore such data would not be comparable. (2) Based on a total of 128,440 houses sold with mortgage financing in Mexico for the three-month period ended March 31, 2010, according to CONAVI.

We have focused on the Affordable Housing segment in Mexico, which we believe to be the largest and most stable segment of the Mexican housing industry for the following reasons:

Mexico’s strong and consistent demand for Affordable Housing. There is a sizable target demographic that remains under-served due to an existing housing deficit in Mexico of approximately 8.9 million houses, according to SHF, which includes both those people who do not own a home and those living in substandard housing. We believe this deficit will continue due to the addition of approximately 530,000 new households each year.

Demand for Affordable Housing is supported by continued mortgage availability. We benefit from a significant supply of government-organized mortgages for our target markets that has been established through mandatory payroll contributions by employers on behalf of their employees. This has allowed industry participants to rely less on capital markets or direct government funding. INFONAVIT and FOVISSSTE provided 447,481 and 100,082 mortgages, respectively, in 2009. INFONAVIT and FOVISSSTE have set mortgage origination goals of 475,000 and 100,000, respectively, for 2010.

Our industry is strategic for Mexico’s economic development. The homebuilding industry plays a critical role in Mexico’s development due to its size and its political and socio-economic importance. We and our competitors directly employ more than 3.3 million people, according to INEGI, making our sector an important component of Mexico’s overall employment. In addition, the Affordable Housing segment is seen as directly addressing one of the key social welfare needs in Mexico: adequate housing.

Our Competitive Strengths

We are a leader in the Affordable Housing market. Our success in focusing on the Affordable Housing segment of the Mexican housing market is evidenced by our leading market shares in mortgages issued by INFONAVIT and FOVISSSTE (7.7% and 9.8%, respectively, as of March 31, 2010, based on our analysis of data provided by each agency). Mortgages issued by INFONAVIT and FOVISSSTE represented approximately 64% of the total amount lent in mortgages for new homes in Mexico in 2009, according to CONAVI, and this market historically has been resilient during economic downturns due to its reliance on payroll deductions for financing.

2 peers. We believe we have a track record of achieving our financial targets, a management team with substantial experience in our industry and comprehensive corporate governance controls.

We maintain superior brand recognition. With “CASAS GEO,” we believe we operate one of the leading brands in our industry. We enjoy national name recognition, which is particularly important in our target segment, which includes a large percentage of the Mexican population. We believe we achieve high customer satisfaction through the most developed marketing channels in the industry and our reputation for quality and post-sales services. Recent surveys conducted in Mexico by Estudios de Comunicación, Medios y Audiencias, S.A. de C.V. (Moctezuma y Asociados) have shown that our company has the most publicly recognized name in our industry; we are the “top of mind” leader, with 47% of respondents naming our company first when asked to name a company in our industry and, when asked to name several companies in our industry, 84% of respondents included our company in their response.

We benefit from large scale and nationwide operations. As one of the two largest homebuilders in Mexico by volume of homes sold, we believe we benefit from economies of scale, including a better negotiating position with suppliers, the ability to launch nationwide advertising campaigns, better access to land and enhanced relationships with financial institutions. We have also developed standardized procurement specifications, which allow us to reduce inventories and the cost of building materials, such as windows and doors, by reducing the number of different models used. We believe our nationwide presence reduces certain risks, such as exposure to local politics, by allowing us to shift our operations across multiple regions. Given that securing land and permits depends on local and municipal governments, we consider this an important differentiator.

We believe we are at the forefront of the modernization of the Mexican homebuilding industry through our ongoing focus on innovation. We have introduced several important innovations to our industry and have recently embarked on the following initiatives:

• Growing our land bank through joint ventures. We believe we were one of the first companies to implement joint ventures to acquire land reserves, beginning with Prudential Real Estate Investors (“Prudential”) in 2003 and more recently with Sólida Administradora de Portafolios, S.A. de C.V. (“Sólida”) in 2006. In June 2009, we signed an additional fully funded U.S.$545 million phase of the Prudential joint venture, increasing the total joint venture value to approximately U.S.$1 billion. Our joint ventures are designed to grow our land bank while decreasing our own risk and working capital requirements, and we believe that our experience with Prudential and Sólida benefits us in discussions with other strategic partners, and enables us to buy larger blocks of land more cost effectively.

• Entering the Macroprojects market. In 2006, we entered the new “Macroprojects” market. Macroprojects are six government-supported developments, which total approximately 31,450 hectares of land. They include industrial areas and urban services (such as parks, recreational and neighborhood centers, waste management and sustainable water systems, and transportation systems), and are expected to be developed in stages over the next 10 to 12 years. We are one of the partners of the Mexican government in developing the Zumpango Macroproject (which is the first and largest Macroproject, and will have up to 120,000 homes), and we have already sold approximately 30,000 homes in Zumpango. We believe there are two primary advantages of participating in the Macroprojects market: the infrastructure financed by the Mexican government facilitates sales, and the required licenses and permits are substantially easier to obtain due to the strong support of the Mexican government.

• Developing GEO Fácil. We have developed the “GEO Fácil” program together with our financial partner, Allianz Fondika, S.A. de C.V. (“Allianz”), to assist clients who do not meet all of the traditional requirements to obtain an INFONAVIT or FOVISSSTE mortgage (in particular, people who are not traditional wage earners). Through this program, potential clients enroll in a savings program with Allianz in order to establish proof of income so that they can qualify for a mortgage from participating Mexican financial institutions. GEO Fácil allows us to give more people access to our products without compromising our eligibility criteria, and, as a result, we believe this program will increase the number of potential clients in our target market.

• Implementing Project Alpha, a fully automated production facility for housing components. Launched in 2007, Project Alpha consists of a standardized manufacturing line of key structural components of a house, which are then assembled on site. This facility is customized to our company’s needs and implements best practices. Upon completion, we believe that Project Alpha will reduce building and delivery time by approximately 30%. We expect each Project Alpha plant to be able to produce 10,000 houses per year. Project Alpha targets areas with a large demand for housing. Consequently, as of May 2010, we have begun operations at our Project Alpha plant in Baja California, which is one of our largest markets. We are also currently operating a Project Alpha facility in Mexico City that we expect to expand in the future. Finally, we are planning the development of two additional Project Alpha facilities in Jalisco and Nuevo Leon. The technology used in Project Alpha has been used in Europe for several years, and we believe we are the first company to successfully implement it in the Americas, with two testing facilities that have produced approximately 1,000 homes.

• Initiating GEO Más. In 2009, we began an initiative known as GEO Más under which we seek to increase the value of the homes we sell. Through GEO Más, we are beginning to offer larger homes, more appliances and more outdoor space without increasing our prices, but also without reducing our margins. We believe that this initiative should result in an improved quality of life for our customers and a higher resale value for the homes that they purchase.

Our Five Step Strategy

Approximately four years ago, we adopted a new strategy of focusing on the Affordable Housing segment of the housing market. In order to align our business with this strategy, we manage our business as a value chain comprised of five key components. We focus on achieving the best value for our clients as well as optimizing cost management and capital usage in each link of our value chain. Our main goals are customer satisfaction and achieving the highest level of service for our clients, both before and after the sale of a home. We continuously aim to monitor, align and improve our processes and to seek new solutions through an innovative approach. We believe our innovative approach is demonstrated by our initiatives such as joint ventures for land bank acquisitions, the “GEO Fácil” program, a comprehensive commercial strategy, our post-sales programs (including the formation and organization of local community boards for our developments) and financing aid for clients. Our commitment to innovation is also evidenced by Project Alpha, which is expected to improve our production efficiency. We believe that we were among the first in our industry to implement these initiatives and similar technologies. In order to accomplish our aims, we have implemented a strategy that consists of the following five main goals:

Development, Planning and Land Sourcing. Joint ventures enable us to acquire larger land parcels and benefit from the appreciation of land values around our developments once core infrastructure has been constructed. In July 2009, we announced a new phase in our joint venture with Prudential that targets the development of Macroprojects. This U.S.$545 million phase is already fully funded. In addition, we acquire land directly through our subsidiaries and through option agreements with land owners. As of March 31, 2010, our land bank reserve totaled Ps. 5,016.6 million and we had a land bank of homes to be developed and collected totaling 357,137 homes, which we estimate is sufficient for five years of development. The majority of our land inventory is suitable for low-income housing.

Commercialization: “Go to the client.” Our penetration strategy is highly focused on our target customers, and we have introduced the concept of “Tiendas GEO.” These are stores that are strategically located throughout Mexico, generally in locations with high pedestrian traffic that are frequented by our target group of clients. As of March 31, 2010, we had 19 of these centers, and we plan to increase this number to 30 by the end of 2011. We estimate that approximately 23% of our sales for the three-month period ended March 31, 2010 were generated through “Tiendas GEO.” We have also expanded our client base to include individuals who are not traditional wage earners through our “GEO Fácil” program. We are focused on providing the best housing product possible and we offer add-on products such as furniture, triple play media services and self-storage through our subsidiary K-Be and our partners equipa-T and Telecapital. We have initiated a nationwide advertising campaign to further strengthen our brand.

Production. Through our “GEO 200” initiative, we have developed, together with Oracle, an Enterprise Resource Planning, or “ERP,” system that has standardized processes further, reduced costs and improved internal

4 communication across the company. This system provides us with real-time information, giving us increased control over our operations. Over the past four years, we have invested Ps.300.6 million in information technology, and we intend to continue to streamline our operational and production efficiencies in the future. We are further improving our production efficiency with our “House Factories” project. The House Factories project focuses on our existing production facilities and targets a more efficient and rapid completion and delivery of the houses we produce. In addition to these efficiency programs, we implemented Project Alpha, as described above, which specifically targets high density areas and should reduce our required capital expenditures per house.

Emphasis on Collections/Titling and Cash Flow. We have developed new techniques that have reduced the time between the initial sale of a home and the titling of the home in the client’s name (which is required before the proceeds from the sale can be disbursed to us). Our strategy is to moderate sales volume growth in order to prioritize free cash generation. Our cash and cash equivalents available at March 31, 2010, however, decreased by 55% to Ps.1,176.7 million from Ps.2,617.1 million available at March 31, 2009. The decrease was principally due to our increased investment in inventory and construction in the first quarter of 2010 as compared to our lower levels of investment in the first quarter of 2009 resulting from the global financial crisis.

Post-Sale Service. Our “Bienestar” program is a unique approach in post-sales services that assures the clients that the development and house they move into will be maintained and security standards will be kept. This is an important part of our strategy as it translates into a sustained high quality of life for our clients and also into a long-term increase in the value of their home. We believe that our high referral rates are a reflection of the success of this strategy.

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We are organized under the laws of Mexico with our principal executive offices located at Margaritas No. 433, Colonia Ex-hacienda Guadalupe Chimalistac, 01050 México, D.F. Our telephone number is (+52-55) 5480-5000. Our company was reorganized as a sociedad anónima bursátil de capital variable on June 13, 2006, to comply with changes to the Mexican securities laws, with an indefinite corporate life as set forth in our by-laws.

THE OFFERING

The following is a brief summary of certain terms of this offering. For a more complete description of the terms of the notes, see “Description of Notes” in this offering memorandum.

Issuer ...... Corporación GEO, S.A.B. de C.V.

Notes Offered ...... U.S.$250,000,000 million aggregate principal amount of 9.25% Senior Guaranteed Notes due 2020.

Maturity ...... June 30, 2020.

Interest Payment Dates ...... December 30 and June 30, beginning December 30, 2010.

Guarantors ...... GEO Baja California, S.A. de C.V., GEO Casas del Bajío, S.A. de C.V., GEO D.F., S.A. de C.V., GEO Edificaciones, S.A. de C.V., GEO Guerrero, S.A. de C.V., GEO Hogares Ideales, S.A. de C.V., GEO Jalisco, S.A. de C.V., GEO Laguna, S.A. de C.V., GEO Monterrey, S.A. de C.V., GEO Morelos, S.A. de C.V., GEO del Noroeste, S.A. de C.V., GEO Puebla, S.A. de C.V., GEO Tamaulipas, S.A. de C.V., GEO Urbanizadora Valle de las Palmas, S.A. de C.V., GEO Veracruz, S.A. de C.V. and Promotora Turística Playa Vela, S.A. de C.V.

Guarantees ...... The payment of principal, interest and premium on the notes will be fully and unconditionally guaranteed on a senior unsecured basis by certain of our existing and future restricted subsidiaries. See “Description of Notes— Note Guarantees.”

Ranking ...... The notes and guarantees will rank

• equally with all of our and the subsidiary guarantors’ existing and future senior indebtedness; and

• senior to all of our and the subsidiary guarantors’ existing and future subordinated indebtedness.

The notes and the guarantees will effectively rank junior to all of our and the subsidiary guarantors’ existing and future secured indebtedness with respect to and up to the value of the assets securing such indebtedness. The notes and the guarantees will be structurally subordinated to all indebtedness (including trade payables) of our non-guarantor subsidiaries. Furthermore, the notes and the guarantees will rank junior to all obligations preferred by statute (such as tax or labor obligations).

As of March 31, 2010, after giving pro forma effect to the issuance of the notes and the use of the net proceeds of this offering,

• GEO and the subsidiary guarantors had Ps.6,039.2 million (U.S.$489.8 million) of senior unsecured indebtedness and Ps.2,082.8 million (U.S.$168.9 million) of secured indebtedness; and

• GEO’s non-guarantor subsidiaries had Ps.69.6 million (U.S.$5.6 million) outstanding indebtedness (including trade payables).

Optional Redemption...... Prior to June 30, 2015, we are entitled to redeem the notes, in whole or in part, at a redemption price equal to the principal amount of the notes plus the Make-Whole Amount and accrued and unpaid interest to the date of redemption. The term “Make-Whole Amount” is defined under “Description of Notes—Optional Redemption.”

On or after June 30, 2015, we are entitled to redeem the notes, in whole or in part, at the fixed redemption prices and subject to the conditions set forth under “Description of Notes—Optional Redemption,” plus accrued and unpaid interest to the date of redemption.

Optional Redemption upon Equity Offerings ...... We may, at our option, at any time on or prior to June 30, 2013, use the net cash proceeds of certain equity offerings to redeem in the aggregate up to 35% of the aggregate principal amount of the notes, including any additional notes we may issue in the future under the Indenture, at a redemption price equal to 109.25% of the principal amount thereof, provided, that:

• after giving effect to any such redemption, at least 65% of the aggregate principal amount of the notes issued under the Indenture remains outstanding; and

• we make such redemption not more than 90 days after the consummation of such equity offering.

Certain Covenants...... The Indenture governing the notes limits what we and our restricted subsidiaries may do. The Indenture limits our and our restricted subsidiaries’ ability to, among other things:

• incur additional indebtedness;

• pay dividends on our capital stock or redeem, repurchase or retire our capital stock or subordinated indebtedness;

• make investments;

• create liens;

• create any consensual limitation on the ability of our restricted subsidiaries to pay dividends, make loans or transfer property to us;

• engage in transactions with affiliates;

• sell assets, including capital stock of our subsidiaries; and

• consolidate, merge or transfer assets.

If the notes obtain investment grade ratings from both (i) Moody’s Investors Services, Inc. (“Moody’s) and Standard & Poor’s Rating Group (“S&P”), or (ii) if S&P or Moody’s or both shall not make a rating of the notes publicly available, a nationally recognized United States securities

rating agency or agencies, as the case may be, selected by the Company, which shall be substituted for S&P or Moody’s or both, as the case may be, and no default has occurred and is continuing, the foregoing covenants will cease to be in effect with the exception of covenants that contain limitations on liens and on, among other things, certain consolidations, mergers and transfers of assets for so long as each of the foregoing rating agencies maintains its investment grade rating.

These covenants are subject to a number of important qualifications and exceptions. See “Description of Notes—Certain Covenants.”

Events of Default...... For a discussion of certain events of default that will permit acceleration of the principal of the notes plus accrued interest, and any other amounts due with respect to the notes, see “Description of Notes—Events of Default.”

Change of Control ...... If we experience a Change of Control, subject to certain conditions, we must give holders of the notes the opportunity to sell to us their notes at 101% of the principal amount, plus accrued and unpaid interest. The term “Change of Control” is defined under “Description of Notes—Change of Control.”

Additional Amounts ...... All payments by us or the subsidiary guarantors in respect of the notes, whether of principal or interest, will be made without withholding or deduction for or on account of any Mexican taxes, unless required by law, in which case, subject to specified exceptions and limitations, we and the subsidiary guarantors will pay such additional amounts as may be required so that the net amount received by the holders of the notes in respect of principal, interest or other payments on the notes, after any such withholding or deduction, will not be less than the amount that would have been received in the absence of any such withholding or deduction. See “Description of Notes—Additional Amounts.”

Redemption for Changes in Mexican Withholding Taxes...... In the event that, as a result of certain changes in Mexican tax laws applicable to payments under the notes, we become obligated to pay additional amounts in respect of interest (or amounts deemed interest) payable under the notes, in excess of those attributable to a Mexican withholding tax rate of 10%, the notes will be redeemable, in whole but not in part, at our option, at any time upon notice, at 100% of their principal amount plus accrued and unpaid interest and any additional amounts due thereon. See “Description of Notes—Additional Amounts.”

Book Entry; Form and Denominations ...... The notes will be issued in the form of one or more global notes without coupons, registered in the name of a nominee of The Depository Trust Company (“DTC”), as depositary, for the accounts of its participants including Euroclear Bank S.A./N.V. (“Euroclear”), and Clearstream Banking, société anonyme, Luxembourg (“Clearstream”). The notes will be issued in minimum denominations of U.S.$100,000 and integral multiples of U.S.$1,000 in excess thereof. See “Description of Notes.”

Listing...... Application has been made to the Luxembourg Stock Exchange for the notes to be listed on the Official List of the Luxembourg Stock Exchange and traded on the Euro MTF market of the Luxembourg Stock Exchange.

Transfer Restrictions...... We have not registered the notes under the Securities Act. The notes are subject to restrictions on transfer and may only be offered in transactions exempt from or not subject to the registration requirements of the Securities Act. See “Transfer Restrictions.”

Use of Proceeds ...... After deducting the discount and fee to the initial purchasers and the estimated offering expenses, we expect the net proceeds from the sale of the notes will be approximately U.S.$241,919,800 million. We expect to use such net proceeds to repay our outstanding certificados bursátiles, of which approximately Ps.2,480.0 million were outstanding as of March 31, 2010. The certificados bursátiles to be repaid with the net proceeds from the sale of the notes accrues interest at various floating rates.

The remainder of the net proceeds from the sale of the notes, if any, will be used to repay additional short-term bank debt and for general corporate purposes. For a description of our outstanding indebtedness, see “Short- Term Debt and Capitalization” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations―Liquidity and Capital Resources.”

Risk Factors...... Investing in the notes involves certain risks. See “Risk Factors.”

Governing Law...... State of New York

Trustee, Registrar, Paying Agent and Transfer Agent ...... The Bank of New York Mellon

Luxembourg Paying Agent, Transfer Agent and Listing Agent...... The Bank of New York Mellon (Luxembourg) S.A.

SUMMARY CONSOLIDATED FINANCIAL AND OTHER INFORMATION

The following table sets forth our summary consolidated financial data as of and for each of the periods presented. The data as of and for the years ended December 31, 2007, 2008 and 2009 has been derived from our audited consolidated financial statements and notes thereto included elsewhere in this offering memorandum. The data as of and for the three-month periods ended March 31, 2009 and 2010, has been derived from our unaudited condensed consolidated financial statements and notes thereto included elsewhere in this offering memorandum. INIF 14 became effective on January 1, 2010 and, for comparative purposes, we have retrospectively applied INIF 14 to the results of operations for the years ended December 31, 2007, 2008 and 2009 and the three-month period ended March 31, 2009, and, unless otherwise indicated, we have retrospectively applied INIF 14 to the financial data for all periods presented in this offering memorandum. The effects of this retrospective application of INIF 14 on the financial information as of and for the years ended December 31, 2009, 2008 and 2007 are presented in note 30 of our audited consolidated financial statements. The effects of this retrospective application of INIF 14 on the financial information as of and for the three month-period ended March 31, 2009, are presented in note 3(a) of our unaudited condensed consolidated financial statements as of and for the three-month periods ended March 31, 2009 and 2010.

Our Consolidated Financial Statements have been prepared in accordance with Mexican FRS, which differs in certain significant respects from U.S. GAAP. See “Description of Certain Differences between Mexican FRS and U.S. GAAP.”

The summary consolidated financial information set forth below as of and for the years ended December 31, 2007, 2008 and 2009, and as of and for the three-month periods ended March 31, 2009 and 2010, should be read in conjunction with, and is qualified in its entirety by reference to, the respective audited and unaudited condensed consolidated financial statements and the notes thereto included elsewhere in this offering memorandum. See “Presentation of Financial and Other Information.” Results for the three months ended March 31, 2010, are not necessarily indicative of the results that may be expected for the entire year.

Three Months Ended March 31, Year Ended December 31, 2009 2010 2010 2007 2008 2009 2009 (millions of Ps.) (millions of (millions of Ps.) (millions of U.S.$)(1) U.S.$) (1) Income Statement Data: Revenues from real estate development activities...... 3,241.3 3,762.8 305.2 12,731.5 14,613.7 17,713.2 1,436.5 Costs from real estate development activities...... 2,428.0 2,751.8 223.2 9,319.7 10,799.6 13,083.1 1,061.0 Gross margin ...... 813.3 1,011.0 82.0 3,411.8 3,814.1 4,630.1 375.5 Selling, general and administrative expenses...... 371.6 382.8 31.0 1,414.4 1,640.8 1,691.3 137.2 Income from operations ..... 441.7 628.2 50.9 1,997.4 2,173.3 2,938.8 238.3 Other (income) expenses – net...... 0.9 (3.1) (0.3) 120.6 31.3 85.5 6.9 Comprehensive financing cost...... 124.6 91.8 7.4 333.9 627.8 616.7 50.0 Income before income tax and equity in income of associated companies, trusts and others...... 316.3 539.5 43.8 1,542.9 1,514.3 2,236.6 181.4 Income taxes...... 91.5 178.7 14.5 513.4 485.7 736.9 59.8 Equity in income (loss) of associated companies, trusts and others...... 0.9 0.8 0.1 39.4 5.8 (2.8) (0.2) Consolidated net income...... 225.6 361.6 29.3 1,073.1 1,025.5 1,450.8 117.2 Controlling interest...... 200.2 304.8 24.7 1,062.6 982.0 1,364.3 110.6 Noncontrolling interest...... 25.4 56.8 4.6 10.5 43.5 86.5 6.6

As of March 31, As of December 31, 2009 2010 2010 2007 2008 2009 2009 (millions of Ps.) (millions of (millions of Ps.) (millions of U.S.$)(1) U.S.$)(1) Balance Sheet Data: Cash, cash equivalents and restricted cash ... 2,617.1 1,176.7 95.4 2,113.7 2,560.1 3,393.4 275.2 Total current assets...... 19,230.5 21,680.2 1,758.2 14,436.4 18,611.3 21,931.6 1,778.6 Total assets ...... 24,781.9 28,175.3 2,285.0 19,061.3 24,325.5 28,489.2 2,310.4 Short-term debt(2)...... 4,974.5 4,009.2 325.2 3,318.2 4,475.9 2,659.5 215.7 Total current liabilities ...... 11,749.4 10,042.4 814.4 9,242.3 11,442.9 9,762.6 782.8 Long-term debt...... 2,843.9 4,023.6 326.3 1,835.3 2,920.7 5,587.2 453.1 Total liabilities...... 16,910.9 18,972.6 1,538.7 12,499.9 16,662.1 19,697.4 1,595.3 Equity of controlling interest...... 6,912.4 7,476.9 606.4 5,725.2 6,792.7 7,119.3 579.5 Equity of noncontrolling interest... 958.6 1,725.8 140.0 836.2 870.7 1,672.6 135.6 Total stockholders’ equity ...... 7,871.0 9,202.7 746.3 19,061.3 24,325.5 28,489.2 2,310.4

Three Months Ended March 31, Year Ended December 31, 2009 2010 2010 2007 2008 2009 2009 (millions of Ps., except for (millions of (millions of Ps., except for ratios or (millions of ratios or percentages) U.S.$, except percentages) U.S.$, except for ratios or for ratios or percentages) percentages) Other Financial Information: Income from operations ... 441.7 628.2 50.9 1,997.4 2,173.3 2,938.8 238.3 Capitalized interest released to costs(3) ...... 183.3 144.5 11.7 708.7 804.1 730.8 59.3 Depreciation and amortization ...... 62.6 91.3 7.4 191.1 163.4 290.3 23.5 EBITDA(4) ...... 687.6 864.0 70.1 2,897.2 3,140.8 3,959.9 321.1 Net interest expense Interest expense...... 137.5 129.7 10.5 385.4 611.0 667.2 54.1 Capitalized interest(3). 183.3 144.5 11.7 708.7 804.1 730.8 59.3 Interest income...... (14.4) (14.3) (1.2) (98.2) (99.8) (124.0) (10.1) Effects of valuation of derivative financial instruments-net ...... — (12.6) (0.4) 44.8 — 39.0 3.2 Ineffective portion of derivative financial instruments ...... — 7.4 0.6 — — 3.9 0.3 Net interest expense(5) ...... 306.4 254.7 20.7 1,040.7 1,315.3 1,316.9 106.8

EBITDA margin(6) ...... 21.2% 23.0% 23.0% 22.8% 21.5% 22.4% 22.4% EBITDA/net interest expense(5)...... 2.2 3.3 3.3 2.8 2.4 3.1 3.1 Net debt/LTM EBITDA(7)(11)...... 1.3 1.7 1.7 1.1 1.5 1.2 1.2 Total debt/LTM EBITDA(8)(11)...... 1.8 1.9 1.9 1.8 2.4 2.1 2.1 Total debt/total capitalization(8)(9)...... 49.8% 46.6% 46.6% 43.9% 46.6% 48.4% 48.4% Net debt/total capitalization(7)(9)...... 33.2% 39.8% 39.8% 26.0% 32.1% 30.5% 30.5%

Three Months Ended March 31, Year Ended December 31, 2009 2010 2007 2008 2009 Other Data: Homes sold in the Affordable Housing sector ...... 8,952 9,474 30,639 34,450 46,570 Average sales price of homes sold in the Affordable Housing sector (in Ps.)(10) ...... 295,596 337,817 251,471 294,343 307,275 Total homes sold ...... 9,776 10,113 36,917 41,811 51,177 Average total home sales price (in Ps.)(10)...... 330,880 350,125 328,983 345,735 352,975 ______(1) Peso amounts have been translated into U.S. dollars, solely for the convenience of the reader, at the rate of 12.3306 pesos per U.S. dollar as of March 31, 2010. (2) Includes notes payable to banks, including construction financing, and the current portion of long-term debt. (3) Represents interest expense capitalized in inventory and expensed through costs related to real estate development activities upon the sale of such inventory in the respective period. (4) EBITDA represents income from operations before income tax, depreciation and amortization, plus the amount of interest expense capitalized in inventory and expensed through costs related to real estate development activities upon the sale of such inventory in the respective period. EBITDA is not a measure of financial performance under Mexican FRS and should not be construed as an alternative measure to (a) net income or income from operations (as defined in accordance with Mexican FRS) as an indicator of our operating performance, or (b) cash provided by operating activities (as defined in accordance with Mexican FRS) as a measure of our liquidity. EBITDA is included because it is a widely accepted financial indicator used by investors and analysts to analyze and compare companies on the basis of operating performance. EBITDA as presented may not be comparable to similarly titled measures reported by other companies because not all companies necessarily calculate EBITDA in an identical manner and, therefore, EBITDA is not necessarily an accurate means of comparison between companies. (5) Net interest expense represents the sum of interest expense and interest capitalized and expensed through costs related to real estate development activities (as defined in footnote three above) less interest income, effects of valuation of derivative financial instruments and ineffective portion of derivative financial instruments recorded through results. (6) EBITDA margin is the ratio of EBITDA to total revenue. (7) Net debt represents total debt less cash, cash equivalents and restricted cash. Reconciliation of net debt is as follows:

As of March 31, As of December 31, 2009 2010 2007 2008 2009 (millions of Ps.) (millions of Ps.) Long-term debt 2,843.9 4,023.6 1,835.3 2,920.7 5,587.2 Plus: Current portion of long-term debt 1,080.5 2,324.7 206.0 956.8 1,124.9 Total long-term debt 3,924.4 6,348.3 2,041.3 3,877.5 6,712.1 Plus: Notes payable to financial institutions 3,894.0 1,684.6 3,112.3 3,519.1 1,534.6 Less: Cash, cash equivalents and restricted cash 2,617.1 1,176.7 2,113.7 2,560.1 3,393.4 Net debt 5,201.3 6,856.2 3,039.9 4,836.5 4,853.3 (8) Total debt represents the sum of short-term and long-term debt. (9) Total capitalization represents the sum of short-term debt, long-term debt and total stockholders’ equity. Reconciliation of capitalization is as follows:

As of March 31, As of December 31, 2009 2010 2007 2008 2009 (millions of Ps.) (millions of Ps.) Stockholders’ equity 7,871.0 9,202.7 6,561.3 7,663.4 8,791.8 Plus: Long-term debt 2,843.9 4,023.6 1,835.3 2,920.7 5,587.2 Plus: Current portion of long-term debt 1,080.5 2,324.7 206.0 956.8 1,124.9 Plus: Notes payable to financial institutions 3,894.0 1,684.6 3,112.3 3,519.1 1,534.6 Total capitalization 15,689.4 17,235.6 11,714.9 15,060.0 17,038.5 (10) Weighted average price of homes we sold in Mexico for the period ended on such date.

(11) Reconciliation of LTM EBITDA for the twelve months ended March 31, 2009 and 2010 is as follows:

Twelve Months ended March 31 2009 2010 2010 (millions of Ps.) (millions of U.S.$)(A) Income from operations 2,366.8 3,125.3 253.5 Capitalized interest (B) 713.1 691.9 56.1 Depreciation and amortization 270.4 319.0 25.9 LTM EBITDA(C) 3,350.3 4,136.2 335.4

(A) Peso amounts have been translated into U.S. dollars, solely for the convenience of the reader, at the rate of 12.3306 pesos per U.S. dollar as of March 31, 2010.

(B) Represents interest expense capitalized in inventory and expensed through costs related to real estate development activities upon the sale of such inventory in the respective period.

(C) LTM EBITDA represents income from operations before income tax, depreciation and amortization, plus the amount of interest expense capitalized in inventory and expensed through costs related to real estate development activities upon the sale of such inventory in the respective period. LTM EBITDA is not a measure of financial performance under Mexican FRS and should not be construed as an alternative measure to (a) net income or income from operations (as defined in accordance with Mexican FRS) as an indicator of our operating performance, or (b) cash provided by operating activities (as defined in accordance with Mexican FRS) as a measure of our liquidity. LTM EBITDA is included because it is a widely accepted financial indicator used by investors and analysts to analyze and compare companies on the basis of operating performance. LTM EBITDA as presented may not be comparable to similarly titled measures reported by other companies because not all companies necessarily calculate LTM EBITDA in an identical manner and, therefore, LTM EBITDA is not necessarily an accurate means of comparison between companies.

RISK FACTORS

You should carefully consider the following discussion of risks, as well as all the other information presented in this offering memorandum, before investing in the notes. In general, investing in the securities of issuers in emerging market countries such as Mexico involves certain risks not typically associated with investing in securities of U.S. companies. The risks and uncertainties described below are not the only risks and uncertainties that we face. Additional risks and uncertainties that are presently unknown to us or that we currently think are immaterial also may impair our business operations or our ability to make payments on the notes and under other existing or future indebtedness.

This offering memorandum also contains forward-looking statements that involve risks. Our actual results could differ materially from those anticipated in these forward-looking statements as a result of certain factors, including risks faced by us described in this offering memorandum.

Risks Relating to Our Business

Our dependence on financing from government-sponsored housing funds may negatively affect our business and results of operations if such public sector financing is not available.

In 2009, purchases in the Affordable Housing segment accounted for 80.1% of our total revenue from home sales. Substantially all financing for sales in the Affordable Housing segment in Mexico is provided by government-sponsored housing funds such as INFONAVIT, FOVISSSTE and SHF, and we are dependent on the availability of financing from these entities. The amount of funding available and the level of mortgage financing from these sources is limited and may vary from year to year. As of March 31, 2010, approximately 97.7% of our revenues were from customers who relied on mortgage financing provided by INFONAVIT, FOVISSSTE, SHF or co-financings of these governmental agencies with private financial institutions. Revenues from customers who relied on INFONAVIT alone represented 79% of our consolidated revenues for the three-month period ended March 31, 2010, and, for the same period, revenues from customers who relied on INFONAVIT and FOVISSSTE together represented 95% of our consolidated revenues. We expect the percentage of funding from government sources to continue to increase in the future as our strategy of focusing on such customers is realized. See “The Mexican Housing Industry—The Housing Financing System” and “The Mexican Housing Industry—The Housing Financing System—Mortgage Providers.” Accordingly, our results of operations and financial condition have been, and will continue to be, affected by the level of funding, policies, programs and administrative procedures of INFONAVIT, FOVISSSTE, SHF and the financial sector and the housing policies of the Mexican government.

No assurance can be given that the amount of mortgage financing provided by INFONAVIT, FOVISSSTE, SHF or any other funding source will be maintained at current levels, or that, as a result of political, economic or other conditions, the Mexican government will not otherwise limit the availability of such financing or change the methods or criteria by which individuals are eligible, including with respect to the individuals seeking financing through our GEO Fácil program. See “Our Business—Operations—Assisting Buyers with Mortgage Financing.” Any decrease in the amount of funds available from such sources, changes in the programs or policies of mortgage financing, different regional allocation of financing or administrative delays in the disbursement of funds could have a material adverse effect on our business, results of operations, financial condition and prospects. In addition, no assurance can be given that such funds will continue to be allocated for housing construction in regions in which we have operations, that we will continue to obtain a sufficient number of mortgage confirmations from mortgage financing providers or that mortgage financing will be made available to the qualified home buyers we locate.

Because INFONAVIT is primarily financed by mandatory employer contributions (currently equal to 5% of a worker’s gross wage) as well as by issuances in the capital markets, the amount of mortgage financing available through it is limited and depends largely upon prevailing conditions in the Mexican economy. FOVISSSTE is funded by government institutions as a benefit for public sector employees, as well as by issuances in the capital markets. SHF is increasingly autonomous and partially self-funded through the capital markets but still receives contributions from the Mexican government and funding from the World Bank. In addition, if unemployment increases in Mexico, fewer people will be employed and private sector employers will be making fewer contributions on behalf of employees to the National Housing Fund, the principal source of funding for INFONAVIT. In the construction industry, there was an overall nominal decrease in output of 6.0% for the year

14 ended December 31, 2009 compared to the prior year and the Mexican economy contracted by 6.5% in 2009 (as adjusted for inflation). While INFONAVIT and FOVISSSTE implemented measures to counteract the negative impact on the housing industry caused by the events of 2009, the Mexican federal government or other government entities may enact laws in the future that restrict or prevent these financing entities from making automatic payroll deductions of mortgage payments or taking actions to support the housing industry; such restrictions could make it more difficult for potential customers to obtain mortgages.

INFONAVIT, FOVISSSTE, SHF and private financial institutions obtain funding for mortgages by securitizing their portfolio of mortgages in the residential mortgage-backed securities (“RMBS”) market. The Mexican domestic capital market is a nascent market for RMBS and such market experienced a substantial decrease during 2009. Deterioration in the Mexican RMBS market negatively affects us as it reduces sources of funding for mortgage providers and consequently mortgage availability.

We have liquidity and capital needs that require us to rely significantly on debt financing, which may increase our costs and decrease our revenues if we cannot obtain financing or cannot obtain it at favorable interest rates.

We are engaged in a capital-intensive business that requires continuous access to short-term construction financing and debt financing. We may not have sufficient liquidity at any time to satisfy our working capital requirements at levels required to support our business. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources.”

We currently obtain financing for substantially all of our development and construction activities through external sources, principally through bridge loans from local financial institutions, special purpose financial companies, or Sofoles or Sofomes secured by the land and construction as well as by means of land outsourcing and securitization of our peso accounts receivable. Although we do not begin full construction of a development until the availability of mortgage financing has been confirmed, we do purchase land, begin certain activities necessary to obtain the permits and licenses and undertake some basic infrastructure development before receiving confirmation. We do not receive the proceeds from a home sale, including financing from public entities or financial institutions, until the home is finished, sold, turned over to the home buyer and the deed (escritura pública) conveying title to the new owner is signed. As a result, the timing and amount of our capital requirements cannot be accurately predicted. We may also seek to finance our operations through the issuance of equity or debt securities, bank loans, joint ventures and other strategies. There can be no assurance that we will continue to have access to such financing or that such additional funds will be available on terms attractive to us or in amounts sufficient to meet our needs. Furthermore, Sofoles have suffered a sharp contraction in 2009, largely due to the stricter capital requirements and reduction in available funding from sources other than SHF. This contraction has adversely affected the housing sector, which effects are unlikely to dissipate in the near future.

We are subject to the risks normally associated with debt financing. Adverse developments in the international and Mexican debt markets, including higher interest rates and financial institutions’ aversion to long- term lending, have in the past significantly increased our costs of borrowing or refinancing maturing indebtedness, each of which has had adverse consequences to our financial condition and results of operations. There can be no assurance that we will be able to refinance any indebtedness or otherwise obtain funds by selling assets or raising equity to make required payments on maturing indebtedness. A substantial part of our inventory carries some kind of mortgage and if we are unable to meet mortgage payments or are unable to refinance this indebtedness on acceptable terms, the respective property or properties securing such indebtedness could be foreclosed upon by, or otherwise transferred to, the lender with consequent losses to us. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources.”

The proposed reform to INFONAVIT could adversely affect the Mexican housing industry.

A proposed law relating to INFONAVIT is currently being discussed in the House of Deputies, which, if passed, would gradually reduce an employer’s required housing deposit on behalf of its employees from 5% to 1% of each employee’s salary, thereby reducing the amount of money directly contributed to INFONAVIT for use in granted mortgages and, in such circumstances, INFONAVIT may need to seek other sources of capital. If this new law relating to INFONAVIT becomes effective, we cannot assure you that it will not result in a material adverse effect on our business, results of operations, financial condition and levels of cash flow.

Changes in Mexican tax law could adversely affect our results of operations and financial condition.

As of December 15, 2009, the Company adopted the new INIF 18, “Recognition of the Effects of the 2010 Tax Reform on Income Tax”, which establishes the accounting treatment for: (i) the income tax resulting from changes to the tax rules relating to the consolidation of subsidiaries, (ii) changes in the income tax rate, and (iii) a credit against IETU for tax losses. The effects on the Company of adopting INIF 18 included the recognition of an income tax liability of Ps. 1,136.3 million (which includes Ps. 18.1 million and Ps. 1,118.2 million of short-term and long-term liabilities, respectively), a reduction in retained earnings for the same amount and the recognition of deferred income taxes in the amount of Ps. 51.0 million. We cannot assure you that future changes in Mexican tax law will not have a negative impact on our business, results of operations and financial condition.

Land available for development is limited and there can be no assurance that we will be able to acquire additional land in the future.

Land available for development in certain regions in Mexico has become significantly more scarce in recent years. We have land reserves sufficient to meet our anticipated construction needs for the next five years, assuming constant annual growth. As of March 31, 2010, we control undeveloped land reserves sufficient for the construction of 357,137 homes, through a combination of owned land, land outsourcing, optioned land and joint ventures. There is no assurance that we will be able to acquire additional land in the future.

We experience significant seasonality in our results of operations, which leads to variability in our financial position and results of operations.

The Mexican housing industry experiences significant variability during the year primarily due to the operational and lending cycles of the various institutions that provide mortgage financing to the sector. The programs, budgets and changes in the authorized policies of these mortgage lenders are approved during the first quarter of the year. Payment by these lenders for home deliveries is slow at the beginning of the year and increases gradually through the second and third quarters, with a rapid acceleration in the fourth quarter. We build and deliver homes in the Affordable Housing segment based on the seasonality of this cycle because we do not begin construction of homes until a mortgage provider commits mortgage financing to a qualified home buyer in a particular development. Accordingly, we also tend to recognize significantly higher levels of revenue in the third and fourth quarters and our debt levels tend to be highest in the first and second quarters. We anticipate that our quarterly results of operations and our level of indebtedness will continue to experience variability from quarter to quarter in the future. In addition, there can be no assurance that future uncertainties related to the Mexican government and financial institutions will not arise or that institutions that currently provide financing or other institutions that may, in the future, provide financing to the sector will not adopt practices that could result in additional variability of our results.

Significant competition from other housing development companies may adversely affect our position in the Mexican housing industry.

The housing development industry in Mexico is highly fragmented and there are currently a large number of businesses engaged in the construction of housing projects. Competition in the Mexican housing industry is intense and we cannot assure you that we will compete successfully to maintain or increase our market share, which was 7.9% as of March 31, 2010 (based on the total number of homes sold with mortgage financing in Mexico, according to CONAVI). We cannot assure you that some of these competitors with a significant presence in various parts of Mexico will not expand their operations in our principal markets. Small developers in the Middle Income Housing and Residential Housing markets may be able to better adapt to specific demand and offer more customized housing than we do.

In addition, we cannot assure you that foreign construction companies with greater financial resources will not begin operations in Mexico in the Affordable Housing sector in the future and that we will not face significant competition from foreign entities.

We may be unable to fully execute our business strategy.

Our strategy contemplates growth through, among other items, implementing Project Alpha, our fully automated production facility for housing components, and entering the Macroprojects market. This strategy may require substantial new capital to finance the future development and acquisition of assets, and we cannot assure you that we will be able to obtain the necessary financing. In addition, if our cost of capital is high, we may not be able to finance the construction or acquisition of assets necessary to implement our strategy. We may be unable to raise the necessary funds on satisfactory terms, if at all, which would impair our ability to execute our strategy. Moreover, if we are unable to obtain the required permits and licenses for the development of the Macroprojects, the resulting decline in our rate of development could have a material adverse effect on our business, results of operations, financial condition or prospects, and may prevent us from fully executing our strategy.

Another aspect of our strategy is the growth of our land bank through financing vehicles, such as joint ventures. Our current joint ventures with Prudential and Sólida permit us to grow our land bank while decreasing our risk and working capital requirements. We cannot assure you that we will be able to maintain these joint venture relationships or that we will be able to participate in similar joint ventures in the future. If we are unable to do so, we may experience slower growth or our company may become more leveraged.

Building and zoning regulations and environmental laws, as well as changes thereto, may adversely affect our business, financial condition or results of operations.

The Mexican housing industry is subject to extensive building and zoning regulations by various federal, state and municipal authorities, which affect land acquisition and other development and construction activities. The costs associated with obtaining building permits, paying construction fees and taxes, securing utility service rights and titling new homes are substantially higher in Mexico than in many other countries and vary significantly from region to region within the country. Our housing development operations are also subject to Mexican federal, state and municipal environmental laws and regulations. Mexican environmental regulations have become increasingly stringent over the past decade. This trend is likely to continue and may be influenced by the North America Agreement on Environmental Cooperation (“NAAEC”), a side agreement to the NAFTA, whose key objectives are to promote sustainable development, encourage pollution prevention policies and practices and increase compliance with environmental laws and regulations. We are also required to obtain the approval of numerous governmental authorities for our development activities, including approvals from INFONAVIT, SHF and FOVISSSTE. We cannot assure you that applicable laws and regulations affecting the housing industry or the enforcement thereof will not change in a manner that could increase our costs of doing business, require additional or different approvals, change our processes and procedures, or have a material adverse effect on our business, results of operations, financial condition or prospects. Any one of the factors referred to above may have a material adverse effect on our results of operations and the levels of cash flow necessary or available to meet our obligations. See “Our Business—Governmental Regulation.”

Our ability to accumulate and deduct tax loss carryforwards could be limited in the future, which may lead to greater taxable income.

Our net results have benefited in the past from our net tax loss carryforwards which reduce the amount of income taxes charged to our income. Generally, tax loss carryforwards are the result of deductions from taxable income of purchases of inventory and certain cash purchases. We also deduct the full amount of our investments of land for purposes of IETU. If our housing development activities do not continue at current levels, the tax loss carryforwards created would be lower than in the past. That would result, after utilization of the accumulated available tax loss carryforwards, in greater taxable income. See note 3(s) to our unaudited condensed consolidated financial statements for the three-month periods ended March 31, 2009 and 2010.

There are financial risks related to our financial derivative instruments.

We have used, and may continue using, financial derivatives in order to (i) manage the risk related to our interest expense and exchange rate risk, (ii) reduce our financial costs, (iii) have access to alternative forms of financing and (iv) hedge some of our financial risks. Most of our financial derivative instruments are subject to margin calls in the event that the market value of those instruments exceeds or falls below an established maximum or minimum. In certain extraordinary scenarios, the cash that could be required by the counterparties in order to

17 hedge the margin call requirements, could be considerable. Therefore, the available funds for our operations and any other capital needs could be adversely affected. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources—Market Risk Disclosure,” and note 13 to our unaudited condensed consolidated financial statements as of and for the three-month periods ended March 31, 2010 and 2009.

A substantial portion of our business is subcontracted, which exposes us to risks relating to subcontractors’ business.

Our construction methods are based on the mass production of housing units and the use of specialized labor. In this respect, we enter into agreements with local subcontractors specializing in different stages of the construction process. We expect to continue this type of outsourcing in the future. All of our subsidiaries employ subcontractors. Any delay or default on performance by the subcontractors could disrupt our business and have an adverse effect on our business operations. We cannot assure you that our subcontractors will perform outsourced projects on a timely basis.

Claims under our construction warranties could adversely affect us.

As required by Mexican law, we provide a one-year warranty to our customers for construction defects, which could be derived either from our operations or from defects in materials supplied by third parties or other circumstances outside our control. There are currently no material outstanding claims against us. We cannot assure you that significant claims under such warranty might not be made in the future.

Increases in costs or scarcity of construction materials and labor could adversely affect our results.

Increases in prices of construction materials for new housing developments or increases in workers’ wages could adversely affect our results of operations. Certain construction materials, such as steel, are indexed to the U.S. dollar and if the value of the Mexican peso depreciates against the U.S. dollar, our cost of obtaining raw materials could increase. In addition, we could be exposed to a potential scarcity of materials or labor that could cause project delays. We cannot assure you that such delays will not occur in the future.

Loss of services of our key management personnel could result in disruptions to our business operations.

Our management and operations are dependent in large part upon the contributions of a small number of key senior management personnel. Because of their knowledge of the industry and our operations and their experience with our company, we believe that our future results will depend to a significant extent upon their efforts. The loss of services of any of these individuals for any reason could result in disruptions to our business operations.

Health epidemics and other outbreaks in Mexico may affect our business operations.

Our business could be adversely affected by the recurrence of an outbreak of A-H1N1 influenza or any other adverse public health development, including avian flu. In April 2009, an outbreak of A-H1N1 influenza occurred in Mexico and the United States and spread to more than 70 countries, leading the World Health Organization to declare the first global flu pandemic in over 40 years. Any prolonged occurrence or recurrence of A- H1N1 influenza or other adverse public health developments in Mexico may have a material adverse effect on our business operations. Our operations may be impacted by a number of health-related factors, including, among other things, quarantines or closures of our facilities and developments, which could disrupt our operations, and a general slowdown in the Mexican economy. Any of the foregoing events or other unforeseen consequences of public health problems could adversely affect our business and results of operations. We have not adopted any written preventive measures or contingency plans to combat any future outbreak of the A-H1N1 influenza or any other epidemic.

Risks Relating to Mexico

Adverse economic conditions in Mexico may negatively affect our financial position and results of operations.

We are a Mexican company with substantially all of our assets located in Mexico and substantially all of our revenues derived from operations in Mexico. As such, our business is significantly affected by the general

18 conditions of the Mexican economy. As in most economies and, in particular, those in developing countries, the housing market is closely tied to the growth or contraction of the local economy. Prolonged adverse economic conditions resulting from the current global economic crisis could limit the growth of the housing industry in Mexico, such that future results of operations may not match those achieved to date.

The housing industry is cyclical and directly affected by the macroeconomic conditions of Mexico. Some of the conditions that have a major impact on this sector include inflation, the value and stability of the peso and other general economic and social conditions in Mexico. Accordingly, changes in the macroeconomic conditions in Mexico could have an adverse impact on our business, financial condition and results of operations.

In the past, high rates of inflation in Mexico have led to high interest rates, devaluation of the peso compared to the U.S. dollar and occasionally the imposition of control mechanisms over exchange rates and the prices of consumer goods. According to figures issued by Banco de México, the rate of inflation in Mexico, as measured by changes in the NCPI, was 2.39% for the first three months of 2010, 3.57% in 2009, 6.53% in 2008 and 3.76% in 2007. Although these figures reflect sustained improvement over high inflation rates that have occurred in the past, Mexico remains vulnerable to international events and crises. High inflation rates can adversely affect consumer purchasing power or result in higher interest rates, and thus, the ability of borrowers to obtain financing for homes and the ability of employers to contribute to the National Housing Fund, which could adversely affect our operations.

Mexico’s nominal gross domestic product, or GDP, was Ps.11,207.8 billion (U.S.$908.9 billion) in 2007, Ps.12,130.8 billion (U.S.$983.8 billion) in 2008 and Ps.11,823.0 billion (U.S.$958.8 billion) in 2009, an annual growth rate of 1.5% from 2007 to 2008 and a contraction of 6.5% from 2008 to 2009 when adjusted for inflation. Banco de México has estimated that Mexico’s GDP will grow by 4.2% in 2010.

A prolonged recession in the Mexican economy, a significant increase in inflation and interest rates, or a significant decrease in GDP growth would lead to a decrease in consumer purchasing power and demand for mortgage financing, and housing may decrease as a result. This may have a material adverse effect on our business, financial position, results of operations, ability to obtain financing and our ability to repay our debt.

Depreciation of the peso against the U.S. dollar could adversely affect our financial condition, results of operations and cash flows, and, if foreign currency exchange controls and restrictions are imposed, we may not be able to service our debt in U.S. dollars or any other specified currencies, thereby exposing investors to foreign currency exchange risk.

Changes in the value of the peso relative to the U.S. dollar could adversely affect our financial condition and results of operations. Because substantially all of our revenues are and will continue to be denominated in pesos and, upon issuance of the notes, a significant portion of our indebtedness will be denominated in U.S. dollars, if the value of the peso decreases against the U.S. dollar, our cost of financing will increase. Further, the devaluation or depreciation of the peso could increase in peso terms the amount of our foreign currency-denominated liabilities, negatively affecting our results of operations. As of March 31, 2010, we had approximately U.S.$266.6 million in dollar denominated liabilities while substantially all of our revenues were in pesos.

Severe devaluation or depreciation of the peso may result in government intervention or disruption of the international foreign exchange markets. While the Mexican government does not currently restrict or regulate the ability of Mexican or foreign persons or entities to convert pesos into U.S. dollars or other specified currencies, or to transfer other currencies outside of Mexico, it has done so in the past, and we cannot assure you that the Mexican government will not institute a restrictive currency exchange control policy in the future. Any such restrictive foreign currency exchange control policy could prevent or restrict access to U.S. dollars or other specified currencies, and may limit our ability to transfer or convert pesos into U.S. dollars and other currencies for the purpose of making timely payments of interest and principal on the notes and any other dollar-denominated debt that we may incur in the future.

In addition, any devaluation or depreciation of the peso could also adversely impact the availability of financing on terms attractive to potential customers in the Middle Income Housing and Residential Housing segments.

Political events in Mexico as well as violence associated with the Mexican drug cartels may adversely affect the Mexican economy, our results of operations and our financial condition.

Our business, financial condition and/or results of operations may be affected by economic, political or social developments in Mexico, including, among others, any political or social instability, changes in the rate of economic growth or contraction, changes in the exchange rate between the Mexican peso and the U.S. dollar, an increase in Mexican inflation or interest rates, changes in Mexican taxation and any amendments to existing Mexican laws and regulations.

Federal Congressional mid-term elections were held on July 5, 2009, and the opposition Institutional Revolutionary Party (Partido Revolucionario Institucional, or “PRI”) won a relative majority of the seats in the Mexican Congress, while the National Action Party (Partido Acción Nacional) lost its majority position. The PRI congressional majority, as well as its de-facto coalition with Mexico’s Green Party (Partido Verde Ecologista de Mexico) and the possible lack of alignment between the President and this new legislature may result in government gridlock. We cannot provide any assurance that the current political situation or any future political developments in Mexico will not have a material adverse effect on our results of operations and financial condition.

Mexico has experienced several periods of criminal violence, primarily due to the activities of drug cartels. In response, the Mexican government has implemented various security measures and has strengthened its military and police forces by creating specialized units. Despite these efforts, drug-related crimes continue to exist in Mexico. These activities, their possible escalation and the violence associated with them may have a negative impact on the Mexican economy, on us or on the market value of our notes.

Changes in Mexican federal governmental policies or regulations could adversely affect our results of operations and financial condition.

Our business is incorporated in Mexico and substantially all of our assets and operations are located in Mexico. As a result, we are subject to political, economic, legal and regulatory risks specific to Mexico. The Mexican federal government has exercised, and continues to exercise, significant influence over the Mexican economy. Accordingly, Mexican federal governmental actions, fiscal and monetary policy and regulation of private industry have a significant impact on our business, including through their effect on market conditions and foreign exchange, interest and inflation rates. We cannot assure potential investors that changes in Mexican federal governmental policies will not adversely affect our business, results of operations and financial condition.

Developments in other countries could adversely affect the Mexican economy, the market value of the notes and our results of operations.

The market value of securities of Mexican companies is affected by economic and market conditions in other emerging market countries. Although economic conditions in those countries may differ significantly from economic conditions in Mexico, investors’ reactions to developments in any of these other countries may have an adverse effect on the market value of securities of Mexican issuers. In past years, for example, prices of both Mexican debt and equity securities dropped substantially as a result of developments in Russia, Brazil, Argentina and several Asian countries.

The correlation between economic conditions in Mexico and the United States has sharpened in recent years because of NAFTA and increased economic activity between the two countries. Recently, the global dislocation of the credit markets and the shortage of liquidity resulting principally from the sub-prime mortgage crisis, especially in the United States, resulted in significant fluctuations in the financial markets, and had a material adverse effect on the Mexican economy. As a result, an economic downturn in the United States, the termination of NAFTA or other related events could have a significant adverse effect on the Mexican economy, which, in turn, could affect our financial condition and results of operations. In addition, terrorist acts in the United States and elsewhere could depress economic activity in the United States and globally, including in Mexico. This could have a material adverse effect on our operations and revenues, which could affect the price of the notes.

Fluctuations in interest rates could adversely affect our financial condition and results of operations.

The availability of mortgages to the Middle Income Housing and Residential Housing markets depends upon fluctuations in interest rates. Historically, when interest rates are high, fewer mortgages become available in Mexico in these housing markets as the mortgages become expensive, and the demand for bank mortgages falls. An increase in interest rates could affect the availability of mortgages from commercial banks and other financial sources to these market segments. If the Mexican economy experiences a prolonged recession or high inflation, which it has at various times in the past, or interest rates increase significantly, housing activity and infrastructure development in Mexico may contract, causing demand for our products to decrease.

In addition, fluctuations in interest rates affect our interest expense. As of March 31, 2010, Ps.5,077 million, or 60%, of our total indebtedness accrued interest at variable rates, at an average rate of 7.29%. We may also incur indebtedness in the future that accrues interest at higher rates or we may be required to refinance our debt at variable rates. Increases in interest rates could adversely affect our results of operations.

It may be difficult to enforce civil liabilities against us or our directors, executive officers and controlling persons.

We are organized under the laws of Mexico. Most of our directors, executive officers and controlling persons reside outside the U.S., a significant portion of the assets of our directors, executive officers and controlling persons, and substantially all of our assets, are located outside the U.S. As a result, it may be difficult to effect service of process within the United States upon these persons or to enforce against them or us in U.S. courts judgments predicated upon the civil liability provisions of the federal securities laws of the United States. We have been advised by our special Mexican counsel, Santamarina y Steta, S.C., that there is doubt as to the enforceability, in original actions in Mexican courts, of liabilities predicated solely on U.S. federal securities law and as to the enforceability in Mexican courts of judgments of U.S. courts obtained in actions predicated upon the civil liability provisions of U.S. federal securities laws.

We prepare our financial statements under Mexican FRS, which differs from U.S. GAAP, and a reconciliation of our Mexican FRS financial statements to U.S. GAAP could show significant quantitative differences.

We prepare our financial statements in accordance with Mexican FRS, which differs in certain respects from U.S. GAAP and accounting principles generally accepted in other countries. Thus, the presentation of Mexican FRS financial statements and the calculation of reported earnings may differ from presentations in other countries. We are not required to and do not provide U.S. GAAP financial information or any reconciliation of our Mexican FRS financial statements to U.S. GAAP. If we were to prepare such reconciliation, it could show significant quantitative differences between the amounts presented under Mexican FRS compared to amounts presented under U.S. GAAP. See “Description of Certain Differences between Mexican FRS and U.S. GAAP.”

Risks Relating to the Notes

Our level of debt could impair our financial condition.

After this offering, we will have a substantial amount of debt and may incur substantially more debt. As of March 31, 2010, after giving pro forma effect to the issuance of the notes and the use of the net proceeds of this offering, we would have had Ps.8,132.5 million (U.S.$659.6 million) of total debt. Our significant level of debt could have important consequences to you, including:

• requiring a substantial portion of our cash flows from operations be used for the payment of principal and interest on our debt, therefore reducing the funds available to us for the operations or other capital needs;

• limiting our flexibility in planning for, or reacting to, changes in our business and the industry in which we operate because our available cash flow after paying principal and interest on our debt may not be sufficient to make the capital and other expenditures necessary to address these changes;

• increasing our vulnerability to general adverse economic and industry conditions because, during periods in which we experience lower earnings and cash flow, we will be required to devote a proportionally greater amount of our cash flow to paying principal and interest on our debt;

• limiting our ability to obtain additional financing in the future to fund working capital, capital expenditures, acquisitions and general corporate requirements;

• making it difficult for us to refinance our indebtedness or to refinance such indebtedness on competitive terms;

• restricting our ability to take advantage of opportunities that would permit us to acquire other businesses;

• placing us at a competitive disadvantage to other relatively less leveraged competitors that have more cash flow available to fund working capital, capital expenditures and general corporate requirements; and

• any borrowings we make at variable interest rates leave us vulnerable to increases in interest rates generally.

We are a holding company and rely on interest, fees, tax refunds and dividends to meet our financial obligations, including under the notes, and to pay our expenses. The inability of any or all of our subsidiaries to pay dividends or make other distributions to us could have a material adverse effect on our financial condition, including our ability to make payments in respect of the notes.

We are a holding company and, as such, conduct substantially all of our operations through our subsidiaries. See “Our Business—Operations.” Accordingly, we must rely on dividends, principal and interest payments on intercompany loans and other intercompany transfers of funds from our subsidiaries as the primary source of funds to pay our expenses and meet our debt service obligations, including our obligations under our notes. We also derive revenue from tax refunds resulting from the tax consolidation of us and our subsidiaries as allowed under Mexican tax law. The extent of such cash flow to us will depend on the results of operations and financial condition of our subsidiaries. In addition, payments and transfers of funds may be restricted by the terms of any indebtedness that may be incurred by our subsidiaries and by applicable law, including corporate and tax laws governing our subsidiaries. Accordingly, in paying the principal of, interest on, and additional amounts, if any, with respect to the notes and other indebtedness or obligations, we will rely on income from interest, fees and dividends from our subsidiaries, as well as tax refunds and income from the disposition of one or more of our subsidiaries, interests therein or assets thereof, to the extent permitted by our debt agreements or any joint venture arrangements.

Our subsidiaries’ ability to pay such dividends or make other payments or distributions to us are dependent on, among other things, (i) the cash flows generated by their operations and borrowings, (ii) their having net income and the requisite amount of paid-in capital and legal reserves required under Mexican law and their estatutos sociales (by-laws), (iii) their complying with financial covenants and restrictions contained in credit agreements and (iv) any other applicable law. Under Mexican law, Mexican companies may only pay dividends from earnings included in annual financial statements approved by stockholders duly convened at a general ordinary stockholders’ meeting after any and all prior existing losses have been offset by such earnings and funds have been set aside for certain mandatory legal reserves. The inability of any or all of our subsidiaries to pay dividends or make other distributions directly or indirectly to us could have a material adverse effect on our financial condition and, as a result, on our ability to make payments in respect of our notes.

The Indenture and the terms of our other indebtedness impose significant operating and financial restrictions, which may prevent us from capitalizing on business opportunities.

The Indenture and the terms of our other indebtedness impose significant operating and financial restrictions on us and our restricted subsidiaries. These restrictions will limit our ability, among other things, to:

• incur additional indebtedness;

• pay dividends on our capital stock or redeem, repurchase or retire our capital stock or subordinated indebtedness;

• make investments;

• create liens;

• create any consensual limitation on the ability of our restricted subsidiaries to pay dividends, make loans or transfer property to us;

• engage in transactions with affiliates;

• sell assets, including capital stock of our subsidiaries; and

• consolidate, merge or transfer assets.

These restrictions could limit our ability to seize attractive growth opportunities for our businesses that are currently unforeseeable, particularly if we are unable to incur financing or make investments to take advantage of these opportunities.

The notes may not be transferred freely; therefore, investors may be required to bear the financial risks of their investment in the notes for an indefinite period of time.

The notes have not been registered under the Securities Act or any state securities laws, and we are not required to make and currently do not plan on making any such registration in the immediate future. The notes may not be offered or sold except pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act and applicable state securities laws. Prospective investors should be aware that investors may be required to bear the financial risks of this investment for an indefinite period of time. See “Transfer Restrictions” for a full explanation of such restrictions.

If an active trading market for the notes does not develop, the market price and liquidity of the notes may be adversely affected.

Currently there is no market for the notes. Application has been made to have the notes listed on the Luxembourg Stock Exchange’s Official List and traded on the Euro MTF market. Even if the notes become listed on this exchange, we may delist the notes. A trading market for the notes may not develop, or if a market for the notes were to develop, the notes may trade at a discount from their initial offering price, depending upon many factors, including prevailing interest rates, the market for similar securities, general economic conditions and our financial condition. The initial purchasers are not under any obligation to make a market with respect to the notes, and we cannot assure you that trading markets will develop or be maintained. Accordingly, we cannot assure you as to the development or liquidity of any trading market for the notes. If an active market for the notes does not develop or is interrupted, the market price and liquidity of the notes may be adversely affected.

If we or the subsidiary guarantors were to be declared bankrupt, holders of notes may find it difficult to collect payment on the notes.

Under Mexico’s Law of Reorganization Proceedings (Ley de Concursos Mercantiles), if we or the subsidiary guarantors are declared bankrupt (en quiebra) or become subject to reorganization proceedings (concurso mercantil), our obligations and the obligations of the subsidiary guarantors under the notes, respectively, (i) would be converted into pesos at the exchange rate prevailing at the time of the declaration of the reorganization proceedings and then from pesos into UDIs, and would not be adjusted to take into account any devaluation of the peso relative to the U.S. dollar occurring after such conversion; (ii) would be subject to the outcome of, and the priorities recognized in, the relevant proceedings; (iii) would be satisfied at the time claims of all our creditors are satisfied; (iv) would cease to accrue interest from the date a reorganization proceeding is declared; and (v) would be

23 subject to certain statutory preferences including tax, social security and labor claims and claims of secured creditors.

In addition, under Mexican law, it is possible that in the event we or the subsidiary guarantors are declared bankrupt or become subject to reorganization proceedings, any amount by which the stated principal amount of the notes exceeds their accreted value may be regarded as not matured and, therefore, claims of holders of the notes may only be allowed to the extent of the accreted value of the notes. There is limited legal precedent in connection with bankruptcy or reorganization proceedings in Mexico on this point and, accordingly, uncertainty exists as to how a Mexican court would measure the value of claims of holders of the notes.

Payments of judgments against us on the notes could be in pesos, and recipients might suffer a U.S. dollar shortfall.

In the event that proceedings are brought against us or the subsidiary guarantors in Mexico, either to enforce a judgment or as a result of an original action brought in Mexico, we and the subsidiary guarantors would not be required to discharge those obligations in a currency other than Mexican currency. Under the Monetary Law of the United Mexican States (Ley Monetaria de los Estados Unidos Mexicanos), an obligation, whether resulting from a judgment or by agreement, denominated in a currency other than Mexican currency, which is payable in Mexico, may be satisfied in Mexican currency at the rate of exchange in effect on the date on which payments are made. Such rate is currently determined by Banco de México and published every banking day in the Official Gazette. As a result, you may suffer a U.S. dollar shortfall if you obtain a judgment or a distribution in bankruptcy in Mexico. You should be aware that no separate action exists or is enforceable in Mexico for compensation for any shortfall.

The notes and the guarantees will be effectively subordinated to our secured debt and to certain claims preferred by statute.

Our obligations under the notes, and the obligations of the subsidiary guarantors under the guarantees are unsecured. As a result, the notes and the guarantees will be effectively subordinated to all of our and the subsidiary guarantors’ secured debt to the extent of the value of the collateral securing such debt. As of March 31, 2010, Ps.2,526 million (U.S.$204.9 million) of our debt, or 30% of our total debt outstanding, was secured by collateral, consisting of land reserves and machinery under lease. Further, the terms of the Indenture permit us to incur additional secured debt in the future. In the event that we or the subsidiary guarantors are not able to repay amounts due under any existing or future secured debt obligations, creditors could proceed against the collateral guaranteeing such indebtedness. In that event, any proceeds upon a realization of the collateral would be applied first to amounts due under the secured debt obligations before any proceeds would be available to make payments on the notes. If there is a default, the value of this collateral may not be sufficient to repay both our secured creditors and the holders of the notes.

Additionally, the claims of holders of the notes will rank effectively junior to certain obligations that are preferred by statute, including certain claims relating to taxes, social security and labor.

To the extent that certain of our subsidiaries are not guarantors, our obligations with respect to the notes will be effectively subordinated to all liabilities of these non-guarantor subsidiaries.

Currently, not all of our subsidiaries are guarantors. For the year ended December 31, 2009, our non- guarantor subsidiaries did not make a material contribution to our net revenue or EBITDA and did not have any material assets. Due to this, and to the extent we acquire other subsidiaries that are not guarantors or our current subsidiary guarantors are released from their guarantees in accordance with the terms of the Indenture, any right that we or the guarantors have to receive assets of any of the non-guarantor subsidiaries upon the liquidation or reorganization of those subsidiaries, and the consequent rights of holders of notes to realize proceeds from the sale of any of those subsidiaries’ assets, will be effectively subordinated to the claims of that subsidiary’s creditors, including trade creditors and holders of debt of that subsidiary.

USE OF PROCEEDS

After deducting the discount and fee to the initial purchasers and the estimated offering expenses, we expect the net proceeds from the sale of the notes will be approximately U.S.$241,919,800 million. We expect to use such net proceeds to repay our outstanding certificados bursátiles, of which approximately Ps.2,480.0 million were outstanding as of March 31, 2010. The certificados bursátiles to be repaid with the net proceeds from the sale of the notes accrues interest at various floating rates.

The remainder of the net proceeds from the sale of the notes, if any, will be used to repay additional short- term bank debt and for general corporate purposes. For a description of our outstanding indebtedness, see “Short- Term Debt and Capitalization” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations―Liquidity and Capital Resources.”

EXCHANGE RATES

Prior to December 1994, Banco de México kept the peso-U.S. dollar exchange rate within a range prescribed by the government through intervention in the foreign exchange market. In December 1994, the government suspended intervention and allowed the peso to float freely against the U.S. dollar. The peso declined sharply in value in December 1994 and continued to fall under conditions of high volatility in 1995. In the past few years, however, the peso has remained relatively stable although in October 2008, the peso suffered a decline in value and has not yet fully recovered. The Issuer cannot assure that the government will maintain its current policies with regard to the peso or that the peso will not further depreciate or appreciate significantly in the future. The following table sets forth, for the periods indicated, the exchange rate calculated by Banco de México, expressed in pesos per U.S. dollar.

FIX Exchange Rate to Pay Obligations Entered into in U.S. Dollars Payable in Mexico

Year Ended December 31, High Low Average(1) Period End

2007 ...... 11.268 10.664 10.927 10.916

2008 ...... 13.918 9.918 11.144 13.833

2009 ...... 15.365 12.597 13.498 13.066

Month Ended

January 31, 2010...... 13.010 12.649 12.802 13.010

February 28, 2010...... 13.175 12.777 12.942 12.777

March 31, 2010...... 12.745 12.331 12.574 12.331

April 30, 2010...... 12.370 12.158 12.230 12.263

May 31, 2010...... 13.182 12.261 12.743 12.915

June 2010 (through June 25)...... 12.929 12.460 12.710 12.704 ______Source: Banco de México: FIX Exchange Rate (1) Calculated using daily averages.

The FIX Exchange Rate calculated by Banco de México on June 25, 2010 was 12.704 pesos per U.S. dollar. Fluctuations in the exchange rate between the peso and the U.S. dollar will affect our ability to meet our U.S. dollar-denominated obligations, including our obligations under the notes.

SHORT-TERM DEBT AND CAPITALIZATION

The following table sets forth our short-term debt and capitalization (total liabilities and stockholders’ equity) as of March 31, 2010.

As of March 31, 2010, we had fully subscribed and paid-in capital of nominal registered shares with no par value, all of which were common shares.

As of March 31, 2010 As Adjusted For Actual This Offering (1) (Ps.) (U.S.$) (3) (Ps.) (U.S.$)(3) (millions)

Short-term debt and current portion of long-term debt: Notes payable...... 1,684.6 136.6 1,638.8 132.9 Current portion of long-term debt ...... 2,324.7 188.5 544.7 44.2 Total short-term debt and current portion of long-term debt(a)...... 4,009.2 325.2 2,183.5 177.1 Long-term debt, excluding current portion(b) ...... 4,023.6 326.3 5,949.0 482.5 Stockholders’ equity: Total stockholders’ equity(c)...... 9,202.7 746.3 9,202.7 746.3 Total capitalization(2) ...... 17,235.6 1,397.8 17,335.2 1,405.9 ______(1) As adjusted to give effect to the application of the net proceeds of this offering as described under “Use of Proceeds.” As adjusted financial information is unaudited. (2) Total Capitalization is equal to (a) + (b) + (c). (3) Peso amounts have been translated into U.S. dollars, solely for the convenience of the reader, at the rate of 12.3306 pesos per U.S. dollar as of March 31, 2010.

SELECTED CONSOLIDATED FINANCIAL AND OTHER INFORMATION

Our Consolidated Financial Statements have been prepared in accordance with Mexican FRS, issued by CINIF, which differs in certain significant respects from U.S. GAAP. See “Description of Certain Differences between Mexican FRS and U.S. GAAP.” No reconciliation to U.S. GAAP of the Consolidated Financial Statements or of any other financial information presented herein has been prepared. There can be no assurance that a reconciliation would not identify material quantitative differences between such financial statements or information prepared on the basis of Mexican FRS and as prepared on the basis of U.S. GAAP.

Significant Changes in Mexican FRS

Beginning January 1, 2008, we adopted NIF B-10, “Effects of Inflation,” whereby the effects of inflation are not recognized unless the economic environment in which the entity operates is considered inflationary, as established within the standard. An environment is considered inflationary when cumulative inflation over the preceding three-year period is 26% or more. Given the low level of inflation in Mexico in the three-year period preceding December 31, 2008, we discontinued the recognition of the effects of inflation on our financial information. Accordingly, data in the Consolidated Financial Statements and “Summary Consolidated Financial Information” as of and for the year ended December 31, 2007 have been restated in constant pesos as of December 31, 2007, unless otherwise noted, and no further restatement to constant pesos has been made after that date. Our financial statements as of and for the years ended December 31, 2008 and 2009, and as of and for the three-month periods ended March 31, 2009 and 2010, report information in nominal pesos.

Additionally, during 2008, we adopted NIF B-2, “Statement of Cash Flows,” which superseded Bulletin B-12, “Statement of Changes in Financial Position.” NIF B-2 requires the presentation of a statement of cash flows using either the direct or indirect method; we elected to use the indirect method. As adoption of this NIF is prospective, we present a statement of cash flows for 2008 and a statement of changes in financial position for 2007 and 2006.

As disclosed in our Consolidated Financial Statements, on January 1, 2010, we adopted the provisions established by INIF 14, “Construction Contracts, Sale of Real Estate and Rendering of Related Services,” an interpretation of NIF D-7, “Construction and Manufacturing Contracts for Certain Capital Assets.” INIF 14 changed the method according to which we recognize our revenues from the “percentage-of-completion” method to

28 recognizing revenues when the contract for sale of a housing unit is notarized and actual, legal title passes to the buyer.

INIF 14 requires separating the different components of contractual agreements in order to identify whether such agreements pertain to construction of real estate, sale of real estate or the rendering of related services, and establishes the rules for recognizing revenue and related costs and expenses in each instance. For real estate sales agreements, according to the criterion established by INIF 14, revenues are recognized when the entity has transferred ownership to the buyer.

Three Months Ended March 31, Year Ended December 31, 2009 2010 2010 2007 2008 2009 2009 (millions of Ps., except for (millions of (millions of Ps., except for ratios or (millions of ratios or percentages) U.S.$, except percentages) U.S.$, except for ratios or for ratios or percentages) percentages) Other Financial Information: Income from operations ... 441.7 628.2 50.9 1,997.4 2,173.3 2,938.8 238.3 Capitalized interest released to costs(3) ...... 183.3 144.5 11.7 708.7 804.1 730.8 59.3 Depreciation and amortization ...... 62.6 91.3 7.4 191.1 163.4 290.3 23.5 EBITDA(4) ...... 687.6 864.0 70.1 2,897.2 3,140.8 3,959.9 321.1 Net interest expense Interest expense...... 137.5 129.7 10.5 385.4 611.0 667.2 54.1 Capitalized interest(3). 183.3 144.5 11.7 708.7 804.1 730.8 59.3 Interest income...... (14.4) (14.3) (1.2) (98.2) (99.8) (124.0) (10.1) Effects of valuation of derivative financial instruments-net ...... — (12.6) (0.4) 44.8 — 39.0 3.2 Ineffective portion of derivative financial instruments ...... — 7.4 0.6 — — 3.9 0.3 (5) Net interest expense ...... 306.4 254.7 20.7 1,040.7 1,315.3 1,316.9 106.8

(8) Total debt represents the sum of short-term and long-term debt. (9) Total capitalization represents the sum of short-term debt, long-term debt and total stockholders’ equity. Reconciliation of capitalization is as follows:

(10) Weighted average price of homes we sold in Mexico for the period ended on such date.

(11) Reconciliation of LTM EBITDA for the twelve months ended March 31, 2009 and 2010 is as follows:

(A) Peso amounts have been translated into U.S. dollars, solely for the convenience of the reader, at the rate of 12.3306 pesos per U.S. dollar as of March 31, 2010.

(B) Represents interest expense capitalized in inventory and expensed through costs related to real estate development activities upon the sale of such inventory in the respective period.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion should be read in conjunction with our Consolidated Financial Statements and notes thereto included elsewhere in this offering memorandum. Our Consolidated Financial Statements have been prepared in accordance with Mexican FRS, which as applied to us, differs in certain significant respects from U.S. GAAP. See “Risk Factors—Risks Relating to the Notes” and “Description of Certain Differences between Mexican FRS and U.S. GAAP.”

This offering memorandum contains forward-looking statements that reflect our plans, estimates and beliefs. Our actual results could differ materially from those discussed in the forward-looking statements. Factors that could cause or contribute to these differences include, but are not limited to, those discussed below and elsewhere in this offering memorandum, particularly in “Disclosure Regarding Forward-Looking Statements” and “Risk Factors.”

Introduction

We are engaged in a vertically integrated homebuilding business encompassing the design, construction and marketing of single-family homes in the Affordable Housing, Middle Income Housing and Residential Housing segments, covering 54 municipalities across 17 Mexican states. We are the leading builder of homes in the Affordable Housing segment in Mexico by the number of mortgages granted by both INFONAVIT and FOVISSSTE to our clients, and we were the largest homebuilder in Mexico in the first quarter of 2010 in terms of revenue. As many home mortgage financing institutions categorize their financing programs by income level, we describe the homes we develop as Affordable Housing, Middle Income Housing or Residential Housing, based on the value of the home itself. In 2009, lower-end housing, including homes in our Affordable Housing line, represented approximately 91.0% of the number of homes we sold and 80.1% of our revenues, with homes in the Middle Income Housing and Residential Housing segments accounting for the balance. Given the significant demand for housing in the Affordable Housing segment in Mexico, which we believe currently exceeds the available supply, and because Mexican federal governmental policy has historically supported and currently supports providing mortgage financing to lower income households, this industry has provided a relatively stable source of revenue for home developers like us.

Development of houses in the Affordable Housing segment in Mexico is heavily dependent on below- market interest rate mortgage financing provided to home buyers primarily by INFONAVIT, FOVISSSTE and SHF, which are government or government-sponsored institutions. Substantially all of our operating revenues for the periods presented in this offering memorandum from sales of homes in the Affordable Housing sector were derived from home mortgage financing made available to our clients by INFONAVIT, FOVISSSTE and SHF. See “Risk Factors—Risks Relating to Our Business—Our dependence on public sector financing may negatively affect our business and results of operations if such public sector financing is not available” for a discussion of how changes in SHF or other mortgage providers’ policies may affect funding of our home developments in the future.

We have continued to develop our position in the high-growth Affordable Housing segment, and continue to focus our growth on this segment. As of March 31, 2010, we had the largest market share with both INFONAVIT and FOVISSSTE (7.7% and 9.8%, respectively) of any homebuilder in Mexico, based on the number of mortgages provided by these entities to our clients. We also continue to grow geographically and now operate in 17 states throughout Mexico.

Factors Affecting our Results of Operations

Described below are certain factors that may be helpful in understanding our overall operating results. These factors are based on the information currently available to our management and may not represent all of the factors that are relevant to an understanding of our current or future results of operations. See “Disclosure Regarding Forward-Looking Statements” and “Risk Factors.”

Our operations consist primarily of our real estate development activities, including (i) land acquisition; (ii) obtaining required permits and licenses; (iii) installing infrastructure improvements required for each housing

33 development; (iv) designing, constructing and marketing housing developments; (v) assisting home buyers in obtaining mortgage loans; (vi) conveyance of title and (vii) post-sale services such as the processing of any complaints or claims by the client, the organization of condominium associations within each development, the delivery of common areas within each development to the condominium associations and community training and related services. In order to increase the development of our real estate projects, we entered into the Residential Investment Program with Prudential in 2003. We also act as a contractor for certain Mexican state government agencies, providing construction activities similar to our development activities, except that we do not acquire the land on which such projects are built.

Proceeds from sales of homes are not actually received by us from the home buyers until the homes are completed and delivered. Accordingly, we must finance substantially all of our development activities through bridge loans and working capital.

For each of the past five years, our revenue has increased, primarily as a result of (i) strong demand for the homes we produce for the Affordable Housing sector, due to a housing deficit in Mexico of approximately 8.9 million homes; (ii) the existence of INFONAVIT, FOVISSSTE and SHF, which provide mortgage financing to our clients based on government-mandated payroll contributions; and (iii) strong support from the Mexican federal government, which has, over the past three presidential administrations, implemented broad policies aimed at promoting affordable housing as a fundamental part of Mexico’s economic and social development.

We focus strategically on increasing the percentage of our revenue derived from sales in the Affordable Housing segment. This strategy has affected our results of operations, as further explained below.

Our operating expenses are related only to the operations of our business and include (i) fixed costs, principally consisting of salaries, employee benefits, depreciation of property, plant and equipment and amortization of other assets and (ii) variable costs, mainly consisting of costs of materials associated with our real estate development activities.

International Financial Reporting Standards (“IFRS”)

On January 27, 2009, the CNBV published in the Mexican Federal Official Gazzette (Diario Oficial de la Federación) the requirements for listed companies to prepare their financial information under IFRS beginning in 2012. Likewise, the CNBV specified that early adoption is allowed.

Management is currently evaluating the effects of the adoption and implementation of IFRS as well as the potential adoption date.

Discontinued Operations

During 2009, the Company discontinued the operation of Geo Oaxaca, S.A. de C.V. Mexican FRS requires that we present the effects of discontinued operations retrospectively for all periods presented. Accordingly, all financial data presented in this offering memorandum have been restated to give effect to this discontinued operation retrospectively. The effects of this retrospective application on the years ended December 31, 2008 and 2007 are presented in notes 27 and 30 of our audited consolidated financial statements.

Critical Accounting Policies

Our Consolidated Financial Statements have been prepared in accordance with Mexican FRS, which require management to make estimates and use certain assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from such estimates. These estimates and assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances.

We believe the most critical accounting policies that require the application of estimates and/or judgments are as follows.

Revenue and Cost Recognition under INIF 14, Construction Contracts, Sale of Real Estate and Rendering of Related Services.

Through December 31, 2009, revenues under our sales of real estate were recognized using the percentage- of-completion method.

In December 2008, INIF 14 was issued by the CINIF to complement Bulletin D-7, “Construction and Manufacturing Contracts for Certain Capital Assets.” INIF 14 provides guidance with respect to the recognition of revenues, costs and expenses for all entities that undertake the construction of capital assets directly or through subcontractors.

Due to the application of INIF 14, on January 1, 2010, we have discontinued recognizing revenues, costs and expenses related to the construction of real estate based on the percentage-of-completion method and instead follow the guidance required by INIF 14. Under INIF 14, we analyze the different components of our construction contracts to identify whether they pertain to construction of real estate, sale of real estate or the rendering of related services. Based on the nature and terms of our contracts, we have determined that they represent sales of real estate, for which INIF 14 permits revenue recognition only when all of the following conditions are fulfilled:

(i) we have transferred to the home buyer the control and significant risks and benefits of the property or ownership of the asset;

(ii) we do not maintain any continuing involvement or participation with respect to management of the related asset, in the usual manner associated with the property, nor do we retain effective control of the asset sold;

(iii) the amount of revenues can be estimated reliably;

(iv) it is probable that we will receive the economic benefits associated with the transaction; and

(v) the costs and expenses incurred or to be incurred related to the transaction can be estimated reliably.

Our analysis of the criteria above has led us to conclude that we generally meet such criteria with respect to our home sales when the sale contract with the home buyer is notarized and the legal title has passed to such buyer. As this occurs at a moment in time different from over the life of construction, as was the case when we applied the percentage-of-completion method, we modified our revenue recognition policy on January 1, 2010. As required by INIF 14, this change in accounting policy must be applied retrospectively for the purpose of comparability. Accordingly, unless otherwise indicated, we have retrospectively applied INIF 14 to all financial data presented in this offering memorandum. The effects of this retrospective application of INIF 14 on the financial information as of and for the years ended December 31, 2009, 2008 and 2007 are presented in note 30 of our audited consolidated financial statements. The effects of this retrospective application of INIF 14 on the financial information as of and for the three-month period ended March 31, 2009 are presented in note 3(a) of our unaudited condensed consolidated financial statements as of and for the three-month periods ended March 31, 2009 and 2010.

Going forward, we will continue to apply INIF 14, which requires our judgment in (i) identifying the components of our construction contracts to determine the appropriate revenue recognition criteria to apply and (ii) determining the moment in time when the risks and rewards of ownership have passed to our clients.

Impairment of Long-Lived Assets

Long-lived assets are tested for impairment when indicators of potential impairment in the carrying amount of long-lived assets in use exist, indicating that the carrying value of such assets may not be recoverable. Management considers impairment indicators including (but not limited to) market conditions (including the availability and level of funding from government-sponsored policies and programs in the Affordable Housing segment as well as other economic indicators, including inflation, interest rates and the behavior of the Mexican peso, that could impact the availability and/or attractiveness of financing to customers in the Middle Income and Residential Housing segments), operating losses or negative cash flows in the current period when combined with a history or projection of such losses or negative cash flows, and depreciation and amortization charged to results that

35 are substantially higher than that of previous years, in percentage terms and competition. The variability of these factors depends on a number of conditions, including uncertainty about future events, and thus accounting estimates may change from period to period. Recoverability of long-lived assets is determined based on the greater of the present value of future net cash flows generated by such assets or an estimated net sales price of the asset; an impairment is recorded when the carrying amount of long-lived assets exceeds the greater of the amounts mentioned above. Present value of future net cash flows for recoverability purposes is based on management’s projections of future operations, discounted using current interest rates.

Income Taxes

Income tax expense, calculated as the higher of IETU or regular income tax, is recorded in the results of the year in which such tax expense or benefit is incurred. We prepare financial projections to determine whether we expect to incur IETU or regular income tax in the future. Such projections are based on estimates regarding future revenues, expenses and cash flow. Deferred income taxes are calculated by applying the corresponding tax rate to the applicable temporary differences resulting from comparing the accounting and tax bases of assets and liabilities, including the effects of any tax loss carryforwards or asset tax credits. Management evaluates the recoverability of deferred income tax assets based on historical taxable income, projected future taxable income and the expected timing of the reversals of existing taxable temporary differences. A valuation allowance is recognized when, based on this analysis, it is highly probable that the deferred income tax asset will not be realized.

Labor Obligations

We record annual amounts related to employee labor obligations, including seniority premiums and severance payments. Such amounts are based on actuarial calculations that include various actuarial assumptions including discount rates, assumed rates of return, compensation increases, turn-over rates and inflation rates. We review the actuarial assumptions on an annual basis and make modifications to the assumptions based on current rates and trends when appropriate.

Provisions

Provisions, such as warranty obligations, are recognized when we have a present obligation (legal or constructive) as a result of a past event, it is probable that we will be required to settle the obligation, and a reliable estimate can be made of the amount of the obligation.

The amount recognized as a provision is the best estimate of the consideration required to settle the present obligation at the balance sheet date, taking into account the risks and uncertainties surrounding the obligation. Where a provision is measured using the cash flows estimated to settle the present obligation, its carrying amount is the present value of those cash flows.

Derivative Financial Instruments

We use derivative financial instruments to hedge certain economic exposures arising from movements in exchange rates, interest rates or other factors that could affect either the value of our assets or liabilities or our future cash flows.

We recognize all assets or liabilities that arise from transactions with derivative financial instruments at fair value in the balance sheet, regardless of our intent for holding them. Fair value is determined using prices quoted in recognized markets. If such instruments are not traded, fair value is determined by applying a straight-line depreciation valuation method.

Movements in the fair values of derivative financial instruments may be accounted for pursuant to hedge accounting where the relevant eligibility, documentation and effectiveness testing requirements are met. If hedge criteria are met, depending on the type of hedge, fluctuation in fair value may be recognized within other comprehensive income within stockholders’ equity. However, if hedge criteria are not met, or where there is an ineffective portion of a derivative financial instrument, movements in the fair values of derivative financial instruments will be recorded in the income statement immediately.

Variability of Quarterly Results

The Mexican affordable housing industry experiences significant revenue variability due to the operating cycles of the various institutions that provide mortgage financing to the sector. The programs, budgets and changes in the authorized policies of the banks, government entities, development funds and housing agencies typically are approved during the first calendar quarter of the year; the majority of construction begins at the end of the first quarter and completion of most homes occurs during the third and fourth quarters. Accordingly, we tend to recognize significantly higher levels of income in the third and fourth quarters as construction is completed and sales activities are highest. However, our debt levels have been and continue to be highest in the second and third quarters of our fiscal year because of higher levels of development.

Results of Operations

INIF 14 became effective on January 1, 2010 and, for comparative purposes, we have retrospectively applied INIF 14 to the results of operations for the years ending December 31, 2007, 2008 and 2009 and the three- month period ended March 31, 2009.

The following table sets forth selected data for the periods discussed in this section, expressed as a percentage of our total revenues.

Three Months Ended March 31, For the Years Ended December 31, 2009 2010 2007 2008 2009 % % % % % Revenues from real estate development activities ...... 100.0 100.0 100.0 100.0 100.0 Costs from real estate development activities ...... (74.9) (73.1) (73.2) (73.9) (73.9) Gross margin ...... 25.1 26.9 26.8 26.1 26.1 Selling, general and administrative expenses...... (11.5) (10.2) (11.1) (11.2) (9.5) Income from operations ...... 13.6 16.7 15.7 14.9 16.6 Comprehensive financing cost(1) ...... 3.8 2.4 2.6 4.3 3.5 Net income of controlling interest ...... 6.2 8.1 8.3 6.7 7.7 Net income of non-controlling interest.. 0.8 1.5 0.1 0.3 0.5 Consolidated net income...... 7.0 9.6 8.4 7.0 8.2 EBITDA(2) ...... 21.2 23.0 22.8 21.5 22.4 ______(1) Represents interest income, interest expense and monetary position gains and losses (through 2007) and excludes capitalized interest (including the corresponding monetary position gains previously capitalized to inventory) and effects of valuation of derivative financial instruments – net. (2) EBITDA represents income from operations before income taxes, depreciation and amortization, plus the amount of interest expense capitalized in inventory and expensed through costs related to real estate development activities upon the sale of such inventory in the respective period. EBITDA is not a measure of financial performance under Mexican FRS and should not be construed as an alternative measure to (a) net income or income from operations (as defined in accordance with Mexican FRS) as an indicator of our operating performance, or (b) cash provided by operating activities (as defined in accordance with Mexican FRS) as a measure of our liquidity. EBITDA is included because it is a widely accepted financial indicator used by investors and analysts to analyze and compare companies on the basis of operating performance. EBITDA as presented may not be comparable to similarly titled measures reported by other companies because not all companies necessarily calculate EBITDA in an identical manner and, therefore, EBITDA is not necessarily an accurate means of comparison between companies.

We operate in 54 municipalities across 17 Mexican states as of March 31, 2010. Sales volumes for the three-month period ended March 31, 2010, totaled 10,113 homes, a 3.4% increase from the same period during the previous year. This was primarily driven by a 5.8% increase in homes sold in the Affordable Housing sector from 8,952 in the three-month period ended March 31, 2009, to 9,474 in the three-month period ended March 31, 2010. Sales from the Middle Income Housing and Residential Housing segments together contributed 639 homes in the three-month period ended March 31, 2010, representing a 22.5% decrease from the 824 homes sold in the same period the prior year.

Three Months Ended March 31, 2010, Compared to Three Months Ended March 31, 2009

Revenues

Total revenues increased by Ps.521.5 million, or 16.1%, to Ps.3,762.8 million in the first quarter of 2010 from Ps.3,241.3 million in the same period in 2009. This increase was principally attributable to both the 3.4% increase in the total number of homes sold in the first quarter of 2010 to 10,113, from 9,776 homes sold during the first quarter of 2009 and an increase of 5.8% in the average price of homes sold. The average price of homes we sold increased from Ps.330,880 during the first quarter of 2009 to Ps.350,125 in the first quarter of 2010. In addition, the increase in our total revenues for the first quarter of 2010 was in part due to the sale of certain commercial real estate and land which generated Ps.222.0 million in revenues.

Costs

Costs increased Ps.323.8 million or 13.3% to Ps.2,751.8 million during the first quarter of 2010 from Ps.2,428.0 million in the first quarter of 2009. This increase principally reflected our changing product mix, as we increased our focus on the fast-growing lower income segments and higher capitalized interest in the costs of goods sold due to higher levels of debt.

Gross Margin

Gross margin increased Ps.197.7 million, or 24.3%, to Ps. 1,011.0 million in the first quarter of 2010 from Ps.813.3 million during the first quarter of 2009. Our gross profit margin increased to 26.9% in the first quarter of 2010 from 25.1% in the same period in 2009. This 1.8% increase resulted principally from the revenues generated from the sale of commercial real estate and land, partially offset by the reduction in our profits as a result of our increased focus on the sale of Affordable Housing.

Selling, General and Administrative Expenses

Selling, general and administrative expenses increased Ps.11.2 million, or 3.0%, to Ps.382.8 million in the first quarter of 2010 from Ps.371.6 million during the first quarter of 2009. This increase was mainly due to an increase in the number of employees, as well as an increase in the size of salaries, resulting in a 4% increase in total payroll costs, and reflects our overall growth in operations. The ratio of selling, general and administrative expenses to total sales improved to 10.2% during the first quarter of 2010 compared with 11.5% in the same period in 2009 as a result of certain improvements with respect to our administrative efficiency and cost control.

EBITDA

EBITDA increased Ps.176.4 million, or 25.6%, to Ps.864.0 million in the first quarter of 2010 from Ps.687.6 million during the first quarter of 2009, and EBITDA margin increased 175 basis points to 23.0% in the first quarter of 2010. The increase in EBITDA was principally due to the factors described above.

Net Comprehensive Financing Cost

Net comprehensive financing cost decreased Ps.32.8 million, or 26.3%, to Ps.91.8 million in the first quarter of 2010 from Ps.124.6 million in the same period in 2009. This was mainly due to gains resulting from the strengthening of the Mexican peso relative to the U.S. dollar and a 5.7% decrease in interest expense.

Provisions for Income Tax

Provisions for income tax increased by Ps.87.2 million, or 95.3%, to Ps.178.7 million in the first quarter of 2010 from Ps.91.5 million in the same period in 2009 mainly because of our higher taxable income. The effective tax rate reflected in the income statement was 33.1% in the first quarter of 2010, compared to 28.9% in the first quarter of 2009, principally due to an increase in the ISR from 28% in 2009 to 30% in 2010.

Consolidated Net Income

Consolidated net income increased by Ps.136 million, or 60.3% in the first quarter of 2010 to Ps.361.6 million from Ps.225.6 million in the same period in 2009 as a result of the factors described above.

Year Ended December 31, 2009, Compared to Year Ended December 31, 2008

Revenues

Total revenues increased by Ps.3,099.5 million, or 21.2%, to Ps.17,713.2 million in 2009 from Ps.14,613.7 million in the same period in 2008. This increase was principally attributable to both the 22.4% increase in the total number of homes sold in 2009 to 51,177, from 41,811 homes sold during 2008 and an increase of 2.1% in the average price of homes sold. The average price of homes we sold increased from Ps. 345,735 during 2008 to Ps. 352,975 in 2009. The average price increase was below the rate of inflation during the period as a result of our continuing focus on selling lower-priced homes in the Affordable Housing segment. As a result of this focus, the percentage of revenues we derived from the sale of homes in the Affordable Housing sector compared to our overall revenues increased to 91.0% in 2009 from 82.4% in 2008.

Costs

Costs increased Ps.2,283.4 million or 21.1% to Ps.13,083.1 million in 2009 from Ps.10,799.6 million in 2008. This increase mirrored the increase in revenues from 2008 to 2009.

Gross Margin

Gross profit increased Ps. 816.0 million, or 21.4%, to Ps.4,630.1 million in 2009 from Ps.3,814.1 million in 2008. Our gross profit margin remained unchanged at 26.1% in both 2009 and 2008.

Selling, General and Administrative Expenses

Selling, general and administrative expenses increased Ps.50.5 million, or 3.1%, to Ps.1,691.3 million in 2009 from Ps.1,640.8 million in 2008. This increase was mainly due the overall growth in our work force, including a 1.8% increase in labor costs and a 4.7% increase in the number of administrative employees in 2009 as compared to 2008. The ratio of selling, general and administrative expenses to total sales improved to 9.5% in 2009 compared with 11.2% in 2008, reflecting the substantially larger increase in revenues.

EBITDA

EBITDA increased 26.1%, to Ps. 3,959.9 million in 2009 from Ps. 3,140.8 million in 2008, and EBITDA margin increased 86 basis points to 22.4% in 2009. The increase in EBITDA was principally due to the factors described above.

Net Comprehensive Financing Cost

Net comprehensive financing cost decreased Ps. 11.1 million, or 1.8%, to Ps. 616.7 million in 2009 from Ps.627.8 million in 2008. This was mainly due to a decrease in our exchange rate loss of Ps. 86.0 million, resulting from the strengthening of the Mexican peso against the U.S. dollar and increased interest income of Ps. 24.2 million, which was partially offset by an increase in interest expense of Ps. 56.3 million due to a higher average cost of debt and a higher debt balance.

Provisions for Income Tax

Provisions for income tax increased by Ps.251.2 million, or 51.7%, to Ps.736.9 million in 2009 from Ps.485.7 million in 2008 mainly because of GEO’s higher taxable income. The effective tax rate reflected in the income statement remained relatively stable at 33.0% in 2009 and 32.1% in 2008.

Consolidated Net Income

Consolidated net income increased by Ps.425.3 million, or 41.5% in 2009 to Ps.1,450.8 million from Ps.1,025.5 million in 2008 as a result of the factors described above.

Year Ended December 31, 2008, Compared to Year Ended December 31, 2007

Revenues

Total revenues increased by Ps.1,882,2 million, or 14.8%, to Ps.14,613.7 million in 2008 from Ps.12,731.5 million in 2007. This increase was principally attributable to both the 13.3% increase in the number of homes sold in 2008 to 41,811, from 36,917 homes sold in 2007, and an increase of 5.1% in the average price. The average price of homes we sold increased to Ps.345,735 in 2008 from Ps.328,983 in 2007. The average price increase was in line with general pricing increases due to inflation and reflected our continued effort to implement our strategy focused on the Affordable Housing segment. As a result, 82.4% of total sales were in this segment compared with 83.0% in 2007.

Costs

Costs increased Ps.1,479.9 million or 15.9% to Ps.10,799.6 million in 2008 from Ps.9,319.7 million in 2007. This increase reflected (i) our changing product mix, as we increased our focus on the faster-growing, lower- income segments and (ii) higher capitalized interest in costs of goods sold due to higher levels of debt. Our capitalized interest increased from Ps.708.7 million in 2007 to Ps. 804.1 million in 2008.

Gross Margin

Gross margin increased Ps.402.3 million, or 11.8%, to Ps.3,814.1 million in 2008 from Ps.3,411.8 million in 2007. Our gross profit margin decreased to 26.1% in 2008 from 26.8% in 2007. This 0.7% decrease principally resulted from our increased focus on the sale of Affordable Housing.

Selling, General and Administrative Expenses

Selling, general and administrative expenses increased Ps.226.4 million, or 16.0%, to Ps.1,640.8 million in 2008 from Ps.1,414.4 million in 2007. This increase was mainly due to an increase in the number of employees, as well as an increase in wages, resulting in an increase to Ps.107 million in payroll costs, and reflects our overall growth in operations. The ratio of selling, general and administrative expenses to total sales remained stable at 11.2% in 2008 and 2007.

EBITDA

EBITDA increased 8.4%, to Ps.3,140.8 million in 2008 from Ps.2,897.2 million in 2007 as a result of the factors described above. EBITDA margin increased 126 basis points to 21.5% in 2008 from 22.8% in 2007. The increase in EBITDA margin was primarily due to the increase in gross profit margin described above.

Net Comprehensive Financing Cost

Net comprehensive financing cost increased Ps.293.9 million, or 88.0%, to Ps.627.8 million in 2008 from Ps.333.9 million in 2007. This was mainly due to (1) an increase in net interest expense of Ps.225.6 million due to a higher average cost of debt and a higher debt balance; and (2) an increase in the exchange rate loss of Ps.114.6 million due to a 26.7% appreciation of the dollar against the peso in 2008.

Provisions for Income Tax

Provisions for income tax decreased by Ps.27.7 million, or 5.4%, to Ps.485.7 million in 2008 from Ps.513.4 million in 2007 mainly because of our slightly lower taxable income. The effective tax rate reflected in the income statement was 32.1% in 2008, compared to 33.3% in 2007.

Consolidated Net Income

Consolidated net income decreased by Ps.47.6 million, or 4.4% in 2008 to Ps.1,025.5 million from Ps.1,073.1 million in 2007, as a result of the factors described above.

Income Tax, Asset Taxes and Business Flat Rate Tax

Income tax is calculated as the higher of IETU or regular income tax. Additionally, an asset tax, equivalent to an alternate minimum tax, was payable at the rate of 1.8% on the net amount of certain assets and liabilities through December 31, 2006 and at the rate of 1.25% of assets without deducting liabilities for 2007, but only to the extent the amount of asset tax exceeded the income tax due. In 2008, the asset tax was replaced with IETU. Subject to certain rules and limitations, it is possible to recover the asset tax paid in the preceding ten years.

In addition to their agreed compensation and benefits, we are required by law to pay our employees profit sharing in an aggregate amount equal to 10% of our pre-tax profits (calculated without reference to inflation adjustments, tax loss carryforwards and after deduction of certain expenses), which is recorded within other expenses. We also pay our employees, including senior management, special annual bonuses, depending upon each employee’s function and performance relative to targets. See “Management—Incentive Program and Employee Stock Ownership Plan.” If statutory employee profit sharing is payable in any year, the portion of the special bonus equal thereto is accounted for under employee profit sharing expense within other expense and any amount in excess is accounted for under selling, general and administrative expenses.

Accordingly, our provision for income taxes for the years 2009, 2008 and 2007 was Ps.736.9 million, Ps.485.7 million and Ps.513.4, respectively, representing 32.9%, 32.1% and 33.3% of our income from continuing operations before income taxes and equity in income of associated companies and trusts for the respective years, and Ps.178.7 million and Ps.91.5 million, respectively, for the three-month periods ending March 31, 2010 and March 31, 2009, representing 33.1% and 28.9% of our income from continuing operations before income taxes and equity in income of associated companies and trusts for the respective periods. We have tax loss carryforwards and recoverable asset tax credits that expire between 2010 and 2020. See note 21(d) to our audited consolidated financial statements as of and for the years ended December 31, 2009, 2008 and 2007.

Liquidity and Capital Resources

We have experienced, and expect to continue to experience, substantial liquidity and capital resource requirements, principally in order to finance development and construction of homes pending payment upon completion and delivery.

Although we generally do not begin the construction of developments until the availability of the mortgage financing has been confirmed, we acquire land and perform the activities necessary to obtain the applicable permits and licenses, as well as certain infrastructure development activities, prior to receiving the confirmation of the availability of mortgage financing. We do not receive the proceeds from home sales until these houses are finished and delivered. As a result, we finance development and construction activities through working capital and outsourcing, mainly by means of bridge loans from a credit institution.

Our liquidity and capital resources increased in 2009 and in the first quarter of 2010 due to faster collections derived from our strategy of focusing on the Affordable Housing segment. The designs of the homes in this segment permit a more rapid production and collections cycle, which we believe will allow us to decrease our liquidity requirements for large projects, as part of our strategy to reduce our need for additional debt financing.

As of March 31, 2010, we had Ps.1,176.7 million in cash and cash equivalents and Ps.18,972.6 million in total liabilities. As of December 31, 2009, we had Ps.3,393.4 million in cash and cash equivalents and Ps.19,697.4 million in total liabilities. We increased our level of operations between 2008 and 2009, from 41,811 to 51,177 units sold (a 22.4% increase). The proportion of total debt to capitalization was 46.6% as of March 31, 2010, as compared

41 to 49.8% as of March 31, 2009. The proportion of total debt to capitalization was 48.4%, as of December 31, 2009, as compared to 46.6% as of December 31, 2008, and 43.9% as of December 31, 2007.

Cash Flows

The table below reflects our consolidated cash, cash equivalents and restricted cash as of the periods indicated and the net cash provided by (or used in) operating, investing, and financing activities during such periods.

Three Months Ended March 31, Year Ended December 31, 2009 2010 2007 2008 2009 (millions of Ps.) Cash, cash equivalents and restricted cash at beginning of period ...... 2,578.3(1) 3,393.4 2,968.5 2,113.7 2,560.1 Net cash or resources provided by (used in) operating activities 624.2 (2,221.0) (281.2) (557.8) 2,400.5 Net cash or resources used in investing activities ...... (82.5) (87.9) (318.6) (574.0) (969.8) Net cash or resources provided by (used in) financing activities (502.9) 92.3 (255.0) 1,578.1 (597.4) Cash, cash equivalents and

restricted cash at end of period 2,617.1 1,176.7 2,113.7 2,560.1 3,393.4 Note: Figures may not sum due to rounding. (1) Includes Ps.18.2 million in cash, cash equivalents and restricted cash that are included within a separate line item in our annual 2009 consolidated financial statements, given that they were related to our discontinued operations at GEO Oaxaca, S.A. de C.V. See note 2(d) and note 7 to our audited consolidated financial statements for the years ended December 31, 2007, 2008 and 2009.

During the first three months of 2010, our net cash used in operating activities was Ps.2,221.0 million, our net cash used in investing activities was Ps.87.9 million and our net cash provided by financing activities was Ps.92.3 million, resulting in a net decrease in cash, cash equivalents and restricted cash of Ps.2,216.6 million for the first three months of 2010.

In 2009, our net cash from operating activities was Ps.2,400.5 million, our net cash used in investing activities was Ps.969.8 million and our net cash used in financing activities was Ps.597.4 million, resulting in a net increase in cash and cash equivalents of Ps.833.3 million at December 31, 2009 compared to 2008.

In 2008, our net cash used in operating activities was Ps.557.8 million, our net cash used in investing activities was Ps.574.0 million and our net cash provided by financing activities was Ps.1,578.1 million, resulting in a net increase in cash and cash equivalents of Ps.464.3 million at December 31, 2008 compared to 2007.

Internal and External Sources of Liquidity

We follow a financial strategy that seeks to improve liquidity and financial flexibility. We anticipate that we will meet our short-term liquidity requirements with resources generated by our own operations, by means of credit lines available and with financings for specific projects. From time to time, we also consider obtaining additional resources financed through private or public placements of equity or debt securities, co-investments or other adjustments. We expect that the additional amounts necessary to finance working capital in the present year will come from cash generated by operations and other financings. It is not possible to be assured that cash from operations or additional financings will be available at attractive terms for us.

Our primary sources of liquidity are:

• cash flow from operations;

• commercial banks, Sofoles and other financial institutions;

• our joint ventures with Prudential and Sólida;

• our issuances of notes in the domestic and international capital markets;

• our euro-commercial paper program;

• financing from sellers of land and, to a lesser extent, suppliers of materials; and

• down payments from home buyers.

As of March 31, 2010, we had Ps. 8,555 million in undrawn uncommitted credit lines available. These credit lines are used for the financing of construction of a project that is approved by the corresponding financial institution in which a bridge loan is involved. Such credit does not have pre-established payment terms since it is repaid when the houses are notarized and sold. The credit lines are specific to each project. Construction financing is secured by land and houses under construction.

Treasury Policies

We maintain a centralized control of the treasury, regulating the treasuries of each one of our subsidiaries in relation to income and expense budgets that each subsidiary presents periodically. Also, a centralized control exists for obtaining and disposing all types of credit by means of the centralized administration of credit lines.

Rights to Payment upon Transfer of Title and Related Securitization

Our working capital consists primarily of accounts receivable that are payable upon transfer of title to our homes. Our subsidiaries established a program to securitize the rights to payment upon transfer of title derived from our purchase-sale contracts (the “Rights”), which are transferred to a trust (the “NaFin Trust”) established by Nacional Financiera, S.N.C., Institución de Banca de Desarrollo (“Nacional Financiera”). Nacional Financiera acts as the trustee for the NaFin Trust. The Company has the obligation to complete the construction of the housing units related to the Rights and is responsible for the collection of the Rights and for depositing the proceeds into the NaFin Trust.

The NaFin Trust obtains funds through public offerings of Amortizable Share Certificates (certificados bursátiles or “CBs”) which consist of preferred and subordinated series. As of March 31, 2010 the Company had one issuance outstanding in an aggregate principal amount of Ps. 281 million that matures in March 2011, which yielded interest at a rate of 8.2%, 9.4% and 7.9% as of December 31, 2009, 2008 and 2007, respectively.

Indebtedness

The following table sets forth information regarding our outstanding consolidated debt as of March 31, 2010.

Amount % of Average (millions of Ps.) Total Average Cost Rate Maturity Mortgage Bridge Loans 1,669.6 20.8% TIIE+ 3.5 8.42% Several Mortgage Loans for Land Purchase 401.2 5.0% TIIE+ 2.4 7.29% Several Unsecured Direct Loans 308.6 3.8% TIIE+ 3.4 8.27% Several Leasing 177.8 2.2% TIIE+3.2 8.09% Several Leasing for Machinery 39.0 0.5% Libor + 2.2 4.30% Several Certificados Bursátiles (Notes) – Short-Term 1,780.0 22.2% -- -- Several – Long-Term 700.0 8.7% TIIE+ 1.9 6.78% Several Senior Guaranteed Notes 2,956.6 36.8% 8.88% 8.88% Sept. 25, 2014 Total 8,032.8 100% -- 7.87% --

Our level of indebtedness from bank loans and long-term debt decreased by Ps.213.9 million to Ps.8,032.8 million as of March 31, 2010 compared to Ps.8,246.7 million as of December 31, 2009, primarily due to: (i) the continued shift of our focus to the Affordable Housing segment, which is less capital-intensive than other housing segments, and (ii) a decrease in our capital expenditures on certain strategic projects such as Project Alpha, Macroprojects and information technology systems, which were substantially completed in 2009. Our consolidated indebtedness includes the indebtedness incurred by our subsidiaries, which mainly comprise bank loans.

On September 25, 2009, we issued U.S.$250,000,000 of Senior Guaranteed Notes due 2014 with a coupon rate of 8.875% (the “2009 Senior Guaranteed Notes”) under a previous indenture. Under the 2009 Senior Guaranteed Notes, we have agreed to certain customary restrictions, including but not limited to: (i) certain cross default provisions that if breached could accelerate the payment of the 2009 Senior Guaranteed Notes, and (ii) restrictive covenants related to the incurrence of additional indebtedness, making certain restricted payments and the sale of assets, among others. The 2009 Senior Guaranteed Notes are guaranteed by our material subsidiaries, which generally includes the same guarantors of the notes to be issued as part of this offering.

After deducting the discount and fee to the initial purchasers and the estimated offering expenses, we expect the net proceeds from the sale of the notes will be approximately U.S.$241.9 million. We expect to use such net proceeds to repay our outstanding certificados bursátiles, of which approximately Ps.2,480.0 million were outstanding as of March 31, 2010. The certificados bursátiles to be repaid with the net proceeds from the sale of the notes accrues interest at various floating rates. See “Use of Proceeds.”

We are jointly liable for all of the bank loans incurred by our subsidiaries. Where unsecured, our obligations under such debt will rank pari passu with the notes issued hereby. In addition, certain of our subsidiaries are jointly liable for our debt and the debt of other subsidiaries, which would allow a creditor to take direct action against both us and our guarantor subsidiaries in case of a default. Furthermore, the terms of some of our subsidiaries’ debt (i) prevent such subsidiaries from paying us dividends if they are in default of certain covenants under such debt, including payment of interest, principal and taxes, (ii) contain cross default provisions that if breached could accelerate the payment of other debt, and (iii) contain financial covenants (for example, requirements to maintain a consolidated interest coverage ratio of greater than 2.0 to 1.0 and consolidated leverage ratio of less than 3.0 to 1.0), some applicable to the subsidiary and some to us, that if breached could eventually accelerate payment of such debt.

We have not paid dividends since we were formed in 1973, and we do not currently expect to pay dividends in the foreseeable future.

As part of our strategy, we currently expect to consummate a securitization transaction with respect to (i) construction machinery and equipment that is either currently leased or owned by certain of our operating subsidiaries, (ii) certain intercompany receivables related to such assets and (iii) a portion of our interest in the capital stock of GEO Maquinaria, S.A.P.I. de C.V. (“GEO Maquinaria”), one of our wholly owned subsidiaries, which has been incorporated as a special purpose vehicle for acquiring, managing and holding this construction machinery and equipment. The purpose of this proposed securitization transaction is to obtain resources from otherwise illiquid assets, reduce our short-term debt and improve our financial ratios.

Pursuant to the terms of the proposed securitization transaction, certain of our operating subsidiaries are expected to exercise options to purchase construction machinery and equipment currently leased from third parties. It is expected that the market value for such machinery and equipment will be significantly higher than the purchase price paid at the time of the exercise, mainly because we have already made payments on such machinery and equipment pursuant to existing lease agreements.

After the exercise of the purchase options, certain of our subsidiaries will sell the optioned machinery, as well as already owned machinery, to GEO Maquinaria in exchange for a promissory note in a principal amount equal to the market value of such machinery. Immediately following the proposed sale, we and GEO Maquinaria intend to enter into a lease and services agreement with various operating subsidiaries for the use and service of the machinery and equipment, pursuant to which GEO Maquinaria will grant use and possession of the machinery and equipment to us, and we will lease the machinery and equipment to other subsidiaries, in exchange for monthly rent. As presently proposed, GEO Maquinaria will retain responsibility for servicing and maintaining the machinery and equipment under such lease and services agreement, in exchange for a fee paid by us.

In addition, we and GEO Maquinaria intend to create a trust to which GEO Maquinaria will pledge all of its machinery and equipment, as well as the right to future receivables under the lease and services agreement with us. We plan to contribute 49% of GEO Maquinaria’s shares to the trust, as well as the right to future receivables under the lease and services agreement. The trust will raise funds through a public offering of trust certificates (certificados fiduciarios) in order to pay us for the pledges in respect of the machinery and equipment, the right to future receivables under the lease and services agreement and the contribution of 49% of GEO Maquinaria’s shares.

We intend to use the proceeds of the securitization transaction to fund new capital expenditures and repay indebtedness. The proposed securitization transaction is part of our overall strategic plan.

While we currently intend to implement this securitization transaction on the terms described above, there can be no assurance that such securitization transaction will be consummated on the terms described above or at all. In addition, GEO Maquinaria is not currently and, after giving effect to the sale and proposed securitization transaction, is not expected to become, a subsidiary guarantor.

Capital Expenditures

Our operations do not require substantial capital expenditures, as we own or lease on a short-term basis most of the construction equipment we use, excluding those owned or leased by our subcontractors, and we subcontract a substantial portion of the services necessary to build the infrastructure of our developments. We spent approximately Ps.67 million in the three-month period ended March 31, 2010, and Ps.636 million in 2009 on capital expenditures, primarily for the development of our Oracle ERP program and the implementation of Project Alpha. These expenditures have been capitalized. Our management expects to incur approximately Ps.400 million of capital expenditures for growth and renovation of equipment for the remainder of 2010.

Our purchases of land are treated as additions to inventory and not as capital expenditures.

Contractual Obligations and Commercial Commitments

Our contractual obligations and commercial commitments consist primarily of bank debt, bonds issued in the Mexican markets and deferred payment land purchase agreements. The following table provides details regarding our contractual and commercial obligations as of March 31, 2010:

Payments Due By Period (millions of Ps.) Less than 12-36 36-60 More than 12 months months months 60 months Short-term debt Mortgage Bridge Loans 1,669.5 ------Mortgage Loans for Land Purchase 15.0 ------Unsecured Direct Loans ------Certificados Bursátiles(1) ------Long-term debt Mortgage Loans for Land Purchase 371.3 14.9 -- -- Certificados Bursátiles(2) 1,780.0 700.0 -- -- Unsecured Direct Loans 71.3 237.3 -- -- Leasing 87.0 90.9 -- -- Leasing for Machinery 15.1 23.9 -- -- Senior Guaranteed Notes -- -- 2,956.6 -- Total contractual obligations 4,009.2 1,067.0 2,956.6 -- ______(1) Includes short-term debt instruments with various interest rates. (2) Includes (i) long-term debt instruments for Ps. 1,000 million with an interest rate of TIIE + 1.75%; (ii) long-term debt instruments for Ps. 500,000 million with an interest rate of TIIE + 1.75%; and (iii) long-term debt instruments for Ps. 280,000 million with an interest rate of TIIE + 4.0%.

Contractual obligations increased in 2009 as a result of normal operations.

Market Risk Disclosure

Interest Rate Risk

In connection with our business activities, we have issued and hold financial instruments that currently expose us to market risks related to changes in interest rates. Interest rate risk exists principally with respect to our indebtedness that bears interest at floating rates. At March 31, 2010 and December 31, 2009, we had outstanding indebtedness of Ps.8032.8 million and Ps.8,247.0 million, respectively, the majority of which bore interest at variable interest rates. The interest rate on our variable rate debt is determined primarily by reference to TIIE. TIIE increases would, consequently, increase our interest payments.

A hypothetical, instantaneous and unfavorable change of 1.5% (150 basis points) in the average interest rate applicable to floating-rate liabilities held at December 31, 2009, would have increased our interest expense in 2009 by approximately Ps.75.7 million over a twelve-month period.

We manage our exposure to changes in interest rates by timing construction and delivery of our homes and payments to our suppliers, thereby allowing us to reduce our borrowing needs. We have also reduced our interest rate exposure by entering into interest rate swap agreements with a notional amount of Ps.2,200 million.

Exchange Rate Risk

As of March 31, 2010, and December 31, 2009, we had approximately U.S.$14.9 million and U.S.$5.0 million, respectively, in foreign currency denominated assets and approximately U.S.$266.6 million and U.S.$269.1 million, respectively in foreign currency denominated liabilities. As of September 23, 2009, the Company has also entered into the following two interest rate and exchange rate hedging derivatives:

• Hedge of U.S.$125 million at an exchange rate of Ps.13.3850 Mexican pesos per U.S. dollar, bearing interest at the TIIE plus 642 basis points, maturity on September 25, 2014. The fair value as of December 31, 2009 was U.S.$(3,731,100).

• Hedge of U.S.$125 million at an exchange rate of Ps.13.3850 Mexican pesos per US dollar, bearing interest at the TIIE rate plus 639 basis points, maturity on September 25, 2014. The fair value as of December 31, 2009 was U.S.$(3,666,228).

For further information regarding our hedging instruments and recent margin calls in connection therewith, see note 13 to the unaudited condensed consolidated financial statements for the three-month periods ended March 31, 2009 and 2010.

Off-balance Sheet Arrangements

Neither we nor our subsidiaries had any off-balance sheet arrangements at December 31, 2009.

THE MEXICAN HOUSING INDUSTRY

Information in this section is based on material obtained from public sources, including publications and materials from INEGI, CONAVI, CONAPO, Softec, Center for Housing Research and Documentation (Centro de Investigación y Documentación de la Casa, or “CIDOC”), INFONAVIT, SHF and FOVISSSTE. The information provided herein has not been independently verified by us.

Overview

In recent years, the Mexican housing sector has experienced considerable growth. However, Mexico continues to experience a housing deficit, as illustrated below, and the mortgage to GDP ratio in Mexico is only 14%, compared to more than 70% in the United States. According to SHF, Mexico is currently experiencing a shortage of approximately 8.9 million housing units, which includes both those people who do not own homes and those living in substandard housing due to overcrowding, deterioration and low quality building materials.

Mexico Today Has a Housing Deficit of 8.9MM

MM 10.0 7.3 (81.1%) 8.9 (100%) 8.0 Basic Substandard Housing 6.0 Extended 4.0 Substandard 1.1 (12.8%) 2.0 0.6 (6.2%) Housing 0.0 Overcrowding Deterioration Low Quality Total Housing Materials Deficit Source: SHF based on ENIGH 2008

Between 2001 and 2008 the Mexican housing market grew from approximately 250,000 to approximately 503,000 units built and sold by developers each year. This growth was made possible in large part by strong government support for the industry. In the Affordable Housing market segment, the market has witnessed the restructuring of INFONAVIT, the creation of SHF and a special loan program that FOVISSSTE offered to government workers and teachers. Within the Affordable Housing market, the sub-segment that has shown the most growth is economic housing (with sales prices up to Ps.217,934 (U.S.$17,674)) due to the strong support of this market by the subsidy program offered to families that are first-time home purchasers. House prices have generally been stable over the last decade, and, unlike other countries, Mexico did not experience a housing bubble. However, in 2008, the housing market contracted by 1.8% as a result of the global financial crisis.

Developer-Built and Self-Built Housing Markets

The housing market in Mexico can be divided into the “self-built” market and the “developer-built” market. The self-built housing market includes units constructed gradually over time, usually without procurement of licenses or permits. Mortgage financing is typically not available for homes constructed in the self-built market. Approximately 40% of all new homes built in Mexico each year are “self-built” homes.

The developer-built housing market consists of homes built by contractors and developers that are commonly sold with mortgage financing. These homes are built with official permits, have access to all municipal services and are on land that is registered and sold to the buyer. In order to build homes for this market, developers must have adequately-zoned land with the necessary infrastructure installed, committed financing and clear title to the land. The relative size of the developer-built market varies with the amount of mortgage financing available. In 2008, developer-built housing represented approximately 60% of the homes built in Mexico.

According to CONAVI and Softec, the developer-built housing market is highly fragmented with some 3,000 homebuilders servicing it, out of which more than 800 are established developers registered with INFONAVIT. Most of these developers are small and operate exclusively in their local markets. In 2008, the top

10 developers sold approximately 49% of the total developer-built homes in Mexico. We are one of only two companies that sell more than 50,000 homes annually, according to Softec. In the three-month period ended March 31, 2010, we had approximately a 7.9% market share in the construction of all homes sold with mortgage financing in Mexico, based on our analysis of data provided by CONAVI.

Segmentation of the Developer-Built Housing Market

We define the three major components of the developer built housing market as: (i) Residential Housing, or upper income, with a sales price of Ps.1,290,873 or more; (ii) Middle Income Housing, with a sales price of between Ps.655,045 and Ps.1,290,873; and (iii) Affordable Housing, with a sales price of less than Ps.655,044. We update our criteria for these categories from time to time to reflect changes in the Mexican housing market, inflation and other factors related to our business. We note that other homebuilders in Mexico may use different thresholds and terminology in defining the components of the developer housing market. While each company uses different criteria, we believe that our definitions are consistent with comparable companies in our industry. The availability of mortgages to the Affordable Housing sector, unlike the Residential Housing and Middle Income Housing sectors, is not dependent upon fluctuations in interest rates as they are strongly supported by the federal government. We further divide the Affordable Housing segment into four main categories, based on price and source of mortgage financing: economic, lower affordable, affordable and affordable plus. This type of housing generally refers to units financed principally through INFONAVIT, FOVISSSTE and SHF with or without private lender co-financing.

Factors Supporting the Affordable Housing Segment

There is a housing deficit of 8.9 million homes in Mexico, according to SHF, and we believe that many of the persons affected by this deficit are part of our target demographic for Affordable Housing. Furthermore, INFONAVIT and FOVISSSTE, both of whose lending activities benefit primarily our Affordable Housing segment, indicate that of the 8.8 million and 2.3 million members of the Mexican work force that they serve, respectively, 5.1 million and 1.6 million of these workers, respectively, are currently eligible for a mortgage, interested in purchasing a home and have the capacity to make payments, but have not yet exercised their right to mortgage financing. In addition, based on current Mexican demographics, there are approximately 530,000 new households per year. We believe that this trend in the housing market will help sustain the demand for Affordable Housing and mortgage financing in the future.

We benefit from a significant supply of government-organized mortgages for our target markets that has been established through mandatory payroll contributions by employers on behalf of their employees. This structure is the result of reforms that were implemented more than 30 years ago through various federal initiatives, laws and regulations that created INFONAVIT and FOVISSSTE, the private and public sector housing funds, respectively. Both agencies have adopted reforms to improve efficiency over recent years, which has fueled further market growth. INFONAVIT and FOVISSSTE provided 447,481 and 100,082 mortgages, respectively, in 2009. Compared to other countries, these government-mandated funding sources for mortgages have allowed industry participants to rely less on the capital markets or direct government funding. In addition, because of the Mexican government’s support for FOVISSSTE and INFONAVIT, these agencies share the same credit rating as the Mexican federal government, despite being fully self-funded.

The homebuilding industry plays a critical role in Mexico’s development due to its size and its political and socio-economic importance. We and our competitors directly employ more than 3.3 million people, according to CONAVI, making our sector an important component of Mexico’s overall employment. In addition, the Affordable Housing segment is seen as directly addressing one of the key social welfare needs in Mexico: adequate housing.

Stable House Prices Over a Decade

Purchase Price: MXN(1) per sqm. 18,000

12,000

6,000

0 1998 2000 2002 2004 2006 2008 1Q10 Economic Affordable Middle Residential Residential Plus Source: Softec

Mortgages in the Affordable Housing segment are structured to match each borrower’s payment ability. They are denominated in pesos, linked to inflation and subject to a cap, which helps to protect borrowers from currency and interest risks. Payment schedules are also aligned with each borrower’s salary. All mortgages require full documentation. We believe this structure helps to protect creditors and creates a more stable market structure than in some international markets.

The RMBS market in Mexico has only developed during the past six years and generally does not involve complex structures, which we believe has prevented the creation of subprime related issues in Mexico. INFONAVIT and FOVISSSTE both have access to the Mexican RMBS market and have issued bonds in 2009 and 2010. Sofoles and commercial banks may also participate in this market.

Total RMBS Issuance per Year

(MXNBn)

40 35.9 35.3 36.8

30 18.5 20 11.9

10 4.7 6.1 0.6 0 (1) 2003 2004 2005 2006 2007 2008 2009 2010YTD

INFONAVIT FOVISSSTE Sofoles & Banks

Source: SHF, INFONAVIT, Bloomberg

(1) As of March 31, 2010

Housing Supply

The housing industry in Mexico is extremely fragmented and a large number of companies are currently engaged in development activities. Most of the companies develop projects consisting of no more than 100 houses. Due to the limited amount of mortgage financing and the lack of working capital, only a short list of companies have become significant competitors in the market. We are currently one of the leading developers of Affordable Housing in Mexico in terms of units sold and geographic diversity.

neighborhoods that also provide schools, hospitals, common green spaces and other amenities, by focusing on the Affordable Housing and Middle Income segments and by establishing and maintaining a well-recognized brand.

The largest public companies that develop houses in the Affordable Housing market in terms of the number of units sold for the first quarter of 2010 were:

Competitor GEO Homex Urbi ARA SARE Number of States with Operations...... 17 21 16 19 10 Sectors...... A, MI, R A, MI, R A, MI, R A, MI, R A, MI, R Home Sales Q1 2010(1) ...... 10,113 9,777 6,389 3,826 1,028 Revenue Q1 2010 (in millions of Ps.) ...... 3,762.8 3,593.4 2,418.5 1,625.3 565.6 Net Debt/EBITDA (Annualized Q1 2010)(2) ...... 2.1 2.4 1.6 0.7 6.1 Market Share Q1 2010 (%)(3) ...... 7.9% 7.6% 5.0% 3.0% 0.8% Infonavit Market Share (March 2010)...... 7.7% 5.3% 3.6% 2.6% 0.7% Land Reserve Q1 2010 (homebuilding capacity)(4) ...... 357,137 412,598 273,490 152,407 55,607 YTD Stock Performance(5)...... -0.6% -22.9% -15.2% -13.4% -41.1% A: Affordable; MI: Middle Income; R: Residential Source: Q1 2010 reports of each of the companies listed above, and internal data. Data for the year ended December 31, 2009 are not included because INIF 14 was not adopted by all of the companies listed in this table, and therefore, such data would not be comparable. ______(1) This number represents total home sales across all categories. (2) Calculated by multiplying Q1 2010 EBITDA times four (4) for each company. EBITDA for the past four (4) historical quarters is not comparable because of the implementation of INIF 14. (3) Based on a total of 128,440 houses sold with mortgage financing in Mexico through March 31, 2010, according to CONAVI. (4) Figures represent the number of homes each homebuilder believes they can build on land held in their inventory as disclosed in their quarterly report. (5) Through June 24, 2010.

Home Buyers

Home buyers in Mexico are generally between 25 and 50 years old. These are the prime productive years and correspond with household formation. Approximately 78% of heads of household are male and approximately 22% are female. However, the percentage of female heads of household has increased in recent years, a trend that has increased the market for homes that cater to working mothers. In addition, approximately 47.8% of all heads of household are 45 years old or more. The average number of occupants per household has been decreasing continuously, and, according to INEGI, reached four members per household in 2009.

We mainly service clients at the bottom end of the social pyramid, who also account for the most resilient segment of the market. These clients earn less than 4 VSM, are subsidized by the government and receive their mortgages from INFONAVIT, FOVISSSTE and other government agencies. These individuals are usually first- time homeowners who aim to improve their living situation through the purchase. These home buyers generally have a greater incentive to make all payments in order to retain the home. In many cases these home buyers previously resided in dwellings that do not meet minimum welfare criteria for both health and security.

Mexican Demographics

The current housing shortage is expected to increase as a result of the current “population pyramid” of Mexico. According to CONAPO, between 2005 and 2009, Mexico’s overall population grew 3.4% and is expected to continue to grow at a 0.7% compounded annual growth rate over the next five years. According to CONAPO, approximately 49.8 million people in Mexico, or 46.2% of Mexico’s population, are between 20 and 50 years old, and this group is expected to increase further by 2020. The main age target market for our housing units is typically between 25 and 35 years old. This demographic group is growing at an annual rate of approximately 0.5%. According to Softec, approximately 70.8% of the Mexican working population earns less than Ps.13,974 (U.S.$1,133) per month, which equals eight times the monthly minimum wage of Ps.1,747.

Thousands of inhabitants

Governmental Policy

In the late 1980s, the Mexican government redefined its policy for the housing industry to encourage investment by the private sector, reduce development costs and stimulate an increase in the development of housing. This policy encouraged participation by commercial banks in mortgage financing arranged through FOVI (the predecessor to SHF) by establishing mortgage loan guarantees and direct payment and savings procedures. The Mexican government also increased the role of the private sector in housing construction by preventing INFONAVIT and FOVISSSTE from actually developing housing units themselves. Currently, these institutions focus on providing mortgage financing. Prior to 1992, Mexican government housing institutions relied on government-mandated funds and acted as developers and mortgage providers. As a result of the 1992 INFONAVIT Reform, INFONAVIT no longer performs development and sales activities and instead functions as a true savings and loan program. See “—The Housing Financing System.” Additionally, the Mexican Congress amended the Mexican Constitution in January 1992 and the Agrarian Law (Ley Agraria) in February 1992 to provide for transfer of previously non-transferable, community-held land. As a result of this amendment there was an increase in the supply of land potentially available for development. See “Our Business—Operations—Access to Land, Land Inventory and Land Outsourcing.” In 1997, the Mexican government reformed portions of the laws regulating INFONAVIT in order to increase the amount of mortgage financing available for buyers of homes in the Affordable Housing segment.

In December 1993, the Mexican government authorized the creation of Sofoles and Sofomes, which are companies authorized to operate as non-bank finance companies to finance certain specific sectors of the Mexican economy. The first Sofoles and Sofomes began operating in 1995. Since their creation, most Sofoles and Sofomes have been incorporated with charters as mortgage banks. There are currently 87 Sofoles and Sofomes operating in Mexico in various segments of the economy, including personal and corporate credit, vehicle financing and equipment financing. To date, 25 Sofoles and Sofomes operating in Mexico have been approved to originate and service mortgages for homes in the Affordable Housing segment funded by the SHF, and it is expected that the Sofoles and Sofomes will complement other mortgage lenders in serving the Affordable Housing mortgage markets.

Sofoles, however, have suffered a sharp contraction in 2009, largely due to the stricter capital requirements and reduction in available funding from sources other than SHF. This contraction has adversely affected the housing sector, which effects are unlikely to dissipate in the near future.

The industry of non-bank financial institutions is currently experiencing a trend toward consolidation, with the acquisition of some Sofoles and Sofomes by banking institutions, as well as by other Sofoles and Sofomes.

In September 2001, the Ministry of Finance and Public Credit (Secretaría de Hacienda y Crédito Público) established SHF to replace FOVI. SHF has greater capacity to raise financing than its predecessor, enabling it to increase the number of mortgage loans it can make available. In response to the current housing deficit, the administration of President Felipe Calderón has announced its intention to underwrite six million mortgages for the period 2007–2012 through INFONAVIT, SHF, FOVISSSTE and other institutions.

The Housing Financing System

Overview

The finance system for Mexico’s housing market is segmented into four institutional groups that provide mortgage funding, each with different operational procedures and beneficiaries:

• mortgage providers (such as INFONAVIT for private sector employees, FOVISSSTE for public sector employees and the Instituto de Seguridad y Servicios Sociales para Las Fuerzas Armadas Mexicanas for military employees) are financed primarily by employer contributions on behalf of employees;

• the SHF provides mortgage credit through Sofoles, Sofomes and, to a lesser extent, commercial banks;

• commercial banks additionally use deposited funds or other types of funding to provide financing independently, primarily to the Middle Income Housing and Residential Housing markets; and

• other public housing agencies (such as FONHAPO and the state housing trusts) provide direct subsidies.

Mortgage Providers

CONAVI (previously known as the Comisión Nacional de Fomento a la Vivienda (“CNFV”))

In July 2001, the Mexican government created a governmental office, the CNFV, in order to respond to the need to implement measures to reduce the housing deficit. The CNFV is independent from SEDESOL. Its role is to design, coordinate, propose and implement housing programs and policies in direct consultation with the executive branch of the Mexican government. The first act of the CNFV was to set up the National Housing Board, which was created on August 31, 2001, and includes members from the public sector, private sector, academia and civil society.

The CNFV represents interests from the development, construction financing and acquisition of housing sectors, as well as representatives involved in the registration of land titles and urban planning. The role of the CNFV is to analyze, opine on and implement proposals to promote the development of the housing sector. As of June 2006, the CNFV became known as CONAVI.

INFONAVIT

INFONAVIT is a government-sponsored agency established in 1972 by the Mexican government, labor unions and private sector employees in the form of a social services entity that provides mortgages to private sector employees. INFONAVIT operates as a primary Affordable Housing loan institution, without the intervention of financial intermediaries. As a result of the 1992 INFONAVIT Reform, government housing funds, such as INFONAVIT, no longer perform development and sales activities and instead function as true savings and loan programs. INFONAVIT is a government-sponsored entity, but is 100% self-funded.

According to CONAVI, INFONAVIT provided approximately 41% of all mortgages financing in Mexico in 2009 in terms of pesos financed. INFONAVIT receives contributions from private sector employers equal to 5% of their employees’ gross wages, and makes loans for home construction, acquisition or improvement to employees whose individual monthly earnings are between 5.8 and 10.9 times the minimum monthly wage. As of March 31, 2010, the minimum monthly wage was Ps.1,747. INFONAVIT housing programs commonly provide financing to the segment of the population with monthly incomes between Ps.10,133 and Ps.19,042. In 2009, the average loan amount granted by INFONAVIT was Ps.219,668 (U.S.$17,815).

Beneficiaries qualifying for INFONAVIT mortgages are approved according to a rating system, with points awarded for income, age, amount of monthly contributions, and number of dependents, among other factors. INFONAVIT publishes a table every three months with the points required for mortgage financing in each region of Mexico. Current policy awards maximum points to workers who earn wages high enough to enable them to repay the mortgage loan over the course of their remaining working life.

INFONAVIT does not require a down payment for the purchase of a home. The term of an INFONAVIT mortgage is 30 years, and repayment is made by direct deduction of the worker’s salary by his or her employer. Debt service on the loan is calculated by reference to the mortgagor’s monthly income. INFONAVIT mortgages carry an annual interest rate of up to 10%, depending on the number of VSMs earned by the worker. INFONAVIT allows borrowers who become unemployed to temporarily defer their mortgage payments for a period of up to 24 months, of which only twelve months may be consecutive. During the first twelve months a borrower defers payments, interest does not accrue. If the borrower defers payments for another twelve-month period, interest continues to accrue and is capitalized. Housing developers do not have any liability with respect to the mortgage financing provided by INFONAVIT.

INFONAVIT requires developers of its homes to complete construction within specific time periods. Under their agreement with INFONAVIT, developers who are unable to complete construction of their homes within such periods are prohibited from adjusting the price of their homes to keep pace with increases in inflation after the end of the relevant period.

INFONAVIT has provided more than 5.4 million mortgages since its creation. INFONAVIT has increased the number of mortgages it provided from approximately 205,346 in 2001 to 447,481 in 2009, resulting in a compound annual growth rate of 10.2%. In 2010, INFONAVIT estimates that total mortgage demand in Mexico will equal approximately Ps.102,473 million. Approximately 67% of our revenues in 2009 were derived from homes sold to buyers receiving mortgages from INFONAVIT. As seen in the chart below, INFONAVIT intends to provide 475,000 mortgages in 2010, approximately 60% of the Mexican government’s total housing goal for the year. As of and for the three-month period ended March 31, 2010, INFONAVIT had provided 101,814 mortgages.

Actual and Projected Mortgage Financing

2009 2010 Goals Credits and Subsidies Investment Market Share Credits and Subsidies Investment (number of credits) (Ps. Million) (%) (number of credits) (Ps. Million) INFONAVIT 447,481 98,297.3 25.7% 475,000 102,473.0 FOVISSSTE 100,082 47,420.7 5.8% 100,000 55,597.0 SHF 45,761 5,573.2 2.6% N/A(3) N/A(3) CONAVI 159,546 4,872.9 9.2% 198,000 5,817.2 FONHAPO 180,929 2,364.4 10.4% 108,854 2,195.2 Financial Entities 144,786 66,594.8 8.3% 170,000 80,000.0 Other Entities 661,821 13,070.8 38.0% 50,989 5,655.1 (1) Total Financing 1,740,406(2) 238,194.0 1,102,843 251,737.5 Homes 1,493,747 N/A(3) ______(1) Total Financing amounts for 2010 Goals do not include data for SHF and consequently are not comparable to the 2009 Total Financing amounts. (2) Includes 246,659 duplicated credits and subsidies due to co-financing. (3) Projection not available as of the date of this offering memorandum.

Currently, INFONAVIT offers five programs for housing financing. Substantially all of our business with INFONAVIT currently is, and is expected in the foreseeable future to be, under the Line 2 program. Under this program INFONAVIT publishes a notice in the press soliciting proposals for housing projects on a national, state or city basis. We submit a proposal in accordance with published procedural rules and technical specifications. In accordance with INFONAVIT rules, prior to submission of such proposals, we are required to demonstrate that we own, or have an option to purchase, the land to be developed, and have obtained all necessary licenses or permits.

An internal committee of INFONAVIT evaluates and screens the proposal and, if acceptable, submits the proposal to INFONAVIT’s board of directors. If our bid is accepted, we must sign a contract with INFONAVIT with regard to the proposed project within, on average, one week of notification. Under the terms of the contract, we agree to sell all housing units in the project to INFONAVIT beneficiaries, and INFONAVIT agrees to provide mortgage financing for qualified beneficiaries who select the housing. We are required to locate, acquire and develop the land, perform all necessary infrastructure and housing construction, and locate qualified INFONAVIT beneficiaries to purchase the homes. Under the Line 2 program, in the event that beneficiaries are not identified for homes within the housing development 60 days prior to completion of construction, the developer may notify INFONAVIT and sell the homes on the open market, unless INFONAVIT provides qualified buyers. Approximately 98.3% of the mortgages provided by INFONAVIT in Mexico during the year 2009 were provided under the Line 2 program.

FOVISSSTE

FOVISSSTE is a pension fund established in 1972 and administered by the Mexican government in order to provide financing for houses in the Affordable Housing segment for public sector employees. It is primarily funded by payments from employees on behalf of employees equal to 5% of the employee’s salary. We are one of the largest users of FOVISSSTE financing and intend to continue utilizing such financing in the foreseeable future.

FOVISSSTE operates in a manner similar to INFONAVIT. Mortgage loans of up to 100% of the price of the home are available from FOVISSSTE without a down payment from the borrower. The maximum mortgage amount available is approximately Ps.706,426 and the average loan amount was Ps.473,818 (U.S.$38,426) in 2009. FOVISSSTE borrowers are approved for mortgage loans through a credit rating system, with points awarded for seniority, number of economic dependents, wages and amounts previously contributed to the institution, as well as a lottery system. The higher the borrower’s rating, the larger the amount of credit it will be eligible to receive.

FOVISSSTE provided approximately 100,082 mortgages in 2009, compared to approximately 90,140 mortgages provided in 2008, which represents an increase of approximately 11% in the total mortgages provided between the two years. In 2010, FOVISSSTE expects to meet 12.7% of the Mexican government’s total housing goal by providing housing to all public sector employees with maximum lending terms of no more than 30 years. In the three-month period ended March 31, 2010, FOVISSSTE provided 14,936 mortgages.

SHF

SHF was created in October 2001 by the Ministry of Finance and Public Credit. SHF, which manages the funds previously held by FOVI, provides financing to qualified home buyers with funds from the World Bank, the Mexican government and its own capital markets portfolios. Although SHF is independent of the CNV, the latter may make recommendations to SHF and other housing institutions. SHF provides financing to qualified home buyers through financial intermediaries (commercial banks, Sofoles and Sofomes) which administer sponsored mortgage loans, including the disbursement of mortgage funds and the servicing of such mortgage loans. Mortgage financing from SHF is available for the upper end of the Affordable Housing market as well as the lower end of the Middle Income Housing market. We use financing from SHF for homes sold to qualified home buyers that earn a minimum of 2 to 12 times the annual minimum wage.

SHF has decreased slightly the number of mortgages it has provided from 47,555 in 2001, to approximately 45,761 in 2009, resulting in a compound annual growth rate of –0.5% since 2001. In 2009, SHF provided approximately 3% of the total mortgages provided in Mexico. Approximately 4% of the homes we sold in 2009 were sold to buyers receiving mortgages from SHF.

SHF provides financing and guarantees through commercial banks, Sofoles and Sofomes for several different categories of homes ranging in price from approximately Ps.190,000 to Ps.2,050,000. Financing from SHF is provided through commercial banks, Sofoles and Sofomes who administer sponsored mortgage loans; generally for an amount between 80% and 90% of the purchase price of the home. We initiate access to such financing by applying to a commercial bank, Sofol or Sofom for technical approval (which includes a review of the project’s specifications) of a planned housing project. Upon receipt of the approval, we submit a bid to SHF pursuant to a public auction held approximately every two months. If SHF accepts our bid, SHF commits itself to make mortgage financing available to qualified home buyers for our project upon SHF acceptance, and we proceed to secure construction financing (normally from the same institution) at market interest rates, and simultaneously proceed to find qualified buyers/borrowers. The bank, Sofol or Sofom is responsible for evaluating the creditworthiness of the borrower and underwriting the loans. Upon completion of the homes, the bank, Sofol or Sofom receives matching

54 funds from SHF and originates the loan. Except for a construction warranty described below, we have no long-term commitment with regard to the loan. SHF now operates three types of products: (i) construction loans for homebuilders, (ii) individual loans for home buyers and (iii) mortgage guarantees for Sofoles and Sofomes.

As of 2006, SHF had a total funding ceiling of 14.5 billion UDIs, equivalent to approximately U.S.$4.5 billion, in 2006, according to Softec. These funds can be allocated directly into one of SHF’s programs or they can be allocated as guarantees for loans issued by Sofoles and Sofomes and sold into the capital markets.

SHF’s law was reformed by Congress on May 8, 2008, to continue to allow SHF to provide direct funding to Sofoles and Sofomes past the deadline of 2009.

On November 5, 2008, The Inter-American Development Bank approved a U.S.$2.5 billion ten-year credit line to the SHF to provide liquidity and stability to the Mexican primary and secondary mortgage markets.

On November 6, 2008, The World Bank approved a loan of U.S.$1 billion to SHF, to strengthen SHF’s financial and technical ability to carry out its mission.

Commercial Bank and Sofoles and Sofomes Financing

Commercial banks and Sofoles and Sofomes generally provide funding to the Middle Income and Residential segments of the housing market. In addition, Sofoles and Sofomes also target the Affordable Housing segment of the housing market. Commercial banks, Sofoles and Sofomes provided approximately 21.3% of all mortgage financing in Mexico in terms of number of mortgages in 2009.

Just three banks account for approximately 56.8% of the assets in the system. Eight banks account for 85.6% of assets. Foreign-owned banks controlled just over 74% of the assets in the system. As of the first quarter of 2010, the value outstanding of mortgage loans granted by commercial banks was Ps.341,802 million (U.S.$27,720 million), representing 2.9% of GDP in 2009. One bank alone accounted for approximately 40.5% of the total mortgage loan portfolio in the system. Mortgage lending by banks has been gradually recovering since 2003, after banks largely refrained from lending after the crisis that erupted in December 1994.

Mortgages originated by commercial banks generally have a maturity of 20 years, and are generally adjusted for increases in the minimum wage and inflation. Home buyers qualifying for commercial bank mortgages are generally assumed to be those purchasing homes with a value ranging from U.S.$75,000 to U.S.$350,000, with an average loan amount of Ps.459,953 (U.S.$37,302) in 2009. While commercial banks, Sofoles and Sofomes provide mortgage financing directly to home buyers, the availability of such financing for homes in a given project is usually coordinated through the project developer. In order to obtain funding for a project, a developer must present the bank with project plans that include clear title to the land, architectural plans, approved licenses and permits and a market study that shows demand for homes proposed to be built. The bank submits the project to its internal credit committee and, once approved, provides construction financing. Funds are disbursed to the developer as the project advances. The bank, however, has no obligation to provide take-out financing to the home buyer. Most banks offer funding to developers on a project-by-project basis, with funds tied to a single project.

Mortgage loans account for just 17.4% of the banks’ loan portfolios. The loan portfolio is not only relatively small; it is largely clean, too, as non-performing loans are just 4.6% of the total. The improvement in credit quality is explained mainly by the banks’ greater scrutiny in terms of client selection, and also by the development of more modern technologies, including credit score systems. We expect commercial banks to continue to target individuals with income levels that are higher than those that are targeted by lending institutions.

Other Public Housing Agencies

In 2009, public housing agencies such as FONHAPO, CONAVI and other state housing trusts provided approximately 23% of mortgage financing in Mexico. These agencies exist at the federal and local levels and serve the largest segment of the population, mainly non-salaried workers earning less than 2 times the minimum monthly wage. FONHAPO and CONAVI’s average loan amount was Ps.21,256 (U.S.$1,724) in 2008. Federal housing agencies lend directly to organizations such as state and municipal housing authorities, housing cooperatives and credit unions representing low-income beneficiaries, as well as to individual borrowers. The amount of mortgage credits available is restricted by the government’s discretionary spending budget. Some agencies provide technical

55 assistance to borrowers and final beneficiaries in designing, contracting and supervising the construction of their own housing. Public agency loans to final beneficiaries can be used for projects such as core houses (e.g., minimal dwellings with one room, one kitchen area and one bathroom), urbanized lots, public service installations, home improvements and self-help construction.

OUR BUSINESS General

The following table summarizes our number of homes sold, revenues, EBITDA and consolidated net income for the periods indicated.

For the three months ended March 31, For the year ended December 31, 2009 2010 % Increase 2007 2008 2009 CAGR(1) (millions of Ps., except (millions of Ps., except Number of Homes Sold) Number of Homes Sold) Total Number of Homes Sold ...... 9,776 10,113 3.4 36,917 41,811 51,177 17.7% Revenues ...... 3,241.3 3,762.8 16.1 12,731.5 14,613.7 17,713.2 18.0% EBITDA ...... 687.6 864.0 25.7 2,897.1 3,140.8 3,959.9 16.9% Consolidated Net Income ...... 225.6 361.6 60.3 1,073.1 1,025.5 1,450.8 16.3% ______

(1) CAGR from December 31, 2007 to December 31, 2009. CAGR is calculated by taking the nth root of the total percentage growth rate, where n is the number of years in the period being considered.

We have focused on the Affordable Housing segment in Mexico, which we believe to be the largest and most stable segment of the Mexican housing industry for the following reasons:

Our Competitive Strengths

We have a strong track record of operating success and an experienced management team. We operate in a highly complex industry in which a large number of processes need to be coordinated simultaneously. We believe that due to our extensive experience and our recent system improvements, we have one of the lowest working capital cycles (152%, as of March 31, 2010) as a percentage of sales among our publicly traded industry peers. We believe we have a track record of achieving our financial targets, a management team with substantial experience in our industry and comprehensive corporate governance controls.

• Growing our land bank through joint ventures. We believe we were one of the first companies to implement joint ventures to acquire land reserves, beginning with Prudential in 2003 and more recently with Sólida in 2006. In June 2009, we signed an additional fully funded U.S.$545 million phase of the Prudential joint venture, increasing the total joint venture value to approximately U.S.$1 billion. Our joint ventures are designed to grow our land bank while decreasing our own risk and working capital

requirements, and we believe that our experience with Prudential and Sólida benefits us in discussions with other strategic partners, and enables us to buy larger blocks of land more cost effectively.

• Developing GEO Fácil. We have developed the “GEO Fácil” program together with our financial partner, Allianz, to assist clients who do not meet all of the traditional requirements to obtain an INFONAVIT or FOVISSSTE mortgage (in particular, people who are not traditional wage earners). Through this program, potential clients enroll in a savings program with Allianz in order to establish proof of income so that they can qualify for a mortgage from participating Mexican financial institutions. GEO Fácil allows us to give more people access to our products without compromising our eligibility criteria, and, as a result, we believe this program will increase the number of potential clients in our target market.

Our Five Step Strategy

59 that we were among the first in our industry to implement these initiatives and similar technologies. In order to accomplish our aims, we have implemented a strategy that consists of the following five main goals:

Production. Through our “GEO 200” initiative, we have developed, together with Oracle, an ERP system that has standardized processes further, reduced costs and improved internal communication across the company. This system provides us with real-time information, giving us increased control over our operations. Over the past four years, we have invested Ps.300.6 million in information technology, and we intend to continue to streamline our operational and production efficiencies in the future. We are further improving our production efficiency with our “House Factories” project. The House Factories project focuses on our existing production facilities and targets a more efficient and rapid completion and delivery of the houses we produce. In addition to these efficiency programs, we implemented Project Alpha, as described above, which specifically targets high density areas and should reduce our required capital expenditures per house.

The following chart shows our historical performance compared to the growth of the Mexican economy.

GEO Units Sold and EBITDA Margin 000s % 60 51.9 56.5 25 46.0 50 41.9 20 37.3 40 33.2 26.6 29.5 15 30 25.8 27.1 20.4 25.0 17.1 10 20 12.2 8.2 8.2 10 5 0 0 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 Units Sold EBITDA Margin Mexico GDP Growth Quarterly, Y-o-Y (%) 10 5 0 (5) (1 0) (1 5) 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

Source: Banco de México

Note: For purposes of comparability, the calculations of units sold and EBITDA margin used to prepare this table are based on calculations using a percentage-of-completion basis and, consequently, are not comparable to other figures in this offering memorandum that reflect the application of INIF 14.

Activities

Currently, our principal activities include: (i) land acquisition through outright purchase or land outsourcing, (ii) procurement of required permits and licenses, (iii) installation of all infrastructural improvements required for each housing development, (iv) designing, constructing and marketing housing developments, (v) assisting potential home buyers in obtaining mortgage financing from housing agencies, (vi) conveyance of title and (vii) post-sale services such as the processing of any complaints or claims by the client, the organization of condominium associations within each development, the delivery of common areas within each development to the condominium associations and community training and related services.

In a typical housing development, we undertake socioeconomic studies at the outset of the project to determine housing demand and identify land purchasing or land outsourcing opportunities. Once a particular site is identified, we often enter into option arrangements with the land owner for purchase of the land at a future date. We then commence obtaining the necessary permits and licenses for building homes on the site. Once all of the licenses and permits are assured or are in place, we decide whether we will acquire the site by either paying cash or utilizing, in whole or in part, seller financing, land credits from a financial institution or one of our land outsourcing programs. Increasingly, we have sought strategic partners to acquire the land through our land outsourcing program.

The next step in the development process requires our design and technical teams to create the design and technical specifications for the development, including all of the homes, clusters, commercial areas and recreational, medical and educational facilities, which form part of the development process. In addition, we begin the process of receiving commitments from commercial banks, Sofoles or Sofomes to provide the necessary bridge loan financing for the project. We also complete the process of obtaining mortgage financing commitments from the housing agencies for our potential customers. Once obtained, we then finalize and commit for the construction financing. See “Our Business—Operations—Assisting Buyers with Mortgage Financing.”

As infrastructure development commences, we begin to draw upon the construction financing in proportion to the stage of the development process we have achieved. Typically, marketing and sales activities for a project are initiated prior to construction by assisting prospective buyers through the application and qualification process for mortgage financing. When a customer is approved for a mortgage, from either a governmental or a private financial institution, we enter into a sales contract with the customer and generally collect a cash down payment from the customer. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” Construction of the project is undertaken in clusters and initiated in phases depending on the number of homes sold in order to minimize our cost of financing and construction risk.

As clusters are completed and delivered and title is transferred to buyers, we collect from the housing agencies or financial institutions on behalf of our customers, with proceeds of each home buyer’s mortgage loan being used to repay bridge loan financing and land outsourcing arrangements.

We intend to continue to decrease development costs and capital requirements through our “House Factories” approach. The goal of this program is to reduce working capital requirements by establishing levels of development according to the demand for homes, thereby minimizing the time between completion of construction and payment from mortgage providers.

Projects

As of March 31, 2010, our management estimates that we had 103 projects under development in the states of Mexico, Morelos, Querétaro, Jalisco, Guerrero, Veracruz, Puebla, Tampico, Nuevo Leon, Tamaulipas, Coahuila, Durango, Baja California and the Federal District. We expect to complete these projects during 2010 and 2011.

Operations

Organization

GEO is a holding company that operates across 17 states in Mexico, including the Federal District (Mexico City), through 35 consolidated subsidiaries, of which 32 are wholly-owned and we hold between 98% and 99% of the equity of the other three. Of the 32 wholly-owned subsidiaries, only those that operate as developers and promoters are participating as guarantors of the notes as set forth in the table below. Our subsidiary guarantors account for substantially all of our operations, including 98.6% of our total revenues in 2009. For the three months ended March 31, 2010 and the years ended December 31, 2009 and 2008, our subsidiary guarantors account for 99.9% of our EBITDA in each period and 92.0%, 99.0% and 99.0%, respectively, of our total assets.

Homes Sold for the % of Our Year Ended Total Homes Subsidiaries State(s) of Operation December 31, 2009 Sold GEO del Noroeste, S.A. de C.V. (parent Baja California, Baja 5,322 10.4% company of GEO Baja California, S.A. de California Sur C.V.) GEO Hogares Ideales, S.A. de C.V. State of Mexico 8,838 17.3% GEO Edificaciones, S.A. de C.V. State of Mexico 7,510 14.7% GEO Guerrero, S.A. de C.V. Guerrero 4,060 7.9% GEO Jalisco, S.A. de C.V. Jalisco, Nayarit 4,196 8.2% GEO Veracruz, S.A. de C.V. Veracruz 3,678 7.2% GEO Casas del Bajío, S.A. de C.V. Querétaro 3,117 6.1% GEO Tamaulipas, S.A. de C.V. Tamaulipas 3,225 6.3% GEO Monterrey, S.A. de C.V. Monterrey 3,422 6.7% GEO Morelos, S.A. de C.V. Morelos 3,125 6.1% GEO Laguna, S.A. de C.V. Coahuila, Durango 1,137 2.2% GEO Puebla, S.A. de C.V. Puebla 2,435 4.8% GEO D.F., S.A. de C.V. Federal District 200 0.4% GEO Urbanizadora Valle de las Palmas, S.A. de Guanajuato 483 0.9% C.V.

Homes Sold for the % of Our Year Ended Total Homes Subsidiaries State(s) of Operation December 31, 2009 Sold Promotora Turística Playa Vela, S.A. de C.V. Acapulco 205 0.4% Total Number of Homes Sold 50,953 99.6%

In July 1998, we formed a partnership with Ingenieros Civiles Asociados S.A. de C.V., one of the largest construction companies in Mexico, to expand our presence in Mexico City through development of vertical condominiums. We hold 50% of this company, GEOICA, S.A. de C.V., which currently has two projects under development in Mexico City with a total of 566 houses.

The map below shows our geographic markets, which consist of the Noroeste (Northwest), Noreste (Northeast), Oeste (West), Central (Central), Sur (Southern) and Bajío (Bajio) regions of Mexico:

Each operating subsidiary, including each guarantor, conducts the full range of development activities in its respective region. However, our executive committee, which is comprised of our senior executive officers together with our senior management, is responsible for (i) authorizing all land acquisitions and development projects; (ii) relations with the Mexican government and all sources of mortgage and other financing, including SHF, FOVISSSTE and INFONAVIT, private sector banks and financial institutions; (iii) allocating resources and purchasing fixed assets; and (iv) authorizing all transactions for the supply of raw materials and construction services. In addition, all of our planning and budgeting systems and internal auditing and legal procedures, among other functions, are centralized through our corporate headquarters located in Mexico City.

The following is general corporate information for each of the guarantors involved in this transaction:

• GEO Baja California, S.A. de C.V., is a stock corporation organized on September 12, 1985, under the laws of Mexico with its principal executive offices located at Misión San Javier 10661, interior 6A Colonia Zona Río C.P. 22320, Tijuana, Baja California, and with an indefinite corporate life according to its by-laws;

• GEO Casas del Bajío, S.A. de C.V., is a stock corporation organized on April 14, 1989, under the laws of Mexico with its principal executive offices located at Avenida Ignacio Zaragoza Poniente 280, Colonia Centro C.P. 76000, Querétaro, Querétaro, and with an indefinite corporate life according to its by-laws;

• GEO D.F., S.A. de C.V., is a stock corporation organized on March 3, 1989, under the laws of Mexico with its principal executive offices located at Av. Revolución 1586, Colonia San Angel C.P. 0100, México, D.F., and with an indefinite corporate life according to its by-laws;

• GEO Edificaciones, S.A. de C.V., is a stock corporation organized on July 4, 1973, under the laws of Mexico with its principal executive offices located at Av. Revolución 1586, Colonia San Angel C.P. 0100, México, D.F., and with an indefinite corporate life according to its by-laws;

• GEO Guerrero, S.A. de C.V., is a stock corporation organized on March 28, 1985, under the laws of Mexico with its principal executive offices located at Rotonda 24, Colonia Fraccionamiento Club Deportivo C.P. 39690, Acapulco, Guerrero, and with an indefinite corporate life according to its by- laws;

• GEO Hogares Ideales, S.A. de C.V., is a stock corporation organized on January 23, 1980, under the laws of Mexico with its principal executive offices located at Avenida Revolución 1586, Colonia San Angel C.P. 01000, México, D.F., and with an indefinite corporate life according to its by-laws;

• GEO Jalisco, S.A. de C.V., is a stock corporation organized on March 19, 1985, under the laws of Mexico with its principal executive offices located at Avenida Americas 1254, Colonia Country Club C.P. 44637, Guadalajara, Jalisco, and with an indefinite corporate life according to its by-laws;

• GEO Laguna, S.A. de C.V., is a stock corporation organized on March 9, 1987, under the laws of Mexico with its principal executive offices located at Avenida Allende 295, Oriente Colonia Centro C.P. 27000, Torreón, Coahuila, and with an indefinite corporate life according to its by-laws;

• GEO Monterrey, S.A. de C.V., is a stock corporation organized on June 16, 1986, under the laws of Mexico with its principal executive offices located at Adolfo Ruíz Cortines 576, Colonia Industrial las Américas CP 67128, Guadalupe, Nuevo León, and with an indefinite corporate life according to its by- laws;

• GEO Morelos, S.A. de C.V., is a stock corporation organized on March 2, 1985, under the laws of Mexico with its principal executive offices located at Av. Palmira 104, Colonia Palmira C.P. 62490, Cuernavaca, Morelos, and with an indefinite corporate life according to its by-laws;

• GEO del Noroeste, S.A. de C.V., is a stock corporation organized on June 12, 2006, under the laws of Mexico with its principal executive offices located at Misión San Javier 10661, interior 6A Colonia Zona Río C.P.22320, Tijuana, Baja California, and with an indefinite corporate life according to its by- laws;

• GEO Puebla, S.A. de C.V., is a stock corporation organized on May 28, 1984, under the laws of Mexico with its principal executive offices located at Boulevard Atlixco 902 esq. 9 Poniente, Colonia La Paz C.P. 72160, Puebla, Puebla, and with an indefinite corporate life according to its by-laws;

• GEO Tamaulipas, S.A. de C.V., is a stock corporation organized on March 20, 1985, under the laws of Mexico with its principal executive offices located at Avenida Hidalgo 2501, Colonia Reforma C.P. 89140, Tampico, Tamaulipas, and with an indefinite corporate life according to its by-laws;

• GEO Urbanizadora Valle de las Palmas, S.A. de C.V., is a stock corporation organized on March 20, 1998, under the laws of Mexico with its principal executive offices located at Boulevard Adolfo Lopez Mateos 1018, Colonia Centro C.P. 38060, Celaya, Guanajuato, and with an indefinite corporate life according to its by-laws;

• GEO Veracruz, S.A. de C.V., is a stock corporation organized on September 30, 1981, under the laws of Mexico with its principal executive offices located at Boulevard Manuel Avila Camacho 3855, Fraccionamiento Costa Verde y Mar Adriatico C.P. 94294, Boca del Río, Veracruz, and with an indefinite corporate life according to its by-laws; and

• Promotora Turística Playa Vela, S.A. de C.V., is a stock corporation organized on September 18, 1987, under the laws of Mexico with its principal executive offices located at Rotonda 24, Colonia Fraccionamiento Club Deportivo C.P. 39690, Acapulco, Guerrero, and with an indefinite corporate life according to its by-laws.

Copies of all of the above guarantors’ statutory documents are available free of charge at our principal office.

We focus on the Affordable Housing segment of the Mexican housing market. “Affordable Housing,” as we define it for purposes of our business, means housing units with sales prices lower than Ps.655,044 (U.S.$53,123). The Affordable Housing segment, as defined by us, can be further divided into four categories: (i) economic (with sales prices up to Ps.217,934 (U.S.$17,674)), (ii) lower affordable (with sales prices between Ps.217,935 (U.S.$17,674) and Ps.275,992 (U.S.$22,383)), (iii) affordable (with sales prices between Ps.275,993 (U.S.$22,383) and Ps.401,760 (U.S.$32,582)) and (iv) affordable plus (with sales prices between Ps.401,761 (U.S.$32,582) and Ps.655,044 (U.S.$53,123)). The sales price ranges may change on an annual basis, as they are adjusted based on VSM.

Number of Homes Sold in the Affordable Housing Sector

Percentage of Our Total Homes Sold in the Affordable Housing Sector

Three Months Ended March 31, Year Ended December 31, 2009 2010 2007 2008 2009

Three Months Ended March 31, Year Ended December 31, 2009 2010 2007 2008 2009 Economic...... 6.8% 18.2% 17.0% 7.7% 8.2% Lower Affordable...... 40.7% 40.0% 27.7% 37.8% 39.1% Affordable...... 13.6% 20.5% 12.3% 14.9% 22.7% Sub-total...... 61.1% 78.7% 57.0% 60.4% 70.0% Affordable Plus...... 30.5% 15.0% 26.0% 22.0% 21.0% Total...... 91.6% 93.7% 83.0% 82.4% 91.0%

We note that other homebuilders in Mexico use different thresholds and terminology in defining the components of the developer housing market; specifically, they may define “Affordable Housing” to include only the economic, lower affordable and affordable categories. While each company uses different criteria, we believe that our definitions are consistent with comparable companies in our industry.

Access to Land, Land Inventory and Land Outsourcing

We have implemented a land acquisition strategy designed to decrease working capital requirements by entering into strategic arrangements with landowners and other investors for the acquisition of real property so that just a small percentage of funds is required from us. The strategy seeks to improve operating free cash flow by reducing property inventory costs, mitigating the risk of ownership of undeveloped land and allowing us to pay for the land at a pace that better matches our receipt of cash proceeds from the sale of homes. It is our objective to control, at all times, a land bank sufficient to meet anticipated project requirements for not less than five years of expected development. Our land bank consists of owned land, land obtained through outsourcing arrangements and investment funds and land that may be acquired through option agreements.

We recognize that access to land is fundamental to the housing industry and have therefore implemented a land outsourcing initiative to reduce our capital requirements. This strategy involves acquiring land through strategic partnerships with a minimum initial outlay of funds. We typically begin a land outsourcing arrangement by conducting extensive market research to determine whether a particular parcel of real property should be purchased. Once we determine that it is desirable to purchase land in a land outsourcing arrangement, the property owner or an investor who invests in the project or the land agrees to transfer the land to an independent trust and further agrees to not receive payment for the land until we have received payment from our customers for homes sold on the designated parcel. Before the start of construction, we acquire all necessary licenses and permits and develop the property according to our strategic development plan. We pay for the land as a fixed percentage of sales after collection. We typically build developments in areas that are not yet highly developed. Due to the infrastructure we build there, the price of surrounding land often increases. Therefore, it is beneficial for us to purchase large parcels of land at once, in order to benefit from these price increases. For that reason, we have begun to outsource land purchases through joint ventures.

For purposes of land outsourcing, we have formed strategic alliances and have entered into outsourcing agreements with Prudential and Sólida, a subsidiary of Grupo Financiero Banorte, one of the largest private commercial banks in Mexico. Our obligation under these outsourcing agreements is to present potential development projects to Prudential and Sólida for their approval. In turn, Prudential and Sólida fund the approved projects and provide us with a right of first refusal to purchase the land acquired by Prudential or Sólida to further the project. The strategy seeks to improve operating free cash flow by reducing property inventory costs and working capital requirements, mitigating the risk of ownership of undeveloped land and allowing us to pay for the land at a pace that better matches our receipt of cash proceeds from the sale of homes. We believe that our land outsourcing will enable us to control property in strategic areas and, together with other land acquisition activities, allow us to maintain adequate real property reserves to cover regional needs for not less than five years of developments.

Our outsourcing agreement with Prudential (the “Residential Investment Program”) established an investment program for developing real estate projects that includes, among other activities, the purchase of land, the construction of homes in the Affordable Housing segment, and the development of shopping malls. The program’s structure includes the creation of trusts established under the laws of the State of New York (the “NY Trusts”), whose principal participants are us, Prudential and other institutional investors. Phase One of the program

66 consisted of contributions from investors in a total amount of U.S.$175 million and Phase Two in a total amount of U.S.$280 million. In June 2009, we entered into Phase Four of the program, which consists of total contributions of U.S.$545 million into the NY Trusts. Our participation in the Residential Investment Program allows us to exert significant influence on the projects, but not control them. As we hold a minority interest in the NY Trusts, it is consolidated as part of our Consolidated Financial Statements.

As of March 31, 2010, our land bank reserve totaled Ps. 5,016.6 million, compared with Ps.4,900.8 million as of December 31, 2009 and Ps.4,537.4 million as of December 31, 2008. We have a land bank of homes to be developed and collected totaling 357,137 homes, through a combination of owned land, land outsourcing, optioned land and joint ventures. With this, we control a land bank equivalent to five years of development assuming a constant annual growth in units with a low financial cost and limited ownership risk. We have developed internal procedures for determining the suitability of land we intend to acquire, or control through other arrangements, for future development. We undertake market research to determine regional demand for houses in the Affordable Housing segment. Each operating subsidiary is responsible for evaluating potential land pursuant to, among other things, the following criteria: (i) light, drainage and water feasibility studies; (ii) highway access; (iii) urban and environmental impact studies; (iv) density level, soil studies and water supply; and (v) lack of encumbrances upon the land. In addition, the process of land acquisition includes: (i) access to necessary infrastructure and utilities; (ii) topographical and geotechnical suitability to housing development; and (iii) the existence of government licenses and development at the desired level of density and acquisition terms permitting the sale of homes at prices within the limits of financing made available by INFONAVIT, SHF or other institutions providing mortgage financing. Each potential property is also subject to a financial review to determine whether the proposed development will meet our financing criteria. Each proposed acquisition, option agreement or outsourcing initiative is submitted to our executive committee for final approval. Our executive committee will only approve a purchase after determining that we will be able to obtain from the relevant local authorities all licenses and permits necessary to undertake the proposed development.

Our existing land bank is structured as follows as of March 31, 2010:

Ownership

Optioned 2% Outsourced

10%

JVs 39% 49% Owned

Housing Segment

Lower Affordable Economic

Residential 32% 31% <1%

Middle 5% 11% 21% Affordable Affordable Plus

Distribution

South

West 10% Northwest 13% 16%

Bajio 10% 8% Northeast

43%

Central

Design

The building designs we use for our homes have been developed internally through computerized design systems. One of our main objectives has been and continues to be the reduction of construction time without any adverse impact on cost. We have diverse prototype homes that can be customized to the various needs of a given region or market. A typical housing development has four different family prototypes, and consists of 400 to 15,000 homes.

We currently base our designs for housing projects on modular design and construction systems and principles. These allow us to maximize the number of town home units (usually two-story) that may be constructed in a specified area. The construction systems are designed to control scheduling, costs and construction quality throughout the different phases of a housing project’s development. The most common town home units we build and sell have a minimum of two bedrooms, one bathroom, one common living space and an adjacent kitchen area, and are built in clusters averaging 40 to 60 units, with each cluster having a central, assigned green space, parking spaces and a security system. In addition, housing developments have commercial areas and recreational, medical and educational facilities. This design promotes maintenance and care of common areas and appeals to what we believe is the market preference for horizontal development as opposed to high-rise structures. In addition, individual homes are built with flexible interior arrangements that may be adjusted based on the needs of a family and may be expanded up to five rooms by the owner through structural additions undertaken with our guidance.

Furthermore, we believe that an important element in the future of the housing industry in Mexico will be the generation of added value within housing developments. We have been distinguishing ourselves from our competitors through our design of open-air areas such as gardens, entertainment areas, services and shopping facilities, and we have also developed a service program to promote organized communities and the maintenance of the urban image within each of our developments.

Awards

We believe that our comprehensive design and planning system, which significantly reduces the cost of our homes, constitutes one of our most significant competitive advantages in the Affordable Housing market.

We and our senior management have been awarded various national and international awards. In October 2009, we won seven different awards in recognition of the quality and innovative design of our developments. These awards, which were presented by the Minister of Social Development, included:

• the National Housing Award, which we won for the seventh consecutive year;

• three awards in the category of “Urban Integration,” among which included awards for our developments in Las Garzas (State of Morelos), Santa Teresa (State of Mexico) and Villas Palmira (State of Queretaro); and

• three awards in the “Best Executed Development” category, which included Las Torres in Saltillo, Coahuila for best accessibility, Paseos de San Juan in Zupango, Mexico for conservation, and Residencial San Carlos in Puebla for integral solutions.

In addition, in 2009 we received the Socially Responsible Company Award for the fourth consecutive year, in recognition of integrating socially responsible practices within our strategy and business culture, maximizing the positive impact of our commercial activities to meet clients’ expectations and benefiting the communities where we operate. This award is granted by the Mexican Center for Philanthropy.

In 2008, we received two awards presented to GEO Casas del Bajío, S.A. de C.V, one for its quality and control procedures and a service award for its quality management system, and we were given an award by INFONAVIT for generating the highest number of mortgages for the year. This recognition highlights our leadership among the most important housing institutions in Mexico. In 2008, we generated a record 31,395 mortgages in the lower income segment of the market—28% more than our closest competitor.

We have obtained three separate ISO 9001:2000 certifications. With respect to investor relations, Corporación GEO, S.A.B. de C.V. received this certification in 2006. GEO Casas del Bajío, S.A. de C.V. received ISO certification in 2008 for its Quality Management System. GEO Morelos, S.A. de C.V. received this certification with respect to Sales, Deeding, Post-Sales Service, Marketing and Customer Service in 2009.

Assisting Buyers with Mortgage Financing

Although we do not provide purchase money financing to our customers, we do assist our clients in the mortgage procurement process. As of March 31, 2010, approximately 97.7% of our revenues were from customers who relied on mortgage financing provided by INFONAVIT, FOVISSSTE, SHF or co-financings of these governmental agencies with private financial institutions. We are dedicated to developing creative financing solutions in order to increase home sales and permit individuals who would otherwise be unable to obtain financing to acquire one of our homes.

During 2009, of the total mortgages granted for the purchase of housing units, 81% were granted by several major institutions (INFONAVIT, FOVISSSTE, FONHAPO, SHF and CONAVI) and the remaining 19% were granted by other financial institutions, which include mainly private banks and Sofoles and Sofomes, according to CONAVI.

We believe that, in addition to the above, a significant portion of the Mexican Affordable Housing market is composed of individuals who participate in the “informal” economy and who could purchase homes in the Affordable Housing segment, but do not have the necessary documentation or formal affiliations to obtain a mortgage loan from existing lenders such as SHF, FOVISSSTE or INFONAVIT. To increase the sales to this segment, we launched “Credigeo” in 2004 to make strategic alliances with the main mortgage suppliers. Since its creation, Credigeo has granted 45,474 mortgages with banks and non-bank lenders, known as Sofoles and Sofomes.

In addition, through other alliances made with banks, Sofoles and Sofomes, we have improved the mortgage loan conditions for our clients through lower rates and lower credit commissions than those banks, Sofoles and Sofomes would have given to such clients in the open market. This represents an important competitive advantage and an added value to our clients.

At the end of 2008, we launched “GEO Fácil,” a savings program scheme created with Allianz, a certified financial institution backed by SHF that grants savings and creditworthiness certificates to potential clients. “GEO Fácil” is aimed at employees in the formal and informal sector who want to buy a home, but cannot make a down payment, have no formal means to prove personal income, and do not meet all of the traditional requirements to obtain an INFONAVIT or FOVISSSTE mortgage. Many of these workers are first-time home buyers whose

70 standard of living would be substantially improved by the purchase of one of our homes; we believe that clients such as these have a strong incentive to obtain a home and keep their mortgage payments current. As an alternative to a traditional proof of income, such as paystubs or other documentation, GEO Fácil allows clients to prove their disposable income level through their savings activity over several months in order to obtain a mortgage. This venture between us and Allianz reaffirms our commitment to Mexican families, especially those with low incomes, by offering innovative options to access the credit required to buy a home.

In those cases where we have received a prior commitment from INFONAVIT, FOVISSSTE, SHF and/or a private financial institution, we locate potential eligible clients to assist them in procuring their mortgages.

Marketing and Sales

We market our homes through a marketing staff who are employed by the marketing departments of our subsidiaries and compensated on a salary-plus-commission basis. Sales personnel are trained by GEO and attend periodic meetings where they are updated on sales techniques, competitive products in the relevant market, the availability of mortgage financing, construction schedules and marketing and advertising plans.

We begin our marketing efforts prior to, or simultaneously with, the commencement of the development of a project. The research department of each regional subsidiary is responsible for identifying potential buyers and compiling information regarding wages, age, qualifications and other relevant information. The sales department of each subsidiary is responsible for all specific sales activities. To facilitate qualifying potential home buyers, we have gained electronic access to the credit reports maintained by the National Bureau of Credit (Buró de Crédito). This enables us to give applicants seeking mortgage financing same day responses, thus increasing the efficiency and productivity of our sales staff responsible for qualifying purchasers for mortgage financing.

We operate a total of 19 “Tiendas GEO” located strategically throughout Mexico. Our management estimates that the Tiendas GEO have the capacity to serve, in the aggregate, more than 500,000 potential clients annually. These sales centers are equipped with model homes, provide title services and host public informational sessions. For those developments not marketed through Tiendas GEO, we normally build, decorate, furnish and landscape a model home for each project and maintain an on-site sales office at the project as well as a central sales office in each region of operation. In addition, in connection with INFONAVIT projects, we market our homes by group sales presentations to major manufacturing companies located in the neighboring urban areas, chambers of commerce and other industrial associations and labor unions.

Our most important sales distribution channels are: our call center (CAT Centro de Atención Telefónica), our website (casasgeo.com), corporate accounts (strategic alliances with major corporate offices) and strategically located small Sales Centers (Tiendas GEO) that offer all the products available around the country.

Construction

We have developed and continue to develop proprietary low-cost construction techniques that afford us opportunities to reduce working capital needs and development costs. Based on our historical experience, we estimate that 80% of the time and cost of the labor associated with construction of housing units was expended on the transportation and elevation of materials of the construction site. In response to this information, we have acquired technologically advanced, multi-functional equipment and machinery with the capacity to elevate and place large units of blocks and other building materials, thus reducing construction time and costs. We manufacture on- site the cement blocks used in the construction of our houses and prefabricate most of the modular units of our homes, such as staircases, plumbing systems and roof panels. The materials we use are fire retardant, waterproof and designed to reduce outside noise.

In 1999, we implemented a program that maintains a continuous development of clusters of homes in order to achieve just-in-time assembly-line development processes. This program coordinates all aspects of the planning, sales, development and building of homes through delivery to and collection from the purchaser. Foundations are laid in the first group of clusters and, as the building process advances, the main floors are constructed in the first clusters, while foundations are laid in the next set of clusters, and so forth. Thus, though driven by the requirements of the master plan for the development and the pace of sales, each group of clusters is in a different phase of construction. Upon completion, the homes of a given cluster are delivered to clients and payment is collected from

71 the relevant housing agency or financial institution. We believe that this program allows us to: (i) shorten collection periods, (ii) decrease our dependency on leverage and bridge financing, (iii) increase the speed of sales, (iv) significantly increase the rate of housing development, (v) decrease the average indebtedness per project and (vi) optimize utilization of our financial, human and material resources.

We are committed to the development of concrete panel technology, a technique used in the construction of concrete panel homes. Although concrete panel technology is slightly more costly than our brick-based construction technologies, it provides financial savings to us by reducing construction time. Concrete panel technology may not be appropriate for regional markets that experience severe weather conditions because concrete panel homes lack certain thermal features and can lead to extreme temperatures (warm or cold) inside the structure.

In 2006, we entered the new “Macroprojects” market that was created with support from the Mexican government. The Mexican government has approved approximately Ps.1,400 million for the development of infrastructure (such as highways and drainage systems) for the Macroprojects. Between 2004 and 2009, we built and sold approximately 30,000 homes in the Macroproject of Zumpango, Estado de México, which has generated revenues of approximately Ps.6,500 million as of March 31, 2010. Additionally, we are currently in the initial stages of developing the “Valle de las Palmas” Macroproject in Baja California, for which we plan to build a total of 5,431 houses in three phases. The first phase, which is currently underway, consists of 2,001 houses on 20 hectares of land and is scheduled to be completed in June of 2010. The second phase is expected to consist of 1,635 houses on 16.2 hectares of land and is scheduled to be completed in September of 2010. Finally, the third phase is expected to consist of 2,035 houses on 20 hectares of land is scheduled to be completed in January of 2011.

In 2007, we launched Project Alpha, with the purpose of industrializing housing production. Project Alpha consists of a standardized manufacturing line of key structural components of a house, which are then assembled on site. The majority of these components rely heavily on customized technology, which reduces both building and delivery time by approximately 30%. The technology used in Project Alpha has been used in Europe for several years, and we are the first company to successfully implement it in the Americas.

We estimate that each of our two new factories from Project Alpha will produce 10,000 to 12,000 houses per year. Through their fully-automated production line, we can reduce labor, construction and inventory costs. While our current process typically takes 12 weeks from start to finish, with Project Alpha we will be able to complete houses in eight weeks. We expect Project Alpha will improve our working capital cycle and reduce our construction financing costs.

Project Alpha is primarily targeted to the economic sub-segment of the Affordable Housing market, as this segment has smaller projects and house sizes and can be highly standardized.

In 2009, we began an initiative known as GEO Más, by which we seek to increase the value of the homes we sell. Through GEO Más, we are beginning to offer larger homes, more appliances and more outdoor space without increasing our prices, but also without reducing our margins. We believe that this initiative will result in an improved quality of life for our customers and a higher resale value for the homes that they purchase.

As part of our strategy, we currently expect to consummate a securitization transaction with respect to (i) construction machinery and equipment that is either currently leased or owned by certain of our operating subsidiaries, (ii) certain intercompany receivables related to such assets and (iii) a portion of our interest in the capital stock of GEO Maquinaria, one of our wholly owned subsidiaries, which has been incorporated as a special purpose vehicle for acquiring, managing and holding this construction machinery and equipment. The purpose of this proposed securitization transaction is to obtain resources from otherwise illiquid assets, reduce our short-term debt and improve our financial ratios.

Materials and Suppliers; Labor

We have long-term supply arrangements with large corporate suppliers for the basic materials used in the construction of the housing units, including cement, steel, bricks, windows, doors, roof tiles and plumbing fixtures. We enter into short-term supply contracts with numerous smaller suppliers for additional construction materials on an as-needed basis, generally following competitive bidding. We generally monitor the market continuously in order to identify the best suppliers and subcontractors, both among existing and new market participants. Other than basic construction materials such as cement, steel and the component materials of our prefabricated modular components, we acquire most of our raw materials from local suppliers located near the construction sites, which substantially reduces costs and delivery times. We have experienced no significant construction delays due to shortages of raw materials. We cannot predict, however, the extent to which shortages in necessary materials or labor may occur in the future. We do not maintain significant inventories of construction materials, except for materials to be used for homes under construction.

We utilize local labor in each region to the extent required for specific housing projects in addition to experienced personnel for supervisory and highly skilled positions. We have not experienced significant delays due to a lack of labor or labor unrest.

Collection and Post-Sales Services

The titling department of each of our operating subsidiaries is responsible for all documentation and arrangements relating to the titling of property and for compliance with all requirements necessary to finalize the mortgage financing relating to the property. The titling documentation from each operating subsidiary can be electronically communicated to mortgage providers by GEO. Once we have delivered and conveyed title to the homes, payment on behalf of our customers will be made by the relevant housing agency or financial institution that is providing the purchase money financing. The client service becomes the most essential element for the continuous generation of added value and the improvement of each client’s quality of life. We work under an institutional service norm, an important differentiator that focuses on client satisfaction before, during and after the acquisition of their new homes. We have developed a post-sales service program to promote organized communities, maintain an urban image within each of our developments, deliver the homes and process any claims brought by the client or organization of condominium associations after the sale and delivery of the home.

Customer Service and Warranty

The post-sale department of each of our operating subsidiaries participates in the pre-sale quality inspection and looks after the needs of customers once the sale of the home is finalized. Before its sale, each unit is inspected by post-sale personnel, and we make any necessary changes. We believe participation of the post-sale department during the construction and pre-sale period reduces preparation and post-sale costs while providing greater customer satisfaction. Our post-sale department continues to provide customer service after the sale of our houses through community training and related services.

We provide a three-month warranty that covers certain defects in plumbing and electrical systems of the home (excluding defects in appliances, fixtures and equipment) and a one-year warranty that covers latent defects. We make a provision of approximately 0.75% of the sales price of a home to cover warranty and service expenses. Our historical experience, however, is that warranty expenses are generally less than this amount. We do not currently have any material litigation or claims regarding warranties with respect to the construction of homes, and current claims are expected to be substantially covered by our reserve account.

Information Technology and Research and Development

Our ERP system, designed by Oracle, enables us to monitor and control in real-time four important aspects of our operations: financial resources, human resources, customer relations management, and website design. Our Hyperion system manages project evaluation, financial planning, and land reserves, and we use PeopleSoft to administer our recruiting, payroll and compensation policies. Our customer relations management, including presale, sale and post-sale operations is organized via Siebel. Customers and investors can access information about our company and the homes we produce on our website. We believe our ERP system differentiates us from our competitors, helps us to maintain high quality standards and increases efficiency.

We are committed to continuing our initiatives in the areas of research, development and technology, which we believe are among our most significant competitive advantages. This commitment permits us to increase development volumes, reduce construction costs and maintain profitability while providing our customers with quality and aesthetically attractive housing. We believe this strategy will allow us to achieve higher levels of construction quality and enhance our competitive position in the future.

Competition

The success of the Mexican homebuilders depends on several factors and we believe we are well positioned with respect to each of them:

• Execution capabilities: We operate in a highly complex industry in which a large number of processes need to be coordinated simultaneously. We need to monitor all parts of our business continuously in order to achieve growth, maintain healthy margins and uphold our solid financial structure. We believe that due to our extensive experience and our recent system improvements, we are one of the market participants with the best execution capabilities.

• Scale: The larger homebuilders in Mexico benefit from economies of scale, including better negotiating position with suppliers, the ability to launch nationwide advertisement campaigns, better access to land and enhanced relationships with financial institutions. As the largest homebuilder in Mexico in the first quarter of 2010 in terms of revenues, we are in a position to benefit from these advantages.

• Nationwide presence: Our nationwide presence reduces certain risks by allowing us to diversify our operations across multiple regions—for example, our largest region, the Mexico City metropolitan area, comprises only 43% of our land inventory. In addition, because securing land and permits depends on local and municipal governments, we believe our nationwide presence mitigates our exposure to local political risk.

• Focus on the Affordable Housing segment: Due to strong support from its solid funding structure, we believe the Affordable Housing sector is the most resilient segment of the Mexican housing market.

We believe that market participants that focus on this sector have been, and will be, outperforming the market, particularly in the current economic environment.

Compared to our competitors, we derive the largest percentage of total revenues from clients who relied on mortgage financing provided by INFONAVIT, FOVISSSTE, SHF and co-financings of these governmental agencies with private financial institutions (approximately 97.7% of our total revenues).

Our access to, and experience with, various sources of mortgage financing and the procedures for assisting potential home buyers in obtaining such financing strengthen our market presence. We believe that our competitive advantages include: an established history of operational success; large scale and nationwide operations; comprehensive design and planning systems; a focus on the Affordable Housing market; utilization of innovative design, construction, technological and commercialization techniques; commitment to the development of our employees; sound financial management; superior brand recognition; direct marketing procedures; assistance with mortgage financing; efficient financing of our land bank through joint ventures; and our reputation for service and quality, including post-sale service.

We believe, based on public information, that, as of March 2010, we are the largest developer of Affordable Housing in Mexico, with a market share of approximately 7.7% of mortgages issued by INFONAVIT. We believe we have achieved this growth in market share by offering a unique product consisting of homes built in neighborhoods that also provide schools, hospitals, common green spaces and other amenities, by focusing on the Affordable Housing and Middle Income segments and by establishing and maintaining a well-recognized brand.

The largest public companies that develop houses in the Affordable Housing market in terms of the number of units sold in 2009 were:

Employees and Labor Relations

As of March 31, 2010, we employed 7,669 full-time employees, 44 of whom held executive management positions. The number of temporary workers we employed, which varies substantially and is largely dependent on the level of our construction activities, was approximately 13,787 (10% more than as of March 31, 2009). Our temporary workers are not unionized. We have not experienced any significant labor disputes or strikes in the 37 years since our company was founded.

Labor relations with our construction workers are governed by collective bargaining agreements that are limited to the duration of the project for which the workers have been hired. These agreements typically permit the

75 work force to be reduced without severance payments as particular tasks are completed. The agreements are subject to periodic review during the course of the project.

In 1997, we established an employee restricted stock-based incentive plan to help motivate employees to achieve our strategic objectives. Currently, approximately 2.8% of our employees own company stock or restricted stock under this incentive plan. As of March 31, 2010, the total number of restricted shares under the incentive plan that were available for distribution to our employees was 17.7 million. At this time, we have no intention of issuing the shares we hold in reserve for distribution under this incentive plan. In addition to the incentive plan, we provide standard benefits required under Mexican law for full-time workers, including life and medical insurance and paid vacations. We also maintain training programs for all of our personnel, designed to teach and update development, sales and administration techniques. See “Management—Incentive Program and Employee Stock Ownership Plan.”

Governmental Regulation

General

Many aspects of our operations are subject to Mexican federal, state and local government regulation. See “Risk Factors—Risks Relating to Mexico—Changes in Mexican federal governmental policies or regulations could adversely affect our results of operations and financial condition.” Generally, our activities in Mexico are subject to the laws that affect the operation of the Mexican housing system: (i) the General Law on Human Settlements (Ley General de Asentamientos Humanos), a federal law that regulates urban development planning and delegates to state governments the responsibility for regulating urban developments within their jurisdiction; (ii) the Federal Housing Law (Ley Federal de Vivienda), which coordinates the operation of the Mexican housing system between the states and municipalities, on the one hand, and the private sector, on the other hand; (iii) various state and municipal development, construction and planning laws, such as the Reglamento de Construcción (construction and zoning regulations of the Federal District) and the Urban Development Plan (Plan de Desarrollo Urbano); and (iv) the INFONAVIT Law (Ley del INFONAVIT), which requires that INFONAVIT construction financing be given only to developers registered with INFONAVIT that participate in a public bidding process.

Environmental Regulation

Our operations are subject to Mexican federal, state and municipal laws and regulations, including federal and local official Mexican standards, having the force of law, relating to the protection of the environment and natural resources. The applicable fundamental environmental laws are the Mexican General Law of Ecological Balance and Environmental Protection and its regulations (Ley General del Equilibrio Ecológico y la Protección al Ambiente –y sus reglamentos-), the National Waters Law and its regulations (Ley de Aguas Nacionales –y su reglamento-) and the General Law for the Prevention and Integral Management of Wastes and its regulations (Ley General para la Prevención y Gestión Integral de los Residuos –y su reglamento-, or “the “Ecological Law”). The Ministry of Environment and Natural Resources (Secretaría del Medio Ambiente y Recursos Naturales, or “SEMARNAT”), oversees compliance with the federal environmental laws through PROFEPA, which has the authority to enforce federal environmental laws. As part of its enforcement powers, PROFEPA is empowered to bring administrative and criminal proceedings against companies that violate environmental laws and also has the power to close non-complying facilities.

We have expended, and expect to expend in the future, substantial funds for compliance with and remediation under Mexican federal and state environmental laws and regulations. Since Mexico’s environmental laws are becoming increasingly stringent, our environmental capital expenditures and costs for environmental compliance are likely to increase in the future. In addition, there can be no assurance that modifications of existing environmental laws and regulations or the adoption of more stringent environmental laws and regulations will not result in the need for investments that are not currently provided for in our capital expenditures program or will not otherwise result in a material adverse effect on our business, financial condition or results of operations. There are no material outstanding environmental proceedings against us as of the date of this offering memorandum.

Insurance

We maintain insurance policies in amounts covering risks that are usual and customary for similar companies in Mexico. We believe our insurance policies, which provide coverage for earthquake, fire, flood and

76 other occurrences, are adequate and comparable to those of our competitors. We are not the beneficiary of “key person” life insurance policies on any of our directors and officers.

Oversight and Control

Our management team holds weekly meetings to set financial and non-financial goals, monitor our progress, and develop solutions to any impediments to reaching these goals. As part of this process, we identify key geographic markets, housing segments, and mortgage financing providers. Generally, we have historically been successful in meeting the goals we have set in these areas.

We have engaged PricewaterhouseCoopers LLC to advise us on our internal oversight and control procedures. This has allowed us to identify and focus on the risks that affect our business and operations, and to modernize our oversight and control procedures.

Facilities

We own two offices and lease fifteen offices under sale and leaseback arrangements in the following regions: North-West, West, Bajío, Mexico City metropolitan area, North-East and South. The aggregate annual rent for these offices is Ps.41.2 million.

Litigation

We are and have been involved in various legal proceedings, all of which are or were in the ordinary course of business. In our management’s opinion, none of these proceedings has had or is expected to have a material adverse effect on our financial condition, results of our operations or on our ability to comply with our obligations under the notes.

Community Services

Fundación GEO began operations in 2004 as part of our effort to operate as a socially responsible business. During its six years, Fundación GEO has implemented several programs to assist the communities in which we operate, including the following activities:

• donations to hospitals, schools and community centers;

• the creation of educational institutions for the professional development of employees of the Mexican housing sector;

• studies for the remodeling of the Casa de Cortés and Patrimonio de la Humanidad cultural centers; and

• reforestation of more than 118,000 trees in Zumpango.

Environmental Sustainability

We are involved in the program “Hipotecas Verdes,” which equips the homes we build with solar-powered heaters, water-saving pipes and faucets and other amenities designed to protect and maintain the environment in which our clients live.

MANAGEMENT

Board of Directors

Our Board of Directors is currently comprised of 16 directors, of whom 7 are independent directors as such term is defined under Mexican law. We have an Audit Committee, a Corporate Practices Committee and a Planning and Finance Committee, in addition to external auditors. The members of the Board of Directors are elected annually at the general shareholders’ meeting.

As of April 14, 2010, the date of our annual shareholders’ meeting, the Directors of our company were:

Name Position Years as Director Age Luis Orvañanos Lascurain CEO / Chairman of the Board 24 65 Emilio Cuenca Friederichsen Chief Legal Officer / Director 24 78 Roberto Orvañanos Conde Chief Operating Officer / Director 3 51 José Manuel Agudo Roldán Director 22 64 Roberto Ordorica Barrera Director 4 40 Iñigo Orvañanos Corcuera Chief Marketing Officer/ Director 4 35 Luis Ignacio Abdeljalek Martínez Chief Real Estate Officer/Director 1 36 Andrés Caire Obregón Director 5 55 Raúl Zorrilla Cosío Director 2 59 José Carral Escalante Independent Director 16 88 Manuel Wienberg López Independent Director 1 68 Roberto Alcántara Rojas Independent Director 1 59 Francisco Gil Díaz Independent Director 2 66 Tomás Lozano Molina Independent Director 3 65 Alberto Guillermo Saavedra Olavarrieta Independent Director 3 46 Álvaro Gasca Neri Independent Director 3 65

Luis Orvañanos Lascurain, CEO & Chairman of the Board

Mr. Orvañanos holds a Bachelor’s degree in Architecture from Universidad Iberoamericana (1969). In July 1973, he founded Corporación GEO, S.A.B. de C.V. He is currently Chairman of the Board and CEO of Corporación GEO and its 35 subsidiaries. He was formerly a member of the Board of Directors of SOFOL Su Casita, S.A. de C.V. and he is currently a member of the Board of Directors of CANADEVI, Grupo Zurich México, S.A., Grupo Financiero Santander, S.A.B. de C.V., Club de Industriales, A.C., Consejo Mexicanos de Hombres de Negocios and Arroz con Leche, S.A. de C.V. Mr. Luis Orvañanos is the father of Mr. Iñigo Orvañanos and the cousin of Mr. Roberto Orvañanos.

Emilio Cuenca Friederichsen, Chief Legal Officer & Director

Mr. Cuenca is President of Fundación GEO, A.C, advisor to the Chairman and member of the Board of Directors of Corporación GEO, S.A.B. de C.V. He was the Legal Vice-President of our company for 25 years. He had worked as an auditor and banker for over 30 years, as well as serving as the General Manager in the Mortgage division of Banca Cremi and a member of the Board of Directors of Casa de Bolsa Cremi, Arrendadora Cremi, Cremi Cor, Inmobiliaria Hábitat, Inmobiliaria las Fuentes and FOVI. Since its foundation in 1994, he has been member of the Board of Directors and shareholder of Hipotecaria Su Casita, S.A. de C.V. as well as in the CANADEVI. Mr. Cuenca holds a Bachelor’s degree in Accounting from Universidad Nacional Autónoma de México UNAM.

Roberto Orvañanos Conde, Chief Operating Officer & Director

Mr. Orvañanos holds a Bachelor’s degree in Architecture from Universidad Nacional Autónoma de México UNAM. During his 12 years working at Corporación GEO, Mr. Orvañanos has worked in important positions throughout our company, including as General Operating Coordinator, Committee A Operating Coordinator,

General Manager of GEO Centro (the most important region of GEO), General Manager of GEO Edificaciones and GEO Tampico. He has been our Chief Operating Officer since December 2006. Mr. Roberto Orvañanos is the cousin of Mr. Luis Orvañanos and the uncle of Mr. Iñigo Orvañanos.

José Manuel Agudo Roldán, Director

Mr. Agudo holds a Bachelor’s degree in Architecture from Universidad Nacional Autónoma de México UNAM and a specialization degree in Financial Management from Instituto de Banca y Finanzas IBAFIN. Since 1989 he has served as Chairman of the Board of Hipotecaria Su Casita. Also, Mr. Agudo is Partner and Director of Softec S.C., a company that provides real estate consulting services to the World Bank and the BID, performs project valuation and commercializes and operates mega projects.

Over the course of his career, Mr. Agudo has been Chairman of Sand Inmuebles, Director of Hipotecaria de Banamex, General Manager of Promotora Hacienda Grande de Tequisquiapan, and Manager of Crédito Hipotecario de Sonora and of Avalúos Banamex. As an architect, he has participated in the construction and design of housing buildings, residential developments, restaurants, bank buildings, malls and industrial buildings. Also, he is a member of the Board of Directors of Corporación GEO and has been Treasurer of Centro Impulsor de la Habitación y la Construcción, Chairman of Federación Nacional de Promotores Industriales de Vivienda, Chairman of Union Interamericana para la Vivienda and Professor at Universidad Nacional Autónoma de México UNAM.

Roberto Ordorica Barrera, Director

Mr. Ordorica is the Chief Administrative Officer at Prudential Real Estate Investors (PREI) and Chief Executive Officer of PREI Latin America. He is also a member of the PREI Committee and of the Investments Committee of PREI Latin America. Before joining PREI, Mr. Ordorica was in charge of the Global Latin American Real Estate Investment Banking division at J.P. Morgan as Senior Latin America Advisor. Mr. Ordorica attended the Marine Military Academy in Harlingen, Texas and holds a Bachelor’s degree in Planning and a Masters degree in Urban Planning and Real Estate from the Massachusetts Institute of Technology.

Iñigo Orvañanos Corcuera, Chief Marketing Officer & Director

Iñigo Orvañanos holds a Bachelor’s degree in Economics from Instituto Tecnológico Autónomo de México ITAM and an MBA from Instituto de Empresa in Madrid. He has been working at GEO for the past 11 years, occupying a variety of different positions. He previously worked in GEO Centro as Regional Marketing Director; Finance and Planning Director; Mortgage Credits Director and as Savings Program Manager. Since January 2008, Mr. Iñigo Orvañanos has been designated as Chief Marketing Officer of Corporación GEO. He is also Founder and Chairman of the Board of EDUCA México, A.C., a nonprofit organization dedicated to supporting nonprofit schools that provide teaching services to children with scarce monetary resources. Mr. Iñigo Orvañanos is the son of Mr. Luis Orvañanos and the nephew of Mr. Roberto Orvañanos.

Luis Ignacio Abdeljalek Martínez, Chief Real Estate Officer & Director

Mr. Abdeljalek graduated from Universidad Anáhuac del Sur as a Public Accountant and also obtained an MBA from Boston University. He has been in the housing industry for the last 16 years, working at Corporación GEO. He is currently Chief Real Estate Officer of the Company in charge of land acquisition, the development of community plans, managing the strategic alliances for the land bank and new real estate developments. Mr. Abdeljalek is also Finance Vice-president of the Urban Land Institute of Mexico.

Andres Caire Obregón, Director

Mr. Caire received a degree in civil engineering from Universidad Anahuac and he is fluent in English, French and Italian. He was Technical Director, Commercial Director, Exports Director and General Manager of Viguetas y Bovedillas S.A.. Mr. Caire was also Construction Director of the construction firm CURSA. Mr. Caire was also Partner and Finance & Development Vice-president of GRUPO TRIBASA, the company that resulted from the merger of Cimentaciones y Edificaciones S.A and GRUPO TRIBASA. In addition, he has been a member of the Board of Directors and the Executive Committee of Grupo ICONSA as well as Partner of Promociones de

Infraestructura Energética S.A. de C.V. Currently, Mr. Caire is President of Crecimiento Programado and works as a consultant for a number of other companies.

Raúl Zorrilla Cosío, Director

Mr. Zorrila has two Bachelor’s degrees from Universidad Nacional Autónoma de México UNAM: one in Business Administration and the other in Public Administration and Political Science. Mr. Zorrila has held a variety of positions at our company; from 1997 to 1999, he was Commercial Vice-president, from 2002 to 2006 he was a lower-income-housing and lank bank-administration consultant, from 2007 to 2008 he was designated as Chief Commercial Officer and, since February 2008, he has been an advisor to the Chairman.

Mr. Zorrilla has occupied important roles in the Mexican public sector and Mexican institutions. He was Regional and General Coordinator at INFONAVIT, Chief Officer of the National Promotion for Tourism Fund, Chief Officer of the National Lottery and Sub-secretary of the Transport and Communications Ministry. In addition, Mr. Zorrilla served as General Sub-Manager of Instituto Mexicano del Seguro Social’s IMSS Divisions as well as the Mexican President’s Private Secretary and General Manager of Administration between 1982 and 1988. Mr. Zorrilla was Executive President of the Mexican Personnel Training Association, a member of the Board of Directors of IMSS, Teléfonos de México (TELMEX), SEPOMEX, Cabo Marina, Nacional Hotelera, the hotel chain Presidente, and President of the National Communication and Information Technology Consultant Committee, among other executive positions.

José Carral Escalante, Independent Director

Mr. Carral has 40 years of experience in international banking. He graduated from Universidad Nacional Autónoma de México UNAM and completed specialization programs at NYU, Universidad de las Américas UDLA and the University of California at Berkeley. He is Founder of Carral y Asociados, S.C and Carral, Rubio Del Cueto, a corporate law firm. He is also the delegate of Credit Commercial De France in Mexico. From 1955 to 1986 he worked for Bank of America in different job positions such as Senior Vice-president & Representative for Mexico handling an asset portfolio of more than U.S.$3.3 billion. Mr. Carral is founder and member of the Board of Directors of INTERMEX (Banco Internacional), Banamex (Citigroup), Bank of América and Nacional Financiera (NAFIN) as well as a member of the Board of Directors of Arrendadora Comermex, Bank of America – Comermex (now Scotiabank).

Also, Mr. Carral was a member of the Board of Directors of CONCANACO, CEMAI, Western Airlines, Bank of Tokyo – Mitsubishi, Alcatel – Indetel, California Commerce Bank, Bancrecer, Casa de Cambio Banamex, Continental Airlines, World Trade Center, Grupo Embotellador de México, Instituto Nacional de Migración, Consejo Mexicano de Promoción, Caterpillar Finance Corporation, Fundación Domecq, Alexander Forbes, Colgate Palmolive, Corporación GEO, Earthwise Technologies, Gardes Energy Services, HSBC, Seros, Zurich Seguros, Asociación de Instituciones Financieras Internacionales, Club Pumas, Consejo Consultivo de UNICEF Mexico – Naciones Unidas and Fundación UNAM.

Roberto Alcántara Rojas, Independent Director

Mr. Alcántara is an entrepreneur in the Mexican transport industry. He directed the National Passenger Transport and Tourism Chamber and was President of the Board of Directors of IAMSA and VivaAerobus.

Manuel Weinberg López, Independent Director

Mr. López holds a Bachelor’s degree in Business Administration from Universidad Nacional Autónoma de México UNAM. He has been Vice-president and General Manager of Tisamex, a textile firm and was a Partner and Director of Fuentes del Valle and FINTECO, which are companies in the real estate and housing industries. In addition, he was Director and Consultant of CPTEL, a telecommunication firm in the United States.

Francisco Gil Díaz, Independent Director

Francisco Gil earned a degree in economics from Instituto Tecnológico Autónomo de México ITAM, and he holds a Masters and a PhD in economics from the University of Chicago. Mr. Gil has been a professor at

80 educational institutions such as ITAM, Universidad Iberoamericana, Colegio de México and UNAM. He has also given conference lectures at universities including Columbia, Harvard, Chicago, UCLA, Miami, San Diego and Tribuna Juan de Oñate in Madrid, Spain. At Banco de México he worked in executive positions such as Economic Director, Economic Studies Director and Member of the Government Board. In the Mexican Ministry of Finance and Public Credit, he held job positions in the General Direction of Financial Planning, General Direction of Income Politics, Income Sub-Ministry and from 2000 to 2006 Mr. Gil was the Minister of Finance and Public Credit.

In the private sector, Mr. Gil was Chief Executive Officer of Avantel, a Mexican telecommunications company and is currently the Chief Executive Officer of Movistar for Mexico and Central America. He is also a member of many governmental institutions, Boards of Directors, committees and other institutions.

Tomás Lozano Molina, Independent Director

Mr. Lozano holds a Bachelor’s degree in Law from Universidad Nacional Autónoma de México UNAM. He has worked as a Public Notary in Notary No. 87 and No. 10. He is professor of post-graduate courses in the Mexican law school Escuela Libre de Derecho and in the Notary College Colegio de Notarios. He has been a board member and advisor in different institutions, partnerships, associations and private assistance institutions.

Mr. Lozano serves as notary in the following financial institutions: Scotiabank, HSBC, Banorte, Santander and Fomento Hipotecario.

Alberto Guillermo Saavedra, Independent Director

Mr. Saavedra has a Bachelor’s degree in Law from Universidad Iberoamericana. For the past 26 years, he has been working for Santamarina y Steta, where he began his legal practice and rose to become a partner. He has been a member of many boards of directors and committees and is a trustee for several public and private companies such as Hysol Indael De México, John Deere, Casa De Bolsa Inverlat, Grupo Industrial Rovitex, Gondi, G. Acción, Grupo Embotelladoras Unidas, Fundación Mexicana Para La Calidad Total, Mexicana De Inversiones Femac, Mexicana De Premezclas, Mercado Mexicano De Derivados (MexDer), Invex Grupo Financiero, Kimberly Clark De México, Nadro, Bolsa Mexicana De Valores, Fondo Mexicano Para La Conservación De La Naturaleza, Grupo Financiero BBVA Bancomer, Sanluis Corporación, Asociación Empresarial Mexicano Suiza and Centros De Conocimiento Tecnológico.

Mr. Saavedra has been a representative in many financial projects such as the Pacific Rim Advisory Council (PRAC). Moreover, he has given classes at the Universidad Iberoamericana and the Universidad Panamericana.

Alvaro Gasca Neri, Independent Director

Mr. Gasca is an accountant who graduated with honors from Instituto Politécnico Nacional IPN and has a Master’s degree in Business Management from l’Université de Nancy in France. He is also professor at the Superior School of Business and Management of IPN. From 1978 to 2006, he was a Partner at Ernst & Young and from 1993 to 2005, member of the Executive Committee. He was Managing Partner of Ernst & Young´s French Business Center from its formation until 2006. He has been a Trustee for well-known Mexican companies such as Grupo Bal, Crédito Afianzador, Peñoles, Grupo Crédito Hipotecario y Banco Minero y Mercantil, Casa de Bolsa Bancomer, Factoraje Bancomer, Arrendadora Bancomer, Schneider de México, Grupo Electricité de France en México, Grupo Gaz de France en México, Moet Hennessy de México, Grupo Nestlé México, Grupo Trouyet, Interindustrias, Grupo GNP, Seguros Monterrey Aetna, Fianzas Monterrey, Grupo Cervecería Moctezuma, Grupo Oxxo, Hoteles Regina, Grupo Hoteles Presidente Intercontinental and Compañía Mexicana de Procesamiento, a joint venture between Banamex, Bancomer and Grupo Alstom.

Mr. Gasca has also served as General Manager of External Audits at the Secretaría de la Contraloría General de la Federación, a Board Member of the Mexican Securities and Exchange Commission and of the Ministry of Finance and Public Credit during the bank privatization process in Mexico. He was an advisor to the Income Subsecretary of the Ministry of Finance and Public Credit, Board Member of the Asian-Pacific International Conference on Accounting Issues, a trustee and member of the Consejo Nacional Directivo del Instituto Mexicano

81 de Ejecutivos de Finanzas, member of the Mexican Public Accountants Academy and member of the Accounting Principles Commission at the Mexican Institute for Public Accountants.

Officers

The following table sets forth our current executive management: Name Position Years with Us Age Luis Orvañanos Lascurain CEO / Chairman of the Board 37 65 Roberto Orvañanos Conde Chief Operations Officer/Director 12 51 Saúl Humberto Escarpulli Gómez Chief Financial Officer 17 40 Daniel Gelové Gómez Chief Administrative Officer 17 52 Luis Ignacio Abdeljalek Martínez Chief Real Estate Officer/Director 16 36 Emilio Cuenca Friederichsen Chief Legal Officer/Director 37 78 Pablo Moch Leiferman Chief of Human Resources 7 49 Iñigo Orvañanos Corcuera Chief Marketing Officer/Director 11 35

Daniel Gelové Gómez, Chief Administrative Officer

Mr. Gelove holds a degree from UNAM, and is an accountant. He has 17 years of experience in the construction sector. Prior to joining us, he worked at Deloitte Touche Tohmatsu.

Saúl Humberto Escarpulli Gómez, Chief Financial Officer

Mr. Escarpulli has 17 years of experience in the construction sector. Mr. Escarpulli holds a degree from Universidad Panamericana A.C. He is an accountant, and worked for KPMG S.C. prior to joining us.

Pablo Moch Leiferman, Head of Human Resources

Mr. Moch holds a degree in psychology from UNAM. He has seven years of experience in the construction sector. Prior to joining us, he worked at Praxis Servicios Integrales.

Internal Controls

Our Chief Executive Officer and our other executive officers are responsible for the preparation and accuracy of our consolidated financial statements, as well as for maintaining a system of internal controls. Internal controls provide shareholders, the market and our investors with reasonable certainty that (i) operations are performed under our Chief Executive Officer’s and other executive officers’ oversight, (ii) financial files and records are accurate as the basis for preparing our consolidated financial statements, (iii) assets are included in the financial statements at their appropriate values and (iv) assets are protected against losses due to unauthorized use or disposition.

In order to comply with their obligations regarding the accuracy of financial information, our Chief Executive Officer and other executive officers maintain and rely on our system of internal controls. This system is based on an organizational structure that effectively delegates duties and ensures effective selection and training of personnel. Additionally, our internal controls system includes policies communicated to personnel through appropriate channels.

As of March 31, 2010, we had three internal control committees: the Audit Committee, the Corporate Practices Committee and the Planning and Finance Committee, which meet every three months, and are presided over by independent members of the Board of Directors. a) The Audit Committee is in charge of recommending the selection of the external auditors, as well as the analysis, implementation and evaluation of the effects of any new accounting regulations. This committee meets quarterly and supports the Board in monitoring the financial information and complying with fiscal and legal regulations. The chairman of the Audit Committee and its members are deemed to be independent under

Mexican law. The members of the Audit Committee are: Álvaro Gasca Neri (Chairman), José Caral Escalante, Manuel Weinberg López and Tomás Lozano Molina. b) The Corporate Practices Committee meets quarterly to review, with the support of our Human Resources department, the appointment, hiring and promotion of employees. In addition, this committee defines variable compensation and the general salary structure for the employees and develops human resources strategies. The chairman of this committee and its members are deemed to be independent under Mexican law. The members of the Corporate Practices Committee are: Alberto Saavedra Olavarrieta (Chairman), Tomás Lozano Molina, Roberto Alcántara Rojas and Manuel Weinberg López. c) The Finance and Planning Committee is in charge of defining the financial strategies of the company, as well as the preparation and approval of the annual budgets, certain investments and financing activities. It is also responsible for developing strategies for the use of financial instruments, relationships with national and international financial institutions, and general communications to the market and investors. The members of the Finance and Planning Committee are: Iñigo Orvañanos Corcuera, Luis Abdeljalek Martínez, Emilio Cuenca Friederichsen, Luis Orvañanos Lascurain, Daniel Gelové Gómez, Roberto Orvañanos Conde, Saúl Escarpulli Gómez, Pablo Moch Leiferman, Mario Orvañanos Conde, Salvador Villaseñor Arai, David Casares Arrangoiz, Adolfo Ceballos Cárdenas, Jorge Nieves Acosta, Gabriel Gómez Castañares, Lorena García Alcocer, Lorenzo Hernández Herrera, Emilio Cuenca Carrara and Raúl Zorrilla Cosío.

Our system of internal controls is supported by internal audits, the results of which are reported to management throughout the year. In addition, we maintain modern and efficient information systems that allow us to obtain real-time up-to-date information and maintain reliable databases to assist us in the preparation of financial reports. Our statutory auditors are Galaz, Yamazaki, Ruiz Urquiza, S.C., a member of Deloitte Touche Tohmatsu. They have held this position for approximately 17 years.

Incentive Program and Employee Stock Ownership Plan

We have implemented a Key Employee Annual Incentive Plan (the “Incentive Program”), pursuant to which our common stock (the “Shares”) may be allocated in favor of our executive officers and directors. The Incentive Program is designed to align the interests of our employees with our current shareholders and to provide our employees with the opportunity to participate in our growth. We have reserved 42.9 million Shares for issuance pursuant to this Incentive Program.

Currently, approximately 2.8% of our employees own company stock or restricted stock under the employee stock ownership plan created in 1997. As of March 31, 2010, we had 17.7 million shares available for distribution to employees. None of the company’s employees are compensated with options, warrants or other derivative instruments.

Executive and Board Compensation and Bonuses

The aggregate amount of salaries and benefits paid by us to our key management and prominent executives as a group for the year ended December 31, 2009, was Ps.255.1 million ($U.S. 20.7 million). The aggregate amount of compensation (including salaries and benefits, statutory year-end benefits and bonuses) paid to our key management and prominent executives as a group for the year ended December 31, 2009 was approximately Ps.402.3 million (U.S.$32.6 million). We continuously review our salary bonus and other compensation plans to offer competitive compensation arrangements for our management.

We offer a bonus plan to our senior management that is based on individual performance and on the results of our operations. This variable compensation can range from 20% to 50% of annual base compensation, depending upon the employee’s position at the Company.

Each independent member of the board of directors is paid a fee of Ps.40,000 (U.S.$3,244) for each board meeting that he or she attends. The remaining directors (with the exception of Roberto Ordorica Barrera, who is ineligible for remuneration due to his position on the Board of Directors of our joint venture partner Prudential) are each paid a fee of Ps.15,000 (U.S.$1,217) for each board meeting that he or she attends.

PRINCIPAL SHAREHOLDERS Share Ownership

As of March 31, 2010, issued and outstanding share capital was composed of 544,437,550 common Series B Shares with no par value. One member of the Board of Directors holds more than 1% of the company’s shares. The following table sets forth certain information as of April 14, 2010, the date of our annual shareholder meeting, concerning ownership of Series B Shares. Board of Directors and Officers...... 84,724,819 15.6% Public Investors ...... 459,088,031 84.3% Shares in Treasury ...... 624,700 0.1% TOTAL...... 544,437,550 100%

As of March 31, 2009 and 2010, authorized common stock was 555,396,540 shares, at no par value. As of March 31, 2010 and March 31, 2009, we had 544,437,550 and 537,802,359 shares outstanding which include 624,700 and 2,230,500 shares held in treasury, respectively.

The Mexican General Corporations Law requires that at least 5% of net income of the corresponding year be transferred to the legal reserve until such reserve equals 20% of a company’s capital stock at par value (historical pesos). The legal reserve may be capitalized but may not be distributed except in the form of a stock dividend, unless the entity is dissolved. The legal reserve must be replenished if it is reduced for any reason. As of March 31, 2009 and 2010, our legal reserve, in historical pesos, remained at Ps.25.7 million. Stockholders’ equity, except restated paid-in capital and tax retained earnings, will be subject to income tax at the rate in effect when the dividend is distributed. Any tax paid on such distribution may be credited against the income tax payable of the year in which the tax on the dividend is paid and the two fiscal years following such payment.

At the Stockholders’ Ordinary General Meeting of April 14, 2010, the stockholders agreed to allocate an amount of up to Ps.1,000 million to the reserve fund during 2010 to acquire our own shares.

Our employee and officer incentive plan requires that officers remain with our company for a given period of time under certain conditions. Employees and officers accept and recognize that the value of their shares will be Ps.0.224 per share. The acquisition rights of shares released under the above plan will not be awarded pro rata for periods of less than a year.

On December 28, 2005, we issued 3,721,008 new unsecured debt securities convertible into shares at par value of Ps.0.224 each, which were acquired by a trust and converted to shares on December 31, 2005, thus representing a nominal capital increase of Ps.836,000. On August 6, 2006, we issued 198,092 new unsecured debt securities convertible to shares, thus representing a nominal capital increase of Ps.44,000 as part of the key personnel incentive plan.

Additionally, on December 28, 2007, we issued 3,400,000 new unsecured debt securities convertible into shares at par value of Ps.0.224 each, which were acquired by trust and converted to shares on January 14, 2008, thus representing a nominal capital increase of Ps.763,000 as part of our key personnel incentive plan. These shares were issued to our employees and officers in 2008.

The market value of the above obligations when converted to shares was Ps.33.00 and Ps.37.58 respectively for the 2006 and 2005 incentive plans. In accordance with International Financial Reporting Standard 2, “Share-Based Payments,” issued by the International Accounting Standards Board, which is supplementary to Mexican FRS, the difference between the par value at which these obligations were issued and the market value of the shares will be charged to results and credited to capital by the straight-line method for the period from the date on which the obligations were converted to shares to that on which the shares are released, and constitute the irrevocable rights of employees and officers. Accordingly, during 2008, we recorded a charge to results of Ps.89 million with a credit to stockholders’ equity for the same amount, which is presented as additional capital in the statement of changes in stockholders’ equity.

On January 23, 2009, 1,027,990 shares under our employee and officer incentive plan were released. The market value of such shares as of the date of the assignment was Ps.14.30 per share; therefore, a charge to results

84 and a credit to stockholders’ equity of Ps.14.7 million were recorded. This credit is presented as additional paid-in capital in the statement of changes in stockholders’ equity in the Consolidated Financial Statements included in this offering memorandum.

On August 7, 2009, 5,029,391 convertible debt securities were issued and acquired by a trust fund. The securities were converted into shares at a par value of Ps.0.224, representing an increase in our common stock of Ps.1.1 million. The rights related to the shares were released as follows:

(1) On August 19, 2009, the rights to 1,295,352 shares were released with a market value as of the date of conversion of Ps.26.99 per share; and

(2) On October 26, 2009, the rights to 2,302,842 shares were released with a market value as of the date of conversion of Ps.32.99 per share.

The difference between the par value at which the securities were issued and the market value of the shares upon conversion is charged to results and credited to stockholders’ equity. Accordingly, a charge to results and a credit to stockholders’ equity of Ps.35.0 million and Ps.76.0 million, respectively, were recorded. This credit is presented as additional paid-in capital in the statement of changes in stockholders’ equity in the Consolidated Financial Statements included in this offering memorandum. The balance of unsubscribed shares of our employee and officer incentive plan as of both March 31, 2010 and December 31, 2009 was 10,334,290.

RELATED PARTY TRANSACTIONS

From time to time we engage in a number of transactions with our shareholders and with companies that are owned or controlled, directly or indirectly, by our controlling shareholders. Any transactions with related parties have been made consistent with normal business operations using terms and conditions available in the market and are in accordance with the applicable legal standards.

The following is a description of certain material transactions between us and related parties in the years ended December 31, 2007, 2008 and 2009, and the three-month periods ended March 31, 2009 and 2010. See note 16 to the audited consolidated financial statements for the years ended December 31, 2007, 2008 and 2009 and note 14 to the unaudited condensed consolidated financial statements for the three-month periods ended March 31, 2009 and 2010.

Outstanding Loans, Payments and Transactions Between Related Parties

We have occasionally extended loans to and received loans from our related parties, and we believe the consideration, terms and conditions of these transactions were substantially equivalent to those of similar transactions carried out with independent parties. See note 16 to the audited consolidated financial statements for the years ended December 31, 2007, 2008 and 2009 and note 14 to the unaudited condensed consolidated financial statements for the three-month periods ended March 31, 2009 and 2010.

Below is an analysis of balances due from and to related parties as of December 31, 2007, 2008 and 2009 and March 31, 2009 and 2010.

Three Months Ended March 31, Year Ended December 31, 2009 2010 2007 2008 2009 (millions of Ps.) (millions of Ps.) Due from related parties: ...... Fideicomiso Maestro Mexicano 412 ... — 120.1 62.9 134.0 120.0 Fideicomiso Maestro Mexicano 371 ... — 13.8 42.4 44.1 13.8

Due to related parties:...... Fideicomiso Maestro Mexicano 412 ... 136.7 — — — — Fideicomiso Maestro Mexicano 371 ... 39.0 — — — —

We purchase land through the Residential Investment Program with Prudential. These transactions are carried out in the ordinary course of business and we believe the consideration is substantially equivalent to that of similar transactions carried out with independent parties. For the years ended December 31, 2007, 2008 and 2009, the total amount of these land purchases were Ps.1,082.4 million, Ps.289.0 million and Ps.51.2 million respectively. For the three-month periods ended March 31, 2009 and 2010, the total amount of these land purchases were Ps.8.0 million and Ps.51.2 million, respectively.

DESCRIPTION OF NOTES

We will issue the Notes under an Indenture, to be dated the Issue Date, between us, the Subsidiary Guarantors and The Bank of New York Mellon, as Trustee (the “Trustee”). We summarize below certain provisions of the Indenture, but do not restate the Indenture in its entirety. We urge you to read the Indenture because it, and not this description, defines your rights. You can obtain a copy of the Indenture in the manner described under “Available Information,” and, for so long as the Notes are listed on the Official List of the Luxembourg Stock Exchange and to trading on the Luxembourg Stock Exchange’s Euro MTF market, at the office of the paying agent in Luxembourg.

You can find the definition of capitalized terms used in this section under “Certain Definitions.” When we refer to:

• the Company in this section, we mean Corporación GEO, S.A.B. de C.V., and not any of its subsidiaries; and

• Notes in this section, we mean the Notes originally issued on the Issue Date and Additional Notes.

General

The Notes will:

• be general unsecured obligations of the Company,

• rank equal in right of payment with all other existing and future Senior Indebtedness of the Company,

• rank senior in right of payment to all existing and future Subordinated Indebtedness of the Company, if any,

• be effectively subordinated to all existing and future secured Indebtedness of the Company,

• be fully and unconditionally guaranteed on a general unsecured senior basis by all of the Company’s existing Restricted Subsidiaries that are Significant Subsidiaries and any future Restricted Subsidiaries that are (x) Wholly-Owned Subsidiaries and (y) Significant Subsidiaries;

• be structurally subordinate to all existing and future Indebtedness and trade payables of the Company’s subsidiaries that do not guarantee the Notes; and

• rank junior to all obligations preferred by statute (such as tax or labor obligations).

As of March 31, 2010, on a pro forma basis after giving effect to this offering and the related transactions as described under “Use of Proceeds”:

• the Company and the Subsidiary Guarantors would have had consolidated total indebtedness of Ps.8,122.0 million (U.S.$658.7 million), of which (a) Ps. 6,039.2 million (U.S.$489.8 million) would have been senior unsecured indebtedness, and (b) Ps.2,082.8 million (U.S.$168.9 million) would have been secured indebtedness;

• the Company’s Subsidiaries that are not Subsidiary Guarantors would have had outstanding indebtedness (including trade payables) of Ps.69.6 million (U.S.$5.6 million).

Additional Notes

Subject to the limitations set forth under “Certain Covenants—Limitation on Incurrence of Additional Indebtedness,” the Company and its Subsidiaries may incur additional Indebtedness. At the Company’s option, this additional Indebtedness may consist of additional Notes (“Additional Notes”) issued by the Company in one or more transactions, which have identical terms (other than issue date and issue price) as Notes issued on the Issue Date. Holders of Additional Notes would have the right to vote together with Holders of Notes issued on the Issue Date as one class; provided, however, that unless such Additional Notes are issued under a separate CUSIP number, such Additional Notes must be fungible with the original notes for U.S. federal income tax purposes.

Principal, Maturity and Interest

The Company will issue Notes in denominations of U.S.$100,000 and integral multiples of U.S.$1,000 in excess thereof. The Notes will mature on June 30, 2020 at 100% of their face value. The Notes will not be entitled to the benefit of any mandatory sinking fund.

Interest on the Notes will accrue at the rate of 9.25% per annum and will be payable semi-annually in arrears on each December 30 and June 30, commencing on December 30, 2010. Payments will be made to the Persons who are registered Holders at the close of business on December 15 and June 15, respectively, immediately preceding the applicable interest payment date.

Interest on the Notes will accrue from the most recent date to which interest has been paid or, if no interest has been paid, from and including the Issue Date. Interest will be computed on the basis of a 360-day year comprised of twelve 30-day months. The redemption of Notes with unpaid and accrued interest to the date of redemption will not affect the right of Holders of record on a record date to receive interest due on an interest payment date.

Initially, the Trustee will act as paying agent, transfer agent and registrar for the Notes. The Company may change the paying agent and registrar without notice to Holders. If a Holder of U.S.$10.0 million or more in aggregate principal amount of Notes has given wire transfer instructions to the Company at least 10 Business Days prior to the applicable payment date, the Company will make all principal, premium and interest payments on those Notes in accordance with those instructions. All other payments on the Notes will be made at the office or agency of the paying agent and registrar in New York City unless the Company elects to make interest payments by check mailed to the registered Holders at their registered addresses. Application has been made to list the Notes on the Official List of the Luxembourg Stock Exchange and to trade on the Luxembourg Stock Exchange’s Euro MTF market. As long as the Notes are listed on this market and as long as the rules of this exchange require, the Company will also maintain a paying agent and a transfer agent in Luxembourg.

Subject to any applicable abandoned property law, the Trustee and the paying agent shall pay to the Company upon request any money held by them for the payment of principal or interest on the Notes that remains unclaimed for two years, and, thereafter, Holders entitled to the money must look to the Company for payment as general creditors.

Additional Amounts

We are required by Mexican law to deduct Mexican withholding taxes from payments of interest to investors who are not residents of Mexico for tax purposes, and will pay additional amounts on those payments to the extent described in this subsection.

The Company and the Subsidiary Guarantors will pay to Holders of the Notes all additional amounts that may be necessary so that every net payment of interest (including any premium paid upon redemption of the Notes) or principal to the Holder will not be less than the amount provided for in the Notes. By net payment, we mean the amount we or our paying agent pay the Holder after deducting or withholding an amount for or on account of any present or future taxes, duties, assessments or other governmental charges imposed with respect to that payment by a Mexican taxing authority.

Our obligation to pay additional amounts is subject to several important limitations and exceptions, however. The Company and the Subsidiary Guarantors will not pay additional amounts to any Holder for or solely on account of any of the following:

• any taxes, duties, assessments or other governmental charges imposed solely because at any time there is or was a connection between the Holder or beneficial owner of the Note and Mexico (or any political subdivision or territory or possession thereof), including such Holder or beneficial owner (i) being or having been a citizen or resident thereof, (ii) maintaining or having maintained an office, permanent establishment, or branch subject to taxation therein, or (iii) being or having been present or engaged in a trade or business therein (other than the mere receipt of a payment or the ownership or holding of a Note),

• any estate, inheritance, gift, transfer or similar tax, assessment or other governmental charge imposed with respect to the Notes,

• any taxes, duties, assessments or other governmental charges imposed solely because the Holder or any other Person fails to comply with any certification, identification, information, documentation or other reporting requirement concerning the nationality, residence, identity or connection with Mexico (or any political subdivision or territory or possession thereof) of the Holder or any beneficial owner of the Note if compliance is required by statute, regulation, officially published administrative practice of the taxing jurisdiction or by an applicable income tax treaty, which is in effect to which Mexico is a party, as a precondition to exemption from, or reduction in the rate of, the tax, assessment or other governmental charge and we have given the Holders at least 30 days’ notice that Holders will be required to provide such information and identification,

• any tax, duty, assessment or other governmental charge payable otherwise than by deduction or withholding from payments on the Notes,

• any taxes, duties, assessments or other governmental charges with respect to such Note presented for payment more than 30 days after the date on which the payment became due and payable or the date on which payment thereof is duly provided for and notice thereof given to Holders, whichever occurs later, except to the extent that the Holders of such Note would have been entitled to such additional amounts on presenting such Note for payment on any date during such 30 day period, and

• any payment on the Note to a Holder that is a fiduciary or partnership or a Person other than the sole beneficial owner of any such payment, to the extent that a beneficiary or settlor with respect to such fiduciary, a member of such a partnership or the beneficial owner of the payment would not have been entitled to the additional amounts had the beneficiary, settlor, member or beneficial owner been the Holder of the Note.

The limitations on our obligations to pay additional amounts stated in the third bullet point above will not apply if the provision of information, documentation or other evidence described in the applicable bullet point would be materially more onerous, in form, in procedure or in the substance of information disclosed, to a Holder or beneficial owner of a Note, taking into account any relevant differences between U.S. and Mexican law, regulation or administrative practice, than comparable information or other reporting requirements imposed under U.S. tax law (including the United States-Mexico Income Tax Treaty), regulations (including proposed regulations) and administrative practice.

Mexican tax law currently allows us to withhold at a reduced rate, provided we comply with certain information reporting requirements. Accordingly, the limitations on our obligations to pay additional amounts stated in the third bullet point above also will not apply and will not entitle us to require the information therein specified unless (a) the provision of the information, documentation or other evidence described in the applicable bullet point becomes expressly required by the applicable Mexican statutes, regulations and administrative practices, and (b) we otherwise would meet the requirements for application of the reduced Mexican tax rate.

In addition, such third bullet point does not require, and should not be construed as requiring that any Person, including any non-Mexican pension fund, retirement fund or financial institution, register with the Ministry of Finance and Public Credit to establish eligibility for an exemption from, or a reduction of, Mexican withholding tax.

Upon request, the Company and the Subsidiary Guarantors will provide the Trustee with documentation satisfactory to the Trustee evidencing the payment of Mexican taxes in respect of which we have paid any additional amount. We will make copies of such documentation available to the Holders of the Notes or the relevant paying agent upon request.

Any reference in this offering memorandum, the Indenture, or the Notes to principal, premium, interest or any other amount payable in respect of the Notes by us will be deemed also to refer to any additional amount that may be payable with respect to that amount under the obligations referred to in this subsection.

In the event that additional amounts actually paid with respect to the Notes pursuant to the preceding paragraphs are based on rates of deduction or withholding of withholding taxes in excess of the appropriate rate applicable to the Holder of such Notes, and as a result thereof such Holder is entitled to make a claim for a refund or credit of such excess from the authority imposing such withholding tax, then such Holder shall, by accepting such Notes, be deemed to have assigned and transferred all right, title and interest to any such claim for a refund or credit of such excess to us. However, by making such assignment, the Holder makes no representation or warranty that we will be entitled to receive such claim for a refund or credit and incurs no other obligation with respect thereto.

In the event of any merger or other transaction described and permitted under “—”Limitation on Merger, Consolidation and Sale of Assets,” then all references to Mexico, Mexican law or regulations, and Mexican taxing authorities under this section “Additional Amounts” (other than the fourth and fifth paragraphs above) and under “Optional Redemption—Optional Redemption for Changes in Withholding Taxes” shall be deemed to also include the United States and any political subdivision therein or thereof, United States law or regulations, and any taxing authority of the United States or any political subdivision therein or thereof, respectively.

Note Guarantees

Each Subsidiary Guarantor will unconditionally guarantee the performance of all obligations of the Company under the Indenture and the Notes. The Obligations of each Subsidiary Guarantor in respect of its Note Guarantee will be limited to the maximum amount as will result in the Obligations not constituting a fraudulent conveyance, fraudulent transfer or similar illegal transfer under applicable law. See “Risk Factors—Risk Factors Related to the Notes—The Guarantees May Not be Enforceable.”

Each Subsidiary Guarantor will be released and relieved of its obligations under its Note Guarantee in the event:

(1) there is a Legal Defeasance or a Covenant Defeasance of the Notes as described under “Legal Defeasance and Covenant Defeasance;”

(2) there is a sale or other disposition of Capital Stock of such Subsidiary Guarantor following which such Subsidiary Guarantor is no longer a direct or indirect Subsidiary of the Company;

(3) there is a sale of all or substantially all of the assets of such Subsidiary Guarantor (including by way of merger, stock purchase, asset sale or otherwise) to a Person that is not (either before or after giving effect to such transaction) a Subsidiary Guarantor, provided that the terms of such sale comply with the terms set forth under “Certain Covenants—Limitation on Asset Sales and Sales of Subsidiary Stock” and all of the Net Cash Proceeds from such sale are applied to repay Senior Indebtedness pursuant to such covenant; or

(4) such Subsidiary Guarantor is designated as an Unrestricted Subsidiary in accordance with “Certain Covenants—Limitation on Designation of Unrestricted Subsidiaries;”

provided, that the transaction is carried out pursuant to and in accordance with all other applicable provisions of the Indenture.

If any Person that is a Wholly-Owned Restricted Subsidiary becomes a Significant Subsidiary (including upon a Revocation of the Designation of a Subsidiary as an Unrestricted Subsidiary), the Company will cause that Wholly-Owned Restricted Subsidiary (promptly following the determination in accordance with the terms of the Indenture that such Restricted Subsidiary is Wholly-Owned and a Significant Subsidiary) concurrently to become a Subsidiary Guarantor on a senior basis by executing a supplemental indenture and providing the Trustee with an Officers’ Certificate and Opinion of Counsel. For the avoidance of doubt, the Company may elect at its option to cause any Subsidiary to become a Subsidiary Guarantor provided that the Company shall comply with the applicable provisions of the Indenture for the addition of Subsidiary Guarantors.

On the Issue Date, GEO Baja California, S.A. de C.V., GEO Casas del Bajio, S.A. de C.V., GEO D.F., S.A. de C.V., GEO del Noroeste, S.A. de C.V., GEO Edificaciones, S.A. de C.V., GEO Guerrero, S.A. de C.V., GEO Hogares Ideales, S.A. de C.V., GEO Jalisco, S.A. de C.V., GEO Laguna, S.A. de C.V., GEO Monterrey, S.A. de C.V., GEO Morelos, S.A. de C.V., GEO Puebla, S.A. de C.V., GEO Tamaulipas, S.A. de C.V., GEO Urbanizadora Valle de las Palmas, S.A. de C.V. GEO Veracruz, S.A. de C.V. and Promotora Turística Playa Vela, S.A. de C.V. will be the Subsidiary Guarantors.

Not all of our “Restricted Subsidiaries” will guarantee the Notes and our Unrestricted Subsidiaries will not guarantee the Notes. In the event of a bankruptcy, liquidation or reorganization of these non-guarantor subsidiaries, these non-guarantor subsidiaries will pay the holders of their debt and their trade creditors before they will be able to distribute any of their assets to us. In addition, holders of minority equity interests in Subsidiaries may receive distributions prior to or pro rata with the Company depending on the terms of the equity interests. See “Risk Factors— Risk Factors Related to the Notes—Certain of Our Subsidiaries are Not Guarantors and Our Obligations with Respect to the Notes Will Be Effectively Subordinated to All Liabilities of These Non-Guarantor Subsidiaries.”

Optional Redemption

Optional Redemption. Except as stated below, the Company may not redeem the Notes prior to June 30, 2015. The Company may redeem the Notes, at its option, in whole at any time or in part from time to time, on and after June 30, 2015, at the following redemption prices, expressed as percentages of the principal amount thereof, if redeemed during the twelve-month period commencing on June 30 of any year set forth below:

Year Percentage 2015...... 104.625% 2016...... 103.083% 2017...... 101.542% 2018 and thereafter...... 100.000%

Prior to June 30, 2015, the Company will have the right, at its option, to redeem any of the Notes, in whole or in part, at any time or from time to time prior to their maturity, on at least 30 days’ but not more than 60 days’ notice, at a redemption price equal to the greater of (1) 100% of the principal amount of such Notes and (2) the sum of the present value of each remaining scheduled payment of principal and interest thereon (exclusive of interest accrued to the date of redemption) discounted to the redemption date on a semi-annual basis (assuming a 360-day year consisting of twelve 30-day months) at the Treasury Rate plus 50 basis points (the “Make-Whole Amount”), plus in each case accrued interest on the principal amount of the Notes to the date of redemption.

“Treasury Rate” means, with respect to any redemption date, the rate per annum equal to the semi-annual equivalent yield to maturity or interpolated maturity (on a day count basis) of the Comparable Treasury Issue, assuming a price for the Comparable Treasury Issue (expressed as a percentage of its principal amount) equal to the Comparable Treasury Price for such redemption date.

“Comparable Treasury Issue” means the United States Treasury security or securities selected by an Independent Investment Banker as having an actual or interpolated maturity comparable to the remaining term of the Notes to be redeemed that would be utilized, at the time of selection and in accordance with customary financial

91 practice, in pricing new issues of corporate debt securities of a comparable maturity to the remaining term of such Notes.

“Independent Investment Banker” means one of the Reference Treasury Dealers appointed by the Company.

“Comparable Treasury Price” means, with respect to any redemption date (1) the average of the Reference Treasury Dealer Quotations for such redemption date, after excluding the highest and lowest such Reference Treasury Dealer Quotation or (2) if fewer than four such Reference Treasury Dealer Quotations are obtained, the average of all such quotations.

“Reference Treasury Dealer” means Morgan Stanley & Co. Incorporated, Citigroup Global Markets Inc. or their respective affiliates which are primary United States government securities dealers and not less than two other leading primary United States government securities dealers in New York City reasonably designated by the Company; provided, however, that if any of the foregoing shall cease to be a primary United States government securities dealer in New York City (a “Primary Treasury Dealer”), the Company will substitute therefor another Primary Treasury Dealer.

“Reference Treasury Dealer Quotation” means, with respect to each Reference Treasury Dealer and any redemption date, the average, as determined by the Independent Investment Banker, of the bid and asked price for the Comparable Treasury Issue (expressed in each case as a percentage of its principal amount) quoted in writing to the Independent Investment Banker by such Reference Treasury Dealer at 3:30 pm New York time on the third business day preceding such redemption date.

Optional Redemption upon Equity Offerings. At any time, or from time to time, on or prior to June 30, 2013 the Company may, at its option, use the net cash proceeds of one or more Equity Offerings to redeem in the aggregate up to 35% of the aggregate principal amount of the Notes issued under the Indenture at a redemption price equal to 109.25% of the principal amount thereof; provided, that:

(1) after giving effect to any such redemption at least 65% of the aggregate principal amount of the Notes issued under the Indenture remains outstanding; and

(2) the Company shall make such redemption not more than 90 days after the consummation of such Equity Offering.

“Equity Offering” means (i) an underwritten public offering of Qualified Capital Stock of the Company pursuant to a registration statement (other than a registration statement filed on Form S-4 or S-8) filed with the U.S. Securities and Exchange Commission in accordance with the Securities Act or in accordance with applicable Mexican laws, rules and regulations, (ii) a rights offering of Qualified Capital Stock of the Company made generally to the holders of such Qualified Capital Stock or (iii) any private placement of Qualified Capital Stock of the Company to any Person, in each case other than issuances upon exercise of options by employees of the Company or any of its Subsidiaries.

Optional Redemption for Changes in Withholding Taxes. If, as a result of any amendment to, or change in, the laws (or any rules or regulations thereunder) of Mexico or any political subdivision or taxing authority or other instrumentality thereof or therein affecting taxation, or any amendment to or change in an official interpretation or application of such laws, rules or regulations, which amendment to or change of such laws, rules or regulations becomes effective on or after the date on which the Notes we are offering are issued (which, in the case of a merger, consolidation or other transaction permitted and described under “—Limitation on Merger, Consolidation and Sale of Assets,” shall be treated for this purpose as the date of such transaction), we have become obligated, or will become obligated, in each case after taking all reasonable measures to avoid this requirement, to pay additional amounts in excess of those attributable to a Mexican withholding tax rate of 10% with respect to the Notes (see “— Additional Amounts” and “Taxation—Mexican Taxation”), then, at our option, all, but not less than all, of the Notes may be redeemed at any time on giving not less than 30 nor more than 60 days’ notice, at a redemption price equal to 100% of the outstanding principal amount, plus accrued and unpaid interest and any additional amounts due thereon up to but not including the date of redemption; provided, however, that (1) no notice of redemption for tax reasons may be given earlier than 90 days prior to the earliest date on which we would be obligated to pay these

92 additional amounts if a payment on the Notes were then due and (2) at the time such notice of redemption is given such obligation to pay such additional amounts remains in effect.

Prior to the publication of any notice of redemption pursuant to this provision, we will deliver to the Trustee:

• a certificate signed by one of our duly authorized representatives stating that we are entitled to effect the redemption and setting forth a statement of facts showing that the conditions precedent to our right to redeem have occurred, and

• an opinion of Mexican legal counsel (which may be our counsel) of recognized standing to the effect that we have or will become obligated to pay such additional amounts as a result of such change or amendment.

This notice, once delivered by us to the Trustee, will be irrevocable.

We will give notice to DTC pursuant to the provisions described under “—Notices” of any redemption we propose to make at least 30 days (but not more than 60 days) before the redemption date.

Optional Redemption Procedures. In the event that less than all of the Notes are to be redeemed at any time, selection of Notes for redemption will be made by the Trustee in compliance with the requirements of the principal national securities exchange, if any, on which Notes are listed or, if the Notes are not then listed on a national securities exchange, on a pro rata basis, by lot or by any other method as the Trustee shall deem fair and appropriate (subject to the procedures of DTC). If a partial redemption is made with the proceeds of an Equity Offering, selection of the Notes or portions thereof for redemption will, subject to the preceding sentence, be made by the Trustee only on a pro rata basis or on as nearly a pro rata basis as is practicable (subject to the procedures of DTC), unless the method is otherwise prohibited. No Notes of a principal amount of U.S.$100,000 or less may be redeemed in part and Notes of a principal amount in excess of U.S.$100,000 may be redeemed in part in multiples of U.S.$1,000 only.

Notice of any redemption will be mailed by first-class mail, postage prepaid, at least 30 but not more than 60 days before the redemption date to each Holder of Notes to be redeemed at its registered address. If Notes are to be redeemed in part only, the notice of redemption will state the portion of the principal amount thereof to be redeemed. For so long as the Notes are listed on the Official List of the Luxembourg Stock Exchange, the Company will cause notices of redemption also to be published as provided under “Certain Covenants—Notices.” A new Note in a principal amount equal to the unredeemed portion thereof (if any) will be issued in the name of the Holder thereof upon cancellation of the original Note (or appropriate adjustments to the amount and beneficial interests in a global note will be made, as appropriate).

The Company will pay the redemption price for any Note together with accrued and unpaid interest thereon up to but not including the date of redemption. On and after the redemption date, interest will cease to accrue on Notes or portions thereof called for redemption as long as the Company has deposited with the paying agent funds in satisfaction of the applicable redemption price pursuant to the Indenture. Upon redemption of any Notes by the Company, such redeemed Notes will be cancelled.

Notwithstanding the provisions of this “Optional Redemption” section, the Company and its Subsidiaries may acquire the Notes by means other than a redemption, including pursuant to a tender offer, an open market purchase or otherwise provided that at the time of such transaction the Notes are not “restricted securities” as defined under Rule 144 of the Securities Act of 1933, as amended.

Change of Control

Upon the occurrence of a Change of Control, each Holder will have the right to require that the Company purchase all or a portion (in integral multiples of U.S.$1,000) of the Holder’s Notes at a purchase price equal to 101% of the principal amount thereof, plus accrued and unpaid interest thereon through the date of purchase (the “Change of Control Payment”).

Within 30 days following the date upon which the Change of Control occurred, the Company must send, by first-class mail, a notice to each Holder, with a copy to the Trustee, offering to purchase the Notes as described above (a “Change of Control Offer”) and publish the Change of Control Offer in a newspaper having a general circulation in Luxembourg (which is expected to be the Luxemburger Wort). The Change of Control Offer shall state, among other things, the purchase date, which must be no earlier than 30 days nor later than 60 days from the date the notice is mailed, other than as may be required by law (the “Change of Control Payment Date”).

On the Business Day prior to the Change of Control Payment Date, the Company will, to the extent lawful, deposit with the paying agent funds in an amount equal to the Change of Control Payment in respect of all Notes or portions thereof so tendered.

On the Change of Control Payment Date, the Company will, to the extent lawful:

(1) accept for payment all Notes or portions thereof properly tendered and not withdrawn pursuant to the Change of Control Offer; and

(2) deliver or cause to be delivered to the Trustee the Notes so accepted together with an Officers’ Certificate stating the aggregate principal amount of Notes or portions thereof being purchased by the Company.

If only a portion of a Note is purchased pursuant to a Change of Control Offer, a new Note in a principal amount equal to the portion thereof not purchased will be issued in the name of the Holder thereof upon cancellation of the original Note (or appropriate adjustments to the amount and beneficial interests in a global note will be made, as appropriate).

The Company will not be required to make a Change of Control Offer upon a Change of Control if (1) a third party makes the Change of Control Offer in the manner, at the times and otherwise in compliance with the requirements set forth in the Indenture applicable to a Change of Control Offer made by the Company and purchases all Notes properly tendered and not withdrawn under the Change of Control Offer, or (2) notice of redemption has been given pursuant to the Indenture as described above under the caption “—Optional Redemption,” unless and until there is a default in payment of the applicable redemption price.

In the event that Holders of not less than 95% of the aggregate principal amount of the outstanding Notes accept a Change of Control Offer and the Company or a third party purchases all of the Notes held by such Holders, the Company will have the right, on not less than 30 nor more than 60 days’ prior notice, given not more than 30 days following the purchase pursuant to the Change of Control Offer described above, to redeem all of the Notes that remain outstanding following such purchase at a purchase price equal to the Change of Control Payment plus, to the extent not included in the Change of Control Payment, accrued and unpaid interest, if any, on the Notes that remain outstanding, to the date of redemption (subject to the right of Holders on the relevant record date to receive interest due on the relevant interest payment date).

Other existing and future Indebtedness of the Company may contain prohibitions on the occurrence of events that would constitute a Change of Control or require that Indebtedness to be repurchased upon a Change of Control. Moreover, the exercise by the Holders of their right to require the Company to repurchase the Notes upon a Change of Control would cause a default under such Indebtedness even if the Change of Control itself does not.

If a Change of Control Offer occurs, there can be no assurance that the Company will have available funds sufficient to make the Change of Control Payment for all the Notes that might be delivered by Holders seeking to accept the Change of Control Offer. In the event the Company is required to purchase outstanding Notes pursuant to a Change of Control Offer, the Company expects that it would seek third-party financing to the extent it does not have available funds to meet its purchase obligations and any other obligations in respect of Senior Indebtedness. However, there can be no assurance that the Company would be able to obtain necessary financing.

Holders will not be entitled to require the Company to purchase their Notes in the event of a takeover, recapitalization, leveraged buyout or similar transaction which does not result in a Change of Control.

The Company will comply with the requirements of Rule 14e-1 under the Exchange Act and any other applicable securities laws and regulations in connection with the purchase of Notes in connection with a Change of Control Offer. To the extent that the provisions of any securities laws or regulations conflict with the “Change of Control” provisions of the Indenture, the Company will comply with the applicable securities laws and regulations and will not be deemed to have breached its obligations under the Indenture by doing so.

The definition of Change of Control includes a phrase relating to the direct or indirect sale, lease, transfer, conveyance or other disposition of “all or substantially all” of the properties or assets of the Company and its Subsidiaries taken as a whole. Although there is a limited body of case law interpreting the phrase “substantially all,” there is no precise established definition of the phrase under applicable law. Accordingly, the ability of a Holder to require the Company to repurchase its Notes as a result of a sale, lease, transfer, conveyance or other disposition of less than all of the assets of the Company and its Subsidiaries taken as a whole to another Person or group may be uncertain.

Certain Covenants

Suspension of Covenants

During any period of time that (i) the Notes have Investment Grade Ratings from both Rating Agencies and (ii) no Default or Event of Default has occurred and is continuing (the occurrence of the events described in the foregoing clauses (i) and (ii) being collectively referred to as a “Covenant Suspension Event”), the Company and its Restricted Subsidiaries will not be subject to the provisions of the Indenture described under:

• “—Change of Control”;

• “—Limitation on Incurrence of Additional Indebtedness”;

• “—Limitation on Guarantees”;

• “—Limitation on Restricted Payments”;

• “—Limitation on Asset Sales and Sales of Subsidiary Stock”;

• “—Limitation on Designation of Unrestricted Subsidiaries”;

• “—Limitation on Dividend and Other Payment Restrictions Affecting Restricted Subsidiaries”;

• “—Limitation on Layered Indebtedness”;

• clause (b) of “—Limitation on Merger, Consolidation or Sale of Assets”;

• “—Limitation on Transactions with Affiliates”; and

• “—Conduct of Business.”

(collectively, the “Suspended Covenants”).

In the event that the Company and its Restricted Subsidiaries are not subject to the Suspended Covenants for any period of time as a result of the foregoing, and on any subsequent date (the “Reversion Date”) one of the Rating Agencies withdraws its Investment Grade Rating or downgrades its rating assigned to the Notes below an Investment Grade Rating, then the Company and its Restricted Subsidiaries will thereafter again be subject to the Suspended Covenants. The period of time between the Suspension Date and the Reversion Date is referred to as the “Suspension Period.” Notwithstanding that the Suspended Covenants may be reinstated, no Default or Event of Default will be deemed to have occurred as a result of a failure to comply with the Suspended Covenants during the Suspension Period (or upon termination of the Suspension Period or after that time based solely on events that occurred during the Suspension Period).

On the Reversion Date, all Indebtedness incurred during the Suspension Period will be classified to have been incurred pursuant to the first paragraph of “—Limitation on Incurrence of Additional Indebtedness” below or one of the clauses set forth in the second paragraph of “—Limitation on Incurrence of Additional Indebtedness” below (to the extent such Indebtedness would be permitted to be incurred thereunder as of the Reversion Date and after giving effect to Indebtedness incurred prior to the Suspension Period and outstanding on the Reversion Date). To the extent such Indebtedness would not be so permitted to be incurred pursuant to the first or second paragraph of “—Limitation on Incurrence of Additional Indebtedness”, such Indebtedness will be deemed to have been outstanding on the Issue Date, so that it is classified as permitted under clause (d) of the second paragraph of “— Limitation on Incurrence of Additional Indebtedness.” Calculations made after the Reversion Date of the amount available to be made as Restricted Payments under “—Limitation on Restricted Payments” will be made as though the covenant described under “—Limitation on Restricted Payments” had been in effect since the Issue Date and throughout the Suspension Period.

Limitation on Incurrence of Additional Indebtedness

(1) The Company will not, and will not cause or permit any of its Restricted Subsidiaries to, directly or indirectly, Incur any Indebtedness, including Acquired Indebtedness, except that:

(a) the Company and any Subsidiary Guarantor may Incur Indebtedness, including Acquired Indebtedness, and

(b) any Restricted Subsidiary that is not a Subsidiary Guarantor may Incur Acquired Indebtedness not Incurred in connection with, or in anticipation or contemplation of, the relevant acquisition, merger or consolidation,

if, at the time of and immediately after giving pro forma effect to the Incurrence thereof and the application of the proceeds therefrom, the Consolidated Fixed Charge Coverage Ratio of the Company is greater than 2.0 to 1.0.

(2) Notwithstanding clause (1) above, the Company and its Restricted Subsidiaries, as applicable, may Incur the following Indebtedness (“Permitted Indebtedness”):

(a) Indebtedness in respect of the Notes and Note Guarantees, excluding Additional Notes and any guarantees of Additional Notes;

(b) Guarantees by any Subsidiary Guarantor of Indebtedness of the Company or any other Subsidiary Guarantor permitted under the Indenture provided, that if any such Guarantee is of Subordinated Indebtedness, then the Note Guarantee of such Subsidiary Guarantor shall be senior to such Subsidiary Guarantor’s Guarantee of such Subordinated Indebtedness;

(c) Indebtedness Incurred by the Company or any Subsidiary Guarantor under Credit Facilities in an aggregate principal amount at any time outstanding not to exceed the greater of (x) U.S.$100 million and (y) 10% of Consolidated Tangible Assets;

(d) other Indebtedness of the Company and its Restricted Subsidiaries outstanding on the Issue Date, other than Indebtedness otherwise specified under any of the other clauses of this definition of Permitted Indebtedness;

(e) Hedging Obligations entered into by the Company and its Restricted Subsidiaries in the ordinary course of business and not for speculative purposes, including, without limitation, Hedging Obligations with respect to the Notes;

(f) intercompany Indebtedness between the Company and any Restricted Subsidiary or between any Restricted Subsidiaries; provided that:

(1) if the Company or any Subsidiary Guarantor is the obligor on such Indebtedness and the payee is not the Company or any Subsidiary Guarantor, such Indebtedness must be expressly subordinated to the prior payment in full of all obligations under the Notes and the Indenture, in the case of the Company, or such Subsidiary Guarantor’s Note Guarantee, in the case of any such Subsidiary Guarantor, and

(2) in the event that at any time any such Indebtedness ceases to be held by the Company or a Restricted Subsidiary, such Indebtedness shall be deemed to be Incurred and not permitted by this clause (f) at the time such event occurs;

(g) Indebtedness of the Company or any of its Restricted Subsidiaries arising from the honoring by a bank or other financial institution of a check, draft or similar instrument inadvertently (including daylight overdrafts paid in full by the close of business on the day such overdraft was Incurred) drawn against insufficient funds in the ordinary course of business; provided, that such Indebtedness is extinguished within five business days of Incurrence;

(h) Indebtedness of the Company or any of its Restricted Subsidiaries represented by letters of credit for the account of the Company or any Restricted Subsidiary, as the case may be, in order to provide security for workers’ compensation claims, payment obligations in connection with self-insurance or similar requirements in the ordinary course of business;

(i) Indebtedness of the Company or any Restricted Subsidiary represented by Capitalized Lease Obligations or Purchase Money Indebtedness, in each case Incurred for the purpose of acquiring or financing all or any part of the purchase price or cost of construction or improvement of property or equipment used in the business of the Company or such Restricted Subsidiary in an aggregate amount at any time not to exceed the greater of (x) U.S.$30 million and (y) 3.0% of Consolidated Tangible Assets;

(j) Indebtedness in respect of bid, performance or surety bonds in the ordinary course of business for the account of the Company or any of its Restricted Subsidiaries, including Guarantees or obligations of the Company or any Restricted Subsidiary with respect to letters of credit supporting such bid, performance or surety obligations (in each case other than for the payment of borrowed money);

(k) Refinancing Indebtedness in respect of:

(1) Indebtedness (other than Indebtedness owed to the Company or any Subsidiary of the Company) Incurred pursuant to clause (1) above (it being understood that no Indebtedness outstanding on the Issue Date is Incurred pursuant to such clause (1) above), or

(2) Indebtedness Incurred pursuant to clause (a), (d) (excluding Indebtedness outstanding on the Issue Date deemed to be incurred under clause (c) above or Indebtedness owed to the Company or a Subsidiary of the Company) or (l) of this covenant;

(l) Permitted Acquisition Indebtedness in an aggregate principal amount not to exceed the greater of (x) U.S.$175 million and (y) 17.5% of Consolidated Tangible Assets at any one time outstanding, and

(m) additional Indebtedness of the Company or any Restricted Subsidiary in an aggregate principal amount not to exceed U.S.$15 million at any one time outstanding (which amount may, but need not, be Incurred, in whole or in part, under Credit Facilities).

(3) For purposes of determining compliance with, and the outstanding principal amount of, any particular Indebtedness Incurred pursuant to and in compliance with this covenant, the amount of Indebtedness issued at a price that is less than the principal amount thereof will be equal to the amount of the liability in respect thereof determined in accordance with GAAP. Accrual of interest, the accretion or amortization of original issue discount, the payment of regularly scheduled interest in the form of additional Indebtedness of the same instrument or the payment of regularly scheduled dividends on Disqualified Capital Stock in the form of additional Disqualified Capital Stock with the same terms will not be deemed to be an Incurrence of Indebtedness for purposes of this covenant; provided that any such outstanding additional Indebtedness or Disqualified Capital Stock paid in respect of Indebtedness Incurred pursuant to any provision of clause (2) of this covenant will be counted as Indebtedness outstanding thereunder for purposes of any future Incurrence under such provision. For purposes of determining compliance with this “Limitation on Incurrence of Additional Indebtedness” covenant, in the event that an item of proposed Indebtedness meets the criteria of more than one of the categories of Permitted Indebtedness described in clauses (a) through (m) above, or is entitled to be incurred pursuant to paragraph (1) of this covenant, the Company will be permitted to classify such item of Indebtedness on the date of its incurrence and will only be required to include the amount and type of such Indebtedness in one of the above clauses, although the Company may divide and classify an item of Indebtedness in one or more of the types of Indebtedness and may later re-divide or reclassify all or a portion of such item of Indebtedness in any manner that complies with this covenant. Notwithstanding any other provision of this covenant, the maximum amount of Indebtedness that the Company or any Restricted Subsidiary may incur pursuant to this covenant shall not be deemed to be exceeded as a result solely of fluctuations in exchange rates or currency values.

Limitation on Guarantees

The Company will not permit any Restricted Subsidiary of the Company that is not a Subsidiary Guarantor to Guarantee any Indebtedness of the Company or to secure any Indebtedness of the Company with a Lien on the assets of such Restricted Subsidiary, unless contemporaneously therewith (or prior thereto) effective provision is made to Guarantee or secure the Notes on an equal and ratable basis with such Guarantee or Lien for so long as such Guarantee or Lien remains effective, and in an amount equal to the amount of Indebtedness so Guaranteed or secured. Any Guarantee by any such Restricted Subsidiary of Subordinated Indebtedness of the Company will be subordinated and junior in right of payment to the contemporaneous Guarantee of the Notes by such Restricted Subsidiary.

Limitation on Restricted Payments

The Company will not, and will not cause or permit any of its Restricted Subsidiaries to, directly or indirectly, take any of the following actions (each, a “Restricted Payment”):

(a) declare or pay any dividend or return of capital or make any distribution on or in respect of shares of Capital Stock of the Company or any Restricted Subsidiary to holders of such Capital Stock, other than:

• dividends or distributions payable in Qualified Capital Stock of the Company,

• dividends or distributions payable to the Company and/or a Restricted Subsidiary, or

• dividends, distributions or returns of capital made on a pro rata basis to the Company and its Restricted Subsidiaries, on the one hand, and minority holders of Capital Stock of a Restricted Subsidiary, on the other hand (or on a less than pro rata basis to any minority holder);

(b) purchase, redeem or otherwise acquire or retire for value:

• any Capital Stock of the Company, or

• any Capital Stock of any Restricted Subsidiary held by an Affiliate of the Company (other than a Restricted Subsidiary) or any Preferred Stock of a Restricted Subsidiary, except for Capital Stock held by the Company or a Restricted Subsidiary or purchases, redemptions, acquisitions or retirements for value of Capital Stock on a pro rata basis from the Company and/or any Restricted Subsidiaries, on the one hand, and minority holders of Capital Stock of a Restricted Subsidiary, on the other hand, according to their respective percentage ownership of the Capital Stock of such Restricted Subsidiary;

(c) make any principal payment on, purchase, defease, redeem, prepay, decrease or otherwise acquire or retire for value, prior to any scheduled final maturity, scheduled repayment or scheduled sinking fund payment, as the case may be, any Subordinated Indebtedness (excluding (x) any intercompany Indebtedness between or among the Company and/or any Restricted Subsidiaries or (y) the purchase, repurchase or other acquisition of Indebtedness that is contractually subordinate to the Notes or any Note Guarantee, as the case may be, purchased in anticipation of satisfying a sinking fund obligation, principal installment or final maturity, in each case within one year of such date of purchase, repurchase or acquisition); or

(d) make any Investment (other than Permitted Investments);

if at the time of the Restricted Payment and immediately after giving effect thereto:

(1) a Default or an Event of Default shall have occurred and be continuing;

(2) the Company is not able to Incur at least U.S.$1.00 of additional Indebtedness pursuant to clause (1) of “—Limitation on Incurrence of Additional Indebtedness”; or

(3) the aggregate amount (the amount expended for these purposes, if other than in cash, being the Fair Market Value of the relevant property) of the proposed Restricted Payment and all other Restricted Payments made subsequent to the Issue Date up to the date thereof, shall exceed the sum of:

(A) 50% of cumulative Consolidated Net Income of the Company or, if such cumulative Consolidated Net Income of the Company is a loss, minus 100% of the loss, accrued during the period, treated as one accounting period, beginning on the fiscal quarter beginning April 1, 2010 to the end of the most recent fiscal quarter for which consolidated financial information of the Company is available; plus

(B) 100% of the aggregate net cash proceeds received by the Company from any Person from any:

• contribution to the equity capital of the Company not representing an interest in Disqualified Capital Stock or issuance and sale of Qualified Capital Stock of the Company, in each case, subsequent to the Issue Date, or

• issuance and sale subsequent to the Issue Date (and, in the case of Indebtedness of a Restricted Subsidiary, at such time as it was a Restricted Subsidiary) of any Indebtedness of the Company or any Restricted Subsidiary that has been converted into or exchanged for Qualified Capital Stock of the Company,

excluding, in each case, any net cash proceeds:

(x) received from a Subsidiary of the Company;

(y) used to redeem Notes under “—Redemption—Optional Redemption Upon Equity Offerings”; or

(z) applied in accordance with clause (2) or (3) of the second paragraph of this covenant below; plus

(D) U.S.$20 million.

Notwithstanding the preceding paragraph, this covenant does not prohibit: (1) the payment of any dividend or the consummation of any irrevocable redemption of Subordinated Indebtedness within 60 days after the date of declaration of such dividend or giving of the redemption notice, as the case may be, if the dividend or redemption would have been permitted on the date of declaration or notice pursuant to the preceding paragraph; provided that such redemption shall be included (without duplication for the declaration) in the calculation of the amount of Restricted Payments;

(2) the making of any Restricted Payment,

(x) in exchange for Qualified Capital Stock of the Company, or

(y) through the application of the net proceeds received by the Company from a substantially concurrent sale of Qualified Capital Stock of the Company or a contribution to the equity capital of the Company not representing an interest in Disqualified Capital Stock, in each case not received from a Subsidiary of the Company;

provided, that the value of any such Qualified Capital Stock issued in exchange for such acquired Capital Stock and any such proceeds shall be excluded from clause (d)(3)(B) of the first paragraph of this covenant (and were not included therein at any time);

(3) the voluntary prepayment, purchase, defeasance, redemption or other acquisition or retirement for value of any Subordinated Indebtedness solely in exchange for, or through the application of net proceeds of a substantially concurrent sale, other than to a Subsidiary of the Company, of:

(x) Qualified Capital Stock of the Company, or

(y) Refinancing Indebtedness for such Subordinated Indebtedness;

provided, that the value of any Qualified Capital Stock issued in exchange for Subordinated Indebtedness and any net proceeds referred to above shall be excluded from clause (d)(3)(B) of the first paragraph of this covenant (and were not included therein at any time);

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(4) if no Default or Event of Default shall have occurred and be continuing, repurchases by the Company of Common Stock of the Company or options, warrants or other securities exercisable or convertible into Common Stock of the Company from any current or former employees, officers, directors or consultants of the Company or any of its Subsidiaries or their authorized representatives upon the death, disability or termination of employment or directorship of such employees, officers or directors, or the termination of retention of any such consultants, in an amount not to exceed U.S.$5 million in any calendar year (with unused amounts in any calendar year being permitted to be carried over into succeeding calendar years) plus the cash proceeds of key man life insurance policies received by the Company and its Restricted Subsidiaries;

(5) the repurchase of Capital Stock deemed to occur upon the exercise of stock options or warrants to the extent such Capital Stock represents a portion of the exercise price of those stock options or warrants;

(6) if no Default or Event of Default shall have occurred and be continuing, the declaration and payment of regularly scheduled or accrued dividends or distributions to holders of any class or series of Disqualified Capital Stock of the Company or any Restricted Subsidiary issued on or after the Issue Date in accordance with the test described pursuant to clause (1) of “—Limitation on Incurrence of Additional Indebtedness”;

(7) upon the occurrence of a Change of Control and within 60 days after the completion of the offer to repurchase the Notes pursuant to the covenant described under “Change of Control” above, any repurchase, redemption or other acquisition or retirement for value of any Subordinated Indebtedness of the Company or any Subsidiary Guarantor required pursuant to the terms thereof as a result of such Change of Control; provided that (A) the terms of such purchase or redemption are substantially similar in all material respects to the comparable provision included in the Indenture, and (B) at the time of such purchase or redemption no Default or Event of Default shall have occurred and be continuing (or would result therefrom); and

(8) if no Default or Event of Default shall have occurred and be continuing, the purchase by the Company of fractional shares arising out of stock dividends, splits or combinations or business combinations.

In determining the aggregate amount of Restricted Payments made subsequent to the Issue Date, amounts expended pursuant to clauses (1) (without duplication for the declaration of the relevant dividend), (4) and (7) above shall be included in such calculation and amounts expended pursuant to clauses (2), (3), (5),(6), and (8) above shall not be included in such calculation.

Limitation on Asset Sales and Sales of Subsidiary Stock

The Company will not, and will not permit any of its Restricted Subsidiaries to, consummate an Asset Sale unless:

(a) the Company or the applicable Restricted Subsidiary, as the case may be, receives consideration at the time of the Asset Sale at least equal to the Fair Market Value of the assets or Capital Stock sold or otherwise disposed of, and

(b) at least 75% of the consideration received for the assets or Capital Stock sold by the Company or the Restricted Subsidiary, as the case may be, in the Asset Sale shall be in the form of cash or Cash Equivalents received at the time of such Asset Sale.

For purposes of the immediately preceding clause (b), each of the following will be deemed to be cash:

(1) any securities, notes or other obligations received by the Company or any such Restricted Subsidiary from such transferee that are converted by the Company or such Restricted

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Subsidiary into cash or Cash Equivalents within 120 days (180 days in the case of sales of land) of the receipt thereof (subject to ordinary settlement periods), to the extent of the cash or Cash Equivalents received in that conversion; and

(2) any Capital Stock of a Person engaged in a Permitted Business that will become, upon purchase, a Restricted Subsidiary or assets (other than current assets as determined in accordance with GAAP or Capital Stock) to be used by the Company or any Restricted Subsidiary in a Permitted Business;

provided, that amounts received pursuant clauses (1) and (2) shall not be deemed to constitute Net Cash Proceeds for purposes of making an Asset Sale Offer.

The Company or such Restricted Subsidiary, as the case may be, may apply the Net Cash Proceeds of any such Asset Sale within 365 days thereof to:

(a) repay any Senior Indebtedness of the Company or a Restricted Subsidiary or Indebtedness of any Restricted Subsidiary that is not a Subsidiary Guarantor (including, in each case without limitation, Capitalized Lease Obligations), or

(b) make capital expenditures or acquire real property used in a Permitted Business, or

(1) assets (other than current assets, as determined in accordance with GAAP, or Capital Stock) to be used by the Company or any Restricted Subsidiary in a Permitted Business, or

(2) all or substantially all of the assets of, or any Capital Stock of, a Person engaged in a Permitted Business if, after giving effect to any such acquisition of Capital Stock, the Permitted Business is or becomes a Restricted Subsidiary,

from a Person other than the Company and its Restricted Subsidiaries, provided that pending the final application of the amount of any such Net Cash Proceeds in accordance with clauses (a), (b) or (c) above, the Company and its Restricted Subsidiaries may apply such Net Cash Proceeds in any manner not prohibited by the Indenture.

In the case of clauses (1) and (2), the Company will have complied with its obligations if it enters into a binding commitment to acquire such assets or such Capital Stock within 365 days after receipt of such Net Cash Proceeds; provided that such binding commitment shall be subject only to customary conditions and that such acquisition is consummated within six months from the date of signing such binding commitment.

To the extent all or a portion of the Net Cash Proceeds of any Asset Sale are not applied within the 365 days of the Asset Sale as described in clause (a) or (b) of the immediately preceding paragraph, the Company will make an offer to purchase Notes (the “Asset Sale Offer”), at a purchase price equal to 100% of the principal amount of the Notes to be purchased, plus accrued and unpaid interest thereon, to the date of purchase (the “Asset Sale Offer Amount”). The Company will purchase pursuant to an Asset Sale Offer from all tendering Holders on a pro rata basis, and, at the Company’s option, on a pro rata basis with the holders of any other Senior Indebtedness with similar provisions requiring the Company to offer to purchase the other Senior Indebtedness with the proceeds of Asset Sales, that principal amount (or accreted value in the case of Indebtedness issued with original issue discount) of Notes and the other Senior Indebtedness to be purchased equal to such unapplied Net Cash Proceeds. The Company may satisfy its obligations under this covenant with respect to the Net Cash Proceeds of an Asset Sale by making an Asset Sale Offer prior to the expiration of the relevant 365-day period.

The purchase of Notes pursuant to an Asset Sale Offer will occur not less than 20 business days following the date of the Asset Sale Offer, or any longer period as may be required by law, nor more than 45 days following the 365th day following the Asset Sale. The Company may, however, defer an Asset Sale Offer until there is an aggregate amount of unapplied Net Cash Proceeds from one or more Asset Sales equal to or in excess of U.S.$20

102 million. At that time, the entire amount of unapplied Net Cash Proceeds, and not just the amount in excess of U.S.$20 million, will be applied as required pursuant to this covenant. Pending application in accordance with this covenant, Net Cash Proceeds may be applied to temporarily reduce revolving credit borrowings that can be reborrowed or Invested in Cash Equivalents.

Each notice of an Asset Sale Offer will be mailed first class, postage prepaid, to the record Holders as shown on the register of Holders within 20 days following such 365th day, with a copy to the Trustee offering to purchase the Notes as described above. Each notice of an Asset Sale Offer will state, among other things, the purchase date, which must be no earlier than 30 days nor later than 60 days from the date the notice is mailed, other than as may be required by law (the “Asset Sale Offer Payment Date”). Upon receiving notice of an Asset Sale Offer, Holders may elect to tender their Notes in whole or in part in amounts of U.S.$100,000 or integral multiples of U.S.$1,000 in excess thereof in exchange for cash.

On the Business Day prior to the Asset Sale Offer Payment Date, the Company will, to the extent lawful, deposit with the paying agent funds in an amount equal to the Asset Sale Offer Amount in respect of all Notes or portions thereof so tendered.

On the Asset Sale Offer Payment Date, the Company will, to the extent lawful:

(1) accept for payment all Notes or portions thereof properly tendered pursuant to the Asset Sale Offer; and

To the extent Holders of Notes and holders of other Senior Indebtedness, if any, which are the subject of an Asset Sale Offer properly tender and do not withdraw Notes or the other Senior Indebtedness in an aggregate amount exceeding the amount of unapplied Net Cash Proceeds, the Company will purchase the Notes and the other Senior Indebtedness on a pro rata basis (based on amounts tendered). If only a portion of a Note is purchased pursuant to an Asset Sale Offer, a new Note in a principal amount equal to the portion thereof not purchased will be issued in the name of the Holder thereof upon cancellation of the original Note (or appropriate adjustments to the amount and beneficial interests in a global note will be made, as appropriate). Notes (or portions thereof) purchased pursuant to an Asset Sale Offer will be cancelled and cannot be reissued.

The Company will comply with the requirements of Rule 14e-1 under the Exchange Act and any other applicable securities laws in connection with the purchase of Notes pursuant to an Asset Sale Offer. To the extent that the provisions of any applicable securities laws or regulations conflict with the “Asset Sale” provisions of the Indenture, the Company will comply with these laws and regulations and will not be deemed to have breached its obligations under the “Asset Sale” provisions of the Indenture by doing so.

Upon completion of an Asset Sale Offer, the amount of Net Cash Proceeds will be reset at zero. Accordingly, to the extent that the aggregate amount of Notes and other Indebtedness tendered pursuant to an Asset Sale Offer is less than the aggregate amount of unapplied Net Cash Proceeds, the Company and its Restricted Subsidiaries may use any remaining Net Cash Proceeds for any purpose not otherwise prohibited by the Indenture.

If at any time any non-cash consideration received by the Company or any Restricted Subsidiary, as the case may be, in connection with any Asset Sale is converted into or sold or otherwise disposed of for cash (other than interest received with respect to any non-cash consideration), the conversion or disposition will be deemed to constitute an Asset Sale hereunder and the Net Cash Proceeds thereof will be applied in accordance with this covenant within 365 days of conversion or disposition.

Limitation on Designation of Unrestricted Subsidiaries

The Company may designate after the Issue Date any Subsidiary of the Company as an “Unrestricted Subsidiary” under the Indenture (a “Designation”) only if:

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(1) no Default or Event of Default shall have occurred and be continuing at the time of or immediately after giving effect to such Designation and any transactions between the Company or any of its Restricted Subsidiaries and such Unrestricted Subsidiary are in compliance with “—Limitation on Transactions with Affiliates”;

(2) at the time of and after giving effect to such Designation, the Company could Incur U.S.$1.00 of additional Indebtedness pursuant to clause (1) of “—Limitation on Incurrence of Additional Indebtedness”;

(3) the Company would be permitted to make an Investment at the time of Designation (assuming the effectiveness of such Designation and treating such Designation as an Investment at the time of Designation) as a Restricted Payment pursuant to the first paragraph of “—Limitation on Restricted Payments” or as a Permitted Investment in an amount (the “Designation Amount”) equal to the amount of the Company’s Investment in such Subsidiary on such date, and

(4) at the time of such Designation, neither the Company nor any Restricted Subsidiary will:

(a) provide credit support for, subject any of its property or assets (other than the Capital Stock of any Unrestricted Subsidiary) to the satisfaction of, or Guarantee, any Indebtedness of such Subsidiary (including any undertaking, agreement or instrument evidencing such Indebtedness);

(b) be directly or indirectly liable for any Indebtedness of such Subsidiary; or

(c) be directly or indirectly liable for any Indebtedness which provides that the holder thereof may (upon notice, lapse of time or both) declare a default thereon or cause the payment thereof to be accelerated or payable prior to its final scheduled maturity upon the occurrence of a default with respect to any Indebtedness of such Subsidiary, except for any non-recourse Guarantee given solely to support the pledge by the Company or any Restricted Subsidiary of the Capital Stock of such Subsidiary.

The Company may revoke any Designation of a Subsidiary as an Unrestricted Subsidiary (a “Revocation”) only if:

(1) no Default or Event of Default shall have occurred and be continuing at the time of and after giving effect to such Revocation; and

(2) all Liens and Indebtedness of such Unrestricted Subsidiary outstanding immediately following such Revocation would, if Incurred at such time, have been permitted to be Incurred for all purposes of the Indenture.

The Designation of a Subsidiary of the Company as an Unrestricted Subsidiary shall be deemed to include the Designation of all of the Subsidiaries of such Subsidiary. All Designations and Revocations must be evidenced by resolutions of the Board of Directors of the Company, delivered to the Trustee certifying compliance with the preceding provisions.

Limitation on Dividend and Other Payment Restrictions Affecting Restricted Subsidiaries

(a) Except as provided in paragraph (b) below, the Company will not, and will not cause or permit any of its Restricted Subsidiaries to, directly or indirectly, create or otherwise cause or permit to exist or become effective any encumbrance or restriction on the ability of any Restricted Subsidiary to:

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(1) pay dividends or make any other distributions on or in respect of its Capital Stock to the Company or any other Restricted Subsidiary or pay any Indebtedness owed to the Company or any other Restricted Subsidiary;

(2) make loans or advances to, or Guarantee any Indebtedness or other obligations of, or make any Investment in, the Company or any other Restricted Subsidiary; or

(3) transfer any of its property or assets to the Company or any other Restricted Subsidiary.

(b) Paragraph (a) above will not apply to encumbrances or restrictions existing under or by reason of:

(1) applicable law rule, regulation or order;

(2) the Indenture, the Notes and the Note Guarantees;

(3) the terms of any Indebtedness outstanding on the Issue Date, and any amendment, modification, restatement, renewal, restructuring, replacement or refinancing thereof; provided, that any amendment, modification, restatement, renewal, restructuring, replacement or refinancing is not materially more restrictive, taken as a whole, with respect to such encumbrances or restrictions than those in existence on the Issue Date;

(4) customary non-assignment provisions of any contract and customary provisions restricting assignment or subletting in any lease governing a leasehold interest of any Restricted Subsidiary, or any customary restriction on the ability of a Restricted Subsidiary to dividend, distribute or otherwise transfer any asset which secures Indebtedness secured by a Lien, in each case permitted to be Incurred under the Indenture;

(5) any instrument governing Acquired Indebtedness not Incurred in connection with, or in anticipation or contemplation of, the relevant acquisition, merger or consolidation, which encumbrance or restriction is not applicable to any Person, or the properties or assets of any Person, other than the Person or the properties or assets of the Person so acquired;

(6) customary restrictions with respect to a Restricted Subsidiary of the Company imposed pursuant to a binding agreement which has been entered into for the sale or disposition of Capital Stock or assets of such Restricted Subsidiary; provided, that such restrictions apply solely to the Capital Stock or assets of such Restricted Subsidiary being sold;

(7) customary restrictions imposed on the transfer of copyrighted or patented materials;

(8) an agreement governing Indebtedness of the Company or any Restricted Subsidiaries permitted to be Incurred subsequent to the date of the Indenture in accordance with the covenant described above under the caption “—Limitation in Incurrence of Additional Indebtedness” provided that the provisions relating to such encumbrance or restriction contained in such agreement are no more restrictive than those contained in the agreement referred to in clause (3) of this paragraph;

(9) purchase money obligations for property (including Capital Stock) acquired in the ordinary course of business and Capitalized Lease Obligations that impose

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restrictions on the property purchased or leased of the nature described in paragraph (a)(3) of this covenant;

(10) Liens permitted to be incurred under the provisions of the covenant described below under the caption “—Limitation on Liens” that limits the right of the debtor to dispose of the assets securing such Indebtedness;

(11) provisions limiting the payment of dividends in the organizational documents, shareholders’ agreements, joint venture agreements or similar documents of, or related to, Restricted Subsidiaries that are not Wholly Owned Subsidiaries and which have been entered into with the approval of the Company’s Board of Directors;

(12) restrictions on cash deposited with banks in the ordinary course of business consistent with past practice to secure trade payable obligations and guarantees of such trade payable obligations of the Company and its Restricted Subsidiaries under Supplier Factoring Facilities; or

(13) restrictions customarily granted in connection with securitization, factoring or discounting involving receivables that are imposed in connection with a Receivables Transaction.

Limitation on Layered Indebtedness

The Company will not, and will not permit any Subsidiary Guarantor to, directly or indirectly, Incur any Indebtedness that is subordinate in right of payment to any other Senior Indebtedness, unless such Indebtedness is expressly subordinate in right of payment to the Notes or, in the case of a Subsidiary Guarantor, its Note Guarantee to the same extent and on the same terms as such Indebtedness is subordinate to such other Indebtedness.

Limitation on Liens

The Company will not, and will not cause or permit any of its Restricted Subsidiaries to, directly or indirectly, Incur any Liens of any kind (except for Permitted Liens) against or upon any of their respective properties or assets, whether owned on the Issue Date or acquired after the Issue Date, or any proceeds therefrom, to secure any Indebtedness or trade payables unless contemporaneously therewith effective provision is made:

(1) in the case of the Company or any Restricted Subsidiary other than a Subsidiary Guarantor, to secure the Notes and all other amounts due under the Indenture; and

(2) in the case of a Subsidiary Guarantor, to secure such Subsidiary Guarantor’s Note Guarantee of the Notes and all other amounts due under the Indenture; in each case, equally and ratably with such Indebtedness or other obligation (or, in the event that such Indebtedness is subordinated in right of payment to the Notes or such Note Guarantee, as the case may be, prior to such Indebtedness or other obligation) with a Lien on the same properties and assets securing such Indebtedness or other obligation for so long as such Indebtedness or other obligation is secured by such Lien.

Limitation on Merger, Consolidation and Sale of Assets

The Company will not, in a single transaction or series of related transactions, consolidate or merge with or into any Person (whether or not the Company is the surviving or continuing Person), or sell, assign, transfer, lease, convey or otherwise dispose of (or cause or permit any Restricted Subsidiary to sell, assign, transfer, lease, convey or otherwise dispose of) all or substantially all of the Company’s properties and assets (determined on a consolidated basis for the Company and its Restricted Subsidiaries), to any Person unless:

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(a) either:

(1) the Company shall be the surviving or continuing corporation, or

(2) the Person (if other than the Company) formed by such consolidation or into which the Company is merged or the Person which acquires by sale, assignment, transfer, lease, conveyance or other disposition the properties and assets of the Company and of the Company’s Restricted Subsidiaries substantially as an entirety (the “Surviving Entity”):

(A) shall be a corporation, organized or formed and validly existing under the laws of Mexico or the United States of America, any State thereof or the District of Columbia, and

(B) shall expressly assume, by supplemental indenture (in form and substance satisfactory to the Trustee), executed and delivered to the Trustee, the due and punctual payment of the principal of, and premium, if any, and interest on all of the Notes and the performance and observance of every covenant of the Notes and the Indenture on the part of the Company to be performed or observed;

(b) immediately after giving effect to such transaction and the assumption contemplated by clause (a)(2)(B) above (including giving effect on a pro forma basis to any Indebtedness, including any Acquired Indebtedness, Incurred or anticipated to be Incurred in connection with or in respect of such transaction), the Company or such Surviving Entity, as the case may be:

(1) will be able to Incur at least U.S.$1.00 of additional Indebtedness pursuant to clause (1) of “—Limitation on Incurrence of Additional Indebtedness,” or

(2) will have a Consolidated Fixed Charge Coverage Ratio of not less than the Consolidated Fixed Charge Coverage Ratio of the Company and its Restricted Subsidiaries immediately prior to such transaction;

(c) immediately before and immediately after giving effect to such transaction and the assumption contemplated by clause (a)(2)(B) above (including, without limitation, giving effect on a pro forma basis to any Indebtedness, including any Acquired Indebtedness, Incurred or anticipated to be Incurred and any Lien granted in connection with or in respect of the transaction), no Default or Event of Default shall have occurred or be continuing;

(d) each Subsidiary Guarantor (including Persons that become Subsidiary Guarantors as a result of the transaction) has confirmed by supplemental indenture that its Note Guarantee will apply for the Obligations of the Surviving Entity in respect of the Indenture and the Notes;

(e) if the Company is organized under Mexican law and merges with a corporation, or the Surviving Entity is, organized under the laws of the United States, any State thereof or the District of Columbia or the Company is organized under the laws of the United States, any State thereof or the District of Columbia and merges with a corporation, or the Surviving Entity is, organized under the laws of Mexico, the Company or the Surviving Entity will have delivered to the Trustee an Opinion of Counsel from each of Mexico and the United States to the effect that, as applicable:

(i) the Holders of the Notes will not recognize income, gain or loss for U.S. or Mexican income tax purposes as a result of the transaction and will be taxed in the Holder’s home jurisdiction in the same manner and on the same amounts

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(assuming solely for this purpose that no Additional Amounts are regarded to be paid on the Notes) and at the same time as would have been the case if the transaction had not occurred,

(ii) any payment of interest or principal under or relating to the Notes or any Note Guarantees will be paid in compliance with any requirements under the section “—Additional Amounts,” and

(iii) no other taxes on income, including capital gains, will be payable by Holders of the Notes under the laws of Mexico or the United States relating to the acquisition, ownership or disposition of the Notes, including the receipt of interest or principal thereon; provided that the Holder does not use or hold, and is not deemed to use or hold the Notes in carrying on a business in Mexico or the United States, and

(f) the Company or the Surviving Entity has delivered to the Trustee an Officers’ Certificate and an Opinion of Counsel, each stating that the consolidation, merger, sale, assignment, transfer, lease, conveyance or other disposition and, if required in connection with such transaction, the supplemental indenture, comply with the applicable provisions of the Indenture and that all conditions precedent in the Indenture relating to the transaction have been satisfied.

For purposes of this covenant, the transfer (by lease, assignment, sale or otherwise, in a single transaction or series of transactions) of all or substantially all of the properties or assets of one or more Restricted Subsidiaries of the Company, the Capital Stock of which constitutes all or substantially all of the properties and assets of the Company (determined on a consolidated basis for the Company and its Restricted Subsidiaries), will be deemed to be the transfer of all or substantially all of the properties and assets of the Company.

The provisions of clause (b)(1) above will not apply to:

(1) any transfer of the properties or assets of a Restricted Subsidiary to the Company or to a Subsidiary Guarantor;

(2) any merger of a Restricted Subsidiary into the Company or a Subsidiary Guarantor; or

(3) any merger of the Company into a Wholly Owned Subsidiary of the Company created for the purpose of holding the Capital Stock of the Company;

so long as, in each case the Indebtedness of the Company and its Restricted Subsidiaries taken as a whole is not increased thereby.

Upon any consolidation, combination or merger or any transfer of all or substantially all of the properties and assets of the Company and its Restricted Subsidiaries in accordance with this covenant, in which the Company is not the continuing corporation, the Surviving Entity formed by such consolidation or into which the Company is merged or to which such conveyance, lease or transfer is made will succeed to, and be substituted for, and may exercise every right and power of, the Company under the Indenture and the Notes with the same effect as if such Surviving Entity had been named as such. For the avoidance of doubt, compliance with this covenant will not affect the obligations of the Company (including a Surviving Entity, if applicable) under “—Change of Control,” if applicable.

Each Subsidiary Guarantor will not, and the Company will not cause or permit any Subsidiary Guarantor to, consolidate with or merge into, or sell or dispose of all or substantially all of its assets to, any Person (other than the Company) that is not a Subsidiary Guarantor unless:

(1) such Person (if such Person is the surviving entity) assumes all of the obligations of such Subsidiary Guarantor in respect of its Note Guarantee by executing a supplemental

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indenture and providing the Trustee with an Officers’ Certificate and Opinion of Counsel, and such transaction is otherwise in compliance with the Indenture;

(2) such Note Guarantee is to be released as provided under “Note Guarantees;” or

(3) such sale or other disposition of substantially all of such Subsidiary Guarantor’s assets is made in accordance with “—Limitation on Asset Sales and Sales of Subsidiary Stock.”

Limitation on Transactions with Affiliates

(1) The Company will not, and will not permit any of its Restricted Subsidiaries to, directly or indirectly, enter into any transaction or series of related transactions (including, without limitation, the purchase, sale, lease or exchange of any property or the rendering of any service) with, or for the benefit of, any of its Affiliates (each an “Affiliate Transaction”), unless:

(a) the terms of such Affiliate Transaction are no less favorable than those that could reasonably be expected to be obtained in a comparable transaction at such time on an arm’s-length basis from a Person that is not an Affiliate of the Company;

(b) in the event that such Affiliate Transaction involves aggregate payments, or transfers of property or services with a Fair Market Value, in excess of U.S.$5 million, the terms of such Affiliate Transaction will be approved by a majority of the members of the Board of Directors of the Company (including a majority of the disinterested members thereof), the approval to be evidenced by a Board Resolution stating that the Board of Directors has determined that such transaction complies with the preceding provisions; and

(c) in the event that such Affiliate Transaction involves aggregate payments, or transfers of property or services with a Fair Market Value, in excess of U.S.$25 million, the Company will, prior to the consummation thereof, obtain a favorable opinion as to the fairness of such Affiliate Transaction to the Company and the relevant Restricted Subsidiary (if any) from a financial point of view from an Independent Financial Advisor and file the same with the Trustee.

(2) Paragraph (1) above will not apply to:

(a) Affiliate Transactions with or among the Company and any Restricted Subsidiary or between or among Restricted Subsidiaries;

(b) reasonable fees and compensation (whether in cash or Capital Stock of the Company) paid to, and any indemnity provided on behalf of, officers, directors, employees, consultants or agents of the Company or any Restricted Subsidiary as determined in good faith by the Company’s Board of Directors;

(c) Affiliate Transactions undertaken pursuant to any contractual obligations or rights in existence on the Issue Date and any amendment, modification or replacement of such agreement (so long as such amendment, modification or replacement is not materially more disadvantageous to the Holders of the Notes, taken as a whole, than the original agreement as in effect on the Issue Date);

(d) any Restricted Payments made in compliance with “Limitation on Restricted Payments” or any Permitted Investments;

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(e) loans and advances to officers, directors and employees of the Company or any Restricted Subsidiary for travel, entertainment, moving and other relocation expenses, in each case made in the ordinary course of business and not exceeding U.S.$2.5 million outstanding at any one time; and

(f) any issuance of Capital Stock (other than Disqualified Stock) of the Company to Affiliates of the Company or to any director, officer, employee or consultant of the Company, and the granting and performance of registration rights.

Conduct of Business

The Company and its Restricted Subsidiaries will not engage in any business other than a Permitted Business.

Reports to Holders

So long as any notes are outstanding, the Company will furnish to the Trustee:

(a) Within 120 days following the end of each of the Company’s fiscal years, consolidated audited income statements, balance sheets and cash flow statements and the related notes thereto for the Company for the two most recent fiscal years in accordance with Reporting GAAP, which need not, however, contain any reconciliation to U.S. GAAP or otherwise comply with Regulation S-X of the U.S. Securities and Exchange Commission, together with an audit report thereon by the Company’s independent auditors. These annual financial statements will be accompanied by a “management’s discussion and analysis” or other report of management providing an overview in reasonable detail of the results of operations and financial condition of the Company and its Subsidiaries for the periods presented. English translations will be provided of any of the foregoing documents prepared in another language; and

(b) Within 60 days following the end of the fiscal quarter ended June 30, 2010 and of the first three fiscal quarters in each of the Company’s fiscal years thereafter, quarterly reports containing unaudited consolidated balance sheets, statements of income, statements of shareholders equity and statements of cash flows and the related notes thereto of the Company, in each case for the quarterly period then ended and the corresponding quarterly period in the prior fiscal year and prepared in accordance with Reporting GAAP, which need not, however, contain any reconciliation to U.S. GAAP or otherwise comply with Regulation S-X of the U.S. Securities and Exchange Commission, together with a management’s discussion and analysis” or other report of management providing an overview in reasonable detail of the consolidated results of operations and financial condition of the Company and its Subsidiaries for the periods presented. English translations will be provided of any of the foregoing documents prepared in another language.

None of the information provided pursuant to the preceding paragraph shall be required to comply with Regulation S-K as promulgated by the U.S. Securities and Exchange Commission. In addition, the Company shall furnish to the Holders of the Notes and to prospective investors, upon the requests of such Holders, any information required to be delivered pursuant to Rule 144A(d)(4) under the Securities Act so long as the notes are not freely transferable under the Exchange Act by Persons who are not “affiliates” under the Securities Act.

If GAAP are materially different, for purposes of calculations under the Indenture, than Reporting GAAP used for purposes of the financial statements provided pursuant to (a) or (b) above, no later than when due under (a) and (b), respectively, the Company will deliver to the Trustee (x) a description of the material differences between accounting principles in the financial statements provided pursuant to (a) or (b) above and the financial statements used for calculations under the Indenture, and (y) an unaudited quantitative reconciliation of revenues, Consolidated EBITDA, Consolidated Net Income, and the Consolidated Fixed Charge Coverage Ratio, and, after any Reversion Date has occurred, cumulative Consolidated Net Income since January 1, 2010.

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For the avoidance of doubt, compliance by the Company with respect to all covenants in the Indenture other than this reporting covenant shall be governed exclusively by GAAP; Reporting GAAP shall only be applicable to financial statements and reports prepared by the Company for the purpose of complying with (a) and (b) above.

The Company will also make available copies of all reports furnished to the Trustee (a) on the Company’s website or (b) to the newswire service Bloomberg L.P. or, if Bloomberg L.P. does not then operate, any similar agency.

So long as the Notes are listed on Euro MTF market, the alternative market of the Luxembourg Stock Exchange, the Company will make available the information specified in the preceding paragraphs at the specified office of the Luxembourg paying agent for the Notes.

Listing

In the event that the Notes are listed on the Luxembourg Stock Exchange’s Euro MTF market, the Company will use its reasonable best efforts to maintain such listing.

Notices

From and after the date the Notes are listed on the Official List of the Luxembourg Stock Exchange, all notices to Holders of Notes will be published in English:

(1) in a leading newspaper having a general circulation in Luxembourg (which is expected to be the Luxemburger Wort);

(2) if such Luxembourg publication is not practicable, in one other leading English language newspaper being published on each day in morning editions, whether or not it shall be published in Saturday, Sunday or holiday editions; or

(3) on the website of the Luxembourg Stock Exchange, at www.bourse.lu.

Notices shall be deemed to have been given on the date of publication as aforesaid or, if published on different dates, on the date of the first such publication. In addition, notices will be mailed to Holders of Notes at their registered addresses.

Events of Default

The following are “Events of Default”:

(1) default in the payment when due of the principal of or premium, if any, on any Notes, including the failure to make a required payment to purchase Notes tendered pursuant to an optional redemption, Change of Control Offer or an Asset Sale Offer;

(2) default for 30 days or more in the payment when due of interest, Additional Amounts or liquidated damages, if any, on any Notes;

(3) the failure to perform or comply with any of the provisions described under “Certain Covenants—Merger, Consolidation and Sale of Assets”;

(4) the failure by the Company or any Restricted Subsidiary to comply with any other covenant or agreement contained in the Indenture or in the Notes for 60 days or more after written notice to the Company from the Trustee or the Holders of at least 25% in aggregate principal amount of the outstanding Notes;

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(5) default by the Company or any Restricted Subsidiary under any Indebtedness which:

(a) is caused by a failure to pay principal of or premium, if any, or interest on such Indebtedness prior to the expiration of any applicable grace period provided in such Indebtedness on the date of such default; or

(b) results in the acceleration of such Indebtedness prior to its stated maturity;

and the principal or accreted amount of Indebtedness covered by (a) or (b) at the relevant time, aggregates U.S.$25 million or more;

(6) failure by the Company or any of its Restricted Subsidiaries to pay one or more final judgments against any of them, aggregating U.S.$25 million or more, which judgment(s) are not paid, discharged or stayed for a period of 60 days or more;

(7) certain events of bankruptcy affecting the Company or any of its Restricted Subsidiaries that are Significant Subsidiaries; or

(8) except as permitted by the Indenture, any Note Guarantee is held to be unenforceable or invalid in a judicial proceeding or ceases for any reason to be in full force and effect or any Subsidiary Guarantor, or any Person acting on behalf of any Subsidiary Guarantor, denies or disaffirms such Subsidiary Guarantor’s obligations under its Note Guarantee.

If an Event of Default (other than an Event of Default specified in clause (7) above with respect to the Company) shall occur and be continuing, the Trustee or the Holders of at least 25% in principal amount of outstanding Notes may declare the unpaid principal of (and premium, if any) and accrued and unpaid interest on all the Notes to be immediately due and payable by notice in writing to the Company and the Trustee specifying the Event of Default and that it is a “notice of acceleration.” If an Event of Default specified in clause (7) above occurs with respect to the Company, then the unpaid principal of (and premium, if any) and accrued and unpaid interest on all the Notes will become immediately due and payable without any declaration or other act on the part of the Trustee or any Holder.

At any time after a declaration of acceleration with respect to the Notes as described in the preceding paragraph, the Holders of a majority in principal amount of the Notes may rescind and cancel such declaration and its consequences:

(1) if the rescission would not conflict with any judgment or decree;

(2) if all existing Events of Default have been cured or waived, except nonpayment of principal or interest that has become due solely because of the acceleration;

(3) to the extent the payment of such interest is lawful, interest on overdue installments of interest and overdue principal, which has become due otherwise than by such declaration of acceleration, has been paid; and

(4) if the Company has paid the Trustee its reasonable compensation and reimbursed the Trustee for its reasonable expenses (including the fees and expenses of its counsel), disbursements and advances.

No rescission will affect any subsequent Default or impair any rights relating thereto.

The Holders of a majority in principal amount of the Notes may waive any existing Default or Event of Default under the Indenture, and its consequences, except a default in the payment of the principal of, premium, if any, or interest on any Notes.

In the event of any Event of Default specified in clause (5) of the first paragraph above, such Event of Default and all consequences thereof (excluding, however, any resulting payment default) will be annulled, waived

112 and rescinded, automatically and without any action by the Trustee or the holders, if within 30 days after such Event of Default arose the Company delivers an Officers’ Certificate to the Trustee stating that the holders thereof have rescinded or waived the acceleration, notice or action (as the case may be) giving rise to such Event of Default provided that none of the Company or any Restricted Subsidiary made or agreed to make any payment or provide any other consideration in exchange for such rescission or waiver. It is understood that in no event shall an acceleration of the principal amount of the notes as described above be annulled, waived or rescinded upon the happening of any such events as described in this paragraph.

Subject to the provisions of the Indenture relating to the duties of the Trustee, the Trustee is under no obligation to exercise any of its rights or powers under the Indenture at the request, order or direction of any of the Holders or otherwise, unless such Holders have offered to the Trustee indemnity satisfactory to it. Subject to all provisions of the Indenture and applicable law, the Holders of a majority in aggregate principal amount of the then outstanding Notes have the right to direct the time, method and place of conducting any proceeding for any remedy available to the Trustee or exercising any trust or power conferred on the Trustee.

No Holder of any Notes will have any right to institute any proceeding with respect to the Indenture or for any remedy thereunder, unless:

(1) such Holder gives to the Trustee written notice of a continuing Event of Default;

(2) Holders of at least 25% in principal amount of the then outstanding Notes make a written request to the Trustee to pursue the remedy;

(3) such Holders of the Notes provide to the Trustee satisfactory indemnity;

(4) the Trustee does not comply within 60 days; and

(5) during such 60 day period the Holders of a majority in principal amount of the outstanding Notes do not give the Trustee a written direction which, in the opinion of the Trustee, is inconsistent with the request; provided, that a Holder of a Note may institute suit for enforcement of payment of the principal of and premium, if any, or interest on such Note on or after the respective due dates expressed in such Note.

Upon becoming aware of any Default or Event of Default, the Company is required to deliver to the Trustee written notice of events which would constitute such Defaults or Events of Default, their status and what action the Company is taking or proposes to take in respect thereof. In addition, the Company is required to deliver to the Trustee, within 105 days after the end of each fiscal year, an Officers’ Certificate indicating whether the signers thereof know of any Default or Event of Default that occurred during the previous fiscal year. The Indenture provides that if a Default or Event of Default occurs, is continuing and is actually known to the Trustee, the Trustee must mail to each Holder notice of the Default or Event of Default within 90 days after the occurrence thereof. Except in the case of a Default or Event of Default in the payment of principal of, premium, if any, or interest on any Note, the Trustee may withhold notice if and so long as a committee of its trust officers in good faith determines that withholding notice is in the interests of the Holders.

Legal Defeasance and Covenant Defeasance

The Company may, at its option and at any time, elect to have its obligations with respect to outstanding Notes and all obligations of the Subsidiary Guarantors under the Note Guarantees discharged (“Legal Defeasance”). Such Legal Defeasance means that the Company will be deemed to have paid and discharged the entire indebtedness represented by the outstanding Notes and Note Guarantees after the deposit specified in clause (1) of the second following paragraph, except for:

(1) the rights of Holders to receive payments in respect of the principal of, premium, if any, and interest on the Notes when such payments are due;

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(2) the Company’s obligations with respect to the Notes concerning issuing temporary Notes, registration of Notes, mutilated, destroyed, lost or stolen Notes and the maintenance of an office or agency for payments;

(3) the rights, powers, trusts, duties, indemnities and immunities of the Trustee and the Company’s and the Subsidiary Guarantor’s obligations in connection therewith; and

(4) the Legal Defeasance provisions of the Indenture.

In addition, the Company may, at its option and at any time, elect to have its obligations and the obligations of the Subsidiary Guarantors released with respect to certain covenants (including, without limitation, obligations to make Change of Control Offers, Asset Sale Offers, the obligations described under “—Certain Covenants” and the cross-acceleration provisions and judgment default provisions described under “Events of Default”) that are described in the Indenture (“Covenant Defeasance”) and thereafter any omission to comply with such obligations will not constitute a Default or Event of Default with respect to the Notes or the Note Guarantees. In the event Covenant Defeasance occurs, certain events (not including non-payment, bankruptcy, receivership, reorganization and insolvency events) described under “Events of Default” will no longer constitute an Event of Default with respect to the Notes.

In order to exercise either Legal Defeasance or Covenant Defeasance:

(1) the Company must irrevocably deposit with the Trustee, in trust, for the benefit of the Holders cash in U.S. dollars, certain direct non-callable obligations of, or guaranteed by, the United States, or a combination thereof, in such amounts as will be sufficient without reinvestment, in the opinion of a nationally recognized investment bank, appraisal firm or firm of independent public accountants, to pay the principal of, premium, if any, and interest (including Additional Amounts) on the Notes on the stated date for payment thereof or on the applicable redemption date, as the case may be;

(2) in the case of Legal Defeasance, the Company has delivered to the Trustee an Opinion of Counsel from counsel in the United States reasonably acceptable to the Trustee (subject to customary exceptions and exclusions) and independent of the Company to the effect that:

(a) the Company has received from, or there has been published by, the Internal Revenue Service a ruling; or

(b) since the Issue Date, there has been a change in the applicable U.S. federal income tax law,

in either case to the effect that, and based thereon such Opinion of Counsel shall state that, the Holders will not recognize income, gain or loss for U.S. federal income tax purposes as a result of such Legal Defeasance and will be subject to U.S. federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such Legal Defeasance had not occurred;

(3) in the case of Covenant Defeasance, the Company has delivered to the Trustee an Opinion of Counsel in the United States reasonably acceptable to the Trustee (subject to customary exceptions and exclusions) to the effect that the Holders will not recognize income, gain or loss for U.S. federal income tax purposes as a result of such Covenant Defeasance and will be subject to U.S. federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such Covenant Defeasance had not occurred;

(4) in the case of Legal Defeasance or Covenant Defeasance, the Company has delivered to the Trustee:

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(a) an Opinion of Counsel from counsel in Mexico reasonably acceptable to the Trustee (subject to customary exceptions and exclusions) and independent of the Company to the effect that, based upon Mexican law then in effect, Holders will not recognize income, gain or loss for Mexican tax purposes, including withholding tax except for withholding tax then payable on interest payments due, as a result of Legal Defeasance or Covenant Defeasance, as the case may be, and will be subject to Mexican taxes on the same amounts and in the same manner and at the same time as would have been the case if such Legal Defeasance or Covenant Defeasance, as the case may be, had not occurred, or

(b) a ruling directed to the Trustee received from the tax authorities of Mexico to the same effect as the Opinion of Counsel described in clause (a) above;

(5) no Default or Event of Default shall have occurred and be continuing on the date of the deposit pursuant to clause (1) of this paragraph (except any Default or Event of Default resulting from the failure to comply with “Certain Covenants—Limitation on Indebtedness” as a result of the borrowing of the funds required to effect such deposit);

(6) the Trustee has received an Officers’ Certificate stating that such Legal Defeasance or Covenant Defeasance shall not result in a breach or violation of, or constitute a default under the Indenture or any other material agreement or instrument to which the Company or any of its Subsidiaries is a party or by which the Company or any of its Subsidiaries is bound;

(7) the Company has delivered to the Trustee an Officers’ Certificate stating that the deposit was not made by the Company with the intent of preferring the Holders over any other creditors of the Company or any Subsidiary of the Company or with the intent of defeating, hindering, delaying or defrauding any other creditors of the Company or others;

(8) the Company has delivered to the Trustee an Officers’ Certificate and an Opinion of Counsel from counsel reasonably acceptable to the Trustee (subject to customary exceptions and exclusions) and independent of the Company, each stating that all conditions precedent provided for or relating to the Legal Defeasance or the Covenant Defeasance have been complied with; and

(9) the Company has delivered to the Trustee an Opinion of Counsel from counsel reasonably acceptable to the Trustee and independent of the Company to the effect that the trust funds will not be subject to the effect of any applicable bankruptcy, insolvency, reorganization or similar laws affecting creditors’ rights generally.

Satisfaction and Discharge

The Indenture will be discharged and will cease to be of further effect (except as to surviving rights or registration of transfer or exchange of the Notes, as expressly provided for in the Indenture) as to all outstanding Notes when:

(1) either:

(a) all the Notes theretofor authenticated and delivered (except lost, stolen or destroyed Notes which have been replaced or paid and Notes for whose payment money has theretofor been deposited in trust or segregated and held in trust by the Company and thereafter repaid to the Company or discharged from such trust) have been delivered to the Trustee for cancellation; or

(b) all Notes not theretofor delivered to the Trustee for cancellation have become due and payable, and the Company has irrevocably deposited or caused to be

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deposited with the Trustee funds or certain direct, non-callable obligations of, or guaranteed by, the United States sufficient without reinvestment to pay and discharge the entire Indebtedness on the Notes not theretofor delivered to the Trustee for cancellation, for principal of, premium, if any, and interest on the Notes to the date of deposit, together with irrevocable instructions from the Company directing the Trustee to apply such funds to the payment;

(2) the Company has paid all other sums payable under the Indenture and the Notes by it; and

(3) the Company has delivered to the Trustee an Officers’ Certificate stating that all conditions precedent under the Indenture relating to the satisfaction and discharge of the Indenture have been complied with.

Modification of the Indenture

From time to time, the Company, the Subsidiary Guarantors and the Trustee, without the consent of the Holders, may amend the Indenture, the Notes or the Note Guarantees for certain specified purposes, including curing ambiguities, defects or inconsistencies, to provide for uncertificated Notes in addition to or in place of certificated Notes; to provide for the assumption of the Company’s or a Subsidiary Guarantor’s obligations to Holders of Notes and Note Guarantees in the case of a merger or consolidation or sale of all or substantially all of the Company’s or such Subsidiary Guarantor’s assets, as applicable, to the extent permitted under the Indenture; to make any change that would provide any additional rights or benefits to the Holders or that does not adversely affect the legal rights under the Indenture of any such Holder; to comply with requirements of the SEC; to conform the text of the Indenture, the Note Guarantees or the Notes to any provision of this Description of the Notes to the extent that such provision in this Description of the Notes was intended to be a verbatim recitation of a provision of the Indenture, the Note Guarantees or the Notes; to allow any Subsidiary Guarantor to execute a supplemental indenture and/or a Note Guarantee with respect to the Notes and to release Subsidiary Guarantors from the Note Guarantee in accordance with the terms of the Indenture; to comply with the requirements of any applicable securities depositary; to provide for a successor Trustee in accordance with the terms of the Indenture, to otherwise comply with any requirement of the Indenture; to issue Additional Notes, and make any other changes which do not adversely affect the rights of any of the Holders in any material respect. The Trustee will be entitled to rely on such evidence as it deems appropriate, including solely on an Opinion of Counsel and Officers’ Certificate, and shall have no liability whatsoever in reliance upon the foregoing.

Other modifications and amendments of the Indenture or the Notes may be made with the consent of the Holders of a majority in principal amount of the then outstanding Notes issued under the Indenture, except that, without the consent of each Holder affected thereby, no amendment may (with respect to any Notes held by a non- consenting Holder):

(1) reduce the principal amount of Notes whose Holders must consent to an amendment, supplement or waiver;

(2) reduce the rate of or change or have the effect of changing the time for payment of interest, including defaulted interest, on any Notes;

(3) reduce the principal of or change or have the effect of changing the fixed maturity of any Notes, or change the date on which any Notes may be subject to redemption, or reduce the redemption price therefor;

(4) make any Notes payable in money other than that stated in the Notes;

(5) make any change in provisions of the Indenture entitling each Holder to receive payment of principal of, premium, if any, and interest on such Note on or after the due date thereof or to bring suit to enforce such payment, or permitting Holders of a majority in principal amount of Notes to waive Defaults or Events of Default;

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(6) amend, change or modify in any material respect the obligation of the Company to make and consummate a Change of Control Offer in respect of a Change of Control that has occurred or make and consummate an Asset Sale Offer with respect to any Asset Sale that has been consummated;

(7) eliminate or modify in any manner a Subsidiary Guarantor’s obligations with respect to its Note Guarantee which adversely affects Holders in any material respect, except as contemplated in the Indenture;

(8) make any change in the provisions of the Indenture described under “Additional Amounts” that adversely affects the rights of any Holder or amend the terms of the Notes in a way that would result in a loss of exemption from Taxes; and

(9) make any change to the provisions of the Indenture or the Notes that adversely affects the ranking of the Notes.

Governing Law; Jurisdiction

The Indenture and the Notes will be governed by, and construed in accordance with, the law of the State of New York but without giving effect to applicable principles of conflicts of law to the extent that the application of the law of another jurisdiction would be required thereby. The Company and the Subsidiary Guarantors consent to the jurisdiction of the Federal and State courts located in the City of New York, Borough of Manhattan and have appointed an agent for service of process with respect to any actions brought in these courts arising out of or based on the Indenture or the Notes.

The Trustee

Except during the continuance of an Event of Default, the Trustee will perform only such duties as are specifically set forth in the Indenture. During the existence of an Event of Default, the Trustee will exercise such rights and powers vested in it by the Indenture, and use the same degree of care and skill in its exercise as a prudent man would exercise or use under the circumstances in the conduct of his own affairs.

The Indenture and the provisions of the TIA contain certain limitations on the rights of the Trustee, should it become a creditor of the Company, to obtain payments of claims in certain cases or to realize on certain property received in respect of any such claim as security or otherwise. Subject to the TIA, the Trustee will be permitted to engage in other transactions; provided, that if the Trustee acquires any conflicting interest as described in the TIA, it must eliminate such conflict or resign.

No Personal Liability

An incorporator, director, officer, employee, stockholder or controlling Person, as such, of the Company or of any Subsidiary Guarantor shall not have any liability for any obligations of the Company or such Subsidiary Guarantor under the Notes (including the Note Guarantees) or the Indenture or for any claims based on, in respect of or by reason of such obligations or their creation. By accepting a Note, each Holder waives and releases all such liability.

Currency Indemnity

The Company and each Subsidiary Guarantor will pay all sums payable under the Indenture or the Notes solely in U.S. dollars. Any amount that you receive or recover in a currency other than U.S. dollars in respect of any sum expressed to be due to you from the Company or any Subsidiary Guarantor will only constitute a discharge to us to the extent of the U.S. dollar amount which you are able to purchase with the amount received or recovered in that other currency on the date of the receipt or recovery or, if it is not practicable to make the purchase on that date, on the first date on which you are able to do so. If the U.S. dollar amount is less than the U.S. dollar amount expressed to be due to you under any Note, the Company and the Subsidiary Guarantors will jointly and severally indemnify you against any loss you sustain as a result. In any event, the Company and the Subsidiary Guarantors will jointly and severally indemnify you against the cost of making any purchase of U.S. dollars. For the purposes

117 of this paragraph, it will be sufficient for you to certify in a satisfactory manner that you would have suffered a loss had an actual purchase of U.S. dollars been made with the amount received in that other currency on the date of receipt or recovery or, if it was not practicable to make the purchase on that date, on the first date on which you were able to do so. In addition, you will also be required to certify in a satisfactory manner the need for a change of the purchase date.

The indemnities described above:

• constitute a separate and independent obligation from the other obligations of the Company and the Subsidiary Guarantors;

• will give rise to a separate and independent cause of action;

• will apply irrespective of any indulgence granted by any Holder; and

• will continue in full force and effect despite any other judgment, order, claim or proof for a liquidated amount in respect of any sum due under any Note.

Certain Definitions

Set forth below is a summary of certain of the defined terms used in the Indenture. Reference is made to the Indenture for a full definition of all such terms, as well as any other terms used herein for which no definition is provided.

“Acquired Indebtedness” means Indebtedness of a Person or any of its Subsidiaries existing at the time such Person becomes a Restricted Subsidiary or at the time it merges, amalgamates or consolidates with the Company or any of its Restricted Subsidiaries or is assumed in connection with the acquisition of assets from such Person; provided that such Indebtedness is not incurred in connection with, or in anticipation or contemplation of such merger, consolidation, amalgamation or acquisition. Such Indebtedness will be deemed to have been Incurred at the time such Person becomes a Restricted Subsidiary or at the time it merges, amalgamates or consolidates with the Company or a Restricted Subsidiary or at the time such Indebtedness is assumed in connection with the acquisition of assets from such Person.

“Additional Amounts” has the meaning set forth under “—Additional Amounts” above.

“Additional Notes” has the meaning set forth under “—Additional Notes” above.

“Affiliate” means, with respect to any specified Person, any other Person who directly or indirectly through one or more intermediaries controls, or is controlled by, or is under common control with, such specified Person. The term “control” means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of voting securities, by contract or otherwise. For purposes of this definition, the terms “controlling,” “controlled by” and “under common control with” have correlative meanings.

“Asset Acquisition” means:

(1) an Investment by the Company or any Restricted Subsidiary in any other Person pursuant to which such Person will become a Restricted Subsidiary, or will be merged with or into the Company or any Restricted Subsidiary;

(2) the acquisition by the Company or any Restricted Subsidiary of the assets of any Person (other than a Subsidiary of the Company) which constitute all or substantially all of the assets of such Person or comprises any division or line of business of such Person or any other properties or assets of such Person other than in the ordinary course of business; or

(3) any Revocation with respect to an Unrestricted Subsidiary.

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“Asset Sale” means any direct or indirect sale, disposition, issuance, conveyance, transfer, lease, assignment or other transfer, including a Sale and Leaseback Transaction (each, a “disposition”) by the Company or any Restricted Subsidiary of:

(a) any Capital Stock of any Restricted Subsidiary (but not Capital Stock of the Company); or

(b) any property or assets (other than cash or Cash Equivalents or Capital Stock of the Company) of the Company or any Restricted Subsidiary;

Notwithstanding the preceding, the following items will not be deemed to be Asset Sales:

(1) the disposition of all or substantially all of the assets of the Company and its Restricted Subsidiaries as permitted under “Certain Covenants—Merger, Consolidation and Sale of Assets”;

(2) sales of homes and land in the ordinary course of business;

(3) land, infrastructure and other properties donated to municipalities, governmental entities or non-profit religious and educational organizations in connection with construction and development of housing complexes by the Company or its Restricted Subsidiaries in the ordinary course of business consistent with past practice;

(4) sales, leases, conveyances or other dispositions of real or personal property, including, without limitation, exchanges or swaps of real estate, for the development of the Company’s or any of its Restricted Subsidiaries’ projects in the ordinary course of business;

(5) sales, leases, sale-leasebacks, conveyances or other dispositions of amenities, model homes and other improvements at the Company’s or its Restricted Subsidiaries’ projects in the ordinary course of business;

(6) for purposes of “Certain Covenants—Limitation on Asset Sales and Sales of Subsidiary Stock” only, the making of a Restricted Payment permitted under “Certain Covenants— Limitation on Restricted Payments” or any Permitted Investment;

(7) a disposition to the Company or a Restricted Subsidiary, including a Person that is or will become a Restricted Subsidiary immediately after the disposition;

(8) any single transaction or series of related transactions that involves assets or Capital Stock of a Restricted Subsidiary having a Fair Market Value of less than U.S.$5 million;

(9) a transfer of assets between or among the Company and any of its Restricted Subsidiaries;

(10) an issuance or sale of Capital Stock by a Restricted Subsidiary of the Company to the Company or any of its Restricted Subsidiaries;

(11) a disposition of accounts receivable in connection with a Receivables Transaction;

(12) any sale or other disposition of damaged, worn-out, obsolete or no longer useful assets or properties in the ordinary course of business;

(13) any sale of assets received by the Company or any of its Restricted Subsidiaries upon the foreclosure on a Lien in the ordinary course of business;

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(14) the good faith surrender or waiver of contract rights or settlement, release or surrender of contract, tort or other claims or statutory rights in connection with a settlement.

“Asset Sale Offer” has the meaning set forth under “Certain Covenants—Limitation on Asset Sales and Sales of Subsidiary Stock.”

“Asset Sale Transaction” means any Asset Sale and, whether or not constituting an Asset Sale, (1) any sale or other disposition of Capital Stock, (2) any Designation with respect to an Unrestricted Subsidiary and (3) any sale or other disposition of property or assets excluded from the definition of Asset Sale by clause (2) of that definition.

“Audit Committee” means the audit committee of the Board of Directors, which shall be comprised of at least a majority of independent directors.

“Board of Directors” means, as to any Person, the board of directors, management committee or similar governing body of such Person or any duly authorized committee thereof.

“Board Resolution” means, with respect to any Person, a copy of a resolution certified by the Secretary or an Assistant Secretary of such Person to have been duly adopted by the Board of Directors of such Person and to be in full force and effect on the date of such certification, and delivered to the Trustee.

“Business Day” means a day other than a Saturday, Sunday or other day on which commercial banking institutions are authorized or required by law to close in New York City.

“Capitalized Lease Obligations” means, as to any Person, the obligations of such Person under a lease that are required to be classified and accounted for as capital lease obligations under GAAP. For purposes of this definition, the amount of such obligations at any date will be the capitalized amount of such obligations at such date, determined in accordance with GAAP.

“Capital Stock” means:

(1) with respect to any Person that is a corporation, any and all shares, interests, participations or other equivalents (however designated and whether or not voting) of corporate stock, including each class of Common Stock and Preferred Stock of such Person;

(2) with respect to any Person that is not a corporation, any and all partnership or other equity or ownership interests of such Person; and

(3) any warrants, rights or options to purchase any of the instruments or interests referred to in clause (1) or (2) above.

“Cash Equivalents” means:

(1) marketable direct obligations issued by, or unconditionally guaranteed by, the United States government or issued by any agency thereof and backed by the full faith and credit of the United States, in each case maturing within one year from the date of acquisition thereof;

(2) Certificados de la Tesoreria de la Federación (Cetes) or Bonos de Desarrollo del Gobierno Federal (Bondes), in each case, issued by the government of Mexico and maturing not later than one year after the acquisition thereof;

(3) marketable direct obligations issued by any state of the United States of America or any political subdivision of any such state or any public instrumentality thereof maturing within one year from the date of acquisition thereof and, at the time of acquisition, having one of the two highest ratings obtainable from either Standard & Poor’s Corporation (“S&P”) or Moody’s Investors Service, Inc. (“Moody’s”) or any successor thereto;

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(4) commercial paper maturing no more than one year from the date of creation thereof and, at the time of acquisition, having a rating of at least A-1 from S&P or at least P-1 from Moody’s;

(5) demand deposits, certificates of deposit, time deposits or bankers’ acceptances maturing within one year from the date of acquisition thereof issued by (a) any bank organized under the laws of the United States of America or any state thereof or the District of Columbia, (b) any U.S. branch of a non-U.S. bank having at the date of acquisition thereof combined capital and surplus of not less than U.S.$500 million, or (c) in the case of Mexican peso deposits, any of the five top-rated banks (as evaluated by an internationally recognized rating agency) organized under the laws of Mexico;

(6) repurchase obligations with a term of not more than seven days for underlying securities of the types described in clause (1) above entered into with any bank meeting the qualifications specified in clause (5) above; and

(7) investments in money market funds which invest substantially all of their assets in securities of the types described in clauses (1) through (6) above.

“Change of Control” means the occurrence of one or more of the following events:

(1) any Person or Group other than the Permitted Holders is or becomes the beneficial owner (as defined below), directly or indirectly, in the aggregate of more than 50% of the total voting power of the Voting Stock of the Company (including a Surviving Entity, if applicable);

(2) during any period of two consecutive years, individuals who at the beginning of such period constituted the Board of Directors of the Company, together with any new directors whose election by such Board of Directors or whose nomination for election by the shareholders of the Company was approved by a vote of a majority of the directors of the Company then still in office who were either directors at the beginning of such period or whose election or nomination for election was previously so approved, cease for any reason to constitute a majority of the Board of Directors of the Company then in office;

(3) the Company consolidates with, or merges with or into, another Person, or the Company sells, conveys, assigns, transfers, leases or otherwise disposes of all or substantially all of the assets of the Company, determined on a consolidated basis, to any Person, other than a transaction where the Person or Persons that, immediately prior to such transaction “beneficially owned” the outstanding Voting Stock of the Company are, by virtue of such prior ownership, or Permitted Holders are, the “beneficial owners” in the aggregate of a majority of the total voting power of the then outstanding Voting Stock of the surviving or transferee Person (or if such surviving or transferee Person is a direct or indirect wholly-owned subsidiary of another Person, such Person who is the ultimate parent entity), in each case whether or not such transaction is otherwise in compliance with the Indenture; or

(4) the approval by the holders of Capital Stock of the Company of any plan or proposal for the liquidation or dissolution of the Company, whether or not otherwise in compliance with the provisions of the Indenture.

For purposes of this definition:

(a) “beneficial owner” will have the meaning specified in Rules 13d-3 and 13d-5 under the Exchange Act, except that any Person or Group will be deemed to have “beneficial ownership” of all securities that such Person or Group has the right to acquire, whether such right is exercisable immediately, only after the passage of time or, except in the case of the Permitted Holders, upon the occurrence of a subsequent condition;

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(b) “Person” and “Group” will have the meanings for “person” and “group” as used in Sections 13(d) and 14(d) of the Exchange Act; and

(c) the Permitted Holders or any other Person or Group will be deemed to beneficially own any Voting Stock of a corporation held by any other corporation (the “parent corporation”) so long as the Permitted Holders or such other Person or Group, as the case may be, beneficially own, directly or indirectly, in the aggregate at least 50% of the voting power of the Voting Stock of the parent corporation and no other Person or Group beneficially owns an equal or greater amount of the Voting Stock of the parent corporation.

“Change of Control Payment” has the meaning set forth under “Change of Control.”

“Change of Control Payment Date” has the meaning set forth under “Change of Control.”

“Commodity Agreement” means any commodity or raw material futures contract, commodity or raw materials option, or any other agreement designed to protect against or manage exposure to fluctuations in commodity or raw materials prices.

“Common Stock” of any Person means any and all shares, interests or other participations in, and other equivalents (however designated and whether voting or non-voting) of such Person’s common equity interests, whether outstanding on the Issue Date or issued after the Issue Date, and includes, without limitation, all series and classes of such common equity interests.

“Consolidated EBITDA” means, for any Person for any period, Consolidated Net Income for such Person for such period, plus the following, without duplication, to the extent deducted or added in calculating such Consolidated Net Income:

(1) Consolidated Income Tax Expense for such Person for such period;

(2) Consolidated Interest Expense for such Person for such period;

(3) Consolidated Non-cash Charges for such Person for such period;

(4) net after-tax losses from Asset Sale Transactions or abandonments or reserves relating thereto for such period;

(5) any income or loss from discontinued operations;

(6) any income or loss from extraordinary transactions; and

(7) any unrealized non cash gains or losses or charges resulting from the application of Statement of Financial Accounting Standards No. 133. less (x) all non-cash credits and gains increasing Consolidated Net Income for such Person for such period, other than any items which represent the reversal in such period of any accrual of, or cash reserve for, anticipated charges in any prior period where such accrual or reserve is no longer required under GAAP and (y) all cash payments made by such Person and its Subsidiaries (Restricted Subsidiaries in the case of the Company) during such period relating to non-cash charges that were added back in determining Consolidated EBITDA in any prior period.

Notwithstanding the foregoing, the items specified in clauses (1) and (3) above for any Subsidiary (Restricted Subsidiary in the case of the Company) will be added to Consolidated Net Income in calculating Consolidated EBITDA for any period:

(a) in proportion to the percentage of the total Capital Stock of such Subsidiary (Restricted Subsidiary in the case of the Company) held directly or indirectly by such Person at the date of determination, and

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(b) to the extent that a corresponding amount would be permitted at the date of determination to be distributed to such Person by such Subsidiary (Restricted Subsidiary in the case of the Company) pursuant to its charter and bylaws and each law, regulation, agreement or judgment applicable to such distribution.

“Consolidated Fixed Charge Coverage Ratio” means, for any Person as of any date of determination, the ratio of the aggregate amount of Consolidated EBITDA of such Person for the four most recent full fiscal quarters for which financial statements are available ending prior to the date of such determination (the “Four Quarter Period”) to Consolidated Fixed Charges for such Person for such Four Quarter Period. For purposes of this definition, “Consolidated EBITDA” and “Consolidated Fixed Charges” will be calculated after giving effect on a pro forma basis in accordance with Regulation S-X under the Securities Act of 1933 for the period of such calculation to:

(1) the Incurrence or repayment or redemption of any Indebtedness (including Acquired Indebtedness) of such Person or any of its Subsidiaries (Restricted Subsidiaries in the case of the Company), and the application of the proceeds thereof, including the Incurrence of any Indebtedness (including Acquired Indebtedness), and the application of the proceeds thereof, giving rise to the need to make such determination, occurring during such Four Quarter Period or at any time subsequent to the last day of such Four Quarter Period and on or prior to such date of determination, to the extent, in the case of an Incurrence, such Indebtedness is outstanding on the date of determination, as if such Incurrence and the application of the proceeds thereof, repayment or redemption occurred on the first day of such Four Quarter Period; and

(2) any Asset Sale Transaction or Asset Acquisition by such Person or any of its Subsidiaries (Restricted Subsidiaries, in the case of the Company), including any Asset Sale Transaction or Asset Acquisition giving rise to the need to make such determination occurring during the Four Quarter Period or at any time subsequent to the last day of the Four Quarter Period and on or prior to such date of determination, as if such Asset Sale Transaction or Asset Acquisition occurred on the first day of the Four Quarter Period.

Furthermore, in calculating “Consolidated Fixed Charges” for purposes of determining the denominator (but not the numerator) of this “Consolidated Fixed Charge Coverage Ratio,”

(a) interest on outstanding Indebtedness determined on a fluctuating basis as of the date of determination and which will continue to be so determined thereafter will be deemed to have accrued at a fixed rate per annum equal to the rate of interest on such Indebtedness in effect on such date of determination;

(b) if interest on any Indebtedness actually Incurred on such date of determination may optionally be determined at an interest rate based upon a factor of a prime or similar rate, a eurocurrency interbank offered rate, or other rates, then the interest rate in effect on such date of determination will be deemed to have been in effect during the Four Quarter Period;

(c) notwithstanding clause (a) above, interest on Indebtedness determined on a fluctuating basis, to the extent such interest is covered by Hedging Obligations, will be deemed to accrue at the rate per annum resulting after giving effect to the operation of such agreements;

(d) interest on a Capitalized Lease Obligation shall be deemed to accrue at an interest rate reasonably determined by a responsible financial or accounting officer of the Company to be the rate of interest implicit in such Capitalized Lease Obligation in accordance with GAAP; and

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(e) for purposes of making the computation referred to above, interest on any Indebtedness under a revolving credit facility computed on a pro forma basis shall be computed based upon the average daily balance of such Indebtedness during the applicable period.

“Consolidated Fixed Charges” means, for any Person for any period, the sum, without duplication, of:

(1) Consolidated Interest Expense for such Person for such period, plus

(2) the amount of all cash and non-cash dividend payments on any series of Preferred Stock or Disqualified Capital Stock of such Person (other than dividends paid in Qualified Capital Stock) or any Subsidiary of such Person (Restricted Subsidiary in the case of the Company) paid, accrued or scheduled to be paid or accrued during such period, excluding dividend payments on Preferred Stock or Disqualified Capital Stock paid, accrued or scheduled to be paid to such Person or another Subsidiary (Restricted Subsidiary in the case of the Company).

“Consolidated Income Tax Expense” means, with respect to any Person for any period, the provision for U.S. federal, state, local and non-U.S. income taxes payable by such Person and its Subsidiaries (Restricted Subsidiaries in the case of the Company) for such period as determined on a consolidated basis in accordance with GAAP.

“Consolidated Interest Expense” means, for any Person for any period, the sum of, without duplication determined on a consolidated basis in accordance with GAAP:

(1) the aggregate of cash and non-cash interest expense of such Person and its Subsidiaries (Restricted Subsidiaries in the case of the Company) for such period determined on a consolidated basis in accordance with GAAP, including, without limitation (whether or not interest expense in accordance with GAAP):

(a) any amortization or accretion of debt discount or any interest paid on Indebtedness of such Person and its Subsidiaries (Restricted Subsidiaries in the case of the Company) in the form of additional Indebtedness,

(b) any amortization of deferred financing costs,

(d) all capitalized interest,

(e) the interest portion of any deferred payment obligation,

(f) commissions, discounts and other fees and charges Incurred in respect of letters of credit or bankers’ acceptances, and

(g) the interest component of any amount paid in respect of Indebtedness of another Person that is Guaranteed by such Person or one of its Subsidiaries (Restricted Subsidiaries in the case of the Company) or secured by a Lien on the assets of such Person or one of its Subsidiaries (Restricted Subsidiaries in the case of the Company); and

(2) the interest component of Capitalized Lease Obligations paid, accrued and/or scheduled to be paid or accrued by such Person and its Subsidiaries (Restricted Subsidiaries in the case of the Company) during such period.

“Consolidated Net Income” means, with respect to any Person for any period, the aggregate net income (or loss) of such Person and its Subsidiaries (after deducting (or adding) the portion of such net income (or loss) attributable to minority interests in Subsidiaries of such Person) for such period on a consolidated basis, determined

124 in accordance with GAAP; provided, that there shall be excluded therefrom to the extent reflected in such aggregate net income (loss):

(1) net after-tax gains or losses from Asset Sale Transactions or abandonments or reserves relating thereto;

(2) net after-tax items classified as extraordinary gains or losses;

(3) the net income (but not loss) of any Person, other than such Person and any Subsidiary of such Person (Restricted Subsidiary in the case of the Company); except that, solely for purposes of calculating Consolidated Net Income pursuant to clause (3) of the first paragraph of “Certain Covenants—Limitation on Restricted Payments” only, Consolidated Net Income of the Company will include the Company’s proportionate share of the net income of:

(a) any Person acquired in a “pooling of interests” transaction accrued prior to the date it becomes a Restricted Subsidiary or is merged or consolidated with the Company or any Restricted Subsidiary; or

(b) a Surviving Entity prior to assuming the Company’s obligations under the Indenture and the Notes pursuant to “Certain Covenants—Limitation on Merger, Consolidation and Sales of Assets”;

(4) the net income (but not loss) of any Subsidiary of such Person (Restricted Subsidiary in the case of the Company) to the extent that (and only so long as) a corresponding amount could not be distributed to such Person at the date of determination as a result of any restriction pursuant to the constituent documents of such Subsidiary (Restricted Subsidiary in the case of the Company) or any law, regulation, agreement or judgment applicable to any such distribution;

(5) any increase (but not decrease) in net income attributable to minority interests in any Subsidiary (Restricted Subsidiary in the case of the Company);

(6) any gain (or loss) from foreign exchange translation or change in net monetary position;

(7) any gains or losses (less all fees and expenses or charges relating thereto) attributable to the early extinguishment of Indebtedness and Hedging Obligations; and

(8) the cumulative effect of changes in accounting principles.

“Consolidated Non-cash Charges” means, for any Person for any period, the aggregate depreciation, amortization and other non-cash expenses or losses of such Person and its Subsidiaries (Restricted Subsidiaries in the case of the Company) for such period, determined on a consolidated basis in accordance with GAAP (excluding any such charge which constitutes an accrual of or a reserve for cash charges for any future period or the amortization of a prepaid cash expense paid in a prior period).

“Consolidated Tangible Assets” means, for any Person at any time, the total consolidated assets of such Person and its Subsidiaries (Restricted Subsidiaries in the case of the Company) as set forth on the balance sheet as of the most recent fiscal quarter of such Person, prepared in accordance with GAAP, less (i) Intangible Assets and (ii) any assets securing Non-Recourse Indebtedness.

“Covenant Defeasance” has the meaning set forth under “Legal Defeasance and Covenant Defeasance.”

“Credit Facilities” means one or more debt facilities, commercial paper facilities or Debt Issuances, in each case with banks, investment banks, insurance companies, mutual funds and/or other institutional lenders or institutional investors providing for revolving credit loans, term loans, receivables or inventory financing (including through the sale of receivables to such lenders or to special purpose entities formed to borrow from (or sell

125 receivables to) such lenders against such receivables), letters of credit or Debt Issuances, in each case, as amended, extended, modified, renewed, restated, Refinanced (including, Refinancing with Debt Issuances), supplemented or otherwise modified (in whole or in part, and without limitation as to amount, terms, conditions, covenants and other provisions) from time to time.

“Currency Agreement” means, in respect of any Person, any foreign exchange contract, currency swap agreement or other similar agreement as to which such Person is a party designed to hedge foreign currency risk of such Person.

“Debt Issuances” means, with respect to the Company or any Restricted Subsidiary, one or more issuances after the Issue Date of Indebtedness evidenced by notes, debentures, bonds or other similar securities or instruments.

“Default” means an event or condition the occurrence of which is, or with the lapse of time or the giving of notice or both would be, an Event of Default.

“Designation” and “Designation Amount” have the meanings set forth under “Certain Covenants— Limitation on Designation of Unrestricted Subsidiaries” above.

“Disqualified Capital Stock” means that portion of any Capital Stock which, by its terms (or by the terms of any security into which it is convertible or for which it is exchangeable at the option of the holder thereof), or upon the happening of any event, matures or is mandatorily redeemable, pursuant to a sinking fund obligation or otherwise, or is redeemable at the sole option of the holder thereof, in any case, on or prior to the final maturity date of the Notes; provided, however, that any Capital Stock that would not constitute Disqualified Stock but for provisions thereof giving holders thereof the right to require such Person to purchase or redeem such Capital Stock upon the occurrence of an “asset sale” or “change of control” occurring prior to the final maturity of the Notes shall not constitute Disqualified Stock if:

(1) the “asset sale” or “change of control” provisions applicable to such Capital Stock are not materially more favorable to the holders of such Capital Stock than the terms applicable to the Notes and described under “— Certain Covenants — Limitation on Sales of Assets and Subsidiary Stock” and “— Change of Control”; and

(2) any such requirement only becomes operative after compliance with such terms applicable to the Notes, including the purchase of any Notes tendered pursuant thereto.

The amount of any Disqualified Capital Stock shall be equal to the greater of its voluntary or involuntary liquidation preference and its maximum fixed repurchase price, but excluding accrued dividends, if any. The amount of any Disqualified Stock that does not have a fixed redemption, repayment or repurchase price will be calculated in accordance with the terms of such Disqualified Stock as if such Disqualified Stock were redeemed, repaid or repurchased on any date on which the amount of such Disqualified Stock is to be determined pursuant to the Indenture; provided, however, that if such Disqualified Stock could not be required to be redeemed, repaid or repurchased at the time of such determination, the redemption, repayment or repurchase price will be the book value of such Disqualified Stock as reflected in the most recent financial statements of such Person.

“Equity Offering” has the meaning set forth under “—Optional Redemption.”

“Event of Default” has the meaning set forth under “Events of Default.”

“Exchange Act” means the Securities Exchange Act of 1934, as amended, or any successor statute or statutes thereto.

“Fair Market Value” means, with respect to any asset, the price (after deducting any liabilities relating to such assets) which could be negotiated in an arm’s-length free market transaction, for cash, between a willing seller and a willing and able buyer, neither of which is under any compulsion to complete the transaction; provided, that the Fair Market Value of any such asset or assets will be determined conclusively by the Board of Directors or the Audit Committee of the Company acting in good faith, and will be evidenced by a Board Resolution or written resolution of the Audit Committee.

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“Four Quarter Period” has the meaning set forth in the definition of Consolidated Fixed Charge Coverage Ratio above.

“GAAP” means the Mexican Financial Reporting Standards as in effect as of the Issue Date.

“Guarantee” means any obligation, contingent or otherwise, of any Person directly or indirectly guaranteeing any Indebtedness of any other Person:

(1) to purchase or pay, or advance or supply funds for the purchase or payment of, such Indebtedness of such other Person, whether arising by virtue of partnership arrangements, or by agreement to keep-well, to purchase assets, goods, securities or services, to take-or- pay, or to maintain financial statement conditions or otherwise, or

(2) entered into for purposes of assuring in any other manner the obligee of such Indebtedness of the payment thereof or to protect such obligee against loss in respect thereof, in whole or in part,

provided, that “Guarantee” will not include endorsements for collection or deposit in the ordinary course of business. “Guarantee” used as a verb has a corresponding meaning.

“Hedging Obligations” means the obligations of any Person pursuant to any Interest Rate Agreement, Currency Agreement or Commodity Agreement.

“Holder” means the Person in whose name a Note is registered in the Note register.

“Incur” means, with respect to any Indebtedness or other obligation of any Person, to create, issue, incur (including by conversion, exchange or otherwise), assume, Guarantee or otherwise become liable in respect of such Indebtedness or other obligation on the balance sheet of such Person (and “Incurrence,” “Incurred” and “Incurring” will have meanings correlative to the preceding).

“Indebtedness” means with respect to any Person, without duplication:

(1) the principal amount (or, if less, the accreted value) of all obligations of such Person for borrowed money;

(2) the principal amount (or, if less, the accreted value) of all obligations of such Person evidenced by bonds, debentures, notes or other similar instruments;

(3) all Capitalized Lease Obligations of such Person;

(4) all obligations of such Person issued or assumed as the deferred purchase price of property, all conditional sale obligations and all obligations under any title retention agreement (but excluding trade accounts payable and other accrued liabilities arising in the ordinary course of business that are not overdue by 180 days or more or are being contested in good faith by appropriate proceedings promptly instituted and diligently conducted);

(5) all letters of credit, banker’s acceptances or similar credit transactions, including reimbursement obligations in respect thereof;

(6) Guarantees and other contingent obligations of such Person in respect of Indebtedness referred to in clauses (1) through (5) above and clauses (8) through (10) below;

(7) all Indebtedness of any other Person of the type referred to in clauses (1) through (6) which is secured by any Lien on any property or asset of such Person, the amount of such Indebtedness being deemed to be the lesser of the Fair Market Value of such property or asset or the amount of the Indebtedness so secured;

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(8) all obligations under Hedging Obligations of such Person;

(9) to the extent not otherwise included in this definition, the Receivables Transaction Amount outstanding relating to any Receivables Transaction; and

(10) all Disqualified Capital Stock issued by such Person.

For the avoidance of doubt, the recognition and acknowledgement by the Company or any Restricted Subsidiary of its obligation to make payment of a trade payable arising in the ordinary course of business to a bank following the sale and assignment thereof pursuant to the terms of Supplier Factoring Facilities shall not be Indebtedness.

“Independent Financial Advisor” means an accounting firm, appraisal firm, investment banking firm or consultant of internationally recognized standing that is, in the judgment of the Company’s Board of Directors, qualified to perform the task for which it has been engaged and which is independent in connection with the relevant transaction.

“Intangible Assets” means with respect to any Person all unamortized debt discount and expense, unamortized deferred charges, goodwill, patents, trademarks, service marks, trade names, copyrights and all other items which would be treated as intangibles on the consolidated balance sheet of such Person prepared in accordance with GAAP.

“Interest Rate Agreement” of any Person means any interest rate protection agreement (including, without limitation, interest rate swaps, caps, floors, collars, derivative instruments and similar agreements) and/or other types of hedging agreements designed to hedge interest rate risk of such Person.

“Investment” means, with respect to any Person, any:

(1) direct or indirect loan, advance or other extension of credit (including, without limitation, a Guarantee) to any other Person,

(2) capital contribution to (by means of any transfer of cash or other property to others or any payment for property or services for the account or use of others) any other Person, or

(3) any purchase or acquisition by such Person of any Capital Stock, bonds, notes, debentures or other securities or evidences of Indebtedness issued by, any other Person.

“Investment” will exclude accounts receivable or deposits arising in the ordinary course of business. “Invest,” “Investing” and “Invested” will have corresponding meanings.

For purposes of the “Limitation on Restricted Payments” covenant, the Company will be deemed to have made an “Investment” in an Unrestricted Subsidiary at the time of its Designation, which will be valued at the Fair Market Value of the sum of the net assets of such Unrestricted Subsidiary at the time of its Designation and the amount of any Indebtedness of such Unrestricted Subsidiary or owed to the Company or any Restricted Subsidiary immediately following such Designation. Any property transferred to or from an Unrestricted Subsidiary will be valued at its Fair Market Value at the time of such transfer. If the Company or any Restricted Subsidiary sells or otherwise disposes of any Capital Stock of a Restricted Subsidiary (including any issuance and sale of Capital Stock by a Restricted Subsidiary) such that, after giving effect to any such sale or disposition, such Restricted Subsidiary would cease to be a Subsidiary of the Company, the Company will be deemed to have made an Investment on the date of any such sale or disposition equal to sum of the Fair Market Value of the Capital Stock of such former Restricted Subsidiary held by the Company or any Restricted Subsidiary immediately following such sale or other disposition and the amount of any Indebtedness of such former Restricted Subsidiary Guaranteed by the Company or any Restricted Subsidiary or owed to the Company or any other Restricted Subsidiary immediately following such sale or other disposition.

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“Investment Grade Rating” means a rating equal to or higher than (i) Baa3 (or the equivalent) by Moody’s or (ii) BBB— (or the equivalent) by S&P, or, if either such entity ceases to rate the notes for reasons outside of the control of the Company, the equivalent investment grade credit rating from any other Rating Agency.

“Investment Return” means, in respect of any Investment (other than a Permitted Investment) made after the Issue Date by the Company or any Restricted Subsidiary:

(1) the proceeds in cash and the Fair Market Value of property other than cash received by the Company or any Restricted Subsidiary upon the sale, liquidation or repayment of such Investment or, in the case of a Guarantee, the amount of the Guarantee upon the unconditional release of the Company and its Restricted Subsidiaries in full, less any payments previously made by the Company or any Restricted subsidiary in respect of such Guarantee;

(2) in the case of the Revocation of the Designation of an Unrestricted Subsidiary, an amount equal to the lesser of:

(a) the Company’s Investment in such Unrestricted Subsidiary at the time of such Revocation;

(b) that portion of the Fair Market Value of the net assets of such Unrestricted Subsidiary at the time of Revocation that is proportionate to the Company’s equity interest in such Unrestricted Subsidiary at the time of Revocation; and

(c) the Designation Amount with respect to such Unrestricted Subsidiary upon its Designation which was treated as a Restricted Payment; and

(3) in the event the Company or any Restricted Subsidiary makes any Investment in a Person that, as a result of or in connection with such Investment, becomes a Restricted Subsidiary, the Fair Market Value of the Investment of the Company and its Restricted Subsidiaries in such Person, in the case of each of (1), (2) and (3), up to the amount of such Investment that was treated as a Restricted Payment under “Certain Covenants—Limitation on Restricted Payments” less the amount of any previous Investment Return in respect of such Investment.

“Issue Date” means June 30, 2010.

“Land Acquisition and Construction Loans” means Indebtedness Incurred for the purpose of financing all or any part of the purchase price, or other costs of construction or improvement of any residential real estate development, including any Refinancing of such Indebtedness that does not increase the aggregate principal amount (or accredited amounts, if less) thereof as of the date of Refinancing; provided that (1) the terms of such Indebtedness (other than any Indebtedness Incurred in connection with the purchase of land) and any Refinancing thereof shall require all net proceeds from the sale of such residential real estate development or interest therein (including any unit therein) be paid by the purchaser first directly to the creditor of such Indebtedness to satisfy the Company’s and its Restricted Subsidiaries obligations under such Indebtedness and thereafter to the Company after all of such Indebtedness has been repaid; (2) the aggregate principal amount of such Indebtedness specifically included for the purpose of the calculation of this clause does not exceed the greater of (A) the Fair Market Value of such residential real estate developments and (B) the purchase price of such property and related cost of construction and improvement of such property and (3) any Lien securing such Indebtedness does not extend to any property of the Company or its Restricted Subsidiaries other than the residential real estate development so acquired, constructed or improved.

“Legal Defeasance” has the meaning set forth under “Legal Defeasance and Covenant Defeasance.”

“Lien” means any lien, mortgage, deed of trust, pledge, security interest, charge or encumbrance of any kind (including any conditional sale or other title retention agreement, any lease in the nature thereof and any

129 agreement to give any security interest); provided that the lessee in respect of a Capitalized Lease Obligation or Sale and Leaseback Transaction will be deemed to have Incurred a Lien on the property leased thereunder.

“Mexican Financial Reporting Standards” means the Mexican financial reporting standards (Normas de Información Financiera Aplicables en Méjico) as issued by the Mexican Board for Research and Development of Financial Reporting Standards (Consejo Mejicano para la Investigación y Desarrollo de Normas de Información Financiera).

“Moody’s” means Moody’s Investors Service, Inc. and its successors and assigns.

“Net Cash Proceeds” means, with respect to any Asset Sale, the proceeds in the form of cash or Cash Equivalents, including payments in respect of deferred payment obligations when received in the form of cash or Cash Equivalents received by the Company or any of its Restricted Subsidiaries from such Asset Sale, net of:

(1) reasonable out-of-pocket expenses and fees relating to such Asset Sale (including, without limitation, legal, accounting and investment banking fees and sales commissions);

(2) taxes paid or payable in respect of such Asset Sale after taking into account any reduction in consolidated tax liability due to available tax credits or deductions and any tax sharing arrangements;

(3) repayment of Indebtedness secured by a Lien permitted under the Indenture that is required to be repaid in connection with such Asset Sale; and

(4) appropriate amounts to be provided by the Company or any Restricted Subsidiary, as the case may be, as a reserve, in accordance with GAAP, against any liabilities associated with such Asset Sale and retained by the Company or any Restricted Subsidiary, as the case may be, after such Asset Sale, including, without limitation, pension and other post- employment benefit liabilities, liabilities related to environmental matters and liabilities under any indemnification obligations associated with such Asset Sale, but excluding any reserves with respect to Indebtedness.

“Non-Recourse Indebtedness” with respect to any Person means Indebtedness of such Person for which (1) the sole legal recourse for collection of principal and interest on such Indebtedness is against the specific property identified in the instruments evidencing or securing such Indebtedness and such property was acquired with the proceeds of such Indebtedness or such Indebtedness was incurred within 365 days after the acquisition or construction of such property and (2) no other assets of such Person may be realized upon in collection of principal or interest on such Indebtedness.

“Note Guarantee” means any guarantee of the Company’s Obligations under the Notes and the Indenture provided by a Restricted Subsidiary pursuant to the Indenture.

“Obligations” means, with respect to any Indebtedness, any principal, interest (including, without limitation, Post-Petition Interest), penalties, fees, indemnifications, reimbursements, damages, and other liabilities payable under the documentation governing such Indebtedness, including in the case of the Notes and the Note Guarantees, the Indenture.

“Officer” means, when used in connection with any action to be taken by the Company, the Chairman of the Board, the Chief Executive Officer, the President, the Chief Financial Officer, any Vice President, the Treasurer, the Controller or the Secretary of the Company.

“Officers’ Certificate” means, when used in connection with any action to be taken by the Company, a certificate signed by two Officers or by an Officer and either an Assistant Treasurer or an Assistant Secretary of the Company and delivered to the Trustee.

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“Opinion of Counsel” means a written opinion of counsel, who may be an employee of or counsel for the Company (except as otherwise provided in the Indenture) and which opinion shall be reasonably acceptable to the Trustee.

“Permitted Acquisition Indebtedness” means Indebtedness of the Company or any of its Restricted Subsidiaries to the extent such Indebtedness was Indebtedness (i) of a Subsidiary prior to the date on which such Subsidiary became a Restricted Subsidiary, (ii) of a Person that was merged, consolidated or amalgamated into the Company or a Restricted Subsidiary or (iii) assumed in connection with the acquisition of assets from a Person, provided in each case that any such Indebtedness was related to the assets being acquired and was not Incurred in connection with, or in anticipation or contemplation of, the relevant acquisition, merger, amalgamation or consolidation, and provided further in each case that on the date such Subsidiary became a Restricted Subsidiary or the date such Person was acquired, merged, consolidated or amalgamated into the Company or a Restricted Subsidiary or assumed in connection with an asset acquisition, as applicable, after giving pro forma effect thereto, (a) the Company, would be permitted to incur at least U.S.$1.00 of additional Indebtedness pursuant to paragraph (1) under “—Certain Covenants—Limitation on Incurrence of Additional Indebtedness,” or (b) the Consolidated Fixed Charge Coverage Ratio of the Company and the Restricted Subsidiaries after such transactions would be greater than the Consolidated Fixed Charge Coverage Ratio immediately prior to such transaction.

“Permitted Business” means the business or businesses conducted by the Company and its Restricted Subsidiaries as of the Issue Date and any business ancillary or complementary thereto.

“Permitted Holders” means (i) any member of the Board of Directors of the Company on the Issue Date, (ii) a parent, brother or sister of any of the individuals named in clause (i), (iii) the spouse or a former spouse of any individual named in clause (i) or (ii), (iv) the lineal descendants of any person named in clauses (i) through (iii) and the spouse or a former spouse of any such lineal descendant, (v) the estate or any guardian, custodian or other legal representative of any individual named in clauses (i) through (iv), (vi) any trust established principally for the benefit of any one or more of the individuals named in clauses (i) through (v), and (vii) any Person in which a majority of the equity interests are owned, directly or indirectly, by any one or more of the Persons named in clauses (i) through (vi).

“Permitted Indebtedness” has the meaning set forth under clause (2) of “Certain Covenants—Limitation on Incurrence of Additional Indebtedness.”

“Permitted Investments” means:

(1) Investments by the Company or any Restricted Subsidiary in any Person that is, or that result in any Person becoming, immediately after such Investment, a Restricted Subsidiary or constituting a merger or consolidation of such Person into the Company or with or into a Restricted Subsidiary, except for a Guarantee of Indebtedness of a Restricted Subsidiary that is not a Subsidiary Guarantor;

(2) Investments by any Restricted Subsidiary in the Company;

(3) Investments in cash and Cash Equivalents;

(4) any extension, modification or renewal of any Investments existing as of the Issue Date (but not Investments involving additional advances, contributions or other investments of cash or property or other increases thereof, other than as a result of the accrual or accretion of interest or original issue discount or payment-in-kind pursuant to the terms of such Investment as of the Issue Date);

(5) Investments permitted pursuant to clause (2)(b) or (e) of “Certain Covenants—Limitation on Transactions with Affiliates”;

(6) Investments received as a result of the bankruptcy or reorganization of any Person or taken in settlement of or other resolution of claims or disputes, and, in each case, extensions, modifications and renewals thereof;

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(7) Investments made by the Company or its Restricted Subsidiaries as a result of non-cash consideration permitted to be received in connection with an Asset Sale made in compliance with the covenant described under “Certain Covenants—Limitation on Asset Sales and Sales of Subsidiary Stock”;

(8) Investments in the form of Hedging Obligations permitted under clause 2(e) of “Certain Covenants—Limitation on Incurrence of Additional Indebtedness”;

(9) Investments in a Person engaged in a Permitted Business not to exceed the greater of (x) U.S.$100 million and (y) 10% of Consolidated Tangible Assets of the Company and its Restricted Subsidiaries at any one time outstanding;

(10) receivables owing to the Company or any Restricted Subsidiary if created or acquired in the ordinary course of business and payable or dischargeable in accordance with customary trade terms;

(11) payroll, travel, entertainment, relocation and similar advances to cover matters that are expected at the time of such advances ultimately to be treated as expenses for accounting purposes and that are made in the ordinary course of business;

(12) loans or advances to employees made in the ordinary course of business consistent with past practices of the Company or such Restricted Subsidiary;

(13) cash deposits with banks made in the ordinary course of business of the Company and its Restricted Subsidiaries, consistent with past practice, to secure payment of trade payables under Supplier Factoring Facilities;

(14) Investments in any Person to the extent such Investments consist of prepaid expenses, negotiable instruments held for collection and lease, utility and workers’ compensation, performance and other similar deposits made in the ordinary course of business by the Company or any Restricted Subsidiary;

(15) Investments in a Receivables Entity in connection with a Receivables Transaction; provided that such Investment in any such Person is in the form of any equity interest or interests in receivables and related assets generated by the Company or any Restricted Subsidiary and transferred to such Person in connection with a Receivables Transaction; and

(16) any receivables or loans taken by the Company or its Restricted Subsidiaries in connection with the sale of homes, land, amenities and other improvements in the ordinary course of business consistent with past practice. provided, however, that with respect to any Investment, the Company may, in its sole discretion, allocate all or any portion of any Investment and later re-allocate all or any portion of any Investment to, one or more of the above clauses (1) through (16) so that the entire Investment would be Permitted Investment.

“Permitted Liens” means any of the following:

(1) statutory Liens of landlords and Liens of carriers, warehousemen, mechanics, suppliers, materialmen, repairmen and other Liens imposed by law incurred in the ordinary course of business for sums not yet delinquent or being contested in good faith;

(2) Liens Incurred or deposits made in the ordinary course of business in connection with workers’ compensation, unemployment insurance and other types of social security, including any Lien securing letters of credit issued in the ordinary course of business consistent with past practice in connection therewith, or to secure the performance of tenders, statutory obligations, surety and appeal bonds, bids, leases, government

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performance and return-of-money bonds and other similar obligations (exclusive of obligations for the payment of borrowed money);

(3) Liens upon specific items of inventory or other goods and proceeds of any Person securing such Person’s obligations in respect of bankers’ acceptances issued or created for the account of such Person to facilitate the purchase, shipment or storage of such inventory or other goods;

(4) Liens securing reimbursement obligations with respect to commercial letters of credit which encumber documents and other property relating to such letters of credit and products and proceeds thereof;

(5) Liens encumbering deposits made to secure obligations arising from statutory, regulatory, contractual, or warranty requirements of the Company or a Restricted Subsidiary, including rights of offset and set-off;

(6) Liens securing Hedging Obligations that relate to Indebtedness that is Incurred in accordance with “Certain Covenants—Limitation on Incurrence of Additional Indebtedness” and that are secured by the same assets as secure such Hedging Obligations;

(7) Liens existing on the Issue Date and Liens to secure any Refinancing Indebtedness which is Incurred to Refinance any Indebtedness below which has been secured by a Lien permitted under the covenant described under “Certain Covenants—Limitation on Liens” not incurred pursuant to clauses (9) or (10) of the definition of “Permitted Liens” and which Indebtedness has been Incurred in accordance with “Certain Covenants— Limitation on Incurrence of Additional Indebtedness”; provided, that such new Liens:

(a) are no less favorable to the Holders of Notes and are not more favorable to the lienholders with respect to such Liens than the Liens in respect of the Indebtedness being Refinanced and

(b) do not extend to any property or assets other than the property or assets securing the Indebtedness Refinanced by such Refinancing Indebtedness;

(8) Liens securing Acquired Indebtedness Incurred in accordance with “Certain Covenants— Limitation on Incurrence of Additional Indebtedness” not incurred in connection with, or in anticipation or contemplation of, the relevant acquisition, merger or consolidation; provided, that

(a) such Liens secured such Acquired Indebtedness at the time of and prior to the Incurrence of such Acquired Indebtedness by the Company or a Restricted Subsidiary and were not granted in connection with, or in anticipation of the Incurrence of such Acquired Indebtedness by the Company or a Restricted Subsidiary; and

(b) such Liens do not extend to or cover any property of the Company or any Restricted Subsidiary other than the property that secured the Acquired Indebtedness prior to the time such Indebtedness became Acquired Indebtedness of the Company or a Restricted Subsidiary and are no more favorable to the lienholders than the Liens securing the Acquired Indebtedness prior to the Incurrence of such Acquired Indebtedness by the Company or a Restricted Subsidiary;

(9) purchase money Liens securing Purchase Money Indebtedness or Capitalized Lease Obligations Incurred to finance the acquisition or leasing of property of the Company or a Restricted Subsidiary used in a Permitted Business; provided, that:

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(a) the related Purchase Money Indebtedness does not exceed the cost of such property together with the related costs of construction or improvement of such property and shall not be secured by any property of the Company or any Restricted Subsidiary other than the property so acquired, and

(b) the Lien securing such Indebtedness will be created within 365 days of such acquisition;

(10) Liens securing an amount of Indebtedness under Credit Facilities outstanding at any one time not to exceed the greater of (x) U.S.$100 million and (y) 10% of the Consolidated Tangible Assets of the Company at such time;

(11) any pledge or deposit of cash or property in conjunction with obtaining surety and performance bonds and letters of credit required to engage in constructing on-site and off-site improvements required by municipalities or other governmental authorities in the ordinary course of business;

(12) Liens in favor of customs and revenue authorities arising as a matter of law to secure payment of customs duties in connection with the importation of goods;

(13) Liens encumbering customary initial deposits and margin deposits, and other Liens that are customary in the industry and incurred in the ordinary course of business securing Indebtedness under Hedging Obligation and forward contracts, options, futures contracts, futures options or similar agreements or arrangement designed to protect the Company and its Restricted Subsidiaries from fluctuations in the price of commodities;

(14) Liens for taxes, assessments or governmental charges or claims that are not yet delinquent or that are being contested in good faith by appropriate proceedings promptly instituted and diligently concluded; provided that any reserve or other appropriate provision as is required in conformity with GAAP has been made therefor;

(15) licenses of intellectual property in the ordinary course of business;

(16) Liens to secure a defeasance trust;

(17) easements, rights of way zoning and similar restrictions, reservations, restrictions or encumbrances in respect of real property or title defects that were not incurred in connection with Indebtedness and that do not in the aggregate materially adversely affect the value of said properties (as such properties are used by the Company or its Restricted Subsidiaries) or materially impair their use in the operation of the business of the Company and its Restricted Subsidiaries;

(18) Liens arising from precautionary Uniform Commercial Code financing statement filings regarding operating leases entered into by the Company or any of its Restricted Subsidiaries in the ordinary course of business;

(19) judgment Liens not giving rise to an Event of Default so long as any appropriate legal proceedings that may have been duly initiated for the review of such judgment shall not have been finally terminated or the period within which such legal proceedings may be initiated shall not have expired;

(20) Liens on Capital Stock of an Unrestricted Subsidiary that secure Indebtedness or other obligations of such Unrestricted Subsidiary; or

(21) Liens on accounts receivable or assets related to such accounts receivable incurred in connection with a Receivables Transaction.

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“Person” means an individual, partnership, limited partnership, corporation, company, limited liability company, unincorporated organization, trust or joint venture, or a governmental agency or political subdivision thereof.

“Post-Petition Interest” means all interest accrued or accruing after the commencement of any insolvency or liquidation proceeding (and interest that would accrue but for the commencement of any insolvency or liquidation proceeding) in accordance with and at the contract rate (including, without limitation, any rate applicable upon default) specified in the agreement or instrument creating, evidencing or governing any Indebtedness, whether or not, pursuant to applicable law or otherwise, the claim for such interest is allowed as a claim in such insolvency or liquidation proceeding.

“Preferred Stock” of any Person means any Capital Stock of such Person that has preferential rights over any other Capital Stock of such Person with respect to dividends, distributions or redemptions or upon liquidation.

“Purchase Money Indebtedness” means Indebtedness Incurred, including without limitation Land Acquisition and Construction Loans, for the purpose of financing all or any part of the purchase price, or other cost of construction or improvement of any property; provided, that (i) except in the case of Land Acquisition and Construction Loans, the aggregate principal amount of such Indebtedness does not exceed the lesser of the Fair Market Value of such property or such purchase price or cost, and (ii) in the case of Land Acquisition and Construction Loans, the aggregate principal amount of such Indebtedness does not exceed the greater of (A) the Fair Market Value of such property and (B) the purchase price of such property and related cost of construction and improvement of such property, including, in each case, any Refinancing of such Indebtedness that does not increase the aggregate principal amount (or accreted amount, if less) thereof as of the date of Refinancing.

“Qualified Capital Stock” means any Capital Stock that is not Disqualified Capital Stock and any warrants, rights or options to purchase or acquire Capital Stock that is not Disqualified Capital Stock that are not convertible into or exchangeable into Disqualified Capital Stock.

“Rating Agencies” means (i) S&P and Moody’s or (ii) if S&P or Moody’s or both shall not make a rating of the notes publicly available, a nationally recognized United States securities rating agency or agencies, as the case may be, selected by the Company, which shall be substituted for S&P or Moody’s or both, as the case may be.

“Receivables Entity” means a Person in which the Company or any Restricted Subsidiary makes an Investment and:

(1) to which the Company or any Restricted Subsidiary transfers receivables and related assets in connection with a Receivables Transaction;

(2) which engages in no activities other than in connection with the Receivables Transaction;

(3) no portion of the Indebtedness or any other obligations (contingent or otherwise) of which:

(a) is guaranteed by the Company or any Restricted Subsidiary (excluding guarantees of Obligations (other than the principal of, and interest on, Indebtedness) pursuant to Standard Securitization Undertakings);

(b) is recourse to or obligates the Company or any Restricted Subsidiary in any way other than pursuant to Standard Securitization Undertakings; or

(c) subjects any property or asset of the Company or any Restricted Subsidiary, directly or indirectly, contingently or otherwise, to the satisfaction thereof, other than pursuant to Standard Securitization Undertakings;

(4) with which neither the Company nor any Restricted Subsidiary has any material contract, agreement, arrangement or understanding (except in connection with a Receivables Transaction) other than on terms no less favorable to the Company or such Restricted

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Subsidiary than those that might be obtained at the time from Persons that are not Affiliates of the Company, other than fees payable in the ordinary course of business in connection with servicing receivables; and

(5) to which neither the Company nor any Restricted Subsidiary has any obligation to maintain or preserve such entity’s financial condition or cause such entity to achieve certain levels of operating results.

“Receivables Transaction” means any securitization, factoring, discounting or similar financing transaction or series of transactions that may be entered into by the Company or any of its Restricted Subsidiaries pursuant to which the Company or any of its Restricted Subsidiaries may sell, convey or otherwise transfer to any Person (including a Receivables Entity), or may grant a security interest in, any receivables (whether now existing or arising in the future) of the Company or any of its Restricted Subsidiaries, and any assets related thereto, including all collateral securing such receivables, all contracts and all guarantees or other obligations in respect of such receivables, the proceeds of such receivables and other assets which are customarily transferred, or in respect of which security interests are customarily granted, in connection with securitization, factoring or discounting involving receivables.

“Receivables Transaction Amount” means the amount of obligations outstanding under the legal documents entered into as part of a Receivables Transaction on any date of determination that would be characterized as principal if such Receivables Transaction were structured as a secured lending transaction rather than a purchase.

“Refinance” means, in respect of any Indebtedness, to issue any Indebtedness in exchange for or to refinance, replace, defease or refund such Indebtedness in whole or in part. “Refinanced” and “Refinancing” will have correlative meanings.

“Refinancing Indebtedness” means Indebtedness of the Company or any Restricted Subsidiary issued to Refinance any other Indebtedness of the Company or a Restricted Subsidiary so long as:

(1) the aggregate principal amount (or initial accreted value, if applicable) of such new Indebtedness as of the date of such proposed Refinancing does not exceed the aggregate principal amount (or initial accreted value, if applicable) of the Indebtedness being Refinanced (plus the amount of any premium required to be paid under the terms of the instrument governing such Indebtedness and the amount of reasonable expenses incurred by the Company in connection with such Refinancing);

(2) such new Indebtedness has:

(a) a Weighted Average Life to Maturity that is equal to or greater than the Weighted Average Life to Maturity of the Indebtedness being Refinanced, and

(b) a final maturity that is equal to or later than the final maturity of the Indebtedness being Refinanced; and

(3) if the Indebtedness being Refinanced is:

(a) Indebtedness of the Company, then such Refinancing Indebtedness will be Indebtedness of the Company and/or a Subsidiary Guarantor,

(b) Indebtedness of a Subsidiary Guarantor, then such Refinancing Indebtedness will be Indebtedness of the Company and/or such Subsidiary Guarantor, and

(c) Subordinated Indebtedness, then such Refinancing Indebtedness shall be subordinate to the Notes or the relevant Note Guarantee, if applicable, at least to the same extent and in the same manner as the Indebtedness being Refinanced.

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“Reporting GAAP” means the Mexican Financial Reporting Standards as in effect as of the Issue Date and any subsequent financial reporting standards authorized by the Mexican Comisión Nacional Bancaria y de Valores and used by the Company.

“Restricted Payment” has the meaning set forth under “Certain Covenants—Limitation on Restricted Payments.”

“Restricted Subsidiary” means any Subsidiary of the Company which at the time of determination is not an Unrestricted Subsidiary.

“Revocation” has the meaning set forth under “Certain Covenants—Limitation on Designation of Unrestricted Subsidiaries.”

“S&P” means Standard & Poor’s Ratings Services and its successors and assigns.

“Sale and Leaseback Transaction” means any direct or indirect arrangement with any Person or to which any such Person is a party providing for the leasing to the Company or a Restricted Subsidiary of any property, whether owned by the Company or any Restricted Subsidiary at the Issue Date or later acquired, which has been or is to be sold or transferred by the Company or such Restricted Subsidiary to such Person or to any other Person by whom funds have been or are to be advanced on the security of such Property.

“Senior Indebtedness” means the Notes and the Note Guarantees and any other Indebtedness of the Company or any Subsidiary Guarantor that ranks equal in right of payment with the Notes or the relevant Note Guarantee, as the case may be.

“Significant Subsidiary” means a Subsidiary of the Company constituting a “Significant Subsidiary” of the Company in accordance with Rule 1-02(w) of Regulation S-X under the Securities Act in effect on the date hereof.

“Standard Securitization Undertakings” means representations, warranties, covenants and indemnities entered into by the Company or any Restricted Subsidiary which are reasonably customary in securitization of receivables transactions.

“Stated Maturity” means, with respect to any security, the date specified in such security as the fixed date on which the final payment of principal of such security is due and payable, including pursuant to any mandatory redemption provision (but excluding any provision providing for the repurchase of such security at the option of the holder thereof upon the happening of any contingency unless such contingency has occurred).

“Subordinated Indebtedness” means, with respect to the Company or any Subsidiary Guarantor, any Indebtedness of the Company or such Subsidiary Guarantor, as the case may be which is expressly subordinated in right of payment to the Notes or the relevant Note Guarantee, as the case may be.

“Subsidiary,” means, with respect to any Person, any other Person of which such Person owns, directly or indirectly, more than 50% of the voting power of the other Person’s outstanding Voting Stock.

“Subsidiary Guarantor” means any Restricted Subsidiary which provides a Note Guarantee pursuant to the Indenture until such time as its Note Guarantee is released in accordance with the Indenture.

“Supplier Factoring Facilities” means supplier factoring facilities established by Mexican public and private banks pursuant to (i) the Convenio Denominado “Cadenas Productivas” para el Desarollo de Proveedores, established on March 30, 2006, by Nacional Financiera, S.N.C. and the Instituto del Fondo Nacional de la Vivienda para los Trabajadores, as amended, or (ii) the factoring line of credit agreement, dated October 16, 2008 entered into by the Company and Banco Inbursa, S.A. Institución de Banca Múltiple, Grupo Financiero Inbursa, for up to Ps.700.0 million, or (iii) the factoring line of credit agreement, dated December 18, 2008 entered into by the Company and BBVA Bancomer, S.A. Institución de Banca Múltiple, Grupo Financiero BBVA Bancomer, for up to Ps.1,000.0 million, in each case as in effect on the Issue Date and as amended from time to time on terms similar to those in effect on the Issue Date, which provide for the sale and assignment from time to time by suppliers on a discounted basis of then existing trade payables of the Company and its Restricted Subsidiaries, and any similar

137 supplier factoring facilities supplementing or replacing such existing facilities; provided, that, any funds disbursed under such facilities shall be solely in consideration for the sale and assignment of then existing trade payables of the Company and its Restricted Subsidiaries generated in the ordinary course of business.

“Surviving Entity” has the meaning set forth under “Certain Covenants—Limitation on Merger, Consolidation and Sale of Assets.”

“Unrestricted Subsidiary” means any Subsidiary of the Company Designated as such pursuant to “Certain Covenants—Limitation on Designation of Unrestricted Subsidiaries.” Any such Designation may be revoked by a Board Resolution of the Company, subject to the provisions of such covenant.

“Voting Stock” with respect to any Person, means securities of any class of Capital Stock of such Person entitling the holders thereof (whether at all times or only so long as no senior class of stock has voting power by reason of any contingency) to vote in the election of members of the Board of Directors (or equivalent governing body) of such Person.

“Weighted Average Life to Maturity” means, when applied to any Indebtedness at any date, the number of years (calculated to the nearest one-twelfth) obtained by dividing:

(1) the then outstanding aggregate principal amount or liquidation preference, as the case may be, of such Indebtedness into

(2) the sum of the products obtained by multiplying:

(a) the amount of each then remaining installment, sinking fund, serial maturity or other required payment of principal or liquidation preference, as the case may be, including payment at final maturity, in respect thereof, by

(b) the number of years (calculated to the nearest one-twelfth) which will elapse between such date and the making of such payment.

“Wholly-Owned Subsidiary” means, for any Person, any Subsidiary (Restricted Subsidiary in the case of the Company) of which all the outstanding Capital Stock (other than, in the case of a Subsidiary not organized in the United States, directors’ qualifying shares or an immaterial amount of shares required to be owned by other Persons pursuant to applicable law) is owned by such Person or any other Person that satisfies this definition in respect of such Person.

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TAXATION

Prospective purchasers of the notes are advised to consult their own tax advisors as to the consequences under the tax laws of the country of which they are residents in connection with the purchase, ownership and disposition of the notes, including, without limitation, the application to their particular situations of the tax considerations discussed below, as well as the application of state, local and foreign tax laws.

General Mexican Tax Considerations

The following is a summary of the main Mexican federal income tax consequences for both Mexican and non-Mexican tax residents in connection with the purchase, ownership or disposition of notes, and is based upon the federal tax laws of Mexico as in effect on the date of this offering memorandum, all of which are subject to change. This summary does not purport to be a comprehensive description of all Mexican tax considerations that may be relevant to a decision to purchase, hold or dispose of the notes. The summary does not address any tax consequences under the laws of any state, municipality or locality of Mexico; neither does it address any tax consequences under the laws of the United States, Luxembourg nor under the laws of any other taxing jurisdiction.

PROSPECTIVE INVESTORS SHOULD CONSULT THEIR OWN TAX ADVISORS AS TO THE MEXICAN AND FOREIGN CONSEQUENCES OF THE PURCHASE, OWNERSHIP AND DISPOSITION OF NOTES, INCLUDING, IN PARTICULAR, THE EFFECT OF ANY FOREIGN (NON-MEXICAN), STATE OR LOCAL TAX LAWS.

The tax implications described herein may vary depending on the applicability of a treaty for the avoidance of double taxation. Mexico has entered into or is negotiating several treaties regarding the avoidance of double taxation with various countries that may have an impact on the tax treatment of the purchase, ownership or disposition of notes. PROSPECTIVE PURCHASERS OF NOTES, WHO ARE NON-MEXICAN RESIDENTS, SHOULD CONSULT THEIR TAX ADVISORS ON THE ENTITLEMENT TO BENEFITS AFFORDED BY TAX TREATIES EXECUTED BY MEXICO, IF ANY.

Mexican Federal Tax Considerations

An individual is a resident of Mexico if such person has established his or her domicile in Mexico. When such person has a home in another country, the individual will be considered a resident of Mexico for tax purposes if his/her center of vital interests is located in Mexico, which is deemed to occur if (i) more than 50% of such individual’s total income, in any calendar year, is from a Mexican source, or (ii) such individual’s principal center of professional activities is located in Mexico. Mexican nationals that are employed by the Mexican government are deemed residents of Mexico, even if his/her center of vital interests is located outside of Mexico. Unless otherwise proven, Mexican nationals are deemed residents of Mexico for tax purposes. A legal entity is a resident of Mexico if it maintains the principal administration of its business or the effective location of its management in Mexico. Furthermore, a permanent establishment in Mexico of a foreign person will be required to pay taxes in Mexico in accordance with applicable tax laws, for income attributable to such permanent establishment. Mexican tax residents—both individuals and legal entities—are taxed on worldwide income regardless of the location of its source. Mexican resident individuals are subject to income tax at progressive rates while legal entities are subject to income tax at the applicable corporate tax rate. The current maximum income tax rate for both individuals and legal entities is 30%.

The following is a general summary of the principal Mexican federal income tax consequences of the purchase, ownership and disposition of the notes by holders that are not residents of Mexico for tax purposes and that do not hold the notes through a permanent establishment in Mexico to which the holding of the notes is attributable for tax purposes. Non-Mexican residents obtaining income from sources located in Mexico that do not constitute a permanent establishment are subject to income tax in Mexico on all income arising from Mexican sources. In general, tax residents with no permanent establishment in Mexico are subject to withholding rates that vary depending on the type of income obtained.

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Taxation of Interest

Interest Received by Non-Mexican Residents. Pursuant to the Mexican Income Tax Law, payments of interest (including original issue discount and premiums, which are deemed interest under the Law) on the notes made by us or the guarantors in Mexico to a foreign holder will generally be subject to Mexican withholding tax at a rate of 4.9%, if, as expected, the following requirements are met:

• a notice has been filed before the CNBV describing the main characteristics of the notes offering as called for in the second paragraph of article 7 of the Mexican Securities Market Law;

• the notes, as expected, are placed in a public offering outside of Mexico through banks or brokerage houses, in a country with which Mexico has in force a treaty for the avoidance of double taxation (which currently includes the United States of America and Luxembourg); and

• the information requirements specified from time to time by the Mexican Tax Administration Service under its general rules, including, after completion of the offering of the notes, certain information related to the notes offering and this offering memorandum are duly complied with.

If any of the above-mentioned requirements is not met, the Mexican withholding tax will be at a rate of 10% or higher.

In addition, if the effective beneficiaries, whether acting directly or indirectly, severally or jointly, with related parties receiving more than 5% of the aggregate amount of each interest payment under the notes are (i) shareholders holding 10% or more of our voting stock, directly or indirectly, or (ii) corporations or other entities having more that 20% of their stock owned directly or indirectly, jointly or severally, by persons related to us, the Mexican withholding tax will be applied at a rate of 30%.

As of the date of this offering memorandum, neither the U.S.-Mexico Tax Treaty nor the Luxembourg- Mexico Tax Treaty is expected to have any effect on the Mexican tax consequences described in this summary, because, as described above, under Mexico’s Income Tax Law, we expect to be entitled to withhold taxes in connection with interest payments under the notes at a 4.9% rate.

Payments of interest on the notes made by us to non-Mexican pension and retirement funds will be exempt from Mexican withholding tax provided that:

• such fund is duly incorporated pursuant to the laws of its country of residence and is the beneficial owner of the interest payment;

• such income is exempt from taxes in its country of residence; and

• such fund is registered in the Registry of Banks, Financing Entities, Pension and Retirement Funds and Investment Funds from Abroad, of the Mexican Ministry of Finance and Public Credit in accordance with the rules issued by the Mexican Tax Administration Service for such purposes.

Holders or beneficial owners of the notes may be requested to, subject to specified exceptions and limitations, provide certain information or documentation necessary to enable us to apply the appropriate Mexican withholding tax rate on interest payments under the notes made by us to such holders or beneficial owners. In the event that the specified information or documentation concerning the holder or beneficial owner, if requested, is not timely provided completely or at all, we may withhold Mexican tax from that interest payments on the notes to that holder or beneficial owner at the maximum applicable rate, but our obligation to pay Additional Amounts relating to those withholding taxes will be limited as described under “Description of Notes—Additional Amounts.”

Payments of Principal. Under existing Mexican law and regulations, payments of principal made by us in respect of the notes will not be subject to Mexican withholding tax.

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Gains obtained from the Disposition of the Notes. Pursuant to the Mexican Income Tax Law, in certain cases gains realized by a non-Mexican resident from the disposition of notes may be subject to income tax in Mexico. In this regard, if notes are transferred by a non-Mexican resident investor to a Mexican resident or to a permanent establishment in Mexico of a non-Mexican resident, gains if any would be subject to Mexican income tax pursuant to the rules described above in respect of interest payments. The amount of deemed interest income will be determined according to the rules established in the Mexican Income Tax Law.

On the other hand, gains realized by a non-Mexican resident investor from the sale or other disposition of notes, if transferred to another non-Mexican Resident would not be subject to income tax withholding in Mexico, provided that neither transferor nor transferee have a permanent establishment in Mexico.

Imputed Interest on the Acquisition of Notes. Under the Mexican Income Tax Law, any discount received by a non-Mexican resident upon purchase of the notes, if acquired from a Mexican resident or a non-Mexican resident with a permanent establishment in Mexico, is treated as deemed interest income, and therefore, subject to taxes in Mexico. Such interest income is calculated as the difference between the face value (plus accrued interest not yet subject to withholding) and the purchase price of such notes. The Mexican seller must determine, pay and collect the tax on behalf of the non-resident purchaser within 15 days after the sale. In such case, the applicable income tax rate would be 10%.

Notes acquired at a discount by a non-Mexican resident with no permanent establishment in Mexico from another non-Mexican resident with no permanent establishment in Mexico would not be subject to income tax on imputed interest on the acquisition of notes.

We have agreed, subject to certain limitations and exceptions, to pay additional amounts in respect of the above-mentioned Mexican withholding taxes in connection with interest payments on the notes. See “Description of Notes—Additional Amounts.”

Interest Received by Mexican Residents. Payments of interest made by us in respect of the notes, where the recipient of such interest is a Mexican resident investor will be subject to income tax in Mexico. Also, gains obtained from the sale or disposition of the notes as well as imputed income on notes acquired at a discount by a Mexican resident investor, would be considered taxable income and will be subject to income tax in Mexico. In general, recipients of interest that are Mexican residents would be required to report any income arising from the notes in their corresponding tax returns. Taxable income and the tax applicable thereupon would be determined according to the rules established in the Mexican Income Tax Law.

In general terms, because legal entities are taxed on the accrual method of accounting and individuals (with certain exceptions) are taxed on the cash method of accounting, legal entities would be required to recognize taxable income on accrued interest while individuals would be required to recognize taxable income when they receive payments of interests. Specific tax consequences may vary depending on the tax regime and particular characteristics of the recipient of the interest (corporation, non-profit organization, financial entity, pension fund, individual with business activities, individual obtaining only interest income, etc.).

NOTE THAT PURSUANT TO THE MEXICAN SECURITIES MARKET LAW, NOTES MUST NEITHER BE OFFERED NOR NEGOTIATED WITHIN MEXICO. THE SUMMARY OF TAX CONSEQUENCES FOR MEXICAN RESIDENTS IS ONLY A BRIEF DESCRIPTION OF THE TAX CONSEQUENCES IN CASE NOTES ARE ACQUIRED BY MEXICAN RESIDENTS OUTSIDE OF MEXICO, BUT SHALL NOT BE CONSIDERED TO BE AN OFFER OF THE NOTES IN MEXICO. MEXICAN TAX RESIDENTS SHOULD CONSULT WITH THEIR TAX ADVISORS ON THE TAX CONSEQUENCES OF PURCHASING, HOLDING AND DISPOSING OF THE NOTES.

Other Mexican Taxes. Under current Mexican tax laws and regulations, investors are not subject to estate, gift, inheritance or similar taxes in connection with the execution of the transaction documents (such as the purchase agreement) prepared in connection with the issuance of the notes or as a result of the enforcement of any thereof, nor will they be liable for Mexican stamp, registration or similar taxes with respect to notes.

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THE ABOVE SUMMARY IS INTENDED TO OUTLINE CERTAIN MEXICAN TAX LAWS AND REGULATIONS AND IS NOT INTENDED TO CONSTITUTE A COMPLETE ANALYSIS OF ALL TAX CONSEQUENCES RELATING TO THE PURCHASE, OWNERSHIP OR DISPOSITION OF THE NOTES. PURSUANT TO ARTICLE 89 OF THE MEXICAN TAX CODE, RECIPIENTS OF THIS OFFERING MEMORANDUM ARE HEREBY ADVISED THAT THE INFORMATION CONTAINED HEREIN MAY BE CONTRARY TO THE INTERPRETATION OF THE MEXICAN FISCAL AUTHORITIES. PROSPECTIVE PURCHASERS SHOULD CONSULT THEIR OWN TAX ADVISORS CONCERNING THE TAX CONSEQUENCES OF THEIR PARTICULAR SITUATIONS.

United States Tax Considerations

TO ENSURE COMPLIANCE WITH U.S. TREASURY DEPARTMENT CIRCULAR 230, HOLDERS ARE HEREBY NOTIFIED THAT: (A) ANY DISCUSSION OF UNITED STATES FEDERAL TAX ISSUES IN THIS PROSPECTUS IS NOT INTENDED OR WRITTEN TO BE RELIED UPON, AND CANNOT BE RELIED UPON, BY HOLDERS FOR THE PURPOSE OF AVOIDING PENALTIES THAT MAY BE IMPOSED ON HOLDERS UNDER THE INTERNAL REVENUE CODE; (B) SUCH DISCUSSION IS INCLUDED HEREIN BY THE ISSUER IN CONNECTION WITH THE PROMOTION OR MARKETING (WITHIN THE MEANING OF CIRCULAR 230) BY THE ISSUER OF THE TRANSACTIONS OR MATTERS ADDRESSED HEREIN; AND (C) HOLDERS SHOULD SEEK ADVICE BASED ON THEIR PARTICULAR CIRCUMSTANCES FROM AN INDEPENDENT TAX ADVISOR.

The following summary contains a description of certain U.S. federal income tax consequences of the purchase, ownership and disposition of the Notes by a U.S. holder (as defined below). This summary addresses only U.S. holders that purchase Notes at their issue price as part of the initial offering and that hold Notes as capital assets for U.S. federal income tax purposes. It does not purport to be a comprehensive description of all tax considerations that may be relevant to a particular investor, and we have assumed that U.S. holders are familiar with the tax rules applicable to investments in securities generally and with any special rules to which they may be subject. In particular, this summary does not address considerations that may be relevant to an investor that may be subject to special tax rules, such as a bank, thrift, real estate investment trust, regulated investment company, insurance company, tax-exempt organization, dealer in securities or currencies, trader in securities or commodities that elects mark-to-market treatment, person that will hold the Notes as a hedge against currency risk or as a position in a “straddle” or conversion transaction, person subject to the alternative minimum tax, or person whose “functional currency” is not the U.S. dollar.

This summary is based upon the U.S. Internal Revenue Code of 1986, as amended (the “Code”), Treasury regulations issued thereunder and judicial and administrative interpretations thereof, each as in effect on the date hereof, all of which are subject to change, possibly with retroactive effect. Furthermore, there can be no assurance that the U.S. Internal Revenue Service (the “IRS”) will not assert a position contrary to those discussed herein.

As used herein, a “U.S. holder” means a beneficial owner of a Note that is, for U.S. federal income tax purposes, (i) a citizen or resident of the United States; (ii) a corporation, or any entity treated as a corporation for U.S. federal income tax purposes, created or organized in the United States or under the laws of the United States or of any political subdivision thereof; (iii) any estate the income of which is subject to U.S. federal income taxation regardless of its source; and (iv) any trust if a court within the United States is able to exercise primary supervision over the administration of the trust and one or more U.S. fiduciaries have the authority to control all substantial decisions of the trust, or if a valid election is in place to treat the trust as a United States person. A “non-U.S. holder” is a beneficial owner of the Notes (other than a partnership) that is not a U.S. holder.

If a partnership (or other entity treated as a partnership for U.S. federal income tax purposes) holds the Notes, then the tax treatment of a partner in such partnership generally will depend upon the status of the partner and the activities of the partnership. Such a partner or partnership should consult its own tax advisor as to the tax consequences of acquiring, owning and disposing of the Notes.

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Investors should consult their own tax advisors regarding the tax consequences of the acquisition, ownership and disposition of the Notes, including the application to their particular circumstances of the tax considerations discussed below, as well as the application of U.S. federal estate and gift tax laws, U.S. state and local tax laws, and foreign tax laws.

U.S. Federal Income Tax Consequences to U.S. Holders

Payments of Interest. Payments of interest on the Notes (including the amount of any withholding taxes and any additional amounts paid with respect thereto) generally will be taxable to a U.S. holder as ordinary interest income at the time that such payments accrue or are received, in accordance with the U.S. holder’s method of accounting for U.S. federal income tax purposes.

With certain exceptions as noted below, any Mexican withholding tax that is imposed on payments of interest will be treated, up to any applicable reduced rate provided under the U.S.-Mexican income tax treaty, as a foreign income tax that is eligible (subject to generally applicable limitations and conditions under U.S. tax laws) for credit against a U.S. holder’s federal income tax liability or, at the U.S. holder’s election, for deduction in computing the U.S. holder’s taxable income. Payments of interest on the Notes generally will constitute foreign- source “passive category income” for U.S. foreign tax credit purposes. The calculation and availability of foreign tax credits and, in the case of a U.S. holder that elects to deduct foreign taxes, the availability of such deduction involves the application of complex rules that depend on a U.S. holder’s particular circumstances. U.S. holders should consult their own tax advisors regarding the availability of foreign tax credits.

Dispositions. A U.S. holder generally will recognize gain or loss on the sale, exchange, redemption or other taxable disposition of the Notes in an amount equal to the difference between the amount realized on such disposition (less any amounts attributable to accrued but unpaid interest, which will be taxable as such) and the U.S. holder’s adjusted tax basis in the Notes. A U.S. holder’s adjusted tax basis in a Note generally will equal its initial investment in that Note. Gain or loss realized by a U.S. holder on a sale, redemption or other disposition of the Notes generally will be U.S.-source capital gain or loss, and generally will be long-term capital gain or loss if, at the time of the disposition, the Notes have been held for more than one year. The net amount of long-term capital gain realized by certain non-corporate holders (including individuals) may be subject to taxation at a preferential rate. The deduction of capital losses is subject to limitations.

U.S. Federal Income Tax Consequences to Non-U.S. Holders

A non-U.S. holder generally will not be subject to U.S. federal income tax (including U.S. withholding tax) on payments of interest on the Notes. In addition, a non-U.S. holder generally will not be subject to U.S. federal income tax on gain realized on the sale, exchange, redemption or other taxable disposition of the Notes. U.S. federal income tax will apply to such interest and gain, however, to the extent that such income is effectively connected with the conduct of a U.S. trade or business by such non-U.S. holder (subject to the provisions of an applicable income tax treaty); furthermore, gain realized by an individual non-U.S. holder will be subject to U.S. federal income taxation if such holder is present in the United States for 183 days or more in the taxable year of the disposition and certain other conditions are met.

Information Reporting and Backup Withholding

Payments in respect of the Notes that are paid within the United States or through certain U.S.-related financial intermediaries are generally subject to information reporting, unless the U.S. holder is a corporation or other exempt recipient. Such payments to a non-exempt recipient may also be subject to backup withholding, unless the U.S. holder provides a taxpayer identification number and certifies that it has not lost its exemption from backup withholding. The amount of any backup withholding collected from a payment to a U.S. holder will be allowed as a credit against the U.S. holder’s U.S. federal income tax liability and may entitle the U.S. holder to a refund, provided that certain required information is furnished to the IRS. A non-U.S. holder generally will not be subject to information reporting or backup withholding, but such a holder may have to comply with certification procedures to establish that it is not a United States person.

Recently enacted legislation requires certain U.S. holders to report information with respect to their investment in Notes not held through a custodial account with a U.S. financial institution to the IRS, provided the

143 aggregate value of the Notes and certain other foreign financial assets exceeds $50,000. A U.S. holder should consult its own tax advisor regarding the application of the information reporting rules to the Notes and the application of the recently enacted legislation to its particular situation.

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TRANSFER RESTRICTIONS

This offering is being made in accordance with Rule 144A and Regulation S under the Securities Act. The notes have not been registered under the Securities Act and may not be offered or sold within the United States or to, or for the account or benefit of U.S. persons except pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act. Accordingly, the notes are being offered hereby only (a) to qualified institutional buyers (“QIBs”) (as defined in Rule 144A under the Securities Act) in compliance with Rule 144A under the Securities Act and (b) in offers and sales that occur outside the United States to persons other than U.S. persons (“non-U.S. purchasers,” which term shall include dealers or other professional fiduciaries in the United States acting on a discretionary basis for non-U.S. beneficial owners (other than an estate or trust), in offshore transactions meeting the requirements of Rule 903 of Regulation S). As used herein, the terms “offshore transactions,” “United States” and “U.S. person” have the respective meanings given to them in Regulation S.

Each purchaser of notes will be deemed to have represented and agreed with us and the initial purchasers as follows:

(1) it is purchasing the notes for its own account or an account with respect to which it exercises sole investment discretion and that it and any such account is (a) a QIB, and is aware that the sale to it is being made in reliance on Rule 144A under the Securities Act or (b) a non-U.S. purchaser that is outside the United States (or a non-U.S. purchaser that is a dealer or other fiduciary as referred to above);

(2) it understands that the notes are being offered in a transaction not involving any public offering in the United States within the meaning of the Securities Act, that the notes have not been and will not be registered under the Securities Act, and that the notes may not be offered or sold within the United States or to, or for the account or benefit of, U.S. persons except as set forth below;

(3) it shall not resell or otherwise transfer any of such notes prior to (a) the date that is one year (or such shorter period of time as permitted by Rule 144(d) under the Securities Act or any successor provision thereunder) after the later of the date of original issuance of the notes and (b) such later date, if any, as may be required by applicable laws except:

• to us or any of our subsidiaries;

• pursuant to a registration statement that has been declared effective under the Securities Act;

• within the United States to a QIB in compliance with Rule 144A under the Securities Act;

• outside the United States to non-U.S. purchasers in offshore transactions meeting the requirements of Rule 904 of Regulation S under the Securities Act; or

• pursuant to another available exemption from the registration requirements of the Securities Act;

(4) it agrees that it will give notice of any restrictions on transfer of such notes to each person to whom it transfers the notes;

(5) it understands that the certificates evidencing the notes (other than the Regulation S global notes) will bear a legend substantially to the following effect unless otherwise agreed by the Issuer:

UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION (“DTC”), TO THE COMPANY OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE, OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE OR

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OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.

THE SECURITIES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR ANY STATE OR OTHER SECURITIES LAWS, AND MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED EXCEPT IN ACCORDANCE WITH THE FOLLOWING SENTENCE. BY ITS ACQUISITION HEREOF OR OF A BENEFICIAL INTEREST HEREIN, THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF (1) REPRESENTS THAT IT, AND ANY ACCOUNT FOR WHICH IT IS ACTING, (A) IS A “QUALIFIED INSTITUTIONAL BUYER” (WITHIN THE MEANING OF RULE 144A UNDER THE SECURITIES ACT) OR (B) IS NOT A U.S. PERSON AND IS ACQUIRING THIS SECURITY IN AN “OFFSHORE TRANSACTION” PURSUANT TO RULE 903 OR 904 OF REGULATION S AND, WITH RESPECT TO (A) AND (B), EXERCISES SOLE INVESTMENT DISCRETION WITH RESPECT TO SUCH ACCOUNT, (2) AGREES FOR THE BENEFIT OF THE COMPANY THAT IT WILL NOT OFFER, SELL, PLEDGE OR OTHERWISE TRANSFER THIS SECURITY OR ANY BENEFICIAL INTEREST HEREIN PRIOR TO THE RESALE RESTRICTION TERMINATION DATE (AS DEFINED IN THE NEXT PARAGRAPH), EXCEPT (A) (I) TO THE COMPANY OR ANY SUBSIDIARY THEREOF, (II) PURSUANT TO A REGISTRATION STATEMENT THAT HAS BECOME EFFECTIVE UNDER THE SECURITIES ACT, (III) TO A QUALIFIED INSTITUTIONAL BUYER IN COMPLIANCE WITH RULE 144A UNDER THE SECURITIES ACT, (IV) IN AN OFFSHORE TRANSACTION COMPLYING WITH THE REQUIREMENTS OF RULE 903 OR RULE 904 OF REGULATION S UNDER THE SECURITIES ACT, OR (V) PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT PROVIDED BY RULE 144 THEREUNDER (IF AVAILABLE), AND (B) IN ACCORDANCE WITH ALL APPLICABLE SECURITIES LAWS OF THE STATES OF THE UNITED STATES AND OTHER JURISDICTIONS, AND (3) AGREES THAT IT WILL GIVE TO EACH PERSON TO WHOM THIS SECURITY IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. AS USED HEREIN, THE TERMS “OFFSHORE TRANSACTION,” “UNITED STATES” AND “U.S. PERSON” HAVE THE RESPECTIVE MEANINGS GIVEN TO THEM BY REGULATION S UNDER THE SECURITIES ACT.

THE RESALE RESTRICTION TERMINATION DATE WILL BE THE DATE:

(1) THAT IS AT LEAST ONE YEAR AFTER THE LAST ORIGINAL ISSUE DATE HEREOF; AND (2) ON WHICH THE COMPANY INSTRUCTS THE TRUSTEE THAT THIS LEGEND (OTHER THAN THE FIRST PARAGRAPH HEREOF) SHALL BE DEEMED REMOVED FROM THIS SECURITY, IN ACCORDANCE WITH THE PROCEDURES DESCRIBED IN THE INDENTURE RELATING TO THIS SECURITY.

PRIOR TO THE REGISTRATION OF ANY TRANSFER IN ACCORDANCE WITH PARAGRAPH 2A(V) ABOVE, THE COMPANY AND THE TRUSTEE RESERVE THE RIGHT TO REQUIRE THE DELIVERY OF SUCH LEGAL OPINIONS, CERTIFICATIONS, OR OTHER EVIDENCE AS MAY REASONABLY BE REQUIRED IN ORDER TO DETERMINE THAT THE PROPOSED TRANSFER IS BEING MADE IN COMPLIANCE WITH THE SECURITIES ACT AND APPLICABLE STATE SECURITIES LAWS. NO REPRESENTATION IS MADE AS TO THE AVAILABILITY OF ANY EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT.*

* This legend (other than the first paragraph hereof) shall be deemed removed from the face of this Security without further action of the Company, the Trustee, or the holders of this Security at such time as the Company instructs the Trustee to remove such legend pursuant to the Indenture.

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(6) If it is a non-U.S. purchaser acquiring a beneficial interest in a Regulation S global note offered pursuant to this offering memorandum, it acknowledges and agrees that, until the expiration of the 40-day “distribution compliance period” within the meaning of Regulation S, any offer, sale, pledge or other transfer shall not be made by it in the United States or to, or for the account or benefit of, a U.S. person, except pursuant to Rule 144A to a QIB taking delivery thereof in the form of a beneficial interest in a U.S. global note, and that each Regulation S global note will contain a legend to substantially the following effect:

PRIOR TO EXPIRATION OF THE 40-DAY DISTRIBUTION COMPLIANCE PERIOD (AS DEFINED IN REGULATION S (“REGULATION S”) UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”)), THIS SECURITY MAY NOT BE REOFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED WITHIN THE UNITED STATES (AS DEFINED IN REGULATION S) OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, A U.S. PERSON (AS DEFINED IN REGULATION S), EXCEPT TO A “QUALIFIED INSTITUTIONAL BUYER” IN COMPLIANCE WITH RULE 144A UNDER THE SECURITIES ACT IN A TRANSACTION MEETING THE REQUIREMENTS OF THE INDENTURE REFERRED TO HEREIN.

(7) it acknowledges that the foregoing restrictions apply to holders of beneficial interests in the notes, as well as holders of the notes;

(8) it acknowledges that the Trustee will not be required to accept for registration of transfer any notes acquired by it, except upon presentation of evidence satisfactory to the Issuer that the restrictions set forth herein have been complied with; and

(9) it acknowledges that we, the Trustee, the initial purchasers and others will rely upon the truth and accuracy of the foregoing acknowledgments, representations and agreements and agrees that if any of the acknowledgments, representations or agreements deemed to have been made by its purchase of the notes are no longer accurate, it shall promptly notify us, the Trustee and the initial purchasers. If it is acquiring the notes as a fiduciary or agent for one or more investor accounts, it represents that it has sole investment discretion with respect to each such account and it has full power to make the foregoing acknowledgments, representations and agreements on behalf of each such account.

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PLAN OF DISTRIBUTION

Under the terms and subject to the conditions contained in the purchase agreement dated June 25, 2010, Morgan Stanley & Co. Incorporated, Citigroup Global Markets Inc. and Santander Investment Securities Inc. as initial purchasers, have agreed to purchase from us, and we have agreed to sell to them, the notes for their placement among investors in general.

Principal Initial Purchasers Amount

Morgan Stanley & Co. Incorporated...... $ 125,000,000 Citigroup Global Markets Inc...... 100,000,000 Santander Investment Securities Inc...... 25,000,000 Total ...... $ 250,000,000

The purchase agreement provides that the obligations of the initial purchasers to purchase and accept delivery of the notes are subject to certain conditions. The initial purchasers are committed to take and pay for all of the notes offered hereby, if any are taken, subject to the conditions set forth in the purchase agreement.

The purchase agreement provides that the Company and the Subsidiary Guarantors will indemnify the initial purchasers against certain liabilities, including liabilities under the Securities Act, and to contribute to payments which the initial purchasers may be required to make in respect thereof.

The notes will constitute a new class of securities with no established trading market. The Company intends to list the notes, or have the notes authorized for negotiation, on the Luxembourg Stock Exchange, Euro MTF market. The initial purchasers are not obligated to perform any market-making activities with respect to the notes and, if commenced, any such activities may be discontinued at any time without notice. Accordingly, we cannot give any assurance as to the liquidity of, or the trading market for the notes.

In connection with this offering, subject to the terms and conditions provided for in applicable regulations, the initial purchasers, or any person acting for them, may engage in transactions that stabilize, maintain or otherwise affect the market price of the notes. Specifically, the initial purchasers may bid for, and purchase, the notes in the open market to cover syndicate shorts or to stabilize the price of the notes. The initial purchasers, or any person acting for them, may also over-allot, creating a syndicate short position in the notes for their own account. Finally, such persons may reclaim selling concessions allowed to a dealer for distributing the notes in this offering, if the initial purchasers repurchase previously distributed notes in transactions to cover short positions, in stabilization transactions or otherwise. Any of these activities may stabilize or maintain the market price of the notes above independent market levels. However, there is no obligation for the initial purchasers, or any person acting for them, to do this. Such stabilizing, if commenced, may be discontinued at any time and must be brought to an end after a limited period.

We have been advised by the initial purchasers that the initial purchasers propose to resell the notes initially at the applicable price set forth on the cover page hereof (i) within the United States to QIBs in reliance on Rule 144A under the Securities Act and (ii) outside the United States in off-shore transactions to certain persons in reliance on Regulation S under the Securities Act. See “Transfer Restrictions.” After the initial offering, the offering price and other selling terms of the notes may from time to time be varied by the initial purchasers.

The notes have not been and will not be registered under the Securities Act and may not be offered or sold within the United States or to, or for the account or benefit of, U.S. persons except as described in the immediately preceding paragraph. For a description of certain restrictions on resale or transfer, see “—Selling Restrictions.”

In connection with sales outside the United States, the initial purchasers have agreed that except for sales described in the second preceding paragraph, it will not offer, sell or deliver the notes to, or for the account of, U.S. persons (i) as part of their distribution at any time or (ii) otherwise until 40 days after the later of the commencement of the offering and the closing date, and it will send to each dealer to whom it sells such notes during such period a confirmation or other notice setting forth the restrictions on offers and sales of the notes within the United States or

148 to, or for the account or benefit of, U.S. persons. Resales of the notes are restricted as described below under “Selling Restrictions.”

Further, until 40 days after the commencement of the offering, an offer or sale of the notes within the United States by a dealer that is not participating in the offering may violate the registration requirement of the Securities Act in such offer or sale made otherwise than in accordance with Rule 144A.

As used herein, the terms “United States” and “U.S. person” have the meaning given to them in Regulation S under the Securities Act.

The initial purchasers or their affiliates have in the past engaged, and may in the future engage, in transactions with and perform services, including commercial banking, financial advisory and investment banking services, for us and our affiliates in the ordinary course of business. Affiliates of Santander Investment Securities Inc. are lenders under certain of our debt facilities.

We expect that delivery of the notes will be made against payment for the notes on June 30, 2010, which will be the third business day following the date of the pricing of the notes.

Selling Restrictions

No action has been taken in any jurisdiction by us or the initial purchasers that would permit a public offering of the notes offered hereby in any jurisdiction where action for that purpose is required. The notes offered hereby may not be offered or sold, directly or indirectly, nor may this offering memorandum or any other offering material or advertisements in connection with the offer and sale of the notes be distributed or published in any jurisdiction, except under circumstances that will result in compliance with the applicable rules and regulations of such jurisdiction. Persons into whose possession this offering memorandum comes are advised to inform themselves about and to observe any restrictions relating to the offering of the notes and the distribution of this offering memorandum. This offering memorandum does not constitute an offer to purchase or a solicitation of an offer to sell any of the notes offered hereby in any jurisdiction in which such an offer or a solicitation is unlawful.

European Economic Area

In relation to each Member State of the European Economic Area which has implemented the Prospectus Directive, each initial purchaser has represented and agreed that with effect from and including the date on which the Prospectus Directive is implemented in that Member State it has not made and will not make an offer of notes to the public in that Member State, except that it may, with effect from and including such date, make an offer of notes to the public in that Member State:

(a) at any time to legal entities which are authorized or regulated to operate in the financial markets or, if not so authorized or regulated, whose corporate purpose is solely to invest in securities;

(b) at any time to any legal entity which has two or more of (1) an average of at least 250 employees during the last financial year; (2) a total balance sheet of more than €43,000,000 and (3) an annual net turnover of more than €50,000,000, as shown in its last annual or consolidated accounts; or

(c) at any time in any other circumstances which do not require the publication by us of a prospectus pursuant to Article 3 of the Prospectus Directive.

For the purposes of the above, the expression an “offer of notes to the public” in relation to any notes in any Member State means the communication in any form and by any means of sufficient information on the terms of the offer and the notes to be offered so as to enable an investor to decide to purchase or subscribe the notes, as the same may be varied in that Member State by any measure implementing the Prospectus Directive in that Member State and the expression Prospectus Directive means Directive 2003/71/EC and includes any relevant implementing measure in that Member State.

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United Kingdom

Each initial purchaser has represented and agreed that it has only communicated or caused to be communicated and will only communicate or cause to be communicated an invitation or inducement to engage in investment activity (within the meaning of Section 21 of the Financial Services and Markets Act 2000) in connection with the issue or sale of the notes in circumstances in which Section 21(1) of such Act does not apply to us and it has complied and will comply with all applicable provisions of such Act with respect to anything done by it in relation to any notes in, from or otherwise involving the United Kingdom.

Italy

The offering of the notes has not been registered pursuant to the Italian securities legislation and, accordingly, each initial purchase has represented, warranted and agreed that it has not offered or sold, and will not offer or sell, any notes in the Republic of Italy in a solicitation to the public, and that sales of the notes in the Republic of Italy shall be effected in accordance with all Italian securities, tax and exchange control and other applicable laws and regulations.

Each of the initial purchasers has represented, warranted and agreed that it will not offer, sell or deliver any notes or distribute copies of this offering memorandum or any other document relating to the notes in the Republic of Italy except:

• to “Professional Investors,” as defined in Article 31.2 of CONSOB Regulation No. 11522 of July 2, 1998, as amended (“Regulation No. 11522”), pursuant to Article 30.2 and 100 of Legislative Decree No. 58 of February 24, 1998, as amended (“Decree No. 58”), or in any other circumstances where an expressed exemption to comply with the solicitation restrictions provided by Decree No. 58 or Regulation No. 11971 of May 14, 1999, as amended, applies, provided, however, that any such offer, sale or delivery of the notes or distribution of copies of this offering memorandum or any other document relating to the notes in the Republic of Italy must be:

• made by investment firms, banks or financial intermediaries permitted to conduct such activities in the Republic of Italy in accordance with Legislative Decree No. 385 of September 1, 1993, as amended (“Decree No. 385”), Decree No. 58, CONSOB Regulation No. 11522 and any other applicable laws and regulations;

• in compliance with Article 129 of Decree No. 385 and the implementing instructions of the Bank of Italy (Istruzioni di Vigilanza della Banca d’Italia), pursuant to which the issue, offer, sale, trading or placement of securities in Italy is subject to a prior notification to the Bank of Italy, unless an exemption, depending, inter alia, on the aggregate amount and the characteristics of the notes issued, offered, sold, traded or placed in the Republic of Italy, applies; and

• in compliance with any other applicable notification requirement or limitation that may be imposed by CONSOB or the Bank of Italy. Hong Kong

The notes may not be offered or sold in Hong Kong by means of any document other than (i) in circumstances which do not constitute an offer to the public within the meaning of the Companies Ordinance (Cap. 32, Laws of Hong Kong), or (ii) to “professional investors” within the meaning of the Securities and Futures Ordinance (Cap. 571, Laws of Hong Kong) and any rules made thereunder, or (iii) in other circumstances which do not result in the document being a “prospectus” within the meaning of the Companies Ordinance (Cap. 32, Laws of Hong Kong) and no advertisement, invitation or document relating to the notes may be issued or may be in the possession of any person for the purpose of issue (in each case whether in Hong Kong or elsewhere), which is directed at, or the contents of which are likely to be accessed or read by, the public in Hong Kong (except if permitted to do so under the laws of Hong Kong) other than with respect to notes which are or are intended to be disposed of only to persons outside Hong Kong or only to “professional investors” within the meaning of the Securities and Futures Ordinance (Cap. 571, Laws of Hong Kong) and any rules made thereunder.

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Japan

The notes have not been and will not be registered under the Financial Instruments and Exchange Law of Japan (the Financial Instruments and Exchange Law) and each initial purchaser has agreed that it will not offer or sell any notes, directly or indirectly, in Japan or to, or for the benefit of, any resident of Japan (which term as used herein means any person resident in Japan, including any corporation or other entity organized under the laws of Japan), or to others for re-offering or resale, directly or indirectly, in Japan or to a resident of Japan, except pursuant to an exemption from the registration requirements of, and otherwise in compliance with, the Financial Instruments and Exchange Law and any other applicable laws, regulations and ministerial guidelines of Japan.

Singapore

The offering memorandum has not been registered as a prospectus with the Monetary Authority of Singapore. Accordingly, this offering memorandum and any other document or material in connection with the offer or sale, or invitation for subscription or purchase, of the notes may not be circulated or distributed, nor may the notes be offered or sold, or be made the subject of an invitation for subscription or purchase, whether directly or indirectly, to persons in Singapore other than (i) to an institutional investor under Section 274 of the Securities and Futures Act, Chapter 289 of Singapore (the “SFA”), (ii) to a relevant person pursuant to Section 275(1), or any person pursuant to Section 275(1A), and in accordance with the conditions specified in Section 275 of the SFA or (iii) otherwise pursuant to, and in accordance with the conditions of, any other applicable provision of the SFA, in each case subject to compliance with conditions set forth in the SFA.

Where the notes are subscribed or purchased under Section 275 of the SFA by a relevant person which is:

(a) a corporation (which is not an accredited investor (as defined in Section 4A of the SFA)) the sole business of which is to hold investments and the entire share capital of which is owned by one or more individuals, each of whom is an accredited investor; or

(b) a trust (where the trustee is not an accredited investor) whose sole purpose is to hold investments and each beneficiary of the trust is an individual who is an accredited investor, shares, debentures and units of shares and debentures of that corporation or the beneficiaries’ rights and interest (howsoever described) in that trust shall not be transferred within six months after that corporation or that trust has acquired the notes pursuant to an offer made under Section 275 of the SFA except:

(i) to an institutional investor (for corporations, under Section 274 of the SFA) or to a relevant person defined in Section 275(2) of the SFA, or to any person pursuant to an offer that is made on terms that such shares, debentures and units of shares and debentures of that corporation or such rights and interest in that trust are acquired at a consideration of not less than S$200,000 (or its equivalent in a foreign currency) for each transaction, whether such amount is to be paid for in cash or by exchange of securities or other assets, and further for corporations, in accordance with the conditions specified in Section 275 of the SFA;

(ii) where no consideration is or will be given for the transfer; or

(iii) where the transfer is by operation of law.

Other Jurisdictions

No action has been or will be taken in any jurisdiction by us that would permit a public offering of notes, or possession or distribution of any offering material in relation thereto, in any country or jurisdiction where action for that purpose is required. Persons into whose hands this offering memorandum comes are required by us to comply with all applicable laws at their own expense.

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GENERAL INFORMATION

Clearing Systems

Application has been made to have the notes accepted for clearance through Euroclear and Clearstream. In addition, application has been made to have the notes accepted for trading in book-entry form by DTC. For the Rule 144A notes, the ISIN number is US21986VAB18 and the CUSIP number is 21986V AB1. For the Regulation S notes, the ISIN number is USP3142CDA47, the CUSIP number is P3142C DA4 and the common code is 052292395.

Listing

Application has been made to the Luxembourg Stock Exchange for the notes to be listed on the Official List of the Luxembourg Stock Exchange and traded on the Euro MTF market. Copies of (i) our by-laws, (ii) the bylaws of our subsidiary guarantors, (iii) the Indenture, which contains the terms of the note Guarantees, as may be amended or supplemented from time to time, (iv) our published annual audited consolidated financial statements and (v) any published quarterly unaudited condensed consolidated financial statements will be available at our principal executive offices, as well as at the offices of the trustee, registrar, paying agent and transfer agent, and at the offices of the Luxembourg listing agent, paying agent, and transfer agent, as such addresses are set forth in this offering memorandum. Our subsidiary guarantors do not publish separate non-consolidated financial statements. Their financial accounts are consolidated with ours when we publish financial statements. We do not publish unconsolidated financial statements. We believe the auditor’s reports included herein have been accurately reproduced. We will maintain a paying and transfer agent in Luxembourg for so long as any of the notes are listed on the Luxembourg Stock Exchange.

As required under the Mexican Securities Market Law, we will notify the CNBV of the offering of the notes outside Mexico. Such notice will be delivered to the CNBV to comply with a legal requirement and for information purposes only, and the delivery to, and the receipt by, the CNBV of such notice, does not imply any certification as to the investment quality of the notes or our solvency, liquidity or credit quality. The information contained in this offering memorandum is exclusively our responsibility and has not been reviewed or authorized by the CNBV. The acquisition of the notes by an investor who is a resident of Mexico will be made under its own responsibility.

Authorization

Pursuant to resolutions adopted by our Board of Directors on February 26, 2010, we have obtained all necessary consents, approvals and authorizations in connection with the issuance and performance of the notes.

No Material Adverse Change

Except as disclosed in this offering memorandum, there has been no material adverse change in our financial position or prospects or that of our subsidiaries taken as a whole since March 31, 2010.

Litigation

We are not involved in any legal or arbitration proceedings (including any such pending or threatened proceedings) relating to claims or amounts that may have or have had during the 12 months prior to the date of this offering memorandum a material adverse effect on our financial position and that our subsidiaries taken as a whole.

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LEGAL MATTERS

The validity of the notes will be passed upon for us by Santamarina y Steta, S.C., our special Mexican counsel, and for the initial purchasers by Ritch Mueller, S.C., special Mexican counsel to the initial purchasers. Certain legal matters in connection with the notes and this offering are being passed upon for us by Cleary Gottlieb Steen & Hamilton LLP, our special U.S. counsel, and for the initial purchasers by Milbank, Tweed, Hadley & McCloy LLP, special U.S. counsel to the initial purchasers. With respect to certain matters governed by Mexican law, Cleary Gottlieb Steen & Hamilton LLP may rely on the opinion of Santamarina y Steta, S.C.

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INDEPENDENT AUDITORS

The consolidated financial statements of Corporación GEO, S.A.B. de C.V., as of and for the years ended December 31, 2007, 2008 and 2009 included in this offering memorandum, have been audited by Galaz, Yamazaki, Ruiz Urquiza S.C. (member of Deloitte Touche Tohmatsu), independent auditors, as stated in their report appearing herein.

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DESCRIPTION OF CERTAIN DIFFERENCES BETWEEN MEXICAN FRS AND U.S. GAAP

Our Consolidated Financial Statements have been prepared in accordance with Mexican FRS, which differs in certain significant respects from U.S. GAAP. Such differences might be material to the consolidated financial information contained in this offering memorandum. We have made no attempt to identify or quantify the impact of those differences.

In making an investment decision, investors must rely on their own examination of our company, the terms of the offering and the financial information. Potential investors should consult their own professional advisors for an understanding of the differences between Mexican FRS and U.S. GAAP, and how those differences might affect the financial information herein.

Set forth below is a description of certain significant differences between Mexican FRS and U.S. GAAP. This summary should not be taken as exhaustive of all differences between Mexican FRS and U.S. GAAP.

Effects of Inflation

Mexico

Through December 31, 2007, Mexican FRS required that effects of inflation be recorded in financial information and that such financial statements be restated to constant Mexican pesos as of the latest balance sheet date presented. Beginning January 1, 2008, new standards under Mexican FRS require companies to consider whether or not the environment they operate in is inflationary. An inflationary environment is one where cumulative inflation over the preceding three-year period is 26% or more, in which case, the effects of inflation need to be recognized; a non-inflationary environment is one where inflation is less than 26% in the same period, in which case, the effects of inflation are not recognized in the financial statements.

Based on the above, all financial information through December 31, 2007, is presented in constant pesos as of December 31, 2007. Nonmonetary assets and liabilities as well as stockholders’ equity were restated through that date using the NCPI. The excess (insufficiency) in restated stockholders’ equity, included in stockholders’ equity through December 31, 2007 reflected the difference between the increase (decrease) in the specific values of nonmonetary assets and the increase attributable to general inflation. Results of periods through December 31, 2007, also reflect the determination of inflationary gains and losses within results of operations resulting from the Company’s net monetary asset or liability position.

Beginning January 1, 2008, financial information is presented in nominal pesos, such that inflationary effects are not recognized, nor is the financial information restated to constant Mexican pesos.

United States

The historical cost basis is generally required under U.S. GAAP.

Revenue Recognition

Mexico

Through December 31, 2009, revenues under our sales of real estate were recognized using the percentage- of-completion method.

In December 2008, Interpretation of Financial Information Standards (“INIF 14”), “Construction Contracts, Sale of Real Estate and Rendering of Related Services,” was issued by the Mexican Board for the Research and Development of Financial Information Standards (“CINIF”) to complement Bulletin D-7, “Construction and Manufacturing Contracts for Certain Capital Assets”. INIF 14 provides guidance with respect to the recognition of revenues, costs and expenses for all entities that undertake the construction of capital assets directly or through subcontractors.

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INIF 14 requires entities to identify the components of construction contracts to determine if they contemplate the construction of real estate, the sale of real estate or the rendering of related services and establishes the rules for recognizing revenue and related costs and expenses in each instance. With respect to sales of real estate, INIF 14 permits recognition of revenue only when all of the following conditions are fulfilled:

(i) the entity has transferred to the home buyer the control and significant risks and benefits of the property or ownership of the asset;

(ii) the entity does not maintain any continuing involvement or participation with respect to management of the related asset, in the usual manner associated with the property, nor does it retain effective control of the asset sold;

(iii) the amount of revenues can be estimated reliably;

(iv) it is probable that the entity will receive the economic benefits associated with the transaction; and

(v) the costs and expenses incurred or to be incurred related to the transaction can be estimated reliably.

United States

Under U.S. GAAP, sales of real estate can only be recognized when a sale is consummated, a significant down payment is received, the earnings process is complete and the collection of any remaining receivables is reasonably assured. All such conditions are met at the time title passes to the buyer. The percentage-of-completion method for recognition of revenues is prohibited for real estate sales under U.S. GAAP.

Deferred Taxes and Employee Profit Sharing

Mexico

Mexican FRS requires the recognition of deferred tax assets and liabilities using an asset and liability approach, similar to U.S. GAAP. However, Mexican FRS requires a net presentation of deferred tax assets and liabilities either as a non-current asset or long-term liability. Any deferred tax assets recorded must be reduced by a valuation allowance if it is “highly probable” that some portion or all of the deferred tax assets will not be realized.

In addition, during 2007, the Mexican Business Flat Tax (“IETU”) Law was enacted, which became effective in 2008. Companies must determine whether they will be subject to regular Mexican income tax (“ISR”) or IETU and calculate and recognize deferred taxes based on such determination. When, based on its projections, a company determines that it will be subject to ISR in some years and IETU in others, the deferred tax asset or liability is recorded as the larger deferred tax liability or the smaller deferred tax asset.

Through December 31, 2007, deferred statutory profit sharing is recognized by comparing financial income and profit sharing income for the period and multiplying the difference by the profit sharing rate of 10%. Beginning January 1, 2008, new Mexican FRS standards require the recognition of deferred statutory profit sharing by comparing the temporary differences between the financial reporting basis and the statutory employee profit sharing basis of assets and liabilities. Mexican FRS requires recognition of deferred employee profit sharing only when it can be reasonably assumed that such difference will generate a liability or benefit, and there is no indication that circumstances will change in such a way that the liabilities will not be paid or benefits will not be realized. Current and deferred employee profit sharing expense is included within other income and expense in results of operations.

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United States

U.S. GAAP also requires an asset and liability approach for financial accounting and reporting for income taxes. However, U.S. GAAP requires separate presentation of current and non-current income tax assets or liabilities, depending on the classification of the asset or liability to which the deferred tax item relates. Any deferred tax assets recorded must be reduced by a valuation allowance if it is “more likely than not” that some portion or all of the deferred tax assets will not be realized.

With respect to ISR and IETU, when an entity determines, based on its projections, that it will be subject to ISR in some years and IETU in others, the company must apply a hybrid approach. This approach requires the scheduling of the reversal of temporary differences for both ISR and IETU to determine, by year, whether the applicable reversing temporary difference should based on ISR or IETU. The corresponding deferred tax asset or liability is determined by applying the applicable rate to the temporary differences in each year.

Deferred employee statutory profit sharing is determined using the principles described above for deferred income tax, under which deferred statutory employee profit sharing is calculated based on the temporary differences between the financial reporting basis and the statutory employee profit sharing basis of assets and liabilities, which is similar to the new Mexican FRS standard adopted on January 1, 2008, thus eliminating the difference as of that date. U.S. GAAP prohibits the recognition of net deferred statutory employee profit sharing assets. Additionally, under U.S. GAAP, the provision for current and deferred employee profit sharing is included as an operating expense.

Consolidation

Mexico

Under Mexican FRS, an entity should consolidate all subsidiaries over which it exercises control, based on corporate governance and economic risk and benefits despite not holding a majority of the voting common stock of the subsidiary.

United States

Under U.S. GAAP, an entity should consolidate all subsidiaries in which it has a controlling financial interest represented by the direct or indirect ownership of a majority voting interest or the existence of other control factors, except for those subsidiaries in which control is temporary, or when the non-controlling interest holders have substantive rights that provide them the right to effectively participate in significant decisions that would be expected to be related to the investee’s ordinary course of business.

Associated Companies

Mexico

Mexican FRS requires the use of the equity method whenever the investor is able to exercise significant influence. Significant influence is presumed to occur when the investor holds between 10% and 50% of the investee, unless the contrary is demonstrated. Significant influence can also be demonstrated with a holding of less than 10% if a specific set of requirements is fulfilled.

United States

U.S. GAAP requires the equity method of accounting whenever the investor is able to exercise significant influence. Significant influence is presumed if the investor holds between 20% and 50% of the investee. A holding of less than 20% leads to the presumption that the investor does not have the ability to exercise significant influence unless that ability can be demonstrated otherwise.

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Joint Ventures

Mexico

Under Mexican FRS, investments in joint ventures where the investor has shared control are allowed to be accounted for under the gross proportionate consolidation method.

United States

Under U.S. GAAP, investments in joint ventures are generally accounted for under the equity method. Gross proportionate consolidation is allowed only within certain industries and under certain specified circumstances.

Preoperating and Development Costs

Mexico

Under Mexican FRS through December 31, 2008, preoperating and development costs that meet certain specific requirements are permitted to be capitalized and amortized over a period of time estimated to generate the income necessary to recover such expenses. With respect to preoperating costs, beginning January 1, 2009, any preoperating costs that are still be amortized must be offset against retained earnings; future preoperating costs will be expensed as incurred.

United States

Under U.S. GAAP, all preoperating and development costs are expensed as incurred.

Capitalized Financing Costs

Mexico

Through December 31, 2006, Mexican FRS allowed, but did not require, capitalization of financing costs as part of the cost of assets under construction. Beginning January 1, 2007, Mexican FRS requires the capitalization of financing costs incurred on debt during construction. Financing costs capitalized include interest expense, foreign exchange gains and losses and monetary position gains generated by such financings. A company may consider the proportional financing costs incurred on debt specifically obtained to finance the construction, or it may calculate capitalizable interest by applying its average cost of borrowing to the balance of construction in-progress to determine the amount to be capitalized.

United States

U.S. GAAP requires the capitalization of interest during construction on qualifying assets and does not allow the capitalization of foreign exchange gains and losses or monetary position gains. Additionally, U.S. GAAP requires that interest on all interest-bearing debt, not just specific new borrowings, during construction be capitalized as a part of the historical cost of acquiring the asset.

Labor Obligations

Mexico

Liabilities and costs related to pension plans, seniority premiums and severance payments are accounted in a similar manner under both Mexican FRS and U.S. GAAP. The primary difference is that Mexican FRS does not require recognition of the over- or under-funded status of a defined post-retirement plan as is required by U.S. GAAP as discussed below.

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United States

Under U.S. GAAP, the accounting for defined benefit post-retirement plans, which include seniority premiums within Mexico, was amended in 2006 such that an employer is required to recognize the over-funded or under-funded status of a defined benefit post-retirement plan (other than a multi-employer plan) as an asset or liability in its statement of financial position, recognizing changes in that funded status in the year in which the changes occur through other comprehensive income. Accordingly, unrecognized items may exist in Mexican FRS which are included as part of the employee benefit liability under U.S. GAAP.

Vacation Expense

Mexico

Through December 31, 2007, under Mexican FRS, vacation expense and other paid absences were recognized only when paid, rather than during the period in which they were earned by employees. Beginning January 1, 2008, vacation expense and other paid absences must be accrued during the period in which they are earned by employees.

United States

Under U.S. GAAP, the amount of the outstanding vacation liability and other compensated absences are accrued at the balance sheet date.

Non-controlling Interest

Mexico

Under Mexican FRS, the non-controlling interest in consolidated subsidiaries is presented as a separate component within the stockholders’ equity section of the consolidated balance sheet. In the income statement, the non-controlling interest in net income is included in consolidated net income, and the distribution between controlling and non-controlling interests is presented below consolidated net income on the face of the income statement.

United States

Through December 31, 2008, under U.S. GAAP, the non-controlling interest is not included within equity; rather, it is presented between liabilities and stockholders’ equity. In the income statement, the non-controlling interest in net income is presented as a reduction of consolidated net income.

Beginning January 1, 2009, new U.S. GAAP standards require similar presentation of non-controlling interest in the balance sheet and statement of income as that of Mexican FRS.

Statement of Changes in Financial Position

Mexico

Through December 31, 2007, Mexican FRS required a statement of changes in financial position which identified the sources and uses of resources determined based on the differences between the beginning and ending financial statement balances in constant pesos, except for certain non-monetary assets which were adjusted by the applicable result from holding non-monetary assets recorded directly to stockholders’ equity. Accordingly, changes in financial position not affecting cash were included in the statement of changes in financial position. Monetary position results and unrealized foreign exchange gains and losses were included in operating activities. Also, no supplemental disclosures are required.

Beginning January 1, 2008, new Mexican FRS standards require the presentation of a cash flow statement, using either the direct or indirect method, presented in nominal pesos.

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United States

U.S. GAAP requires a statement of cash flows describing the cash flows provided by or used in operating, investing and financing activities, similar to that presented under Mexican FRS beginning January 1, 2008. Non- cash transactions are excluded from the statement of cash flows. Supplemental disclosure of interest and income taxes paid must be disclosed, along with other non-cash transactions.

Impairment and Sales of Long-Lived Assets

Mexico

Mexican FRS requires that all long-lived assets be evaluated periodically for potential impairment. The calculation of impairment losses requires the determination of the recoverable value of assets, which is defined as the greater of the net selling price of a cash-generating unit and its value in use, which is the present value of discounted future net cash flows. In addition, under certain limited circumstances, the reversal of previously recognized impairment losses is permitted. Any recorded impairment losses are presented in other expenses.

The gain or loss on sales of long-lived assets is recorded within other income (expense).

United States

U.S. GAAP requires that long-lived assets be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. The carrying amount of an asset is not recoverable when the estimated future undiscounted cash flows expected to result from the use of the asset are less than the carrying value of the asset. The impairment loss is measured as the difference between the carrying value of the asset and its fair value. Any impairment loss recorded for an asset to be held and used establishes a new cost basis and, therefore, cannot be reversed in the future. Any recorded impairment losses are presented in operating expenses.

Gains or losses on sales of long-lived assets are recorded within operating income (expense).

Recognition and Measurement of Provisions

Mexico

Under Mexican FRS, provisions are recognized for current obligations that result from a past event, are likely to result in the use of economic resources and can be reasonably estimated. The amount recognized as a provision should be the best estimate of the expenditure required to settle the present obligation as of the balance sheet date. Where the provision being measured involves a large population of items, the obligation is estimated by weighting all possible outcomes by their associated probabilities using the “expected value” method. Where a single obligation is being measured, the individual most likely outcome may be the best estimate of the liability. Provisions are discounted if the effect of the time value of money is material.

United States

Under U.S. GAAP, an estimated loss from a loss contingency shall accrue by a charge to income only if information available prior to issuance of the financial statements indicates that it is probable that an asset had been impaired or a liability had been incurred at the date of the financial statements (it is implicit in this condition that it must be probable that one or more future events will occur confirming the fact of the loss) and the amount of loss can be reasonably estimated. If a range of estimates is present and no amount in the range is more likely than any other amount in the range, the minimum amount should be used to measure the liability. However, if any amount in the range is a better (more likely) estimate than other amounts in the range, that amount is used to measure the liability. Certain amounts recorded as provisions are not discounted.

U.S. GAAP also requires the recognition of a liability at the inception of certain guarantees for the fair value of the obligation taken in issuing the guarantee as well as requires specific disclosures regarding the company’s obligations under certain guarantees that it has issued.

160

Factoring

Mexico

Under Mexican FRS, a risk and rewards approach is used to determine the appropriateness of derecognition of a financial asset. Under certain circumstances, derecognition may apply even when the asset is not transferred, but rather the entity has an offsetting obligation to pass through the cash flows of a particular asset.

United States

Under U.S. GAAP, a control-based model is used in which each party to a transfer of financial assets recognizes or continues to recognize the assets that it controls, and derecognizes assets when control is surrendered.

161

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

Condensed Consolidated Financial Statements for the three-month periods ended March 31, 2010 and 2009.

Unaudited Condensed Consolidated Balance Sheets as of March 31, 2010 and 2009 F-2 Unaudited Condensed Consolidated Statements of Income for the three-month periods ended March 31, 2010 and 2009 F-4 Unaudited Condensed Consolidated Statements of Cash Flows for the three-month periods ended March 31, 2010 and 2009 F-5 Notes to the Unaudited Condensed Consolidated Financial Statements for the three-month periods ended March 31, 2010 and 2009 F-7

Consolidated Financial Statements for the years ended December 31, 2009, 2008 and 2007 Independent Auditors’ Report to the Board of Directors and Stockholders of Corporación GEO, S.A.B. de C.V. F-25 Consolidated Balance Sheets as of December 31, 2009, 2008 and 2007 F-27 Consolidated Statements of Income for the years ended December 31, 2009, 2008 and 2007 F-29 Consolidated Statements of Changes in Stockholders’ Equity for the years ended December 31, 2009, 2008 and 2007 F-30 Consolidated Statement of Cash Flows for the years ended December 31, 2009, 2008 and 2007 F-31 Consolidated Statement of Changes in Financial Position for the year ended December 31, 2007 F-33 Notes to the Consolidated Financial Statements for years ended December 31, 2009, 2008 and 2007 F-34

F-1 Corporación Geo, S. A. B. de C. V. and Subsidiaries Condensed consolidated balance sheets

As of March 31, 2010 and 2009 (In thousands of Mexican pesos)

Assets 2010 2009 (Unaudited) As adjusted; see Note 3a Current assets: Cash, cash equivalents, and restricted cash $ 1,176,738 $ 2,617,117 Accounts receivable - Net 615,381 340,539 Real estate inventories 19,218,072 15,404,385 Other current assets 670,007 868,485 Total current assets 21,680,198 19,230,526

Real estate inventories 3,338,131 2,883,416 Investments in associated companies, trusts and others 458,458 413,919 Property, machinery and equipment - Net 1,998,886 1,715,458 Other assets - Net 699,647 538,536

Total $ 28,175,320 $ 24,781,855

Liabilities and stockholders’ equity

Current liabilities Notes payable to financial institutions $ 1,684,561 $ 3,894,014 Current portion of long-term debt 2,324,672 1,080,486 Obligations for future sale of receivables contracts 1,025,343 2,163,729 Amounts payable to suppliers of land - current portion 427,403 560,994 Amounts payable to other suppliers 2,357,229 2,093,480 Customer advances 863,343 507,951 Accrued expenses, taxes payable and other current liabilities 1,285,609 1,414,022 Income tax payable 18,136 - Direct employee benefits 56,112 34,739 Total current liabilities 10,042,408 11,749,415

Amounts payable to suppliers of land 543,323 389,752 Employee benefits 80,034 53,736 Long-term debt 4,023,585 2,843,862 Derivative financial instruments 384,835 - Long-term income tax payable 1,118,176 - Deferred income taxes 2,780,220 1,874,120 Total liabilities 18,972,581 16,910,885

F-2

2010 2009

Contingencies

Stockholders’ equity: Common stock 122,354 121,224 Additional paid-in capital 727,700 498,515 Reserve for repurchase of shares 974,434 1,000,000 Retained earnings 5,652,442 5,292,641 Controlling interest 7,476,930 6,912,380

Noncontrolling interest 1,725,809 958,590 Total stockholders’ equity 9,202,739 7,870,970

Total $ 28,175,320 $ 24,781,855

See accompanying notes to condensed consolidated interim financial statements.

Luis Orvañanos Lascuraín Daniel Gelové Gómez Chairman of the Board of Directors Deputy Director of Administration and Chief Executive Officer

Saúl H. Escarpulli Gómez Jorge Isaac Garcidueñas de la Garza Deputy Director of Finance Deputy Legal Director

F-3

Corporación Geo, S. A. B. de C. V. and Subsidiaries

Condensed consolidated statements of income

For the three-month periods ended March 31, 2010 and 2009 (In thousands of Mexican pesos)

2010 2009 (Unaudited) As adjusted; see Note 3a

Revenues from real estate development activities $ 3,762,808 $ 3,241,341

Costs from real estate development activities 2,751,764 2,427,999

Gross margin 1,011,044 813,342

Selling, general and administrative expenses 382,843 371,613

Income from operations 628,201 441,729

Other (income) expenses - Net (3,123) 870

Comprehensive financing cost: Interest income (14,260) (14,437) Interest expense 129,673 137,496 Exchange (gain) loss - Net (18,410) 1,521 Effects of valuation of derivative financial instruments - Net (5,206) - 91,797 124,580

Income from operations before income taxes and equity in income of associated companies and trusts 539,527 316,279

Income taxes 178,736 91,544

Equity in income of associated companies, trusts and other 790 877

Consolidated net income $ 361,581 $ 225,612

Controlling interest $ 304,760 $ 200,180 Noncontrolling interest 56,821 25,432

Consolidated net income $ 361,581 $ 225,612

See accompanying notes to condensed consolidated interim financial statements.

F-4

Corporación Geo, S. A. B. de C. V. and Subsidiaries

Condensed consolidated statements of cash flows (Indirect Method) For the three-month periods ended March 31, 2010 and 2009 (In thousands of Mexican pesos)

2010 2009 (Unaudited) As adjusted; see Note 3a

Operating activities: Income before income taxes and equity in income of associated companies, trusts and others $ 539,527 $ 316,279

Items related to investing activities: Depreciation and amortization 91,334 62,554 Other asset retirements 58,499 Valuation effects of derivative financial instruments 74,651 - Loss on sale of fixed assets 46 - Items related to financing activities: Interest expense 323,122 137,496 Officer incentive plan 53,197 14,700 Unrealized exchange (gain) loss (193,623) 10,821 946,753 541,850

(Increase) decrease in: Accounts receivable (305,342) 717,766 Real estate inventories (2,653,329) (2,279,279) Other current assets 94,120 (120,304) Increase (decrease) in: Amounts payable to suppliers (204,977) 2,282,906 Customer advances (16,659) 5,348 Accrued expenses, taxes payable and other current liabilities (76,638) (531,836) Employee benefits paid (4,927) 7,777 Net cash provided by (used in) operating activities (2,220,999) 624,228

Investing activities: Purchases of other assets (31,016) (38,523) Purchases of machinery and equipment (except purchases under capital lease) (56,930) (53,030) Investments in associated companies, trusts and others (47) (25,764) Proceeds from sale of machinery and equipment 55 34,808 Net cash used in investing activities (87,938) (82,509)

Cash to be (obtained from) used in financing activities (2,308,937) 541,719

F-5

2010 2009

Financing activities: Proceeds from borrowings and loans 1,933,922 2,829,516 Repayments of loans (1,691,379) (2,469,604) Interest paid (571,040) (108,835) Payments received (made) under securitizations of receivables 487,634 (507,951) Payments of finance lease obligations (55,897) (39,068) Payment of subordinated securities certificates - (198,118) Contractual payment to noncontrolling interest holders in trusts (10,939) (8,880) Net cash provided by financing activities 92,301 (502,940)

(Decrease) increase in net cash, cash equivalents and restricted cash (2,216,636) 38,779

Cash, cash equivalents and restricted cash at beginning of period 3,393,374 2,578,338

Cash, cash equivalents and restricted cash at end of period $ 1,176,738 $ 2,617,117

See accompanying notes to condensed consolidated interim financial statements.

F-6

Corporación Geo, S. A. B. de C. V. and Subsidiaries

Notes to condensed consolidated financial statements (Unaudited) For the three-month periods ended March 31, 2010 and 2009 (In thousands of Mexican pesos)

1. Nature of business

Corporación Geo, S. A. B de C. V. (“GEO”) is a holding company that, together with its subsidiaries (collectively, the “Company”), is incorporated as a Sociedad Anónima Bursátil de Capital Variable (Public Stock Company with Variable Capital). The Company is a fully integrated developer of affordable housing complexes built in Mexico.

The Company is in the process of closing phase I of the “Geo Alpha project” located in Valle de las Palmas, in Tijuana, Baja California. This project is the first prefabricated concrete housing program of the Company. This program will begin operations in 2010 and is expected to deliver between 10 thousand to 12 thousand homes per year.

The Company’s principal activities in real estate development include (i) land acquisition, (ii) obtaining required permits and licenses, (iii) installing infrastructure improvements required for each housing development, (iv) designing, constructing and marketing housing developments, and (v) assisting home buyers in obtaining mortgage loans. In addition to its real estate development activities, the Company acts as a contractor for certain Mexican state government agencies, providing construction activities similar to its development activities, except that the Company does not acquire the land on which such projects are built. Additionally the Company develops, in smaller proportion middle income and residential housing.

2. Basis of presentation

a. Explanation for translation into English - The accompanying condensed consolidated financial statements have been translated from Spanish into English for use outside of Mexico. These condensed consolidated financial statements are presented on the basis of Mexican Financial Reporting Standards (“MFRS”, individually referred to as Normas de Información Financiera or “NIFs”). Certain accounting practices applied by the Company that conform with MFRS may not conform with accounting principles generally accepted in the country of use.

b. Interim financial condensed statements - The accompanying condensed consolidated interim financial statements as of and for the three-month periods ended March 31, 2010 and 2009 (as adjusted) have not been audited. In the opinion of Company’s Management, all the adjustments, including those related to the recasting for the adoption of a new accounting principles mentioned in Note 3a, and other ordinary recurring adjustments necessary for a fair presentation of the accompanying financial statements are included. The results of the periods are not necessarily indicative of the results for the full year. These financial statements should be read in conjunction with the audited consolidated financial statements of the Company and the respective notes for the years ended December 31, 2009.

c. Monetary unit of the financial statements - The financial statements and notes as of and for the three- month periods ended March 31, 2010 and 2009 (as adjusted) include balances and transactions denominated in Mexican pesos of different purchasing power.

d. Consolidation of financial statements - The consolidated financial statements include those of GEO and its trusts and subsidiaries of which it exercises control, whose shareholding percentage in their capital stock is shown below. Significant intercompany balances and transactions have been eliminated in these condensed consolidated financial statements. Permanent investments in entities where the Company’s ownership interest in 50%, or less, but over which the Company exercises control are consolidated in these condensed financial statements. F-7

As of March 31, 2010 and 2009, the Company consolidates the following investments in associated companies and trusts:

Ownership Percentage 2010 2009 % %

Consolidado de Nuevos Negocios, S. A. de C. V. 100 100 Construcciones BIPE, S. A. de C. V. 100 100 Crelam, S. A. de C. V. 100 100 Evitam, S. A. de C. V. 100 100 Geo Baja California, S. A. de C. V. - 100 Geo D. F., S. A. de C. V. 99 99 Geo Edificaciones, S. A. de C. V. 100 100 Geo Urbanizadora Valle de las Palmas S. A. de C. V. (formerly Geo Guanajuato, S. A. de C. V.) 100 100 Geo Guerrero, S. A. de C. V. 100 100 Geo Hogares Ideales, S. A. de C. V. 100 100 Geo Importex, S. A. de C. V. 100 100 Geo Jalisco, S. A. de C. V. 100 100 Geo Laguna, S. A. de C. V. 100 100 Geo Monterrey, S. A. de C. V. 100 100 Geo Morelos, S. A. de C. V. 100 100 Geo Oaxaca, S. A. de C. V. 100 100 Geo Puebla, S. A. de C. V 100 100 Geo Casas del Bajío, S. A. de C. V. (formerly Geo Querétaro, S. A. de C. V.) 100 100 Geo Tamaulipas, S. A. de C. V. 100 100 Tiendas Geo, S. A. de C. V. 100 100 Geo Veracruz, S. A. de C. V. 100 100 Inmobiliaria Anso, S. A. de C. V. 100 100 Geo Producción Industrial, S. A. de C. V. (formerly Inmobiliaria Camar, S. A. de C. V.) 100 100 Maquinaria Especializada MXO, S. A. P. I. de C. V. 100 100 Lotes y Fraccionamientos, S. A. de C. V. (Tenedora de GEOICASA, S.A. de C.V.) 100 100 Administradora Profesional de Inmuebles Bienestar, S. A. de C. V. (formerly Obras y Proyectos Coma, S. A. de C. V.) 100 100 Promotora Turística Playa Vela, S. A. de C. V. 100 100 Sistemas y Promoción de Servicios, S. A. de C. V. 100 100 Geopolis, S. A. de C. V. 99 99 Geopolis Temixco, S. A. P. I. de C. V. 100 100 Geopolis Zumpango, S. A. P. I. de C. V. 100 100 K-be Diseño y Funcionalidad, S. A. de C. V. 100 100 Geo Alpha, S. A. de C. V. 98 98 Administradora Alpha S. A. de C. V. (formerly Geo Maquinaria, S. A. P. I. de C. V.) 100 100 Fin México Servicios, S. A. de C. V. (100% holding of Geo Baja California, S. A. de C. V.) 100 100

Changes in subsidiaries - On September 30, 2009, Geo Guanajuato, S. A. de C. V. changed its corporate name to Geo Urbanizadora Valle de las Palmas, S. A. de C. V. and its location to Tijuana, Baja California, thereby modifying its activity from construction and sale of housing to development of parcels and plots of land. The entity’s previous operation in the State of Guanajuato was absorbed by Geo Casas del Bajío, S. A. de C. V., formerly, Geo Querétaro S. A. de C. V.

F-8

On December 15, 2009, Geo Maquinaria, S. A. P. I. de C. V., changed its legal name and corporate denomination to Administradora Alpha, S. A. de C. V.

During 2009, the Company acquired 100% of the shares of Fin México Servicios, S. A. de C. V. through the capitalization of liabilities. Additionally, GEO made a contribution in-kind of shares of a subsidiary, Geo Baja California, S. A. de C. V. as a result of the group’s restructuring. As the entities were under common control, the net assets acquired were recorded at their carrying value.

Discontinued operations (Geo Oaxaca, S. A. de C. V.) - The Board of Directors agreed to close the operations of Geo Oaxaca, S. A. de C. V. as of September 2009. The close will consist of selling off houses and undeveloped plots of land, converting fixed assets, inventories, materials, and plots of land into cash and settling the liabilities. The effects of the discontinued operation are not considered significant to the March 31, 2010 and 2009 financial statements.

Trusts.-. The Company has entered into trust contracts in order to develop real estate projects. Such entities are considered special purpose entities (“SPE’s”) in accordance with NIF B-8, Consolidated or Combined Financial Statements, for which the Company holds variable equity and exercises control, for which reason it consolidates such trusts. The investment held by the noncontrolling interest in such contracts are presented in the condensed consolidated financial statements under the heading noncontrolling interest. The following are the most significant trusts consolidated in the accompanying condensed consolidated interim financial statements:

Ownership Percentage Trust 2010 2009 % %

JP Morgan (F-00370) Chalco 72 72 JP Morgan (F-00389) Los Quemados 69 69 JP Morgan (F-00416) Valle de San Miguel 74 74 JP Morgan (F-00426) Joyas Ixtapa 88 88 JP Morgan (F-00471) Mata de Pita 91 91 JP Morgan (F-00533) Vallarta 84 84 JP Morgan (F-00596) San Gabriel 90 90 JP Morgan (F-00470) La Florida 91 91 HSBC (F-232092) Los Cenizos 84 84 HSBC (F-231118) San Juan de las Vegas 76 76 HSBC (F-254185) El Porvenir 87 87 HSBC (F-254630) San Rafael 87 87 HSBC (F-254614) Salinas Victoria 86 86 HSBC (F-255955) Ozumbilla 89 89 HSBC (F-254622) San Miguel 88 88 HSBC (F-256048) Senderos del Lago 88 88 HSBC (F-257966) Pocitos (Arvento) 50 50 HSBC (F-262170) Acolman 84 84 HSBC (F-262145) Cayaco 87 87 HSBC (F-262153) Lobato 83 83 HSBC (F-262218) Morrocoy II 88 88 HSBC (F-262200) Pachuca 89 89 HSBC (F-257508) Loma Alta 50 50 Bank of New York (F-00648) San Francisco Ocotlán 50 50 Bank of New York (F-00622) Hacienda de las Delicias III 50 50 Bank of New York (F-00658) San Juan del Río 50 50 Bank of New York (F-00669) Calimaya II 89 89 HSBC (F-262552) Arco Antiguo 88 - HSBC (F-262080) Tequisquipan 86 -

F-9

As of March 31, 2010 and 2009, the Company holds equity in the following associated companies and trusts, over which it exercises significant influence and thus accounts for such entities using the equity method of accounting, as discussed in Note 3.f: Ownership Percentage 2010 2009 % % Associated companies, trusts and other: Hipotecaria su Casita, S. A. 6.94 6.94 Sociedad Financiera Equipate, S. A. de C. V. SOFOM, E.N.R 50.00 50.00 Grupo Punta Condesa, S. A. de C. V. 50.00 50.00 Telecapital, S.A. de C.V. 50.00 50.00 Servicios de Autoalmacenaje, S. A. de C. V. 45.60 45.60 Other 3.50 3.50

Trusts: Residential Investment Program (Trust 371) 4.96 4.96 Residential Investment Program (Trust 412) 1.85 1.85

e. Income from operations - Income from operations is the result of subtracting cost of sales and general expenses from net sales. While NIF B-3, Statement of Income, does not require inclusion of this line item in the condensed consolidated statements of income, it has been included for a better understanding of the Company’s economic and financial performance.

3. Summary of significant accounting policies

The accompanying consolidated financial statements have been prepared in conformity with MFRS, which require that management make certain estimates and use certain assumptions that affect the amounts reported in the consolidated financial statements and their related disclosures; however, actual results may differ from such estimates. The Company’s management, upon applying professional judgment, considers that estimates made and assumptions used were adequate under the circumstances. The significant accounting policies of the Company are as follows:

a. Accounting change:

On January 1, 2010, the Company adopted Interpretation of Financial Information Standard (“INIF”) 14, Contracts of Construction, Sale of Real Property and Provision of Related Services, which supplements Bulletin D-7, Construction and Manufacturing Contracts for Certain Capital Assets, and requires the separation of the various components of construction contracts into their separate elements to define whether the contract refers to the construction or sale of real property or to the provision of related services. INIF 14 also establishes the applicable rules for recognition of revenues and related costs and expenses based on the identification of the different elements of the contracts. In contracts involving the sale of real property, revenues may only be recognized when the entity has transferred control to the buyer, i.e., the significant risks and benefits inherent to ownership of the real property. Therefore, use of the percentage-of-completion method previously applied by the Company was no longer appropriate. INIF 14 must be applied retrospectively. The effects of retrospective adoption of INIF 14 on financial information previously presented as of and for the three-month periods ended March 31, 2009, are presented below: Condensed Balance Sheet Balance Assuming Reported Balance Effects of Adoption of Adoption March 31, 2009 INIF 14 March 31, 2009 Assets Cash, cash equivalents and restricted cash $ 2,617,117 $ - $ 2,617,117 Accounts receivable - Net 8,188,988 (7,848,449) 340,539 Real estate inventories 8,101,904 7,302,481 15,404,385 Other current assets 868,485 - 868,485 Total current assets 19,776,494 (545,968) 19,230,526 Total non-current assets 6,100,000 (549,288) 5,551,329 Total assets $ 25,877,111 $ (1,095,256) $ 24,781,855

F-10

Condensed Balance Sheet Balance Assuming Reported Balance Effects of Adoption of Adoption March 31, 2009 INIF 14 March 31, 2009 Current liabilities $ 9,077,735 $ 2,671,680 $ 11,749,415 Long-term liabilities 6,183,130 (1,021,660) 5,161,470 Total liabilities 15,260,865 1,650,020 16,910,885 Total stockholders’ equity 10,616,246 (2,745,276) 7,870,970 Total $ 25,877,111 $ (1,095,256) $ 24,781,855

Condensed Statement of Income Balance Assuming Reported Balance Effects of Adoption of Adoption March 31, 2009 INIF 14 March 31, 2009 Revenues from real estate development activities $ 3,823,799 $ (582,458) $ 3,241,341 Costs from real estate development activities 2,826,582 (398,583) 2,427,999 Selling, general, administrative and other expenses 372,483 - 372,483 Comprehensive financing cost 124,580 - 124,580 Income before taxes and other 500,124 (183,875) 316,279 Income taxes and other 142,152 (51,485) 90,667 Consolidated net income $ 358,002 $ (132,390) $ 225,612 b. Reclassifications - In addition to the adoption of INIF 14, certain other amounts in the financial statements for the three-month period ended March 31, 2009 have been reclassified to conform to the presentation of the 2010 financial statements. c. Recognition of the effects of inflation - Since the cumulative inflation for the three fiscal years prior to those ended December 31, 2009 and 2008, was 15.01% and 11.56%, respectively, the economic environment may be considered non-inflationary in both years. Inflation rates for the period ended March 31, 2010 and 2009 were 1.02% and 1.01%, respectively.

Beginning on January 1, 2008, the Company discontinued recognition of the effects of inflation in its financial statements. However, assets, liabilities and stockholders’ equity include the restatement effects recognized through December 31, 2007. d. Cash, cash equivalents and restricted cash - Cash and cash equivalents consist mainly of bank deposits in checking accounts and short-term investments, highly liquid and easily convertible into cash, which are subject to insignificant value change risks. Cash is stated at nominal value and cash equivalents are valued at fair value; any fluctuations in value are recognized in comprehensive financing (cost) income of the period. Cash equivalents are represented mainly by investments in Treasury Certificates (CETES), investment funds and money market funds.

As mentioned in Note 13, as of March 31, 2010, the Company maintains $60,470 of restricted cash, in connection with derivative financial instruments. e. Real estate inventories - Real estate inventories primarily consist of the acquisition cost of land, licenses, materials, labor and direct and indirect expenses incurred in the Company’s construction activities. The Company classifies real estate inventories as long-term when the period of construction exceeds one year.

During the development period of real estate inventories, net comprehensive financing cost of mortgage bridge loans and other financing related to the construction process is capitalized.

F-11 f. Investment in shares of associated companies, trusts and others - Beginning in January 2009, permanent investments in entities where significant influence exists are initially recognized based on the net fair value of the entities’ identifiable assets and liabilities as of the date of acquisition. Such value is subsequently adjusted for the portion related both to comprehensive income (loss) of the associated company and the distribution of earnings or capital reimbursements thereof. When the fair value of the consideration paid is greater than the value of the investment in the associated company, the difference represents goodwill, which is presented as part of the same investment. Otherwise, the value of the investment is adjusted to the fair value of the consideration paid. Through December 31, 2008, investment in shares of associated companies is valued according to the equity method. If impairment indicators are present, investment in shares of associated companies is subject to impairment testing. g. Other permanent investments - Permanent investments made by the Company in entities where it has no control, joint control, or significant influence, are initially recorded at acquisition cost and any dividends received are recognized in current earnings, except when they are taken from earnings of periods prior to the acquisition, in which case, they are deducted from the permanent investment. h. Property, machinery and equipment - Property, plant and equipment are initially recorded at acquisition cost. Balances arising from acquisitions made through December 31, 2007 were restated for the effects of inflation by applying factors derived from the National Consumer Price Index (“NCPI”) through that date. Depreciation and amortization are calculated using the straight-line method based on the useful lives of the related assets, as follows.

Useful Life in Years

Buildings 40 Machinery and equipment 3-6 Vehicles 4 Computers 3 Furniture and fixtures 10 Installation costs 5 i. Leases - Lease arrangements are recognized as capital leases if they meet at least one of the following conditions:

a) Under the agreement, the ownership of the leased asset is transferred to the lessee upon termination of the lease. b) The agreement includes an option to purchase the asset at a reduced price. c) The term of the lease is essentially equal to the remaining useful life of the leased asset. d) The present value of minimum lease payments is essentially equal to the market value of the leased asset, net of any benefit or scrap value.

When the lessor retains the risks or benefits inherent to the ownership of the leased asset, the agreements are classified as operating leases and rent is charged to results of operations. j. Impairment of long-lived assets in use - The Company reviews the carrying amounts of long-lived assets in use when an impairment indicator suggests that such amounts might not be recoverable, considering the greater of the present value of future net cash flows or the net sales price upon disposal. Impairment is recorded when the carrying amounts exceed the greater of the aforementioned amounts. Impairment indicators considered for these purposes are, among others, operating losses or negative cash flows in the period if they are combined with a history or projection of losses, depreciation and amortization charged to results, which in percentage terms in relation to revenues are substantially higher than that of previous years, obsolescence, reduction in the demand for the Company’s products, competition and other legal and economic factors. k. Derivative financial instruments - The Company obtains financing under different conditions. If the rate is variable, interest rate swaps are entered into to reduce exposure to the risk of rate volatility, thus converting the interest payment profile from variable to fixed. These instruments are negotiated only with institutions of recognized financial strength and when trading limits have been established for each institution. The Company’s policy is not to carry out transactions with derivative financial instruments for the purpose of speculation. F-12

The Company recognizes all assets or liabilities that arise from transactions with derivative financial instruments at fair value in the consolidated balance sheet, regardless of its intent for holding them. Fair value is determined using prices quoted on recognized markets. If such instruments are not traded, fair value is determined by applying valuation techniques recognized in the financial sector.

When derivatives are entered into to hedge risks, and such derivatives meet all hedging requirements, their designation is documented at the beginning of the hedging transaction, describing the transaction’s objective, characteristics, accounting treatment and how the effectiveness of the instrument will be measured.

Changes in the fair value of derivative instruments designated as hedges are recognized as follows: (1) for fair value hedges, changes in both the derivative instrument and the hedged item are stated at fair value and recognized in current earnings; (2) for cash flow hedges, changes in the effective portion are temporarily recognized as a component of other comprehensive income (loss) in stockholders’ equity and then reclassified to current earnings when affected by the hedged item. The ineffective portion of the change in fair value is immediately recognized in current earnings; (3) for hedges of an investment in a foreign subsidiary, the effective portion is recognized as a component of other comprehensive income (loss) as part of the cumulative translation adjustment. The ineffective portion of the gain or loss on the hedging instrument is recognized in current earnings, if it is a derivative financial instrument. If not, it is recognized as a component of other comprehensive income (loss) until the investment is sold or transferred.

The Company discontinues hedge accounting when the derivative instrument matures, is sold, cancelled or exercised, when the derivative instrument does not reach a high percentage of effectiveness to compensate for changes in fair value or cash flows of the hedged item, or when the Company decides to cancel its designation as a hedge.

For cash flow hedges, upon discontinuing hedge accounting, the amounts recorded in stockholders’ equity as a component of other comprehensive income (loss) remain there until the time when the effects of the forecasted transaction or firm commitment affect current earnings. If it is not likely that the firm commitment or forecasted transaction will occur, the gains or losses accumulated in other comprehensive income (loss) are immediately recognized in current earnings. When the hedge of a forecasted transaction has proven satisfactory, but subsequently the hedge fails the effectiveness test, the cumulative effects recorded within other comprehensive income (loss) in stockholders’ equity are proportionately recorded in current earnings, to the extent that the forecasted asset or liability affects current earnings.

While certain derivative financial instruments are contracted for hedging from an economic point of view, they are not designated as hedges because they do not meet all of the requirements and are instead classified as held-for-trading for accounting purposes. Changes in fair value are recognized as a component of other comprehensive income (loss). l. Tools and equipment - Tools and equipment are recorded at cost. Through December 31, 2007, tools and equipment were restated for the effects of inflation. They are amortized based on the straight-line method over three years. m. Debt issuance costs - Costs related to the issuance of debt are recorded at cost and through December 31, 2007, were restated using the NCPI. They are amortized as interest expense over the life of the related debt in accordance with the interest method, or using the straight–line method when the total amount is paid upon expiration. n. Other assets - Costs incurred in the development phase that meet certain requirements and that the Company has determined will have future economic benefits are capitalized and are amortized based on the straight-line method over five years. Through December 31, 2007, other assets were restated for the effects of inflation. Disbursements that do not meet such requirements, as well as research costs, are recorded in results of the period in which they are incurred. All the internal and external software’s costs (ERP) incurred in the development phase are capitalized by the Company. Disbursements that do not meet such requirements, as well as research costs, are recorded in results of the period in which they are incurred. Preoperating costs incurred and capitalized up to December 31, 2002, were amortized through December 31, 2008, according to the straight line method over 20 years and the unamortized balance as of that date was cancelled in against retained earnings on January 1, 2009. F-13 o. Provisions - Provisions are recognized for current obligations that result from a past event, that are probable to result in the future use of economic resources, and that can be reasonably estimated. p. Direct employee benefits - Direct employee benefits are calculated based on the services rendered by employees, considering their most recent salaries. The liability is recognized as it accrues. These benefits include mainly PTU payable, compensated absences, such as vacation and vacation premiums, and incentives. q. Employee retirement obligations - Liabilities from seniority premiums, pension plans and severance payments are recognized as they accrue and are calculated by independent actuaries using the projected unit credit method at net discount rates. Accordingly, the liability is being accrued which, at present value, will cover the obligation from benefits projected to the estimated retirement date of the Company’s employees. r. Statutory employee profit sharing - PTU is recorded in the results of the year in which it is incurred and presented under other income and expenses in the accompanying condensed consolidated statements of income. Deferred PTU is derived from temporary differences between the accounting result and income for PTU purposes and is recognized only when it can be reasonably assumed that such difference will generate a liability or benefit, and there is no indication that circumstances will change in such a way that the liabilities will not be paid or benefits will not be realized. s. Share-based payments - The Company has implemented a share-based payment plan for its key officers. Payments are settled with the Company’s own equity instruments. Compensation cost is recognized based on a projection of the fair value of the instruments, from the grant date to the estimated exercise date, taking into account terms and conditions according to which the equity instruments are granted. t. Income taxes - Income tax (“ISR”) and the Business Flat Tax (“IETU”) are recorded in the results of the year they are incurred. To recognize deferred income taxes, based on its financial projections, the Company determines whether it expects to incur ISR or IETU and, accordingly, recognizes deferred taxes based on the tax it expects to pay. Deferred taxes are calculated by applying the corresponding tax rate to temporary differences resulting from comparing the accounting and tax bases of assets and liabilities and including, if any, future benefits from tax loss carryforwards and certain tax credits. Deferred tax assets are recorded only when there is a high probability of recovery. u. Foreign currency balances and transactions - Foreign currency transactions are recorded at the applicable exchange rate in effect at the transaction date. Monetary assets and liabilities denominated in foreign currency are translated into Mexican pesos at the applicable exchange rate in effect at the balance sheet date. Exchange fluctuations are recorded as a component of net comprehensive financing cost in the consolidated statements of income. v. Recognition of revenues and costs -

(1) Revenues from the Company’s real estate development activities are recognized when the Company transfers to its customers the significant risks and rewards derived from the ownership of the real estate property, which normally occurs at the time the transactions are formalized (transfer of title) or delivered.

Construction costs, provision of construction services and sale of real property of real estate developments, include the land, materials, subcontracts and all the indirect costs related to such developments, such as indirect labor, purchases, repairs and depreciation. General and administrative expenses are charged to results when they are incurred.

Through December 31, 2009, prior to the adoption of INIF 14 and its retrospective application in the accompanying consolidated financial statements, revenues and costs were recorded under the percentage-of-completion method, based on the number of equivalent units and based on the costs incurred in each project or development.

In instances when the total estimated costs to complete the complex exceed the total estimated earnings for the project, thereby representing an impairment of the inventory recognized, the expected loss is recorded within results of the period. F-14

(2) For those projects that qualify as construction and construction services agreements under INIF 14, the Company recognizes revenues using the percentage-of-completion method as established in Bulletin D-7, Contracts of Construction and Manufacture of Certain Capital Goods, in which revenues are recognized based on the stage of completion, which is determined by the proportion of costs incurred or through the approval, by customers, of the progress achieved.

In instances when the total complex estimated costs exceed the total estimated earnings for the project, the expected loss is recorded within results of the period.

w. Customer advances - Current liabilities shown in the condensed consolidated balance sheet under customer advances from customers represent cash received from customers for the down payments, expenses and other payments received during the presale stage before the properties are formalized.

x. Obligation for sale of agreements - As of March 31, 2010 and 2009, the Company has entered into sales contract programs with a financial institution (“factoring program” or “securization” ) with respect to certain of its contracts for the purchase and sale of housing. Under this program, the risks and rewards associated with the accounts receivable that will be obtained from the purchase/sale of houses are effectively transferred to the financial institution. A liability results from the cash received by the Company from the financial institution in advance of the collection of receivables from its customers, and thus represents the obligation of the Company for the future securitization of amounts to be received under housing sale agreements executed with customers. This obligation will be settled once the housing units related to such contracts are formalized and the associated cash is collected.

4. Accounts receivable 2010 2009 As adjusted; see Note 3a Notes and accounts receivable from customers for real estate sales $ 596,597 $ 297,771 Allowance for doubtful accounts (15,269) (15,487) Commitment deposits 33,225 49,257 Billings on contracts 749 8,347 Retainage on subcontractors 79 651

$ 615,381 $ 340,539

5. Real estate inventories 2010 2009 As adjusted; see Note 3a

Land held for development $ 5,016,574 $ 4,159,919 Construction in - progress of real estate developments 15,922,585 12,800,284 Construction materials 817,276 762,535 Advances to land suppliers 313,654 218,923 Advances to suppliers 486,114 346,140 22,556,203 18,287,801 Non-current real estate inventory - land and construction 3,338,131 2,883,416

$ 19,218,072 $ 15,404,385

6. Other current assets 2010 2009

Recoverable taxes $ 230,086 $ 487,906 Sociedad Financiera Equipate, S. A. de C. V. SOFOM, E.N.R - related party 43,285 33,376 Geoicasa,S.A. de C.V. - related party 37,942 - Grupo Punta Condesa, S.A. de C.V. - related party 37,260 - Sundry debtors 83,069 106,749 Prepaid expenses 238,365 232,658 Other - 7,796

$ 670,007 $ 868,485 F-15

7. Investments in associated companies, trusts and others

Investments in associated companies, trusts and others are as follows:

2010 2009 Associated companies: Hipotecaria su Casita, S. A. $ 208,362 $ 230,849 Grupo Punta Condesa, S.A. de C.V. 53,482 57,188 Sociedad Financiera Equipate, S. A. de C. V. SOFOM, E.N.R 14,778 14,778 Servicios de Autoalmacenaje, S. A. de C. V. 74,029 71,950 Others 7,134 7,340

Trusts: Trust Sólida 5,380 16,200 Trust Sólida Temixco 37,934 - Residential Investment Program (Trust 371) 13,281 - Residential Investment Program (Trust 412) 13,999 - Residential Investment Program (Trust 850) 30,079 15,614

$ 458,458 $ 413,919

Equity in income of associated companies, trusts and others is as follows:

2010 2009

Hipotecaria su Casita, S. A. $ - $ (1,174) Sociedad Financiera Equípate, S. A. de C. V. SOFOM, E.N.R - 214 Residential Investment Program 790 1,837

Net income $ 790 $ 877

8. Property, machinery and equipment

2010 2009

Land $ 359,328 $ 438,747 Buildings 336,368 343,258 Machinery, equipment and vehicles 1,538,623 1,542,033 Computers 183,821 159,255 Furniture and fixtures 133,095 130,009 2,551,235 2,613,302 Accumulated depreciation (1,254,936) (1,077,709)

1,296,299 1,535,593

Construction in-progress 496,472 -

Installation costs 502,591 400,559 Accumulated amortization (296,476) (220,694)

206,115 179,865

$ 1,998,886 $ 1,715,458

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9. Other assets 2010 2009

Tools and equipment $ 36,513 $ 45,099 Debt issuance costs 138,062 41,418 Development of new projects 30,992 23,764 205,567 110,281 Accumulated amortization (45,555) (24,827) 160,012 85,454

Enterprise Resource Planning (“ERP”) – Net 300,616 304,828 Commitment deposits 239,019 127,398 Debt coverage premium - 20,856

$ 699,647 $ 538,536

10. Notes payable to financial institutions

2010 2009 Mexican pesos: Bridge loans with real estate inventories as collateral, bearing interest at the Mexican Interbank Equilibrium Interest Rate (“TIIE”) plus an average of 3.13 and 2.88 basis points as of December 31, 2010 and 2009, respectively. $ 1,669,561 $ 2,052,353

Securitized certificate, bearing interest at the TIIE rate plus between 2.9 and 3.2 basis points. Paid in full during April, May and October 2009 - 280,000

Mortgage loans for purchases of land with real estate inventories as a collateral, bearing interest at the TIIE rate plus 3.75 basis points as of March 31, 2010 15,000 -

Unsecured loans bearing interest at annual rate of 11.54% - 1,195,507

U.S. dollars: Commercial Europaper program up to an amount of US $200,000,000. As of December 31, 2009 the amount of US $26,000,000 was borrowed at a fixed annual interest rate of 6.62%, which was paid during the first quarter of 2010. - 366,154

$ 1,684,561 $ 3,894,014

As of March 31, 2010 and 2009, the TIIE was 7.15% and 7.93%, respectively.

As of March 31, 2010, the 180-day London Interbank Offered Rate (“LIBOR”) was .9%.

All interest rates mentioned above are their annual equivalent.

11. Accrued expenses, taxes payable and other current liabilities

2010 2009

Taxes other than income taxes $ 112,196 $ 165,842 Provisions 93,403 81,039 Services and other 1,080,010 1,167,141

$ 1,285,609 $ 1,414,022

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12. Long-term debt

2010 2009

Mexican pesos:

Securitized certificate maturing on January 6, 2011, bearing interest at the TIIE rate plus 4 basis points $ 280,000 $ -

Securitized certificate maturing on January 6, 2012, bearing interest at the TIIE rate plus 1.25 basis points 700,000 700,000

Securitized certificate maturing on March 25, 2011, bearing interest at the TIIE rate plus 1.75 basis points 1,000,000 1,000,000

Securitized certificate maturing on November 26, 2010, bearing interest at the TIIE rate plus 1.75 basis points 500,000 500,000

Securitized certificate bearing interest at the TIIE rate plus 1.70 basis points; paid in full on October 29, 2009 - 500,000

Loan maturing on January 1, 2013, bearing variable interest at an annual average rate of 14% 11,337 -

Loan maturing on May 2, 2011, bearing variable interest at an annual average rate of 8.19% 19,365 34,348

Mortgage loans for purchases of land with real estate inventories as collateral, bearing interest at the TIIE rate plus 4.5 basis points as of March 31, 2010; paid in full on May 7, 2010 40,300 -

Loan maturing on June 1, 2010, bearing interest at the TIIE rate plus 1.9 basis points 1,955 -

Loan maturing on June 29, 2010, bearing interest at the TIIE rate plus 1.54basis points 1,947 -

Loan maturing on November 1, 2012, bearing interest at the TIIE rate plus 4 basis points 12,656 -

Loan maturing on January 1, 2013, bearing variable interest at the TIIE rate plus 9.08 basis points 22,418 -

Mortgage loans for purchases of land with real estate inventories as collateral, bearing interest at the TIIE rate plus 2.4 and 1.88 basis points as of March 31, 2010 and 2009, respectively; maturity dates on 2010, 2011 and 2012. 386,218 897,169

Capital leases for the acquisition of machinery and equipment bearing interest at a TIIE rate plus 2.3 and 1.8 7basis points on average as of March 31, 2010 and 2009 177,869 282,972

Other - 9,859

F-18

2010 2009

U.S. dollars:

Fixed asset loan for U.S.$13,084,723 maturing on December 30, 2016; bearing interest at the LIBOR rate plus 2.2 basis points 170,964 -

Fixed asset loan for U.S.$3,892,276 maturing on April 24, 2016; bearing interest at the LIBOR rate plus 2.2 basis points 50,856 -

Fixed asset loan for U.S.$1,316,608 maturing on September 30, 2016; bearing interest at the LIBOR rate plus 2.2 basis points 15,807 -

Senior guaranteed note for U.S.$250,000,000 maturing on September 25, 2014, bearing interest at a rate of 8.875% guaranteed with third-party security of the group’s operating subsidiaries 3,317,258 -

Adjustment for the fair value of the derivative financial instrument related to the senior guaranteed note (360,693) - 6,348,257 3,924,348

Less current portion of long-term debt 2,324,672 1,080,486

$ 4,023,585 $ 2,843,862

Maturities of long-term debt as of March 31, 2010 are:

2012 $ 752,130 2013 100,776 2014 10,913 2015 2,956,565 2016 203,201

$ 4,023,585

13. Derivative financial instruments

(1) The Company issued a five-year bond of U.S.$250,000,000 with a fixed 8.875% coupon and a yield rate at maturity of 9%. To reduce its exposure to interest rate and exchange fluctuations, on September 23, 2009 the Company contracted two interest rate and exchange rate hedging derivatives with the following characteristics:

- Hedge of U.S.$125,000,000 at an exchange rate of $13.3850 Mexican pesos per U.S. dollar, bearing interest at the TIIE plus 642 basis points, maturity on September 25, 2014. The fair value as of September 30, 2009 was U.S.$(3,731,100)

- Hedge of U.S.$125,000,000 at an exchange rate of $13.3850 Mexican pesos per US dollar, bearing interest at the TIIE rate plus 639 basis points, maturity on September 25. The fair value as of December 31, 2009 was U.S.$(3,666,228).

F-19

As of March 31, 2010, details of the hedge are as follows:

Fair value Notional Inception Maturity Rate Rate Fair value (Thousands of Year amount (USD) date date paid received (USD) MxP)

September September TIIE plus 639 2009 125,000,000 2009 2014 basis points 8.875% (17,886,446) $ (192,771) September September TIIE plus 642 2009 125,000,000 2009 2014 basis points 8.875% (17,829,088) (192,064)

$ (384,835)

During the three-month period ended March 31, 2010, the Company recognized a debit to results and a credit to the existing derivative liability of $17,119 representing the change in fair value of the liability portion of the derivative financial instrument. Additionally, the Company recognized a credit to results of $79,857 representing interest income earned on the derivative financial instruments, as well as a credit of $225,183 representing the change in fair value of the asset portion of the derivative, resulting in a net fair value of the derivative financial liability of $384,835 as of March 31, 2010.

The fair value of the derivative liability as of March 31, 2010 was $(384,835).

Restricted cash - As a consequence of the devaluation of the Mexican peso against the U.S. dollar, the hedge contract mentioned above required a guarantee margin payment of $45,000 and $15,469 for each tranche, which the Company has deposited in an investment account and thus represents restricted cash of $60,469 at March 31, 2010. This restricted cash represents a guarantee to the counterparty of the amount that would be paid if the hedge were to be liquidated at the reporting date, and is subject to change over the life of the hedge.

(2) On July 8, 2008, the Company entered into three hedging instruments (variable to fixed interest rate swaps) with the following characteristics:

- Hedge of $1,000,000 at a fixed 7.17% rate maturing on March 25, 2011. At the beginning of the transaction the Company paid a premium of $6,860.

- Hedge of $700,000 at a fixed 7.17% rate maturing on January 6, 2012. At the beginning of the transaction the Company paid a premium of $7,755.

- Hedge of $500,000 at a fixed 7.17% rate maturing on November 26, 2010. At the beginning of the transaction the Company paid a premium of $1,245.

The fair value of these derivative financial instruments as of March 31, 2010 is $(3,634).

While these derivative financial instruments were contracted for hedging an economic risk they are not accounted for as hedge instruments since they do not meet all of the accounting requirements and are classified as trading instruments for accounting purposes. Changes in fair value are recognized in comprehensive financing income of the period.

14. Transactions and balances with related parties

a. Balances with related parties as of March 31 were as follows:

2010 2009 Due from related parties - Residential Investment Program 412 $ 120,051 $ - Residential Investment Program 371 13,802 -

Due to related parties - Residential Investment Program 412 $ - $ 136,725 Residential Investment Program 371 - 39,047

F-20

b. Transactions with related parties, carried out in the ordinary course of business whose consideration is equivalent to those in similar transactions carried out with independent parties were as follows:

2010 2009

Purchase of land $ 51,211 $ 8,051

c. Employee benefits granted to Company key management (and/or prominent executives) were as follows: 2010 2009

Salaries and benefits $ 66,351 $ 29,556 Statutory year end benefit 5,529 2,463 Bonus 53,549 -

Total $ 125,429 $ 32,019

15. Stockholders’ equity

a. As of March 31, 2010 and 2009, authorized common stock was 555,396,540 shares, at no par value. As of March 31, 2010 and 2009, the Company had 544,445,650 and 537,802,359 shares outstanding and 616,600 and 2,350,000 shares held in treasury, respectively.

b. Retained earnings include the statutory legal reserve. The General Corporate Law requires that at least 5% of net income of the year be transferred to the legal reserve until the reserve equals 20% of capital stock at par value (historical pesos). The legal reserve may be capitalized but may not be distributed unless the entity is dissolved. The legal reserve must be replenished if it is reduced for any reason. As of March 31, 20010 and 2009 the legal reserve, in historical pesos, was $25,712.

c. Stockholders’ equity, except restated paid-in capital and tax retained earnings, will be subject to income tax at the rate in effect when dividends are distributed. Any tax paid on such distribution may be credited against the income tax payable of the year in which the tax on the dividend is paid and the two fiscal years following such payment.

d. The balances of the tax accounts of stockholders’ equity as of March 31, 2010and 2009 are as follows:

2010 2009

Contributed capital account $ 3,610,510 $ 3,486,058 Net tax income account 799,461 825,940

$ 4,409,971 $ 4,311,998

16. Foreign currency balances

a. As of March 31, 2010, the foreign currency monetary position is as follows:

Balances in Mexican foreign currency peso Currency (Thousands) equivalent

U.S. dollars: Monetary assets 14,881 $ 184,181 Monetary liabilities (266,604) (3,523,464)

Net monetary liability position (251,723) $ (3,339,283)

b. Mexican peso exchange rates in effect at the dates of the condensed consolidated balance sheets and at the date of the related independent auditors’ report were as follows:

April 19, 2010 March 31, 2010 March 31, 2009

Mexican pesos per one U.S. dollar $ 12.23 $ 12.33 $ 14.15 F-21

17. Income taxes

The ISR rate for 2010 was 30% and 2009 was 28%. The rate will stay at 30% until2012, 29% for 2013, and 28% for 2014 and thereafter. The Company pays ISR, together with subsidiaries on a consolidated basis.

On December 7, 2009, amendments to the ISR Law were published, which became effective beginning in 2010. These amendments state that: a) ISR relating to tax consolidation benefits obtained from 1999 through 2004 should be paid in installments beginning in 2010 through 2015, and b) ISR relating to tax benefits obtained in the 2005 tax consolidation and thereafter, should be paid during the sixth through the tenth year after that in which the benefit was obtained. Payment of ISR in connection with tax consolidation benefits obtained from 1982 (tax consolidation starting year) through 1998 may be required in those cases provided by law.

IETU - Revenues, as well as deductions and certain tax credits, are determined based on cash flows of each fiscal year. The IETU rate is 17.5% and 17% in 2010 and 2009, respectively. The Asset Tax Law was repealed upon enactment of the IETU Law; however, under certain circumstances, asset tax (“IMPAC”) paid in the ten years prior to the year in which ISR is paid, may be recovered, according to the terms of the law. In addition, as opposed to ISR, the parent and its subsidiaries will incur IETU on an individual basis.

Income tax incurred will be the higher of ISR and IETU.

Based on its financial projections and according to INIF 8, Effects of the Business Flat Tax, the Company determined that it will basically pay ISR. Therefore, it only recognizes deferred ISR

To determine deferred ISR at December 31, 2009 and 2008, the Company applied the applicable tax rates to temporary differences based on their estimated reversal dates

INIF 18, Recognition of the Effects of the 2010 Tax Reform on Income Taxes - As discussed above, during 2009, the Mexican tax authorities issued a series of tax reforms that went into effect as of January 1, 2010. Subsequently, INIF 18 was issued which establishes guidelines for accounting for the effects of the tax reforms on a company’s financial information. Based on the Company’s analysis of the reforms and estimates of its effects to the Company, which are subject to change and which such changes could be substantial, depending on future criteria issued by the Mexican tax authorities as well as interpretations made by the Company of such criteria, the table below represents the estimated future tax obligations resulting from the tax reforms, payable in each year as follows (note that such obligation was recognized as a debit to retained earnings, as permitted by INIF 18) :

Year of Payment Amount

2010 $ 18,136 2012 43,266 2013 88,496 2014 144,254 2015 231,326 2016 223,465 2017 175,131 2018 120,308 2019 76,526 2020 15,404 1,136,312 Short-term 18,136

$ 1,118,176

F-22

18. Contingencies

a. Neither the Company nor its assets are subject to any legal action other than those that arise in the normal course of business.

b. Based on the provisions of the Mexican Law, one-year warranties for construction defects are provided by the Company to its customers. In order to resolve all its customer’s claims, the Company obtains collateral and guarantee deposits from its contractors, which are refunded when the warranty period has expired. The Company has contracted insurance against potential defects in the houses that it builds, for a ten-year period.

c. On February 3, 2009, the Mexican Tax Authorities began to exercise its official inspection powers to enforce the tax position whereby the consolidated tax income should be added or the consolidated tax loss should be deducted in accordance with Article 68, Section II of the Income Tax Law, which is not the position taken by the Company. The effect of this deduction is approximately $235,457. According to the Company's legal advisers, there are sufficient grounds to uphold the deduction position adopted.

d. On February 15, 2010, the Company filed an action for annulment with the tax authorities challenging the reforms to the tax consolidation regime included in the ISR Law effective as of 2010, as mentioned above, specifically the following aspects which adversely affect the Company:

The transition regime (the years 2004 and previous years): Future obligations arising from tax losses for such years, obligations arising from the comparison of net tax income accounts (CUFIN) aggregated for each subsidiary when compared to the consolidated CUFIN accounts, obligations arising from accounting dividends and other special consolidation items arising in additional obligations for the Company.

The regime applied as of the years 2005 through 2009: Future obligations arising from tax losses for such years, obligations arising from the comparison of net tax income accounts (CUFIN) aggregated for each subsidiary when compared to the consolidated CUFIN accounts and obligations arising from accounting dividends.

19. New accounting principles

As part of its efforts to converge Mexican standards with international standards, in 2009, the Mexican Board for Research and Development of Financial Information Standards (“CINIF”) issued the following NIFs, INIFs and improvements to NIFs applicable to profitable entities which become effective as follows:

a. For fiscal years that begin on January 1, 2011:

B-5, Financial Segment Information, and B-9, Interim Financial Information

Some of the most important changes established by these standards are:

NIF B-5, Financial Segment Information - Uses a managerial approach to disclose financial information by segments, as opposed to Bulletin B-5, which also used a managerial approach but required that the financial information be classified by economic segments, geographical areas, or client groups. NIF B-5 does not require different risks among business areas to separate them. It allows areas in the preoperating stage to be classified as a segment, and requires separate disclosure of interest income, interest expense and liabilities, as well as disclosure of the entity’s information as a whole with respect to products, services, geographical areas and major customers. Like the previous Bulletin, this Standard is mandatory only for public companies or companies in the process of becoming public.

F-23

NIF B-9, Interim Financial Information - As opposed to Bulletin B-9, this Standard requires presentation of the statement of changes in stockholders’ equity and statement of cash flows, as part of the interim financial information. For comparison purposes, it requires that the information presented at the closing of an interim period contain the information of the equivalent interim period of the previous year, and in the case of the balance sheet, presentation of the previous years’ annual balance sheet.

At the date of issuance of these condensed consolidated financial statements, the Company has not fully assessed the effects of adopting these new standards on its financial information.

20. International Financial Reporting Standards

In January 2009, the National Banking and Securities Commission published the amendments to its Single Circular for Issuers, which requires companies to file financial statements prepared according to the International Financial Reporting Standards beginning in 2012, and permits their early adoption.

21. Consolidated financial statement issuance authorization

On April 19, 2010, the issuance of the condensed consolidated financial statements was authorized by Luis Orvañanos Lascurain, Chairman of the Board of Directors and Chief Executive Officer; Daniel Gelové Gómez, Deputy Director of Administration; Saúl H. Escarpulli Gómez, Deputy Director of Finance and Jorge Isaac Garcidueñas de la Garza, Deputy Legal Director. These condensed consolidated financial statements are subject to approval at the stockholders’ ordinary general meeting, where they may be modified, based on the provisions of the Mexican General Companies Law.

* * * * * *

F-24

Independent Auditors’ Report to the Board of Directors and Stockholders of Corporación Geo, S. A. B. de C. V.

In thousands of Mexican pesos

We have audited the accompanying consolidated balance sheets of Corporación Geo, S. A. B. de C. V. and subsidiaries (the “Company”) as of December 31, 2009, 2008 and 2007, and the related consolidated statements of income and changes in stockholders’ equity for the years then ended, the consolidated statements of cash flows for the years ended December 31, 2009 and 2008 and the consolidated statement of changes in financial position for the year ended December 31, 2007. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted in Mexico. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement and that they are prepared in accordance with Mexican Financial Reporting Standards. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the financial reporting standards used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

As discussed in Note 2b, on January 1, 2010, the Company adopted Interpretation to Financial Information Standard (“INIF”) 14, Construction Contracts, Sale of Real Estate and Rendering of Related Services. The accounting changes resulting from the application of INIF 14 were recognized retrospectively as required by Financial Information Standard (“NIF”) B-1, Accounting Changes and Correction of Errors.

As mentioned in Note 3a, on December 15, 2009, the Company adopted INIF 18, Recognition of the Effects of the 2010 Tax Reform on Income Taxes, which establishes the accounting treatment for income taxes derived from changes to the tax consolidation regime. The effects of adopting this interpretation resulted in the recognition of an income tax liability of $1,136,312 ($18,136 and $1,118,176 in current and long-term, respectively) as of December 31, 2009, and a corresponding decrease to retained earnings in 2009 for the same amount. Additionally, in January 2009, the Company adopted NIF C-8, Intangible Assets, which resulted in the write-off of previously capitalized preoperating costs existing as of January 1, 2009 against 2009 retained earnings of $67,987.

In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of Corporación Geo, S. A. B. de C. V. and subsidiaries as of December 31, 2009, 2008 and 2007, and the results of their operations and changes in their stockholders’ equity for the years then ended, their cash flows for the years ended December 31, 2009 and 2008 and changes in their financial position for the year ended December 31, 2007, in conformity with Mexican Financial Reporting Standards.

F-25

Our audits also comprehended the presentation of the consolidated statement of cash flows for the year ended December 31, 2007. In our opinion, such consolidated statement of cash flows has been prepared in conformity with the basis stated in Note 2c. The consolidated statement of cash flows for the year ended December 31, 2007 has been presented solely for the convenience of readers.

The accompanying consolidated financial statements have been translated into English for the convenience of users.

Galaz, Yamazaki, Ruiz Urquiza, S.C. Member of Deloitte Touche Tohmatsu

C.P.C. Roberto Velasco Gómez February, 24, 2010 May 17, 2010 as to Note 2b and 2c

F-26

Corporación Geo, S. A. B. de C. V. and Subsidiaries

Consolidated Balance Sheets As of December 31, 2009, 2008 and 2007 (In thousands of Mexican pesos)

Assets 2009 2008 2007

Current assets: Cash and cash equivalents $ 3,393,374 $ 2,560,074 $ 2,113,747 Accounts receivable – Net 830,675 917,004 857,006 Real estate inventories 16,809,927 14,174,734 10,395,578 Other current assets 897,609 959,470 1,070,051 Total current assets 21,931,585 18,611,282 14,436,382

Real estate inventories 3,342,342 3,063,765 2,603,655 Investments in associated companies, trusts and others 457,621 387,278 339,669 Property, machinery and equipment – Net 2,010,384 1,695,204 1,369,192 Other assets – Net 747,297 567,921 312,380

Total $ 28,489,229 $ 24,325,450 $ 19,061,278

Liabilities and stockholders’ equity

Current liabilities: Notes payable to financial institutions $ 1,534,633 $ 3,519,099 $ 3,112,293 Current portion of long-term debt 1,124,879 956,840 205,932 Obligations under sale of receivables contracts 1,519,716 2,745,012 1,984,179 Amounts payable to suppliers of land - current portion 735,808 380,261 324,910 Amounts payable to other suppliers 2,562,206 1,996,355 1,897,964 Customer advances 346,670 155,314 180,803 Accrued expenses, taxes payable and other current liabilities 1,866,701 1,663,861 1,374,950 Income tax payable 18,136 - - Direct employee benefits 53,829 26,204 161,274 Total current liabilities 9,762,578 11,442,946 9,242,305

Amounts payable to suppliers of land 537,888 420,918 17,195 Employee benefits 84,961 53,804 67,090 Long-term debt 5,587,235 2,920,665 1,835,338 Derivative financial instruments 96,914 - - Long-term income tax payable 1,118,176 - - Deferred income taxes 2,509,639 1,823,720 1,338,004 Total liabilities 19,697,391 16,662,053 12,499,932

F-27

2009 2008 2007 Contingencies and commitments (Notes 24, 25 and 26)

Stockholders’ equity: Common stock $ 122,354 $ 121,224 $ 120,461 Additional paid-in capital 674,503 483,815 394,745 Reserve for repurchase of shares 974,713 405,154 409,512 Retained earnings 5,347,682 5,782,491 4,800,459 Controlling interest 7,119,252 6,792,684 5,725,177

Noncontrolling interest 1,672,586 870,713 836,169 Total stockholders’ equity 8,791,838 7,663,397 6,561,346

Total $ 28,489,229 $ 24,325,450 $ 19,061,278

See accompanying notes to consolidated financial statements.

Luis Orvañanos Lascuraín Daniel Gelové Gómez Chairman of the Board of Directors Deputy Director of Administration and Chief Executive Officer

Saúl H. Escarpulli Gómez Jorge Isaac Garcidueñas de la Garza Deputy Director of Finance Deputy Legal Director

F-28

Corporación Geo, S. A. B. de C. V. and Subsidiaries

Consolidated Statements of Income For the years ended December 31, 2009, 2008 and 2007 (In thousands of Mexican pesos, except per share amounts)

2009 2008 2007

Revenues from real estate development activities $ 17,713,169 $ 14,613,705 $ 12,731,497

Costs from real estate development activities 13,083,087 10,799,642 9,319,706

Gross margin 4,630,082 3,814,063 3,411,791

Selling, general and administrative expenses 1,691,253 1,640,761 1,414,424

Income from operations 2,938,829 2,173,302 1,997,367

Other expenses – Net 85,507 31,285 120,625

Comprehensive financing cost: Interest income (123,989) (99,772) (98,244) Interest expense 667,208 610,958 385,360 Exchange loss – Net 30,579 116,580 1,942 Effects of valuation of derivative financial instruments – Net 38,969 - 44,794 Ineffectiveness of derivative financial instruments 3,946 - -

616,713 627,766 333,852 Income from operations before income taxes, equity in income of associated companies, trusts and others and discontinued operations 2,236,609 1,514,251 1,542,890

Income taxes 736,899 485,716 513,356

(Loss) equity in income of associated companies, trusts and others (2,821) 5,789 39,380

Income before discontinued operations 1,496,889 1,034,324 1,068,914

(Loss) income from discontinued operations – Net (46,058) (8,828) 4,157

Consolidated net income $ 1,450,831 $ 1,025,496 $ 1,073,071

Controlling interest $ 1,364,336 $ 982,032 $ 1,062,558 Noncontrolling interest 86,495 43,464 10,513

Consolidated net income $ 1,450,831 $ 1,025,496 $ 1,073,071

Basic earnings per common share from continued operations $ 2.75 $ 1.92 $ 2.00

(Loss) earnings per share from discontinued operation $ (0.08) $ (0.02) $ 0.01

See accompanying notes to consolidated financial statements.

F-29

Corporación Geo, S. A. B. de C. V. and Subsidiaries

Consolidated Statements of Changes in Stockholders’ Equity For the years ended December 31, 2009, 2008 and 2007 (In thousands of Mexican pesos) Common Stock Initial Additional Reserve for Insufficiency in Cumulative Paid-in Repurchase Retained Restated Stockholders’ Effect of Deferred Noncontrolling Nominal Restated Capital of Shares Earnings Equity Income Taxes Interest Total

Balances as of January 1, 2007 (As originally reported) $ 120,421 $ 348,246 $ 2,906,489 $ 540,635 $ 7,059,089 $ (3,410,043) $ (711,754) $ 685,700 $ 7,538,783 Adjustment for adoption of new accounting principle (see Notes 2b and 30) - - - - (1,708,988) - - (16,356) (1,725,344) Balance as of January 1, 2007 (As adjusted, see Notes 2b and 30) 120,421 348,246 2,906,489 540,635 5,350,101 (3,410,043) (711,754) 669,344 5,813,439

Repurchase of shares - - - (131,123) - - - - (131,123) Additional stock issuance for officer incentive plan 40 - 38,701 - - - - - 38,741 Comprehensive income - - - - 1,062,558 (389,094) - 10,513 683,977 Additional capital contribution of noncontrolling interest ------292,956 292,956 Contractual payment to noncontrolling interest holders in trusts ------(136,644) (136,644) Capital applications - (348,246) (2,550,445) - (1,612,200) 3,799,137 711,754 - -

Balances as of December 31, 2007 120,461 - 394,745 409,512 4,800,459 - - 836,169 6,561,346

Repurchase of shares - - - (4,358) - - - - (4,358) Additional stock issuance for officer incentive plan 763 - 89,070 - - - - - 89,833 Comprehensive income - - - - 982,032 - - 43,464 1,025,496 Additional capital contribution of noncontrolling interest ------359,897 359,897 Contractual payment to noncontrolling interest holders in trusts ------(368,817) (368,817)

Balances as of December 31, 2008 121,224 - 483,815 405,154 5,782,491 - - 870,713 7,663,397

Additional capital contribution of noncontrolling interest holders ------1,117,590 1,117,590 Contractual payment to noncontrolling interest holders in trusts ------(402,212) (402,212) Additional stock issuance for officer incentive plan 1,130 - 125,627 - - - - - 126,757 Repurchase of shares - - 65,061 (25,287) - - - - 39,774 Increase of reserve for repurchase of shares - - - 594,846 (594,846) - - - - Effect of cancelation of unamortized balance of preoperating costs - - - - (67,987) - - - (67,987) Effect of additional liability from tax reform - - - - (1,136,312) - - - (1,136,312) Comprehensive income - - - - 1,364,336 - - 86,495 1,450,831

Balances as of December 31, 2009 $ 122,354 $ - $ 674,503 $ 974,713 $ 5,347,682 $ - $ - $ 1,672,586 $ 8,791,838

See accompanying notes to consolidated financial statements.

F-30 Corporación Geo, S. A. B. de C. V. and Subsidiaries

Consolidated Statements of Cash Flows (Indirect Method) For the years ended December 31, 2009, 2008 and 2007 (In thousands of Mexican pesos)

Presentation for the convenience of users (See Note 2c)

2009 2008 2007 Operating activities: Income before income taxes, equity in income (loss) of associated companies, trusts and others and discontinued operations $ 2,236,609 $ 1,514,251 $ 1,542,890

Items related to investing activities: Depreciation and amortization 290,280 163,392 191,118 Other asset retirements 92,609 44,139 41,154 Valuation effects of derivative financial instruments (42,915) - - Loss (gain) on sale of fixed assets 8,248 - (85,829) Items related to financing activities: Interest expense 1,237,016 1,534,558 1,206,454 Officer incentive plan 125,627 89,070 38,701 Unrealized exchange (gain) loss (17,332) 82,171 1,796 3,930,142 3,427,581 2,936,284

(Increase) decrease in: Accounts receivable 86,329 (59,998) 1,462,883 Real estate inventories (1,871,446) (3,771,652) (3,805,379) Other current assets (47,200) 29,635 (534,939) Increase (decrease) in: Amounts payable to suppliers 565,851 98,391 356,615 Customer advances 191,356 (25,489) (461,307) Accrued expenses, taxes payable and other current liabilities (485,656) (242,938) (235,383) Employee benefits 31,157 (13,286) 55 Net cash provided by (used in) operating activities 2,400,533 (557,756) (281,171)

Investing activities:

Purchases of other assets (371,363) (300,372) (203,404) Purchases of machinery and equipment (except purchases under capital lease) (756,993) (333,295) (617,771) Investments in associated companies, trusts and others (73,164) (41,820) 34,064 Proceeds from sale of machinery and equipment 245,871 52,064 406,107 Discontinued operations (14,177) 49,409 62,394

Net cash used in investing activities (969,826) (574,014) (318,610)

Cash to be used in (obtained from) financing activities 1,430,707 (1,131,770) (599,781)

F-31

Presentation for the convenience of users (Note 2c)

2009 2008 2007

Financing activities: Issuance of stock for officer incentive plan 1,130 763 40 Derivative financial instruments 11,761 - - Proceeds from borrowings and loans 12,764,162 4,605,541 1,255,532 Repayments of loans (11,653,758) (2,445,734) (375,000) Interest paid (1,064,502) (1,295,468) (1,128,826) Repayment of liabilities from capital leases (186,056) (34,560) (17,533) Obligations under sale of receivables contracts (1,225,296) 760,833 (14,405) Gain (loss) on repurchase of shares 39,774 (4,358) (131,123) Contractual payment to noncontrolling interest holders in trusts (402,212) (368,817) (136,644) Additional capital contribution of noncontrolling interest 1,117,590 359,897 292,956 Net cash (used in) provided by financing activities (597,407) 1,578,097 (255,003)

Net increase (decrease) in cash and cash equivalents 833,300 446,327 (854,784)

Cash and cash equivalents at beginning of period 2,560,074 2,113,747 2,968,531

Cash and cash equivalents at end of period $ 3,393,374 $ 2,560,074 $ 2,113,747

See accompanying notes to consolidated financial statements.

F-32

Corporación Geo, S. A. B. de C. V. and Subsidiaries

Consolidated Statement of Changes in Financial Position For the year ended December 31, 2007 (In thousands of Mexican pesos)

2007 Operating activities: Income before discontinued operations $ 1,068,914 Items that did not require (generate) resources: Deferred income taxes (11,984) Depreciation and amortization 191,118 Equity in income of associated companies and trusts (39,380) Gain from sale of machinery and equipment (85,829) Labor obligations 55 1,122,894 Changes in operating assets and liabilities: Accounts receivable, net 1,462,883 Real estate inventories (3,780,770) Other current assets (534,939) Amounts payable to suppliers 222,721 Customer advances (461,307) Accrued expenses, taxes payable and other current liabilities 407,835 Statutory employee profit sharing payable 69,035

Net resources used in operating activities (1,491,648)

Financing activities: Common stock 40 Net borrowings - short-term 1,397,982 Net borrowings - long-term (235,699) Repurchase of shares (131,123) Obligations under sale of receivables contracts (14,405) Officer incentive plan 38,701 Contractual payment to non-controlling interest holders in trusts (136,644) Additional capital contribution of non-controlling interest 292,956 Net resources generated by financing activities 1,211,808

Investing activities: Acquisition of machinery and equipment (915,259) Acquisition of other assets (203,404) Proceeds from the sale of other assets 41,154 Proceeds from the sale of machinery and equipment 406,107 Discontinued operations 62,394 Investment in shares of associated company 34,064 Net resources used in investing activities (574,944)

Cash and, cash equivalents: Net decrease (854,784) Balance at beginning of year 2,968,531

Balance at end of year $ 2,113,747

See accompanying notes to consolidated financial statements.

F-33

Corporación Geo, S. A. B. de C. V. and Subsidiaries

Notes to Consolidated Financial Statements For the years ended December 31, 2009, 2008 and 2007 (In thousands of Mexican pesos)

1. Nature of business

The Company is in the process of closing phase I of the “Geo Alpha project” located in Valle de las Palmas, in Tijuana, Baja California. This project is the first prefabricated concrete factory program in Mexico. This program will begin operations in 2010 and is expected to deliver between 10 thousand to 12 thousand homes per year.

2. Basis of presentation

a. Explanation for translation into English – The accompanying consolidated financial statements have been translated from Spanish into English for use outside of Mexico. These consolidated financial statements are presented on the basis of Mexican Financial Reporting Standards (“MFRS”, individually referred to as Normas de Información Financiera or “NIFs”). Certain accounting practices applied by the Company that conform with MFRS may not conform with accounting principles generally accepted in the country of use.

b. Reissuance of 2009, 2008 and 2007 financial statements – On January 1, 2010, the Company adopted Interpretation of Financial Information Standard (“INIF”) 14, Construction Contracts, Sale of Real Estate and Rendering of Related Services, which supplements Bulletin D-7, Construction and Manufacturing Contracts for Certain Capital Assets. INIF 14 requires the separation of the various components of construction contracts into their separate elements to determine whether the contract refers to the construction of property, the sale of real estate or the provision of related services and establishes rules for the recognition of revenues under each instance. In contracts involving the sale of real estate, revenues may only be recognized when the entity has transferred to the buyer control and the significant risks and benefits inherent to ownership of the property. This generally occurs when title to the property has transferred to the customer. Previous to the adoption of INIF 14 in 2010, revenues from sales of real estate were recognized using the percentage-of-completion method. The accounting changes from the adoption of INIF 14 are required to be recognized retrospectively, as required by NIF B-1, Accounting Changes and Correction of Errors.

F-34

In connection with the presentation of the interim condensed consolidated financial statements for the three months ended March 31, 2010, and the Company’s decision to seek different ways of financing in the domestic and international markets, these consolidated financial statements for the years ended December 31, 2009, 2008 and 2007, have been reissued to reflect the retrospective change from adopting INIF 14. The effects of adoption on the accompanying consolidated financial statements are presented in Note 30. c. Explanation for presentation of the statement of cash flows for the year ended December 31, 2007 for the convenience of users – NIF B-2, Statement of Cash Flows, became effective January 1, 2008, which requires entities to present a statement of cash flows for years ending on or after December 31, 2008. This NIF replaced Bulletin B-12, Statement of Changes in Financial Position, which required the presentation of a statement of changes in financial position through December 31, 2007. NIF B-2 establishes general rules for the presentation, structure and preparation of a cash flow statement, as well as the disclosures supplementing such statement. NIF B-2 requires that the statement show a company’s cash inflows and outflows during the period, as opposed to general changes in assets and liabilities, whether cash or non-cash, as required by Bulletin B-12. Line items in the statement of cash flows are required to be presented gross. Additionally, cash flows from financing activities are presented below those from investing activities, different from the presentation requirements of Bulletin B-12. Finally, classifications of interest, taxes and certain other items between operating, investing and financing activities exist between the two standards. NIF B-2 allows entities to determine and present their cash flows from operating activities using either the direct or the indirect method. Although it is not required to present a consolidated statement of cash flows for years prior to 2008, the Company decided to present such statement, prepared under NIF B-2, using the indirect method, for the year ended December 31, 2007 solely for the convenience of readers. The Company elected to use the indirect method. d. Discontinued operation – During 2009, the Company decided to discontinue the operation of Geo Oaxaca, S.A. de C.V. MFRS requires the effects of discontinued operations to be presented retrospectively for all periods presented. See further discussion in insert e below. The effects of retrospective application on the 2008 and 2007 consolidated financial statements are presented in Note 30. e. Monetary unit of the financial statements – The consolidated financial statements and notes as of December 31, 2009, 2008 and 2007 and for the years then ended include balances and transactions denominated in Mexican pesos of different purchasing power. f. Consolidation of financial statements – The consolidated financial statements include those of GEO and its trusts and subsidiaries over which it exercises control and whose shareholding percentage in their capital stock is shown below. Significant intercompany balances and transactions have been eliminated in these consolidated financial statements. Permanent investments in entities in which the Company’s ownership interest is 50%, or less, but over which the Company exercises control, are also consolidated in these financial statements.

Ownership Percentage 2009 2008 2007 % % %

Consolidado de Nuevos Negocios, S. A. de C. V. 100 100 100 Construcciones BIPE, S. A. de C. V. 100 100 100 Crelam, S. A. de C. V. 100 100 100 Evitam, S. A. de C. V. 100 100 95 Geo Baja California, S. A. de C. V. - 100 100 Geo D. F., S. A. de C. V. 99 99 99 Geo Edificaciones, S. A. de C. V. 100 100 100

F-35

Ownership Percentage 2009 2008 2007 % % % Geo Urbanizadora Valle de las Palmas S. A. de C. V. (formerly Geo Guanajuato, S. A. de C. V.) 100 100 100 Geo Guerrero, S. A. de C. V. 100 100 100 Geo Hogares Ideales, S. A. de C. V. 100 100 100 Geo Importex, S. A. de C. V. 100 100 100 Geo Jalisco, S. A. de C. V. 100 100 100 Geo Laguna S. A. de C. V. 100 100 100 Geo Monterrey, S. A. de C. V. 100 100 100 Geo Morelos, S. A. de C. V. 100 100 100 Geo Oaxaca, S. A. de C. V. 100 100 100 Geo Puebla, S. A. de C. V 100 100 100 Geo Casas del Bajío, S. A. de C. V. (formerly Geo Querétaro, S. A. de C. V.) 100 100 100 Geo Tamaulipas, S. A. de C. V. 100 100 100 Tiendas Geo, S. A. de C. V. 100 100 - Geo Veracruz, S. A. de C. V. 100 100 100 Inmobiliaria Anso, S. A. de C. V. 100 100 100 Geo Producción Industrial, S. A. de C. V. (formerly Inmobiliaria Camar, S. A. de C. V.) 100 100 100 Maquinaria Especializada MXO, S. A. P. I. de C. V. 100 - - Lotes y Fraccionamientos, S. A. de C. V. (Holding of GEOICASA, S.A. de C.V.) 100 100 100 Administradora Profesional de Inmuebles Bienestar, S. A. de C. V. (formerly Obras y Proyectos Coma, S. A. de C. V.) 100 100 100 Promotora Turística Playa Vela, S. A. de C. V. 100 100 100 Sistemas y Promoción de Servicios, S. A. de C. V. 100 100 100 Geopolis, S. A. de C. V. 99 99 99 Geopolis Temixco, S. A. P. I. de C. V. 100 100 - Geopolis Zumpango, S. A. P. I. de C. V. 100 100 - K-be Diseño y Funcionalidad, S. A. de C. V. 100 100 100 Geo Alpha, S. A. de C. V. 98 98 - Administradora Alpha S. A. de C. V. (formerly Geo Maquinaria, S. A. P. I. de C. V.) 100 - - Geo del Noreste, S. A. de C. V. (formerly Fin México Servicios, S. A. de C. V., 100% holding of Geo Baja California, S. A. de C. V.) 100 - -

Changes in subsidiaries – On September 30, 2009, Geo Guanajuato, S. A. de C. V. changed its corporate name to Geo Urbanizadora Valle de las Palmas, S. A. de C. V. and its location to Tijuana, Baja California, and modified its activity from construction and sale of housing to development of parcels and plots of land. The entity’s previous operation in the State of Guanajuato was absorbed by Geo Casas del Bajío, S. A. de C. V., formerly, Geo Querétaro, S. A. de C. V.

On December 15, 2009, Geo Maquinaria, S. A. P. I. de C. V., changed its legal name and corporate denomination to Administradora Alpha, S. A. de C. V.

F-36

On February 24, 2010, Fin Mexico Servicios, S.A. de C.V. changed its legal name to Geo del Noroeste S.A. de C.V.

Discontinued operations (Geo Oaxaca, S.A. de C.V) – During 2009, the Board of Directors agreed to close the operations of Geo Oaxaca, S.A. de C.V. as of September 2009. The close will consist of selling off houses and undeveloped plots of land, converting fixed assets, inventories, materials, and plots of land into cash and settling all liabilities. Management of the Company estimates that this process will conclude in March 2010. Condensed financial information with respect to the discontinued operation is presented in Note 27. The effects of retrospective application on the 2008 and 2007 consolidated financial statements are presented in Note 30.

Trusts – The Company has entered into trust contracts in order to develop real estate projects. Such entities are considered special purpose entities (“SPE’s”) in accordance with NIF B-8, Consolidated or Combined Financial Statements, for which the Company holds variable equity and exercises control, for which reason it consolidates such trusts. The investment held by the noncontrolling interest in such contracts is presented in the condensed consolidated financial statements under the heading of “noncontrolling interest”. The following are the most significant trusts consolidated in the accompanying condensed consolidated interim financial statements.

Ownership Percentage Trust 2009 2008 2007 % % %

JP Morgan (F-00370) Chalco 72 87 87 JP Morgan (F-00389) Los Quemados 69 78 78 JP Morgan (F-00416) Valle de San Miguel 74 73 73 JP Morgan (F-00426) Joyas Ixtapa 88 85 85 JP Morgan (F-00471) Mata de Pita 91 91 - JP Morgan (F-00533) Vallarta 84 84 - JP Morgan (F-00596) San Gabriel 90 - - JP Morgan (F-00470) La Florida 91 - - HSBC (F-232092) Los Cenizos 84 85 85 HSBC (F-231118) San Juan de las Vegas 76 82 HSBC (F-254185) El Porvenir 87 - 82 HSBC (F-254630) San Rafael 87 - - HSBC (F-254614) Salinas Victoria 86 - - HSBC (F-255955) Ozumbilla 89 - - HSBC (F-254622) San Miguel 88 - - HSBC (F-256048) Senderos del Lago 88 - - HSBC (F-257966) Pocitos (Arvento) 50 - - HSBC (F-262170) Acolman 84 - - HSBC (F-262145) Cayaco 87 - - HSBC (F-262153) Lobato 83 - - HSBC (F-262218) Morrocoy II 88 - - HSBC (F-262200) Pachuca 89 - - HSBC (F-257508) Loma Alta 50 - - Bank of New York (F-00648) San Francisco - Ocotlán 50 - Bank of New York (F-00622) Hacienda de - las Delicias III 50 - Bank of New York (F-00658) San Juan del Río 50 - - Bank of New York (F-00669) Calimaya II 89 - -

F-37

As of December 31, 2009, 2008 and 2007, the Company holds equity in the following associated companies and trusts, over which it exercises significant influence and thus accounts for such entities using the equity method of accounting, as discussed in Note 3.f:

Ownership Percentage 2009 2008 2007 % % % Associated companies, trusts and other: Ultima Comunicaciones, S. A. de C. V. - - 48.00 Hipotecaria su Casita, S. A. 6.94 6.94 6.94 Centro de Investigación y Documentación de la Casa, S. C. - - 9.09 Sociedad Financiera Equipate, S. A. de C. V. SOFOM, E.N.R 50.00 50.00 50.00 Fin México Servicios, S. A. de C. V. - 50.00 50.00 Grupo Punta Condesa, S. A. de C. V. 50.00 50.00 50.00 Telecapital, S.A. de C.V. 50.00 50.00 - Servicios de Autoalmacenaje, S. A. de C. V. 45.60 45.60 - Other 3.50 3.50 3.50

Trusts: Residential Investment Program 371 4.96 4.96 4.96 Residential Investment Program 412 1.85 1.85 1.85

g. Comprehensive income – Represents changes in stockholders’ equity during the year, for items other than distributions and activity in contributed common stock, and is comprised of the net income of the year, plus other comprehensive income loss items of the same period, which are presented directly in stockholders’ equity without affecting the consolidated statements of income. In 2007, other comprehensive income is comprised of the insufficiency in restated stockholders’ equity. In 2008 and 2009, there were no items of other comprehensive income.

h. Income from operations – Income from operations is the result of subtracting cost of real estate development activities and selling, general and administrative expenses from revenues from real estate development activities. While NIF B-3, Statement of Income, does not require inclusion of this line item in the consolidated statements of income, it has been included for a better understanding of the Company’s economic and financial performance.

3. Summary of significant accounting policies

a. Accounting Changes

NIF B-7, Business Acquisitions, requires valuation of noncontrolling interest (formerly minority interest) at fair value, as of the date of acquisition, and recognition of the total goodwill at fair value. NIF B-7 also establishes that transaction expenses should not form part of the purchase consideration and restructuring expenses should not be recognized as an assumed liability. The adoption of this new standard did not have a material impact on the accompanying consolidated financial statements.

F-38

NIF B-8, Consolidated or Combined Financial Statements, establishes that special purpose entities over which the Company has control should be consolidated. It also establishes the option of presenting separate financial statements for intermediate controlling entities, provided certain requirements are met. NIF B-8 also requires consideration of potential voting rights to analyze whether control exists. The adoption of this new standard did not have a material impact on the accompanying consolidated financial statements.

NIF C-7, Investments in Associated Companies and Other Permanent Investments, requires valuation, through the equity method, of investments in special purpose entities over which the Company has significant influence. It also requires consideration of potential voting rights to analyze whether significant influence exists. NIF C-7 establishes a specific procedure and sets a limit for the recognition of losses in associated companies, and requires that the investment in associated companies include the related goodwill. The adoption of this new standard did not have a material impact on the accompanying consolidated financial statements.

NIF C-8, Intangible Assets, establishes that separating an intangible asset is not the only condition necessary for its identification and adds the condition that the asset must derive from contractual or legal rights. It eliminates the assumption that intangible assets are amortized over a period not greater than 20 years and requires that any unamortized pre-operating expenses incurred up to December 31, 2002 be offset against retained earnings. NIF C-8 separates disclosures that are specific for public entities. The effects of adoption of this accounting change resulted in a debit to retained earnings on January 1, 2009 of $67,987 and a corresponding credit to other assets to eliminate unamortized preoperating expenses (see Note 10).

NIF D-8, Share-based Payments, sets the rules for recognition of transactions involving share-based payments (at fair value of goods received, or fair value of equity instruments granted), including granting employees the option to purchase Company shares, thus eliminating the supplemental application of International Financial Information Standard No. 2, Share-based Payments. The adoption of this new standard did not have a material impact on the accompanying consolidated financial statements.

As of December 15, 2009, the Company adopted Interpretation of Financial Information Standard (“INIF”) 18, Recognition of the Effects of the 2010 Tax Reform on Income Taxes, which establishes the accounting treatment for changes to the income tax law which were enacted in 2009, including with respect to, among other things: 1) income taxes resulting from changes to the tax consolidation regime, 2) changes in the income tax rate and 3) credits against IETU for tax losses. The effects of adopting this interpretation resulted in the recognition of an income tax liability (with respect to changes to the tax consolidation regime) of $1,136,312 ($18,136 and $1,118,176, current and long-term, respectively) as of December 31, 2009, and a corresponding decrease to retained earnings in 2009for the same amount. Additionally, the change in the income tax rate resulted in additional deferred income taxes of $50,680. b. Reclassifications – Certain amounts in the consolidated financial statements as of and for the years ended December 31, 2008 and 2007 have been reclassified to conform to the presentation of the 2009 consolidated financial statements. c. Recognition of the effects of inflation – Since the cumulative inflation for the three fiscal years prior to those ended December 31, 2009 and 2008 was 14.32% and 11.13%, respectively, the economic environment is considered non-inflationary in both years. Inflation rates for the years ended 2009, 2008 and 2007 were 3.57%, 6.52% and 3.75%, respectively.

Accordingly, beginning January 1, 2008, the Company discontinued recognition of the effects of inflation in its financial statements. However, assets, liabilities and stockholders’ equity include the restatement effects recognized through December 31, 2007.

F-39

d. Cash and cash equivalents – Cash and cash equivalents consist mainly of bank deposits in checking accounts and short-term investments, highly liquid and easily convertible into cash, which are subject to insignificant value change risks. Cash is stated at nominal value and cash equivalents are valued at fair value; any fluctuations in value are recognized in comprehensive financing (cost) income of the period. Cash equivalents are represented mainly by investments in Treasury Certificates (CETES), investment funds and money market funds. e. Real estate inventories – Real estate inventories primarily consist of the acquisition cost of land, licenses, materials, labor and direct and indirect expenses incurred in the Company’s construction activities. Through December 31, 2007, inventories were restated using the specific cost method. The Company classifies real estate inventories as long-term when the period of construction exceeds one year.

During the development period of real estate inventories, net comprehensive financing cost of mortgage bridge loans and other financing related to the construction process is capitalized. f. Investment in shares of associated companies, trusts and others – Beginning in January 2009, permanent investments in entities where significant influence exists, are initially recognized based on the net fair value of the entities’ identifiable assets and liabilities as of the date of acquisition. Such value is subsequently adjusted for the portion related both to comprehensive income (loss) of the associated company and the distribution of earnings or capital reimbursements thereof. When the fair value of the consideration paid is greater than the value of the investment in the associated company, the difference represents goodwill, which is presented as part of the same investment. Otherwise, the value of the investment is adjusted to the fair value of the consideration paid. If impairment indicators are present, investment in shares of associated companies is subject to impairment testing. Through December 31, 2008, investment in shares of associated companies was valued based on the acquisition cost of the asset and any excess value paid was recognized within other assets. g. Other permanent investments – Permanent investments made by the Company in entities where it has no control, joint control, or significant influence, are initially recorded at acquisition cost and any dividends received are recognized in current earnings, except when they are taken from earnings of periods prior to the acquisition, in which case, they are deducted from the permanent investment. h. Property, machinery and equipment – Property, machinery and equipment are initially recorded at acquisition cost. Balances arising from acquisitions made through December 31, 2007 were restated for the effects of inflation by applying factors derived from the National Consumer Price Index (“NCPI”) through that date. Depreciation and amortization are calculated using the straight-line method based on the useful lives of the related assets, as follows.

Useful Life in Years

Buildings 40 Machinery and equipment 3-6 Vehicles 4 Computers 3 Furniture and fixtures 10 Installation costs 5 i. Leases – Lease arrangements are recognized as capital leases if they meet at least one of the following conditions.

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When the lessor retains the risks or benefits inherent to the ownership of the leased asset, the agreements are classified as operating leases and rent is charged to results of operations. j. Impairment of long-lived assets in use – The Company reviews the carrying amounts of long-lived assets in use when an impairment indicator suggests that such amounts might not be recoverable, considering the greater of the present value of future net cash flows or the net sales price upon disposal. Impairment is recorded when the carrying amounts exceed the greater of the aforementioned amounts. Impairment indicators considered for these purposes are, among others, operating losses or negative cash flows in the period if they are combined with a history or projection of losses, depreciation and amortization charged to results, which in percentage terms in relation to revenues are substantially higher than that of previous years, obsolescence, reduction in the demand for the Company’s products, competition and other legal and economic factors. k. Derivative financial instruments – The Company obtains financing under different conditions. If the rate is variable, interest rate swaps are entered into to reduce exposure to the risk of rate volatility, thus converting the interest payment profile from variable to fixed. These instruments are negotiated only with institutions of recognized financial strength and when trading limits have been established for each institution. The Company’s policy is not to carry out transactions with derivative financial instruments for the purpose of speculation.

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F-42

s. Statutory employee profit sharing – PTU is recorded in the results of the year in which it is incurred and presented under other income and expenses in the accompanying consolidated statements of income. Deferred PTU is derived from temporary differences between the accounting result and income for PTU purposes and is recognized only when it can be reasonably assumed that such difference will generate a liability or benefit, and there is no indication that circumstances will change in such a way that the liabilities will not be paid or benefits will not be realized. t. Share-based payments – The Company has implemented a share-based payment plan for its key officers. Payments are settled with the Company’s own equity instruments. Compensation cost is recognized based on a projection of the fair value of the instruments, from the grant date to the estimated exercise date, taking into account terms and conditions according to which the equity instruments are granted. u. Income taxes – Income tax (“ISR”) and the Business Flat Tax (“IETU”) are recorded in the results of the year they are incurred. To recognize deferred income taxes, based on its financial projections, the Company determines whether it expects to incur ISR or IETU and, accordingly, recognizes deferred taxes based on such expectation. Deferred taxes are calculated by applying the corresponding tax rate to temporary differences resulting from comparing the accounting and tax bases of assets and liabilities and including, if any, future benefits from tax loss carryforwards and certain tax credits. Deferred tax assets are recorded only when there is a high probability of recovery. v. Foreign currency balances and transactions – Foreign currency transactions are recorded at the applicable exchange rate in effect at the transaction date. Monetary assets and liabilities denominated in foreign currency are translated into Mexican pesos at the applicable exchange rate in effect at the balance sheet date. Exchange fluctuations are recorded as a component of net comprehensive financing cost in the consolidated statements of income. w. Recognition of revenues and costs –

Construction costs, provision of construction services and sale of real estate developments include the land, materials, subcontracts and all the indirect costs related to such developments, such as indirect labor, purchases, repairs and depreciation. General and administrative expenses are charged to results when they are incurred.

In instances when the total estimated costs to complete the complex exceed the total estimated earnings for the project, thereby representing an impairment of the inventory recognized to date, such impairment is recognized within results of the period.

(2) For those projects that qualify as construction and construction services agreements, the Company recognizes revenue using the percentage-of-completion method as established in Bulletin D-7, Construction and Manufacturing Contracts for Certain Capital Assets, in which revenues are recognized based on the stage of completion, which is determined by the proportion of costs incurred to total costs or based on construction incurred and approved by customers.

In instances when the total complex estimated costs exceed the total estimated earnings for the project, the expected loss is recorded within results of the period.

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x. Customer advances – Current liabilities shown in the balance sheet under customer advances represent cash received from customers for down payments, expenses and other payments received during the presale stage before the properties are formalized.

y. Obligations under sale of receivables contracts – As of December 31, 2009, 2008 and 2007, the Company has entered into sales contract programs with a financial institution (“factoring program” or ”securization” ) with respect to certain of its contracts for the purchase and sale of housing. Under this program, the risks and rewards associated with the accounts receivable that will be obtained from the sale of homes are effectively transferred to the financial institution. A liability results from the cash received by the Company from the financial institution in advance of the collection of receivables from its customers, and thus represents an obligation of the Company for the future securitization of amounts to be received under housing sale agreements executed with customers. This obligation will be settled once the housing units related to such contracts are formalized and the associated cash is collected.

z. Earnings per share – Basic earnings per common share is calculated by dividing net income attributable to GEO by the weighted average number of shares outstanding during the year.

4. Accounts receivable

2009 2008 2007

Notes and accounts receivable from customers for real estate sales $ 829,915 $ 875,334 $ 639,000 Allowance for doubtful accounts (27,450) (32,478) (5,330) Commitment deposits 27,383 72,531 220,913 Billings on contracts 749 966 745 Retainage on subcontractors 78 651 1,678

$ 830,675 $ 917,004 $ 857,006

5. Real estate inventories 2009 2008 2007

Land held for development $ 4,900,779 $ 4,537,407 $ 2,855,665 Construction in – progress of real estate developments 14,006,629 11,507,857 9,030,859 Construction materials 750,091 697,379 498,956 Advances to land suppliers 198,959 232,061 427,671 Advances to suppliers 295,811 263,795 186,082 20,152,269 17,238,499 12,999,233 Non-current real estate inventory – land and construction 3,342,342 3,063,765 2,603,655

$ 16,809,927 $ 14,174,734 $ 10,395,578

6. Assets subject to capitalization of comprehensive financing cost (“CFC”)

2009 2008 2007

Real estate inventories $ 7,516,046 $ 8,695,720 $ 8,377,676 Construction in-progress 492,862 - -

Assets subject to capitalization of CFC $ 8,008,908 $ 8,695,720 $ 8,377,676

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Reconciliation of CFC for the year:

2009 2008 2007

Interest expense $ 1,237,016 $ 1,534,558 $ 1,206,454 Exchange loss – Net 30,579 116,580 1,942 Effects of valuation of derivative financial instruments – Net 38,969 - - Ineffectiveness of derivative financial instruments 3,946 - -

Total CFC subject to capitalization $ 1,310,510 $ 1,651,138 $ 1,208,396

Capitalized CFC attributable to real estate inventories (538,951) (923,600) (776,300) Capitalized CFC attributable to construction in-progress (30,857) - -

Amount recognized in results 740,702 727,538 432,096 Interest income (123,989) $ (99,772) $ (98,244)

Net amount recognized in CFC $ 616,713 $ 627,766 $ 333,852

Capitalized CFC attributable to real estate inventories released to cost $ 730,817 $ 804,125 $ 708,699

During 2009, 2008 and 2007, cumulative capitalized amounts (before their transfer to cost of sales) in the development of real estate inventories were $7,516,046, $8,695,720 and $8,377,676, respectively (these do not include the territorial reserve).As of December 31, 2009, the accumulated amount capitalized within construction in-progress is $492,493.

The annualized capitalization rate in 2009, 2008 and 2007 was 6.95%, 11.50% and 9.53%, respectively.

7. Other current assets 2009 2008 2007

Recoverable taxes $ 354,431 $ 341,888 $ 64,991 Accounts receivable from sales of equipment - - 340,063 Sundry debtors 71,873 103,263 66,937 Prepaid expenses 225,158 241,466 227,636 Sociedad Financiera Equipate, S. A. de C. V. SOFOM, E.N.R – related party 33,708 33,378 - Geoicasa,S.A. de C.V.- related party 51,666 - - Grupo Punta Condesa, S.A. de C.V.- related party 36,814 - - Discontinued operations 123,959 233,020 359,242 Other - 6,455 11,182

$ 897,609 $ 959,470 $ 1,070,051

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8. Investments in associated companies, trusts and others

Investments in associated companies, trusts and others are as follows:

2009 2008 2007 Associated companies: Hipotecaria su Casita, S. A.(1) $ 208,362 $ 211,531 $ 223,173 Grupo Punta Condesa, S.A. de C.V. 53,482 57,188 57,188 Sociedad Financiera Equipate, S. A. de C. V. SOFOM, E.N.R 14,778 14,565 11,384 Fin México Servicios, S.A. de C.V. - 2,339 2,339 Servicios de Autoalmacenaje, S.A. de C.V. 74,029 71,950 5,380 Other 7,134 (412) (139)

Trusts and others: Trust Sólida 5,380 - - Trust Sólida Temixco 699 37,934 - - Residential Investment Program (Trust 371) 13,318 14,479 32,014 Residential Investment Program (Trust 412) 13,125 15,638 8,330 Residential Investment Program (Trust 850) 30,079 - -

$ 457,621 $ 387,278 $ 339,669

Equity in income (loss) of associated companies, trusts and others is as follows:

2009 2008 2007

Hipotecaria su Casita, S. A.(1) $ (10,134) $ (14,087) $ 27,926 Residential Investment Program 9,021 17,315 16,401 Sociedad Financiera Equipate, S. A. de C. V. SOFOM, E.N.R 213 2,561 (4,877) Other (1,921) - (70)

Equity in net income (loss) $ (2,821) $ 5,789 $ 39,380

(1) The Company’s management does not believe that this investment is impaired; the entity is waiting to receive financing from its stockholders and other financial institutions.

9. Property, machinery and equipment

2009 2008 2007

Land $ 358,834 $ 432,529 $ 207,663 Buildings 339,481 355,984 103,496 Machinery, equipment and vehicles 1,478,799 1,458,516 1,481,458 Computers 173,156 157,516 111,390 Furniture and fixtures 122,759 120,320 156,440 2,114,195 2,092,336 1,852,784 Accumulated depreciation (1,158,673) (1,014,141) (944,269) 955,522 1,078,195 908,515 F-46

2009 2008 2007

Construction in-progress 492,862 - - 1,807,218 1,510,724 1,116,178

Installation costs 464,493 400,687 402,404 Accumulated amortization (261,327) (216,207) (149,390) 203,166 184,480 253,014

$ 2,010,384 $ 1,695,204 $ 1,369,192

10. Other assets 2009 2008 2007

Tools and equipment $ 40,895 $ 54,775 $ 30,975 Debt issuance costs 134,990 37,715 26,081 Development of new projects 76,348 77,716 73,999 252,233 170,206 131,055 Accumulated amortization (37,300) (28,155) (27,463) 214,933 142,051 103,592

Enterprise Resource Planning (“ERP”) - Net 334,182 283,804 148,907 Accumulated amortization (61,510) - - 272,672 283,804 148,907 Intangible asset for employee retirement obligations and severance payments - - 17,015 Commitment deposits 251,393 126,324 - Debt coverage premium (1) 8,299 15,742 42,866

$ 747,297 $ 567,921 $ 312,380

The effects of the adoption of NIF C-8 are as follows:

Balance at Balance at December 31, Adoption of Additions Disposals December 31, 2008 NIF C-8 during 2009 during 2009 2009 Tools and equipment $ 54,775 $ - $ 5,347 $ (19,227) $ 40,895 Debt issuance costs 37,715 - 97,275 - 134,990 Development of new projects 77,716 (67,987) 93,294 (26,675) 76,348 170,206 (67,987) 195,916 (45,902) 252,233 Accumulated amortization (28,155) - (23,948) 14,803 (37,300) 142,051 (67,987) 171,968 (31,099) 214,933 Enterprise Resource Planning (“ERP”) 283,804 - 50,378 (61,510) 272,672 Commitment deposits 126,324 - 125,069 - 251,393 Debt coverage premium 15,742 - 5,138 (12,581) 8,299 $ 567,921 $ (67,987) $ 352,553 $ (105,190) $ 747,297

(1) See Note 14.

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11. Notes payable to financial institutions

2009 2008 2007

Mexican pesos

Bridge loans with real estate inventories as a collateral, bearing interest at the Mexican Interbank Equilibrium Interest Rate (“TIIE”) plus an average of 3.11, 2.34 and 1.82 basis points as of December 31, 2009, 2008 and 2007, respectively. $ 1,486,138 $ 1,878,254 $ 1,911,151

Mortgage loans for purchases of land with real estate inventories as a collateral, bearing interest at the TIIE rate plus 2.76, 2.60 and 1.73 basis points as of December 31, 2009, 2008 and 2007, respectively. 48,495 88,525 304,558

Unsecured loans bearing interest at an annual rate of 11.97%. Paid in full in January and February 2009. - 850,429 30,564

Securitized certificate, bearing interest at the CETES rate plus 1.41 basis points. Paid in full in October, 2008. - - 580,000

Securitized certificate, bearing interest at the TIIE rate plus 6.00 basis points. Paid in full in January 29, 2009. - 80,000 -

Securitized certificate bearing interest at the TIIE rate plus 2.9 basis points. Paid in full in February 10, 2009. - 60,000 -

Securitized certificate bearing interest at the TIIE rate plus 3.2 basis points. Paid in full on October 20, 2009. - 140,000 -

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2009 2008 2007 U.S. dollars:

Commercial Europaper program up to an amount of U.S. $200,000,000. In 2008, the amount of U.S. $30,500,000 was borrowed at a fixed annual interest rate of between 6.70% and 6.32% and was paid in full in 2009. - 421,891 286,020

$ 1,534,633 $ 3,519,099 $ 3,112,293

As of December 31, 2009, the Company has available credit lines of $4,591,808. The most significant available credit lines are represented by mortgage bridge loans of $2,988,806.

CETES – “Certificados de la Tesorería” or “National Tresury Bonds” established by “El Banco de México” or “The Bank of Mexico”. At December 31 2007, the CETES rate was 7.58%.

As of December 31, 2009, 2008 and 2007, the TIIE was 4.1950%, 8.6886% and 7.925%, respectively.

All interest rates mentioned above represent their annual rate.

12. Accrued expenses, taxes payable and other current liabilities

2009 2008 2007

Taxes other than income taxes $ 130,499 $ 75,821 $ 153,121 Provisions 69,701 122,762 94,751 Services and other 1,628,776 1,350,373 970,220 Discontinued operations 37,725 114,905 156,858

$ 1,886,701 $ 1,663,861 $ 1,374,950

13. Obligations under sale of receivables contracts

As of December 31, 2009, 2008 and 2007, the following obligations existed with respect to the Company’s factoring and securization programs:

2009 2008 2007

Fourth issue – March 31, 2004 $ 172,000 $ 172,000 $ 172,000 Fifth issue – March 11, 2005 281,000 281,000 281,000 453,000 453,000 453,000

Other factoring 1,066,716 2,292,012 1,531,179

$ 1,519,716 $ 2,745,012 $ 1,984,179

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Subsidiaries of GEO established a revolving program to securitize collection rights of future receivables (the “Rights”) derived from the Company’s purchase-sale contracts of homes, which are placed in a trust established for such purpose with Nacional Financiera, S.N.C., Institución de Banca de Desarrollo (“Nacional Financiera”). Nacional Financiera acts as the trustee.

The trust obtains funds through public offerings of Amortizable Share Certificates (CBs), to purchase Rights, which include the issuance of preferred and subordinated series of CBs acquired by the general public and GEO, respectively. Once Rights are collected, new acquisitions can be made, based on the maturity of the CBs issuances or by the early amortization of the issuance. As of December 31, 2009, 2008 and 2007 the Company currently has the fourth and fifth issuances outstanding, for $172,000 and $281,000, respectively, with maturity dates on March 2010 and 2011, respectively.

GEO has the obligation to complete the construction of the housing units related to the Rights and is responsible for the collection of the Rights and for depositing the proceeds daily in the trust. Preferred CB’s are paid at nominal value. The fourth issuance yields interest at a rate of 8.23%, 9.43% and 7.9% as of December 2009, 2008 and 2007, respectively. The fifth issuance yields interest at a rate of 7.97%, 9.50% and 7.9% as of December 31, 2009, 2008 and 2007, respectively. Both of them are charged to the trust’s net worth. Using the resources obtained from the collection of the Rights, a fund (Capacity) was established in the trust to pay expenses and interest on the preferred CB’s. Once the preferred CBs are paid in full, the remaining amount of the trust’s net worth is used to pay the subordinated CBs.

Early amortization of preferred CBs, as established with the trust and subject to prior instructions from the Technical Committee to the trustee, will be made at face value, among other reasons, when:

a. The trustors for any reason refuse to or cannot assign additional future Rights to the trust to make permitted investments, and such eventuality is translated into the accrual of 50% in cash held in trust over the principal of the preferred CBs, and such situation remains in effect for 60 calendar days; or

b. the Rights do not meet the eligibility criteria established in the trust issue instrument.

Securitization - On September 28, 2008, Sólida Administradora de Portafolios, S.A. de C.V., in its capacity as Trustor, Banco Mercantil del Norte, S.A., in its capacity as Trustee, and Institución de Banca Múltiple and Grupo Financiero Banorte, in their capacity as Beneficiary, entered into trust contract F/00612. Among others, the purpose of this trust is to acquire the accounts receivable of the GEO subsidiaries.

Financial factoring with recourse - As of December 31, 2009 and 2008, a contingent obligation exists derived from factoring contracts with recourse of $1,074,341 and $623,949, respectively. Given the low probability that we will be required to reimburse such amounts to the financial institution, the accompanying consolidated financial statements do not include the provision of such obligation.

Financial factoring without recourse - The Company is jointly and severally liable for up to 5% of the discounted portfolio with a credit institution. The respective amount as of December 31, 2008 and 2007 is $24,268 and $20,402.

14. Long-term debt

2009 2008 2007 Mexican pesos:

Securitized certificate maturing on January 6, 2011, bearing interest at the TIIE rate plus 4 basis points. $ 280,000 $ - $ -

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2009 2008 2007

Securitized certificate maturing on January 6, 2012, bearing interest at the TIIE rate plus 1.25 basis points. 700,000 700,000 700,000

Securitized certificate maturing on March 25, 2011, bearing interest at the TIIE rate plus 1.75 basis points. 1,000,000 1,000,000 -

Securitized certificate bearing interest at the TIIE rate plus 1.70 basis points. Paid in full on October 29, 2009. - 500,000 500,000

Securitized certificate maturing on November 26, 2010, bearing interest at the TIIE rate plus 1.75 basis points. 500,000 500,000 500,000

Loan maturing on January 1, 2013, bearing variable interest at an annual average rate of 14%. 11,875 - -

Loan maturing on May 2, 2011, bearing variable interest at an annual average rate of 8.19%. 23,244 - -

Loan maturing on November 1, 2012, bearing interest at the TIIE rate plus 4 basis points. 13,660 - -

Loan maturing on January 1, 2013, bearing variable interest rate at an annual average rate of 14%. 23,482 - -

Loan maturing on June 29, 2010, bearing interest at the TIIE rate plus 1.54 basis points. 6,687 - -

Loan bearing variable interest at an annual average rate of 8.19%. Paid in full during 2009. - 39,037 -

Loan maturing on January 1, 2010, bearing variable interest at an annual average rate of 9.45%. - - 47,776

Fixed asset loan maturing on March 15, 2010, bearing interest at 10.63%. 3,891 11,714 -

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2009 2008 2007

Mortgage loans with land as a collateral, bearing interest at the TIIE rate plus 2.2 and 1.68 basis points on average. Maturity dates in 2010, 2011 and 2012. 524,787 845,312 -

Capital leases for the acquisition of machinery and equipment bearing interest at a TIIE rate plus 2.39 and 1.8 basis points on average. 185,336 281,442 293,494

U.S. dollars:

Fixed asset loan for U.S.$13,084,723 maturing on December 30, 2016; bearing interest at the London Interbank Offered rate (“LIBOR”) plus 2.2 basis points. 170,964 - -

Fixed asset loan for U.S.$3,892,276 maturing on April 24, 2016; bearing interest at the LIBOR rate plus 2.2 basis points. 50,855 - -

Fixed asset loan for U.S.$1,316,608 maturing on September 30, 2016; bearing interest at the LIBOR rate plus 2.2 basis points. 17,203 - -

Senior guaranteed note for U.S. $250,000,000 maturing on September 25, 2014, bearing interest at a rate of 8.875% guaranteed with third-party security of the group’s operating subsidiaries. 3,335,641 - -

Adjustment for the fair value of the senior guaranteed note resulting from a derivative financial instrument. (135,511) - -

6,712,114 3,877,505 2,041,270

Less current portion of long-term debt 1,124,879 956,840 205,932

$ 5,587,235 $ 2,920,665 $ 1,835,338

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Maturities of long-term debt as of December 31 are:

2011 $ 1,353,930 2012 793,232 2013 35,626 2014 3,200,129 2016 204,318

$ 5,587,235

As of December 31, 2009, the 180-day LIBOR rate was .04%.

The loan agreements contain restrictive clauses, which require the Company to maintain certain minimum financial ratios and to adhere to other “affirmative and negative” covenants, during the term of the loan. As of December 31, 2009, the Company has complied with all these obligations, restrictions and ratios.

Derivative financial instruments

(1) As discussed above, the Company issued a five-year bond of U.S.$250,000,000 with a fixed 8.875% coupon and a yield rate at maturity of 9%. To reduce its exposure to interest and exchange rate fluctuations, on September 23, 2009, the Company entered into two interest rate and exchange rate hedging derivatives with the following characteristics:

- Hedge of U.S.$125,000,000 at an exchange rate of $13.3850 Mexican pesos per U.S. dollar, bearing interest at the TIIE rate plus 639 basis points, maturity on September 25, 2014. The fair value as of December 31, 2009 was U.S.$(3,666,228).

As of December 31, 2009, details of the hedge are as follows:

Notional Inception Rate received Fair value Year amount USD date Maturity date Rate paid: USD USD Fair value MXN

U.S.$125 September September TIIE rate plus 2009 million 2009 2014 6.39% 8.875% (3,731,100) $ (48,750) U.S.$125 September September TIIE rate plus 2009 million 2009 2014 6.42% 8.875% (3,666,228) (48,164) $ 96,914

During 2009, the company recognized a debit to results and a credit to a derivative liability of $36,449, representing the fair value of the liability portion of the derivative financial instrument. Additionally, the Company recognized a credit to results of $75,046 representing interest income earned on the derivative financial instruments, as well as a debit of $135,511 with a corresponding credit to the existing liability was recognized, representing the change in the fair value of the asset portion of the derivative, resulting in a net fair value of the derivative financial liability of $96,914 as of December 31, 2009.

1. The entity’s strategy and objectives regarding risk management are as follows:

The purpose of the hedge is to reduce the variability of the fair value of an obligation denominated in a currency other than the functional currency of GEO. The strategy is to have financial derivatives contracted which also permit changes in the frequency of payment. F-53

2. The specific risk to be hedged is as follows:

Interest rate and exchange rate risk. The risk comes from the changes in the LIBOR interest rate, and in the exchange rate between the Mexican peso and the U.S. dollar.

3. Identification of the primary position subject to the hedge is as follows:

Senior guaranteed note for U.S.$250,000,000 at 8.875% maturing in 2014, issued by GEO on September 18, 2009.

4. The financial derivative is used for hedging purposes is as follows:

Two cross currency swaps (“CCS”) in which GEO receives fixed rate and pays the 28-day TIIE rate plus an average of 6.42% basis points. The swaps are non-redeemable with exchange of principal at the start and at the end of the instrument.

5. The form that will be used by the entity to evaluate the effectiveness of the hedge, from the start (prospectively) and subsequently (retrospectively), offsetting the exposure to changes in fair value or in the cash flows of the primary position attributed to the risks hedged is as follows:

Effectiveness will be tested based on the comparison of changes in the fair values of the primary position (by means of a hypothetical derivative) and the derivatives.

The test will be conducted prospectively on the designation date and on each reporting date, using the scenarios method.

For the retrospective test, the changes observed in valuations of the hypothetical derivative and the derivatives contracted will be compared.

In both tests, the criteria to conclude whether the derivative is effective will be whether the results are in the range of 80% to 125% on an accumulated basis.

6. The treatment of the total gain or loss on the hedge instrument in the determination of the hedge effectiveness, indicating whether any factor will be excluded in such measurement, is as follows:

The gains or losses on the CCS will be recorded in results and surpluses above 100% efficiency will be classified as hedge inefficiencies.

7. Tax treatment of the derivative is as follows:

Any gain or loss obtained will be considered as interest and as such will be accruable or deductible, respectively.

Determination of gain or loss:

1. For the reciprocal payments of interest, the difference (in Mexican pesos) between the interest collected and interest paid will be accruable or deductible, respectively. The difference is determined by converting the interest paid into Mexican pesos at the exchange rate in effect on the day the payment is made.

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2. For the equivalent amounts in foreign currencies on which interest is calculated (reciprocal payments), the Mexican peso amount resulting from multiplying the amount of each of the payments of the foreign currency to which the transaction is referenced by the difference between the exchange rate agreed at the start of the transaction and the exchange rate in effect on the date of payment is made, will be accruable or deductible, as the case may be.

3. In the year that the transaction is performed (and maturity occurs after the close of the year in which it is performed), the foreign currency amounts resulting from multiplying the unpaid balance at the close of the year of the foreign currency to which the transaction is referenced by the difference between the exchange rate agreed at the start of the transaction and the exchange rate in effect at the closing date of such year, will be accruable or deductible, as the case may be.

4. In years after that in which the transaction is performed: the Mexican peso amount resulting from multiplying each of the payments made of the foreign currency to which the transaction is referenced by the difference between the exchange rate in effect at the close of the immediately previous year and the exchange rate in effect on the day that each payment is made, or, as the case may be, the Mexican peso amount resulting from multiplying the unpaid balance of such amount at the close of the year in question by the difference between the exchange rate in effect at the closing date of the immediately previous year and the exchange rate in effect at the close of the year in question, in accordance with rule I .3 .2 .1 of the Omnibus Tax Ruling for 2009, will be accruable or deductible, respectively.

(2) On July 8, 2008, the Company contracted three hedging instruments (variable to fixed interest rate swaps) with the following characteristics:

- Hedge of $1,000,000 at a fixed 7.17% rate maturing on March 25, 2011. At the beginning of the transaction the Company paid a premium of $6,860.

- Hedge of $700,000 at a fixed 7.17% rate maturing on January 6, 2012. At the beginning of the transaction the Company paid a premium of $7,755.

- Hedge of $500,000 at a fixed 7.17% rate maturing on November 26, 2010. At the beginning of the transaction the Company paid a premium of $1,245.

The fair value of these derivative financial instruments as of December 31, 2009 is $8,299 (see Note 10).

On February 21, 2006, the Company entered into two derivative financial instruments that establish a maximum interest rate for liabilities of $2,000,000 to reduce its exposure to interest rate fluctuations. However, as these instruments did not comply with accounting requirements to be accounted as hedges, they are classified as trading instruments. The derivative financial instruments are cap sales options for the notional amount of $2,000,000, which will expire in November 2012, and establish the monthly dates on which they can be exercised if the financial interest rate exceeds an annual 9% TIIE. At the beginning of this transaction the Company paid a premium of $74,700. On July 10, 2009, management decided to liquidate these caps, with a fair value of $16,105 and residuals were applied to comprehensive financing cost of the period.

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Summary of the effects of the financial derivatives recorded in comprehensive financing cost are as follows:

Valuation for CCS asset $ 135,511 Valuation for clean CCS liability 36,449 Change in the fair value of the senior guaranteed note (135,511) 36,449 Ineffectiveness of the CCS financial derivative, reclassified 3,946 Total CCS valuation 32,503 Plus trading financial derivatives 6,466 Net effect of the financial derivatives in the RIF $ 38,969

15. Employee benefits

Net periodic cost for obligations resulting from the pension plan, severance payments and seniority premiums was $50,367, $41,983 and $31,537 in 2009, 2008 and 2007, respectively. Other disclosures required under financial reporting standards are not considered material.

16. Transactions and balances with related parties

a. Balances with related parties as of December 31 were as follows:

2009 2008 2007

Due from related parties - Mexican Master Trust 412 $ 120,051 $ $133,998 $ 62,892 Mexican Master Trust 371 13,802 44,132 42,419

2009 2008 2007

Purchase of land $ 51,211 $ 289,027 $ 1,082,398

c. Employee benefits granted to Company key management (and/or prominent executives) were as follows:

2009 2008 2007

Salaries and benefits $ 255,080 $ 246,453 $ 178,906 Statutory year end benefit 21,257 20,537 14,906 Bonus 125,922 123,525 168,103

Total $ 402,259 $ 390,515 $ 361,915

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17. Stockholders’ equity

a. As of December 31, 2009, 2008 and 2007, authorized common stock was 555,396,540 shares, at no par value. As of December 31, 2009, 2008 and 2007 the Company had 544,445,650, 537,802,359 and 534,539,859 shares outstanding, respectively, and 616,600, 2,350,000 and 2,093,000 shares held in treasury, respectively.

b. At the stockholders’ and Board of Directors’ extraordinary meetings held in April, May and August, 2001, the creation of an employee and executive incentive plan was approved, which is subject to the following conditions:

x Participants must act as a Company officer during the established periods and under the respective terms, while recognizing that the value of shares will be $0.224.

x Acquisition rights for shares will not have proportional effects based on the completed periods of the year; as such rights will only be generated on specifically established dates.

x On January 23, 2009, 1,027,990 shares of the “Employee and Officer Incentive Plan” were released. The market value as of the date of the assignment was $14.30; therefore, a charge to results and a credit to stockholders’ equity of $14,700 was recorded. This credit is presented within additional paid-in capital in the accompanying statement of changes in stockholders’ equity.

x On August 7, 2009, 5,029,391 convertible debt securities were issued. They were acquired by a trust fund and converted into shares at par value of $0.224, representing an increase in common stock of $1,130. Release of the rights related to the shares is as follows: On August 19, 2009, rights to 1,295,352 shares; the market value of these shares as of the date of conversion was $26.99; and on October 26, 2009, rights to 2,302,842 shares; the market value of these shares as of the date of conversion was $32.99; rights to the remaining shares will be released in 2010. Accordingly, a charge to results and a credit to stockholders’ equity of $34,956 and $75,971 respectively, were recorded. This credit is presented within additional paid-in capital in the accompanying statement of changes in stockholders’ equity.

On December 28, 2007, the Company issued 3,400,000 new unsecured debt securities convertible to shares at par value of $0.224 each, which were acquired by a trust and converted to shares on January 14, 2008, thus representing a nominal capital increase in 2008 of $763. In addition, as part of the key personnel incentive plan 2,555,215 shares were released to Company employees and officers in 2008. The market value of the obligation when converted to shares was $33.00. Accordingly, the Company recorded a charge to results of $89,070, with a credit to stockholders’ equity for the same amount, which is presented within additional paid-in capital.

In 2007, the Company issued 178,571 new unsecured debt securities convertible to shares at par value of $0.224 each, acquired by a trust and converted to shares, thus representing a nominal capital increase of $40. In addition, as part of the key personnel incentive plan 1,002,296 shares were released to Company employees and officers in 2007. The market value of the above obligations when converted to shares was $38.61. Accordingly, the Company recorded a charge to results of $38,701, with a credit to stockholders’ equity for the same amount, which is presented within additional paid-in capital

Effects of the incentive plan during the fiscal years ended 2009, 2008 and 2007 are as follows:

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Issuance of stock officer incentive plan:

Released date Stocks released Issued value per share Issued capital

August, 2009 5,029,391 $ 0.224 $ 1,130 January, 2008 3,400,000 $ 0.224 763 December, 2007 178,571 $ 0.224 40

4,626,184 $ 1,933

The balance of unsubscribed incentive plan shares as of December 31, 2009, 2008 and 2007 is 10,334,290, 15,363,681 and 18,763,681, respectively.

Amounts recorded to additional paid-in capital in 2009 are as follows:

Additional paid-in Released date Stocks released Value per share capital

January, 2009 1,027,990 $ 14.30 $ 14,700 August, 2009 1,295,352 $ 26.99 34,956 October, 2009 2,302,842 $ 32.99 75,971

4,626,184 $ 125,627

Amounts recorded to additional paid-in capital in 2008 are as follows:

Additional paid-in Released date Stocks released Value per share capital

January, 2008 2,555,215 $ 34.86 $ 89,070

Amounts recorded to additional paid-in capital in 2007 are as follows:

Additional paid-in Released date Stocks released Value per share capital

December, 2007 1,002,296 $ 38.61 $ 38,701 c. At the stockholders’ ordinary meetings held on March 20, 2009 and April 27, 2007, $1,000,000 and $500,000, respectively, were approved as the maximum amount for the reserve fund for the repurchase of the Company’s own shares for fiscal years 2009 and 2007, respectively. d. During the year ended December 31, 2007, the Company’s management performed appropriations between the earned and contributed capital accounts, which were approved by the stockholders and are shown in the consolidated statement of changes in stockholders’ equity. e. Retained earnings include the statutory legal reserve. The General Corporate Law requires that at least 5% of net income of the year be transferred to the legal reserve until the reserve equals 20% of capital stock at par value (historical pesos). The legal reserve may be capitalized but may not be distributed unless the entity is dissolved. The legal reserve must be replenished if it is reduced for any reason. As of December 31, 2009, 2008 and 2007 the legal reserve, in historical pesos, was $25,712.

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f. Stockholders’ equity, except restated paid-in capital and tax retained earnings, will be subject to income tax at the rate in effect when dividends are distributed. Any tax paid on such distribution may be credited against the income tax payable of the year in which the tax on the dividend is paid and the two fiscal years following such payment.

g. The balances of the tax accounts of stockholders’ equity as of December 31, 2009, 2008 and 2007 are as follows:

2009 2008 2007

Contributed capital account $ 3,610,510 $ 3,486,058 $ 3,272,679 Net tax income account 799,461 825,940 357

$ 4,409,971 $ 4,311,998 $ 3,273,036

18. Foreign currency balances

As of December 31, 2009, the foreign currency monetary position is as follows:

Balances in Foreign Mexican Currency Peso (Thousands) Equivalent U.S. dollars: Monetary assets 5,049 $ 65,969 Monetary liabilities (269,131) (3,516,438)

Net monetary liability (264,082) $ (3,450,469)

Mexican peso exchange rates in effect at the dates of the consolidated balance sheets and at the date of the related independent auditors’ report were as follows:

May 17, December 31, 2010 2009 2008 2007

Mexican pesos per one U.S. dollar $ 12.5684 $ 13.0659 $ 13.7700 $ 10.9200

19. Other expenses – net

2009 2008 2007

Statutory employee profit sharing $ 48,192 $ 27,078 $ 147,817 (Gain) loss on sale of fixed assets 8,248 2,391 (85,929) Other expenses 29,067 1,816 58,737

$ 85,507 $ 31,285 $ 120,625

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20. Noncontrolling interest

Noncontrolling interest as of December 31, 2009, 2008 and 2007, consisted of the following:

2009 2008 2007

Common stock of consolidated trusts $ 2,439,786 $ 1,322,196 $ 963,127 Retained earnings 139,645 53,150 9,686 Contractual payment to noncontrolling interest holders in trusts (906,845) (504,633) (136,644)

$ 1,672,586 $ 870,713 $ 836,169

21. Income taxes

The ISR rate for 2009, 2008 and 2007 was 28%, and will be 30% for 2010 to 2012, 29% for 2013, and 28% for 2014 and thereafter. The Company pays ISR, together with subsidiaries on a consolidated basis.

On December 9, 2009, amendments to the ISR Law were published, to become effective beginning in 2010. These amendments state that: a) ISR relating to tax consolidation benefits obtained from 1999 through 2004 should e paid in installments beginning in 2010 through 2015, and b) ISR relating to tax benefits obtained in the 2005 tax consolidation and thereafter, should be paid during the sixth through the tenth year after that in which the benefit was obtained. Payment of ISR in connection with tax consolidation benefits obtained from 1982 (tax consolidation starting year) through 1998 may be required in those cases provided by law.

IETU - Revenues, as well as deductions and certain tax credits, are determined based on cash flows of each fiscal year. The IETU rate was 17% and 16.5%, in 2009 and 2008, respectively; and will be 17.5% beginning in 2010. The Asset Tax Law was repealed upon enactment of the IETU Law; however, under certain circumstances, asset tax (“IMPAC”) paid in the ten years prior to the year in which ISR is paid, may be recovered, according to the terms of the law. In addition, as opposed to ISR, the parent and its subsidiaries will incur IETU on an individual basis.

Income tax incurred will be the higher of ISR and IETU.

Based on its financial projections and according to INIF 8, Effects of the Business Flat Tax, the Company determined that it will basically pay ISR. Therefore, it only recognizes deferred ISR.

In 2007, IMPAC was calculated by applying 1.25% to the net average value of the majority of the Company’s assets (at restated values), without deducting any liabilities, and was paid only to the extent that it exceeded ISR payable for the same period.

Income tax expense for the years ended December 31 is as follows:

2009 2008 2007 Income tax expense: Deferred $ 688,361 $ 408,529 $ (11,984) Current - - 525,340 Tax effect due to rate changes 50,980 - - Write-off of IMPAC (2,442) 77,187 -

$ 736,899 $ 485,716 $ 513,356

F-60 a. The reconciliation of the statutory and effective ISR rates expressed as a percentage of income before taxes on income is:

2009 2008 2007

Statutory rate 28.00% 28.00% 28.00% Add the effect of permanent differences, mainly nondeductible expenses. 1.74 3.07 3.83 Write-off of IMPAC (0.03) 3.00 - Tax effect due to rate changes 2.23 - - Inflationary effect 1.01 (2.00) 1.44

Effective rate 32.95% 32.07% 33.27%

b. The main items originating a deferred ISR liability are:

2009 2008 2007 Deferred income tax liabilities: Unbilled receivables $ 35,569 $ 24,116 $ 18,514 Property, machinery and equipment 116,372 103,105 82,587 Real estate inventories 2,731,226 2,488,985 1,633,535 Other 48,681 23,946 36,379 2,931,848 2,640,152 1,771,015 Deferred income tax assets: Advances from customers 116,966 243,454 220,644 Provisions 92,011 70,783 81,542 Effects of tax loss carryforwards 196,527 487,932 39,375 405,504 802,169 341,561

Subtotal 2,526,344 1,837,983 1,429,454

Recoverable asset tax 16,705 14,263 91,450

Net deferred tax liabilities $ 2,509,639 $ 1,823,720 $ 1,338,004

To determine deferred ISR at December 31, 2009 and 2008, the Company applied the applicable tax rates to temporary differences based on their estimated reversal dates. c. The benefits of restated tax loss carryforwards and recoverable IMPAC for which the deferred ISR asset has been recognized, can be recovered subject to certain conditions. Restated amounts as of December 31, 2009 and expiration dates are:

Year of Tax Loss Recoverable Expiration Carryforwards IMPAC

2018 $ 654,326 $ 16,750 2019 764 -

$ 655,090 $ 16,750

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d. As of December 31, 2009, 2008 and 2007 the Company has temporary taxable differences derived from deferred PTU with a value of $3,536,284, $3,360,094 and $2,172,411, respectively, mainly due to real estate inventories (land), the acquisition of which, based on the Company’s activities, is still deductible. Consequently, a liability will not be recorded for deferred PTU since the Company considers that this situation will not arise given the continuity of its transactions.

e. INIF 18, Recognition of the Effects of the 2010 Tax Reform on Income Taxes – As discussed above, during 2009, the Mexican tax authorities issued a series of tax reforms that went into effect as of January 1, 2010. Subsequently, INIF 18 was issued, which establishes guidelines for accounting for the effects of the tax reforms on a company’s financial information. Based on the Company’s analysis of the reforms and estimates of its effects to the Company, which are subject to change and which such changes could be substantial, depending on future criteria issued by the Mexican tax authorities as well as interpretations made by the Company of such criteria, the table below represents the estimated future tax obligations resulting from the tax reforms, payable in each year as follows (note that such obligation was recognized as a debit to retained earnings, as permitted by INIF 18):

Year of Amount Payment

2010 $ 18,136 2012 43,266 2013 88,496 2014 144,254 2015 231,326 2016 223,465 2017 175,131 2018 120,308 2019 76,526 2020 15,404 1,136,312 Current 18,136

$ 1,118,176

22. Transactions that did not affect cash flows

As of December 31, 2009, 2008 and 2007, the principal items affects assets and liabilities which did not generate or require the flow of cash are as follows.

2009 2008 2007

Purchase of land, unpaid 472,517 459,074 307,091 Purchases under capital lease 78,638 207,481 297,488 Depreciation and amortization 290,280 163,392 191,118 Cancelation of preoperating costs incurred and capitalized (67,987) - - Disposal of other assets (92,609) (44,139) (41,154) Valuation effects of derivative financial instruments (92,596) (27,124) (13,188) Fair value adjustment of debt resulting from derivative financial instrument (135,511) - - Additional liability from tax reform 1,136,312 - - Officer incentive plan 125,627 89,070 38,701 Increase in reserve for repurchase of shares 569,559 - - Capital applications - - (1,612,200) Unrealized exchange (gain) loss (17,332) 82,171 1,796 F-62

23. Earnings per share

The amounts used to determine basic earnings per share were as follows:

Number Mexican pesos Income (loss) of shares per share

Net income attributable to common stock for 2009 before discontinued operations $ 1,496,889 544,445,650 $ 2.75

Net loss attributable to common stock from discontinued operations for 2009 $ (46,058) 544,445,650 $ (0.08)

Net income attributable to common stock for 2008 before discontinued operations $ 1,034,324 537,802,359 $ 1.92

Net loss attributable to common stock from discontinued operations for 2008 $ (8,828) 537,802,359 $ (0.02)

Net income attributable to common stock for 2007 before discontinued operations $ 1,068,914 534,539,859 $ 2.00

Net income attributable to common stock from discontinued operations for 2007 $ 4,157 534,539,859 $ 0.01

24. Contingencies

a. Neither the Company nor its assets are subject to any legal action other than those that arise in the normal course of business.

b. Based on the provisions of the Mexican Law, one-year warranties for construction defects are provided by the Company to its customers. In order to resolve its customer’s claims, the Company obtains collateral and guarantee deposits from its contractors, which are refunded when the warranty period has expired. The Company has contracted insurance against potential defects in the houses that it builds, for a ten-year period. The amounts of the premiums paid are $8,900, $5,206 and $6,719 for the years ended December 31, 2009, 2008, 2007, respectively.

d. On February 15, 2010, the Company filed an action for annulment with the tax authorities challenging the reforms to the tax consolidation regime included in the ISR Law effective as of 2010, specifically the following aspects which adversely affect the Company:

25. Commitments

On August 19, 2003, an agreement was signed between Prudential Investment Management, Inc. (“Prudential”) and GEO, described as the “Residential Investment Program”.

The general purpose of the agreement is to establish an investment program for developing real estate projects that includes, among others, the purchase of land, the construction of housing, which may be affordable, medium-income and upper-income housing, and shopping malls. The structure defined for the program includes the creation of a trust under the laws of the State of New York, U.S.A. (“NY Trust”), whose principal participants will be the Company, Prudential and other institutional investors, with GEO holding a minority interest. Phase I of the program contemplates contributions for a total of U.S.$175 million and Phase II, U.S.$280 million. The participation of GEO pursuant to the terms of the Master Trust allows it to exert significant influence on the projects, but not control them.

In accordance with the program, in each specific trust contract GEO or its subsidiaries must make a deposit (“Significant Deposit”) to the Master Trust equal to 10% of the acquisition cost of any land which will be contributed to the specific trust. The deposit guarantees the trust the recovery of its investment, in order to construct the houses or develop the land.

GEO has no liability for any financing obtained by the Master Trust to finance these transactions. Accordingly, the risks and benefits for GEO in relation to the trusts are limited to the amount of its contribution, any development cost it incurs and the respective allocation of income or loss to GEO, and any significant deposits which it has to make.

As of December 31, 2009, 2008 and 2007, the Company has 4, 9 and 17 projects in Phase I of this program; respectively. The balance of work completed by the Company is presented under the heading of real estate inventory with a value of $136,953, $131,642 and $2,112,359, respectively.

As of December 31, 2009, 2008 and 2007, commitment deposits under Phase I have been made for the amounts of $20,510, $66,609 and $130,208, respectively, recorded within other current liabilities.

As of December 31, 2009, 2008 and 2007, the Company has 19, 19 and 17 projects in Phase II of this program, respectively. The balance of work completed by the Company is presented under the heading of real estate inventory with a value of $990,887, $1,294,863 and $233,405, respectively.

As of December 31, 2009, 2008 and 2007, commitment deposits under Phase II have been made for the amounts of $179,933, $135,118 and $91,619; respectively, recorded within other current liabilities.

Phase IV, a new investment phase, was implemented in June 2009 with Prudential for U.S.$545 million. This is a revolving program contracted for a seven-year period. Work completed by GEO will be presented under the heading of real estate inventories. Prudential has purchased land with a value of $915,186. The program involves six projects and a commitment deposit of $78,739.

In June 2009, a new strategic program was implemented with Prudential to create the Macro Project or Integrally-Planned and Sustainable Cities Project with a capital investment of up to U.S.$1 billion over the next 10 years. Fund capital will be used to acquire large extensions of land and develop infrastructure, urbanization and the equipment needed to generate “Macro Lots” with land use rights, residential, commercial, industrial and equipment services.

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In June 2009, the initial stage was executed in which the Fund invested in the first phase of Valle de las Palmas, located in Tijuana, B.C., with an area of 347 hectares and a value of U.S.$108.3 million. The project is based on land that will be used to develop more than 18,000 homes, as well as industrial and commercial properties.

The program was signed between Prudential and GEO under the following terms:

Works Contract Payment: GEO receives a 15% advance 12 months after project startup, 85% based on work completion and a 5% withholding against the delivery of the “Macro Lots”.

Work and Budget Supervision: GEO will receive work and budget supervision fees.

GEO Fees: 3% of the total investment budget based on each partial payment and 2% of sales, excluding GEO residential areas.

Additional costs: any cost in addition to those approved in the Master Plan must be paid by GEO.

Aéreas GEO: GEO maintains purchase options for at least 50% of saleable land.

Partnership with Sólida, Administradora de Portafolios, S.A. de C.V.: Geo created a partnership with Sólida Administradora de Portafolios, S. A. de C. V. for real estate development projects. The partnership began operations in May 2006 based on a project-by-project approval scheme. During 2009, the amount of $256 million pesos was been invested. The accrued investment at December 31, 2009is $1,982 million pesos in 13 projects.

26. Commitments for rentals

a. The Company leases an aircraft under a ten year non-cancelable operating lease. Rental expense was $8,700, $8,792 and $10,829 for the years ended December 31, 2009, 2008 and 2007, respectively. Future minimum payments for lease commitments in US dollars are:

Years US dollars

2010 673,434 2011 673,434 2012 673,434 2013 505,036

The basic rental payment is US$673,434 and is adjusted by an adjustment factor consisting of the LIBOR rate in effect at the beginning of each quarterly period, plus 1.11%.

b. The Company has executed operating lease agreements for the buildings where the “Alpha Projet” development is. The lease agreements are for a non-cancelable 10-year period and establish the following minimum payment commitments:

Years US dollars

2010 1,389,096 2011 1,389,096 2012 1,389,096 2013 1,389,096 2014 1,389,096 2015 a 2020 6,945,480

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c. The Company leases construction machinery and equipment. Lease expense of $225,228, $113,114 and $271,101were incurred for year ended December 31, 2009, 2008 and 2007, respectively. Operating lease contracts have been executed for obligatory periods of two and three years and establish the following minimum payments:

Years Amount

2010 $ 60,991 2011 16,257 2012 6,637

d. The Company has executed operating lease agreements for the buildings where some of its subsidiaries are located. The lease agreements are for a non-cancelable 15-year period and establish the following minimum payment commitments.

Years Amount

2010 $ 36,340 2011 37,976 2012 39,684 2012 to 2023 573,566

e. The Company has assumed the commitment to construct different construction works benefiting the local communities where its projects are located, such as schools, parks, clinics, etc., as part of the licenses and authorizations, in accordance with the regulations in effect in each location. These expenses are already integrated on each project budget.

27. Discontinued operation

As discussed in Note 2, the operating results of Geo Oaxaca, S. A. de C. V. have been accounted for as discontinued operations and are shown separately from continued operations. Condensed financial information of the discontinued operation is as follows:

2009 2008 2007

Income from discontinued operation $ (123,348) $ (238,562) $ (211,667) Costs and expenses 179,387 256,875 205,910 Other expenses – net 3,365 (4,248) (354) Income taxes (13,346) (5,237) 1,954

Net income (loss) from discontinued operation $ 46,058 $ 8,828 $ (4,157)

The assets and liabilities from discontinued operations are presented grouped with other balance sheet line items, see Notes 7 and 12. The condensed figures of the financial statements of Geo Oaxaca, S. A. de C.V. are as follows:

2009 2008 2007

Current assets $ 108,713 $ 262,077 $ 292,294 Noncurrent assets 13,760 21,856 55,796 Current liabilities 25,952 121,611 114,952 Long-term liabilities 3,642 31,749 31,185

Total stockholders’ equity $ 92,879 $ 130,573 $ 201,953

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28. New accounting principles

a. For fiscal years that begin on January 1, 2010:

C-1, Cash and Cash Equivalents Improvements to NIFs for 2010 INIF 14, Construction Contracts, Sale of Real Property and Rendering of Related Services F 17, Service Concession Contracts

Some of the most important changes established by these standards are:

NIF C-1, Cash and Cash Equivalents, changes the “cash” concept to be consistent with the definition in NIF B-2, Statement of Cash Flows”, and introduces definitions for restricted cash, cash equivalents and readily available investments.

Improvements to NIFs for 2010 - The main improvements generating accounting changes that must be recognized retroactively are:

NIF B-1, Accounting Changes and Correction of Errors - Requires further disclosures when an entity applies a particular Standard for the first time.

NIF B-2, Statement of Cash Flows - Requires recognition of the effects of fluctuations in exchange rates used for translating cash in foreign currencies, and changes in fair value of cash in the form of precious metal coins, and other cash items, at fair value, in a specific line item.

NIF B-7, Business Acquisitions - Permits recognition of intangible assets or provisions in a business acquisition for a contracts whose terms and conditions are favorable or unfavorable, respectively, with respect to market, only when the acquired business is the lessee in an operating lease. This accounting change should be recognized retroactively for acquisitions made on or after January 1, 2009.

NIF C-7, Investments in Associated Companies and Other Permanent Investments - Modifies how the effects derived from increases in equity percentages in an associated company are determined. It also establishes that the effects due to an increase or decrease in equity percentages in associated companies should be recognized under equity in income (loss) of associated companies, rather than in the non- ordinary line item within the statement of income.

NIF C-13, Related Parties - Requires that, if the direct or ultimate controlling entity of the reporting entity does not issue financial statements available for public use, the reporting entity should disclose the name of the closest, direct / indirect, controlling entity that issues financial statements available for public use.

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INIF 17, Service Concession Contracts - is a supplement to Bulletin D-7, Construction and Manufacturing Contracts for Certain Capital Assets, and establishes that, when the infrastructure of the service concession contracts falls within the scope of this INIF, it should not be recognized under property, plant and equipment. It also establishes that when the operator renders construction or improvement services, as well as operation services under the same contract, revenues should be recognized for each type of service, based on the fair value of each consideration received at the time the service is rendered. When amounts are clearly identified and, after they are quantified, the applicable revenue recognition criterion should be followed, taking the nature of the service rendered into consideration. Also, INIF 17 establishes that, when the operator renders construction or improvement services, both revenues and the associated costs and expenses should be recognized under the percentage-of-completion method and consideration received, or receivable, should be recognized, initially, at fair value. Revenues from operation services should be recognized as the services are rendered and taking into account supplemental application of International Financial Reporting Standard IAS 18, Revenue.

b. For fiscal years that begin on January 1, 2011:

B-5, Financial Segment Information, and B-9, Interim Financial Information

Some of the most important changes established by these standards are:

NIF B-5, Financial Segment Information – Uses a managerial approach to disclose financial information by segments, as opposed to Bulletin B-5, which also used a managerial approach but required that the financial information be classified by economic segments, geographical areas, or client groups. NIF B-5 does not require different risks among business areas to separate them. It allows areas in the preoperating stage to be classified as a segment, and requires separate disclosure of interest income, interest expense and liabilities, as well as disclosure of the entity’s information as a whole with respect to products, services, geographical areas and major customers. Like the previous Bulletin, this Standard is mandatory only for public companies or companies in the process of becoming public.

NIF B-9, Interim Financial Information – As opposed to Bulletin B-9, this Standard requires presentation of the statement of changes in stockholders’ equity and statement of cash flows, as part of the interim financial information. For comparison purposes, it requires that the information presented at the closing of an interim period contain the information of the equivalent interim period of the previous year, and in the case of the balance sheet, presentation of the previous years’ annual balance sheet.

At the date of issuance of these consolidated financial statements, the Company has not fully assessed the effects of adopting these new standards on its financial information.

29. International Financial Reporting Standards

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30. Reissued 2009, 2008 and 2007 financial statements: As discussed in Note 2b, on January 1, 2010, the Company adopted INIF 14, which requires the separation of the various components of construction contracts into their separate elements to define whether the contract refers to the construction or sale of real estate or to the provision of related services. INIF 14 also establishes the applicable rules for recognition of revenues and related costs and expenses based on the identification of the different elements of the contracts. In contracts involving the sale of real estate, revenues may only be recognized when the entity has transferred to the buyer control and the significant risks and benefits inherent to ownership of the real estate, which generally occurs upon transfer of title to the buyer. Previous to the adoption of INIF 14 in 2010, the Company recognized revenues using the percentage-of-completion method. Due to the reissuance of these financial statements for the years ended December 31, 2009, 2008 and 2007, as mentioned in note 2b, these financial statements have been updated to reflect the retrospective application of INIF 14. The effects of adoption of INIF 14 are shown below. In addition, as discussed in Note 3c and 3e, the Company discontinued the operation of Geo Oaxaca, S.A. de C.V. during 2009. MFRS requires the effects of discontinued operations to be presented retrospectively for all periods presented. Accordingly, for informational purposes, the Company has included the effect of the discontinued operation on the 2008 and 2007 consolidated financial statements below.

Consolidated Condensed Balance Sheets

Balance Assuming Balance Assuming Balance Assuming Reported Balance Effects of Adoption Adoption Reported Balance Effects of Adoption Discontinued Adoption Reported Balance Effects of Adoption Discontinued Adoption December 31, 2009 of INIF 14 December 31, 2009 December 31, 2008 of INIF 14 Operations December 31, 2008 December 31, 2007 of INIF 14 Operations December 31, 2007 Assets Cash and cash equivalents $ 3,393,374 $ - $ 3,393,374 $ 2,560,074 $ - $ - $ 2,560,074 $ 2,129,620 $ - $ (15,873) $ 2,113,747 Accounts receivable - Net 9,876,949 (9,046,274) 830,675 8,280,300 (7,341,659) (21,637) 917,004 6,159,380 (5,214,459) (87,915) 857,006 Real estate inventories – current 8,904,756 7,905,171 16,809,927 7,266,951 7,087,476 (179,693) 14,174,734 5,743,319 4,840,765 (188,506) 10,395,578 Other current assets 764,127 133,482 897,609 968,424 (243,948) 234,994 959,470 710,809 - 359,242 1,070,051 Total current assets 22,939,206 (1,007,621) 21,931,585 19,075,749 (498,131) 33,664 18,611,282 14,743,128 (373,694) 66,948 14,436,382 Total non-current assets 7,287,930 (730,286) 6,557,644 6,065,338 (329,314) (21,856) 5,714,168 4,876,266 (195,574) (55,796) 4,624,896

Total assets $ 30,227,136 $ (1,737,907) $ 28,489,229 $ 25,141,087 $ (827,445) $ 11,808 $ 24,325,450 $ 19,619,394 $ (569,268) $ 11,152 $ 19,061,278

Other current liabilities $ 7,567,490 $ 328,702 $ 7,896,192 $ 8,710,192 $ (84,417) $ (83,155) $ 8,542,620 $ 6,986,244 $ 48,742 $ 42,337 $ 7,077,323 Obligations under future sale of receivables contracts - 1,519,716 1,519,716 - 2,745,012 - 2,745,012 - 1,984,179 - 1,984,179 Customer advances - 346,670 346,670 - 155,314 - 155,314 - 180,803 - 180,803 Total current liabilities 7,567,490 2,195,088 9,762,578 8,710,192 2,815,909 (83,155) 11,442,946 6,986,244 2,213,724 42,337 9,242,305

Deferred income taxes 3,616,562 (1,106,923) 2,509,639 2,715,175 (891,455) - 1,823,720 2,026,142 483,497 - 2,509,639 Long-term liabilities 7,425,174 - 7,425,174 3,395,387 (94,963) 94,963 3,395,387 1,922,100 (1,142,927) (31,185) 747,988 Total liabilities 18,609,226 1,088,165 19,697,391 14,820,754 1,829,491 11,808 16,662,053 10,934,486 1,554,294 11,152 12,499,932 Total stockholders’ equity 11,617,910 (2,826,072) 8,791,838 10,320,333 (2,656,936) - 7,663,397 8,684,908 (2,123,562) - 6,561,346

Total $ 30,227,136 $ (1,737,907) $ 28,489,229 $ 25,141,087 $ (827,445) $ 11,808 $ 24,325,450 $ 19,619,394 $ (569,268) $ 11,152 $ 19,061,278

Consolidated Condensed Statements of Income

Balance Assuming Balance Assuming Balance Assuming Reported Balance Effects of Adoption Adoption Reported Balance Effects of Adoption Discontinued Adoption Reported Balance Effects of Adoption Discontinued Adoption December 31, 2009 of INIF 14 December 31, 2009 December 31, 2008 of INIF 14 Operations December 31, 2008 December 31, 2007 of INIF 14 Operations December 31, 2007 Revenues from real estate development activities $ 19,210,864 $ (1,497,695) $ 17,713,169 $ 17,234,026 $ (2,381,759) $ (238,562) $ 14,613,705 $ 14,975,647 $ (2,032,483) $ (211,667) $ 12,731,497 Costs from real estate development activities 14,228,355 (1,145,268) 13,083,087 12,649,559 (1,597,557) (252,360) 10,799,642 10,924,829 (1,445,577) (159,546) 9,319,706 Selling, general, administrative and other expenses 1,761,123 15,637 1,776,760 1,672,313 - (267) 1,672,046 1,577,951 - (42,902) 1,535,049 Comprehensive financing cost 616,713 - 616,713 627,766 - - 627,766 370,786 (33,826) (3,108) 333,852 Income before taxes, other and discontinued operation 2,604,673 (368,064) 2,236,609 2,284,388 (784,202) 14,065 1,514,251 2,102,081 (553,080) (6,111) 1,542,890

Income taxes and other 914,677 (174,957) 739,720 705,766 (231,076) 5,237 479,927 630,792 (154,862) (1,954) 473,976 Income (loss) from discontinued operation 54,707 (8,649) 46,058 16,070 (16,070) 8,828 8,828 - - (4,157) (4,157)

Consolidated net income $ 1,635,289 $ (184,458) $ 1,450,831 $ 1,562,552 $ (537,056) $ - $ 1,025,496 $ 1,471,289 $ (398,218) $ - $ 1,073,071

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Consolidated Condensed Statements of Cash Flows

Effects of Adoption Balance Assuming of INIF 14 and Balance Assuming Reported Balance Effects of Adoption Adoption Reported Balance Discontinued Adoption December 31, 2009 of INIF 14 December 31, 2009 December 31, 2008 Operations December 31, 2008 Operating activities: Income before income taxes, equity in income (loss) of associated companies, trusts and others and discontinued operations $ 2,604,673 $ (368,064) $ 2,236,609 $ 2,284,388 $ (770,137) $ 1,514,251

Non cash activities 1,681,819 11,714 1,693,533 1,799,998 113,332 1,913,330

Changes in assets and liabilities activities (2,781,427) 1,251,818 (1,529,609) (3,522,400) (462,937) (3,985,337)

Net cash provided by (used in) operating activities 1,505,065 895,468 2,400,533 561,986 (1,119,742) (557,756)

Net cash provided by (used in) investing activities (916,930) (52,896) (969,826) (916,163) 342,149 (574,014)

Cash to be used in (obtained from) financing activities 588,135 842,572 1,430,707 (354,177) (777,593) (1,131,770)

Net cash provided by financing activities 245,165 (842,572) (597,407) 802,894 775,203 1,578,097

Net increase (decrease) in cash and cash equivalents 833,300 - 833,300 448,717 (2,390) 446,327

Cash and cash equivalents at beginning of period 2,560,074 - 2,560,074 2,129,620 (15,873) 2,113,747

Cash and cash equivalents at end of period $ 3,393,374 $ - $ 3,393,374 $ 2,578,337 $ (18,263) $ 2,560,074

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31. Consolidated financial statement issuance authorization

On May 15 2010, the issuance of the reissued consolidated financial statements was authorized by Luis Orvañanos Lascurain, Chairman of the Board of Directors and Chief Executive Officer; Daniel Gelové Gómez, Deputy Director of Administration; Saúl H Escarpulli Gómez, Deputy Director of Finance and Jorge Issac Garcidueñas de la Garza, Deputy Legal Director. These reissued consolidated financial statements are subject to approval at the stockholders’ ordinary general meeting, where the consolidated financial statements may be modified, based on the provisions of the Mexican General Companies Law

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[THIS PAGE INTENTIONALLY LEFT BLANK] [THIS PAGE INTENTIONALLY LEFT BLANK] [THIS PAGE INTENTIONALLY LEFT BLANK] ISSUER

Corporación GEO, S.A.B. de C.V. Margaritas 433 Col. Ex-hacienda Guadalupe, Chimalistac, Mexico, D.F. 01050 Mexico

LEGAL ADVISORS

To the Issuer

As to U.S. Federal and New York law: As to Mexican law: Cleary Gottlieb Steen & Hamilton LLP Santamarina y Steta, S.C. One Liberty Plaza Campos Eliseos 345, Pisos 2 y 3 New York, New York 10006 Chapultepec Polanco U.S.A. México, D.F. 11560 Mexico

To the Initial Purchasers

As to U.S. Federal and New York law: As to Mexican law: Milbank, Tweed, Hadley & McCloy LLP Ritch Mueller, S.C. 1 Chase Manhattan Plaza Blvd. M. Avila Camacho 24, Piso 20 New York, New York 10005 Lomas de Chapultepec U.S.A. México, D.F. 11000 Mexico

AUDITORS

Galaz, Yamazaki, Ruiz Urquiza S.C. Member of Deloitte Touche Tohmatsu Reforma 489, Piso 6 México, D.F. 06500 Mexico

TRUSTEE, REGISTRAR, PAYING AGENT LUXEMBOURG PAYING AGENT AND AND TRANSFER AGENT TRANSFER AGENT

The Bank of New York Mellon The Bank of New York Mellon (Luxembourg) S.A. 101 Barclay Street, 4th Floor East Vertigo Building-Polaris New York, New York 10286 2-4 rue Eugène Ruppert L-2453 Luxembourg

LUXEMBOURG LISTING AGENT

The Bank of New York Mellon (Luxembourg) S.A. Vertigo Building-Polaris 2-4 rue Eugène Ruppert L-2453 Luxembourg