Press Publication 2010 Annual Report Uk

ANNUAL REPORT
REGISTRATION DOCUMENT
2010
TABLE OF CONTENTS
GROUP PROFILE
1 2 3 4 5 6
7
7 11
12 18 21
SOCIAL AND ENVIRONNEMENTAL RESPONSABILITY

7.1 7.2 7.3 7.4 Health and Safety Social information Environment Reporting methodology and ratings
109
110 112 114 116
SELECTED FINANCIALDATA
RISK FACTORS
Presentation of the principal risks Risk management Insurance and risk coverage
2.1 2.2 2.3
8 9 10 F
ADDITIONAL INFORMATION
8.1 8.2 8.3 8.4 8.5 8.6 8.7 8.8 Share Capital Shares owned by the Company Securities non representative ofsharecapital-Bonds Authorizations delegated totheBoardofDirectors Articles of Association (Statuts) Change of control Material Contracts Documents on Display
117
118 119 120 121 123 126 126 127
INFORMATION ONLAFARGE
3.1 3.2 Our strategy Our businesses Cement Aggregates &Concrete Gypsum The Group
23
24 25 26 31 34 37
3.3
CONTROLS ANDPROCEDURES
9.1 Report of the Chairman of the Board ofDirectors oninternal control procedures andon corporate governance(article L.225-37 oftheFrenchCommercial Code) Statutory auditors Report, prepared inaccordance with Article L.225-235 ofthe French Commercial Code (Code decommerce) onthe report prepared bytheChairman oftheBoard ofDirectors of Lafarge
129
OPERATING ANDFINANCIAL REVIEW ANDPROSPECTS 43

4.1 4.2 4.3 4.4 Overview Accounting policies and definitions Results of operations for the fiscal years endedDecember31, 2010 and 2009 Liquidity and Capital Resources 44 45 49 61
130
9.2
133
AUDITING MATTERS
10.1 Auditors 10.2 Auditors Fees and Services
135
136 137
CORPORATE GOVERNANCE AND COMPENSATIONS

5.1 5.2 5.3 5.4 5.5 5.6
65
Board of Directors 66 Board and Committee rules and practices 82 Executive Officers 90 Compensations and benefits 92 Long term incentives (stockoptionsandperformanceshareplans) 96 Share ownership 101
CERTIFICATION
139
MAJOR SHAREHOLDERS AND LISTING

6.1 6.2 6.3 6.4 6.5 6.6 Major shareholders and share capital distribution Shareholder agreement with the Sawiris family andNNSHoldingSrl Threshold notifications imposed by law anddeclarations of intent Employee Share Ownership Other information Listing
FINANCIAL STATEMENTS
F1
103
104 105 106 107 108 108
AMF CROSS-REFERENCE TABLE GLOSSARY
237
This Annual Report was filed in the French language withtheAutorit des marchs financiers on March 22, 2011 in accordance with article 212-13 of its General Regulations. Itmay be used to support a financial transaction if accompanied by an information memorandum (note dopration) approved by the AMF. It has been prepared by the issuer and is the responsibility of the person whose signature appears herein.
This document is a translation of the original French document and is provided for information purposes only. In all matters of interpretation of information, views or opinions expressed therein, the original French version takes precedence over this translation.
GROUP PROFILE
Lafarge
World leader in building materials, Lafarge holds top-ranking positions in each of its business lines. With a diversied and balanced geographic portfolio and 76,000 employees in 78 countries, Lafarge is at the heart of global growth supporting developing economies and responding to the tremendous need for housing and infrastructure in emerging countries.
Key Figures
at December 31, 2010
REVENUES in million euros
16,169 78
PRESENT IN
76,000 1,963
NUMBER OF EMPLOYEES
countries
PRODUCTION SITES
n an environment that proved to be challenging for the building materials sector, Lafarge teams focused on reinforcing the solidity of the Group. We continued to implement our capacity increase program in emerging countries with 12 million tonnes started up in Africa, Middle East and Asia. We also pursued our non-strategic assets divestment program, securing 550 million euros of disposals during the year, exceeding the original target of 500 million euros. Meanwhile, we managed to strengthen our asset base in some growing markets, such as Central Europe and Brazil, through no cash operations such as partnerships and asset swap. Finally, we proved our ability to reduce our costs and limit our investments. The steps that we took in 2010 favorably position the Group to benefit from growth in 2011. We also remained focused on our safety and performance objectives. We were ranked sixth in the Carbon Disclosure Project and entered the global Dow Jones Sustainability in 2010 in recognition of our sustainable development action. With first signs of recovery materializing at the end of the year, we enter 2011 with more optimism. For the first time since 2008, volumes increased in the last quarter of 2010, providing a strong indication for our business.
2010 | Annual Report and Registration Document | Lafarge
GROUP PROFILE
Lafarge Worldwide
World map of Lafarges presence as at December 31, 2010 (plants and sales offices).
Key figures by Division and Geographic Area

Employee, site and country information includes 100% of fully or proportionally consolidated companies and excludes associates at December 31, 2010.
GROUP REVENUES BY DIVISION
GROUP REVENUES BY GEOGRAPHIC AREA
%
Cement Aggregates & Concrete Gypsum 59.7 31.5 8.8 Western Europe North America Africa & Middle East Central & Eastern Europe Latin America Asia
%
26.7 20.6 24.1 6.5 5.5 16.6
Lafarge | Annual Report and Registration Document | 2010
GROUP PROFILE
Cement World Leader
Cement, hydraulic binders and lime for construction, renovation and public works.
9,656
168
NUMBER OF PLANTS
44,253
NUMBER OF EMPLOYEES
50 countries
PRESENT IN
Aggregates & Concrete No. 2 & No. 3 Worldwide
Aggregates, ready-mix and precast concrete products, asphalt and paving for engineering structures, roads and buildings.
5,088
1,718 23,438
NUMBER OF PLANTS
NUMBER OF EMPLOYEES
36 countries
PRESENT IN
Gypsum No. 3 Worldwide
1,422
Plasterboard systems and gypsum-based interior solutions for new construction and renovation.
77
NUMBER OF PLANTS
7,986
NUMBER OF EMPLOYEES
30 countries
PRESENT IN
GROUP EMPLOYEES BY DIVISION
GROUP EMPLOYEES BY GEOGRAPHIC AREA
%
Cement Aggregates & Concrete Gypsum 58.5 31.0 10.5 Western Europe North America Africa & Middle East Central & Eastern Europe Latin America Asia
%
20.7 14.2 24.9 10.1 4.4 25.7
GROUP PROFILE
Lafarge In Figures
REVENUES in million euros 16,169 15,884 19,033 EBITDA (1) in million euros 3,614 3,600 4,618 OPERATING INCOME BEFORE CAPITAL GAINS, IMPAIRMENT, RESTRUCTURING AND OTHER (1)
Stable EBITDA, as strict cost control and exchange rates mitigated the impact of higher production costs 2% improvement in sales, supported by improved cement and aggregates volume trends, favourable exchange rates and new capacities in Brazil
2010
2009 2008
2010
2009 2008
in million euros 2,441 2,477 3,542

Resilient Group operating margin, amounts to 15.1% for the year
2010
2009 2008 FREE CASH FLOW (1)
in million euros 2,151(2) 2,834 2,113

Solid cash flow generation, supported by reduction in costs and optimization of working capital
2010
2009 2008 GROUP NET DEBT (1)
in million euros 13,993 13,795 16,884

Net debt affected by a negative currency impact of 490 million euros and an exceptional payment of 338 million euros
2010
2009 2008 NET INCOME GROUP SHARE
in million euros 827 736 1,598

12% improvement icluding the capital gain of 161 million euros on the sale of Cimpor shares
2010
2009 2008 NET EARNINGS PER SHARE
in euros 2.89 2.77 7.19 (3)

Net earnings per share increases by 4%
2010
2009 2008 DIVIDEND PER SHARE
in euros 1.00 (4) 2.00 2.00

A proposed dividend of 1 euro per share
2010
2009 2008
The selected financial information is derived from our consolidated financial statements for the year ended December 31, 2010. (1) See section 4.2 (Accounting Policies and Definitions). (2) Before non-recurring payment in 2010 of the Gypsum competition fine. (3) 2008 period has been restated further to the April 2009 capital increase since it includes bonus elements for existing shareholders. (4) Proposed dividend to be decided at the General Meeting of shareholders on May 12, 2011.
GROUP PROFILE
Lafarge Board of Directors
Back row: Michel Bon, Thierry de Rudder, Nassef Sawiris, Jrme Guiraud, Bertrand Collomb, Juan Gallardo, Grald Frre, Paul Desmarais, Jr., Colette Lewiner, Pierre de Lafarge. Front row: Philippe Dauman, Oscar Fanjul, Hlne Ploix, Bruno Lafont, Michel Pbereau, Michel Rollier, Vronique Weill. (Absent: Philippe Charrier).
Lafarge Executive Committee
From left to right: Guillaume Roux, Jean-Carlos Angulo, Jean-Jacques Gauthier, Isidoro Miranda, Eric Olsen, Bruno Lafont, Grard Kuperfarb, Christian Herrault, Jean Desazars de Montgailhard, Thomas Farell.
1
Revenues EBITDA
(1)
Following European Regulation no.1606/2002 issued on July 19, 2002, the Group has prepared consolidated financial statements for the year ending December31, 2010 in accordance with the International Financial
Reporting Standards (IFRS) adopted by the European Union at December31, 2010. The tables below show selected consolidated financial data under IFRS on and for the years December31, 2010, 2009, and 2008. The selected financial information is derived from
our consolidated financial statements, which were audited by Deloitte &Associs and Ernst & Young Audit. The audited consolidated financial statements on and for the years December 31, 2010 and 2009 appear in partF at the end of this report.
KEY FIGURES FOR THE GROUP

(million euros, unless otherwise indicated)
2010
2009
2008
CONSOLIDATED STATEMENTS OF INCOME

16,169 3,614 2,441 2,169 1,114 827 287 15,884 3,600 2,477 2,250 1,046 736 310 19,033 4,618 3,542 3,362 1,939 1,598 341
Operating income before capital gains, impairment, restructuring and other Operating income Net income Out of which part attributable to: Owners of the parent of the Group Non-controlling interests Earnings per share - attributable to the owners of the parent company:
Basic earnings per share (euros)

Diluted earnings per share (euros) Basic average number of shares outstanding (thousands)
(1) See Section4.2.4 (Reconciliation of non GAAP financial measures) for the definition of these indicators.
(million euros)
2.89 2.89 286,087
2.77 2.77 265,547
7.19 7.16 222,350
2010
2009
2008
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

ASSETS Non-current assets Current assets TOTAL ASSETS EQUITY AND LIABILITIES Equity attributable to the owners of the parent company Non-controlling interests Non-current liabilities Current liabilities TOTAL EQUITY AND LIABILITIES
(million euros)
34,752 7,742 42,494 16,144 2,080 16,765 7,505 42,494

2010
32,857 6,640 39,497 14,977 1,823 16,652 6,045 39,497

2009
32,928 7,680 40,608 12,910 1,725 17,043 8,930 40,608

2008
CONSOLIDATED STATEMENTS OF CASH FLOWS

Net cash provided by operating activities Net cash used in investing activities Net cash provided by/(used in) financing activities Increase in cash and cash equivalents 2,172 (1,244) 38 966 3,206 (1,074) (1,489) 643 3,001 (8,771) 6,030 260
1
2010
2009
8930
ADDITIONAL FINANCIAL INDICATORS(1)

Free Cash-Flow Return on capital employed after tax (%) Group Net Debt
(1) See Section4.2.4 (Reconciliation of non GAAP financial measures) for the definition of these indicators. (2) Excluding the 338 million euros one-time payment for the Gypsum competition fine.
2,151(2) 5.8 13,993
2,834 6.0 13,795
2,113 8,8 16,884
(euros, unless otherwise indicated)
2010(1)
2009
2008
DIVIDENDS
Total dividend (million euros) Basic dividend per share Loyalty dividend per share (2) 288 (3) 1.00 1.10 575 2.00 2.20 393 2.00 2.20
(1) Proposed dividend. (2) See Section8.5 (Articles of Association (Statuts) - Rights, preferences and restrictions attached to shares) for an explanation of our Loyalty dividend. (3) Based on an estimation of 286,090,221 shares eligible for dividends.
10
RISK FACTORS
2.1 PRESENTATION OF THE PRINCIPAL RISKS
2.1.1 2.1.2 2.2.1 2.2.2 Risks related to our business Financial andmarket risks Risk identication andanalysis Risk management systems
12
12 15
2.2 RISK MANAGEMENT
18
18 19
2.3 INSURANCE AND RISK COVERAGE
21
11
RISK FACTORS
2.1Presentation of the principal risks
2.1 Presentation of the principal risks

Lafarge operates in a constantly evolving environment, which exposes the Group to risk factors and uncertainties in addition to the risk factors related to its operations. The materialization of the risks described below could have a material adverse effect on our operations, our financial condition, our results, our prospects or our share price. There may be other risks that have not been identified yet or whose occurrence is not considered likely to have such material adverse effect as of the date of this Annual Report. The information given below is based on certain assumptions and hypotheses, which could, by their nature, prove to be inaccurate. 60% of the Groups Current Operating Income. Our growth strategy focuses on development opportunities in emerging markets, and we expect that an increasing portion of our total revenues and earnings will continue to flow from these markets. Our increased presence in emerging markets exposes us to risks such as gross domestic product volatility, significant currency fluctuations, political, financial and social uncertainties and turmoil, high inflation rates, exchange control systems, less certainty concerning legal rights and their enforcement and the possible nationalization or expropriation of privately-held assets, any of which could damage or disrupt our operations in a given market. While we attempt to manage these risks by spreading emerging markets operations among a large number of countries, our diversification efforts will not enable us to avoid risks that affect multiple emerging markets at the same time. No individual emerging country represents over 5% of our sales. See Section 2.2.2 (Management of the Groups assets portfolio) page 19 and Section3.3.2 (Recent acquisitions, partnerships, and divestitures) on page 38 for an example related to the nationalization of our activity in Venezuela and Note 34 (Subsequent events) page F69 to illustrate a country risk. See Section2.2.2 (Risk management systems) on page19 and Section2.3 (Insurance and risk coverage) on page22 for more information on risk management by the Group.
Seasonality and weather

Construction activity, and thus demand for our products, decreases during periods of cold weather, snow, or sustained rainfall. Consequently, demand for our products is lower during the winter in temperate countries and during the rainy season in tropical countries. Our operations in Europe, North America and similar markets are seasonal, with sales generally increasing during the second and third quarters because of usually better weather conditions. However, high levels of rainfall or low temperatures can adversely affect our operations during these periods as well. Such adverse weather conditions can materially affect our operational results and profitability if they occur with unusual intensity, during abnormal periods, or last longer than usual in our major markets, especially during peak construction periods.
2.1.1 Risks related to our business

a) Risks related to our worldwide presence
Operations and cycle

Our products are used in buildings and civil works. Demand for our products in the different markets in which we operate is dependent on the level of activity in the construction sector. The construction sector tends to be cyclical and depends on various factors such as the level of infrastructure spending, the level of residential and commercial construction activity, interest rates, and generally, the level of economic activity in a given market. The cyclicality of the construction sector together with its dependence on economic activity could have a negative impact on our financial results and the profitability of our operations. We manage this risk by operating in geographically diverse markets, with a portfolio of operations both in developed markets and in emerging countries, thereby minimizing our exposure to risk in a given country, although we might be significantly affected by global downturns or in individual significant markets.
b) Risks relating to theglobal economic conditions

Our results depend mainly on residential, commercial, and infrastructure construction activity, and spending levels. The economic crisis which started in the second half of 2008 has significantly impacted the construction business in developed markets. To varying degrees depending on market, this has had, and may continue to have, a negative impact on product demand as well as our business and operational results. We have prepared internal analysis of potential worldwide demand for our products for purposes of internal planning and resource allocation. Our analysis of worldwide demand for cement is described in Sections 3.1 (Our Strategy) on page24 and 4.1.2 (Trend information and 2011 perspectives on page44). We estimate that cement demand in our markets will grow between 3% to 6% in 2011 versus 2010. Emerging markets should continue to be the main driver of demand, supported by long-term trends of demographical growth and urbanization, and Lafarge should benefit from its well balanced geographic spread of high quality assets. For developed markets, the Group expects that demand will continue to slowly recover. Overall
Climate and natural disasters

Our presence in 78countries increases our exposure to meteorological and geological risks such as natural disasters, climate hazards, or earthquakes which could damage our property or result in business interruptions, and which could have a material adverse effect on our operations. We have put in place a specific process relating to natural events to identify the sites most at risk and classify potential losses depending on their financial impact by event, country or financial year as well as the probability of occurrence. The current outcome of this process is that the following countries where Lafarge is present are currently believed to present a natural disaster risk: Algeria, Saudi Arabia, Bangladesh, China, Egypt, Greece, Indonesia, Jordan, Morocco, the Philippines and Syria. These countries represent approximately 18% of our consolidated sales. In the future, other countries may be exposed to meteorological and geological risks.
Emerging markets
Approximately 50% of our revenues are derived from emerging markets, defined as countries outside Western Europe and North America other than Japan, Australia and New Zealand. In 2008, before the impact of the economic crisis in the developed markets, emerging markets represented approximately
12
RISK FACTORS
pricing is expected to increase over the year, although levels of pricing movements will vary by market. We estimate that the measures we have taken, notably since the end of 2008, ranging from structural cost savings, selected disposals, or optimisation of our working capital to strategic investments in growing markets such as Brazil, will provide the foundation for earnings growth in 2011, as volumes recover. However, if economic conditions worsen or market recovery is postponed or slower than expected, it might continue to negatively affect our business operations and financial results.
measures, material increases or changes in energy and fuel costs have affected, and may continue to affect, our financial results. See Sections2.1.2 (Financial and market risks) on page15 and 3.2 (Our businesses) on page25 for further information.
See Section3.2 (Our Businesses) on page25 and Section 2.2.2 (Risk management systems) on page19 for more information on how the Group manages this risk.
d) Sourcing and access to raw materials
e) Competition Competition Law Investigations

Each of our three Divisions operates in markets where competition is strong. Competition, whether from established market participants or new entrants could cause us to lose market share, increase expenditure or reduce pricing, any one of which could have a material adverse effect on our business, financial condition, results of operations or prospects. The factors affecting our competitive environment include barriers to entering our markets (including investment costs and local regulations), price adjustments to the cost variation, the financial strength of competitors and proximity to natural resources. Given the worldwide presence of our three Divisions and the fact that we sometimes operate in markets where the concentration of market participants is high, we are currently, and could in the future be, subject to investigations and civil or criminal proceedings by competition authorities for alleged infringement of antitrust laws. These investigations and proceedings can result in fines, or civil or criminal liability, which may have a material adverse effect on our image, financial condition and results of operations of some of the Groups Divisions, particularly given the level of fines imposed by European authorities in recent cases. In November 2008, the major European cement companies, including Lafarge, were placed under investigation by the European Commission for alleged anti-competitive practices. In December2010, the European Commission launched an official investigation, while indicating that this only meant that the Commission intends to pursue this as a matter of priority but does not imply that the Commission has conclusive evidence of any infringement. At this stage, given the fact-intensive nature of the issues involved and the inherent uncertainty of such litigation and investigations, we are not in a position to evaluate the possible outcome of this investigation. We are committed to the preserving of vigorous, healthy and fair competition as well as complying with relevant antitrust laws in countries where we operate. In line with this objective, the Group has a competition policy and a competition compliance program described in Section2.2.2 (Risk management
Quarries and permits

We generally maintain reserves of limestone, gypsum, aggregates and other raw materials that we use to manufacture our products. Access to the raw materials necessary for our operations is a key consideration in our investments. Failure to obtain, maintain or renew these land and mining rights (as well as more generally any other permits, licences, rights and titles necessary to carry out our operations) or expropriation as a result of local legislative, regulatory or political action could have a material adverse effect on the development of our operations and results. For an illustration of this risk in relation to our operations in Bangladesh, see Note29 (Legal and arbitration proceedings) to our consolidated financial statements on pageF65. We actively manage the quarries and production plants we operate or expect to operate, and the related permits, licences, rights and titles, in order to secure our operations in the long-term. We usually own or hold long-term land and mining rights on the quarries of raw materials essential to our operations spread in a large number of countries across the world, and are managing with the necessary care the lengthy and complex process to obtain or renew our various permits, licences, rights and titles.
c) Energy costs
Our operations consume significant amounts of energy (electricity, coal, petcoke, natural gas, fuel, diesel) the cost of which can fluctuate significantly in many parts of the world. The price of energy has varied significantly in the past several years, and may vary significantly in the future, largely as a result of market conditions and other factors beyond our control. Energy markets may be regulated in some of the countries where we operate and the evolution of prices could have an adverse impact on the result of the operations of our subsidiaries. We take a number of steps to manage our energy costs: - we sometimes enter into medium-term supply contracts. In addition, our centralized purchasing organization at Group level also gives us more leverage with our suppliers, enabling us to obtain the most competitive terms and conditions. Nonetheless, if our supply contracts contain indexation clauses, they will not always protect us from fluctuations in energy prices. Similarly, if we enter into fixed price contracts when prices are high, we will not benefit if energy prices subsequently decline; - we also use derivative instruments, such as forward energy agreements on organized markets or on the over the counter (OTC) market, to manage our exposure to risk related to energy cost fluctuations; - in addition, we encourage our plants to use a variety of fuel sources, including alternative fuels such as biomass, used oil, recycled tires and other recycled materials or industrial by-products, which has resulted in less vulnerability to fossil fuels price increases. While these measures are useful, they may not fully protect us from exposure to energy price volatility. As a result, in spite of these
Other raw materials

In addition, we increasingly use certain by-products of industrial processes, such as synthetic gypsum, slag and fly ash, produced by third parties as raw materials. In general, we are not dependent on our raw materials suppliers and we try to secure the supply of these materials needed through longterm renewable contracts and framework agreements, which ensure better management of our supplies. We do, however, have shortterm contracts in certain countries. Should our existing suppliers cease operations or reduce or eliminate production of these by-products, our sourcing costs for these materials may increase significantly or we may be required to find alternatives for these materials.
13
RISK FACTORS
systems) of the present Chapter. Nonetheless, these procedures cannot provide absolute assurance against the risks relating to these issues. See Section3.2 (Our Businesses) on page25 for a description of our competitors in each of our markets. See Note 29 (Legal and arbitration proceedings) to our consolidated financial statements on pageF65 for further information on material legal and arbitration proceedings. See Section 2.2.2 (Risk management systems) on page19 for more information on our competition policy and on how the Group manages this risk.
on January 21, 2010, our subsidiary Lafarge North AmericaInc. and certain of its subsidiaries (LNA) entered into a settlement of certain alleged violations of the USClean Air Act with the EPA and a number of USStates. Under this settlement, LNA is required to decrease Sulfur Oxide (SO2) and Nitrogen Oxide (NOx) emanating from its UScement manufacturing plants by making the necessary investments over a period of five years. LNA has also agreed to pay a civil penalty of 5 million US dollars, which was paid in April2010. We have implemented internal standards at Group level whereby environmental risks are taken into account in our management cycle and have developed a unified and consistent reporting system in each Division to measure and control our environmental performances. See Section7.3 (Environment) on page144 for more information on the impact of environmental matters on our operations, our environmental policy and our various environmental initiatives. See Section2.2.2 (Risk management systems) on page19 for more information on how the Group manages these risks. See also Notes2.3 (Use of estimates and judgments) on pageF11 and 24 (Provisions) to our consolidated financial statements on pageF53.
the country through exchange control regulations. To the best of our knowledge, aside from North Korea, there are currently no countries in which we operate that prohibit the payment of dividends. Furthermore, the continued transfer of dividends and other income from our subsidiaries may be limited by various credit or other contractual arrangements and/or tax constraints, which could make such payments difficult or costly. Should such regulations, arrangements and constraints restricting the payment of dividends be significantly increased in the future simultaneously in a large number of countries where we operate, it might impair our ability to make shareholder distributions. In addition, our subsidiaries are open to tax audits by the respective tax authorities in the jurisdictions in which they are located. Various tax authorities have proposed or levied assessments for additional taxes for prior years. Although we believe that the settlement of any or all of these assessments will not have a material and unfavorable impact on its results or financial position, we are not in a position to evaluate the possible outcome of these proceedings. See Section 2.2.2 (Risk management systems) on page19 for more information on how the Group manages these risks and Note 22 (taxes) to the consolidated financial statements on pageF45.
f) Industrial risks relating tosafety andtheenvironment

While our industrial processes are very well known and are dedicated to the production of cement, plasterboard, aggregates and concrete, which are not usually considered to be hazardous materials, our operations are subject to environmental and safety laws and regulations, as interpreted by relevant agencies and courts, which impose increasingly stringent obligations, restrictions and protective measures regarding, among other things, land and products use, remediation, air emissions, noise, waste and water, health and safety. The costs of complying with these laws and regulations could increase in some jurisdictions, in particular as a result of new or more stringent regulations or change in their interpretation or implementation. In addition, non-compliance with these regulations could result in sanctions, including monetary fines, against our Group. The risks faced by the Group regarding the environment can be illustrated by the following examples relating to our operations in the United States: the cement industry air emissions regulation in the United States is under review by the USEnvironmental Protection Agency (EPA). This new set of rules primarily relates to the content of air emissions, including fine particles, mercury, and chlorine. These regulations are still under discussion at the federal level, but stricter limits are expected industry-wide. This is part of a global trend in different countries as part of the United Nations Environment Programme to strictly limit mercury emissions and the impact of industry on the environment. We are active in developing solutions in anticipation of such changes. However, at this stage, it is still difficult to foresee the impact of such potential changes on our results;
g) Legal risk - Litigation

Our Group has worldwide operations and our subsidiaries are required to comply with applicable national and local laws and regulations, which vary from one country to another. As part of our operations we are, or could be, involved in various claims, and legal, administrative and arbitration proceedings and class action suits. New proceedings may be initiated against the Groups entities in the future. See Note 29 (Legal and arbitration proceedings) to the consolidated financial statements on pageF65 for more information on material legal and arbitration proceedings.
Acquisition-related accounting issues

As a result of significant acquisitions, many of our tangible and intangible assets are recorded in our consolidated balance sheet at amounts based on their fair value as of the acquisition date. We have also recorded significant goodwill (we had 14.3billion euros of goodwill on our consolidated balance sheet as of December31, 2010). In accordance with IFRS, we are required to test long-lived assets, including goodwill, for impairment, as described in Note2.12 (Impairment of long-lived assets) to our consolidated financial statements on pageF16 and further detailed in Note10 (Goodwill) to our consolidated financial statements on pageF31 for goodwill. In particular, an impairment test of goodwill is performed at least annually and a specific analysis is performed at the end of each quarter in case of impairment indications. Depending on the evolution of the recoverable value of Cash Generating Units (CGU)/ groups of CGUs, which is mostly related to
h) Risks related to our structure
Financial and tax issues

Lafarge S.A. is a holding company with no significant assets other than direct and indirect interests in its numerous subsidiaries. A number of our subsidiaries are located in countries that may impose regulations restricting the payment of dividends outside
14
RISK FACTORS
future market conditions, further impairment charges might be necessary and could have a significant impact on our results.
Minority shareholders
We conduct our business through subsidiaries. In some instances, third-party shareholders hold minority interests in these subsidiaries. While we generally consider this positive as it may result in partnership or investment agreements, various disadvantages may also result from the participation of minority shareholders whose interests may not always coincide with ours. Some of these disadvantages may, among other things, result in our inability to implement organizational efficiencies and transfer cash and assets from one subsidiary to another in order to allocate assets most effectively. See Section3.3.3 (Organizational Structure) on page39 for further information on our relationship with minority shareholders within our subsidiaries and Section 2.2.2 (Risk management systems) on page19 for more information on how the Group manages these risks.
the end of 2010, these agreements represented approximately 8% of the Groups consolidated financial liabilities. Our main covenants are described in Note 25 (e) (Particular clauses in financing contracts) to our consolidated financial statements on page F56. Our agreements and those of our subsidiaries also include cross-acceleration clauses. If we, or under certain conditions, our material subsidiaries, fail to comply with our or their covenants, then our lenders could declare default and accelerate repayment of a significant part of our debt. If the construction sector economically deteriorates further, the reduction of our operating cash flow could make it necessary to obtain additional financing. Changing conditions in the credit markets and the level of our outstanding debt could impair our ability to obtain additional financing for working capital, capital expenditures, acquisitions, general corporate purposes or other purposes, or make access to this financing more expensive than anticipated. This could result in greater vulnerability, in particular by limiting our flexibility to adjust to changing market conditions or withstand competitive pressures. Our financial costs and our ability to raise new financing can be significantly impacted by the level of our credit ratings. The rating agencies could downgrade our ratings either due to factors specific to us, or due to a prolonged cyclical downturn in the construction sector. On the filing date of this Annual Report, our long-term corporate credit rating is Baa3 (negative outlook) according to the rating agency Moodys. It is BB+ (stable outlook) according to Standard & Poors Rating Services, further to a downgrading on March 17, 2011. The impact of such downgrading will be an increase in our interests costs by approximately 20million euros in 2011 on the basis of our existing debt at December31, 2010. This impact would reach 65million euros on a full-year basis starting from 2012 if our rating is maintained. Any new decline in our ratings below these levels could have a negative impact on our financial condition, our results, and our ability to refinance our existing debt. See Section 4.4 (Liquidity and Capital Resources) on page61 for more information.
also maintains committed credit lines with various banks, which are primarily used as a back-up for the debt maturing within one year as well as for the Groups short-term financing, and which contribute to the Groups liquidity. Based on our current financial outlook, we believe that we have sufficient resources for our ongoing operations in both the short term and the long-term. See Section 4.4 (Liquidity and Capital Resources) on page61 and Note26 (g) to the consolidated financial statements on pageF63 for more information on liquidity risk and such risk management.
Pension plans
We have obligations under defined benefit pension plans, mainly in the United Kingdom and North America. Our funding obligations depend upon future assets performance, the level of interest rates used to measure future liabilities, actuarial assumptions and experience, benefit plan changes, and government regulations. Due to the large number of variables that determine pension funding requirements, which are difficult to predict, as well as any legislative action, future cash funding requirements for our pension plans and other post-employment benefit plans could be significantly higher than currently estimated amounts. If so, these funding requirements could have a material adverse effect on our business, financial condition, results of operations or prospects. See Section4.2 (Accounting policies and definitions) on page45 and Note23 (Pension plans, end of service benefits and other post retirement benefits) to our consolidated financial statements on page F49 for more information on pension plans. See Section2.2.2 (Risk management systems) on page19 for more information on how the Group manages these risks.
2.1.2 Financial andmarket risks

a) Financial risks
Indebtedness
We are exposed to different market risks, which could have a material adverse effect on our financial condition or on our ability to meet our financial commitments. In particular, our access to global sources of financing to cover our financing needs or repayment of our debt could be impaired by the deterioration of financial markets or downgrading of our credit rating. On December31, 2010, our net debt (which includes put options on shares of subsidiaries and derivative instruments) amounted to 13,993million euros, and our gross debt amounted to 17,421million euros. 3,268 million euros of our gross debt as of December31, 2010 was due in one year or less. As part of our strict financial policies, we are implementing actions to manage our debt and improve our financial structure. We cannot, however, give any assurance that we will be able to implement these measures effectively or that further measures will not be required in the future. The financing contracts of Lafarge and its subsidiaries contain various commitments. Some of our subsidiaries are required to comply with certain financial covenants and ratios. At
b) Market risks
In this Section debt figures are presented excluding put options on shares of subsidiaries.
Currency exchange risks and exchange rate sensitivity

CURRENCY EXCHANGE RISK
Liquidity risk
We are exposed to a risk of insufficient financial resources, which could impact our ability to continue our operations. The Group implements policies to limit its exposure to liquidity risk. As a result of these policies, a significant portion of our debt has a long-term maturity. The Group
We are subject to foreign exchange risk as a result of our subsidiaries purchase and sale transactions in currencies other than their operating currencies. With regard to transaction-based foreign currency exposures, our policy is to hedge all material foreign currency exposures through
15
RISK FACTORS
derivative instruments no later than when a firm commitment is entered into or becomes known to us. These derivative instruments are generally limited to forward contracts and standard foreign currency options, with terms of generally less than one year. From time to time, we also hedge future cash flows in foreign currencies when such flows become highly probable. We do not enter into foreign currency exchange contracts other than for hedging purposes. Each subsidiary is responsible for managing the foreign exchange positions arising as a result of commercial and financial transactions performed in currencies other than its domestic currency. Exposures are centralized and hedged with the corporate Treasury department using foreign currency derivative instruments when local regulations allow it. Otherwise, our exposures are hedged with local banks. The corporate Treasury department covers its position in the market, and attempts to reduce our overall exposure by netting purchases and sales in each currency on a global basis, where feasible. As far as financing is concerned, our general policy is for subsidiaries to borrow and invest excess cash in the same currency as their functional currency, except for subsidiaries operating in emerging markets, where cash surpluses are invested, wherever possible, in USdollars or in euros. A major portion of our financing is in USdollars and British pounds, in particular as a result of our operations located in these countries. Part of this debt was initially raised in euros at parent company
level then converted into foreign currencies through currency swaps. We hold assets, earn income and incur expenses and liabilities directly and through our subsidiaries in a variety of currencies. Our financial statements are presented in euros. Therefore, when we prepare the Groups financial statements, we must convert our assets, liabilities, income and expenses in other currencies into euros at then-applicable exchange rates. See Note25 (Debt) on pageF54 and Note26 (Financial instruments) on pageF57 to our consolidated financial statements for more information on debt and financial instruments. Additional information on the Group policies in place to mitigate this risk can be found in Section2.2 (Risk management systems) on page19.
EXCHANGE RATE SENSITIVITY
In 2010, we generated approximately 78% of our sales in currencies other than the euro, with approximately 23% denominated in USor Canadian dollars. As a result, a 10% change in the USdollar/euro exchange rate and in the Canadian dollar/euro exchange rate would have an impact on our sales of approximately 365million euros. In addition, on December31, 2010, before currency swaps, 18% of our total debt was denominated in USdollars and 9% in British pounds. After taking into account the swaps, our USdollar denominated debt amounted to 24% of our total debt, while our debt denominated in British pounds represented 5% of the total. A +/-5% fluctuation in the US dollar/euro and in the British pound/ euro exchange rate would have an estimated maximum impact of -/+ 229million euros on our debt exposed to these two foreign currencies as of December31, 2010. The table below provides information about our debt and foreign exchange derivative financial instruments that are sensitive to exchange rates. The table shows: - for debt obligations, the principal cash flows in foreign currencies by expected maturity dates and before swaps, - for foreign exchange forward agreements, the notional amounts by contractual maturity dates. These notional amounts are generally used to calculate the contractual payments to be exchanged under the contract.
If the euro increases in value against a currency, the value in euros of assets, liabilities, income and expenses originally recorded in the other currency will decrease. Conversely, if the euro decreases in value against a currency, the value in euros of assets, liabilities, income, and expenses originally recorded in that other currency will increase. Consequently, increases and decreases in the value of the euro may affect the value in euros of our non-euro assets, liabilities, income, and expenses, even though the value of these items has not changed in their original currency.
MATURITIES OF NOTIONAL CONTRACT VALUES ON DECEMBER31, 2010

(million euros)
2011
2012
2013
2014
2015
> 5 YEARS
TOTAL
FAIR VALUE
DEBT IN FOREIGN CURRENCIES*

USdollar British pound Other currencies TOTAL 875 81 855 1,811 121 646 208 975 435 178 218 831 31 148 179 458 68 526 1,147 639 69 1,855 3,067 1,544 1,566 6,177 3,137 1,652 1,559 6,348
FOREIGN EXCHANGE DERIVATIVES**

Forward contract purchases and currency swaps USdollar British pound Other currencies TOTAL Forward contract sales and currency swaps USdollar British pound Other currencies TOTAL
*
600 888 307 1,795 1,480 62 334 1,876
23 23
23 23
600 888 307 1,795 1,526 62 334 1,922
(8) (15) 5 (18) 20 1 (6) 15
**
The fair value of long-term debt was determined by estimating future cash flows on a borrowing-by-borrowing basis, and discounting these future cash flows using an interest rate that takes into account the Groups incremental borrowing rate at year-end for similar types of debt arrangements. Market price is used to determine the fair value of publicly traded instruments. The fair value of foreign currency derivative instruments has been calculated using market prices that the Group would pay or receive to settle the related agreements.
16
RISK FACTORS
Based on outstanding hedging instruments on December 31, 2010, a +/-5% shift in exchange rates would have an estimated maximum impact of respectively -/+1million euros on equity in respect of foreign currency derivatives designated as hedging instruments in a cash flow hedge relationship. The net income statement impact of the same exchange rate fluctuations on the Groups foreign exchange derivative instruments is not material. Fair values are calculated with internal models that rely on market observable data (currency spot rate, forward rate, currency rate curves, etc.).
the associated financial income or expense unchanged; cash flow risk for floating-rate assets and liabilities. Changes in interest rates have little impact on the market value of floating-rate assets and liabilities, but directly influence the future income or expense flows of the Company. In accordance with the general policy established by our senior management we seek to manage these two types of risks, including the use of interest-rate swaps and forward rate agreements. Our corporate Treasury department manages our financing and interest rate risk exposure in accordance with rules defined by our senior management in order to keep a balance between fixed rate and floating rate exposure. Although we manage our interest rate exposure to some extent, it cannot immunize us fully from interest rate risks. See Note25 (Debt) on pageF54 and Note26 (Financial instruments) on pageF57 to our consolidated financial statements for more information. Additional information on the Group policies in place to mitigate this risk can be found in Section2.2 (Risk management systems) on page19.
INTEREST RATE SENSITIVITY
Before taking into account interest rate swaps, on December31, 2010, 74% of our total debt carried a fixed rate. After taking into account these swaps, the portion of fixed-rate debt amounted to 66%. A +/-1% change in short-term interest rates calculated on the net floating rate debt, taking into account derivative instruments would have a maximum impact on the Groups 2010 pre-tax consolidated income of -/+24million euros. The table below provides information about our interest-rate derivative instruments and debt obligations that are sensitive to changes in interest rates and presents: - for debt obligations, the principal cash flows by expected maturity dates and related weighted average interest rates before swaps; - for interest-rate derivative instruments, notional amounts by contractual maturity dates and related weighted average interest rates. Notional amounts are used to calculate the contractual payments to be exchanged under the contract. Weighted average floating rates are based on effective rates at year-end.
Interest rate risks and sensitivity

INTEREST RATE RISKS
We are exposed to interest-rate risk through our debt and cash. Our interest rate exposure can be sub-divided among the following risks: price risk for fixed-rate financial assets and liabilities. By contracting a fixed-rate liability, for example, we are exposed to an opportunity cost in the event of a fall in interest rates. Changes in interest rates impact the market value of fixed-rate assets and liabilities, leaving
MATURITIES OF NOTIONAL CONTRACT VALUES ON DECEMBER31, 2010

(million euros)
AVERAGE RATE (%)
2011 H1
2011 H2
2012
2013
2014
2015
> 5 YEARS
TOTAL
FAIR VALUE
DEBT
(1)
Long-term debt (2) Fixed-rate portion Floating-rate portion Short-term debt
5.5 6.1 3.3 3.7
913 806 107 965
1,031 488 543 71
1,831 731 1,100
1,579 935 644
2,090 1,711 379
1,807 1,271 536
6,726 6,616 110
15,977 12,558 3,419 1,036
16,428 13,019 3,409 1,036
INTEREST-RATE DERIVATIVES (3)

Pay Fixed Euro Other currencies Pay Floating Euro Other currencies Other interest-rate derivatives Euro Other currencies 2.0 218 20 331 569 (38) 1.2 1.5 1,200 300 75 232 1,500 307 3 6 4.5 5.4 48 72 70 31 58 71 42 108 7 170 337 (11) (35)
(1) The fair value of long-term debt was determined by estimating future cash flows on a borrowing-by-borrowing basis, and discounting these future cash flows using an interest rate that takes into account the Groups incremental borrowing rate at year-end for similar types of debt arrangements. (2) Including the current portion of long-term debt. (3) The fair value of foreign interest rate derivative instruments has been calculated using market prices that the Group would pay or receive to settle the related agreements.
Based on outstanding hedging instruments on December31, 2010, a +/-100 basis point shift in yield curves would have an estimated maximum impact of respectively -/+12million euros on equity in respect of interest-rate derivatives designated as hedging instruments in a cash flow hedging relationship. The
impact on the income statement related to interest-rate derivative instruments designated as hedging instruments in a fair value hedging relationship is netted off by the revaluation of the underlying debt. Furthermore, the income statement impact of the same yield curve fluctuations on interest-rate derivative
instruments, not designated as hedges for accounting purposes, would have a maximum impact of -/+ 2million euros in income. Fair values are calculated with internal models that rely on observable market data (currency rate curves, zero coupon curves, etc.).
17
RISK FACTORS
2.2Risk management
Commodity risk and sensitivity

We are subject to commodity risk with respect to price fluctuations mainly in the electricity, natural gas, petcoke, coal, fuel, diesel and also maritime freight markets. We attempt to limit our exposure to fluctuations in commodity prices and to increase our use of alternative fuels and renewable energies. From time to time, and if a market exists, we hedge our commodity exposures through derivative instruments at the latest when a firm commitment is entered into or known, or where future cash flows are highly probable. These derivative instruments are generally limited to swaps and options, with maturities and terms adaptable on a case by case basis. We do not enter into commodities contracts other than for hedging purposes. Based on outstanding hedging instruments on December31, 2010, a +/-20% change in the commodity indexes against which Lafarge is hedged, i.e. mainly natural gas (Nymex), heating oil (Nymex), gas oil (IPE), maritime freight (Panamax), and coal (Newcastle FOB), would have an estimated maximum impact of respectively -/+11million euros on equity in respect of commodity derivative instruments designated as hedging instruments in a cash flow hedging relationship. The net income statement impact of the same commodity
index fluctuations on the Groups commodity derivative instruments is not material. Fair values are calculated with internal models that rely on observable market data (raw materials spot and forward rates). See Note26 (e) to our consolidated financial statements on pageF62 for more information on financial instruments and commodity risk.
(Financial instruments) to our consolidated financial statements on pageF57 as well as Sections2.3 (Insurance and risk coverage) on page22.
Listed shares risk

QUOTED EQUITY
Counterparty risk for financial operations

We are mainly exposed to credit risk in the event of default by a counterparty (mainly banks and other financial institutions). We attempt to limit our exposure to counterparty risks by rigorously selecting the counterparties with whom we trade, by regularly monitoring the ratings assigned by credit rating agencies, and by taking into account the nature and maturity of our exposed transactions, according to internal Group policies. We establish counterparty limits that are regularly reviewed. We believe we have no material concentration of risk with any counterparty. We do not anticipate any third-party default that might have a significant impact on our financial condition and operational results. For further information on our exposure to credit and counterparty risks and our management thereof, see Note 26
After to the disposal of all of our investment in Cimentos de Portugal (Cimpor) in February2010, the Group no longer holds non consolidated investments in listed companies which could have a significant impact on the Groups profit and financial situation. See Note 3 (Significant events) to our consolidated financial statements on pageF23 and Section 3.3.2 (Recent acquisitions, partnerships and divestitures) on page38 for further details on the disposal of our participation in Cimpor in February2010.
TREASURY SHARES
On December 31, 2010 the Group held 363,558treasury shares. These shares are assigned to cover stock-option or performance shares grants. The risk exposure regarding our self-owned shares considered not significant by the Group.
2.2 Risk management

In order to ensure the sustainability of its business development and to meet the targets defined by its Executive Committee, the Group makes ongoing efforts to prevent and control the risks to which it is exposed. Risk management requires establishing standard procedures to identify and analyze the main risks to which the Group is exposed and continually deploying and managing risk management systems designed to eliminate or reduce the probability that risks will arise and to limit their impact. selected by the Group Executive Committee on the basis of the Group risk mapping, which was updated in 2009, has been conducted in 2010 and submitted to the Audit Committee. An in-depth analysis has been performed on the main risk areas identified and action plans have been developed and are progressively implemented. As part of the Groups management cycle, strategic reviews of all Group operational units are conducted periodically by the heads of the operational units, the Divisions and the Group. These strategic reviews include an analysis of the main risks to which the operational entities are exposed. Every year, an analysis of risks related to the reliability of financial information, asset protection, and fraud detection and prevention is performed at the Group level by the Internal Control department, in conjunction with the relevant functional departments. This analysis serves as a basis for updating the Groups internal control standards, which are deployed across the Groups main business units, the Divisions and within the Groups functional departments. The annual audit plan drawn up by the Group Internal Audit Department takes into account the various analyses described above. In preparing this plan, Group Internal Audit also conducts a large number of interviews and corroborates or supplements these analyses. Implementation of this plan and the summary of work presented to the Group Executive Committee and Audit Committee lead to more in-depth analyses in certain areas and contribute to the ongoing risk identification process.
2.2.1 Risk identification andanalysis

Risk identification and analysis is structured around several coordinated approaches conducted within the Group under the responsibility of the Group Executive Committee. A follow-up of the main risks
18
RISK FACTORS
2.2Risk management
2.2.2 Risk management systems

An active risk management plan based on the risk identification and analysis work described above has been in place within the Group for several years. It is continually adjusted in response to new issues and risks to which the Group is exposed.
recommendations, and prohibitions pertaining primarily to the following: compliance with laws and regulations, abiding by free competition, corruption prevention, insider trading, conflicts of interest, participation in politics, health and safety, discrimination and harassment prevention, respect for the environment, protection of assets, reliability of information, importance of internal control and application of sanctions in case of violations. The action to strengthen the dissemination of the Code of Business Conduct and its appropriation by all Group employees, which was initiated in 2008, was largely completed in 2009. This training programme, which is based on concrete case studies drawn from business examples, was reviewed by Transparency International and the International Chamber of Commerce in 2008, as well as a complete presentation to the Group Stakeholders Panel. The Group continued in 2010 the roll-out of this programme and plans in 2011 to sustain this action by implementing of awareness and training tools, accessible through the Group intranet in all countries where the Group operates.
ASSET PROTECTION
General risk management framework and Code of Business Conduct

RESPONSIBILITY AND PRINCIPLES UNDERLYING RISK MANAGEMENT
an ethics line set up to enable employees, anywhere in the world to anonymously exercise their whistleblowing rights, to report any breach of the rules laid down in the Code of Business Conduct and, more specifically, to report fraud cases. The guidelines issued by the Cnil (the French national data protection and privacy agency) were used to set up this system, including the most recent developments related to the decision of the Cassation Court, in which ensures strict adherence to specific rules implemented in France regarding reporting mecanims; the Groups internal control standards, which cover many key controls that directly and indirectly target the risk of fraud and have been widely deployed; more generally, the body of rules, procedures, and controls applied within the Groups organizations.
Generally speaking, the heads of the Divisions, Business Units and functional departments are responsible for defining and/or applying the measures required to reduce the Groups risk exposure. Risk management is based primarily on certain defining principles, such as: the Groups Principles of Action, which define the Groups commitments to customers, employees, local community institutions, and shareholders, and explain the Lafarge Way, i.e. the Groups management philosophy; the principles of organization, which define responsibilities at different levels within the organization (business unit, Division, Group), the different factors in the management cycle, and key principles for improving performance. These principles are communicated on an ongoing basis and are a major component of the Groups preventive management of main risks by defining the Groups fundamental values and clearly identifying responsibilities. In addition, the Group and each functional department have defined a set of complementary policies and rules. The functional managers, their staff, and the operational unit managers are in charge of disseminating and applying these policies and rules to ensure that practices are consistent at each level of the organization. All of these rules have been gradually gathered to facilitate their implementation.
LAFARGE EMPLOYEE CODE OF CONDUCT
Systems for managing specific risks

In particular, risk management systems have been developed and applied in the following areas: management of the Groups asset portfolio; actions to secure access to raw materials; environmental risk management and safety program; antitrust compliance program; financial and market risks management. These systems are defined by precise objectives, which are approved by the Groups governing bodies, the use of dedicated tools and resources to achieve these objectives, and a set of oversight and monitoring actions to ensure that they are properly implemented.
MANAGEMENT OF THE GROUPS ASSET PORTFOLIO
For many years, the Group has been defining policies and practices implemented for the purpose of protecting its assets, both tangible (fixed assets, inventories, accounts receivable, financial assets, etc.) and intangible (brand, information, know-how, patents, etc.). The application of these policies has been strengthened by establishing internal control standards in the Groups main operational units and functional departments, with one main objective being the safeguarding of assets.
FRAUD PREVENTION PROGRAM
The Group has a program designed to prevent, deter, and detect fraud. This program has been gradually reinforced since 2004 and encompasses: the Code of Business Conduct, which provides a general framework in this area; a procedure that was defined and deployed for reporting and monitoring cases of fraud and breaches of the Code of Business Conduct, which requires that each case be reported to Group through the various channels set out in this procedure and defines the role of the different parties involved (Group heads of the operational units, Legal, Internal Audit, and Internal Control departments), the various types of fraud and the course to be followed in case of suspected fraud;
Management of the Groups asset portfolio mainly entails: actively monitoring country risks, particularly those arising from the economic, political and social climate; a process for geographically modeling natural disaster risks; a structured decision-making process for investments and divestments; a system to optimize the flows of funds into the Group. The Group Strategy department has defined a methodology for measuring and monitoring
As a core part of its policies, in 2004, the Group adopted a Code of Business Conduct that sets out the principles of conduct that each individual is to adopt in every day business situations. The Code of Business Conduct is essential in preventing the main risks faced by the Group, by setting out the issues,
19
RISK FACTORS
2.2Risk management
country risk trends over time. This analysis is conducted annually and is taken into account when defining the Groups asset management strategy. With the support of these analyses, we continue to diversify our portfolio geographically and exercise care to manage the respective weight of each country for the Group. The Groups Risks and Insurance department has developed a process for modeling natural event risks with the primary aim of setting up insurance programs to secure optimum coverage for such risks. Acquisitions and disposals are subject to review and approval at various levels as a function of their materiality, upon completion of each phase economic opportunity study, feasibility study and detailed study. The Risk and Portfolio Committee reviews the risks and rewards of each acquisition or disposal project submitted thereto, based on an assessment report that covers the strategic, business and financial, legal, tax, Human Resources, and technical aspects (status of assets and mineral reserves, energy access conditions), as well as aspects related to sustainable development. A risk and opportunity analysis is performed in each of these areas. Lastly, a Dividends Committee, in which the Groups Tax, Legal, Control and Consolidation and Financing & Treasury departments are represented, determines how to optimize returns of cash to the Group.
ACTIONS TO SECURE ACCESS TO CERTAIN RAW MATERIALS
of the health and safety of persons who work on its sites. This is being accomplished by defining and deploying specific rules and standards, as well as through systematic analyses of the causes of serious incidents, and by disseminating information on lessons learned and good practices throughout the sites. All Group operational units have been mobilized to implement these standards, which are gradually reducing accident risks. The main existing standards apply to working at heights, wearing protective equipment, reporting and analyzing incidents and accidents, and overseeing the safety of work outsourced to subcontractors.
ANTITRUST COMPLIANCE PROGRAM
units were tested for compliance with the Compliance Program by the end of 2010.
FINANCIAL AND MARKET RISK MANAGEMENT
Management of financial and market risks (currency and interest rate risk, liquidity risk, equity risk and risk of price volatility for energy sources used in the production cycle) is centralized by the Group Finance department, which works jointly with the Group Purchasing department for energy source issues. The Groups Executive Committee determines a set of strict policies and procedures to cover these risks and defines the responsibilities of the different parties involved. Approval must be obtained from the Group Finance Department for all operations or transactions involving setting up financing and guarantees for a term of more than one year or above a certain amount, the use of some hedging instruments or derivatives, and the distribution of dividends. Our policies do not allow for any speculative positions on the market. We have instituted management rules based on the segregation of duties, financial and administrative control and risk measurement. We have also introduced an integrated system for all operations managed at corporate level that permits real-time monitoring of hedging strategies. Our policy is to use derivative instruments to hedge our exposure to exchange rate and interest rate risks. We also use derivative instruments from time to time to manage our exposure to commodity risks. We use financial instruments only to hedge existing or anticipated financial and commercial exposures. We undertake this hedging in the over-the-counter market with a limited number of highly rated counterparties. Our positions in derivative financial instruments are monitored using various techniques, including the fair value approach. To reduce our exposure to currency risks and interest rate fluctuations, we manage our exposure both on a central basis through our Treasury department and in conjunction with some of our subsidiaries. We use various standard derivative financial instruments, such as forward exchange contracts, interest rate, currency swaps, and forward rate agreements, to hedge currency, and interest rate fluctuations on assets, liabilities and future commitments, in accordance with guidelines established by our senior management. We are subject to commodity risk with respect to price changes principally in the energy and
The Group antitrust compliance program (Compliance Program), which has been in place since 2007, aims to ensure that Group employees strictly abide by antitrust rules and regulations. It is applicable in all countries where the Group has operations and covers all of its activities, including those conducted jointly with third parties in the context of partnerships. The Compliance Program is being deployed steadily and continuously worldwide through a number of awareness-building and training actions for the Groups employees, as well as verifications that the rules of the Compliance Program are being followed at the business unit level and information reporting through a dedicated network of antitrust coordinators based in every country where the Group operates. In general, in the event of allegations of breach of compliance with antitrust rules and regulations made against the Group or one of its subsidiaries, the Groups policy is to fully collaborate with the local antitrust authorities. In 2010, the Group Competition Team deployed worldwide the new training tool called operational business cases, which consists of various practical business situations that need to be analysed and resolved from a competition law perspective. Train the trainers sessions were held for the local lawyers in each of the regions of the world where Lafarge is present and several workshops were subsequently conducted at the business unit level using this tool. In addition, to the foregoing, several Group guidelines were issued and disseminated worldwide with the objective to increase the awareness of Group employees towards specific competition risks and to support them in effectively managing risks in line with the Compliance Program. Pursuant to the sustainability ambitions undertaken by the Group, 100% of its significant business
Managing the risk associated with access to raw materials is organized upstream in the Groups development process, primarily through actions to secure long-term access to resources via acquisitions and development projects and ongoing management of land resources and other supply sources.
MANAGEMENT OF ENVIRONMENTAL, HEALTH ANDSAFETY RISKS
The Group takes many measures to manage the environmental impact of its business operations. The Groups Environmental and Public Affairs department monitors the application of its environmental policy throughout all Group entities. This policy covers managing production facilities in compliance with the law, minimizing quantities of non-renewable resources used, minimizing waste production, and implementing quarry rehabilitation plans. Audits and performance controls are carried out to ascertain that standards and performance targets are met. The Group is engaged in an ambitious programs to improve its performance in terms
20
RISK FACTORS
2.3Insurance and risk coverage
maritime freight markets. From time to time, we use derivative financial instruments to manage our exposure to these commodity and energy risks.
A follow-up of risks related to financial instruments is regularly carried out based on indicators provided to the management team through internal reporting.
Lafarge participates in the selection and monitoring of financial assets covering pension benefit obligations in conjunction with the entities that manage these funds.
2.3 Insurance and risk coverage

The Groups general insurance policy is based on the following key principles: implement prevention and protection actions in order to mitigate risks; retain exposure to frequency risks through Group captives; transfer only severity risks, above the selfretention threshold, to the leading insurers and reinsurers. Special attention is given to the financial strength of market participants; cover subsidiaries in which we own a majority shareholding under Groupwide insurance policies, subject to local regulatory constraints and specific geographical exclusions. In 2010, the total cost of the Groups insurance programs, including the risks selfinsured via the captives, amounted to about 4 per thousand of the revenues of the insured perimeter. Potential fire loss scenarios for the largest sites are regularly evaluated with specialized engineers from an external consulting firm. The highest Maximum Foreseeable Loss for fire per site is lower than200million euros except for the Groups Egyptian cement plant where it could reach 230million euros taking into consideration this plants very large production capacity. Accordingly, the Group Property Damage and Business Interruption program limit remains at200million euros per claim, with the usual sub-limits set by insurance companies. Due to the highest Maximum Foreseeable Loss in Egypt, an additional 30million euros of coverage has been suscribed for this plant in2010. The Group has implemented a regular modelization process of risks linked to natural disasters, based on the best tools used by international insurers and reinsurers. This process aims at identifying the sites with main exposure, classifying potential losses according to their financial impact per event, country and occurrence probability, in order to adjust the coverage of the Groups assets. This process covers risks which can be modeled (earthquake, flood...) on the basis of available models and data. The number and diverse geographical locations of the Groups industrial sites all over the world help mitigate the risk of high business interruption exposure. In accordance with the plan decided by the Group, fire risk protection standards are progressively implemented in all cement plants with the support of prevention engineers from an external consulting firm.
Liability insurance
Public liability, product liability and environmental impairment liability policies are the main liability-type policies within the Group. They cover amounts commensurate with the nature of Lafarges business activities, the relevant countries, loss experience and available capacity in the insurance and reinsurance markets. Within our global public and product liability program, Lafarge North AmericaInc., our subsidiary in North America, has its own stand-alone primary casualty insurance program designed to cover the specific liability risks in North America.
Captive insurance
The Group has one insurance and one reinsurance captives insurance companies located in Europe to manage the frequency risk of the Groups subsidiaries. The amount of liability retained by these captives stands at a maximum of 2million euros per casualty claim and 5million euros per property damage claim. In North America, the Group has two insurance captives companies covering workers compensation, automobile liability and general liability coverage. The maximum liability retained by these captives ranges from 2million US dollars to 5million US dollars per loss, depending on the type of coverage.
Property damage andbusiness interruption insurance

These insurance programs cover property losses resulting from fire, explosion, natural disasters, machinery breakdown, etc. and related business interruption, if any. These programs provide worldwide coverage. Group assets are insured at their actual cash value. Total insured values amount to 30,700million euros.
21
RISK FACTORS
22
3.1 OUR STRATEGY 3.2 OUR BUSINESSES
3.2.1 3.2.2 3.2.3 3.2.4 3.2.5 3.3.1 3.3.2 3.3.3 3.3.4 Cement Aggregates &Concrete Gypsum Summary of ourcapital expenditures in2010 and2009 Capital expenditures planned for2011 History andDevelopment oftheGroup Recent acquisitions, partnerships anddivestitures Organizational Structure Innovation
24 25
26 31 34 36 36
3.3 THE GROUP
37
37 38 39 39
23
3.1Our strategy
General presentation
LafargeS.A. is a Limited Liability Company (Socit Anonyme) incorporated in France under French law. We produce and sell building materials cement, aggregates, ready mix, asphalt, concrete, gypsum wallboard, and related products worldwide, mostly under the Lafarge brand name. Our products are used to build and renovate residential, commercial and public works throughout the world. Based on sales, we are the world
leader in building materials. Based on internal and external research, we are believed to be the world leader in the cement market, the second largest aggregates producer, the third largest concrete producer and the third largest gypsum wallboard manufacturer worldwide. Our reporting currency is the euro (). In 2010, the Group generated 16,169million euros in sales, and posted a current operating income (as defined in Section4.2 (Accounting policies and definitions)) of 2,441million euros and net income, Group share of 827million
euros. At year-end 2010, its assets totalled 42,494million euros and the Group employed approximately 76,000people in 78countries. Lafarge shares have been traded on the Paris Stock Exchange Nyse Euronext since1923. They are a component of the CAC 40, the principal market index in France (and have been in such index calculation since the beginning). Our market capitalization totalled 13.4billion euros at December31, 2010.
3.1 Our strategy

Our goal is to create shareholder value. To achieve this, the Groups strategy aims at strengthening our position as world leader in building materials, in terms of market share, innovation, recognition by customers, geographical portfolio, and profitability. We have two strategic priorities: cement, primarily in emerging markets, and innovative products and solutions, particularly construction systems, including sustainable construction solutions. Over the past twenty years, world cement consumption has significantly increased with
EVOLUTION OF THE CEMENT WORLD MARKET
an average rate of growth above 5% per year. Despite the economic and financial crisis, global cement demand grew by approximately 9% in 2010, supported by the dynamism of most large emerging markets, particularly China, Brazil, India and Sub Saharan Africa. Mid and long-term prospects for cement demand remain favorable, especially in these markets, where demography and urbanization drive the needs for housing and infrastructure. Emerging markets account for 74% of Groups current operating income (77% for the Cement Division) in 2010.
We believe that we are in a very good position to benefit from this long-term fundamental growth thanks to our well diversified geographical portfolio, strengthened during recent years by our cement capacity increase program and the acquisition of Orascom Cement in January2008. Most of our new production capacity projects are located in emerging markets. The Group will seize the opportunities to participate in the consolidation of the cement market, including when necessary, by intensification of the aggregates and concrete vertical integration.
Million tonnes
3,000 2,500 2,000 1,500 1,000 500 0 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 1,140 1,200 1,250 1,300 1,350 1,470 1,495 1,570 1,620 1,700 1,800 1,900 3,250 2,980
5% per an
num
2,500 2,300 2,100
2,740
2,800
1,420
Year
Lafarge estimate
24
3.2Our businesses
Our second strategic priority is to develop our sales of innovative building materials, systems and services that meet the expectations of our clients in terms of sustainable construction, aesthetics and cost. The experience accumulated by the Group in the developped markets was considerably enriched by our development in emerging countries. The combined effect of the cross-fertilization between our various geographies and the increase of our Research &Development and testing capabilities has led to a broadening of our product range and services. These higher value-added products and systems aim at meeting the increased expectations of our clients in terms of performance, ease of use, reduced application time and recycling. Sustainable development is core to the Groups strategy. It encompasses:
preservation of the environment and combating climate change (limited raw materials extraction, emissions reduction notably CO 2 and biodiversity promotion), health protection and medical care for our employees and neighboring communities, and more generally the Groups social involvement, as illustrated by the Groups actions following natural disasters.
demonstrating our commitment to deliver in this area; See Section7.1 (Health and Safety) for more information. the Groups second operational priority is cost-cutting. This was reflected in the resilience of our operating margin permitted by 220million euros structural cost savings in 2010, as we continued to optimize our industrial processes and organization; the third priority is People Development with a focus on filling our talent pipeline, developing our talents, leveraging diversity, and ensuring effective organization. We estimate that the Groups strategy strongly supports our goal of being recognized as the best creator of value by our shareholders, the best supplier of products and services by our customers, the best employer by our employees and the best partner for the communities in the regions where we operate.
Furthermore, Lafarge has three operational priorities: the first is the day-to-day health and safety of the women and men who work for the Group, be they on the payroll or with sub-contractors, on site or on the road. Between 2008 and 2010 (based on our 2007 business scope), we managed to reduce by 36% the number of workplace accidents resulting in sick leave,
3.2 Our businesses

Overview
The2010 contribution to the Groups consolidated sales by Division and by region was as follows compared with2009:
SALES BY DIVISION*
2010 2009
(million euros)
(%)
(million euros)
(%)
Cement Aggregates &Concrete Gypsum Other TOTAL

* After elimination of inter-Division sales.
9,656 5,088 1,422 3 16,169
59.7 31.5 8.8 NS 100.0
9,477 5,064 1,334 9 15,884
59.7 31.9 8.4 NS 100.0
25
3
Asia TOTAL
*
3.2Our businesses
SALES BY GEOGRAPHIC AREA*

2010 2009
(million euros)
(%)
(million euros)
(%)
Western Europe North America Middle East &Africa Central &Eastern Europe Latin America
4,313 3,336 3,903 1,043 894 2,680 16,169
26.7 20.6 24.1 6.5 5.5 16.6 100.0
4,657 3,028 4,018 1,053 791 2,337 15,884
29.3 19.1 25.3 6.6 5.0 14.7 100.0
By destination.
For each of the three Divisions, the following schedule presents the contribution made to current operating income in years ending December31,2010 and 2009:
CONTRIBUTION TO GROUPS CURRENT OPERATING INCOME*
(in %) 2010 2009

* As defined in Section4.2 (Accounting Policies and Definitions).
91.4 8.8 2.4 (2.6) 100.0
94.6 7.8 1.5 (3.9) 100.0
In the following pages of this Section 3.2: - sales figures are presented by destination market. They include all the amounts both produced and sold in the market, as well as any quantities imported into the market by our operations, and exclude any exports to other markets. They are presented before elimination of inter-Division sales and calculated following applicable consolidation rules, - data regarding the number of sites and production capacity include 100% of all its subsidiaries facilities and production capacity, whether fully or proportionately consolidated, - the percentage of sales for each region is computed in relation to the total sales of the relevant Division, before elimination of interDivision sales. When operating our business, we may face risks presented in Section2 (Risks Factors).
projects throughout the world, including the 50countries in which our Cement Division has production facilities. Based on both internal and external research, we believe that we are the worlds leading producer of cement, taking into account sales, production capacity, geographical positions, technological development and quality of service. At year-end 2010, the Groups consolidated businesses operated 125cement, 37clinker grinding and 6slag grinding plants, with an annual production capacity of217 million tonnes (total capacity of entities controlled by Lafarge). Consolidated sales for 2010 reached approximately 136million tonnes.
seawater, sulfates and other natural conditions hostile to concrete) and specific applications (e.g.white cement, oil-well cements, blended silica fume, blended fly-ash, blended pozzolana, blended slag cements and road surfacing hydraulic binders), natural lime hydraulic binders, masonry cements, and ground blast furnace slag. We design our cements to meet the diverse needs of our customers, including highperformance applications for which enhanced durability and strength are required. We also offer our customers a number of extra services, such as technical support in connection with the use of our cements, ordering and logistical assistance to ensure timely delivery to the customers, plus documentation, demonstrations and training relating to the properties and appropriate use of our cements.
Products
We produce and sell an extensive range of cements and hydraulic binders for the construction industry, including basic Portland and masonry cements and a variety of other blended and specialty cements and binders. We offer our customers a broad line, which varies somewhat by market. Our cement products (all of which are referred to as cement in this report) include specialty cements suitable for use in a variety of environmental conditions (e.g.exposure to
3.2.1 Cement
Cement is a fine powder which is the principal strength-giving and propertycontrolling component of concrete. It is a high quality, cost-effective building material that is a key component of construction
Production and Facilities Information

COMPOSITION AND PRODUCTION OF CEMENT
Cement is made by crushing and grinding calcium carbonate (limestone), silica (sand), alumina and iron ore in appropriate proportions
26
3.2Our businesses
and heating the resulting mixture in a rotary kiln to approximately 1,500C. In the more modern dry process used by around 88% of Lafarges plants, the ore mixture enters the kiln dry, as opposed to the older process in which it is mixed with water. Each process produces clinker, which is then finely ground with gypsum to make cement powder. A breakdown of the production cost of cement (before distribution and administrative costs) is approximately: energy 30%, raw materials and consumables 29%, labor, maintenance and other production costs 28%, and depreciation 13%. Raw materials for making cement (calcium carbonate, silica, alumina, and iron ore) are usually present in limestone, chalk, marl, shale and clay, and are available in most countries. Cement plants are normally built close to large deposits of these raw materials. For most of our cement plants, we obtain these materials from nearby land that we either own or over which we hold long-term quarrying rights. The quantity of proven and permitted reserves at our cement plants is believed to be adequate to operate the plants at their current levels for their planned service life. Where technically available and economically viable, we may substitute ground blast furnace slag, pozzolan or fly ash for certain raw materials when making cement, or mix slag, pozzolan or fly ash with cement at the end of the process. Ground blast furnace slag is a by-product of steel manufacturing, and fly ash is a product of burning coal in electric thermal utility plants. Whether and how they are used depends on the physical and chemical characteristics of the slag or ash and on the physical and chemical properties required of the cement being produced. These materials help lower our capital costs per tonne of cement produced. Their use is environmentally friendly since it increases cement supplies by recycling post-industrial material and helps to limit CO2 emissions. Wemeasure improvement by the cement over clinker ratio which reached 1.30 in 2010 compared to 1.29 in 2009.
ENERGY OPTIMIZATION
Wherever possible, we use advanced plant designs (such as preheaters to heat raw materials prior to entering the kiln) and waste materials (e.g.tires, used oils) to curb the use of fossil fuels. In2010, fuel waste materials accounted for close to 13% of our worldwide cement manufacturing fuel consumption, withalmost two-thirdsof our cement plants using some form of fuel waste materials. The availability of fuel waste materials varies widely from region to region, and in particular between developed markets (where they are more abundant) and emerging markets (where they are at an early stage of development). In addition, many of our plants can switch between several fuels with minimal disruption to production, allowing us to enjoy the benefit of lower cost fuels.
MANUFACTURING EXPERTISE
quality, distinctive and targeted solutions enabling them to create more value in their businesses. Our customers generally purchase cement from us through current orders in quantities sufficient to meet the needs of their building or renovation projects.
Markets
CEMENT INDUSTRY
We have developed significant expertise in cement manufacturing through our experience of operating numerous cement production facilities worldwide for over 175years. This expertise has been formally documented and is passed on via our Technical Centers, which employ over 600 engineers and technicians worldwide. We strive to share our collective knowledge throughout the Group to improve our asset utilization, lower our production costs, and increase the product efficiency. Through this culture of knowledge-sharing, we also endeavor to disseminate best production practices and employ benchmarking tools worldwide to drive superior performance and unlock continuous operating improvements.
Historically, the global cement industry has been fragmented, with most markets served by local producers. Beginning in Europe in the1970s, then continuing in the United States during the1980s and later in Asia (outside China), the cement industry underwent significant worldwide consolidation. Today, there are just a limited number of international cement companies, including Lafarge and our major worldwide competitors, i.e.Buzzi (Italy), Cemex (Mexico), Cimentos de Portugal SGPS, S.A. (Cimpor, Portugal), HeidelbergCement (Germany), Holcim (Switzerland), Italcementi (Italy), Taiheiyo (Japan), and Votorantim (Brazil). These companies compete against one another and also against local producers in the various markets around the world. Cement production is capital intensive. Construction of a new dry process cement line represents a significant amount of capital expenditure, depending on the location. The cement industry is highly competitive in our major markets. Some countries or regions are more exposed during certain periods than others due to factors such as the strength of demand, market access, and raw material reserves.
CEMENT MARKETS
Customers
In each of the major regions in which we operate, we sell cement to several thousand customers, primarily concrete producers, precast concrete product manufacturers, contractors, builders and masons, as well as building materials wholesalers. Our cement is used in three major segments of the construction industry: residential, non-residential construction and infrastructure projects. Cement performance characteristics and service requirements from our customers vary widely depending on the projects for which our cement is used, as well as their experience and expertise. We strive to meet our customers diverse requests and to deliver
Emerging markets represent approximately 90% of the worldwide market, with North America and Western Europe accounting for most of the remainder. We have substantial operations in many of these markets, along with other multinational cement companies and local cement producers. A countrys cement demand is generally driven by the growth in per capita income. Demographic growth, industrialization and urbanization progress tend to trigger a rapid growth in housing and infrastructure needs, leading to increased cement consumption.
Energy is the largest expense item among the Groups production costs (30% of total, excluding distribution and administrative costs).
27
3.2Our businesses
CEMENT CONSUMPTION PER CAPITA IN 2010 Cement consumption per cap (kg)
1,400
China
1,200
1,000
South Korea Singapore
800
Turkey
600
Vietnam
Egypt Jordan Algeria Morocco Ecuador Moldova Honduras India Sri Lanka Thailand Serbia Romania Mexico Brazil Argentina Poland Slovakia Croatia Russia Czech Republic France Germany Chile United Kingdom Malaysia Portugal Slovenia Japan Netherlands Canada United States Greece Spain Italy Austria Ireland
400
Syria
South Africa Colombia
200 Ukraine Philippines Kenya Pakistan Nigeria Bangladesh Cameroon Tanzania Zambia Benin Malawi Uganda Indonesia 0 0 5,000
10,000
15,000
20,000
25,000
30,000
35,000
40,000
45,000
50,000
Source: IMF, UN and Cembureau
GDP per capita ($)
LOCATION OF OUR CEMENT PLANTS ANDMARKETS
BREAKDOWN BY REGION
Cement is a product that is costly to transport over land. Consequently, the radius within which a typical cement plant is competitive extends for no more than 300kilometers for the most common types of cement. However, cement can be shipped economically by sea and inland waterway over great distances, significantly extending the competitive radius of cement plants with access to waterborne shipping lanes. Thus, the location of a cement plant and the cements transportation cost produced through our distribution network significantly affect the plants competitiveness, and ultimately our profitability.
CEMENT QUALITY AND SERVICES
We produce and sell cement in the regions and countries listed in the tables below. The following presentation shows each regions percentage contribution to our2010 cement sales in euros, as well as the number of plants we operate, our cement production capacity, and approximate market share in each country over the year ending December31, 2010.
SALES BY DESTINATION 2010
In the following section, stated production capacities are reported on the basis of 100% of operating plants controlled by Lafarge in the indicated countries. Volumes sold are reported on a stand alone basis before elimination of intra-group sales. Our approximate market share has been calculated per country based on information contained in the Industrial Building Materials Sector report published by Jefferies in February2011 (the Jefferies Report) and internal estimates. Comparable information for the year2009 is available in the Annual Report 2009.
The reliability of a producers deliveries and the quality of our cement and support services are also factors influencing a cement producers competitiveness. Accordingly, the Group strives to deliver consistent cement quality over time, to maintain a high standard and quality of support service and to offer special-purpose cements to set ourselves apart from our competitors.
%
Western Europe Central and Eastern Europe Middle East & Africa North America Latin America Asia
18 8 34 13 7 20 100
TOTAL
28
3.2Our businesses
WESTERN EUROPE (18% OF THE DIVISIONS2010 SALES)

NUMBER OF COUNTRIES CEMENT PLANTS GRINDING PLANTS CEMENT PRODUCTION CAPACITY APPROXIMATE MARKET SHARE
(million tonnes)
(%)
France United Kingdom Greece Spain Germany Austria TOTAL WESTERN EUROPE
10 5 3 3 3 2 26
4 2 6
9.5 5.1 9.8 6.8 3.4 2.0 36.6
34 40 50 10 10 32
In 2010, all the countries of the region except the United Kingdom registered volume declines, reflecting lower markets due to
the economic environment. The region as a whole consumed close to 154million tonnes of cement in 2010, according to the Jefferies
Report. We sold 20.3million tonnes of cement in Western Europe in 2010 and 22.6million tonnes in 2009.
NORTH AMERICA (13% OF THE DIVISIONS2010 SALES)

(million tonnes)
(%)
United States Canada TOTAL NORTH AMERICA
12 7 19
3 2 5
14.8 6.4 21.2
12 33
The progressive improvement of the economic situation had a positive impact on our markets in 2010. Sales are seasonal in Canada and much of the East Coast and Mid West of the UnitedStates,
because temperatures in the winter fall below minimum setting temperatures for concrete. The region as a whole consumed close to 79million tonnes of cement in 2010, according to the Jefferies Report. Wesold
13.6 million tonnes of cement in North America in 2010 and 12.7million tonnes in 2009.
CENTRAL AND EASTERN EUROPE (8% OF THE DIVISIONS2010 SALES)

(million tonnes)
(%)
Poland Romania Russia Moldavia Ukraine Serbia Slovenia Czech Republic TOTAL CENTRAL AND EASTERN EUROPE
3 2 2 1 1 1 1 1 12
1 1
5.2 4.9 4.1 1.4 1.3 2.0 0.6 1.2 20.7
20 31 7 62 12 45 38 9
In 2009 and 2010 Central and Eastern Europe has been severely impacted by the residential market contraction due to the economic crisis. However since the second half of 2010
volumes have stabilized. The region as a whole consumed 106million tonnes of cement in 2010, according to the Jefferies Report. We sold 11.1million tonnes of cement in Central
and Eastern Europe in 2010 and 11.9million tonnes in 2009.
29
3
COUNTRIES
3.2Our businesses
MIDDLE EAST AND AFRICA (34% OF THE DIVISIONS2010 SALES)

NUMBER OF CEMENT PLANTS GRINDING PLANTS CEMENT PRODUCTION CAPACITY APPROXIMATE MARKET SHARE
(million tonnes)
(%)
Morocco Nigeria Algeria Iraq Jordan Zambia Egypt United Arab Emirates Syria South Africa Tanzania Kenya Uganda Cameroon Benin Malawi
TOTAL MIDDLE EAST AND AFRICA
3 3 2 2 2 2 1 1 1 1 1 1 1 1 1 23
1 2 1 1 1 6
6.8 3.5 8.6 4.8 4.8 1.3 10.0 3.0 2.6 3.6 0.3 2.0 0.8 1.7 0.7 0.2 54.7
43 32 36 21 51 75 20 6 NS 17 22 48 62 92 37 76
In this region, which consumed close to 319 million tonnes of cement in 2010 (according to the Jefferies Report), we have sold40.2million tonnes of cement in 2010, compared to 44.1million tonnes of cement in 2009. Sustained demographic
growth and significant needs for housing and infrastructures support the strong potential of this region. In addition, we hold a 76.4% interest in Circle Cement in Zimbabwe, which operates one plant with a capacity of 400,000tonnes.
In Morocco, the Group develops its cement business through a joint venture with Socit Nationale dInvestissement. The Group also operates through a joint venture in the United Arab Emirates.
LATIN AMERICA (7% OF THE DIVISIONS2010 SALES)

(million tonnes)
(%)
Brazil Mexico Ecuador Honduras French West Indies/Guyana TOTAL LATIN AMERICA
5 2 1 1 9
3 1 3 7
7.0 0.8 1.4 1.3 1.0 11.5
7 NS 20 55 100
Latin America as a whole consumed 144million tonnes of cement in2010, according to the Jefferies Report. Thanks
to a buoyant market in Brazil and Ecuador and also to the newly integrated assets in the North East region, we sold 8.4million
tonnes of cement in Latin America in2010, compared to 7.6million tonnes in2009.
30
3.2Our businesses
ASIA (20% OF THE DIVISIONS2010 SALES)

(million tonnes)
(%)
China Philippines Malaysia South Korea India Pakistan Indonesia Bangladesh(4) Vietnam TOTAL ASIA
(1) (2) (3) (4)
22 5 3 1 2 1 1 1 36
12 1 2 2 1 18
30.5 6.0 12.5 9.6 7.4 2.1 1.6

(1)
622 (2) 33 37 13 20 (3) 6 4 7 1
1.6 0.5 71.8
The Banda Aceh plant in Indonesia was reconstructed after tsunami damage in 2004. Depending on region where Lafarge is operating. For the North East region. See Note 29 to the Consolidated Financial Statements for more information on Lafarge Surma Cement.
We believe that the long-term growth prospects for Asia are very promising. The region as a whole consumed close to 2,300million tonnes of cement in2010, according to the Jefferies Report. We sold 42.1million tonnes of cement in the region in2010 and 42.3million tonnes in 2009. In China, the Group operates a joint venture with Hong Kong based company ShuiOn. This joint venture is currently the market leader in southwest China (Sichuan, Chongqinq, Guizhou, and Yunnan). Our cement business in Bangladesh is held through a joint venture with Cementos Molins (Spain). Furthermore, in Japan, we hold a 39% indirect interest in Lafarge Aso Cement (accounted for by the equity method and therefore not included in the table above), which operates two plants with a combined capacity of 3million tonnes.
CEMENT TRADING ACTIVITIES
3.2.2 Aggregates &Concrete

Aggregates andconcrete, like cement, are key components of the building industry. Based on internal and external analysis, in 2010 Lafarge was the worlds third largest producer of aggregates and the worlds second largest producer of ready-mix concrete. On December 31, 2010, we had production facilities and sales offices in 36countries. In the year ending December 31, 2010, our consolidated businesses operated 579 aggregates quarries, which sold approximately 193 million tonnes of aggregates, and 1,139concrete plants, which sold approximately 34millioncubic meters of concrete. We also produce pre-cast concrete products and asphalt and asphalt contracting and surfacing services . We are vertically integrated to varying degrees with our Cement Division which supplies substantial volumes of cement to our concrete operations in several markets. Also within our Aggregates & Concrete Division, our aggregates operations supply a substantial volume of aggregates required for our concrete and asphalt operations.
industrial processes, and as base materials for roads, landfills, and buildings. The primary aggregates we produce and sell are hard rock (usually limestone and granite), but we also produce natural sand and gravel. Additionally, depending on the market, we process and sell recycled asphalt and concrete. Aggregates differ in their physical and chemical properties, granularity and hardness. Local geology determines the type of aggregates available in a given market, and not all types of aggregates are available in every market. Through our Research &Development (Lafarge Research Center, LRC) we have greatly increased our understanding of the impact that the various properties of aggregates have in their final applications. Consequently, we have been able to refine our product offerings and step up innovation in our downstream products. See Section 3.3.4 (Innovation) for more information on the R&D in the Group.
CONCRETE
The Group also manages worldwide cement trading activities, which help us to meet fluctuations in demand in certain countries, without building plants that may result in excess capacity. We conduct these activities primarily through our Cementia Trading subsidiary. In addition, our Marine Cement subsidiary acts mainly as an importer and distributor of cement in the Indian Ocean and the Red Sea countries.
Products
AGGREGATES
Aggregates are used as raw materials for concrete, masonry, asphalt, and other
Concrete is a mix of aggregates, cement, admixtures, and water that hardens to form the worlds most used building material. We produce and sell a wide range of concrete and masonry mixes to meet our customers diverse needs. Tensile strength, resistance to pressure, durability, set times, ease of placing, aesthetics, workability under various weather and construction conditions as well environmental impact are the main characteristics that our customers consider
31
3.2Our businesses
when buying concrete. From the very basic to the cutting edge, we offer a broad range of concrete mixes. Through our internal Research center we have introduced innovative products such as: Agilia which offers superior coverage and filling abilities and self-levelling capability, with enhanced durability and aspect; Extensia, flooring concrete which significantly reduces saw joints; Chronolia whose drying speed allows to remove formworks two hours after placing. In addition, we continue to successfully develop in all our markets our Artevia range of decorative concretes. Demand for new products and for a broader range of products is accelerating due to sustainability initiatives and new customer needs. In association with a leading partner, Bouygues Construction, we launched in 2009 a new generation of concrete to boost buildings energy performance: the Thermedia range. We believe our strong Research &Development program gives us a distinct advantage over our competitors. See Section 3.3.4 (Innovation) for more information on the R&D in the Group.
ASPHALT
marine locations, which generally requires less crushing but still requires screening to different sizes. The production of aggregates involves intensive use of heavy equipment and regular use of loaders, haul trucks, crushers and other heavy equipment at our quarries. After mineral extraction, we restore our sites to a high standard so that they may be used for other purposes: agricultural, commercial, and natural. In a world of growing environmental pressures, where it is increasingly difficult to obtain extraction permits, and where mineral resources are becoming more scarce, mineral reserve management is a key to success in the aggregate business. Consequently, we emphasize mineral and land management in our business. Across our existing markets, we regularly search for new material reserves to replace depleting deposits well in advance of their exhaustion, and we work to obtain necessary government permits allowing the extraction of our raw materials. We seek to position new reserves as close to our markets as possible. We are also very active in developing our reserve portfolio in new markets. On December31, 2010, we estimate that we had in excess of 40years of permitted reserves at current levels of production. We control significant additional aggregates deposits, for which we have either not yet received or requested extraction permits.
CONCRETE
materials (such as fly ash or slag) may be substituted for portions of cement to adjust the concrete performance characteristics desired by the customer. Consequently, significant technical expertise and quality control are required to address the many construction issues our customers face, such as concrete setting time, pumpability, placeability, weather conditions, shrinkage and structural strength. Through our extensive Research &Development activities, we focus on supplying concrete that meets these various needs. Because of concretes limited setting time, delivery logistics are key to ensure the cost efficiency and timely delivery of our product. Raw material prices account for approximately 70% of the cost to supply concrete and may vary considerably across the many markets in which we operate. Given the significantly high percentage of raw materials costs, we strive to adjust concrete mix designs to optimize our raw material usage. Delivery represents the second largest cost component, accounting for approximately20% of the costs to supply concrete.
PRE-CAST CONCRETE PIPES, WALL PANELS AND OTHER PRODUCTS
In North America and the United Kingdom, we produce asphalt which we sell either as a stand-alone product, or in conjunction with contracted paving. Asphalt consists of 90-95% dried aggregates mixed with 5-10% heated liquid bitumen, a by-product of oil refining that acts as a binder. In Asphalt, we are using our internal Research center to develop new products, such as the Durapave, line of specialty product line, with enhanced appearance, placing and energy efficiency properties. Demand for new products and for a broader range of products is accelerating due to environmental initiatives and new customer needs.
Production and Facilities Information

AGGREGATES
Ready mixed concrete is produced by mixing aggregates, cement, chemical admixtures and water in varying proportions at concrete production plants and placing the resulting mixture in concrete trucks where it is usually mixed further and delivered to our customers. We obtain most of our concrete raw materials (e.g. cement and aggregates) from internal sources. Concrete is produced with equipment that mixes raw materials in desired ratios, checks the quality of the product obtained, and places the mixture into concrete trucks. Concrete plants can be either fixed permanent sites or portable facilities, which may be located at our customers construction sites. Many concrete mixes are designed to achieve various performance characteristics desired by our customers. Cement and aggregate chemistries may be varied, chemical admixtures may be added (such as retarding or accelerating agents) and other cementitious
These products are manufactured by pouring the proper type of concrete into molds and compacting the concrete through pressure or vibration, or a combination of both. In order to limit the transport costs ,the pre-cast plants are usually located close to aggregates resources which are themselves close to principal markets.
ASPHALT
Aggregates production involves primarily blasting hard rock from quarries and then crushing and screening it to various sizes to meet our customers needs. Aggregates production also involves the extraction of sand and gravel from both land and
As described above, asphalt is produced by blending aggregates with liquid bitumen at asphalt production plants. We obtain much of the aggregates needed to produce asphalt from internal sources and purchase the bitumen from third party suppliers. Bitumen is a by-product of petroleum refining, the price of which is tied to oil prices. Asphalt is produced at low capital-intensive plants consisting of raw material storage facilities and equipment for combining raw materials in the proper proportions at a high temperature. Our asphalt plants range in output from 5,000 to 500,000tonnes per year and are located in NorthAmerica and the United Kingdom.
32
3.2Our businesses
Customers
We sell our aggregates, concrete and asphalt to thousands of unaffiliated customers in local markets throughout the world. Markets are local because of the high cost of transporting these products over land and because most of these products are delivered in trucks. However, where our quarries have access to shipping lanes or railroads, we may ship aggregates over significant distances. We sell aggregates primarily to concrete producers, manufacturers of pre-cast concrete products, asphalt producers, road contractors, and construction companies of all sizes. In some markets, we sell aggregates for use in various industrial processes, such as steel manufacturing. We sell concrete primarily to construction and road contractors ranging from major international construction companies to small residential builders, farmers, and do-it-yourself enthusiasts. We sell asphalt primarily to road contractors for the construction of roads, driveways, and parking lots, as well as directly to state and local authorities. Our customers generally purchase aggregates, concrete, and asphalt in quantities sufficient to meet their immediate requirements. Occasionally, we enter into agreements to supply aggregates to certain plants which produce concrete, asphalt, or pre-cast concrete products. These contracts tend to be renegotiated annually. Backlog orders for our aggregates, concrete, and asphalt are normally not significant.
Environmental and planning laws in many countries restrict new quarry development. In addition, excluding the cost of land and mineral rights, the plant and equipment costs for a new quarry range from around 2 to 4million euros for a small quarry to several tens ofmillion euros for a very large quarry. We have implemented standards for the design and construction of our plants. We believe we have a strong competitive position in aggregates through our well located reserves in key markets and our logistic networks. Our worldwide experience allows us to develop, employ, and refine business models through which we share and implement best practices relating to strategy, sales and marketing, manufacturing and land management; this gives us a superior quality product to offer the market. In addition, we have a strong understanding of the needs of most of our aggregates customers since we are vertically integrated in their predominant lines of business. Finally, we believe that we have a reputation for responsible environmental stewardship and land restoration, which assists us in obtaining new permits more easily and encourages landowners to deal with us as the operator of choice. Consolidation in the global concrete industry is less pronounced and, as with aggregates, we face competition from numerous independent operators throughout our markets. However, we often compete with multinational groups such as Cemex, CRH, HeidelbergCement, Holcim and Italcementi. An essential element of our strategy is innovation. We have developed substantial technical expertise relating to concrete. Consequently, we can provide significant technical support and services to our customers to differentiate us from competitors. Furthermore, as a consequence of this technical expertise, we recently developed several new products, such as Agilia , Artevia, Chronolia, Extensia and the new Thermedia lines. Again, our worldwide experience permits us to further differentiate ourselves based on product quality and capability. To improve our competitive position in local concrete markets, we situate our plants to optimize our delivery flexibility, production capacity and backup capability. We evaluate
each local market periodically and may realign our plant positioning to maximize profitability when market demand declines or capacity rises too high. We increased our use of mobile plants in a number of markets to increase our flexibility in realigning plants in response to market changes and to meet customers needs. Like concrete, asphalt must be delivered quickly after it is produced. Thus, asphalt markets tend to be very local. Generally speaking, asphalt is sold directly by the asphalt producer to the customer, with only very limited use of intermediate distributors or agents since prompt and reliable delivery in insulated vehicles is essential.
LOCATION OF OUR MARKETS
Markets
DESCRIPTION OF MARKETS AND OF OUR POSITION IN THESE MARKETS
The majority of our aggregates, concrete, and asphalt operations are located in Western Europe and North America, where national demand generally moves in line with the countrys level of infrastructure and construction spending. Shipping aggregates over long distances is costly, and concrete and asphalt cannot be transported over distances that involve more than about one hour of transportation time. Consequently, markets for these products tend to be local in nature and, while brand recognition and loyalty play a role in sales of these products, local customers tend to choose producers based on location, quality of product, reliability of service, and price. Furthermore, demand for aggregates, concrete, and asphalt depends mostly on local market conditions, which can vary dramatically within and across a broader regional or national market. Our Aggregates &Concrete operations are located in countries where the nature and enforcement of applicable regulations provide a balanced playing field. We usually avoid markets where small local operators are not obliged to follow appropriate environmental and labor standards, because they either do not exist locally or are not enforced. Consequently, we are very careful in choosing the growing markets in which we wish to conduct our Aggregates &Concrete operations, selecting only those where the appropriate standards are in place.
Most local aggregates, concrete, and asphalt markets are highly fragmented and are served by a number of multinational, regional, and local producers. Globally, the aggregates industry is in the early stages of consolidation, mainly in developed markets. We face competition in our local markets from independent operators, regional producers such as Martin Marietta Materials and Vulcan Materials in the United States and international players (Cemex, CRH, HeidelbergCement and Holcim).
33
3
France
3.2Our businesses
PORTFOLIO MANAGEMENT
In line with the Groups strategy, this year we continued our selective divestment policy with the sale of the Aggregates &Concrete activity in Switzerland and in the Alsace region of France at the end of 2010. At the end of December we also announced the sale of our
activity in Portugal which still requires approval of the Portuguese competition authorities.
BREAKDOWN BY REGION
and the volume of aggregates and concrete our consolidated operations sold in2010. Volumes sold take into account 100% of volumes from fully consolidated subsidiaries and the consolidation percentage for proportionately consolidated subsidiaries.
We produce and sell aggregates and concrete in the regions and countries of the world listed in the table below. The table shows the number of sites we operated on December31, 2010
NUMBER OF INDUSTRIAL SITES
VOLUMES SOLD CONCRETE AGGREGATES CONCRETE
Region/country
AGGREGATES
(million tonnes)
(million cubic meters)
WESTERN EUROPE 127 48 12 10 4 1 234 68 14 13 3 23 5 3 1 1 5 3 4 579 260 111 104 24 29 13 139 95 35 14 56 21 6 22 15 12 3 3 8 35 41 68 25 1,139 38.3 14.0 5.0 2.9 1.6 0.5 49.5 48.1 9.5 2.7 3.2 4.8 3.1 0.2 0.3 1.5 2.1 2.1 0.4 3.7 193.2 6.9 1.7 2.3 0.8 0.9 0.5 4.1 3.0 0.7 0.3 1.2 1.7 0.5 0.4 0.7 0.2 0.2 0.2 0.6 1.4 0.8 3.4 1.7 34.0 United Kingdom Spain Greece Portugal Other NORTH AMERICA Canada United States CENTRAL &EASTERN EUROPE Poland Romania Ukraine MIDDLE EAST &AFRICA South Africa Egypt Algeria Morocco Qatar Oman Saudi Arabia United Arab Emirates Jordan OTHER Malaysia/Singapore Brazil India Others TOTAL
In2010, our asphalt operations produced and sold a total of 4.7million tonnes in the United States, Canada and the United Kingdom.
3.2.3 Gypsum
Gypsum wallboard (also known as plasterboard) and other gypsum-based products (e.g. plaster, joint compounds, plaster blocks) and related products (such as metal studs and accessories) are used primarily
to offer gypsum-based building solutions for constructing, finishing, or decorating interior walls and ceilings in residential, commercial and institutional construction projects throughout the world, as well as for sound and thermal insulating partitions. Other gypsum-based products include industrial plaster (used for special applications such as mouldings or sculptures), medical plasters, and self-levelling floor-screeds.
We believe that we are among the three largest manufacturers of gypsum wallboard worldwide. At the end of 2010, we had production facilities in 30 countries. Our consolidated businesses operated 41wallboard plants (with an annual production capacity of over 1billionsquare meters) and 36other plants which produced primarily plaster, plaster blocks, joint compounds, or metal studs as well as paper (2wallboard paper plants).
34
3.2Our businesses
Products
WALLBOARD
wallboard. Synthetic gypsum is produced as a by-product of certain chemical manufacturing and electrical thermic production operations. At the end of 2010, our consolidated businesses operate and own 21 gypsum quarries worldwide, including 16in Europe. Some of our plants have entered into longterm supply contracts with third parties to supply natural gypsum. The plants using synthetic gypsum are supplied through longterm contracts, most of which contain one or more options to renew. We believe our current supply of gypsum, both natural and synthetic, is adequate for current and foreseeable operating levels. Paper and gypsum account for approximately 25% and 15% of our wallboard production costs, respectively. We produce less than half of our wallboard paper requirements at our own mills in France and at one mill in the United States operated through a joint venture. All of our paper production is based on recycled waste paper fibers. In 2010, we closed our paper mill in Orebro, Sweden.
Our principal gypsum product is wallboard. We produce wallboard in a number of standard lengths, widths and thicknesses and with a variety of characteristics depending on the intended use of the board. We offer a full line of wallboard and finishing products: standard wallboard; and technical wallboards e.g. fire retardant, water-resistant, sag-resistant, resistant to mold, high humidity, design and decoration and very high traffic areas. Some of these wallboards combine two or more of these properties. We regularly seek to expand and improve the range of our wallboard products. Following the launch of Synia wallboard, with all four edges tapered which considerably facilitates the work of installers in many areas leading to high quality finishing, we launched in 2008 an exclusive and very high performance wet area board (WAB) which met success in 2009 and 2010 with distributors and installers. This product has been and is presently launched in other subsidiaries. In 2010, more than 15% of our sales were from new products, launched over the past 5 years.
OTHER PRODUCTS
This sector is highly competitive in Western Europe and North America with production mostly concentrated among several national and international players.
BREAKDOWN BY REGION
The following presentation shows the percentage contribution made by each of these regions to our2010 Gypsum Division sales in euros.
SALES BY DESTINATION 2010
%
Western Europe North America Asia Other TOTAL 50 13 13 24 100
Customers
We sell our gypsum wallboard products mostly to general building materials distributors, plasterboard installers wallboard specialty dealers, do-it-yourself home centers and transforming industries. In some markets, prescribers (such as architects) may influence which products are to be used to construct given projects. Our marketing efforts are focused not only on actual purchasers, but also on those who may indirectly determine which materials are used.
Western Europe
Western Europe is the worlds third largest regional wallboard market. The technical performance of products and systems plays a critical role in this market. The region as a whole consumed close to onebillionsquare meters of wallboard in 2009, based on our estimates. We sold over 250million square meters of wallboard in Western Europe in 2010. Additionally, we have a minority interest in Yesos Ibericos (Grupo Uralita) in Spain. In 2009, we closed our Frampton (UK) facility and a new metal studs facility was opened in Cavaillon (France).
We also produce gypsum plaster, plaster blocks, joint compounds, metal studs, anhydrite binders for self-levelling floorscreeds and industrial plasters, which are also intended for the construction and decorating industries. Sales of such products accounted for approximately one third of our Gypsum Division sales in 2010. Production and Facilities Information.
Markets
DESCRIPTION OF MARKETS AND OF OUR POSITION IN THESE MARKETS
Production and facilities information

Gypsum wallboard exploits the crystalline structure of gypsum (calcium sulfate dihydrate a naturally occurring mineral common in sedimentary environments), within which water molecules are physically retained. Plaster is made by grinding and heating gypsum to release the trapped water molecules, wallboard is made by mixing the plaster with water to form a slurry, extruding the slurry between two continuous sheets of paper, and then drying and cutting the resulting board into proper sizes. When drying, the slurry rehydrates into gypsum crystals which interlock with each other and grow into the liner paper, giving the board its strength. We use both naturally occurring gypsum and synthetic gypsum to produce
We believe we share approximately 75% of todays worldwide wallboard market with six other producers in a sector which is increasingly concentrated (Saint-Gobain, Knauf, US Gypsum, Yoshino, National Gypsum, BNBM). These companies operate gypsum wallboard plants and usually own the gypsum reserves they use to produce their wallboard. In the gypsum wallboard market, companies compete, on a regional basis, on price, product quality, product range, solution design, efficiency, flexibility, and customer service. Our largest competitors in Western Europe are Knauf and Saint-Gobain, and in the United States National Gypsum, SaintGobain, and USGypsum.
North America North America is the worlds largest regional wallboard market. The region as a whole consumed close to 2billion squaremeters of wallboard in 2009, based on our estimates. We sold over 150million square meters of wallboard in North America in 2010.
At the beginning of 2009, we opened a new joint compounds facility at Silver Grove, Kentucky.
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3.2Our businesses
Asia In Asia, the worlds second largest regional wallboard market, we conduct gypsum wallboard and related operations through a 50/50 joint venture managed jointly with the Australian company Boral Limited. The joint venture operates three wallboard plants in South Korea, four in China, one in Malaysia, two in Thailand, two in Indonesia, one in Vietnam, and one in India. It also has several plaster and metal stud plants in these countries. In 2010, the joint venture started a new wallboard plant in Shanghai, a new metal studs facility has been opened in Saraburi (Thailand), and a new wallboard line has doubled the wallboard capacity of Saraburi. The ceiling tiles capacity has been doubled in South Korea. Also, a new metal studs facility started in the Philippines, and Vietnams metal studs capacity was doubled. Other countries We also conduct wallboard and related operations in other markets, and operate:
in Romania, a wallboard plant and a joint compounds plant;
in Ukraine, a wallboard plant; in Poland, a wallboard plant, a metal studs facility, and a joint compounds plant; in Turkey, a wallboard plant and a construction plaster plant near Ankara through a joint venture with Dalsan Insaat. Together, we own a wallboard plant in Istanbul, which was completed at the end of 2008; in South Africa, a plasterboard plant, as well as manufacturing lines for gypsum components; in Morocco, one plaster plant; in Algeria, one plaster plant; in Autralia two wallboard plants, a plaster plant and a joint compound plant; in Saudi Arabia, Lafarge has a minority interest in a plaster plant; in Latin America, through companies we control jointly with the Etex group, we operate three wallboard plants (Argentina, Brazil and Chile) and two plaster plants (Brazil and Chile). A new wallboard plant in Colombia started its operations in 2009. In Mexico,
Lafarge operates a wallboard plant through a joint venture with a majority partner, the Comex group. Our wallboard and related products sales in emerging markets, including Asia and excluding Australia, amount to over 400 million euros in 2010. These sales accounted for approximately 30% of our total wallboard and related product sales.
3.2.4 Summary of ourcapital expenditures in2010 and2009

The following table presents the Groups capital expenditures for each of the two years ending December 31, 2010 and 2009. Sustaining expenditures serve to maintain or replace equipment, while internal development expenditures are intended to enhance productivity, increase capacity, or build new production lines. External development expenditures are devoted to the acquisition of production assets and equity interests in companies. Amounts presented below are net of cash and cash equivalents of companies acquired.
EXTERNAL DEVELOPMENT EXPENDITURES 2010 2009
SUSTAINING AND INTERNAL DEVELOPMENTEXPENDITURES

(million euro)
2010
2009
Western Europe North America Middle East &Africa Central &Eastern Europe Latin America Asia TOTAL
234 166 433 151 37 289 1,310
341 253 551 139 42 280 1,606
26 5 24 31 (26) 10 70
46 8 25 7 3 24 113
See Section 4.4 (Liquidity and Capital Resources) for more information on 2010 investments. The Group generally owns its plants and equipment. The legal status of the quarries and lands depends on the activity of the Division: in the Cement Division, we own our quarries or hold long-term operating rights; in the Aggregates Division, we favor mineral lease contracts in order to minimize the capital employed;
concerning the Gypsum activity, we own the quarries and secure long-term supply of synthetic or natural gypsum.
0.5billion euros for development capital expenditure, mainly related to the building of new capacities for the Cement Division in emerging markets. These capital expenditures will be financed notably by the cash provided by operating activities, the cash provided by the issuance of debt, and establishment of short and medium term credit lines.
3.2.5 Capital expenditures planned for2011

Capital expenditures for 2011 are expected to be approximately: 0.5 billion euros for sustaining capital expenditure;
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3.3The Group
3.3 The Group

3.3.1 History andDevelopment oftheGroup
Lafarge S.A. was incorporated in 1884 under the name J.et A.Pavin de Lafarge. Our corporate term is due to expire on December31, 2066 and may be extended pursuant to our by-laws. Our registered office is located at 61, rue des Belles Feuilles, 75116 Paris, France, and our telephone number is +33144341111. We are registered under the number 542105572RCS Paris with the registrar of the Paris Commercial Court (Tribunal de commerce de Paris). We began operating around 1833 when Auguste Pavin de Lafarge set up a lime operation in France. Through numerous acquisitions of lime and cement companies throughout France, we became Frances largest cement producer by the late1930s. Our first foray outside France took place in 1864 when we supplied lime for construction of the Suez Canal. Our international expansion continued in the 20th century when we set up operations in North Africa and the United Kingdom, and later when we
KEY DATES
began doing business in Brazil and Canada. Through our 1981 acquisition of General PortlandInc., we became one of the largest cement manufacturers in North America. We conduct these operations principally through Lafarge North AmericaInc., now a wholly owned subsidiary following our acquisition in May2006 of the interests previously held by minority shareholders. We further expanded internationally through the purchase of the British cement company Blue Circle Industriesplc (BlueCircle) in2001 and further acquisitions, mainly around the Mediterranean Basin, in Central Europe, and in Asia. The January2008 acquisition of Orascom Building Materials HoldingS.A.E (Orascom Cement), the Cement activities of the Orascom group, provided us with a leading position and unparalleled presence in Middle East and Africa. This transaction represented a decisive step in the Groups Cement strategy, diversified our worldwide presence, and accelerated our growth in emerging markets. We are the world leader in the cement industry, with sites in 50countries.
We have also broadened our other product lines of aggregates, concrete and gypsum plasterboard. Our aggregates and concrete business, now operating in 36 countries, developed progressively over the years and made a significant leap forward in1997 with the acquisition of Redlandplc, one of the principal manufacturers of aggregates and concrete worldwide at the time, and to a lesser extent through our acquisition of BlueCircle in 2001. We first entered the market for gypsum products in1931, with the production of powdered plaster. Since then, we have become the worlds third largest wallboard producer, offering a full range of gypsumbased building solutions, with operations in 30countries. In February 2007, we sold our Roofing Division, which we acquired through our1997acquisition of Redlandplc. We have an organizational structure based on our three Divisions, with decentralized local operations and strong corporate expert departments, which are involved in strategic decisions. We also draw on a shared culture and shared ambitions with all our employees, as expressed in our Principles of Action.
1833
Beginning of operations in France
1931
Lafarge enters in gypsum
1981
Acquisition of General Portland, making Lafarge one of the largest cement manufacturers in North America
1997
Acquisition of Redland plc, one of the principal manufacturers of aggregates and concrete worldwide
2006
Lafarge owns 100 % of Lafarge North America Inc.
January 2008
Acquisition of Orascom Cement
1864
Lafarge delivers 110,000 tonnes of lime for the construction of the Suez Canal
1956
Lafarge builds its 1st cement plant in Richmond, Canada
1994
Lafarge enters the Chinese market
2001
Acquisition of Blue Circle Industries plc.
February 2007
Sale of the Roong Division
37
3.3The Group
3.3.2 Recent acquisitions, partnerships anddivestitures Significant recent acquisitions

See Notes 3 (Significant events) and10 (b) (Acquisitions) to our consolidated financial statements for more information on these acquisitions. Brazil. In February 2010 the Group sold its 17.28% stake in Cimentos de Portugal (Cimpor) to Votorantim in exchange for Cement operations in Brazil. These operations located in North East and Mid-West Brazil and around Rio de Janeiro include two grinding stations, one cement plant, slag and clinker supply agreements to grinding stations. These operations, valued at 755million euros, were transferred to the Group on July19, 2010. As a result of this transaction, the Group became the third largest cement producer in Brazil. In addition, over the past two years, we have acquired small-to-medium sized businesses. Acquisitions during the last two years had an overall positive effect on our revenues of 178million euros in 2010 compared with 2009.
Central Europe. On May 25, 2010, Lafarge and STRABAG announced their agreement to combine their cement activities in several Central European countries. Lafarge will bring its cement plants in Mannersdorf and Retznei in Austria, Ckovice in Czech Republic and Trbovlje in Slovenia, while STRABAG will contribute the plant it is currently building in Pcs in Hungary. Lafarge will hold a 70% interest in the joint-venture, and STRABAG will hold 30%. The closing of this transaction is subject to meeting a few conditions precedent including the approval by the competition authorities which was obtained in February of 2011.
of Votorantims cement assets in Brazil, as described above in Significant recent acquisitions. Turkey. On December30, 2009, we sold our Turkish subsidiaries, Lafarge Aslan Cimento and Lafarge Beton to Oyak Cement group, the leading Turkish company in the cement sector. Following this divestment the Group will continue to own a grinding station in Karadeniz Eregli-Zonguldak and also remains present with its Gypsum activities through a joint venture with Dalsan and with a minority shareholding in Baticim in the Aegean region. The cement plant located in the Eastern region of the country was sold on September7, 2009 to Askale Cimento. Venezuela. Following the announcement in April2008 by the Venezuelan government of the nationalization of CA Fabrica Nacional de Cementos SACA and CA de Cementos Tachira, the Group sold on September23, 2009 all its shares in these two Venezuelan companies to the Corporacion Socialista del Cemento. The assets sold included 2 cement plants and 13 concrete plants. Chile. On August28, 2009, Lafarge sold its 84% shareholding in its Chilean Cement and Aggregates &Concrete business to the Peruvian Brescia group. These assets include a cement plant located around 100 kilometers from Santiago, a grinding station in southern Chile and a second one currently being built in Ventanas, 54 ready-mix concrete units, five aggregates quarries as well as an import terminal and a mortar production unit. The Group retains its minority participation in its Chilean Gypsum activities. In addition, during 2009, we carried out several small-to-medium sized divestments, such as the divestment of part of our Aggregates &Concrete activities in Switzerland, of our Asphalt and Paving activities in East Canada and some Concrete assets in North America. In total, divestitures during the last two years reduced the Groups sales by 349million euros in2010 compared to2009.
Significant recent divestitures

See Notes 3, 5 and 32 to our consolidated financial statements for more information on these transactions. Switzerland and Alsace (France). On December 31, 2010, Lafarge sold its Aggregates &Concrete business in Alsace and Switzerland, including 8 concrete production plants (4 in Alsace and 4 in Switzerland) and 8 aggregates quarries in Alsace. The Swissbased concrete operations have been sold to Holcim and the French-based Aggregates and Concrete activities have been sold to Eiffage Travaux Publics and Holcim. Portugal. On December27, 2010, Lafarge entered into an agreement for the sale of its entire Aggregates &Concrete business in Portugal (29 concrete plants and 4 aggregates quarries) to the Portuguese construction group Secil. The closing of this transaction is subject to approval by the competition authorities. Malaysia. Lafarge sold, on July 16,2010, a 11.2% interest in Lafarge Malayan Cement Berhad (LMCB) by way of placement done on Bursa Malaysia Securities Berhad. The net proceeds of this operation amount to 141 million euros. Lafarge keeps the management control of the Malayan activities and remains the majority shareholder with a 51% controlling shareholding in LMCB. Portugal. On February3, 2010, Lafarge sold its 17.28% minority interest in the Portuguese company Cimpor to the Brazilian company Votorantim. This transaction is an exchange of Cimpor shares held by Lafarge for some
Significant recent partnerships

See Notes 3, 5 et 34 to our consolidated financial statements for more information on these transactions. United Kingdom. On February 18, 2011, Lafarge and Anglo American plc. announced an agreement to combine their cement, aggregates, ready-mix concrete, asphalt and contracting businesses in the United Kingdom. The transaction will form a 50-50 joint-venture and will create a leading UK construction materials company, with a portfolio of high quality assets drawing on the complementary geographical distribution of operations and assets, the skills of two experienced teams and a portfolio of wellknown and innovative brands. The closing of this transaction is subject to approval by the competition authorities.
38
3.3The Group
3.3.3 Organizational Structure

See Note35 to our consolidated financial statements for more information on our principal subsidiaries, including their full legal name and country of incorporation. Lafarge S.A. is a holding company. We conduct our operations through more than 1,000 subsidiaries, out of which 82% are consolidated. We have a large number of operating companies because we conduct our operations through several Divisions, our businesses are local in nature, and we have facilities in 78countries.
markets on their own and, thus, obtain and carry their own financing. For those subsidiaries for which it is possible (most subsidiaries located in the euro-zone, Poland, Romania, Switzerland and the United Kingdom), LafargeS.A. uses a cash pooling program, through which cash generated by such subsidiaries is consolidated and managed by LafargeS.A. in connection with the financing of the subsidiaries operations. See Section 4.4 on page 61 for more information on Liquidity and Capital resources. The assistance component relates to the supply by LafargeS.A. of administrative and technical support to the subsidiaries of the Group. LafargeS.A. also grants rights to use its brands, patents, and industrial know-how to its various subsidiaries. The Research &Development activities are managed by the Lafarge Research Center located in Lyon (LIsle-dAbeau), France. In the Cement Division, technical support services are provided by our various regional Technical Centers located in Lyon, Vienna, Montreal, Atlanta, Beijing, Cairo, and Kuala Lumpur. Subsidiaries are charged for these various services and licenses under franchise, support, or brand licensing contracts. See Section 3.3.4 on page 39 for more information on Innovation and Research and Development.
in managing these subsidiaries with our partners, which could present a risk to our financial structure. Some of these shareholder agreements contain exit provisions for our minority shareholders that may be exercised at any time, at certain fixed times, or under specific circumstances, such as a continuing disagreement between LafargeS.A. and the shareholder or a change in control of the relevant subsidiary or LafargeS.A. In particular, our shareholder agreements relating to our Cement operations in Morocco, as well as the shareholder agreement concluded with our joint venture partner Boral in Asia for Gypsum activities, contain provisions that enable our partners to buy back our shareholding in these businesses in the event of a change in control of LafargeS.A. See Note25 (f) to our consolidated financial statements for more information on put options on shares of subsidiaries.
LafargeS.A.s relationship withitssubsidiaries

LafargeS.A.s relationship with its subsidiaries is that of an industrial holding and includes a financial component and an assistance component. The financial component covers the financing by Lafarge S.A. of most subsidiaries operations and the pooling of cash generated by subsidiaries, where possible, and the transfer of dividends from subsidiaries. On December 31, 2010, Lafarge S.A. held approximately 79% of the Groups debt excluding put options on shares of subsidiaries. Lafarge S.A. is subject to a quotation by Standard & Poors and by Moodys. The Company has access to shortterm and long-term financial markets and large banking networks, and provides financing to its subsidiaries through inter-company loans. To fund such loans, we draw primarily on our Euro Medium Term Note program for medium to long-term financing and the related Commercial Paper program for shortterm financing. Nevertheless, this general financing rule has some exceptions. As an example, if we cannot obtain financing through these programs in a subsidiarys local currency, we secure local funding to ensure the subsidiarys operations are financed in the relevant local currency. Furthermore, certain of our consolidated subsidiaries, which have minority shareholders, can access the financial
3.3.4 Innovation
a) Innovation, Research and Development (R&D)
Innovation remains one of the Groups two strategic priorities. The Groups R&D activities focus on three main objectives: researching new products and systems that offer increased added value solutions to our customers, developing our product ranges to respect our commitments in terms of sustainable construction, and implementing processes and products that help reduce CO2 emissions. In 2010, the overall Group expenditure for product innovation and industrial process improvement was 153 million euros, compared to 152million euros in 2009 .
Group relationship with minority shareholders of its subsidiaries

In addition to our listed subsidiaries that have a broad base of minority shareholders, certain other controlled subsidiaries may have industrial or financial partners, government entities, prior employees or prior owners as minority shareholders. In some cases, such minority shareholders are required by local law or regulations (e.g.in the case of a partial privatization). In other instances, we have partnered with them to share our business risk. In many cases, we have entered into shareholder agreements with such minority shareholders providing for Board membership or other similar provisions, shareholders information rights and control provisions. We have not recently experienced any difficulties
High level research teams andinternational network

The Groups Research investments are mainly based at the Lafarge Research Center (LCR), located near Lyon, France. Today, this research center is made up of approximately 240talented men and women: engineers and technicians, (approximately 70have a PhD level degree) who come from various scientific
39
3.3The Group
and international backgrounds. LCR is an acknowledged leader and continues to attract researchers from all over the world. LCRs research activity is organized in a matrix structure with two axes, scientific competencies and project portfolio. Scientific skills were strengthened in 2010 in the fields of building energy and industrial processes. 2010 was also the year when LCRs expertise and scientific management team was structured and our international partnerships were significantly increased, notably in emerging markets such as China and India. Two events fostering exchanges on breakthrough scientific subjects were organized: a Lafarge-CNRS seminar gathering the 10main laboratories that are involved in research work for us, helped to reveal how coherent and far-reaching our collaboration is. It also enabled us to pave the way for new partnerships with leading scientists who until that time, had not been identified by us; the Lafarge International Workshop brought together 20 leading scientific experts (from USA, Europe, India, China, Brazil) specialized in our domains, in order to explore scientific breakthroughs and anticipated trends up to the year 2020. After MIT in 2007, Berkeley in 2008, and Georgia Tech in 2009, the Lafarge Chair for research and teaching (Ecole des Ponts et Chausses/Ecole Polytechnique) on Construction Materials for Sustainable Construction took its 2010 students in its Master program to Delft University. This confirms the interest of foreign universities in a doctorate program, which, for the time being, does not exist anywhere else.
Two international competitions have also been helping to widen our sources of innovation: the IdeaFactory, a groupwide initiative aiming at collecting ideas in three directions (products, industrial processes and client service) has put the spotlight on the creative potential at all levels in our business units: more than 1,700ideas were submitted; Best ideas are being analyzed for implementation; the Lafarge Invention Awards 2010, open to European construction scientists and inventors, rewarded three projects (French, Polish and Serbian) selected out of 100submissions. This competition was also an opportunity to broaden our scientific network, especially in Eastern and Central Europe, and to establish contacts with new research teams.
Amid the economic conditions currently prevailing, cutting production costs and raising operational performance are more than ever major priorities for the Cement Division. To this end, the Division is backed up by a network of Technical Centers providing plants with the permanent support of their high-caliber experts in all key areas of the cement industry, i.e. Safety, Environment, Geology, Processes, Products, and Equipment. Aside from providing strong support to operations by deploying a genuinely safety-oriented culture of reducing the environmental footprint of our plants, the Technical Centers notably support the rapid deployment of the performance programs launched by the Group and the Division, such as Excellence 2010. By focusing on the principal levers of industrial performance, including reducing consumption of power and heat, increasing the use of cheap alternative fuels and cement additives, and cutting fixed costs, this program focuses the Cement Divisions attention on objectives that will pave the way for cost reductions in the short to medium term. Likewise, the continuous improvement programs to enhance plant reliability, the installation of automatic control systems for kilns and grinding plants, assistance with the development of new products, and the industrialization of the R&Ds results also form part of the Technical Centers role. They are also responsible for integrating the recently built plants and newly acquired units, which can thus adopt the Groups standard practices and rapidly deliver high performance. Generally speaking, the Technical Centers continuously analyze and benchmark the results of the plants and are able to respond very rapidly to the slightest decrease in performance, promptly sending in their experts in the event of a serious incident in order to analyze and resolve the corresponding problems. Lastly, the Technical Centers are responsible for capitalizing, sharing, and implementing best practices and technical standards, which aim to sustain the benefits of the short-term initiatives over time.
AGGREGATES &CONCRETE
Innovating research axes

Our research work for the Business Divisions in 2010 was directed as follows:
CEMENT
We pursued our programs aiming to differentiate our products for certain segments of the construction clientele. Priority was given to the pre-cast segment as well as that of cement in bags for masonry. A major priority for the Cement research program remained the reduction of our carbon footprint in our cement applications. We successfully performed an industrial trial for producing Aether cement, the chemical composition of which allows a 25% reduction of carbon emissions per tonne of clinker. It also allows a 15% reduction in the energy needed for clinkering. This was achieved in a conventional cement plant, without any significant expenditure. The European Union has also lent us its support as part of the Life+ program to further develop this product for launch into the marketplace. Our research has further focused on the increase of mineral additives in our cements in order to reduce our environmental impact. This work is more specifically based on the fundamental research outcomes achieved in the Nanocem European research network. Finally, we have supported the Novacem start-up with the objective of producing a magnesium silicate binder (an alternative to limestone and clay with which our cements are manufactured) via a process with potentially low carbon emissions.
Well-established innovation dynamics

Members of the Groups Executive Committee come to LCR regularly to air their expectations and challenge researchers in terms of the field of possibilities and the results obtained within the research project programs undertaken and financed by the Divisions. The dynamics for boosting our project portfolio was sustained by the impetus of a Creativity team composed of volunteering engineers and technicians. They have the green light to stimulate the emergence of new ideas in line with our strategic goals and in liaison with our marketing teams.
Research on aggregates was pursued in 2010: product performances were optimized according to their destination and certain by-products were upgraded, thus contributing to the preservation of this natural resource. The road program, launched at the end of 2008 focused its efforts on road material recycling. The aim is to reduce energy
40
3.3The Group
production costs and the carbon footprint of asphalts. The 2010 priority was to widen the Thermedia concrete range with thermal and mechanical properties resulting in improved building thermal efficiency. We have also completed our research work on new concretes with highperformance environmental characteristics such as pervious concrete and low carbon concrete which help to better manage storm and rain water runoffs (Sustainable Urban Draining System). World-scale transfers of recent concrete innovations (Extensia large slabs without joints, Chronolia the rapid concrete, Agilia the self-levelling concrete, the Artevia architectonic concretes) were pursued at a rapid pace thanks to dedicated engineers and technicians and sustained by the equipment in the technological building inaugurated in 2008. We are pursuing the development of our new material Ductal, belonging to the family of UHPFRC (UltraHigh Performance Fiber reinforced Concrete). Jobs are in progress in numerous places.
GYPSUM
Thanks to the improved performances of our products and systems, we can now make a contribution to the major stakes of sustainable construction. We have pursued the development of new finishing coatings to meet local market requirements and also anticipate user expectations in terms of new functionalities. Finally, our research work continues to find ways to continuously improve gypsum production processes, thus respecting our commitments to industrial performance and reducing the environmental impact from gypsum board production.
bearing the Lafarge name and logo. Further investigations, on behalf of the Gypsum Division, resulted in the discovery during a raid in a bag manufacturing factory, and resulting seizure of 31,000counterfeit joint compound bags, again bearing the Lafarge name and logo. Criminal and civil actions have been initiated in both cases. In line with the Groups focus on sustainable construction, global trademark protection has been sought for the new slogans Efficient Building with Lafarge and Pro Eco Efficient Building avec Lafarge. Trademark protection has also been sought for potential new recycled aggregate products with AGGEOS, AGGNEO and AGGENIUS. The use of, and access to, Lafarges Intellectual Property rights are governed by the terms of industrial franchise agreements. The agreements provide for an industrial franchise, granted by LafargeS.A. to its subsidiaries, and include a series of licenses, permitting the use of the intangible assets developed by the Group (such as know-how, trademark, trade name, patents, and best practices). New agreements are being implemented, where appropriate, for existing and new business units and for joint ventures, in particular in the major Middle Eastern countries. The Lafarge patent portfolio continues to grow considerably, with a further increase in the submission of patent applications during 2010, arising notably from the Group Research Center and also from the Business Units, thereby reflecting Lafarges commitment to innovation; in particular, the patent portfolio relating to the cement, aggregates and concrete businesses has grown steadily in the last six years as presented in the figure below.
b) Intellectual property
Lafarge has a substantial portfolio of intellectual property rights including patents, trademarks, domain names and registered designs, which are used as a strategic tool in the protection of its business activities. Lafarge aims to enhance the value of this intellectual property by coordinating, centralizing and establishing its titles through patents, trademarks, copyright and other relevant laws and conventions and by using legal and regulatory recourse in the event of infringement of the rights by a third party. The Group Intellectual Property department is in charge of protecting the Group trade name, which is a registered trademark in more than 120countries, and implementing the necessary legal recourse against third party unauthorized use of the Lafarge name. Action against illegal use of the Lafarge name and logo increased during 2010, with new civil and criminal actions launched against local counterfeiters in respect to cement and gypsum products. In particular, a lawsuit was initiated after the seizure in China of 100,000counterfeited cement bags
Our Gypsum research team worked more particularly on improving fundamental knowledge of water and humidity resistance of gypsum board based systems. They also worked on reinforcing our system offer in terms of acoustic comfort and thermal insulation in buildings. This work resulted in a significant increase in our sales of Prgy Wabproducts (gypsum boards for moisture-laden rooms and light faades) and Prgymax (which includes a layer of thermal-acoustic insulation allowing optimal thermal performance).
TOTAL NUMBER OF PATENT APPLICATIONS FOR CEMENT AND AGGREGATES & CONCRETE BUSINESSES 2010 2009 2008 2007 2006 2005 863 755 629 580 464 394
41
42
OPERATING EXAMEN ANDFINANCIAL DE LA SITUATION REVIEW FINANCIERE ANDPROSPECTS ET TENDANCES

4.1 OVERVIEW VUE DENSEMBLE
4.1.1 4.1.2 4.1.3 4.2.1 4.2.2 4.2.3 4.2.4
52 44
Synthse de nos rsultats 2010 52 Summary ofour2010 results 44 Informations sur les tendances etperspectives 2011 52 Trend information and2011 perspectives 44 vnements rcents 52 Recent events 44
4.2 ACCOUNTING COMPTABLES ET DFINITIONS POLITIQUES POLICIES AND DEFINITIONS

Principales politiques comptables Critical accounting policies Incidence desmodications du primtre Effects on reported resultsofchanges deconsolidation etdesvariations de change inthescopeofoperations andcurrencyuctuations D Denition Rconciliation de mesures non comptables Reconciliation ofour non-GAAP nancialmeasures
53 45
53 45 54 46 54 46 54 46
4.3 RESULTS OF OPRATIONNELS THE FISCAL YEARS RSULTATS OPERATIONS FOR POUR LES EXERCICES CLOS ENDEDDECEMBER31, 2010 AND 2009 Consolidated sales and 2010 ET 2009 income LES31DCEMBRE current operating
49 49 57
4.4 LIQUIDITY AND CAPITAL RESOURCES 4.4.1 Group funding policies 4.4 RSULTATS OPRATIONNELS 4.4.2 Cash ows POUR LES EXERCICES CLOS 4.4.3 Level of debt and ET2008 LES31DCEMBRE 2009nancial ratios
Cement Chiffre daffaires consolid etrsultat dexploitation courant 51 57 Aggregates&Concrete 55 Chiffre daffaires et rsultat dexploitation Gypsum 58 courant par branche 59 Other (including holdings) 59 Granulats & Bton 63 Operating income and net income 59 Pltre 66 Autres activits (y compris holdings) 67
61
61 61
69
atDecember31,2010 Chiffre daffaires consolid etrsultat dexploitation courant 62 69 4.4.4. daffaires et rsultat dexploitation 63 Chiffre Rating courant par branche 71 Ciment 72 Granulats & Bton 77 Pltre 79 Autres activits (ycomprisholdings) 80
4.5
TRSORERIE ET CAPITAUX
Flux nets de trsorerie lis auxoprations dexploitation Flux nets de trsorerie lis auxoprations dinvestissement Flux nets de trsorerie lis auxoprations de nancement Endettement et ratios nanciers au31dcembre201 Excdents de trsorerie
83
83 83 84 85 86
4.6
RISQUES DE MARCH
Risque de change Risque de taux dintrt Risque de variation des cours des matires premires Sensibilit aux taux de change Sensibilit aux taux dintrt Sensibilit aux prix des matires premires Risque de contrepartie suroprations nancires Risque de liquidit Risque action
87
87 87 88 88 88 89 89 89 90
43
OPERATING ANDFINANCIAL REVIEW ANDPROSPECTS

4.1Overview
4.1 Overview
4.1.1 Summary ofour2010 results
While 2010 was a challenging year for the cement sector as a whole, the return to cement volume growth in the fourth quarter and the successful cash generation accomplishments of our operating teams in the last two years are encouraging. Sales increased for the full year and more particularly in the fourth quarter, helped by improved cement and aggregates volume trends, favorable foreign exchange, and new capacities in Brazil. Structural cost savings exceeded target, reaching 220million euros for the year. Current operating income was slightly down for the year as higher sales volumes in the fourth quarter, favorable foreign exchange and cost cutting mitigated volume decline in the first part of the year and higher energy costs in the second half-year. The Group secured 550 million euros of divestments, meeting target for the year. Significant cash flow generation in 2010 was helped by strong results on working capital. Strong cash and liquidity position were maintained.
4.1.2 Trend information and2011 perspectives

The Group estimates cement demand in its markets to grow between 3 to 6percent in 2011 versus 2010. Emerging markets continue to be the main driver of demand and Lafarge benefits from its well balanced geographic spread of high quality assets. For developed markets, the Group expects that demand will continue to slowly recover. Overall pricing is expected to move higher for the year, although levels of pricing movements will vary by market. The steps the Group has taken in 2010, ranging from structural cost savings to strategic investments in growing markets such as Brazil, will provide the foundation for further improvement and growth as entering 2011. It will also allow us to accelerate deleveraging and reduce debt by at least two billion euros in 2011. We will get the full benefit from volume growth thanks to our new cement capacities and the overall quality and strength of our portfolio of assets. Lower cost base, new capacities, and actions to mitigate higher cost inflation are in place to drive earnings growth in 2011 as volumes recover. The above trends and targets do not constitute forecasts. They are by nature subject to risks and uncertainties (see Section2 (Risk factors)). These statements do not reflect future performance of the Company, which may materially differ. The Company does not undertake to provide updates of these statements.
4.1.3 Recent events

On February18, 2011, Lafarge SA and Anglo American announced a joint venture for their cement, aggregates, concrete and asphalt activities in the United Kingdom. See Note 3.3.2 (Recent partnerships) for details on this partnership.
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4.2Accounting policies and definitions
4.2 Accounting policies and definitions

4.2.1 Critical accounting policies
See Note 2 to the consolidated financial statements for more information on the significant accounting policies we apply under IFRS. results of these evaluations also depend on the discount rates and perpetual growth rates used. We have defined country specific discount rates for each of our CGUs or group of CGUs based on their weighted average cost of capital. In some cases, we may use a third-party valuation as part of our goodwill impairment testing. See Note10 to the consolidated financial statements for more information on goodwill.
Environmental costs
Costs incurred that result in future economic benefits, such as extending useful lives, increasing capacity or safety, and those costs incurred to mitigate or prevent future environmental contamination are capitalized. When we determine that it is probable that a liability for environmental costs exists and that its resolution will result in an outflow of resources, an estimate of the future remediation cost is recorded as a provision without contingent insurance recoveries being offset (only quasi-certain insurance recoveries are recognized as an asset on the Statement of Financial Position). When we do not have a reliable reversal time schedule or when the effect of the passage of time is not significant, the provision is calculated based on undiscounted cash flows. Environmental costs, which are not included above, are expensed as incurred. See Note24 (Provisions) to the consolidated financial statements.
Impairment of goodwill
In accordance with IAS36 Impairment of assets, the net book value of goodwill is tested for impairment at least annually and beyond, when there are some indications that an impairment loss may have occurred. This test, whose purpose is to take into consideration events or changes that could have affected the recoverable amount of these assets, is performed during the last quarter of the year. For testing purposes, the Groups net assets are allocated to Cash Generating Units (CGUs) or groups of CGUs. CGUs generally represent one of our three Divisions in a particular country. A CGU is the smallest identifiable group of assets generating cash flow independently and represents the level used by the Group to organize and present its activities and results in its internal reporting. When it is not possible to allocate goodwill on a non-arbitrary basis to individual CGUs, goodwill can be allocated to a group of CGUs at a level not higher than the business segment. In our goodwill impairment test, we compare in a first step the carrying value of our CGUs/ groups of CGUs with a multiple of their EBITDA. For CGUs/groups of CGUs presenting an impairment risk according to the first step approach, we then determine the fair value or the value in use of the related CGUs/groups of CGUs. Fair value is estimated based either on a market multiple or on discounted expected future cash flows over a 10-year period. If the carrying value of the CGUs / group of CGUs exceeds its recoverable amount, defined as the higher of fair value less costs to sell or the value in use of the related assets and liabilities, we recognize impairment in goodwill (under Other operating expenses). Evaluations used for impairment testing are significantly affected by estimates of future prices for our products, trends in expenses, economic developments in the local and international construction sector, expectations concerning the long-term development of emerging markets and other factors. The
Pension plans and other postretirement benefits

Accounting rules for pension plans and other postretirement benefits require us to make certain assumptions that have a significant impact on the expenses and liabilities that we record for pension plans, end of service indemnities, and other post employment benefits. The main defined benefit pension plans and other postretirement benefits provided to employees by the Group are in the United Kingdom and North America (the United States of America and Canada). The related projected benefit obligations as of December 31, 2010 represent 55% and 34%, respectively, of the Groups total obligations in respect of pension plans, end of service indemnities and other post employment benefits. See Note 23 to our consolidated financial statements for more information on the primary assumptions made to account for pension plans, end of service indemnities and other post employment benefits. Our pension and other postretirement benefit obligations are impacted by the 2010 discount rates, which reflect the rate of long-term high-grade corporate bonds. The impact of decreasing the discount rate assumption by one percentage point at December 31, 2010 for the valuation of the most significant benefit plans located in the United Kingdom and North America would have been to increase the total benefit obligation by approximately 675 million euros. In 2007, the Group has adopted the IAS19 option which consists in the recognition of actuarial gains and losses through equity.
Site restoration
Where we are legally, contractually or implicitly required to restore a quarry site, we accrue the estimated costs of site restoration and amortize them under cost of sales on a unit-ofproduction basis over the operating life of the quarry. The estimated future costs for known restoration requirements are determined on a site-by-site basis and are calculated based on the present value of estimated future costs. See Note24 (Provisions) to the consolidated financial statements.
Income taxes
In accordance with IAS12 Income taxes, deferred income taxes are accounted for by applying the liability method to temporary differences between the tax base of assets and liabilities and their carrying amounts on the balance sheet (including tax losses available for carry forward). Deferred taxes are measured by applying currently enacted or substantially enacted tax laws. Deferred tax assets are recognized, and their recoverability is then assessed. If it is unlikely that a deferred tax asset will be recovered in future years, werecord a valuation allowance to reduce the deferred tax asset to the amount that is likely to be recovered.
45

We offset deferred tax assets and liabilities on the balance sheet if the entity has a legally enforceable right to offset current tax assets against current tax liabilities, and the deferred tax assets and deferred tax liabilities relate to income taxes levied by the same taxing authority. We calculate our income tax obligations in accordance with the prevailing tax legislation in the countries where the income is earned. See Note 22 (Income taxes) to our consolidated financial statements.
and operating income before capital gains, impairment, restructuring and other are adjusted to take into account the contribution of these businesses during the prior year only for a period of time identical to the period of their consolidation in the current year.
a measure of our operating performance that excludes these items, enhancing the predictive power of our financial statements and providing information regarding the results of the Groups ongoing trading activities that allows investors to better identify trends in the Groups financial performance. In addition, operating income before capital gains, impairment, restructuring and other is a major component of the Groups key profitability measure, return on capital employed. This ratio is calculated by dividing the sum of Operating income before capital gains, impairment, restructuring and other, after tax and income from associates by the average of capital employed. This measure is used by the Group internally to: a) manage and assess the results of its operations and those of its business segments, b) make decisions with respect to investments and resource allocations, and c) assess the performance of management personnel. However, because this measure has the limitations outlined below, the Group restricts the use of this measure to these purposes. The Groups subtotal shown under operating income may not be comparable to similarly titled measures used by other entities. Furthermore, this measure should not be considered as an alternative for operating income as the effects of capital gains, impairment, restructuring and other amounts excluded from this measure ultimately affect our operating performance and cash flows. Accordingly, the Group also presents operating income on the consolidated statement of income, which encompasses all the amounts affecting the Groups operating performance and cash flows.
Currency fluctuations
Similarly, as a global business operating in numerous currencies, changes in exchange rates against our reporting currency, the euro, may result in an increase or a decrease in the sales and operating income before capital gains, impairment, restructuring and other reported in euros not linked to trends in underlying performance. Unless stated otherwise, we calculate the impact of currency fluctuations as the difference between the prior years figures as reported (adjusted if necessary for the effects of businesses leaving the scope of consolidation) and the result of converting the prior years figures (adjusted if necessary for the effects of businesses leaving the scope of consolidation) using the current years exchange rates.
4.2.2 Effects on reported resultsofchanges inthescopeofoperations andcurrencyfluctuations

Changes in the scope of our operations, such as acquisitions and divestitures, together with changes in how we account for our business units, such as a change from proportionate to full consolidation, may increase or decrease our consolidated sales and operating income before capital gains, impairment, restructuring and other in comparison to a prior year and thus make it difficult to determine trends in the underlying performance of our operations.
4.2.3 Definition
The Group has included the Operating income before capital gains, impairment, restructuring and other subtotal (which we commonly refer to as current operating income in our other shareholder and investor communications; current operating income hereinafter) on the face of consolidated statement of income. This measure excludes aspects of our operating performance that are by nature unpredictable in their amount and/ or in their frequency, such as capital gains, asset impairment charges and restructuring costs. While these amounts have been incurred in recent years and may recur in the future, historical amounts may not be indicative of the nature or amount of these charges, if any, in future periods. The Group believes that the Operating income before capital gains, impairment, restructuring and other subtotal is useful to users of the Groups financial statements, as it provides them with
Changes in the scope of our operations

In order to provide a meaningful analysis between any two years (referred to below as the current year and the prior year), sales and operating income before capital gains, impairment, restructuring and other are adjusted to compare the two years at constant scope. With respect to businesses entering the scope of consolidation at any time during the two years under comparison, current year sales and operating income before capital gains, impairment, restructuring and other are adjusted to take into account the contribution made by these businesses during the current year only for a period of time identical to the period of their consolidation in the prior year. With respect to businesses leaving the scope of consolidation at any time during the two years under comparison, prior-year sales
4.2.4 Reconciliation ofour non-GAAP financialmeasures Net debt and cash flow from operations
To assess the Groups financial strength, we use various indicators, in particular the net
46

debt-to-equity ratio and the cash flow from operations to net debt ratio. We believe that these ratios are useful to investors as they provide a view of the Group-wide level of debt in comparison with its total equity and its cash flow from operations.
See Section 4.4 (Liquidity and capital resources Level of debt and financial ratios at December31, 2010 and 2009) for the value of these ratios in2010 and 2009. As shown in the table below, our net debt is defined as the sum of our long-term debt,
short-term debt and current portion of longterm debt, derivative instruments, liabilities non-current and derivative instruments, liabilities current less our cash and cash equivalents, derivative instruments, assets non-current and derivative instruments, assets-current.
2010 2009
(million euros)
Long-term debt Short-term debt and current portion of long-term debt Derivative instruments, liabilities non-current Derivative instruments, liabilities current Cash and cash equivalents Derivative instruments, assets non-current Derivative instruments, assets current NET DEBT
14,096 3,184 57 84 (3,294) (78) (56) 13,993
13,712 2,265 45 60 (2,220) (43) (24) 13,795
We calculate the net debt-to-equity ratio by dividing the amount of our net debt, as computed above, by our total equity as shown on our statement of financial position.
We calculate the cash flow from operations to net debt ratio by dividing our cash flow from operations by our net debt as computed above. Cash flow from operations (after interest and income tax paid) is the net cash provided
by operating activities from operations, before changes in operating working capital items, excluding financial expenses and income taxes, as follows:
(million euros)
2010
2009
Net operating cash generated by operations* Changes in operating working capital items, excluding financial expenses and income taxes Exceptional payment CASH FLOW FROM OPERATIONS
* Excluding payment during 2010 of the 338 million euros gypsum competition fine.
2,172 (354) 338 2,156
3,206 (1,029) 2,177
Free cash flow

Free cash flow is defined as net operating cash generated by operations less sustaining capital expenditures.
Return on capital employed after tax

One of the key profitability measures used by our Group and Division management for each Division is the return on capital employed after tax. This non-GAAP measure is calculated by dividing the sum of current operating income after tax and income from associates by the average of capital employed at the end of the current and prior year.
See Note 4 to the consolidated financial statements for more information on current operating income, the share of income from associates and capital employed by Division. In2010, return on capital employed after tax is determined using the effective consolidated tax rate of 21.9%.
EBITDA
EBITDA is defined as the current operating income before depreciation and amortization on tangible and intangible assets. The EBITDA margin is calculated as the ratio EBITDA on revenue.
47
4
2010 Cement Aggregates &Concrete Gypsum Other TOTAL FOR OPERATIONS 2009

For 2010 and 2009, return on capital employed after tax for each Division and the Group was calculated asfollows:
CURRENT OPERATING INCOME

(million euros)
CURRENT OPERATING INCOME AFTER TAX (B) = (A) X(1-21.9%)
INCOME FROM ASSOCIATES (C)
CURRENT OPERATING INCOME AFTER CAPITAL CAPITAL TAX WITH EMPLOYED EMPLOYED INCOME FROM ATDECEMBER31, ATDECEMBER31, ASSOCIATES 2010 2009 (D) = (B) +(C) (E)
AVERAGE CAPITAL EMPLOYED
RETURN ONCAPITAL EMPLOYED AFTER TAX (%) (H) = (D)/(G)
(A)
(F) (G) =((E) +(F))/2
2,230 216 58 (63) 2,441
1,742 169 45 (48) 1,907
(26) 5 5 (16)
1,716 174 50 (48) 1,891
26,780 5,198 1,511 271 33,760
24,924 5,102 1,437 373 31,836
25,851 5,150 1,474 322 32,798
6.6 3.4 3.4 N/A 5.8

(million euros)
CURRENT OPERATING INCOME AFTER TAX (B) = (A) X(1-19.9%)
INCOME FROM ASSOCIATES (C)
CURRENT OPERATING INCOME AFTER CAPITAL CAPITAL TAX WITH EMPLOYED EMPLOYED INCOME FROM ATDECEMBER31, ATDECEMBER31, ASSOCIATES 2009 2008 (D) = (B) +(C) (E)
AVERAGE CAPITAL EMPLOYED
RETURN ONCAPITAL EMPLOYED AFTER TAX (%) (H) = (D)/(G)
(A)
(F) (G) =((E) +(F))/2
Cement Aggregates &Concrete Gypsum Other TOTAL FOR OPERATIONS
2,343 193 38 (97) 2,477
1,877 155 30 (78) 1,984
(27) 2 5 2 (18)
1,850 157 35 (76) 1,966
24,924 5,102 1,437 373 31,836
25,547 5,503 1,484 731 33,265
25,235 5,303 1,461 552 32,551
7.3 3.0 2.4 N/A 6.0
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4.3Results of operations for the fiscal years endedDecember31, 2010 and 2009
4.3 Results of operations for the fiscal years
endedDecember31, 2010 and 2009

Consolidated sales and current operating income Sales
Consolidated sales increased by 2% to 16,169million euros from 15,884million euros in 2009. At constant scope of consolidation and exchange rates, sales dropped by 3% for the full year, but showed progressive improvement when comparing quarterly trends over the course of the year (-8% in the first quarter, -2% in the second quarter, -2% in the third quarter and stable sales in the fourth quarter). In mature markets, our sales were bolstered by a steady volumes growth in North America and in the UK, while Spain and Greece continued to be impacted by the economic environment. In emerging markets, activities were contrasted, with favourable demand trends overall but lower volumes experienced in some markets.
All data presented in the discussions below and elsewhere in Chapter4 regarding sales, current operating income and sales volumes, include the proportional contributions of our proportionately consolidated subsidiaries. Demand for our Cement and Aggregates &Concrete products is seasonal and tends to be lower in the winter months in temperate countries and in the rainy season in tropical countries. We usually experience a reduction in sales on a consolidated basis in the first quarter during the winter season in our principal markets in Western Europe and North America, and an increase in sales in the second and third quarters, reflecting the summer construction season.
Net changes in the scope of consolidation had a negative impact on our sales of 171million euros or -1% (-3% in the first quarter, -3% in the second quarter, 0% in the third quarter and +2% in the fourth quarter), reflecting the disposal of our Chilean and Turkish operations (respectively in August and December2009) and the divestiture of Aggregates & Concrete assets in North America (mostly in June2009) while we began to benefit from the effect of the consolidation of our new assets in Brazil from the end of July2010. Currency fluctuations were favourable at +899million euros or +6% (+1% in the first quarter, +6% in the second quarter, +8% in the third quarter and +7% in the fourth quarter), reflecting the impact of the depreciation of the euro against most major currencies. The most significant currency impacts were due to the appreciation of the Canadian dollar, the US dollar, the South African rand, the Brazilian real, the Korean won, Malaysian ringit, and Indian rupee.
Contribution to our sales by Division (before elimination of inter-Division sales) for the years ended December31, 2010 and 2009, and the related percentage changes between the two periods were as follows:
SALES
2010 VARIATION2010/2009 2009
(million euros)
(%)
(million euros)
Cement Aggregates&Concrete Gypsum Other Elimination of inter-Division sales TOTAL
10,280 5,093 1,441 3 (648) 16,169
1.7 0.5 6.3 (66.7) (0.6) 1.8
10,105 5,067 1,355 9 (652) 15,884
Contribution to our consolidated sales by Division (after elimination of inter-Division sales) for the years ended December31, 2010 and 2009, and the related percentage changes between the twoperiods were as follows:
SALES
2010 VARIATION2010/2009 2009
(million euros)
(%)
(%)
(million euros)
(%)
9,656 5,088 1,422 3 16,169
59.7 31.5 8.8 0.0 100.0
1.9 0.5 6.6 (66.7) 1.8
9,477 5,064 1,334 9 15,884
59.7 31.9 8.4 0.1 100.0
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4
Cement Aggregates &Concrete Gypsum Other

At constant scope and exchange rates, the changes in sales by Division between the years ended December31, 2010 and 2009 were as follows:
2010 2009 VARIATION 2010/2009 % CHANGE AT CONSTANT % GROSS SCOPE AND CHANGE EXCHANGE ACTUAL RATES (J) = (C-H)/ (H)
SCOPE ON A EFFECT OF COMPARABLE ACTUAL ACQUISITIONS BASIS

(million euros)
ACTUAL (D)
SCOPE CURRENCY ON A EFFECT OF AT CONSTANT FLUCTUATION COMPARABLE DISPOSALS SCOPE EFFECTS BASIS (E) (F) = (D)+(E) (G)
(A)
(B)
(C) = (A)-(B)
(H) = (F)+(G) (I) = (A-D)/(D)
10,280 5,093 1,441 3 (648) 16,169
113 69 (4) 178
10,167 5,024 1,441 3 (644) 15,991
10,105 5,067 1,355 9 (652) 15,884
(162) (228) (2) (7) 50 (349)
9,943 4,839 1,353 2 (602) 15,535
550 320 67 (38) 899
10,493 5,159 1,420 2 (640) 16,434
1.7 0.5 6.3 (66.7) (0.6) 1.8
(3.1) (2.6) 1.5 50.0 0.6 (2.7)
Elimination of inter-Divisionsales TOTAL
Current operating income

Current Operating Income was slightly down in 2010 versus 2009, at 2,441million euros from 2,477million euros in 2009. Scope effects and currency fluctuations increased Current Operating Income by 44 million euros and 141 million euros, respectively, on a full year basis. At constant scope and exchange rates, current operating income decreased by 8% for the full year, mostly due to lower volumes, higher input costs and lower prices in a few countries that were partially offset by strong cost reductions across the Divisions. However, on a like for like basis, the current operating
income decline eased to 4% in the fourth quarter, reflecting improved volume trends for our 3divisions. Our Cement Division and our Aggregates and Concrete Division benefited from infrastructure spending in North America and in the UK along with a stabilization in residential housing trends. Our cement operations in emerging markets showed contrasted trends, with noticeable improvement in Latin America offset by lower trends in Middle East Africa and Asia. Our Gypsum Division saw its Current Operating Income progressing on the back of particularly positive market trends in Asia and stabilization in most of the mature countries.
As a percentage of sales, current operating income margin was 15.1% in 2010, compared to 15.6% in 2009, reflecting overall lower level of volumes, higher input costs and lower prices in a few countries. Group return on capital employed after tax (using the effective tax rate) is 5.8% compared to 6.0% in 2009, reflecting a higher tax rate (21.9% versus 19.6% in 2009) and slightly lower earnings. See Section 4.2.4 (Reconciliation of our non-GAAP financial measures) for more information on capital employed after tax.
Contribution to our current operating income by Division for the years ended December31, 2010 and 2009, and the related percentage changes between the periods were as follows:
2010 VARIATION2010/2009 2009
(million euros)
(%)
(%)
(million euros)
(%)
2,230 216 58 (63) 2,441
91.4 8.8 2.4 (2.6) 100.0
(4.8) 11.9 52.6 (35.1) (1.5)
2,343 193 38 (97) 2,477
94,6 7,8 1,5 (3,9) 100,0
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At constant scope and exchange rates, the changes in consolidated current operating income by Division between the years ended December31, 2010 and 2009 were as follows:
2010 2009 VARIATION 2010/2009 % CHANGE AT CONSTANT % GROSS SCOPE AND CHANGE EXCHANGE ACTUAL RATES (J) = (C-H)/ (H)
SCOPE ON A EFFECT OF COMPARABLE ACTUAL ACQUISITIONS BASIS

(million euros)
ACTUAL (D)
SCOPE CURRENCY ON A EFFECT OF AT CONSTANT FLUCTUATION COMPARABLE DISPOSALS SCOPE EFFECTS BASIS (E) (F) = (D)+(E) (G)
(A)
(B)
(C) = (A)-(B)
(H) = (F)+(G) (I) = (A-D)/(D)
2,230 216 58 (63) 2,441
18 2 20
2,212 214 58 (63) 2,421
2,343 193 38 (97) 2,477
5 17 2 24
2,348 210 40 (97) 2,501
116 23 1 1 141
2,464 233 41 (96) 2,642
(4.8) 11.9 52.6 (35.1) (1.5)
(10.2) (8.3) 42.3 (34.4) (8.4)
Sales and current operating incomeby Division

METHOD OF PRESENTATION
Geographic market information: by domestic origin of sale and by destination Unless stated otherwise, we analyze our sales for each region or country by origin of sale.
Domestic sales and domestic volumes concern only sales and volumes both originating and completed within the relevant geographic market, and thus exclude export sales and volumes. When not described as domestic, this information includes domestic sales or volumes plus exports to
other geographic markets. Unless stated otherwise, all domestic information is provided at constant scope and exchange rates. Certain volume information is also presented by destination market. Such information represents domestic volumes for the relevant market plus imports into thismarket. Exports to other markets are then excluded.
Sales before elimination of inter-division sales Figures for individual Divisions are stated below prior to elimination of inter-Division sales. For sales by each Division after elimination of interDivision sales, see the table under Sales and Current Operating Income above.
Cement
SALES AND CURRENT OPERATING INCOME
VARIATION AT CONSTANT SCOPE AND EXCHANGE RATES
2010
2009
VARIATION 2010/2009
(million euros)
(million euros)
(%)
(%)
SALES CURRENT OPERATING INCOME
10,280 2,230
10,105 2,343
1.7 (4.8)
(3.1) (10.2)
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4
Sales
SALES Asia

Contribution to our sales by geographic origin of sale for the years ended December31, 2010 and 2009, and the related percentage change between the two periods were as follows:
2010 VARIATION2010/2009 2009
(million euros)
(%)
(%)
(million euros)
(%)
Western Europe North America Middle East & Africa Central&Eastern Europe Latin America SUB-TOTAL BEFORE ELIMINATION OF INTER-DIVISION SALES
1,892 1,333 3,530 757 722 2,046 10,280
18.4 13.0 34.3 7.4 7.0 19.9 100.0
(10.1) 12.1 (1.0) (4.8) 17.6 11.4 1.7
2,104 1,189 3,566 795 614 1,837 10,105
20.8 11.8 35.3 7.9 6.1 18.1 100.0
Sales of the Cement Division increased by 2% to 10,280 million euros in 2010. Currency fluctuations had a positive impact of 550 million euros (or 5.4%) on sales. Changes in the scope of consolidation had a net negative impact of 49million euros (or -0.6%), reflecting the disposal of our Chilean and Turkish operations, and the benefit of the new Brazilian assets for 5 months in 2010. The total volume sold in 2010 was 135.7million tonnes, representing a decrease
versus 2009 of 3% at constant scope, with trends improving over the course of the year. For the first time since the fourth quarter 2008, total cement volumes sales returned to growth and increased by 1% to 34.4million tonnes in the fourth quarter. At constant scope and exchange rates, our sales dropped by 3% for the year but increased by 1% for the fourth quarter. In mature countries, positive volume trends continued in North America and in the UK.
By contrast, Spain, and more significantly Greece, continued to be negatively impacted by difficult economic conditions. Market demand continued to post growth in most of the emerging markets, but our volumes in some countries were hindered by the entrance of new capacities and lower production levels. In a challenging environment, prices remained resilient overall, although several markets did show 2010 average prices lower than 2009 levels.

Contribution to our current operating income by region for the years ended December31, 2010 and 2009, and the related percentage change between the periods were as follows:
2010 VARIATION2010/2009 2009
(million euros)
(%)
(%)
(million euros)
(%)
Western Europe North America Middle East & Africa Central&Eastern Europe Latin America Asia SUB-TOTAL BEFORE ELIMINATION OF INTER-DIVISION SALES
427 79 1,000 193 193 338 2,230
19.1 3.5 44.8 8.7 8.7 15.2 100.0
(15.8) 229.2 (4.6) (26.3) 37.9 (6.6) (4.8)
507 24 1,048 262 140 362 2,343
21.6 1.0 44.7 11.2 6.0 15.5 100.0
Current operating income decreased by 5% to 2,230million euros in 2010, compared to 2,343million euros in 2009. Currency fluctuations had a positive impact of 5% or 116million euros. Net changes in the scope of consolidation are negligible.
At constant scope and exchange rates, current operating income decreased by 10% for the year. As a percentage of the Divisions sales, current operating income margin declined to 21.7% in 2010, from 23.2% in 2009, impacted by higher production costs that were not fully compensated by significant cost-cutting measures.
Return on capital employed after tax was 6.6% in 2010 compared to 7.3% in 2009. See Section 4.2.4 (Reconciliation of our non-GAAP financial measures) for more information on return on capital employed after tax.
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Western Europe
SALES
efforts partially mitigated the impact of the challenging market conditions. In Germany, stabilized sales and optimized fixed costs helped improving the current operating income. In Greece, increased operational performance and restructuring only partially offset the impact of the steep drop in sales and the increase in bad debt reserves booked in the context of difficult market conditions.
In the Middle East and Africa region, our sales slightly decreased by 1%, to 3,530million euros, against 3,566million Euros in 2009. At constant scope and exchange rates, domestic sales decreased by 5% for the full year, but increased by 4% in the fourth quarter. Volumes sold in Middle East and Africa by destination were 40.2million tonnes, against 44.1 million tonnes in 2009. In Egypt, our domestic sales decreased by 6% after a significant increase of 36% in 2009. The decline in sales was most significant in the second quarter due to lower volumes. Since then, volumes have returned to growth in the third and fourth quarters with prices slightly lower than last year. In Algeria, market trends continued to be solid but work stoppages and lower industrial performance led domestic sales to decrease by 5%. In Morocco, domestic sales slightly decreased by 2% with prices remaining solid. In Iraq, domestic sales increased by 14%, on the back of strong market demand and favorable prices. In Jordan, our volumes dropped by 46%, as new entrants significantly increased capacity in the country. Prices remained well-oriented, driven by increasing fuel costs. In Nigeria, our domestic volumes were stable due to a slowdown of government construction projects early in the year that has since recovered, with lower prices. In Kenya, our domestic sales contracted by 12% as new capacities entered the market, but our volume trends improved throughout the year. In South Africa, an expanded footprint led to a 12% increase in domestic sales. Lastly, two new plants started in 2010, in Uganda and Syria, and began to contribute to our sales from the second quarter and fourth quarter, respectively. Our sales in Central and Eastern Europe dropped by 5% in 2010 to 757million euros from 795million euros in 2009. Appreciation of Eastern Europe currencies against the euro had a positive impact of 26million euros. At constant scope and exchange rates, domestic sales decreased by 9% but stabilized in the fourth quarter helped by improved market situation in Russia and Poland and despite poor weather. Volumes sold in Central and Eastern Europe by destination were
In Western Europe, sales decreased by 10% to 1,892million euros compared to 2009. Overall the rate of volume decline slowed as compared to 2009 trends. At constant scope and exchange rates, domestic sales decreased by 11%, reflecting the particularly adverse market conditions in Greece and Spain. Elsewhere, some stabilization signs were witnessed, although the fourth quarter was impacted by poor weather. Volumes sold in Western Europe by destination, at 20.3 million tonnes, were down 10% compared with 2009. In France, domestic sales were down 7%, reflecting lower volumes, partly due to a delay in phasing of certain road building projects in our regions and strikes in the country in the fourth quarter, while prices were solid. In the United Kingdom, domestic sales stabilized, combining positive volume trends on the back of some transport projects with prices slightly down. In Spain, domestic sales experienced a drop of 26% due to lower volumes and pricing in the context of a significant decline in the Spanish construction sector. In Germany, domestic sales stabilized despite a small volume decline. In Greece, the overall economic and social situation continued to significantly deteriorate in 2010 and impacted the construction market. As a consequence, domestic volumes were down 26%.
North America
SALES
Sales increased by 12% to 1,333million euros compared to 1,189million euros in 2009, and by 25% in the fourth quarter, driven by a significant improvement in volumes that increased three quarters in a row and benefiting from the appreciation of the US and Canadian dollars against the euro (impact of +102million euros for the full year). Domestic sales, at constant scope and exchange rates, increased by 3% for the full year. Volumes in North America experienced a significant increase of 7%, to 13.6 million tonnes. Domestic volumes increased by 6% and 10% in the United States and Canada respectively, driven by higher infrastructure spending and the stabilization of the residential market. Higher prices in Canada partly mitigated the price decline in the United States.
Current operating income in Western Europe declined by 16%, to 427 million euros compared to 507 million euros in 2009. At constant scope and exchange rates, current operating income decreased by 16% in 2010, as the impact of foreign exchange fluctuations and scope variations were negligible. For the year 2010, improved performance in reducing CO2 emissions combined with lower volumes allowed the Group to sell 113million euros of carbon credit, compared with 99million euros in 2009. In France, cost reduction actions helped mitigate the decline in volumes. In the United Kingdom, higher volumes and cost reduction measures more than offset the effect of lower prices. In Spain, optimization of the distribution network and other continuing cost reduction
Current operating income in North America increased to 79 million euros compared to 24 million euros in 2009. At constant exchange rates, current operating income for the year more than doubled, reflecting the volume recovery and continued cost cutting measures.
Emerging markets
SALES
Sales in emerging markets increased by 4% to 7,055million euros in 2010 from 6,812million euros in 2009. The depreciation of euro versus most currencies of these countries had a positive impact on sales of 434million euros, while the net effect of changes in scope negatively impacted the sales by 49million euros. Activities in emerging markets generally had favorable market demand trends. In some cases our sales were lower as we readjusted to the entrance of new capacities or experienced lower production levels in some of our plants.
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11.1million tonnes year-to-date, still below 2009 level. In Poland, domestic volumes significantly improved in the second half of the year and consequently increased by 3% year-to-date, on the back of infrastructure projects, while prices were lower. In Russia, our domestic sales increased by 2% year-to-date, with double digit volume growth and favorable prices in the third and fourth quarters, thus fully absorbing the decrease in sales in the first semester. In Romania, the economic environment remained depressed, with domestic sales dropping by 20%. In Serbia, the increase in input costs led pricing gains, offsetting the drop in volumes. In Latin America, our sales jumped by 18% to 722million euros, from 614million euros in 2009, benefiting from well-oriented markets and favourable currency fluctuations (impact of +62million euros). Scope variations were neutral as the impact of the integration of our new Brazilian assets for 5months fully offset the impact of the disposal of our Chilean operations in August2009. At constant scope and exchange rates, full year domestic sales increased by 7%. Volumes sold in Latin America by destination increased to 8.4million tonnes from 7.6million tonnes in 2009. In Brazil, domestic volumes of our historical assets rose 7%, bolstered by a buoyant market, while prices increased by 2%. Additionally, the new Brazilian assets integrated from the end of July2010 and located in the dynamic north-east region of this country contributed to further benefit from the market growth. In Ecuador, domestic sales increased 12% with good market conditions and solid prices.
Honduras sales declined slightly due to the economic and political environment. Our sales in Asia grew by 11%, to 2,046million euros, benefiting from the appreciation of most of the Asian currencies against the euro (impact of +200million euros). At constant scope and exchange rates, domestic sales were stable compared with 2009. Volumes sold in Asia by destination were almost stable versus last year at 42.1million tonnes. In China, the positive effect of higher prices and volumes in Yunnan was more than offset by lower volumes and prices in Chonqing and Sichuan due to increased competitor capacities in these regions, resulting in a drop of domestic sales by 5%. The start-up of our new capacities began to benefit our volumes in the end of the fourth quarter. In India, domestic sales grew 15% driven by solid market growth in the Northeast Region on the back of robust rural demand and sustained infrastructure works. The new production line at Sonadih and our grinding station in Mejia started in the second half of 2009 allowed us to fully benefit in 2010 from this market growth. Year-to-date, 2010 average prices were higher than in 2009, but were lower in the fourth quarter. In the Philippines, domestic sales increased by 4%, mostly due to favorable prices. The market remained solid, although it slowed down in the fourth quarter due to delays in governmental infrastructure spending. The South Korean market environment remained challenging, and our domestic sales decreased by 19%, impacted by a decline in both volumes and prices. In Malaysia, domestic sales increased by 3%, driven by a price hike advanced in the second quarter, while domestic volumes slightly decreased.
In Indonesia, the new Aceh plant started its grinding activity in the second quarter, allowing us to better capture market growth through local manufacturing.
Current operating income in emerging markets decreased by 5% in 2010 to 1,724million euros compared to 1,812million euros in 2009, representing 77% of the Cement Divisions current operating income. Currency fluctuations had a positive impact of 105 million euros on current operating income. At constant scope and exchange rates, current operating income decreased by 11%. In Middle East and Africa, current operating income in 2010 decreased by 5% to 1,000million euros compared to 1,048million euros in 2009. At constant scope and exchange rates, current operating income decreased by 9%, mostly due to lower volumes. In the last quarter, current operating income increased by 16%, benefiting from the reversal of a regulatory fee on past purchases of raw materials in Egypt for 67million euros. In Egypt, aggressive cost cutting measures mitigated the impact of lower sales and enabled us to maintain solid operating margins. In Algeria, additional clinker purchases to continue to fulfill the markets needs in a context of lower production levels reduced our results. In Morocco, higher petcoke cost and slightly lower sales negatively impacted the earnings. In Nigeria, strong improvements were achieved in energy costs, fully offsetting the impact of slightly lower prices. In Iraq, higher sales combined with costcutting measures translated into a strong increase in current operating income.
54

In Jordan, our results were hampered by the impact of lower volumes and higher fuel costs. Significant cost cutting measures, including temporary kiln shutdowns were also implemented to limit this impact. In Kenya, the impact of lower clinker purchases and other cost cutting measures fully offset the decrease in domestic sales. In South Africa, the earnings improvement was driven by higher volumes and cost reductions. In Central and Eastern Europe, current operating income decreased by 26% to 193million euros compared to 262million euros in 2009. At constant scope and exchange rates, current operating income decreased by 27% in 2010. For the full year 2010, we sold 44million euros of carbon credit, compared with 43million euros in 2009. In Poland, the impact of lower prices was the primary driver for earnings decrease. In Russia, the strong improvement of both volumes and prices experienced in the second half of the year fully offset the impact of lower volumes in the first half of the year.
In Romania, difficult market conditions drove the lower current operating income. In Serbia, increased prices helped to offset lower volumes and increased input costs. In Latin America, current operating income increased by 38% to 193 million euros from 140million euros in 2009, reflecting the positive market trends in the region, the impact of favourable currency fluctuations, and the integration of our new assets in Brazil for the last five months in 2010 partly offset by the impact of the deconsolidation of our Chilean operations sold in August2009. At constant scope and exchange rates, current operating income increased by 12%. Brazil continued to strongly improve through higher volumes and prices that more than offset the increase in input costs. In Ecuador, higher volumes drove the current operating income improvement. In Honduras, earnings slightly increased due to price improvement. In Asia, current operating income decreased by 7% to 338million euros in 2010 from 362million euros in 2009.
At constant scope and exchange rates, current operating income decreased by 15% for the year and by 25% for the last quarter, mostly reflecting higher variable costs. In Malaysia, well-oriented domestic prices and contained costs assisted to offset the impact of the drop in export sales. In the Philippines, logistics optimization, favorable prices and volumes drove the improvement in current operating income. In India, good market conditions in the northeast and higher prices helped to absorb higher transportation costs and other input costs. Price pressure in the fourth quarter impacted moderately our earnings. In China, the significant increase in energy costs combined with the decrease of prices lowered our operating results. In South Korea, lower energy costs were not sufficient to offset the impact of lower prices in a declining market. In Indonesia, the substitution of traded cement sales by sales of locally grinded clinker improved the profitability.
Aggregates&Concrete
VARIATION AT CONSTANT SCOPE AND EXCHANGE RATES
2010
2009
VARIATION 2010/2009
(million euros)
(million euros)
(%)
(%)
5,093 216
5,067 193
0.5 11.9
(2.6) (8.3)
55
4
Sales
SALES

Contribution to our sales by activity and geographic origin for the years ended December31, 2010 and 2009, and the related percentage change between the two periods were as follows:
2010 VARIATION2010/2009 2009
(million euros)
(%)
(%)
(million euros)
(%)
AGGREGATES & RELATED PRODUCTS Of which pure aggregates: Western Europe North America Emerging markets TOTAL PURE AGGREGATES READY MIX CONCRETE & CONCRETE PRODUCTS Of which ready-mix: Western Europe North America Emerging markets TOTAL READY MIX CONCRETE Eliminations of intra Aggregates &Concrete sales TOTAL AGGREGATES & CONCRETE BEFORE ELIMINATION OF INTER-DIVISIONSALES
2,511 807 913 316 2,036 2,946 1,181 793 864 2,838 (364) 5,093 41.6 27.9 30.4 100 39.6 44.8 15.5 100
5.6 (2.8) 18.0 4.3 6.8 (2.8) (7.0) 13.0 (8.9) (2.8) (6.4) 0.5
2,377 830 774 303 1,907 3,032 1,270 702 948 2,920 (342) 5,067 43.5 24.0 32.5 100.0 43.5 40.6 15.9 100.0
Sales of the Aggregates & Concrete Division increased by 1% to 5,093million euros in 2010 compared to 5,067million euros in 2009. The 2009 divestiture of our Chilean activities and some operations in North America had a negative impact on sales of 159million euros or -3%, but this effect was more than offset by a positive effect of currency fluctuations (320million euros for the year). At constant scope and exchange rates, sales declined by 3% year-on-year, benefiting from improved volumes in North America and in
the UK, with contrasted trends in the other regions. Sales of pure aggregates increased by 7% to 2,036million euros in 2010 compared with 1,907million euros in 2009. Currency fluctuations had a positive impact on sales of 126million euros, partially offset by the net impact of scope changes of 30million euros. At constant scope and exchange rates, sales increased by 2%. Aggregates sales volumes in 2010 decreased by 1% to 193.2million tonnes; at constant scope, sales volumes increased by 1%.
Sales of ready-mix concrete decreased by 3% to 2,838million euros in 2010 compared with 2,920million euros in 2009. Currency fluctuations had a positive impact on sales of 166million euros while changes in scope of consolidation had a negative impact of 62 million euros. At constant scope and exchange rates, sales declined by 6% year-to date. Sales volumes of ready-mix concrete decreased 8% to 34.0million cubic meters; at constant scope, sales volumes decreased by 5%.
56


Contribution to our current operating income by activity and by region for the years ended December31, 2010 and 2009, and the related percentage change between the periods were as follows:
2010 VARIATION2010/2009 2009
(million euros)
(%)
(%)
(million euros)
(%)
Aggregates&related products Ready-mix concrete&concrete products TOTAL BY ACTIVITY Western Europe North America Other regions TOTAL BY REGION
175 41 216 62 96 58 216
81.0 19.0 100 28.7 44.4 26.9 100.0
56.3 (49.4) 11.9 (34.0) 433.3 (28.4) 11.9
112 81 193 94 18 81 193
58.0 42.0 100.0 48.7 9.3 42.0 100.0
Current operating income of the Aggregates & Concrete Division increased by 12% to 216million euros in 2010 from 193million euros in 2009. Changes in scope and currency fluctuations had a positive impact of 19million euros and 23million euros, respectively. At constant scope and exchange rates, current operating income declined by 8%. As a percentage of the Divisions sales, current operating income margin improved to 4.2% in 2010, compared to 3.8% in 2009. Current operating income for aggregates & related products increased by 56% to 175million euros in 2010 from 112million euros in 2009, mostly due to better volume trends in North America and in the UK, and the effect of cost cutting measures. Current operating income for ready-mix concrete & concrete products was down 49% in the year, at 41million euros in 2010, from 81million euros in 2009, reflecting the impact of lower volumes and some price declines, mitigated by the increasing value generated by innovative products and strict cost management. Return on capital employed after tax increased to 3.4% from 2.9% in 2009. See Section 4.2.4 (Reconciliation of our non-GAAP financial measures) for more information on return on capital employed after tax.
Western Europe
SALES
North America
SALES
Pure aggregates sales in Western Europe decreased by 3% to 807 million euros compared with 830million euros in 2009. The UK market improved all through the year on the back of major infrastructure projects, but the end of large projects and bad weather translated in lower volumes in the fourth quarter. In France, volume trends were positive in the second and third quarters, but the fourth quarter was impacted by adverse weather conditions and strikes in the country. Spain and Greece suffered from difficult economic conditions with reduced public spending. Overall, prices were solid. Asphalt and paving sales increased, bolstered by several infrastructure projects in the UK. Ready-mix concrete sales decreased by 7% to 1,181 million euros compared with 1,270 million euros in 2009. At constant scope and exchange rates, sales were down 9%. Ready-mix concrete volumes continued to grow in the UK driven by large projects and are stabilizing in France. In other parts of Western Europe, and noticeably in Greece and Spain, still depressed market conditions drove volume declines. Prices slightly decreased, notably in Spain.
Pure aggregates sales and ready-mix concrete sales increased 18% to 913million euros and 13% to 793million euros in 2010 respectively, benefiting from higher infrastructure spending in the United States and Canada and from a gradual improvement of the residential housing construction. Prices were solid for aggregates, and were lower for ready-mix concrete, partly due to adverse product and geographical mix. At constant scope and exchange rates, Asphalt and paving sales benefited from several projects in Canada and United States, and experienced Asphalt double digit volume growth in the West of Canada and in the East of United States with stable prices.
Current operating income in Western Europe was down 34% to 62million euros in 2010, mostly reflecting the impact of lower volumes and prices in the ready mix concrete activity.
In North America, current operating income strongly increased to 96million euros in 2010 from 18 million euros in 2009. Currency variations and scope variations had a positive impact of 13million euros each. At constant scope and exchange rates, the increase in current operating income reflected the progressive improvement of market conditions in North America, with higher volumes for our 3 activities (Pure aggregates, Asphalt and Ready-Mix concrete) and the strict cost control.
57
4
SALES

Emerging Markets
In emerging markets, pure aggregates sales increased by 4%, while ready-mix concrete sales decreased by 9%. At constant scope and exchange rates, pure aggregates decreased by 4% year-to-date,
while ready mix concrete sales dropped by -9%, reflecting the completion of major projects in the Durban area in South Africa end of 2009. Pure aggregates sales improved by 2% in the fourth quarter, confirming the marked improved volumes trends in Poland all along the year, supported by national and local road
projects. The ready mix concrete sales decline slowed down to 6% in the fourth quarter, benefiting from an improved situation in Poland, Brazil or India.
Current operating income decreased by 28% to 58million euros in 2010, reflecting volumes declines.
Gypsum
VARIATION PRIMTRE ET TAUX DE CHANGE CONSTANTS
2010
2009
VARIATION 2010/2009
(million euros)
(million euros)
(%)
(%)
1,441 58
1,355 38
6.3 52.6
1.5 42.3
Sales
Contribution to our sales by origin for the years ended December31, 2010 and 2009 and the related percentage change between the two periods were as follows:
SALES
2010 VARIATION2010/2009 2009
(million euros)
(%)
(%)
(million euros)
(%)
Western Europe North America Other regions TOTAL BEFORE ELIMINATION OF INTER-DIVISIONSALES
753 184 504 1,441
52.3 12.8 35.0 100.0
(1.2) 2.2 22.0 6.3
762 180 413 1,355
56.2 13.3 30.5 100.0
At constant scope and exchange rates, sales increased 2% year-to-date, and 4% in the last quarter, mostly driven by higher volumes, while average 2010 prices were slightly down. In 2010, sales volumes of wallboards grew by 3% to 690million square meters, and by 5% in the fourth quarter.
In Western Europe, our sales decreased by 1% to 753million euros, combining positive market trends in the UK and more challenging market conditions in France. In North America, our sales increased by 2% to 184million euros, benefiting from the favourable fluctuations of the Canadian and
the USdollar versus the euro, but the level of activity remained low with depressed prices. In the other regions, the sales increased by 22% to 504million euros, mostly reflecting positive market trends in Asia and Latin America.

Contribution to our current operating income by region, for the years ended December31, 2010 and 2009, and the related percentage change between the periods were as follows:
2010 VARIATION2010/2009 2009
(million euros)
(%)
(%)
(million euros)
(%)
Western Europe North America Other regions TOTAL BEFORE ELIMINATION OF INTER-DIVISIONSALES
58 (46) 46 58
100.0 (79.3) 79.3 100.0
20.8 (7.0) 39.4 52.6
48 (43) 33 38
126.3 (113.1) 86.8 100.0
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Current operating income increased by 53% to 58million in 2010 from 38million in 2009. Currency fluctuations and net scope changes were negligible. At constant scope and exchange rates, current operating income improved due to an increase in volumes and tight cost control, and despite
the lower selling prices compared with 2009. The increase in paper costs was fully offset by contained energy costs. As a percentage of the Divisions sales, current operating income margin increased to 4.0% in 2010, from 2.8% in 2009.
Return on capital employed after tax increased to 3.4% in 2010 from 2.5% in 2009. See Section 4.2.4 (Reconciliation of our non-GAAP financial measures) for more information on return on capital employed after tax.
Other (including holdings) Sales

Sales of our other operations decreased to 3 million euros in 2010 compared to 9million euros in 2009.
Current operating income (loss)

Current operating loss of our other operations, which includes central unallocated costs, reached 63million euros in 2010 compared to a loss of 97million euros in 2009, benefiting from a change in the pension indexation in the UK.
Operating income and net income

The table below shows our operating income and net income for the years ended December31, 2010 and 2009:
2010 VARIATION2010/2009 2009
(million euros)
(%)
(million euros)
CURRENT OPERATING INCOME Gains on disposals, net Other operating income (expenses) OPERATING INCOME Finance (costs) income Of which: Finance costs Finance income Income from associates INCOME BEFORE INCOME TAX Income tax NET INCOME Out of which part attributable to: Owners of the parent of the Group Non-controlling interests
2,441 45 (317) 2,169 (723) (1,069) 346 (16) 1,430 (316) 1,114 827 287
(1.5) (56.3) 3.9 (3.6) 21.9 5.9 64.8 11.1 9.5 (21.5) 6.5 12.4 (7.4)
2,477 103 (330) 2,250 (926) (1,136) 210 (18) 1,306 (260) 1,046 736 310
Gains on disposals, net, were 45million euros in 2010 compared to 103million euros in 2009. Other operating expenses were 317million euros versus 330million euros in 2009, and mainly comprise closure and impairment costs of a paper plant in Sweden, the impairment of assets located in Western Europe and South Korea due to the impact of the economic environment, and restructuring costs primarily in Western Europe. Operating income decreased by 4% to 2,169million euros, from 2,250million euros in 2009. Finance costs, comprised of financial expenses on net debt, foreign exchange results and other financial income and expenses, improved by 22% to 723million euros from 926million euros in 2009. The financial expenses on net debt slightly increased by 2% from 760 to 773million euros, reflecting the higher average cost of debt. The average interest rate on our gross debt was 5.3% in 2010, as compared to 5.1% in 2009. Foreign exchange resulted in a loss of 26million euros in 2010 compared with a loss of 37million euros in 2009, mostly relating to loans and debts denominated in currencies for which no hedging market is available. Other finance income and expenses include the gain of the disposal of Cimpor shares for 161million euros. Excluding this one-off item, other financial costs were almost halved to 85 million euros, compared to 129million euros in 2009, partly due to the negative impact in 2009 of the accelerated amortization of syndication costs on the Orascom Cement 2008 acquisition credit line following early reimbursement of tranches A1 and A2. The contribution from our associates represented in 2010 a net loss of 16million
59

euros, versus a loss of 18million euros in 2009. Income tax increased to 316million euros in 2010 from 260 million euros in 2009. The effective tax rate for 2010 increased to 21.9% from 19.6% in 2009, mostly reflecting the progressive withdrawal of temporary tax holidays, partly offset by the non taxable gain on the disposal of Cimpor shares. Net income Group Share grew by 12% to 827million euros in 2010 from 736million euros in 2009.
(1)
2010 and 2009 were impacted by significant one-off items. They included the reversal of the German competition litigation provision, the settlement of USG litigation, and the impairment loss on cement assets located in Western Europe in 2009, whereas in 2010, they comprised the gain on the disposal of Cimpor shares for 161million euros. Non controlling interests decreased 7% to 287million euros, from 310million euros in 2009, mostly reflecting the lower earnings in Jordan.
Basic earnings per share increased by 4% for 2010 to 2.89euros, compared to 2.77euros in 2009, reflecting the combined effect of the increase in the net income and the full impact of the April 2009 rights issue of 1.5 billion euros on the 2010 average number of shares. The basic average number of outstanding shares during the year, excluding treasury shares, was 286.1 million compared to 265.5million in 2009.
(1) Net income/loss attributable to the owners of the parent company.
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4.4Liquidity and Capital Resources
4.4 Liquidity and Capital Resources

4.4.1 Group funding policies
Our Executive Committee establishes our overall funding policies. The aim of these policies is to safeguard our ability to meet our obligations and to maintain a strong balance sheet structure. These policies take into consideration our expectations concerning the required level of leverage, coverage ratios, the average maturity of debt, interest rate exposure and the level of committed credit lines. These targets are monitored on a regular basis. As a result of these policies, a significant portion of our debt has a long-term maturity. We constantly maintain unused medium term committed credit lines.
COMPONENTS OF CASH FLOW
(million euros) 2010 2009
We are subject to foreign exchange risks as a result of our subsidiaries transactions in currencies other than their operating currencies. Our general policy is for subsidiaries to borrow and invest excess cash in the same currency as their functional currency. However, we encourage the investment of excess cash balances in USdollars or euros in emerging markets. A portion of our subsidiaries debt funding is borrowed at the parent company level in foreign currencies or in euros and then converted into foreign currencies through currency swaps.
4.4.2 Cash flows

During the period presented, our main sources of liquidity were: cash provided by operating activities; cash provided by the divestment of assets; cash provided by the issuance of bonds and commercial paper, of our share capital, and set up of short and medium term credit lines.
CASH FLOW FROM OPERATIONS * Changes in operating working capital items excluding financial expenses and income taxes Non-recurring payment* NET CASH PROVIDED BY OPERATING ACTIVITIES NET CASH PROVIDED BY/(USED IN) INVESTING ACTIVITIES NET CASH PROVIDED BY/(USED IN) FINANCING ACTIVITIES INCREASE/(DECREASE) IN CASH AND CASH EQUIVALENTS
*
2,156 354 (338)
2,177 1,029 -
2,172 (1,244) 38 966
3,206 (1,074) (1,489) 643
Cash flow from operations excludes the 338 million euros one-time payment for the Gypsum competition fine, presented on the line non-recurring payment.
a) Net cash provided by operating activities

Net cash provided by operating activities amounted to 2,172 million euros (3,206 million euros in 2009). Excluding the non recurring payment of the Gypsum competition fine for 338 million euros in July 2010, net cash provided by operating activities decreased by 22%, primarily reflecting the evolution of the change in working capital. Indeed, in 2009, the strong reduction of our working capital by 1,029 million euros benefited from actions taken to lower the number of sales days of working capital but also from the large decrease in the activity level between the fourth quarter of 2008 and the fourth quarter of 2009. In 2010,
we pursued our actions to optimize our strict working capital* that further decreased 11 days to 32 days when expressed as a number of days sales at the end of December 2010. However, the absolute level of working capital did not decline as significantly as in 2009, given that the level of sales activity started to increase in the last quarter of 2010, and that it compared to an already optimized level at the end of 2009. See Section 4.2.4 (Reconciliation of our non-GAAP financial measures) for more information on cash flow from operations.
b) Net cash used in investing activities

Net cash used in investing activities amounted to 1,244 million euros (1,074 million euros in 2009). Sustaining capital expenditures were contained at 359 million euros in 2010 compared to 372 million euros in 2009. Capital expenditures for the building of new capacity decreased to 950 million euros in 2010 from 1,234 million euros in 2009, and reflect mainly major cement projects such as the extension of our capacities in Eastern India, China, Poland, Russia, Uganda and Nigeria, the reconstruction of our Aceh plant in Indonesia and the investments in new capacities in Syria and Saudi Arabia.
Strict working capital defined as trade receivables plus inventories less trade payables.
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The divestments operations performed in 2010 have reduced the Groups net debt by 364 million euros (net of selling costs and including the debt disposed of) as at December 31, 2010. In addition to the proceeds of the sale of a minority stake in Lafarge Malayan Cement Berhad for 141 million euros, disposals mainly included the second instalment of the divestment of our Venezuelan operations, the divestment of our A&C operations in Alsace (France) and Switzerland and the sale of several industrial assets and lands. In 2009, divestments mainly comprised the disposal of our Chilean operations, our cement Turkish and Venezuelan activities (first payment) and our Aggregates and Concrete activities in Eastern Canada. See Section 3.3.2 (Recent acquisitions, partnerships and and divestitures) for more informations.
on April13, 2010, a 500million euros bond bearing a fixed interest rate of 5.000% with an 8-year maturity; on December16, 2009, a 750million euros bond bearing a fixed interest rate of 5.500% with a 10-year maturity; on November 6, 2009, a 150 million euros private placement bearing a fixed rate of 6.850%, with an 8-year maturity. On June29, 2009, a 250million euros of the same nature, with the same maturity, bearing a fixed rate of 7.250%; on June24, 2009, a 750million euros bond bearing a fixed interest rate of 7.625%, with a 7-year and 5-month maturity. On May27, 2009, a 1,000million euros bond, bearing the same fixed interest rate, with a 5-year maturity; on May29, 2009, a 350million British pounds bond bearing a fixed rate of 8.750%, with an 8-year maturity.
Cash management
In order to ensure that cash surpluses are used efficiently, we have adopted cash pooling structures on a country-by-country basis in a number of cases. We have established a centralized cash management process for most of the euro-zone countries, and we have also extended the centralization of cash management to significant European non-euro countries (such as Poland, Romania, Switzerland and the United Kingdom). Local cash pools have also been set up in other parts of the Group. Owing to legal or regulatory constraints or national regulations, we do not operate a fully global centralized cash management program. However, the policies set by our senior management tend to maximize cash recycling within the Group. Where cash cannot be recycled internally, cash surpluses are invested in liquid, short-term instruments, with at least half of any cash surplus invested in instruments with a maturity of less than three months.
c) Net cash provided by financing activities

At December 31, 2010, the Groups net debt amounted to 13,993 million euros (13,795 million euros at December 31, 2009). The fluctuations in exchange rates resulted in an increase of our net debt by 0.5 billion euros, primarily reflecting the appreciation of the US dollar against the euro during the period. At constant exchange rates, net debt decreased by 0.3 billion euros. In addition, we continued to improve our maturity profile with the issuance of 1.9 billion euros of bonds in 2010 and to maintain a solid liquidity position, increasing the level of unused committed credit lines to 3.8 billion euros at December 31, 2010. See Note25 of our consolidated financial statements for more information on our financing.
Outside the EMTN Program on July 6, 2010, the Group placed a 550 million US dollars bond on the American market, bearing a fixed interest rate of 5.500% with a 5-year maturity.
PRINCIPAL DEBT REPAYMENTS IN 2010
Equity issuance and dividends

During 2010, equity issuance resulted in a net cash inflow of 41million euros,. The amount was 1,534 million euros in 2009 mainly reflecting the capital increase with preferential subscription rights completed on April28, 2009. See Section8.1.1 (Changes in the share capital during the fiscal year ended December31, 2010 and 2009) for more information. Total dividends paid in 2010 amounted to 849million euros, including the payments made to minority shareholders by our subsidiaries. See Chapter 1 (Selected financial data) for more information on dividends paid by LafargeS.A.
On July6, 2010 , Lafarge repaid a 500million euros private placement.
Short term debt

Short-term needs are met mainly through the issuance of domestic commercial paper, as well as the use of credit lines. We currently have a euro-denominated commercial paper program, with a maximum available amount of 3,000million euros. At December31, 2010, 724million euros in commercial paper were outstanding under this program. In addition to credit lines set up for specific purposes (as for the acquisition of Orascom Cement), we maintain committed credit lines with various banks (mainly at parent company level) to ensure the availability of funding on an as-needed basis. At December31, 2010, these committed credit lines amounted to 3,852 million euros (compared with 3,469million euros at December31, 2009). Of this amount, 3,839million euros were available at December31, 2010 (compared with 3,457million euros at December31, 2009). The average maturity of these credit facilities was approximately 2.7years at the end of 2010 versus 2.5years at the end of 2009.
Long and medium term debt

In general, we meet our medium and longterm financing needs through bond issues and the use of long-term instruments, such as our Euro Medium Term Notes (EMTN) program and bank loans. Under our EMTN program, we have a maximum available amount of 12,000million euros of which 9,498million euros is used at December31, 2010.
LONG AND MEDIUM-TERM DEBT SECURITIES ISSUANCES IN 2010 AND 2009
4.4.3 Level of debt and financial ratios atDecember31,2010

See Note25 to our consolidated financial statements for more information on debt.
Total debt
On December 31, 2010, our total debt amounted to 17,013million euros (compared with 15,667million euros in 2009) excluding put options on shares of subsidiaries and impact of derivative instruments. At the end of 2010, we reclassified 724million euros of short-term debt (936million euros at the end
Under the EMTN Program on November29, 2010, a 1,000million euros bond bearing a fixed interest rate of 5.375% with an 8-year maturity;
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of 2009) as long-term debt on the basis of our ability to refinance this obligation using the available funding provided by medium and long-term committed credit lines. Long-term debt totalled 14,033million euros at year-end 2010 compared with 13,634million euros at year-end 2009. Approximately 48% of the 2010 long-term debt is due to mature after 2015. Long-term debt mainly comprises fixedrate debt (after taking into account interest rate swaps). Most of this debt is denominated in euros, USdollars and British pounds.
At December31, 2010, our short-term debt (including the current portion of long-term debt) amounted to 2,980million euros.
Our net-debt-to-equity ratio stood at 77% at December31, 2010 (compared with 82% at December31, 2009). Our cash flow from operations* to net debt ratio stood at 15% at December31, 2010 (compared with 16% at December31, 2009). See Section 4.2.4 (Reconciliation of our non-GAAP financial measures) for more information on these ratios.
subsidiaries at December31, 2010. For most of them, these financial covenants have a low probability of being triggered. Given the split of these contracts on various subsidiaries and the quality of the Groups liquidity through its access to committed credit lines, the existence of such clauses cannot materially affect the Groups financial situation. See Notes25 (e) to our consolidated financial statements.
Loan agreements
Some of our loan agreements contain restrictions on the ability of subsidiaries to transfer funds to the parent company in certain specific situations. The nature of these restrictions can be either regulatory, when the transfers of funds are subject to approval by local authorities, or contractual, when the loan agreements include restrictive provisions, such as negative covenants on the payment of dividends. However, we do not believe that any of these covenants or restrictions, which relate to just a few loans, will have any material impact on our ability to meet our obligations. See Section 2.1.2 (Financial and market risks). At December 31, 2010, the financing contracts of Lafarge S.A. do not contain any financial covenants. A few of our subsidiaries loan agreements include such provisions. These subsidiaries are located in the following countries: Algeria, Bangladesh, China, Ecuador, India, Indonesia, Jordan, Nigeria, Qatar, Saudi Arabia, Syria, Thailand, United Arab Emirates, United Kingdom and Vietnam. Debt with such financial covenants represents approximately 8% of the total Group debt excluding put options on shares of
4.4.4. Rating
Because we use external sources to finance a significant portion of our capital requirements, our access to global sources of financing is important. The cost and availability of unsecured financing are generally dependent on our short-term and long-term credit ratings. Factors that are significant in the determination of our credit ratings or that otherwise could affect our ability to raise short-term and long-term financing include: our level and volatility of earnings, our relative positions in the markets in which we operate, our global and product diversification, our risk management policies and our financial ratios, such as net debt to total equity and cash flow from operations to net debt. We expect credit rating agencies to focus, in particular, on our ability to generate sufficient operating cash flows to cover the repayment of our debt. Deterioration in any of the previously stated factors or a combination of these factors may lead rating agencies to downgrade our credit ratings, thereby increasing our cost of obtaining unsecured financing. Conversely, an improvement in these factors may prompt rating agencies to upgrade our credit ratings.
At December31, 2010, the average spot interest rate on our total debt after swaps was 5.5%, compared to 5.3% at December31, 2009. The average annual interest rate on debt after swaps was 5.3% in 2010 (compared with 5.1% in 2009). Our cash and cash equivalents amounted to 3,294million euros at year-end 2010, with close to half of this amount denominated in euros and the remainder in a large number of other currencies. See Section2.1.2 (Financial and market risks) and Notes25 and 26 to the consolidated financial statements for more information on our debt and financial instruments.
Net debt and net debt ratios

Our net debt, which includes put options on shares of subsidiaries and derivative instruments, totalled 13,993million euros at December 31, 2010 (compared with 13,795million euros at December31, 2009).
Before exceptional payment of the Gypsum competition fine (338 million euros) in 2010.
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4
S&P MOODYS
*

Since the filing date of the previous report, the credit ratings for our short and long-term debt evolved as follows:
12/31/2009 3/1/2010 12/31/2010 03/17/2011*
Short-term rating Long-term rating Short-term rating Long-term rating
A-3 BBB- (stable outlook) Not rated Baa3 (negative outlook) BBB- (negative outlook)
A-3 BBB- (negative outlook) Not rated Baa3- (negative outlook)
B BB+ (stable outlook)
On February 23, 2011, the rating agency Standards & Poors Ratings Services placed our long-term rating BBB- under negative watch. On March 17, 2011, Standard & Poors Rating Services downgraded our long-term credit rating to BB+ (stable outlook) and our short-term credit rating to B.
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5.1 BOARD OF DIRECTORS
5.1.1 Form oforganization ofthe management BoardofDirectors Chairman and Chief Executive Ofcer Vice-Chairman of the Board Information onDirectors Independent Directors Parity withinthe Board Directors charter Board of Directors Committees Self-assessment bythe Board, Committees, Chairmanand ChiefExecutive Ofcer Summary table on the attendance at Board andCommittee meetings Powers oftheChairman andChief Executive Ofcer
66
66 66 79 80
5.1.2 5.1.3 5.1.4 5.2.1 5.2.2 5.2.3 5.2.4 5.2.5
5.2 BOARD AND COMMITTEE RULES AND PRACTICES
82
82 82 87 88 88
5.3 EXECUTIVE OFFICERS 5.4 COMPENSATIONS AND BENEFITS

5.4.1 5.4.2 5.4.3 Compensations paid toDirectors Directors fees Compensation and benets paid totheChairman and ChiefExecutive Ofcer Total compensation of the Chairman andChief Executive Ofcer in2010 and 2009, pensionandotherretirement benets
90 92
92 93
95
5.5 LONG-TERM INCENTIVES (STOCK-OPTIONSANDPERFORMANCESHAREPLANS) 96

5.5.1 5.5.2 5.5.3 5.6.1 5.6.2 Grant policy - Performance conditions andholdingrule Stock-options plans Performance share plans 96 97 99
5.6 SHARE OWNERSHIP
101
Directors, Chairman and Chief Executive Ofcer andExecutive Committee members share ownership 101 Trading in Lafarge shares by Directors, Chairmanand Chief Executive Ofcer andExecutive Committee members 101
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5.1Declaration in terms of corporate governance GovernanceCode of reference
Declaration in terms of corporate governance GovernanceCode of reference

At its November6, 2008 meeting, the Lafarge Board of Directors decided that the Code of Corporate Governance to which the Company refers is the Code of the Corporate Governance of Listed Corporations published by the Afep (Association franaise des entreprises prives) and the Medef (Mouvement des entreprises de France) named the AfepMedef Code and whose December2008 version integrates the recommendations (Principles for coporate governance based on consolidation of the October2003 Afep and Medefs reports and on their January2007 and October2008s recommendations concerning the compensation of Executive Directors of listed companies). This Code was modified in April2010 concerning the intensification of the presence of women within Boards of Directors. The Lafarge Board of Directors considers that these recommendations are in line with the corporate governance principles of the Company. According to this Code, the companies which enforce it must state in their Annual Report how they apply these recommendations and explain, if need be, the reasons why they have not applied some of them. If relevant, these informations will be mentioned in the present Chapter5.
5.1 Board of Directors

At present, the Board of Directors consists of 18 members with various complementary profiles and experience. Its composition has been modified during the 2010 financial year following the appointment of two new Independent Directors at the May6, 2010 General Meeting (MrsColette Lewiner and MrsVronique Weill). A number of Board members have held positions within the Group or have had professional dealings with the Group and therefore know our activities well. Others are not as close to our business and bring to the table other experience, a global understanding of business matters and the ability to benchmark its activities against practices and standards in other industries. In accordance with the Directors Charter each Board member must carry out his duties with full independence of mind. Proposals for the election of a new Director when their nomination is on the agenda, are made by the Corporate Governance and Nominations Committee. According to the Articles of Association, the Directors are appointed for 4-year office term. MrBruno Lafont is the only Board member exercising executive functions within the Group. The Directors shall not be over 70years old, and each shall own at least 1,143 shares of the Company. There is no Director representing either the employee shareholders or the employees.
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See Section 8.5 (Articles of Association) (statuts) for more information on the rules governing the Board of Directors.
Vice-Chairman of the Board

The Boards internal regulations ensure the respect of corporate governance best practices in the framework of such management practice. These regulations notably state that a Vice-Chairman of the Board is elected from among the Directors classified as independent for a one-year renewable term of office upon recommendation by the Corporate Governance and Nominations Committee. The Vice-Chairman of the Board is a member of the Corporate Governance and Nominations Committee and of the Remuneration Committee. He chairs meetings of the Board in the absence of the Chairman and Chief Executive Officer and, in particular, chairs the Board of Directors discussions at least once per year to assess the performance and set the remuneration of the Chairman and Chief Executive Officer, such discussions taking place in the absence of the latter. These functions are currently exercised by MrOscar Fanjul.
5.1.1 Form oforganization ofthe management BoardofDirectors Chairman and Chief Executive Officer Vice-Chairman of the Board Chairman of the Board and Chief Executive Officer
At its May3, 2007 meeting, following the recommendation of the Remunerations Committee, the Lafarge Board of Directors decided, in the best interest of the Company, to unify the functions of Chairman of the Board and Chief Executive Officer. On the same date, it decided to confer these functions to MrBruno Lafont. This type of governance is very common in French issuing companies with Board of Directors. It is deemed appropriate for the Lafarge organization and practice, and complies with the prerogatives of each governing body (General Meetings, Board of Directors, Executive Officers), in particular regarding the control of Group activity. See Section5.2.5 (Powers of the Chairman and Chief Executive Officer) for further information regarding the powers of the Chairman and Chief Executive Officer and their limitations.
5.1.2 Information onDirectors

The presentation below illustrates the respective experience and expertise of the Directors, especially in terms of management.

5.1Board of Directors
Presentation of the Directors Expertise and experience

BRUNO LAFONT
(born on June8, 1956) EXPERIENCE AND EXPERTISE
BUSINESS ADDRESS: NUMBER OF LAFARGE SHARES HELD:
61, rue des Belles Feuilles, 75116 Paris, France
24,006
Chairman of the Board of Directors and Chief Executive Officer

Bruno Lafont was appointed as Chairman of the Board of Directors in May 2007. He has officiated as Director since May 2005 and Chief Executive Officer since January 1, 2006. He graduated from the Hautes tudes commerciales business school (HEC 1977, Paris) and the cole Nationale dAdministration (ENA 1982, Paris). He began his career at Lafarge in 1983 and held various positions in finance and international operations. In 1995, Mr Lafont was appointed Group Executive Vice-President, Finance, then Executive Vice-President of the Gypsum Division in 1998. Mr Lafont joined the Groups General Management as Chief Operating Officer between May 2003 and December 2005. He also acts as Director for EDF. His term of office will expire at the General Meeting called to approve the financial statements for fiscal year 2012. POSITION (APPOINTMENT/ RENEWAL/ TERMINATION OF THE POSITION) Appointment as Director of Lafarge in 2005. Termination of the position after the General Meeting called to approve the financial statements for 2012. Chief Executive Officer since January2006. Chairman and Chief Executive Officer since May2007. POSITIONS HELD IN FRANCE AND ABROAD OVER THE LAST FIVE YEARS AND THAT HAVE ENDED CURRENT POSITIONS: In France: Director of Lafarge Director of EDF Abroad: Positions in various subsidiaries of the Group: Director of Lafarge India Private Limited Director of Lafarge Shui On Cement Limited OVER THE LAST FIVE YEARS THAT HAVE ENDED, IN FRANCE AND INTERNATIONAL: Abroad: Positions in various subsidiaries of the Group
OSCAR FANJUL
(born on May20, 1949) EXPERIENCE AND EXPERTISE
BUSINESS ADDRESS:
NUMBER OF LAFARGE SHARES HELD:
Paseo de la Castellana, 28-5, ES-28046 Madrid, Spain
6,193
Vice-Chairman of the Board and Director, member of the Corporate Governance and Nominations Committee, member of the Remunerations
Committee Oscar Fanjul was appointed to Lafarges Board of Directors in 2005 and has been Vice-Chairman of the Board since August1, 2007. He began his career in 1972 working for industrial holding I.N.I. (Spain), then acted as President and Founder of Repsol YPF (Spain) until1996. He acts as Vice-Chairman of Omega Capital, SL (Spain). MrFanjul is a Director of Marsh &McLennan Companies (United States), Acerinox (Spain) and Areva. His term of office will expire at the General Meeting called to approve the financial statements for fiscal year 2012. POSITION (APPOINTMENT/ RENEWAL/ TERMINATION OF THE POSITION) Appointment as Director of Lafarge in 2005. Termination of the position after the General Meeting called to approve the financial statements for 2012. POSITIONS HELD IN FRANCE AND ABROAD OVER THE LAST FIVE YEARS AND THAT HAVE ENDED CURRENT POSITIONS: In France: Director and Vice-Chairman of the Board of Lafarge Director of Areva Abroad: Vice-Chairman of Omega Capital, SL (Spain) Director of Marsh &McLennan Companies (USA) Director of Acerinox (Spain) OVER THE LAST FIVE YEARS THAT HAVE ENDED, IN FRANCE AND INTERNATIONAL: Abroad: Director of Unilever Director of Colonial Director of the London Stock Exchange (United Kingdom)
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MICHEL BON
(born on July5, 1943) EXPERIENCE AND EXPERTISE
BUSINESS ADDRESS:
86, rue Anatole-France, 92300Levallois-Perret, France
5,552
Director, member of the Audit Committee, member of the Strategy, Investment and Sustainable Development Committee Michel Bon was appointed to Lafarges Board of Directors in 1993. He is Chairman of the Supervisory Board of Devoteam and ditions du Cerf. He is a Director of Sonepar and senior adviser to Roland Berger and Vermeer Capital. He previously served as Chairman and Chief Executive Officer of France Telecom from 1995 to 2002, and Chief Executive Officer then Chairman and Chief Executive Officer of Carrefour from 1985 to 1992. His term of office expires at the General Meeting called to approve the financial statements for fiscal year 2012.
POSITION (APPOINTMENT/ RENEWAL/ TERMINATION OF THE POSITION) Appointment as Director of Lafarge in 1993. Termination of the position after the General Meeting called to approve the financial statements for 2012. POSITIONS HELD IN FRANCE AND ABROAD OVER THE LAST FIVE YEARS AND THAT HAVE ENDED CURRENT POSITIONS: In France: Director of Lafarge Director of Sonepar Chairman of the Supervisory Board of ditions du Cerf Chairman of the Supervisory Board of Devoteam Abroad: Director of SONAE (Portugal) Director of Myriad (Switzerland) Director of Cie Europenne de Tlphonie (Luxembourg) OVER THE LAST FIVE YEARS THAT HAVE ENDED, IN FRANCE AND INTERNATIONAL: In France: Director of Provimi until 2010 Director of Editis until 2009 Censor of Asterop until2008 Director of Banque Transatlantique until2007 Director of Orsid SAS until2005
PHILIPPE CHARRIER
(born on August2, 1954) EXPERIENCE AND EXPERTISE
BUSINESS ADDRESS:
60-62, rue dHauteville, 75010Paris, France
3,368
Director, member of the Remunerations Committee, member of the Strategy, Investment and Sustainable Development Committee Philippe Charrier was appointed to Lafarges Board of Directors in 2005. He acts as President of Labco, Chairman of the Board of Directors of Alphident and Dental Emco S.A. He is also Founder member of the Club Entreprise et Handicap, Director of the Fondation Nestl pour la nutrition and of Rallye. He was Vice-President, Chief Executive Officer and Director of nobiol from2006 to 2010 and Chairman and Chief Executive Officer of Procter &Gamble France from 1999 to 2006. He joined Procter &Gamble in 1978 and held various financial positions before serving as Chief Financial Officer from 1988 to 1994, Marketing Director in France from 1994 to 1996, and Chief Operating Officer of Procter &GambleMorocco from 1996 to 1998.
His term of office will expire at the General Meeting called to approve the financial statements for fiscal year 2012. POSITION (APPOINTMENT/ RENEWAL/ TERMINATION OF THE POSITION) Appointment as Director of Lafarge in 2005. Termination of the position after the General Meeting called to approve the financial statements for 2012. POSITIONS HELD IN FRANCE AND ABROAD OVER THE LAST FIVE YEARS AND THAT HAVE ENDED CURRENT POSITIONS: In France: Director of Lafarge President of Labco Chairman of the Board of Directors of Alphident and Dental Emco S.A. (subsidiary of Alphident) Director of Rallye OVER THE LAST FIVE YEARS THAT HAVE ENDED, IN FRANCE AND INTERNATIONAL: In France: Vice-President, Chief Executive Officer and Director of nobiol from2006 to 2010 Chairman of the Supervisory Board of Spotless Group until 2010 Chairman of Entreprise et Progrs until 2009. Chairman and Chief Executive Officer of Procter &Gamble in France from 1999 to 2006
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BERTRAND COLLOMB
(born on August14, 1942) EXPERIENCE AND EXPERTISE
BUSINESS ADDRESS:
112,942
Director and Honorary Chairman BertrandCollomb was appointed to the Board of Directors in 1987 and served as Chairman and Chief Executive Officer from 1989 to 2003 and Chairman of the Board of Directors from 2003 to 2007. He previously held various executive positions with the Group, namely in North America, from 1975 to 1989 and in the French Ministry of Industry and government cabinets from 1966 to 1975. He is a Director of Total, Atco Ltd. (Canada) and DuPont (US). He is also a Chairman of the French Institute of International Relations, Chairman of the Institut des hautes tudes for Science and Technology, member of the Executive Committee of the European Institute of Innovation and Technology and of the European Corporate Governance Forum. He is a member of the Institut de France (Acadmie des sciences morales et politiques). His term of office will expire at the General Meeting called to approve the financial statements for fiscal year 2012.
POSITION (APPOINTMENT/ RENEWAL/ TERMINATION OF THE POSITION) Appointment as Director of Lafarge in 1987. Termination of the position after the General Meeting called to approve the financial statements for 2012. Honorary Chairman of Lafarge. POSITIONS HELD IN FRANCE AND ABROAD OVER THE LAST FIVE YEARS AND THAT HAVE ENDED CURRENT POSITIONS: In France: Director of Lafarge Director of Total Abroad: Director of Atco Ltd. (Canada) Director of DuPont (USA) OVER THE LAST FIVE YEARS THAT HAVE ENDED, IN FRANCE AND INTERNATIONAL: Abroad: Positions in various subsidiaries of the Group Director of Vivendi Universal until2005 (France) Director of Unilever until2006 (Netherlands)
PHILIPPE DAUMAN
(born on March1, 1954) EXPERIENCE AND EXPERTISE
BUSINESS ADDRESS:
1515 Broadway, NewYork, NY 10036, USA
1,143
Director, member of the Corporate Governance and Nominations Committee, member of the Strategy, Investment and Sustainable Committee, Philippe Dauman was appointed to Lafarges Board of Directors in May2007. He has been President and Chief Executive Officer of ViacomInc. (US) since September2006. He was previously Joint Chairman of the Board and Managing Director of DND Capital Partners LLC (US) from May2000. Before creating DND Capital Partners, MrDauman was Vice-Chairman of the Board of Viacom from 1996 to May2000, Executive Vice-President from 1995 to May2000, and Chief Counsel and Secretary of the Board from 1993 to 1998. Prior to that, he was a partner in NewYork law firm Shearman &Sterling. He served as Director of Lafarge North America from 1997 to 2006. He is currently a Director of National AmusementsInc. (US), a member of the Deans Council for the University of Columbia Law School, a member of the Business Roundtable (US), a member of the Executive Committee of the National Cable &Telecommunications Association (US), a member of The Paley Center for Medias Council (US), and a member of the Executive Committee of Lenox Hill Hospital (US). His term of office will expire at the General Meeting called to approve the financial statements for fiscal year2010.
POSITION (APPOINTMENT/ RENEWAL/ TERMINATION OF THE POSITION) Appointment as Director of Lafarge in 2007. Termination of the position after the General Meeting called to approve the financial statements for 2010. POSITIONS HELD IN FRANCE AND ABROAD OVER THE LAST FIVE YEARS AND THAT HAVE ENDED CURRENT POSITIONS: In France: Director of Lafarge Abroad: President and Chief Executive Officer of ViacomInc. (USA) Director of National AmusementsInc. (USA) OVER THE LAST FIVE YEARS THAT HAVE ENDED, IN FRANCE AND INTERNATIONAL: Abroad: Co-Chairman of the Board of Directors and Managing Director of DND Capital Partners LLC (USA) Director of Lafarge North America from 1997 to 2006 (USA)
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PAUL DESMARAIS, JR.

(born on July3,1954) EXPERIENCE AND EXPERTISE
BUSINESS ADDRESS:
751, Square Victoria, Montreal, Quebec H2Y 2J3, Canada
6,715
Director, member of the Strategy, Investment and Sustainable Development Committee Paul Desmarais, Jr. was appointed to Lafarges Board of Directors in January2008. He has been Chairman and Co-Chief Executive Officer of Power Corporation of Canada (PCC) since 1996 and Co-Chief Executive Office and Chairman of the Executive Committee of Power Financial Corporation (PFC). Prior to joining PCC in 1981, he was at SG Warburg &Co. in London and Standard Brands Incorporated in NewYork. He was President and Chief Operating Officer of PFC from 1986 to 1989 and Chairman from 1990 to 2005. He is a Director and member of the Executive Committee of many Power group companies in North America. He is also Executive Director and Vice-Chairman of the Board of Pargesa Holding S.A. (Switzerland), and a Director of Groupe Bruxelles Lambert (Belgium), Total S.A. and GDF-Suez (France). MrDesmarais is Chairman of the Board of Governors of the International Economic Forum of the Americas, Founder and Chairman of the International Advisory Committee of the cole des hautes tudes commerciales (HEC) in Montreal and Founder and member of the International Advisory Board of the McGill University Faculty of Management. He is a member of the International Council and a Director of the INSEAD, and Global Advisor for Merrill Lynch (NewYork, US). MrDesmarais is a member of the Economic Consultative Council directed by minister Flaherty (Canada), member of the Board of the Trudeau Foundation, Vice-Chairman of the Board and member of the Executive Committee of the CCCE (Conseil canadien des chefs dentreprise). He is also member of the Honorary Council of the Peres Center for peace, member of the National Strategy Concil of the Mazankowski Alberta Heart Institute, member of the BAC and Co-President of the national campaign for the preservation of nature in Canada (NCC). MrDesmarais studied at McGill University where he obtained a Bachelors degree in Commerce. He then graduated from the European Institute of Business Administration (INSEAD) in Fontainebleau, France, with an MBA. His term of office will expire at the General Meeting called to approve the financial statements for fiscal year2011.
POSITION (APPOINTMENT/ RENEWAL/ TERMINATION OF THE POSITION) Appointment as Director of Lafarge in 2008. Termination of the position after the General Meeting called to approve the financial statements for 2011.
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PAUL DESMARAIS, JR.

(born on July3,1954)
BUSINESS ADDRESS:
751, Square Victoria, Montreal, Quebec H2Y 2J3, Canada
6,715
POSITIONS HELD IN FRANCE AND ABROAD OVER THE LAST FIVE YEARS AND THAT HAVE ENDED CURRENT POSITIONS: In France: Director of Lafarge Director of Total S.A. Director of GDF-Suez Abroad: Chairman of the Board and Co-Chief Executive Officer of Power Corporation of Canada Chairman of the Executive Committee, Co-Chief Executive Officer and Director of Power Financial Corporation (Canada) Vice-Chairman of the Board of Directors and Deputy Managing Director of Pargesa Holding (Switzerland) Director and member of the Executive Committee of Great-West, Compagnie dassurance-vie (Canada) Director and member of the Executive Committee of Great-West Life &Annuity Insurance Company (USA) Director and member of the Executive Committee of Great-West LifecoInc. (Canada) Director and member of the Executive Committee of Groupe Bruxelles Lambert S.A. (Belgium) Director and member of the Executive Committee of Groupe InvestorsInc. (Canada) Director and member of the Executive Committee of London Insurance GroupInc. Director and member of the Executive Committee of London Life Compagnie dassurance-vie (Canada) Director and member of the Executive Committee of MackenzieInc. Director and member of the Executive Committee of Canada Life Assurance Company (Canada) Director and member of the Executive Committee of Canada Life Financial Corporation (Canada) Director and member of the Executive Committee of Canada Life Capital Corporation (Canada) Director and member of the Executive Committee of Power Corporation International Director of Gesca Lte Director of Les Journaux Trans-Canada Director of La Presse Lte Director of Power CommunicationsInc. Member of the Board of Directors of Putnam Investments LLC Director of Power Financial B.V. President of the Advisory Board of Sagard Private Equity Partners OVER THE LAST FIVE YEARS THAT HAVE ENDED, IN FRANCE AND INTERNATIONAL: In France: Vice-Chairman of the Board of Imrys Abroad: Director of GWL Properties until2007 Chairman of Power Financial Corporation (Canada)
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GRALD FRRE
(born on May17,1951) EXPERIENCE AND EXPERTISE
BUSINESS ADDRESS:
12, rue de la Blanche Borne, 6280 Loverval, Belgium
1,143
Director, member of the Corporate Governance and Nominations Committee Grald Frre was appointed to Lafarges Board of Directors in 2008. He has been Managing Director of Groupe Bruxelles Lambert since 1993. He joined the family company, the Frre-Bourgeois group (Belgium), in 1972. He was appointed to the Board of Directors of Groupe Bruxelles Lambert in 1982 and has been Chairman of the Executive Committee since 1993. He is also Chairman of the Board of Directors of Compagnie Nationale Portefeuille SA (CNP) and TVI SA (RTL Belgium). He is Regent of the National Bank of Belgium. He is Vice-Chairman of the Board of Directors of Pargesa Holding SA (Switzerland), Director of Power Financial Corporation (Canada) and Electrabel SA (Belgium). His term of office will expire at the General Meeting called to approve the financial statements for fiscal year2011.
Grald Frre and Thierry de Rudder are brothers-in-law. POSITION (APPOINTMENT/ RENEWAL/ TERMINATION OF THE POSITION) Appointment as Director of Lafarge in 2008. Termination of the position after the General Meeting called to approve the financial statements for 2011. POSITIONS HELD IN FRANCE AND ABROAD OVER THE LAST FIVE YEARS AND THAT HAVE ENDED CURRENT POSITIONS: In France: Director of Lafarge Director of Pernod Ricard Abroad: Chairman of the Board of Directors of Compagnie Nationale Portefeuille S.A. (CNP) (Belgium) Chairman of the Board of Directors of Filux S.A. (Luxembourg) Chairman of the Board of Directors of Gesecalux S.A. (Luxembourg) Chairman of the Board of Directors of Stichting Administratie Kantoor Bierlaire (Netherlands) Chairman of the Board of Directors of RTL Belgium Vice-Chairman of the Board of Directors of Pargesa Holding S.A. (Switzerland) Chairman of the Board of Directors and Deputy Managing Director of the Haras de la Bierlaire S.A. (Belgium) Chairman of the Executive Committee and Deputy Managing Director of Groupe Bruxelles Lambert S.A. (Belgium) Chairman of the Compensation and Appointment Committee of Compagnie Nationale Portefeuille S.A. (CNP) (Belgium) Deputy Managing Director of Financire de la Sambre S.A. (Belgium) Deputy Managing Director of Frre-Bourgeois S.A. (Belgium) Director of Power Financial Corporation (Canada) Director of Erbe S.A. (Belgium) Director of ASBL Fonds Charles-Albert Frre (Belgium) Director of Stichting Administratie Kantoor Frre-Bourgeois (Netherlands) Commissaris of Parjointco N.V. (Netherlands) Rgent of the Banque Nationale de Belgique (Belgium) Member of the Budget Committee of the Banque Nationale de Belgique Member of the Compensation Committee of the Power Financial Corporation (Canada) Member of the Related Parties and Conduct Review Committee of Power Financial Corporation (Canada) Member of the Supervisory Board of the Financial Services Authority (Belgium) Honorary consul of France in Charleroi (Belgium) Manager Agriger Sprl (Belgium) Manager Gbl Energy SARL (Luxembourg) Manager Gbl Verwaltung Sarl (Luxembourg) Director of Electrabel S.A. (Belgium) Commisaris of Agesca Nederland N.V. (Netherlands) 72
OVER THE LAST FIVE YEARS THAT HAVE ENDED, IN FRANCE AND INTERNATIONAL: Abroad: Chairman of the Compensation Committee of the Banque Nationale de Belgique until 2010 Director of Suez-Tractebel S.A. (Belgium) until 2010 Commissaris of Frre-Bourgeois Holding B.V. (Netherlands) until2009

JUAN GALLARDO
(born on July28,1947) EXPERIENCE AND EXPERTISE
BUSINESS ADDRESS:
Monte Caucaso 915-4piso, Col. Lomas de Chapultepec C.P., MX11000 Mexico
1,500
Director, member of the Audit Committee, member of the Corporate Governance and Nominations Committee, member of the Remunerations Committee Juan Gallardo was appointed to Lafarges Board of Directors in 2003. He has been Chairman of Grupo Embotelladoras Unidas S.A. de C.V. (Mexico) since 1985. He is the Chairman of Grupo Azucarero Mexico S.A., a Director of IDEA S.A., Grupo Mexico S.A. de C.V. (Mexico) and CaterpillarInc. (USA). He is a member of the Mexican Business Roundtable. He was previously a member of the International Advisory Council of Lafarge, the Chairman of the Fondo Mexico, a Director of Mexicana de Aviacion and Vice-President of Home Mart Mexico. His term of office will expire at the General Meeting called to approve the financial statements for fiscal year 2012.
POSITION (APPOINTMENT/ RENEWAL/ TERMINATION OF THE POSITION) Appointment as Director of Lafarge in 2003. Termination of the position after the General Meeting called to approve the financial statements for 2012. POSITIONS HELD IN FRANCE AND ABROAD OVER THE LAST FIVE YEARS AND THAT HAVE ENDED CURRENT POSITIONS: In France: Director of Lafarge Abroad: Chairman of the Board of Directors of Grupo Embotelladoras Unidas, S.A. de C.V. (Mexico) Chairman of Grupo Azucarero Mexico S.A. (Mexico) Director of IDEA S.A. (Mexico) Director of Grupo Mexico S.A. de C.V. (Mexico) Director of CaterpillarInc. (USA) OVER THE LAST FIVE YEARS THAT HAVE ENDED, IN FRANCE AND INTERNATIONAL: In France: Member of the International Advisory Board of Lafarge Member of the International Advisory Board of TextronInc. Abroad: Chairman of Fondo Mexico from February1989 to March2005 Director of Mexicana de Aviacion (Mexico) until 2010
JRME GUIRAUD
(born on January7,1961) EXPERIENCE AND EXPERTISE
BUSINESS ADDRESS:
4 Cork street, London W1S 3LB, United Kingdom
3,948
Director, member of the Audit Committee JrmeGuiraud was appointed to the Board of Directors in 2008. He graduated from Hautes tudes Commerciales (HEC 1984Paris). J.Guiraud started his career at the French Embassy in Zagreb (Croatia) in 1985 as Deputy to the Attach Commercial. He joined the Socit Gnrale group, at the Inspection Gnrale, department in 1986. From 1993 he has held various managing positions abroad, in Europe and in emerging countries on capital markets, then as Country Manager and Director of the Socit Gnrale groups listed subsidiaries. He joined the NNS group in 2008. He is currently a Director Chief Executive Officer of NNS Capital and a Director and Audit Committees member of Orascom Construction Industries (major actor in construction and in fertilizer, listed on London, N.Y. and Cairo stock exchanges). His term of office will expire at the General Meeting called to approve the financial statements for fiscal year2011.
POSITION (APPOINTMENT/ RENEWAL/ TERMINATION OF THE POSITION) Appointment as Director of Lafarge in 2008. Termination of the position after the General Meeting called to approve the financial statements for 2011. POSITIONS HELD IN FRANCE AND ABROAD OVER THE LAST FIVE YEARS AND THAT HAVE ENDED CURRENT POSITIONS: In France: Director of Lafarge Abroad: Director Chief Executive Officer of NNS Capital (United Kingdom) Director of Orascom Construction Industries S.A.E (Egypt) OVER THE LAST FIVE YEARS THAT HAVE ENDED, IN FRANCE AND INTERNATIONAL: Abroad: Chairman of the Executive Board of Socit Gnrale Marocaine de Banque (Morocco) and Director of Morocco subsidiaries of the Groupe Socit Gnrale from 2004 to 2008 (Morocco) Director of Maphars (Morocco subsidiary of Sanofi-Aventis) from 2006 to 2008 Director of JET4YOU (Morocco subsidiary of TUI) from 2006 to 2008
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PIERRE DE LAFARGE
(born on September26,1946) EXPERIENCE AND EXPERTISE
BUSINESS ADDRESS:
8, rue des Graviers, 92521 Neuilly-sur-Seine Cedex, France
30,354
Director, member of the Strategy, Investment and Sustainable Development Committee Pierre de Lafarge was appointed to Lafarges Board of Directors in 2007. He graduated from the cole des mines de Nancy (France). Pierre de Lafarge has terminated his career as Director of International Development for Kerneos, a subsidiary of the Materis group. He worked in the Group from 1972 to 2001, holding various positions. From 1992 to 1995, he was Vice-Chief Executive Officer for Lafarge Rfractaire then in charge of Development in Eastern Europe for Lafarge Mortier from 1996 to 2000, Director of Strategy and International Development for Lafarge Mortier from 2000 to 2001 and of the mortar activities of Materis from 2001 to 2003. His term of office will expire at the General Meeting called to approve the financial statements for fiscal year2010.
POSITION (APPOINTMENT/ RENEWAL/ TERMINATION OF THE POSITION) Appointment as Director of Lafarge in 2007. Termination of the position after the General Meeting called to approve the financial statements for 2010. POSITIONS HELD IN FRANCE AND ABROAD OVER THE LAST FIVE YEARS AND THAT HAVE ENDED CURRENT POSITIONS: In France: Director of Lafarge OVER THE LAST FIVE YEARS THAT HAVE ENDED, IN FRANCE AND INTERNATIONAL: In France: Director of international development for Kerneos, retired since July1, 2008
COLETTE LEWINER
(born on Septembre 19, 1945) EXPERIENCE AND EXPERTISE
BUSINESS ADDRESS:
Tour Europlaza-La Dfense 4, 20 avenue Andr Prothin, 92927 Paris-La Dfense, France
1,200
Director, member of the Strategy, Investment and Sustainable Development Committee Colette Lewiner was appointed to Lafarges Board of Directors in 2010. She is currently Vice-President at Capgemini, and Global Leader of the Energy, Utilities &Chemicals sector that she created in 1998 when she joined the Group. She is also non executive Chairman of TDF. From 1992 to 1998, she was Chairman and CEO of SGN-Rseau Eurisys, a subsidiary of COGEMA (Areva group). From 1979 to 1992, Colette Lewiner held various positions within the EDF Group, at the Research &Development department, and then at the fuel procurement department that she managed in 1987. In 1989, she created the Development and Commercial Strategy Division and became the first woman executive Vice-President at EDF. Colette Lewiner is also a member of the French Academy of Technologies and of the European Union Advisory Group on Energy. After entering the cole normale suprieure and graduating as a Doctor in Physics (PhD), she started her career as an Associate Professor and Researcher at the Denis Diderot University in Paris. Herterm of office will expire at the General Meeting called to approve the financial statements for fiscal year 2013.
POSITION (APPOINTMENT/ RENEWAL/ TERMINATION OF THE POSITION) Appointment as Director of Lafarge in 2010. Termination of the position after the General Meeting called to approve the financial statements for 2013. POSITIONS HELD IN FRANCE AND ABROAD OVER THE LAST FIVE YEARS AND THAT HAVE ENDED CURRENT POSITIONS: In France: Director of Lafarge Director of La Poste Director of Nexans Director of Bouygues Chairman of TDF (SAS) Abroad: Director of TGS-Nopec (Norway) OVER THE LAST FIVE YEARS THAT HAVE ENDED, IN FRANCE AND INTERNATIONAL: Abroad: Director of Ocean Rig (Norway) until 2010
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MICHEL PBEREAU
(born on January23,1942) EXPERIENCE AND EXPERTISE
BUSINESS ADDRESS:
3, rue dAntin, 75002 Paris, France
3,080
Director, member of the Corporate Governance and Nominations Committee, member of the Remunerations Committee, member of the Strategy, Investment and Sustainable Development Committee Michel Pbereau was appointed to Lafarges Board of Directors in 1991. Michel Pbereau is Chairman of BNP Paribas and holds various executive positions in the subsidiaries of the Company. He was previously Chief Operating Officer and subsequently Chairman and Chief Executive Officer of Crdit Commercial de France from 1982 to 1993, Chairman and Chief Executive Officer of BNP then BNP Paribas from 1993 to 2003. He is a Director of Total, Saint-Gobain, EADS N.V. (Netherlands), Pargesa Holding (Switzerland) and AXA and non-voting Director of Galeries Lafayette. He is President of the Institut de lEntreprise and President of the Supervisory Board of the Institut Aspen France. His term of office will expire at the General Meeting called to approve the financial statements for fiscal year2010.
POSITION (APPOINTMENT/ RENEWAL/ TERMINATION OF THE POSITION) Appointment as Director of Lafarge in 1991. Termination of the position after the General Meeting called to approve the financial statements for 2010. POSITIONS HELD IN FRANCE AND ABROAD OVER THE LAST FIVE YEARS AND THAT HAVE ENDED CURRENT POSITIONS: In France: Director of Lafarge Chairman of the Board of Directors of BNP Paribas and various executive positions in the Groups subsidiaries Director of Compagnie de Saint-Gobain Director of Total Director of AXA Censor of the Socit Anonyme des Galeries Lafayette Abroad: Director of EADS N.V. (Netherlands) Director of Pargesa Holding S.A. (Switzerland) Member of the Supervisory Board of the Banque Marocaine pour le Commerce et lIndustrie (Morocco) Director of BNP Paribas S.A. (Switzerland) OVER THE LAST FIVE YEARS THAT HAVE ENDED, IN FRANCE AND INTERNATIONAL: Abroad: Director of BNP Paribas UK Holdings Ltd. until2005 (United Kingdom) Member of AXA Supervisory Board (until the change of AXA to a Company with a Board of Directors on April 29, 2010)
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HLNE PLOIX
BUSINESS ADDRESS:
162, rue du Faubourg-Saint-Honor, 75008 Paris, France
1,971
Director, member of the Audit Committee Hlne Ploix was appointed to Lafarges Board of Directors in 1999. MrsPloix is Chairman of PechelIndustries SAS and PechelIndustries Partenaires SAS. She is also Chairman of FSH SAS. She was previously Deputy Chief Executive Officer of Caisse des Dpts et Consignations (France) and Chairman and Chief Executive Officer of CDC Participations from 1989 to 1995, Chairman of the Caisse Autonome de Refinancement and Chairman of the Supervisory Board of CDC Gestion. She previously served as Special Counsel for the single currency at KPMG Peat Marwick from 1995 to 1996 and as Director of Alliance Boots Plc. (UK) from 2000 to July2007. She is a member of the Supervisory Board of Publicis Groupe, a non-executive Director of BNP Paribas, Ferring S.A. (Switzerland) and Completel N.V. (Netherlands). As Pechel Industries Partenairess permanent representative, she is also a Director of non-listed companies. Her term of office will expire at the General Meeting called to approve the financial statements for fiscal year 2012.
POSITION (APPOINTMENT/ RENEWAL/ TERMINATION OF THE POSITION) Appointment as Director of Lafarge in 1999. Termination of the position after the General Meeting called to approve the financial statements for 2012. POSITIONS HELD IN FRANCE AND ABROAD OVER THE LAST FIVE YEARS AND THAT HAVE ENDED CURRENT POSITIONS: In France: Director of Lafarge Director of BNP Paribas Member of the Supervisory Board of Publicis Groupe Chairman of Pechel Industries Partenaires SAS Chairman of Pechel Industries SAS Chairman of FSH SAS Director of Ypso Holding S.A. (as legal representative of Pechel Industries Partenaires) Manager of Hlne Ploix SARL, Manager of HMJ (Hlne Marie Joseph) SARL Manager of Sorepe Socit Civile Abroad: Director of Ferring S.A. (Switzerland) Director of Completel N.V. (Netherlands) OVER THE LAST FIVE YEARS THAT HAVE ENDED, IN FRANCE AND INTERNATIONAL: In France: Chairman of Pechel Services SAS Various positions as Director in relation with her position in Pechel Industries Partenaires (Xiring, Quinette Gallay, CVGB-Dourthe Kressman S.A., HFR6 S.A., SVP Management et Participations S.A.) Abroad: Director of Alliance Boots Plc. (United Kingdom) from 2000 to 2007
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MICHEL ROLLIER
BUSINESS ADDRESS:
23, place des Carmes-Dchaux, 63000 Clermont-Ferrand, France
1,758
Director, member of the Audit Committee, member of the Corporate Governance and Nominations Committee
Michel Rollier was appointed to Lafarges Board of Directors in 2008. He graduated from the Institut dtudes politiques (1967) and the Universit de Droit of Paris (1968). He has been Managing Partner of the Compagnie Gnrale des tablissements Michelin since May2005. He previously held several positions with Aussedat-Rey (International Paper Group) starting in 1971, including controller until 1982, Unit Operational Manager from 1982 to 1987, Chief Financial Officer between 1987 and 1994 and Deputy Managing Director from 1994 to 1996. MrRollier joined Michelin as Chief Legal Officer and Head of Financial Operations. He was appointed member of the Michelin Group Executive Council and Chief Financial and Legal Officer in 1999. His term of office will expire at the General Meeting called to approve the financial statements for fiscalyear2011. POSITION (APPOINTMENT/ RENEWAL/ TERMINATION OF THE POSITION) Appointment as Director of Lafarge in 2008. Termination of the position after the General Meeting called to approve the financial statements for 2011. POSITIONS HELD IN FRANCE AND ABROAD OVER THE LAST FIVE YEARS AND THAT HAVE ENDED CURRENT POSITIONS: In France: Director of Lafarge Director of Moria Grant Managing Partner of the Compagnie Gnrale des tablissements Michelin Abroad: Managing Partner of la Compagnie Financire Michelin (Switzerland) OVER THE LAST FIVE YEARS THAT HAVE ENDED, IN FRANCE AND INTERNATIONAL:
THIERRY DE RUDDER
BUSINESS ADDRESS:
Avenue Marnix 24, 1000 Bruxelles, Belgium
10,842
Director, member of the Audit Committee, member of the Remunerations Committee

Thierry de Rudder was appointed to Lafarges Board of Directors in January2008. He is a graduate in Mathematics from the University of Geneva and the Universit Libre de Bruxelles and has an MBA from Wharton School in Philadelphia. He acts as Executive Director of Groupe Bruxelles Lambert which he joined in 1986. He previously held various positions in NewYork and in Europe with Citibank which he joined in 1975. He is currently a Director of Compagnie Nationale Portefeuille in Belgium and of GDF-Suez and Total in France. His term of office will expire at the General Meeting called to approve the financial statements for fiscal year2011. Grald Frre and Thierry de Rudder are brothers-in-law. POSITION (APPOINTMENT/ RENEWAL/ TERMINATION OF THE POSITION) Appointment as Director of Lafarge in 2008. Termination of the position after the General Meeting called to approve the financial statements for 2011. POSITIONS HELD IN FRANCE AND ABROAD OVER THE LAST FIVE YEARS AND THAT HAVE ENDED CURRENT POSITIONS: In France: Director of Lafarge Director of GDF-Suez Director of Total S.A. Abroad: Deputy Managing Director of Groupe Bruxelles Lambert (Belgium) Various positions as Director in relation with his position in the Groupe Bruxelles Lambert (Brussels Securities, GBLTreasury Center, Sagerpar, GBL Energy Sarl, GBL Verwaltung Sarl, GBL Verwaltung GmbH, Ergon Capital Partners, Ergon Capital Partners II, Ergon Capital Partners III), Director of Compagnie Nationale Portefeuille S.A. (Belgium) OVER THE LAST FIVE YEARS THAT HAVE ENDED, IN FRANCE AND INTERNATIONAL: In France: Director of SI Finance until2005 Director of Imerys until 2010 Abroad: Various positions as Director in relation with his position in the Groupe Bruxelles Lambert (GBL Finance SA until 2009 and Immobilire Rue de Namur until 2007, GBL Participations until 2010 Director of Suez-Tractebel S.A. (Belgium) until 2010
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NASSEF SAWIRIS
(born on January19,1961)
BUSINESS ADDRESS:
1,671 (this figure does not take into account the shares owned by NNS Holding Srl) (See Section6 Major shareholders)
EXPERIENCE AND EXPERTISE
Director, member of the Remunerations Committee, member of the Strategy, Investment and Sustainable Development Committee
Nassef Sawiris was appointed to the Lafarge Board of Directors in January, 2008. Nassef Sawiris is the major shareholder, Chairman and the Chief Executive Officer of Orascom Construction Industries (OCI), currently the largest listed company on the Egyptian Stock Exchange. MrSawiris joined the Orascom Group in 1992 and became the Chief Executive Officer of Orascom Construction Industries in 1998 ahead of its initial public offering, which was successfully completed in the second quarter of 1999. He leads the company in devising its investment strategies. He led the establishment of its cement business, investments in natural gas industries and significant geographic expansion of the construction group. Through investment in complementary business, MrSawiris has grown the family business into an international corporation. He is also a Director of the BESIX Group (Belgium) and of NNS holding, a privately-owned investment group in Luxembourg and a Director of the Dubai international Financial Exchange (Nasdaq DIFC). He joined Citigroups international Adisory Board in 2010. Nassef Sawiris holds a BA in Economics from the University of Chicago, USA. He was born in 1961 and is an Egyptian citizen. His term of office will expire at the General Meeting approving financial statements for fiscal year2011. POSITION (APPOINTMENT/ RENEWAL/ TERMINATION OF THE POSITION) Appointment as Director of Lafarge in 2008. Termination of the position after the General Meeting called to approve the financial statements for 2011. POSITIONS HELD IN FRANCE AND ABROAD OVER THE LAST FIVE YEARS AND THAT HAVE ENDED CURRENT POSITIONS: In France: Director of Lafarge Abroad: Chairman and Chief Executive Officer of Orascom Construction Industries S.A.E (OCI) (Egypt) Director of Besix (Belgium) Director of NNS Holding (Luxembourg) Director of Nasdaq DIFX (Dubai International Stock Exchange) (United Arab Emirates) Director and General Manager of several subsidiaries of OCI Group (Egypt) Chairman of Lafarge Cement Egypt (Egypt) and positions in various subsidiaries of the Group OVER THE LAST FIVE YEARS THAT HAVE ENDED, IN FRANCE AND INTERNATIONAL: Abroad: Director of OBMH (Orascom Building Material Holding S.A.E) Director of the Caire and Alexandria Stock Exchange from 2004 to 2007
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VRONIQUE WEILL
(born on Septembre 16, 1959) EXPERIENCE AND EXPERTISE
BUSINESS ADDRESS:
25, avenue Matignon, 75008 Paris, France
1,200
Director, member of the Audit Committee

Vronique Weill was appointed to the Lafarge Board of Directors in 2010. Madam Weill is currently Chief Operating Officer of the AXA group, in charge of Marketing, Distribution, IT, Operational Excellence, Procurement and GIE AXA since December10th, 2009. Since January1st, 2009, she is a member of the Executive Committee of the AXA group. Vronique Weill joined AXA in June2006 as a Chief Executive Officer of AXA Business Services and Group Executive Vice-President of Operational Excellence. In January2008, she was appointed Executive Vice-President IT and Operational Excellence of the group, including the worldwide management of the companies AXA Technology Services, AXA Group Solutions, AXA Business Services and transversal departments AXA Way Group (Group strategy of operational excellence and service quality) and Group IS (Group IT Strategy). Vronique Weill is also a member of the Scientific Board of the AXA Research Fund. She had previously spent more than 20years at JP Morgan and has notably served as Group head of Operations for Business Banking and global head of IT &Operations for Asset Management and Private Clients. Vronique Weill graduated from the Institut dEtudes Politiques of Paris and from the Universit la Sorbonne (Licence de Lettres). Her term of office will expire at the General Meeting approving financial statements for fiscal year 2013. POSITION (APPOINTMENT/ RENEWAL/ TERMINATION OF THE POSITION) Appointment as Director of Lafarge in 2010. Termination of the position after the General Meeting called to approve the financial statements for 2013. POSITIONS HELD IN FRANCE AND ABROAD OVER THE LAST FIVE YEARS AND THAT HAVE ENDED CURRENT POSITIONS: In France: Director of Lafarge Chairman of the Board of AXA Group Solutions (SA) Chairman and member of the Supervisory Board of GIE AXA Group Solutions Chairman and member of the Executive Committee, AXA Technology Services (SAS) Abroad: Director of AXA Business Services Privates Ltd.(India) OVER THE LAST FIVE YEARS THAT HAVE ENDED, IN FRANCE AND INTERNATIONAL: In France: Chief Executive Officer of AXA Business Services
Sanctions applicable to theDirectors

To our knowledge, no Director was, over the previous five years, convicted of fraud, involved in a bankruptcy, receivership or liquidation, subject to official public incrimination and/or sanctions, or disqualified by a court from acting as Director or in management or conducting the affairs of any issuer.
5.1.3 Independent Directors Parity withinthe Board Independence

DIRECTORS QUALIFIED AS INDEPENDENT
Colette Lewiner Hlne Ploix Vronique Weill Michel Bon Philippe Charrier Philippe Dauman
DIRECTORS NON-QUALIFIED AS INDEPENDENT/JUSTIFICATION
Oscar Fanjul Juan Gallardo Pierre de Lafarge Michel Pbereau Michel Rollier
Bruno Lafont Bertrand Collomb Paul Desmarais, Jr. Thierry de Rudder Grald Frre Jrme Guiraud Nassef Sawiris
Corporate officer of Lafarge Former Chairman and Chief Executive Officer of Lafarge, as well as former corporate officer of various companies within the Group during the last fiveyears. Connected to Group Brussels Lambert, a shareholder detaining more than 10% of the capital and voting rights of the Company. Connected to NNS Holding Srl, a shareholder detaining more than 10% of the capital and voting rights of the Company.
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In accordance with the recommendations of the Afep-Medef Code and the Boards internal regulations, the Board regularly reviews the situation of the Directors in light of the independence criteria. The Board of Directors, after an individual assessment of each Directors situation in light of the independence criteria applicable to the Company, considers that eleven Directors, out of the eighteen members of the Board, are independent, corresponding to 61% of independent Directors. In accordance with the recommendations of the Afep-Medef Code, the Boards internal regulations provide that a majority of the members of the Board, the Corporate Governance and Nominations Committee and the Remuneration Committee must qualify as independent and that at least two-thirds of the members of the Audit Committee must qualify as independent. The Board of Directors considers that the composition of the Board and its Committees is compliant with its internal regulations. The formal non-qualification as independent Director in no way challenges the professionalism or freedom of judgment that characterize all Directors. To the best of Lafarges knowledge, there are no conflicts between the duties of the Group Board members and their private interests and other duties. Lafarge has not entered into service contracts providing for the granting of future benefits. See Section 5.2.2 (Committees) for more information on the involvement of Independant Directors in the Committees.
not to be a customer, supplier, investment banker or commercial banker:

that is material for the corporation or its group, or for a signicant part whose business the corporation or its group accounts;
MrsVronique Weill as Directors by the General Meeting of May6, 2010 raised the rate of women elected to the Board from 6% to 17%.
5.1.4 Directors charter

The full text of the Lafarge Directors Charter is set out below:
not to be related by close family ties to a Corporate Officer; not to have been an auditor of the corporation over the previous five years; not to have been a Director of the corporation for more than twelve years; finally, as regards to Board members representing shareholders holding 10% or more of the capital or voting rights of the Company, the Afep-Medef Code provides that the Board should systematically examine their qualifications as independent Directors. The Lafarges Directors linked to our two major shareholders (Groupe Bruxelles Lambert and NNS Holding) are not qualified as independent Directors. The Board of Directors did not apply the recommended 12-year limitation on length of service as Director. The Board considers that in a long-term business such as ours, where management is stable, serving as Director for a long period of time can bring more experience and authority, increasing the Directors independence. MessrsMichel Bon and Michel Pbereau have served as Directors of Lafarge for over 12years. Furthermore, the Board reviewed the relationship between Lafarge and BNP Paribas, one of the Groups corporate and investment banks, of which Michel Pbereau is Chairman. The fact that Lafarge can rely on a pool of banks competing with one other prevents the possibility of a relationship of dependency on BNP Paribas. Likewise, the fees that BNP Paribas receives from the Group account for an infinitesimal percentage of the banks revenues and do not create a relationship of dependency for Lafarge. In the light of these factors, and given the independent thinking that Michel Pbereau has shown in his capacity as Director, the Board has decided to consider him for a position as independent Director.
Preamble
In accordance with the principles of corporate governance, a Director carries out his duties in good faith, in such amanner as, in his opinion, best advances the interests of the Company, applying the care and attention expected of a normally careful person in the exercise of such office.
1. COMPETENCE
Before accepting office, a Director must ascertain that he is acquainted with the general and specific obligations assigned to him. He must, in particular, acquaint himself with legal and statutory requirements, the Company articles of association (statuts), current internal rules and any supplementary information that may be provided to him by the Board.
2. DEFENDING CORPORATE INTEREST
A Director must be an individual shareholder and hold the number of Company shares required by the articles of association (statuts), i.e., a number representing in total a nominal value of at least 4,572euros which amounts to 1,143shares, recorded in the share register in nominal form. Every Director represents the body of shareholders and must in all circumstances act in their interest and in that of the Company.
3. CONFLICTS OF INTEREST
Independence criteria
The Board of Directors has followed the recommendations of the Afep-Medef Code in its assessment of independent Directors, which are the following: not to be an employee or Corporate Officer of the corporation, or an employee or Director of its parent or a company that it consolidates and not having been in such a position over the previous five years; not to be a Corporate Officer of a company in which the corporation holds a directorship, directly or indirectly, or in which an employee appointed as such or a Corporate Officer of the corporation (currently in office or having held such office going back five years) is a Director;
A Director is required to inform the Board of any situation involving a conflict of interests, even one of a potential nature, and must refrain from taking part in any vote on any resolution of the Board where he finds himself in any such situation.
4. DILIGENCE
Parity
Concerning the male-female parity within our Board of Directors, 3 Directors out of the 18 members of the Board are women. The appointment of MrsColette Lewiner and
A Director must dedicate the necessary time and attention to his office, while respecting the legal requirements governing the accumulation of several appointments. He must be diligent and take part, unless impeded from doing so for any serious reason, in all meetings of the Board and, where necessary, in any Committee to which he may belong.
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5. INFORMATION CONFIDENTIALITY
A Director is bound by obligation to keep himself informed to be able to contribute in a useful manner on the issues under discussion on the Board agenda. With regard to information outside of the public domain and which he has acquired while in office, a Director must consider himself bound by a duty of confidentiality, which goes beyond the simple obligation to maintain discretion as provided for by law.
6. TRAINING
8. PRIVILEGED INFORMATION TRADING INSHARES
11. INFORMATION OF DIRECTORS
A Director must not carry out any transactions involving Company shares except within the framework of the rules determined by the Company. He must make a statement to Lafarge concerning any transactions involving Lafarge shares carried out by him within five days of any such transaction.
9. INDEPENDENCE
The Chairman ensures that the Directors receive in a timely manner, the information and documents needed to perform the full extent of their duties. Similarly, the Chairman of each of the said Committees ensures that every member of his Committee has the information needed to perform his duties. Prior to every meeting of the Board (or of every Committee), the Directors must thus receive in a timely manner a file setting out all the items on the agenda. Any Director who was unable to vote because he was not fully apprised of the issue has to inform the Board and insist on receiving the critical information. Generally, every Director receives all the information necessary to perform his duties and may arrange to have all the relevant documents delivered to him by the Chairman. Similarly, the Committee Chairmen must supply the members of the Board, in a timely manner, with the reports they have prepared within the scope of their duties. The Chairman ensures that members of the Board are apprised of all the principal relevant items of information, including any criticism concerning the Company, in particular, any articles of press or financial research reports. Meetings, during which any Director may make presentations and discuss with the Directors his field of activity, are held on a regular basis by the Chairman during or outside Board meetings. Every Director is entitled to request from the Chairman the possibility of special meetings with Group management in the fields of interest to them, without his presence.
Every Director may, in particular at the time of his election to the Board and where he deems it necessary, take advantage of training on specific aspects of the Company and the Group, its business activities, field of activity, organization and particular financial circumstances.
7. LOYALTY
A Director undertakes, in all circumstances, to maintain his independence of thought, judgment, decision and action and will resist all pressure, whatever the nature or origin. A Director undertakes to refrain from seeking or accepting from the Company, or any other company linked to it, either directly or indirectly, any personal benefits likely to be deemed to be of such a nature as might compromise his freedom of judgment.
10. AGREEMENTS IN WHICH DIRECTORS HAVE ANINTEREST
A Director is bound by an obligation of loyalty. He must not, under any circumstances, do anything liable to damage the interests of the Company or those of any of the other companies in the Group. He may not personally take on any responsibilities, within any undertakings or businesses having any activity competing with those of Lafarge without first notifying the Board of Directors thereof.
The Directors are required to inform the Chairman promptly of any relations that may exist between the companies in which they have a direct interest and the Company. The Directors must also, in particular, notify the Chairman of any agreement covered by articleL.225-38etseq. of the French Commercial Code that either they themselves, or any company of which they are Directors or in which they either directly or indirectly hold a significant number of shares, have entered into with the Company or any of its subsidiaries. These provisions do not apply to agreements made in the ordinary course of business.
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5.2Board and Committee rules and practices
5.2 Board and Committee rules and practices

5.2.1 Board of Directors Indicators
Number of meetings in 2010 Average attendance rate in 2010 Number of Directors* Percentage of independent Directors*
Information as of the date of this Annual Report.
8 93% 18 61% (11 out of 18)
Duties and responsibilities

In accordance with law and Lafarges articles of association, the Board of Directors determines the strategic direction of the Companys operations and supervises the implementation of such strategy. Subject to the powers expressly granted by law to Shareholders Meetings and within the scope of the Companys corporate purpose, the Board is vested with the power to deliberate and take decisions on any matter relating to the operations and business of the Company. The Board can conduct any audits and investigations as it deems appropriate. The Board of Directors is also granted specific powers by law, such as the calling of Shareholders Meetings, the approval of statutory and consolidated financial statements, the approval of management reports, the authorization of regulated agreements, the appointment of Directors in case of vacancy, the appointment of the Chairman and Chief Executive Officer and the power to set the Chief Executive Officers and the Directors compensation. It is a collegial body representing all the shareholders collectively, and is required to act at all times in the interests of the Company.
Committees. They are amended on a regular basis to take into account changes to the Companys organization and to keep in line with the best governance practice in the market. As regards the information presented to the Board, the Boards internal regulations state that at each meeting of the Board, the Chairman and Chief Executive Officer will give a summary of the Companys business during the previous period and of its financial situation, cash flow position and commitments. In addition, the Chairman and Chief Executive Officer will make a presentation of the main development projects in progress, and, depending on their state of advancement, of the principal industrial and financial data relating to such projects. In addition, the Directors Charter presented in Section5.1.4 describes in its article11 the terms for the information for Directors. In particular, it provides that Directors are apprised of the financial research reports. See Section5.1 (Board of Directors). Cases where prior approval of the Board is required for significant investments, divestments or financial transactions are described in the Boards internal regulations. They are presented in Section5.2.5 relating to the limitations of the Chairman and Chief Executive Officers powers. See Section5.2.5 (Powers of the Chairman and Chief Executive Officer).
In accordance with the Boards internal regulations, certain topics, depending on their nature, are first discussed within the relevant Committees before being submitted to the Board for approval. These mainly relate to: the review of financial statements, internal control procedures, auditor assignments and financial transactions for the Audit Committee; the election of new Directors, the appointment of senior managers and the composition of the Committees as regards the Corporate Governance and Nominations Committee; Directors and senior managers compensation as regards the Remuneration Committee and general strategic priorities of the Company and the Group for the Strategy, Investment and Sustainable Development Committee. The Committees carry out their duties under the supervision of the Board of Directors. In 2010, in addition to the approval of the quarterly, interim and annual financial statements, the preparation of the General Meeting, determination of the compensation of senior managers and other decisions in the ordinary course of business, the Board notably worked on: the follow up of developments and divestments, the Groups financing, bond issues and grants of stock-options and performance shares. The Board also debated on its organization and practices.
Boards internal regulations

The Boards internal regulations define the respective roles and duties of the Chairman and Chief Executive Officer and of the ViceChairman of the Board of Directors, the restrictions to the powers of the Chairman and Chief Executive Officer, the composition of the Board of Directors and its Committees, as well as the responsibilities of the various Board Committees. The internal regulations also specify the applicable rules for the evaluation of the Chairman and Chief Executive Officer, of the Board of Directors and of the Board
5.2.2 Committees
The Board of Directors has defined, in its internal regulations, the duties and responsibilities of its various Standing Committees, which are: the Audit Committee; the Corporate Governance and Nominations Committee; the Remuneration Committee; the Strategy, Investment and Sustainable Development Committee.
Main activities
Approximately one week prior to every Board meeting, every Director receives a file containing the agenda for the meeting, the minutes of the previous meeting and documentation relating to each topic on the agenda.
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The Committees are composed of a minimum of three members and a maximum of ten members nominated by the Board of Directors from among its members. The term of office of the Committee members is aligned with their Director office. These positions can be renewed simultaneously. The Committees are convened by their Chairmen or at the request of the Chairman and Chief Executive Officer by any means possible, including orally. TheCommittees may meet anywhere and using whatever
means, including videoconference or teleconference. A quorum consists of at least one-half of members present. At least 2meetings are held per year. The agenda for Committee meetings is drawn up by its Chairman. Minutes of the Committee meetings are drafted after each meeting. For the purpose of their work, the Committees may interview members of Executive Officers of the Group or any other Group manager. The Committees may also engage any expert and interview him about his report.
The Committees report on their work to the next meeting of the Board, by way of verbal statement, opinion, proposals, recommendations or written reports. The Committees may not handle on their own initiative any issue outside of their terms of reference, as defined below. They have no decision-making powers, merely the power to make recommendations to the Board of Directors.
a) Audit Committee
Indicators
Number of meetings in 2010 Average attendance rate in 2010 Number of members* Percentage of independent Directors*
* Information as of the date of this Annual Report.
6 93% 7 71% (5 out of 7)
Composition
The Audit Committee is chaired by MrsHlne Ploix. It is composed of the following members: Hlne Ploix, President (independent Director) Michel Bon (independent Director) Juan Gallardo (independent Director) Jrme Guiraud Michel Rollier (independent Director) Thierry de Rudder Vronique Weill (independent Director) Mr Jean-Pierre Boisivon was a member of the Audit Committee until the term of his office which ended at the General Meeting of May6, 2010. MrsVronique Weill became a member of the Audit Committee further to her appointment as Director by the General Meeting held on May6, 2010. Upon the Audits Committees proposal, the Board of Directors resolved on July 29, 2010, that each member of the Audit Committee had the required level of expertise in finance or accounting with regards to their education and professional experience, as described in the biographies set out in paragraph 5.1.2 (Information on Directors).
Duties and Responsibilities

The Audit Committee has the following duties:
FINANCIAL STATEMENTS
to ensure that the statutory auditors assess the relevance and consistency of accounting methods adopted for the preparation of the consolidated or statutory financial statements, as well as appropriate treatment of the major transactions at Group level; when the financial statements are prepared, to carry out a preliminary review and give an opinion on the draft statutory and consolidated financial statements, including quarterly, semiannual and annual statements prepared by management, prior to their presentation to the Board; for those purposes, the draft financial statements and all other useful documents and information must be provided to the Audit Committee at least 3 days before the review of the financial statements by the Board. In addition, the review of the financial statements by the Audit Committee must be accompanied by (i)a memorandum from the statutory auditors highlighting the key points of the results and the accounting options adopted; and (ii)a memorandum from the Finance Director describing the Companys exposure to risk and the major off-balance sheet commitments. The Audit Committee interviews the statutory auditors, the Chairman and Chief Executive Officer and financial management, in particular concerning depreciation, reserves, the treatment of goodwill and consolidation principles;
to review the draft interim financial statements, the draft half-year report and the draft report on results of operations prior to publication, together with all the accounts prepared for specific transactions (asset purchases, mergers, market operations, prepayments of dividends, etc.); to review, where necessary, the reasons given by the Chairman and Chief Executive Officer for not consolidating certain companies; to review the risks and the major off-balance sheet commitments.
INTERNAL CONTROL AND INTERNAL AUDIT
to be informed by the Chairman and Chief Executive Officer of the definition of internal procedures for the gathering and monitoring of financial information, ensuring the reliability of such information; to be informed of procedures and action plans in place in terms of internal control over financial reporting, to interview the persons in charge of internal control every half-year and at the end of each financial year and to examine the terms of engagement of the statutory auditors; to examine the Groups internal audit plan and interview the persons in charge of internal audit for the purposes of taking note of their programs of work and to receive the internal audit reports of the Company and Group or an outline of those reports, and provided the Chairman and Chief Executive Officer has been informed in advance,
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these hearings may take place, if necessary, without the Chairman and Chief Executive Officer being in attendance.
STATUTORY AUDITORS
the Group; if a meeting of the Committee cannot be held owing to an emergency, the Audit Committee is informed of such reasons; to review any financial or accounting issue submitted to it by the Board, the Chairman and Chief Executive Officer or the statutory auditors; to be informed by the Chairman and Chief Executive Officer of all third party complaints and of any internal information criticizing accounting documents or the Companys internal control procedures, as well as of procedures put in place for this purpose, and of the remedies for such complaints and criticism.
FRAUD
Main Activities
In 2010, the Audit Committee conducted a preliminary review of the 2009 statutory and consolidated annual financial statements, our statutory interim financial statements and of the quarterly financial consolidated statements for the first three quarters of 2010. The Audit Committee also reviewed the press releases and analyst slides concerning the publication of these financials statements. It worked on the Groups financing, liquidity and debt situation, as well as on the Companys credit ratings. The Committee also supervised the Groups internal control, risk management and internal audit. In particular, the Audit Committee reviewed the managements update of the Groups risk mapping and followed up the different action plans relating to the Groups priority risks. It also made regular updates on fraud and reviewed the auditors 2010 budget. An evaluation of the Audit Committees missions and operation was part of the annual self-assessment of the Board of Directors further described in paragraph 5.2.3 (Selfassessment by the Board, Committees, Chairman and Chief Executive Officer). As part of its preliminary review of the 2010 statutory and consolidated financial statements in February2011, and on the basis of presentations made by the finance management and external auditors, the Audit Committee reviewed the principal items of the closing, with a special focus on other operating income and expense, finance costs, tax, goodwill impairment tests, as well as major off-balance sheet commitments and exposure to risks. It also reviewed the managements assessment on internal controls over financial reporting which are described in detail in the Chairmans report on internal control procedures and considered the description of the Groups risk factors in the Annual Report. It also examined the auditors assessment on accounting options selected at closing, fairness of our financial statements and on our internal control over financial reporting. Finally, the Audit Committee reviewed the draft dividend payout plan for 2010 and issued recommendations to the Board. See Chapter 9 (Controls and Procedures).
to listen regularly to the statutory auditors reports on the methods used to carry out their work; to propose to the Board, where necessary, a decision on the points of disagreement between the statutory auditors and the Chairman and Chief Executive Officer, likely to arise when the work in question is performed, or because of its contents; to assist the Board in ensuring that the rules, principles and recommendations safeguarding the independence of the statutory auditors are applied and, for such purposes, the members of the Committee have, by way of delegation by the Board of Directors, the following duties:
supervising the selection or renewal procedure (by invitation to tender) of statutory auditors, while taking care to select the best bidder as opposed to the lowest bidder, formulating an opinion on the amount of the fees sought for carrying out the statutory audit assignments, formulating an opinion stating the reasons for the selection of statutory auditors and notifying the Board of its recommendation in this respect, supervising the questions concerning the independence, fees and duties of the statutory auditors.
FINANCIAL POLICY
to ensure that procedures are put in place for the receipt, retention and treatment of accounting and financial related complaints received by the Company; to be informed of possible cases of fraud involving management or employees who have a significant role in internal controls concerning financial reporting.
RISK MANAGEMENT
to ensure that appropriate means and measures are put in place by, or at the initiative of, the general management to enable identification, analysis and continuing improvement in the management of risks to which the Group may be exposed as a result of its operations; every year, to dedicate one of its meetings to Internal Control, Internal Audit and risk management. To enable the Audit Committee to carry out the full extent of its duties, the Boards internal rules state that all pertinent documents and information must be provided to it by the Chairman and Chief Executive Officer on a timely basis.
to be informed by the Chairman and Chief Executive Officer of the financial standing of the Group, the methods and techniques used to lay down financial policy, and to be regularly informed of the Groups financial strategy guidelines in particular with regard to debt and the hedging of currency risks; to be informed of the contents of official financial statements prior to their release; to be informed in advance of the conditions of the financial transactions performed by
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b) Corporate Governance and Nominations Committee
Indicators
4 100% 7 71% (5 out of 7)
Composition
The Corporate Governance and Nominations Committee is chaired by Mr Oscar Fanjul. It is composed of the following members: Oscar Fanjul, President (Vice-President independent Director) Philippe Dauman (independent Director) Grald Frre Juan Gallardo (independent Director) Michel Pbereau (independent Director) Michel Rollier (independent Director) Nassef Sawiris Mr Nassef Sawiris was appointed as a member of the Corporate Governance and Nominations Committee by the Board on November4, 2010. This appointment was made after the Committees final session for fiscal year 2010.
by the Company and ensuring that the Companys governance rules remain among the best in the market; reviewing proposals to amend the internal regulations or the Directors Charter to be submitted to the Board; submitting to the Board the criteria to be applied to assess the independence of its Directors; submitting to the Board, every year before publication of the Annual Report, a list of Directors qualifying as independent; preparing assessment of the work of the Board provided for by the Boards Internal Regulations; preparing changes in the composition of the Companys management bodies; giving its prior approval before the Corporate Executive Officer accepts a corporate office of a listed company that does not belong to the Group. The Committee has special responsibility for examining the succession plans for senior management members and the selection of new Directors. It also makes recommendations to the Board for the appointment of the ViceChairman and the Chairmen of other Standing Committees. The choices made by the Corporate Governance and Nominations Committee on
the appointments of the candidates to the office of Director are guided by the interests of the Company and all its shareholders. They take into account the balance of the Boards composition, in accordance with the relevant rules laid down in its internal regulations. They ensure that each Director possesses the necessary qualities and availability, and that the Directors represent a range of experience and competence, thereby enabling the Board to perform its duties effectively, while maintaining the requisite objectivity and independence with regard to the Chairman and Chief Executive Officer and any shareholder or any particular group of shareholders.
Main Activities
In 2010, the Corporate Governance and Nominations Committee focused mainly on the Boards composition, evaluation of the Chairman and Chief Executive Officer and self-assessment of the Board of Directors practice and organization as further described in 5.2.3 (Self-assessment by the Board, Committees, Chairman and Chief Executive Officer) below. It made recommendations on the reappointment of the Vice-Chairman of the Board and on the composition of the different Committees.
Duties And Responsibilities

The Corporate Governance and Nominations Committee is responsible, in cooperation with the Chairman and Chief Executive Officer, for ensuring compliance with the Companys corporate governance rules. In particular, it is responsible for: monitoring governance practices in the market, submitting to the Board the corporate governance rules applicable
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c) Remunerations Committee
Indicators
Information as of the date of this Annual Report.
3 89% 6 67% (4 out of 6)
Composition
The Remunerations Committee is chaired by Mr Oscar Fanjul. It is composed of the following members: Oscar Fanjul, President (Vice-President independent Director) Philippe Charrier (independent Director) Juan Gallardo (independent Director) Michel Pbereau (independent Director) Thierry de Rudder Nassef Sawiris
to define and implement the rules for the determination of the variable portion of their remuneration, while taking care to ensure these rules are compatible with the annual evaluation of the performances of senior management and with the medium-term strategy of the Company and Group; to deliver the Board with an opinion on the general allocation policy for stock subscription and/or purchase options and on the stock-option plans set up by the Chairman and Chief Executive Officer, and submit the allocation of stock subscription or purchase options to the Board; to be informed of the remuneration policy concerning the principal management personnel (aside from senior management) of the Company and other Group companies, and to examine the consistency of this policy; to suggest to the Board the total amount of Directors fees for proposal at the Companys Shareholders Meeting; to suggest to the Board the allocation rules for Directors fees and the individual payments to be made to the Directors, taking into account the attendance rate of the Directors at Board and Committee meetings;
to examine every matter submitted to it by the Chairman and Chief Executive Officer, relating to the questions above, as well as plans for increases in the number of shares outstanding owing to the implementation of employee stock ownership; to approve the information disclosed to the shareholders in the Annual Report on the remuneration of senior management members and the principles and methods determining the compensation of said persons, as well as on the allocation and exercize of stock subscription or purchase options by senior management.
Duties and Responsibilities

The Remunerations Committee is responsible for examining the compensation and benefits paid to Directors and members of senior management, and providing the Board with comparisons and benchmarking with market practices, in particular: to review and make proposals in relation to the remuneration of senior management members, both with regard to the fixed portion and the variable portion of said remuneration, and all benefits in kind, stock subscription and purchase options granted by any Group company, provisions relating to their retirements, and all other benefits of any kind;
Main Activities
During the course of 2010, the work of the Remunerations Committee was primarily focused on: stock-options and performance shares (2010 grants and validation of the performance conditions applicable to the 2009 grants), a review of the Directors fees budget and distribution for 2010, benchmark on executive officers remuneration, the Chairman and Chief Executive Officers remuneration (including the criteria for the variable part of such remuneration) and payment of an additional amount within the scope of the profit-sharing scheme.
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d) Strategy, Investment and Sustainable Development Committee
Indicators
3 91% 8 75% (6 out of 8)
Composition
The Strategy, Investment and Sustainable Development Committee is chaired by Mr Michel Pbereau. It is composed of the following members: Michel Pbereau, President (independent Director) Michel Bon (independent Director) Philippe Charrier (independent Director) Philippe Dauman (independent Director) Paul Desmarais, Jr Pierre de Lafarge (independent Director) Colette Lewiner (independent Director) Nassef Sawiris MrsColette Lewiner became a member of the Strategy, Investment and Sustainable Development Committee further to her appointment as Director by the General Meeting held on May6, 2010.
Duties And Responsibilities

The Strategy, Investment and Sustainable Development Committee is responsible for: advising the Board on the main strategic priorities of the Company and Group and on the investment policy and important strategic issues put before the Board; reviewing in detail and giving the Board its opinion on the issues submitted to it relating to major investments, the creation and upgrading of equipment, external growth, or divestments and asset or share sales; ensuring that sustainable development and societal responsibility are a component of Lafarges long-term strategy and constitute one of the aspects of its economic development.
Main Activities
Since 2004, the Strategy, Investment and Sustainable Development Committee has been open to all Directors wishing to attend its meetings. In 2010, the Strategy, Investment and Sustainable Development Committee discussed the Groups strategy with a special emphasis on the Groups divestment program in order to reinforce the Groups financial structure. It also performed a benchmark of Lafarges performance compared to its competitors. In particular, the Committee discussed the impact of the economic crisis on the Groups Strategy. The interconnection between the effects of climate change and the Groups strategy was also discussed.
5.2.3 Selfassessment bythe Board, Committees, Chairmanand ChiefExecutive Officer

The Boards internal regulations provide that the Board is to hold a discussion at least once a year about its practices with a view to assessing and improving their efficiency and to proceed with the evaluation of the Chairman and Chief Executive Officer. A formal assessment of its operations, the verification that important issues are properly prepared and debated within the Board, and the effective participation and involvement in the deliberation of each Director, is to take place at least every 2years using a questionnaire approved by the Board. In 2010, theBoard initiated a debate on its organization and practices in accordance with its internal regulations. This debate was led by the Vice-Chairman of the Board, first within the Corporate Governance and Nominations Committee and then within the Board of Directors, following interviews with each of
the Directors. This review also included an assessment of each of the Committees. The outcome of the comments and discussions resulting from this assessment was that the Directors consider that the organization and practices of the Board and its Committees are globally very satisfactory. The principal findings and recommendations for potential optimization are as follows: concerning the composition of the Board, the Directors noted the sufficient diversity of background of its various members and how the necessary balance between Directors qualifying as independent and shareholder representatives had been successfully achieved. A reduction in the overall number of Directors as well as an increase in the number of women appointed to the Board was identified as a potential improvement for the future; the organization of the Board and its Committees was considered very satisfactory. The breadth of topics covered during meetings was considered adequate, topics being handled effectively although the
length of debates could be optimised further depending on the nature of topics under discussion. The involvement of the Board in the definition of the Groups strategy and the level of information received on the financial condition of the Company were perceived as very positive. The Committees organization and in particular the allocation of work between Committees and the Board as well as the nature and extent of reported information were considered appropriate. A reinforcement of the role of the Strategy Committee and of the frequency of discussions on remunerations could be envisaged; members of the Board noted their appreciation of how discussions of the Board were chaired by the Chairman and Chief Executive Officer regarding direction of debates as well as the quality of his contributions, in particular on the Companys strategy, position and global organization.
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Michel Bon

5.2.4 Summary table on the attendance at Board andCommittee meetings

The following table shows the number of Board and Committee meetings during fiscal year 2010, as well as Director membership and attendance at these various meetings.
STRATEGY, CORPORATE INVESTMENT GOVERNANCE AND ATTENREMUNEATTEN- AND SUSTAINABLE ATTENNOMINATIONS DANCE RATIONS DANCE DEVELOPMENT DANCE COMMITTEE RATE (%) COMMITTEE RATE (%) COMMITTEE RATE (%)
ATTENATTENBOARD OF DANCE AUDIT DANCE DIRECTORS RATE (%) COMMITTEE RATE (%)
Number of meetings in 2010 Bruno Lafont Oscar Fanjul Jean-Pierre Boisivon * Philippe Charrier Bertrand Collomb Philippe Dauman Paul Desmarais Jr Grald Frre Juan Gallardo Jrme Guiraud Bernard Kasriel * Pierre de Lafarge Colette Lewiner ** Michel Pbereau Hlne Ploix Michel Rollier Thierry de Rudder Nassef Sawiris Vronique Weill **
* **
8 8 8 5/5 8 8 8 7 7 8 7 8 4/5 8 3/3 6 8 6 8 6 3/3 100 100 100 100 100 100 88 88 100 88 100 80 100 100 75 100 75 100 75 100
6 3/3 6 5 6 6 5 5 3/3 100 100 83 83 83 100 100 100
4 4 4 4 4 4 4 100 100 100 100 100 100
3 3 3 3 3 3 1 100 33 100 100 100 100
3 3 3 3 2 3 2/2 3 2 67 100 100 100 100 67 100 100
Directors whose term of office ended on May6, 2010. Directors appointed on May6, 2010.
5.2.5 Powers oftheChairman andChief Executive Officer

The Chairman and Chief Executive Officer represents the Company in its relations with third parties. He has broad powers to act on behalf of our Company in all circumstances. In addition, as Chairman of the Board, the Chairman and Chief Executive Officer represents the Board of Directors. He organizes and directs the work of the Board in accordance with the provisions of its internal regulations. The Companys strategic priorities are proposed by the Chairman and Chief Executive Officer and are discussed annually by the Board of Directors. Specific strategic
presentations may be submitted to the Board of Directors as often as necessary. The Companys strategic priorities are approved by the Board of Directors. Limitations of the Chairman and Chief Executive Officers powers are contained in the Boards internal regulations and concern investment and divestment decisions, as well as certain financial transactions.
Investments and divestments

The Boards internal regulations stipulate that investment and divestment decisions must be submitted to the Board of Directors as follows: as regards transactions, in line with our strategies as previously approved by the Board:
submission for information purposes following the closing of the transaction: for transactions below 200million euros, submission for approval of the principle of the transaction, either during a Board meeting or in writing, enabling Directors to comment on the proposed transaction or request a Board decision: for transactions between 200 and 600millioneuros, submission for prior approval of the transaction and its terms: for transactions in excess of 600millioneuros;
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as regards transactions that do not fall within the scope of the Companys strategy as previously defined by the Board: submission for prior approval of transactions exceeding 100millioneuros. The above amounts refer to the Companys total commitment including assumed debt and deferred commitments.
of Directors and the General Meeting, are subject to the following rules: financing transactions carried out through bilateral or syndicated credit facilities for an amount below 2billion euros are submitted to the Board of Directors by the Chairman and Chief Executive Officer for information purposes when the transaction closes. Those transactions exceeding 2 billion euros are submitted to the Board for prior approval; bond issues, which may be decided by the Chairman and Chief Executive Officer pursuant to a Board delegation, must be submitted to the Board as follows:
Financial transactions
The Boards internal regulations provide that transactions relating to the arrangement of debt, financing and liquidity that can be decided by Chief Executive Officers by law, or pursuant to a delegation by the Board
for information purposes following the closing of the issue: for bond issues below 300million euros, for information purposes prior to the launch of the issue: for bond issues between 300million and 1billioneuros, the Chief Executive Ofcer is in charge of dening the terms and conditions of the issue, for prior approval of the issue and its terms: for bond issues in excess of 1billion euros, for prior approval of the issue and its terms for bond issues convertible or exchangeable into shares.
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5.3Executive Officers
5.3 Executive Officers

The Executive Officers include Bruno Lafont, our Chairman and Chief Executive Officer, and the members of the Executive Committee. The Executive Committee includes the following members: Jean-Carlos Angulo: Executive Vice-President Cement, 61, rue des Belles Feuilles, 75116 Paris, France. Jean-Carlos Angulo (born in 1949) is a graduate from the cole des mines de Nancy (France) and from the European Business Institute, and has been with the Group since 1975. From 1971 to 1974, he was a project engineer in the aeronautics industry with the Socit Europenne de Propulsion in Bordeaux. He joined Lafarge in 1975 as Project Manager then as Project Director of the Groups subsidiaries specialized in engineering and later as Director of Lafarge Consulteria e Estudos in Brazil. In 1984, he joined Lafarge Aluminates as Head of Development. From 1990 to 1996, he served as Chief Executive Officer of Lafarge in Brazil and as President for South and Latin America. In 1996, he was appointed Chief Executive Officer of Lafarge Ciments France. From 2000 to August2007, he was President of Cement Division operations in Western Europe and Morocco. He has been Executive Vice-President Cement and a member of the Executive Committee since September1, 2007. Isidoro Miranda: Executive Vice-President Cement, 61, rue des Belles Feuilles, 75116 Paris, France. With a doctorate (PhD) in engineering from Navarre University (Spain), Senior Visiting Scholar at Stanford (US) and an MBA from INSEAD, Isidoro Miranda (born in 1959) began his career with a strategic consulting firm in London and Paris. He joined the Group in 1995 as the Director of Group Strategic Studies, before being appointed Chief Executive Officer of Lafarge Asland, our Cement subsidiary in Spain. In 2001, he was appointed Executive Vice-President of the Cement Division and a member of the Executive Committee. From May 2003 to August 2007, he acted as Executive Vice-President Gypsum. He has been Executive Vice-President Cement since September1, 2007. Guillaume Roux: Executive Vice-President Cement, 61, rue des Belles Feuilles, 75116 Paris, France. A graduate of the Institut dtudes politiques in Paris, Guillaume Roux (born in 1959) joined the Group in 1980 as an internal auditor with Lafarge Ciment, France. He was Chief Financial Officer of the Biochemicals Unit in the United States from 1989 to 1992, before returning to Lafarge headquarters as project manager for the Finance department. In 1996, he returned to the United States as Vice-President of Marketing for Lafarge North AmericaInc. In 1999, he was appointed Chief Executive Officer of Lafarges operations in Turkey and then in 2001, Executive Vice-President of the Cement Divisions operations in South-East Asia. Guillaume Roux has been Executive Vice-President Cement and a member of the Executive Committee since January1, 2006. Thomas Farrell: Executive Vice-President Aggregates &Concrete, 61, rue des Belles Feuilles, 75116 Paris, France. A graduate from Brown University with a PhD from Georgetown University (J.D), Thomas Farrell (born in 1956) began his career as a lawyer with Shearman &Sterling. He joined Lafarge in 1990 as Director of Strategic Studies for the Group. From 1992 to 1994, he managed an operating unit of Lafarge Aggregates &Concrete in France. In 1996, he became Vice-President/General Manager of Aggregates, Concrete &Asphalt Divisions operations in South Alberta (Canada). In 1998, he was appointed Chief Executive Officer of Lafarge in India. From 2002 to 2006, he was Executive Vice-President of Lafarge North AmericaInc. and President of the Aggregates, Concrete &Asphalt Divisions operations for Western North America. From 2006 to August2007, he was President of the Aggregates, Concrete &Asphalt Division in North America. Thomas Farrell was appointed Executive Vice-President Aggregates &Concrete and became a member of the Executive Committee on September1, 2007. He is a Director of the National Stone Sand and Gravel Association and of the American Road and Transportation Builders Association, both USindustry associations. Grard Kuperfarb: Executive Vice-President Aggregates &Concrete, 61 rue des Belles Feuilles, 75116 Paris, France. Grard Kuperfarb (born in 1961) graduated from the cole des mines de Nancy (France). He also holds a Masters degree in Materials Science from the cole des mines de Paris and a MBA from the cole des Hautes tudes Commerciales (HEC). He has been with the Group since 1992. He began his career in 1983 as an engineer at the Centre de mise en forme des matriaux of the cole des mines de Paris, before joining the Composite materials Division at Ciba group in 1986, where he held sales and marketing functions. In 1989, he joined a strategy consulting firm in Brussels and Paris. He joined Lafarge in 1992 as Marketing Director for the Refractories business then became Vice-President for strategy at Lafarge Specialty Materials. In 1996, he became Vice-President Ready-mix Concrete strategy in Paris. In 1998, he was appointed Vice-President/General Manager for the Aggregates &Concrete Business in Southwest Ontario (Canada) before heading the Performance group at Lafarge Construction Materials in North America in 2001. He joined the Aggregates &Concrete Division in Paris as Senior Vice-President Performance in 2002. From 2005 to August2007, he was President of the Aggregates &Concrete Business for Eastern Canada. Grard Kuperfarb was appointed Executive Vice-President Aggregates &Concrete and became a member of the Executive Committee on September1, 2007. Christian Herrault: Executive Vice-President Gypsum, 61, rue des Belles Feuilles, 75116 Paris, France. A graduate of the cole Polytechnique (1972) and the cole nationale suprieure des mines de Paris, Christian Herrault (born in 1951) joined the Group in 1985, taking over responsibility for strategy and development at the Bioactivities Unit. Between 1987 and 1992, he acted as Chief Operating Officer for the Seeds Unit, initially in the United States, then in France, and managed the Glutamates business from 1992 to 1994. In 1995, he was appointed Chief Executive Officer of the Aluminates &Admixtures Unit (no longer part of the Group). In 1998, he was appointed Executive Vice-President Organization and Human Resources and joined the Executive Committee. He has been Executive VicePresident Gypsum since September 1, 2007, and is still a member of the Executive Committee. He is the Chairman of the Board of Directors of the cole des mines de Nantes. Jean-Jacques Gauthier: Chief Financial Officer and Executive Vice-President, 61, rue des Belles Feuilles, 75116 Paris, France. Jean-Jacques Gauthier (born in 1959) joined the Group in February2001. After graduating in law and economics, he began his career with Arthur Young. Between 1986 and 2001, he held several positions at the Matra group in France and the United States. In 1996, he
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5.3Executive Officers
was appointed Chief Financial Officer of the Franco-British venture Matra Marconi Space and between 2000 and 2001 he served as CFO for Astrium. After joining Lafarge in 2001, Jean-Jacques Gauthier became Chief Financial Officer and a member of the Executive Committee. Eric Olsen: Executive Vice-President Organization and Human Resources, 61, rue des Belles Feuilles, 75116 Paris, France. Eric Olsen (born in 1964) is a graduate in finance and accounting from Colorado University and holds a Masters degree awarded by the cole des Hautes tudes Commerciales (HEC). He has been with the Group since 1999. He began his career as a senior auditor with Deloitte &Touche in New York. From 1992 to 1993, he worked as senior associate at Paribas bank in Paris and partner at the consulting firm Trinity Associates in Greenwich, Connecticut, from 1993 to 1999. He joined Lafarge North AmericaInc. in 1999 as Senior Vice-President Strategy and Development. In 2001, he was appointed President of the Cement Division for
Northeast America and Senior Vice-President Purchasing for Lafarge North AmericaInc. He was appointed Chief Finance Officer of Lafarge North AmericaInc. in 2004. He was appointed Executive Vice-President for Organization and Human Resources and became a member of the Executive Committee on September1, 2007. Jean Desazars de Montgailhard: Executive Vice-President for Strategy, Development and Public Affairs, 61, rue des Belles Feuilles, 75116 Paris, France. Jean Desazars de Montgailhard (born in 1952) graduated from the Institut dtudes politiques de Paris and the cole nationale dadministration (ENA) with a Masters degree in economics. He joined the Group in 1989. He began his career at the French Ministry of Foreign Affairs in Madrid, Stockholm, Washington DC and Paris, before joining Lafarge Cements as Strategy Director in Paris and then Lafarge Asland in Spain as Communication and Marketing Director. From 1996 to 1999, he acted as Regional
President for Asia in Singapore, then in Paris until 2006 for Africa. He was appointed as Executive Vice-President, Strategy and Development for the Group in 2006. He has been Executive Vice-President Strategy, Development &Public Affairs and a member of the Executive Committee since January1, 2008. He is a Director of COE Rexecode (France). There are no conflicts of interest affecting members of the Executive Committee between any duties owed to us and their private interests. To our knowledge, during the previous five years, no member of the Executive Committee has been convicted of fraudulent offences, involved in a bankruptcy, receivership or liquidation, subject to official public incrimination and/or sanctions or disqualified by a court from acting as a Director or from acting in the management or conduct of the affairs of any issuer.
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5.4Compensations and benefits
5.4 Compensations and benefits

5.4.1 Compensations paid toDirectors Directors fees
The General Meeting held on May6, 2010 set the maximum aggregate amount of Directors fees at 700,000euros. The envelope had not been increased since the General Meeting held on May28, 2001. This increase of 15% of the maximum aggregate amount reflects the Boards willingness to continue to offer Lafarge a high standard of governance with high profile and committed Directors.
In addition, the Board of Directors adopted on March24, 2010 the following rules: Each Director is currently entitled to receive a fixed fee of 17,000euros per year (increased by 5,000 euros for the Committee Chairmen and by 15,000 for the Vice-Chairman). A Director who is appointed or whose office ends during the course of the year is entitled to 50% of the fixed fee.
a variable fee of 1,200euros is payable to each Director for every Board of Directors meeting or of one of its Committees attended. Some Directors who must travel from distant locations are eligible for a double variable fee. The total amount of Directors fees paid in 2011 (with respect to the 2010 fiscal year) was 683,000euros. In 2010 (with respect to the 2009 fiscal year) it amounted to 609,787euros, equivalent to the total amount paid in 2009 (with respect to the 2008 fiscal year).
DIRECTORS FEES FOR 2008 PAIDIN2009(EUROS)
DIRECTORS
Bruno Lafont Oscar Fanjul Jean-Pierre Boisivon Michel Bon Philippe Charrier Bertrand Collomb Philippe Dauman Paul Desmarais, Jr. Grald Frre Juan Gallardo Jrme Guiraud Bernard Kasriel Colette Lewiner Hlne Ploix Michel Rollier Thierry de Rudder Nassef Sawiris Vronique Weill (2) TOTAL
(1) (1)
26,600 60,000 18,100 37,400 33,800 26,600 50,600 38,600 31,400 62,600 33,800 13,300 30,200 14,500 41,200 38,800 35,000 36,200 38,600 15,700 683,000
23,326 45,152 29,098 31,407 32,562 23,326 40,643 29,098 26,789 63,732 29,098 23,326 25,635 N/A 37,528 32,910 30,253 36,025 49,879 N/A 609,787
24,652 46,672 29,356 31,708 28,180 24,652 36,412 34,060 11,150 52,875 13,502 24,652 27,004 N/A 40,224 33,168 14,678 31,708 48,171 N/A 609,794(3)
Pierre de Lafarge
(2)
Michel Pbereau
(1) Directors whose term of office expired on May6, 2010. (2) Directors appointed on May6, 2010. (3) Including fees paid to Directors whose term of office expired before 2010.
According to Group policy, no Directors fees have been paid with respect to the 2010 fiscal year either to LafargeS.A. Senior Officers or to Group Executive members for offices they may hold in any Group subsidiary. The compensation paid to Directors with respect to the 2010 fiscal year comprised only fees (excluding Chairmans compensation).
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5.4.2 Compensation and benefits paid totheChairman and ChiefExecutive Officer Fixed and variable compensation paid to the Chairman and Chief Executive Officer
Our Remuneration Committee is responsible for submitting to our Board of Directors a remuneration policy for our Chairman and Chief Executive Officer. The Remuneration Committee, in establishing the policy, seeks guidance from outside consultants on the market practices of comparable companies. These Board of Directors decisions are taken with Bruno Lafont not attending the discussion. The compensation paid to the Chairman and Chief Executive Officer comprises a fixed portion and a performance-related portion.
2010 FIXED COMPENSATION
qualitative objectives set at the beginning of the year. The Board of Directors decided to set the percentage of the 2010 performancerelated pay due to our Chairman and Chief Executive Officer at 52.4 % of his maximum performance-related portion, which amounts to 796,100 euros, paid in2011. Thisperformance corresponds to an achievement of 36.5 % of financial objectives and at 100 % of qualitative objectives. The 2010 financial objectives were: evolution of the earnings per share; generation of Free cash flow; EBITDA; ROCE (Return on capital employed); change in Lafarges performance compared to competitors. The 2010 qualitative objectives were related to: Groups strategy, taking into account the challenge of climate change; financial structure; health and safety; development of the management team;
Long-term incentive based ontheCompanys performance

On November 5, 2009, the Board of Directors decided to grant a long-term incentive to the Chairman and Chief Executive Officer Bruno Lafont, based on the Companys performance over a period of 3 to 7 years. Such compensation will be due and payable between 2012 and 2016 insofar as the Companys performance as benchmarked against a group of peer companies in the sector remains in the top half (external performance condition). Provided this external performance condition is met, the amount of the long-term incentive will depend on the achievement of free cash flow and return on capital employed (ROCE) pre-defined objectives over a given period, such objectives corresponding to the Companys strategic objectives as set by the Board and already used in relation to the Groups senior management (internal performance conditions). The amount of the long-term incentive will be reduced by a quarter for each internal performance condition which remains unsatisfied. Each performance condition (external and internal) will be tested every two years over the period until it is declared as being fulfilled. If all performance conditions are satisfied, the long-term incentive will amount to 1,500,000 euros as positively or negatively adjusted based on the evolution of the total shareholder return since the beginning of 2010 (percentage calculated by taking into account dividend and share price evolution).
In 2010, his fixed annual compensation was raised to 950,000 euros. There had been no change since his appointment as Chairman and Chief Executive Officer on May 3, 2007.
2010 PERFORMANCE-RELATED PORTION
The performance-related portion could be a maximum of 160% of his fixed compensation. 75% of the performance-related pay is based on the financial results of the Group in comparison to objectives set at the beginning of the year, and 25% is based on his individual performance also determined by reference to
relations with investors and shareholders.
THE COMPENSATION PAID TO OUR CHAIRMAN AND CHIEF EXECUTIVE OFFICER FOR 2010 AND 2009 WAS AS FOLLOWS:
2010 AMOUNT
(thousand euros)
2009 AMOUNT PAID DUE PAID
DUE
Bruno Lafont, Chairman and Chief Executive Officer

Fixed compensation Variable compensation Exceptional compensation Lafarge S.A. Directors fees Benefits in kind (Company car) TOTAL 950 796 N/A 27 5 1,778 950 1,016 N/A 23 5 1,994 900 1,016 N/A 23 5 1,944 900 919 N/A 25 5 1,849
In 2010, 100,000 stock-options have been granted to the Chairman and Chief Executive Officer. These stock-options are fully subject to performance conditions.
(euros)
VALUATION OF OPTIONS GRANTED IN 2010*
B. Lafont
*
1,145,000
Stock-options fair value are calculated at grant date using the Black & Scholes model. See Notes to the consolidated statements No. 2.24 and 21 (Share-based payments).
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The information on stock-options granted in 2010 to the Chairman and Chief Executive Officer (as well as their valuation) are detailed in Section 5.5.2. (Stock-Options plans). The company considers that these items must not be aggregated because the amount of stockoptions valuation at fair value at the grant date is not a compensation paid to the beneficiary. No performance shares have been granted to the Chairman and Chief Executive Officer in 2010.
of respectively, not acting in concert, more than 30% and 20% of the Companys voting rights or (ii) the fact that another shareholder or several shareholders acting in concert hold more than 50% of the Companys voting rights) or after a change in the Companys strategy; the second condition is performance based. This term will be satisfied and severance compensation would be paid if two of the following three criteria are satisfied. If only one criterion out of the three is satisfied, the condition will only be partially satisfied and only one half of the severance compensation would be paid. If none of the criteria are satisfied, the condition would not be satisfied and no severance compensation would be paid. The three criteria to be satisfied, over the last three fiscal years preceding the employment contracts termination, are as follows:
on average, over the last three fiscal years: the after-tax return on invested capital is greater than the Average Weighted Cost of the Capital. Here, the term Average Weighted Cost of the Capital means the sum of the cost of debt multiplied by the total debt divided by the total of the capital and cost of equity multiplied by the equity and divided by the total of capital (Group gures), on average, over the last three fiscal years: the ratio EBITDA/Turnover is strictly greater than 18% (Group gures), on average, over the last three fiscal years: the average percentage of given bonuses under the Employment Contract or the Term of Ofce is greater than 60% of the maximum bonus. The amount of such severance compensation is a maximum equal to two years of total gross remuneration received by Bruno Lafont for the most favourable of the three years preceding the date of his dismissal notice. In order to ensure that the total amount of the compensation due to Bruno Lafont in case of a departure is within such limit, such severance compensation would be reduced:
by all the amounts received by Bruno Lafont during and based on his dismissal notice period. A job elimination or a decrease in the level of responsibilities would also constitute a case of dismissal creating a right to dismissal compensation. In addition, at the Boards request and in order to ensure his presence to successfully carry out the strategy undertaken by the Group, Bruno Lafont has agreed not to leave the Company before June 30, 2011. As consideration for such commitment, the Company has agreed, in the case of dismissal other than for gross negligence or serious misconduct that Bruno Lafonts dismissal notice may run until such date. The amendments to Bruno Lafonts employment contract resulting from the decisions made by the Board and mentioned above have been presented and approved by the shareholders general meeting held on May 6, 2009.
Employment contract and Severance arrangements fortheChairman andChiefExecutive Officer

EMPLOYMENT CONTRACT OF BRUNO LAFONT
To achieve compliance with the Afep-Medef Code, the principle to terminate Bruno Lafonts employment contract on June 30, 2011 had been agreed between him and the Board of Directors in February 2009. Since then the Autorit des marchs financiers considers that a company is complying with the Afep-Medef Code if it explains that it is maintaining an executives employment contract because of the persons length of service as an employee and his personal circumstances. The employment contract of Bruno Lafont, originally signed on January 1, 1983, had been suspended as from January 1, 2006, the date of his appointment as Chief Executive Officer.
SEVERANCE COMPENSATION AND AMENDMENTS TO THE EMPLOYMENT CONTRACT
Pensions and other retirement benefits for the Chairman andChief Executive Officer
Bruno Lafont is eligible for a supplementary defined benefits plan (through two collective plans applicable to Senior Management). In principle, a person is eligible for this plan only if he is still working in the Company upon his retirement date or if he ends his career in the company after 55 years old on the initiative of the latter. As far as Bruno Lafont is concerned, and due to his 27 years of service within the Group, this plan would provide him with a pension equal to 26% of his reference salary (average of the variable and fixed compensation over the last 3 years) in excess of 8 times the annual French social security cap to which an additional 13% would be added in excess of 16 times the annual French social security cap. In February 2009, the Board of Directors reviewed the recommendations of the AfepMedef Code, and checked that the estimated pension amount paid to the Chairman and Chief Executive Officer related to these two plans would remain below 40% of his last total cash compensation (variable and fixed). This cap will be applied as the rule adopted by the Board of Directors for any future Senior Officer.
If Bruno Lafonts contract were to become valid again after his term of office as Chairman and Chief Executive Officer, in the event of dismissal (for any reason other than serious misconduct or gross negligence), he would receive contractual severance compensation, the conditions of which have been reviewed by the Board in order to take into account the Afep-Medef recommendations on the subject. Such severance compensation would therefore be due only insofar as all terms have been fulfilled: the first condition is the event giving rise to the right to severance compensation. The dismissal must take place after a change of control (meaning (i) a change in the Companys capital distribution characterized by the holding by the Groupe Bruxelles Lambert and NNS Holding Srl
by the amount of the contractual dismissal compensation due pursuant and in compliance with the terms of the applicable collective bargaining agreement; and
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There is no specific pension plan for Corporate Officers.

SUMMARY
SEVERANCE ARRANGEMENTS PAID OR TO BE PAID IN CASE OF TERMINATION OR CHANGE OF POSITION YES NO
CORPORATE EXECUTIVE OFFICER
EMPLOYMENT CONTRACT YES NO
SUPPLEMENTARY PENSION PLAN YES NO
NON COMPETITION CLAUSE PAYMENTS YES NO
Bruno Lafont * Chairman and Chief Executive Officer

*
X (see above)
X (see above)
X (see above)
Bruno Lafont was appointed as Director on May 25, 2005, Chief Executive Officer on January 1, 2006 and Chairman and Chief Executive Officer on May 3, 2007. His Director office was renewed by the General Meeting on May 6, 2009.
5.4.3 Total compensation of the Chairman and Chief Executive Officer in2010 and 2009, pensionandotherretirement benefits
The Executive Officers include Bruno Lafont, Chairman and Chief Executive Officer, and the members of the Executive Committee.
2010 2009
Average number of persons
(1)
10.7 10.1
(3)
11.0 8.9 21.4
Amount paid (inmillion euros) (2) Pension commitment (inmillion euros)
30.2
(1) All those who were Executive Officers for the period of the year during which they were Executive Officers. (2) This amount includes: - the fixed compensation of Executive Officers for the related year; - a qualitative performance component, a financial performance component and a collective performance component as the variable portion paid for the preceding year; - directors fees paid by LafargeS.A. to Bruno Lafont. (3) The evolution of the global commitment between 2010 and 2009 is mainly explained by an increase of the defined benefit obligation due to a decrease of the discount rate from 5% to 4.75%
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5.5Long-term incentives (stock-optionsandperformanceshareplans)
5.5 Long-term incentives
(stock-optionsandperformanceshareplans)
Chairman and Chief Executive Officer must be conditional upon performance requirements. This is also the case for performance shares, which may now be granted also to the Chairman and Chief Executive Officer. All stock options granted to the Chairman and Chief Executive Officer in 2010 and 2011 were subject to performance requirements. The Board of Directors did not grant any stock options to the Chairman and Chief Executive Officer in 2009. In addition stock options and performance shares, granted to members of the Executive Committee are also conditional upon performance requirements, in an increasing proportion since 2003. In 2011, this proportion reached 80%. It was 70% in 2009 and 2010, 50% from 2005 to 2008, and 30% for the years 2003 and 2004. Stock options and performance shares granted to other employees is also conditional upon performance requirements, in a proportion depending on the employees level of responsibility. In 2011, the proportion of grants subject to performance requirements was at least 25%.
APPLICABLE PERFORMANCE CONDITIONS
5.5.1 Grant policy Performance conditions andholdingrule Grant policy

The objective of the Groups remuneration policy is to reward and retain key talent while providing managers and employees with an opportunity to share in the success of the Groups business through the grant of stock-options and performance shares (free allotment of shares), which are connected to the Groups long-term strategy. Stockoptions are granted to senior management and the Chairman and Chief Executive Officer. Performance shares are granted to middle management, expatriates and other employees in recognition of their commitment and achievements for the Group. Since the Board of Directors meeting held on March 15, 2011, performance shares may also be granted to the Chairman and Chief Executive Officer and senior management. Stock-options and performance shares are granted by the Board of Directors upon a recommendation of the Remuneration Committee. Regarding stock-options, the Groups practice since 2002 is to allocate subscription options. No discount is applied to the exercise price. Following the Afep-Medef Code recommendations, the Board of Directors decided to limit the number of stock-options or performance shares attributable to Corporate Executive Officers. Under this rule, the proportion of options and performance shares attributable to Corporate Executive Officers may not exceed respectively 10% of the total amount of options and 10% of the total amount of performance shares granted during any given fiscal year.
level of responsibility of the eligible population. These criteria also applied to stock-options granted to the Chairman and Chief Executive Officer in 2010 (as the Chairman and Chief Executive Officer did not receive any stockoptions in 2009). In 2007 and 2008, stock-options granted to the Chairman and Chief Executive Officer, members of the Executive Committee and some senior executives had for sole performance condition cost reduction targets as part of the Excellence 2008 program. From 2007 until 2010, the performance condition applicable to stock-options and performance shares granted to employees (other than members of the Executive Committee and some senior executives) was the achievement of cost reduction targets as part of the Excellence 2008 program (for 2007 and 2008 grants) and the Excellence 2010 program (for 2009 and 2010 grants). All performance conditions based on the cost reduction targets set out in the Excellenceprograms have been met.
Holding rule - hedging instruments

The Chairman and Chief Executive Officer is required to hold 50% of shares resulting from the exercise of stock-options for each allocation and 50% of performance shares acquired at the end of the holding period for each allocation, until the shares held by the Chairman and Chief Executive Officer (whatever their origin) represent an aggregate amount equivalent to 3 years of their last fixed pay (based on a calculation taking in account the share price (i) at the time of each exercise of stock-options or (ii) at the end of the holding period for performance shares). This rule is applicable to all exercises of options carried out for options awarded that have not yet been exercised and to all performance shares granted yet to be acquired, until the end of the Chairman and Chief Executive Officers mandate. In addition, each member of the Executive Committee is required to (i) invest one third of the net theoretical gain after tax realised upon exercise of his stock purchase or subscription options in Lafarge shares each year and (ii)
Performance shares and stock-options granted in 2011 are conditional upon several performance criteria for all beneficiaries. These criteria are both external based on the Groups performance compared to competitors and internal based on free cash flow and return on capital employed. The proportion of performance shares and stockoptions subject to these performance criteria depends on the level of responsibility of the eligible population, as described above. In 2009 and 2010, stock-options granted to members of the Executive Committee and some senior executives were also conditional upon several performance criteria, which were external based on the Groups performance compared to competitors and internal based on free cash flow, return on capital employed, Ebitda or cost reduction targets. These criteria were alternate or combined in part, depending on the grant year and on the
Performance conditions
PROPORTION OF OPTIONS OR PERFORMANCE SHARES SUBJECT TO PERFORMANCE CONDITIONS
In line with the Afep-Medef Code, the Groups policy approved by the Board of Directors in 2009 is that all stock options granted to the
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hold one third of the performance shares acquired at the end of the holding period for each allocation, until each holds in aggregate the equivalent in value of his fixed annual remuneration in Lafarge shares and until the
term of his position as member of the Group Executive Committee. The Chairman and Chief Executive Officer and members of the Executive Committee
must not use hedging instruments in relation to options and performance shares granted.
5.5.2 Stock-options plans

Total stock-options outstanding at the end of December2010 were 9,113,828 representing approximately 3.18% of our outstanding shares at December31, 2010. As of the date of this Annual Report all the stock-option exercise prices of the options attributed and capable of being exercised are above the Lafarge share price.
TERMS OF EXERCISE
Stock-options granted between December 1997 and May 2001 were subject to a five-year vesting period. SinceDecember2001, the vesting period has been reduced to 4years. This vesting period also applied to the stockoptions granted by the Board as part of the LEA 2002 plan (share offering reserved for employees enabling them to subscribe between 1 and 110shares, with the right to receive one option for every share purchased beginning with the eleventh share). Since 2007, stock-options vest immediately in the event of termination of employment due to retirement, early retirement, a tender offer launched on Lafarge or a merger or demerger of Lafarge in all stock-options plan rules.
CANCELLATION OF OPTIONS
Since 2007, stock-options are also cancelled in specific circumstances, such as resignation or termination of employment. The right to stock-options may be maintained if the beneficiarys employing company is sold outside the Group.
Main terms
STOCK-OPTION TERMS
Fiscal year 2010: stock-options granted to the Chairman and Chief Executive Officer and to largest beneficiaries
The tables below set forth the following information related to Mr Bruno Lafont, Chairman and Chief Executive Officer: options granted by Lafarge and Group subsidiaries in 2010; options exercised in2010; total number of options outstanding at December31, 2010.
All stock-options are valid for a period of 10years. The exercise price of options is set as the average of the share price during the twenty trading days preceding the date of grant by the Board of Directors. No discount is applied to the exercise price.
Stock-options not exercised within 10years of their date of grant are cancelled.
OPTIONS GRANTED IN 2010 TO THE CHAIRMAN AND CHIEF EXECUTIVE OFFICER
VALUATION OF OPTIONS PER ACCOUNTING TREATMENT USED IN THE CONSOLIDATED ACCOUNTS * (EUROS)
PLAN NO. AND DATE OFGRANT TYPE OF OPTIONS
TOTAL NUMBER OF OPTIONS
EXERCISE PRICE
(EUROS)
EXERCISE PERIOD
B. Lafont
OSA 2010 03/24/2010
Subscription
11.45
100,000
51.30
2014/03/24 to 2020/03/23
OPTIONS EXERCISED BY THE CHAIRMAN AND CHIEF EXECUTIVE OFFICER

WEIGHTED AVERAGE EXERCISE PRICE PLAN NO. AND DATE OF GRANT TOTAL NUMBER OF OPTIONS EXERCISED
(EUROS)
Bruno Lafont
The Corporate Executive Officer did not exercise any option in 2010
OPTIONS GRANTED BY US AND OUR CONSOLIDATED SUBSIDIARIES TO THE CHAIRMAN AND CHIEF EXECUTIVE OFFICER OUTSTANDINGATDECEMBER31,2010
OPTIONS EXERCISABLE AT DECEMBER31, 2010 OPTIONS NOT EXERCISABLE AT DECEMBER31, 2010 TOTAL
B. Lafont
*
227,186*
308,252*
535,438*
Including those options, exercisability of which is contingent upon performance conditions.
MrBruno Lafont, Chairman and Chief Executive Officer, does not use hedging instruments in relation to options granted. As of the date of this Annual Report all the stock-option exercise prices of the options attributed and capable of being exercised are above the Lafarge share price.
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5
Lafarge Lafarge
*

THE FOLLOWING TABLE SHOWS THE TOTAL OF THE TEN LARGEST OPTION GRANTS MADE TO THE GROUPS EMPLOYEES OTHER THANTHE CHAIRMAN AND CHIEF EXECUTIVE OFFICER, AND THE TOTAL OF THE TEN LARGEST OPTION EXERCISES
TOTAL NUMBER OF OPTIONS GRANTED/SHARES SUBSCRIBED OR PURCHASED WEIGHTED AVERAGE PRICE PLAN NO.
Options granted during the financial year by the issuer and its consolidated subsidiaries for stock-option grant purposes to the ten employees of the issuer and its subsidiaries having received the largest grants (global information) 250,000 51.30 euros OSA 2010 03/24/2010 Shares* subscribed or purchased during the financial year as a result of the exercise of stock-options of the issuer and its consolidated subsidiaries for stock-option grant purposes, by the ten employees of the issuer and its subsidiaries having subscribed or purchased the largest number of shares (global information) 463 57 euros OSA 2003 12/10/2003
One share per option.
Directors, Chairman and Chief Executive Officer and Senior Management stock-options
At December31, 2010, the Directors, Chairman and Chief Executive Officer and Senior Management (listed in Section5.3 (Executive Officers)) held 21.84% of unexercised options.
Stock-options outstanding in2010

The total number of shares that could be subscribed or purchased upon exercise of the options, and the exercise price set forth in the following tables have been readjusted since the date of grant to reflect transactions that have affected option value, such as certain
increases in the share capital or the issue of performance shares to existing shareholders, to maintain a constant total option value for each beneficiary as provided by law.
OPTIONS TO SUBSCRIBE FOR SHARES GRANTED FROM DECEMBER13, 2001 TO DECEMBER16, 2005
OSA 2001 12/13/2001 OSA 2002-LEA 05/28/2002** OSA 2002-2 12/11/2002 OSA 2003 12/10/2003 OSA 2004 12/14/2004 OSA 2005 12/16/2005
Allotment authorized by the Shareholders Meeting of Date of allotment by the Board of Directors Type of options The total number of shares that could be subscribed upon exercise oftheoptions Of which by Directors and Chairman and Chief Executive Officer Bruno Lafont Bertrand Collomb Bernard Kasriel Initial beneficiaries (total) Available for exercise from Option exercise period lapses Exercise price (euros) Total number of options subscribed asatDecember31, 2010 Total number of options cancelled orthathavelapsed* OPTIONS OUTSTANDING ATDECEMBER31,2010
* ** In accordance with the terms of the plan. Plan Lafarge en action 2002
05/28/2001 12/13/2001 subscription 1,403,607
05/28/2001 05/28/2002 subscription 539,000
05/28/2001 12/11/2002 subscription 545,730
05/20/2003 12/10/2003 subscription 1,427,604
05/20/2003 12/14/2004 subscription 791,575
05/25/2005 12/16/2005 subscription 1,466,294
12,296 147,549 73,556 1,703 12/13/2005 12/13/2011 83.12 328,717 58,971 1,015,919
124 14,364 05/28/2006 05/28/2012 87.98 104,831 5,617 428,552
12,296 421 12/11/2006 12/11/2012 64.38 218,427 8,726 318,577
28,925 92,556 137,013 1,732 12/10/2007 12/10/2013 57.00 263,473 49,475 1,114,656
34,709 46,279 80,987 479 12/14/2008 12/14/2014 61.19 9,134 33,285 749,156
69,418 46,278 69,418 1,916 12/16/2009 12/16/2015 62.78 45,975 64,249 1,356,070
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OPTIONS TO SUBSCRIBE FOR SHARES GRANTED FROM MAY24, 2006 TO MARCH24, 2010
OSA 2006-1 05/24/2006 OSA 2006-2 05/24/2006 OSA 2007 06/15/2007 OSA 2008 03/26/2008 OSA 2009 03/25/2009 OSA 2010 03/24/2010
Allotment authorized by the Shareholders Meeting of Date of allotment by the Board of Directors Type of options The total number of shares that could be subscribed upon exercise oftheoptions Of which by Directors and the Chairman and Chief Executive Officer Bruno Lafont Bertrand Collomb Bernard Kasriel Initial beneficiaries (total) Available for exercise from Option exercise period lapses Exercise price (euros) Total number of options subscribed asatDecember31, 2010 Total number of options cancelled orthathavelapsed* OPTIONS OUTSTANDING ATDECEMBER31,2010
* In accordance with the terms of the plan.
05/25/2005 05/24/2006 subscription 768,626
05/25/2005 05/24/2006 subscription 171,980
05/03/2007 06/15/2007 subscription 621,865
05/03/2007 03/26/2008 subscription 819,487
05/03/2007 03/25/2009 subscription 744,045
05/06/2009 03/24/2010 subscription 1,203,500
69,418 536 05/24/2010 05/24/2016 84.42 3,050 34,463 731,113
33 05/24/2010 05/24/2016 84.42 0 15,785 156,195
69,418 169 06/15/2011 06/15/2017 110.77 0 52,973 568,892
138,834 184 03/26/2012 03/26/2018 96.18 0 38,849 780,638
197 03/25/2013 03/25/2019 30.74 0 27,541 716,504
100,000 596 03/24/2014 03/24/2020 51.30 0 40,700 1,162,800
OPTIONS TO PURCHASE SHARES GRANTED

OAA 2000 DU 12/13/2000 OAA 2001 DU 12/13/2001
Allotment authorized by the Shareholders Meeting of Date of allotment by the Board of Directors Type of options The total number of shares that could be purchased upon exercise of the options Of which by Directors and Chairman and Chief Executive Officer Bruno Lafont Bertrand Collomb Bernard Kasriel Initial beneficiaries (total) Available for exercise from Option exercise period lapses Exercise price (euros) Total number of options purchased as at December31, 2010 Total number of options cancelled or that have lapsed* OPTIONS OUTSTANDING AT DECEMBER31, 2010
* In accordance with the terms of the plan.
05/27/1999 12/13/2000 purchase 538,242 8,755 438 12/13/2005 12/13/2010 68.92 244,137 294,105 0
05/27/1999 05/28/2001 purchase 14,756 1 05/28/2006 05/28/2011 88.27 0 0 14,756
Fiscal year 2011 : Stock-options grant

On March 15, 2011, the Board of Directors granted 781,980 options to subscribe for shares to 206 beneficiaries, out of which 70,000 options were granted to the Chairman and Chief Executive Officer.
5.5.3 Performance share plans

The total number of outstanding performance shares at the end of December2010 was 492,560, representing approximately 0.17% of our outstanding shares at December31, 2010.
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Main terms
PERFORMANCE SHARE TERMS
Performance shares are definitively allotted to beneficiaries upon expiry of a two-year vesting period for French tax residents or upon expiry
of a four-year vesting period for non-French tax residents. In addition, French tax residents must also hold the performance shares for a further period of 2years following definitive allotment.
LOSS OF RIGHTS TO THE PERFORMANCE SHARES
Under certain circumstances, such as resignation or termination of employment, the right to performance shares will be lost during the vesting period. The right to performance shares may be maintained if the beneficiarys employer company is sold outside the Group.
Fiscal year 2010: performance shares granted to largest beneficiaries

TOTAL OF THE TEN LARGEST PERFORMANCE SHARES GRANTS MADE TO THE GROUPS EMPLOYEES OTHER THAN THE CHAIRMAN ANDCHIEF EXECUTIVE OFFICER
TOTAL NUMBER OF OPTIONS GRANTED/SHARES SUBSCRIBED OR PURCHASED PLAN
Performance shares granted during the financial year by the issuer and its consolidated subsidiaries for performance shares grant purposes to the ten employees of the issuer and its subsidiaries having received the largest grants (global information) Lafarge 1,250 AGA 2010 03/24/2010
Performance shares plans outstanding in 2010

PERFORMANCE SHARES GRANTED FROM JUNE15, 2007 TO MARCH24, 2010
AGA 2007 06/15/2007 AGA 2008 03/26/2008 AGA 2009 03/25/2009 AGA 2010 03/24/2010
Allotment authorized by the Shareholders Meeting of Date of allotment by the Board of Directors Performance shares initially granted (total) Initial beneficiaries (total) French tax residents Non-French tax residents Date of definitive allotment French tax residents Non-French tax residents Date performance shares can be transferred (all beneficiaries included) Performance shares cancelled* Performance shares definitively allotted at December31, 2010* PERFORMANCE SHARES OUTSTANDING AT DECEMBER31, 2010
* According to the plan rules.
05/03/2007 06/15/2007 143,090 2,040 741 1,299 06/15/2009 06/15/2011 06/15/2011 13,585 56,645 72,860
05/03/2007 03/26/2008 52,250 628 201 427 03/26/2010 03/26/2012 03/26/2012 3,000 16,470 32,780
05/03/2007 03/25/2009 230,758 2,461 693 1,768 03/25/2011 03/25/2013 03/25/2013 9,438 120 221,200
05/06/2009 03/24/2010 169,605 2,032 547 1,485 03/24/2012 03/24/2014 03/24/2014 3,885 0 165,720
Fiscal year 2011 : Performance shares grant

On March15, 2011, the Board of Directors granted 328,755 performance shares to 2,257beneficiaries. The Board of Directors also decided upon the principle of a future grant of performance
shares to Mr. Bruno Lafont, Chairman and Chief Executive Officer. 20,000 performance shares would be effectively granted following the Combined Shareholders General Meeting of May12, 2011 and would represent less than 10% of the total award (threshold determined by the Board of Directors in implementation of the
Afep-Medefs recommendations) and 0.01% of the current share capital. All the performance shares granted to Mr. Bruno Lafont will be subject to the achievement of the same performance conditions than those applying to the stockoptions grant, as described in Section 5.5.1 (Grant policy - Performance conditions and holding rule) above.
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5.6Share ownership
5.6 Share ownership

5.6.1 Directors, Chairman and Chief Executive Officer andExecutive Committee members share ownership
The Directors, Chairman and Chief Executive Officer and Executive Committee members held together 0.08% of our share capital and 0.11% of voting rights at December31, 2010. The Chairman and Chief Executive Officer must hold at least the equivalent of their fixed annual remuneration in Lafarge shares.
5.6.2 Trading in Lafarge shares by Directors, Chairman and Chief Executive Officer andExecutive Committee members
The following transactions in Lafarge shares were carried out by our Directors, Chairman and Chief Executive Officer and Executive Committee members in2010:
NAME OF DIRECTOR NATURE OFTRANSACTION UNIT PRICE (EUROS) TOTAL AMOUNT OF TRANSACTION (EUROS) TYPE OF FINANCIAL INSTRUMENT PLACE OFTRANSACTION DATE OFTRANSACTION
Philippe Charrier Philippe Charrier Colette Lewiner Hlne Ploix Hlne Ploix Thierry de Rudder Vronique Weill Vronique Weill
Acquisition Acquisition Acquisition Sale Acquisition Acquisition Acquisition Acquisition
45.395 41.23 41.00 43.007 41.3679 38.65 49.64 48.326
22,886.45 10,403.25 49,200.00 73,974.85 71,472.14 193,250.00 10,069.44 48,326.00
Lafarge shares Lafarge shares Lafarge shares Lafarge shares Lafarge shares Lafarge shares Lafarge shares Lafarge shares
Euronext Paris Euronext Paris Euronext Paris Euronext Paris Euronext Paris Euronext Paris Euronext Paris Euronext Paris
May26, 2010 July14, 2010 July5, 2010 October6, 2010 October7, 2010 August12,2010 June11, 2010
101
102

6.1 MAJOR SHAREHOLDERS AND SHARE CAPITAL DISTRIBUTION 104
6.2 SHAREHOLDER AGREEMENT WITH THE SAWIRIS FAMILY ANDNNSHOLDINGSRL 105 6.3 THRESHOLD NOTIFICATIONS IMPOSED BY LAW ANDDECLARATIONS OF INTENT
Groupe Bruxelles Lambert NNS Holding Srl andNassef Sawiris Dodge &Cox
106
106 106 106
6.4 EMPLOYEE SHARE OWNERSHIP

Employee Stock Ownership Policy LEA 2009 - Share capital increase for employees Summary table
107
107 107 107
6.5 OTHER INFORMATION 6.6 LISTING
108 108
103

6.1Major shareholders and share capital distribution
6.1 Major shareholders and share capital distribution

The following tables set out, to the best of our knowledge, the principal holders of Lafarge S.A.s share capital at December31,2010 and 2009, their percentage ownership and geographic distribution:
GROUP OF SHAREHOLDERS
2010 AtDecember31, Number of shares held Number of votes % of total shares held issued % of total voting rights Number of shares held 2009 Number of votes % of total shares held issued % of total voting rights
Groupe Bruxelles Lambert NNS HoldingSrl Dodge &Cox Other institutional shareholders (4) Individual shareholders Treasury shares TOTAL
60,307,265 39,827,277 13,405,899 140,687,036 31,862,744 363,558 286,453,779
90,568,625 69,862,917 20,165,524 148,758,866 37,928,003 363,558 (5) 367,647,493
21.1 13.9 4.7 49.1 11.1 0.1 100.0
24.6 19.0 5.5 40.5 10.3 0.1 (5) 100.0
60,307,265 (1) 39,827,277 (2) 12,942,274 143,709,122 29,287,230 380,148 286,453,316
91,276,163 39,827,277 19,626,899 150,200,648 35,184301 380,148 336,495,436
21.1 13.9 4.5 50.2 10.2 0.1 100.0
27.1 11.8 5.8 (3) 44.6 10.5 0.1 100.0
Source: Capital Precision (1) Including 19,044,762 shares subscribed as part of the share capital increase which was completed on April28, 2009. (2) Including 12,824,457 shares subscribed as part of the share capital increase which was completed on April28, 2009. (3) Percentage of voting rights taking into account Dodge &Coxs notification of January11, 2010. (4) Including 51,581 LafargeS.A. shares currently held by Cementia Holding AG for the benefit of shareholders who have not yet requested the delivery of their LafargeS.A. shares, following the squeeze-out procedure carried out by LafargeS.A. in2002 with respect to the Cementia Holding AG shares. (5) Theoretical voting rights; at a General Meeting these shares bear no voting right.
DISTRIBUTION BY TYPE OF SHAREHOLDER
%
Individual shareholders* Treasury shares French institutions Non-French institutions TOTAL 11.1 0.1 16.7 72.1 100.0
* Including 1.50% of the share capital held by Group employees.
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6.2Shareholder agreement with the Sawiris family andNNSHoldingSrl
GEOGRAPHICALDISTRIBUTION
2010 AtDecember31, Number of shares held % of total shares issued 2009 Number of shares held % of total shares issued
France United States of America Belgium * United Kingdom Luxembourg ** Rest of the World TOTAL
Source: Capital Precision. * Including shares held by Groupe Bruxelles Lambert. ** Including shares held by NNS HoldingSrl.
79,421,530 43,269,341 63,824,239 11,346,234 41,310,813 47,281,622 286,453,779
27.7 15.1 22.3 4.0 14.4 16.5 100.0
84,765,527 45,700,760 62,646,137 14,378,317 40,810,600 38,151,975 286,453,316
29.6 16.0 21.9 5.0 14.2 13.3 100.0
GEOGRAPHICAL DISTRIBUTION
%
France
United States of America Belgium United Kingdom Luxembourg
27.7 15.1 22.3 4.0 14.4 16.5 100.0
Rest of the world TOTAL
6.2 Shareholder agreement with the Sawiris family
andNNSHoldingSrl
A 10-year shareholder agreement was entered into with certain members of the Sawiris family and NNS Holding Srl on December9, 2007, following the acquisition of Orascom Cement (the cement activity of Orascom Construction Industries S.A.E., acquired by the Group on January 23, 2008.). This agreement contains certain commitments regarding the shares issued for their benefit as a result of the reserved capital increase of 2008. In particular, the shareholder agreement contains
(i)a lock-up commitment of four years (with limited exceptions) followed by a three-year period for phased disposals; (ii)a standstill commitment for a four-year period not to acquire more than 8.5% of the share capital in addition to their current shareholding, such holding in any case not to exceed a total of 20% of the share capital or any other higher level of shareholding that would come to be held by another shareholder acting alone or in concert; and (iii)a commitment not to
act in concert with a third party in relation to Lafarge S.A. shares for a 10-year period. In consideration of these commitments, the Company has undertaken to make its best efforts to ensure that NNS HoldingSrl is entitled to nominate two of its representatives as members of the Board of Directors as long as NNS HoldingSrl and the Sawiris family together hold more than 10% of the share capital of the Company and comply with all their obligations under this agreement.
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6.3Threshold notifications imposed by law anddeclarations of intent
6.3 Threshold notifications imposed by law
anddeclarations of intent
Groupe Bruxelles Lambert

In 2010, Groupe Bruxelles Lambert declared having fallen on June 17 below the 25% threshold of the voting rights of LafargeS.A. and holding 60,307,265 Lafarge S.A. shares representing 85,762,580 voting rights (corresponding to 21.05% of the share capital and 23.85% of the voting rights). In 2009, Groupe Bruxelles Lambert did not notify any threshold crossing nor made any declaration of intent. As part of its threshold notification of September 4, 2008, Groupe Bruxelles Lambert declared contemplating further acquisitions where in line with market opportunities, that it had no intention of taking control of LafargeS.A. or soliciting the appointment of additional Directors other than its existing three representatives to Lafarges Board of Directors and that it was not acting in concert with a third party.
As part of this notification, NNS Holding Srl and Nassef Sawiris declared acting in concert, it being specified that as a result of the shareholders agreement of December9, 2007 entered into between Lafarge S.A. and NNS Holding Srl, they had undertaken not to act in concert with any third party (with the exception of members of Nassef Sawiris family and related companies) for the duration of the shareholders agreement (10years). NNS Holding Srl and Nassef Sawiris also declared reserving their right to proceed to further acquisitions (within the limits set by the shareholders agreement of December9, 2007, described further in 6.2 Shareholder agreement with the Sawiris family and NNS Holding Srl), having no intention of taking control of LafargeS.A. and renewing their support to the management of the Company. NNS Holding Srl and Nassef Sawiris further declared that they were not party to any agreement for the temporary transfer of Lafarge S.A. shares or voting rights and had no project for any: merger, restructuring, liquidation or transfer of a substantial part of the Companys assets; change to the Companys articles of association or business; delisting of a category of securities issued by the Company; issue of Lafarge securities; request for the appointment of further Board members.
In addition, it was noted for information that a cash-settled share forward transaction had been entered into by NNS Holding (Cayman), the indirect majority shareholder of NNS Holding Srl. This forward transaction, which allows for early termination, does not give NNS Holding (Cayman) any right to Lafarge S.A. shares nor voting rights in the Company. NNS Holding Srl (the Sawiris family holding company) and Nassef Sawiris did not notify any threshold crossing nor make any declaration of intent during2009.
Dodge &Cox
In 2009, Dodge & Cox, acting for client accounts, declared having fallen below the 5% threshold of the voting rights of LafargeS.A. on November20, 2009. Dodge &Cox, acting for client accounts, further declared having exceeded the 5% threshold of the voting rights of LafargeS.A. on January11, 2010, and holding for the accounts of the above mentioned clients 12,942,274 Lafarge S.A. shares representing 19,626,899 voting rights corresponding to 4.52% of the share capital and 5.83% of the voting rights as a result of the allotment of double voting rights. Dodge &Cox did not notify any further threshold crossing nor made any declaration of intent during 2010. To our knowledge, there is no shareholder holding more than 5% of our share capital or voting rights other those mentioned above.
NNS Holding Srl andNassef Sawiris

MrNassef Sawiris declared having exceeded the threshold of 15% of the voting rights in Lafarge S.A. on March27, 2010, acting in concert with NNS Holding Srl (the Sawiris family holding company) and holding in concert as at March31, 2010 39,828,948 Lafarge S.A. shares representing 65,362,911 voting rights (corresponding to 13.90% of the share capital and 17.75% of the voting rights), as a result of the allotment of double voting rights.
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6.4Employee Share Ownership
6.4 Employee Share Ownership

As at December31, 2010, Lafarge employees held 1.50% of the share capital and 1,85% of voting rights. The employee savings fund LG2M represented 0.49% and the balance was held by employees in direct ownership (registered account). Lafarge launched employee stock ownership programs called Lafarge en action (LEA) in 1995, 1999, 2002, 2005 and 2009, enabling employees participating in these plans to subscribe forLafarge S.A. shares, with an employer contribution depending on the gross domestic product of the relevant country and applying to the firstshares purchased. The plans launched in 1995 and 2002 also gave employees the right to receive one option for every share purchased beginning with the eleventh share. Lafarge also set up an employee savings fund in 1990 for its French employees, called LG2M, under which participating employees can contribute to a savings plan linked to the value of the Lafarge S.A. shares and benefit from an employer contribution. There are also specific employee share purchase plans, which have been implemented by some of our subsidiaries, including Lafarge North AmericaInc. a delegation of the Annual Shareholders Meeting of May 6, 2009 and under the delegation of the Board of Directors, decided on the terms of the plan LEA 2009. The goal of this employee stock ownership plan was to reach all employees of Lafarge, meaning that it was offered in all countries where it was legally feasible. The subscription price for the shares was set at 48.80euros, corresponding to 80% of the reference price calculated on the basis of the average opening share price on Euronext Paris S.A. over the twenty trading days preceding October12, 2009. In the case of LEA 2009, each employee was offered the possibility to subscribe for shares of Lafarge while benefiting from a contribution from their employer on the first 15 shares purchased. The share capital increase reserved to eligible employees was realized on December11, 2009; the total amount of the share capital increase was 4,407,336euros, corresponding to the issuance of 1,101,834shares. The subscription rate was 53%. In the case where it was not possible to offer the LEA program in a country, employees could subscribe to an alternative plan providing the same economical benefits.
Employee Stock Ownership Policy

Lafarge has developed and maintained an active employee share ownership program over a number of years. Since 1961, date of the first share offering reserved for employees, employee offerings have shared the following common features: they are intended for all employees of companies controlled by Lafarge in as many countries as possible, to the full extent permitted by local laws; t h e e m p l o y e e s c o n t r i b u t i o n i s supplemented by an employer contribution; savings in the plans cannot be sold or disposed of for a minimum period of five years, except in case of an early release event, subject to local requirements.
LEA 2009 - Share capital increase for employees

On October 12, 2009, the Chairman and Chief Executive Officer acting by virtue of
Summary table
The following table sets out the main terms of employee stock ownership plans:
LEA 2009 (1) LEA 2005 (1) LEA 2002 (1) LEA 1999 (2) LEA 1995 (2)
Number of countries covered Number of eligible employees Subscription rate Total number of shares subscribed Maximum number of shares offered to each employee Subscription price (euros) Associated stock-option grant TOTAL NUMBER OF STOCK-OPTIONS GRANTED
(1) (2) (3) (4)
55 70,085 53.0% 1,101,834 Unlimited 48.80 No N/A
46
(3)
47 53,818 53.3% 708,718 110 81.84 Yes 437,373
33 40,570 51.6% 493,954 110 73.17 No N/A
21 20,113 74.6% 482,582 110 39.94 Yes 331,060(4)
51,150 48.8% 576,125 110 57.31 No N/A
Plans not offered in the United States or Canada. Plan not offered in Canada. Countries covered were those in which Lafarge employed over 100employees at December31, 2004, subject to local requirements. These stock-options may no longer be exercised.
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6.5Other information
6.5 Other information

Based on our knowledge, 6 institutional shareholders held between 1% and 4% of our outstanding shares at December31, 2010. Of these institutional shareholders, 3held between 1% and 2% of our shares, 2 held between 2% and 3% of our shares and 1 held between 3% and 4% of our shares. All of our shares are subject to the same voting right conditions, except for our treasury shares, which at General Meetings bear no voting rights, and our shares held in registered form for over two years, which carry double voting rights. See Section 8.5 (Articles of association (statuts))
6.6 Listing
The Companys shares are listed on NYSE Euronext (Paris), under code ISIN FR0000120537 and symbol LG. Lafarges shares are traded on the Paris stock exchange since 1923 and have been part of the French CAC 40 index since its creation on December 31, 1987. The following tables show the volume and high and low closing price of our shares of common stock, as reported by NYSE Euronext (Paris).
FIVE MOST RECENT FINANCIAL YEARS
1,554 1,163
115.00 99.51 73.55 32.13 2006 2007 2008
1,509
1,467
1,235
137.20 125.45
66.59
63
Average daily volume (in thousands of shares)

26.06 2009 35.57 2010
High intraday (in euros) Low intraday (in euros)
THE LAST 6 MONTHS 1,917 1,694 1,498 1,313 1,343
890
43.70 37.05 Sept. 10
43.52 40.30 Oct. 10
46.49 40.89 Nov. 10
48.60 42.19 Dec. 10
48.67 42.51 Jan. 11
48.37 43.10 Feb. 11
Average daily volume (in thousands of shares) High intraday (in euros) Low intraday (in euros)
Lafarge voluntarily delisted its American Depository Receipts (ADRs) from the New York Stock Exchange on September 13, 2007. The delisting became effective on September
108
24, 2007. Since its delisting, the Lafarge ADR program has been maintained and ADRs continue to be traded over the counter (level one program). Each ADR represents a quarter
of a share. Since October 8, 2007, Lafarge is no longer subject to Securities & Exchange Commission regulations.

7.1 HEALTH AND SAFETY 7.2 SOCIAL INFORMATION 7.3 ENVIRONMENT 7.4 REPORTING METHODOLOGY AND RATINGS 110 112 114 116
109

7.1Health and Safety
Since May2007, the Group has continued to move towards the targets that were fixed in its Sustainability Ambitions 2012. These ambitions define our objectives in the fields of management, Health & Safety and environmental performance and were developed after consultation with the Groups Stakeholder Panel. This Panel meets three times a year, including a full day meeting with the Groups Chairman and Chief Executive Officer and the Group Executive Committee members. By way of its presence in many different areas of the world, Lafarge is able to make a significant contribution to improving the quality of life of local communities, to the development of emerging markets and to the fight against climate change.
In addition to this Annual Report, the Group publishes every year a Sustainability Report.
7.1 Health and Safety

Health and Safety is the first operational priority of the Group, and Lafarge has one very clear goal: reach zero accidents and rank among the safest companies in the world. Lafarges objective is to have a low total injury frequency rate over the long-term and across all our units, with contractors working on the same standards as employees, leading to a low level of occupational health incidents. Moreover, Lafarge wants to be recognized by NGOs and the business community as a world leader in safety. As shown below, in the graph Lafarge has greatly improved its employee last time incident frequency rate, with over half its business units not having recorded any employee LTIs (Lost Time Injury) for over a year. Lafarge has achieved in 2010 its targeted reduction in injuries to employees and there were fewer fatalities on Lafarge sites, despite a broader scope. Indeed, the safety reporting now including the safety results in two important sub-groups acquired since 2008 (Orascom Cement in Middle East and Africa and Larson & Toubro in India) shows a sharp decrease and a similar measurement for contractors also shows a reduction. This demonstrates progress in extending Health and Safety culture over the Group. To bring about lasting change, a Health and Safety Management System (HSMS) has been issued in 2010. The HSMS is a comprehensive and systematic approach to managing H&S. It is a high level, overarching system which connects together all H&S initiatives and activities including the roadmap that was used up to now. It describes the elements which need to be implemented to achieve the ambition of becoming a leader in H&S. It focuses on continuous improvement by clarifying the gaps to be addressed. It is Lafarges belief that the full and successful implementation of the HSMS elements would enable the Group to achieve world class H&S performance. At the beginning of 2010, Lafarge has issued a Standard which adresses one of our major risk: Energy Isolation (EI) which impacts on the manufacturing process and team behaviour. To ensure effective implementation worldwide of this standard, we have deployed a 8 fulltime experts around the world. Their mission should be completed at the end of 2011. Efforts team to instill a health and safety culture that permeates all the Group have continued with an increase in Visible Felt Leadership (VFL) visits by management, training to create a sense of empowerment in the area of health and safety and with local initiatives reflecting the fact that a sustainable health and safety culture cannot be imposed with Group driven top down measures alone. Besides the Health and Safety Month in June has become a tradition in the Group, an occasion to stimulate initiatives and celebrate results in each operational Unit and site. Another working axis has been the Good Practice of Systematic Housekeeping The group expects from this good practice a significant improvement both in diminishing risks and improving Safety mindset.
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7.1Health and Safety
GROUPS EMPLOYEES LOST TIME INJURY FREQUENCY RATE Rate*

10 8.35 8 6.56 6 4.68 4
3.1 2.57 1.66
1.57 0.98 0.76
0 2002 2003 2004 2005 2006 2007 2008 2009 2010
Year
Incidents with lost time of more than one day permillion hours of work.
Neverthess, the level of fatalities remains an area of great concern, as the Group recorded some fatalities again in 2010. In 2010, two thirds of the fatalities, representing 21 fatalities (employees and contractors) took place on the road. Some of the countries where Lafarge operates have high road accident rates where driver training needs improvement and Lafarge remains committed to tackling transportrelated safety in all countries where it operates. In this context, a particular focus is put on this topic, and Lafarge has issued in 2010 three group-wide transport advisory documents which set world-class ambitions that have been benchmarked against the oil
industry; locally-led, transport safety initiatives are taking place in many business units. Lafarge believes that road fatalities will be avoided when the recommendations of these advisories will be fully implemented but this will take several years. In addition, three of Lafarge or contractors employees died on customer job sites. To improve the health and safety of our employees and contractors on these sites improvements have been identified and proposed to customers. More generally, continuous efforts are made with our business partners to share Health and Safety culture and exchange experience and knowledge.
Lastly, the Group has put a particular emphasis on Health in 2010. A Health Assessment Standard Operating Procedure is now in place; it provides for basic health assessments for all employees, with complementary assessments for those facing higher risks. It forms a key part of our Health Strategy and Roadmap; the roll out plan specifies full implementation by 2011 for Western Europe and North America and by 2014 for the Business Units in other regions. Additionally, the public health methodology developed in Africa for tackling HIV/AIDS and malaria has been successfully extended to Russia and Ukraine but with some adjustment to reflect local public health needs and culture.
LOST TIME INJURIES AND FATALITIES**
2010
2009
Number of lost time injuries among Lafarge employees Number of lost time injuries among contractors employees Lafarge employee fatalities on site Lafarge employee fatalities - transport Lafarge employee fatalities - customer job sites Contractors employee fatalities on site Contractors employee fatalities Transport Contractors employee fatalities - customer job sites Lafarge employee fatality rate (number of fatal accidents per 10,000)
*
120 111 1 7* 1 8 14* 2 1.18*
142 119 5 1 1 13 11 1 0.90
Respectively 1 employee, 9 contractors fatalities and 0,39 fatality rate with previous method as applied in 2009. During 2010 we decided to report any fatality occuring while going to or returning from work for Lafarge, whether to or from Lafarge or third parties sites. Such transport accidents used to be reported only internally. ** In addition 11 persons members of the public died in accidents caused by Lafarge or contractors employees during missions for Lafarge. Ofcourse all the efforts described above are also aiming at the total elimination of such accidents.
111

7.2Social information
7.2 Social information

Headcount
The Group had 75,677 employees at the end of 2010, which represents a decrease of 2,317employees compared to December2009. This reduction mainly reflects the persistent economic downturn in Western Europe, and re-organization efforts made throughout the Group. This net headcount variation takes into account the effect of the acquisition of part of Votorantims assets in Brazil, as well as the increase in headcount in Saudi Arabia and Syria due to build-up of new capacities. The following tables set forth our headcount by region and by division at December31, 2010 and 2009. Both tables account for 100% of the employees of our fully consolidated and proportionately consolidated subsidiaries.
EMPLOYEES BY GEOGRAPHICAL AREA - EMPLOYEES BY DIVISION

EMPLOYEES BY GEOGRAPHICAL AREA 2010 HEADCOUNT % 10 VS 09 % 2009 HEADCOUNT %
Western Europe North America Middle East and Africa Central andEastern Europe Latin America Asia TOTAL
15,625 10,748 18,843 7,652 3,355 19,454 75,677
20.7 14.2 24,9 10.1 4.4 25.7 100.0
(4.8) (1.2) (4.3) (1.1) 28.5 (5.8) (3.0)
16,410 10,883 19,695 7,740 2,610 20,655 77,994
21.0 14.0 25.3 9.9 3.3 26.5 100.0
2010 EMPLOYEES BY DIVISION HEADCOUNT % 10 VS 09 %
2009 HEADCOUNT %
Cement Aggregates &Concrete Gypsum TOTAL
44,253 23,438 7,986 75,677
58.5 31.0 10.5 100.0
(4.8) (0.5) 0.2 (3.0)
46,468 23,552 7,974 77,994
59.6 30.2 10.2 100.0
Group Employment Policy

The Group Employment Policy is guided by three core principles, which are to structure businesses for efficiency and excellence, to find solutions to restructuring programs and provide support to employees when facing employment issues.
Participation in the Groups performance

Employees are associated with the Groups performance through the various profitsharing mechanisms which exist in countries where we operate.
Working with Unions

The emphasis on social dialog within Lafarge is believed to be fundamental at all levels. In 2010, like in 2009, 67% of Group employees are represented by elected representatives or unions. Under the initiative of the European Works Council, 3 new well-being at work surveys were launched in 2010, with a view to maintaining dialog with our employees. Other surveys also took place, besides this European initiative. Furthermore, our international social partners came to a common understanding with the Group regarding the implementation of the Freedom of Association in the United States.
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7.2Social information
Diversity
Diversity is a key concern for the Group, and is tackled at various levels: on Gender Diversity, increasing our female workforce is subject to a KPI when it comes to women amongst our senior and executive management (Lafarge grades 18+), but there are also a number of local initiatives to drive this diversity (mentoring programmes, implementation of Diversity workshops). But Diversity at Lafarge also means including people with disabilities,
and promoting a culturally diverse workforce throughout the organization. Major steps were taken in 2010 in this respect, to reflect our vision that Diversity is a success factor for having best teams and most effective organizations: In addition a Diversity & Inclusion Director position was created and filled and two more women have joined the Board of Directors this year.
People Development
One of the Groups operational priorities is to develop its people. In 2010, a Learning and Development Director was appointed in order to promote the Learning and Development offers, capabilities, processes and structure to significantly support this Group priority. In addition, the use of the e-learning tool is increasingly growing, with 8,500 regular users in 2010 compared with 3,000 in 2009.
SOCIAL DATA
2010 2009
Employment Percentage of full-time employees Percentage of part-time employees Percentage of permanent employees Percentage of fixed-term contracts employees Percentage of temporary employees Number of hirings Number of resignations Number of retirements Number of redundancies Number of deaths Diversity Percentage of employees under the age of 30 Percentage of employees between 30 and 50 Percentage of employees above 50 Training Average number of hours of training for management staff Average number of hours of training for non-management staff People development Percentage of management staff having an annual performance review Percentage of non-management staff having an annual performance review Industrial relations Percentage of Lafarge employees represented by elected staff representatives and/or trade union organizations Percentage of business units where employees are covered by collective agreements Number of business units with strike actions Percentage of total workforce represented in Health &Safety Committees 67% 71% 14 97% 67% 72.5% 11 96% 94% 64% 93% 70% 45 31 63 25 16.7% 63.3% 20.0% 15.7% 64.2% 20.1% 99.1% 0.9% 91% 4% 5% 5,991 3,752 1,057 3,986 142 98.7% 1.3% 91% 4% 5% 5,385 2,813 947 5,625 119
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7.3Environment
7.3 Environment
The Ambitions regarding the environment, in particular, deal mainly with four subjects: industrial emissions, CO2, biodiversity and quarries. A system of measurement and control of the environmental performance by Division has been put into place. Our operations involve the use, release, disposal, and clean up of certain substances, and are subject to strict regulations. In 2010 our European business units finalized the implementation of the Reach (Registration, Evaluation and Authorisation of Chemicals) regulation. at the center of discussions in Cancun in December. In 2010, Lafarge once again actively participated in the work of the WBCSD (World Business Council for Sustainable Development) and the European Round Table of Industrialists (ERT): The CSI (Cement Sustainability Initiative), is a sectoral approach of the world cement sector, which aims to promote a sustainable approach by exchanging best practices and by perfecting instruments for measurement and verification. Thanks to the efforts of Lafarge, which co-chairs the Climate Change working group, the CSI has continued to integrate its five new Chinese members and has participated in the work on a new CO2 protocol for the cement industry in China. All CSI actions on climate protection can be consulted at www.wbcsdcement.org Bruno Lafont became Chairman of the Energy &Climate Change working group of the ERT in 2010, and has launched several initiatives aimed at explaining how some European policies impact European industrys competitiveness and investment strategies. Position papers and reports are available at www.ert.be In the European Union, benchmarks and rules of allocations for the ETS (Emission Trading Scheme) period 2013-2020 have been voted by the Climate Change Committee (Commission + Member States). Lafarge welcomes the outcome of this vote, which formalizes a single benchmark based on clinker, and common to all installations in the EU. We believe that this benchmark will trigger further CO2 emission reductions in our sector in a fair and competitive environment. The Emissions Trading Directive and its provisions apply to all our cement plants located in the European Union (we operate cement plants in 10of the 27European Union Member States) and, to a lesser extent, to our Gypsum operations. Allowances that were allocated to these facilities represent some 28million tonnes of greenhouse gas per year. At the end of 2010, Lafarge had a volume of non-used allowances (around 38% of the total allocated quotas) that was sold on the greenhouse gas market. This volume results from a lower level of demand in our European markets in 2010 and from the continuous performance improvement of our industrial processes. As part of its innovation program towards CO2 emission reductions, Lafarge publicly presented the Aether project in September2010. This new formulation of clinker, the main component of cement, emits 25% less CO2 and has a 15% lower energy consumption. Its development potential has been validated by tests in laboratories as well as in an industrial kiln; Aether has received financial support from the European Union (Life+ program). Finally, regarding our WWF voluntary commitment to cut our net global greenhouse gas emissions by 20% per tonne of cement produced between 1990 and 2010, the target was reached in 2009, one year ahead of schedule. Between 1990 and 2010, we reduced our net greenhouse gas emissions per tonne of cement by 21.7%. New voluntary objectives have been designed in 2010 and will be made public in 2011 within the framework of our partnership with WWF.
Energy and climate change

In 2010, Lafarge was rated 6th in the worldwide ranking of the Carbon Disclosure Project (CDP) which identifies the companies with the best approach to the fight against climate change. For the third year in a row Lafarge appeared in the Leadership Index, which comprises the 50 best companies worldwide. This CDP Leadership Index is established on the basis of a questionnaire sent, in 2010, to 4,700companies worldwide operating in all sectors of activity. The analysis focuses on each companys assessment of the risks and opportunities related to climate change applicable to its activity and on the way these risks and opportunities are addressed. Companies are assessed on their transparency. This performance illustrates the importance given by Lafarge to measuring, reporting and verifying CO2 emissions. These subjects were
CO2 NET EMISSIONS PER TONNE OF CEMENT In kg 2010 2009 2008 1990 606 614 631 774 Reduction in % (base 1990) -21.7% -20.7% -18.4%
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7.3Environment
Stack emissions
Within the framework of our Ambitions 2012, the Cement Division has developed, since 2005, a voluntary effort to reduce the global emissions of cement production. In particular, the quantities of dust, sulphur dioxide and nitrogen dioxide have been reduced respectively by 35.7%, 52.8% and 27.9% per tonne of clinker produced since 2005. This is a result of the permanent efforts to invest in state-of-the-art technologies both in existing plants as well as in new production lines. In 2010 the Group reached its objective to measure its emissions of persistent pollutants in all its operating kilns in order to implement best practices to limit emissions. Concerning dust emissions, they have been reduced as indicated above by 35.7% compared to 2005, fulfilling the 2012 ambition two years ahead of schedule.
Natural resources savings Partnerships and industry leadership In 2010 Lafarge continued the review process
of updating the quarry mining plans to improve the optimization of the deposits and increase quarry life. These mining plans incorporate the rehabilitation plans for the quarries. Throughout the year, the Aggregates & Concrete Division conducted a review into the use of demolition waste recycling in its operations. In 2010 demolition waste was used in the following countries; United Kingdom. France, Portugal, North America, Canada and Reunion. The Gypsum Division re-uses gypsum, by-product of industrial process, thus realizing savings of about 40% of natural gypsum. During the last 10years Lafarge has put a lot of effort into involving external stakeholders in its management of operations. The partnership initiated in 2000 with WWF International was renewed in March2009, as was the partnership with CARE France. These partnerships have a triple purpose: working together on major sustainability issues, proposing publicly proclaimed targets to progress on key topics and communicating together on these issues. A new openly communicated aspect of these partnerships is the commitment to help push the whole industry to consider progress. The renewal of the partnership with WWF enabled an extension of the work program to cover five key areas, each with its own targets, action plans and indicators to measure the progress made: climate change, water, biodiversity, persistent pollutants, sustainable construction. We also work on communication issues. In 2010 the Group co-chaired the Cement Sustainability Initiative (CSI) of the WBCSD (World Business Council for Sustainable Development), which develops industry standards and best management practices. Another WBCSD initiative called Energy Efficiency in Buildings, was jointly chaired by Lafarge and United Technologies and produced the Transforming the Market report promoting zero net energy consumption in buildings. Lafarge is also actively involved in the WBCSD CSI taskforce for Biodiversity, the Cembureau taskforce for Biodiversity and the European Aggregates Association (UEPG) on biodiversity.
Water management
With the same mindset as for biodiversity, Lafarge and WWF International have elaborated a water management program according to the international water footprint concept, which enables us to assess the challenges for our industrial sites according to the local freshwater availability. In 2010 we implemented the method at pilot sites in our three activities (Cement, Aggregates & Concrete and Gypsum) in order to gain experience, and to identify and implement good practices to reduce our water footprint and connect with local communities.
Biodiversity
In 2010 Lafarge continued its strong commitment to biodiversity. The Group actively promoted the Year of Biodiversity, notably through its publication of a biodiversity review, through participation and sponsorship of international conferences and through joint internal seminars with WWF. In 2007 Lafarge set three ambitions related to quarry rehabilitation and biodiversity, two of them with targets set for 2010. The first objective was to screen all our active quarries according to criteria validated by WWF International. This has virtually been achieved, with 95% of all active quarries being screened and is a significant improvement on 64% achieved in 2009. However, it was not possible to screen all quarries due to changes in ownership. The second objective was to reach a rate of 85% of active quarries with a rehabilitation plan. The 2010 performance was 85%, which was a good improvement compared with 2009. There were two meetings of the international advisory panel on biodiversity in 2010, at which the initial results of the screening were discussed.
Stakeholder relationship management

For many years, Lafarge has attached great importance to developing relationships with the communities surrounding our operations, carrying out actions in the fields of health, education and insertion of young people, and also the environment. The Group has developed tools and a methodology to support Business Unit and local sites in their engagement with stakeholders, in order to measure the impact of our presence on the economic and social environment. This approach was originally focused on cement plants, but it has now been formally deployed across all Lafarge operations. As well as making methodologies, tools and best practices widely available, there is a dedicated team on this topic who deliver action-orientated workshops to Business Unit teams. Key Performance Indicators (KPIs) are in place to measure progress.
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7.4Reporting methodology and ratings
7.4 Reporting methodology and ratings

Reporting standards
A central system dedicated to sustainable development is used for the collection and storage of environmental and social data. Key Performance Indicators (KPIs) are produced by this system for the current and reference years, to measure progress against the Group Sustainability Ambitions 2012 and other targets. The rules for computing the KPIs are consistent with the GRI G3 reporting standard. All elements for calculating KPIs are documented in a glossary specific to the cement, gypsum or aggregate and concrete businesses. Health and safety data is collected separately taking into account our internal guidelines and external best practice. The Groups Social Policies Department conducts a separate survey on social data. Our 2008 and 2009 Sutainability Reports were awarded an A+ rating against the GRI G3 guidelines; this is a standard we intend to maintain.
Perimeter for consolidation

The reporting covers all business units and their industrial production sites under the Groups management control throughout the world. When a new site is acquired by Lafarge, procedures and definitions for sustainability data are not necessarily in line with Lafarge standards. Accordingly we give the new site a maximum of four years to meet our standards. This period is necessary to implement the appropriate management and data collection systems, in order to yield good and reliable data for reporting. When a plant is sold, we cease to include its performance data and we remove its data from the baseline data used for our Sustainability Ambitions, whether the base year is 1990 or 2005.
Control and assurance

Environmental data is collected by divisions and consolidated at Group level. For cement, environmental experts in the regional technical centers review and validate the performance data for the plants within their regions. Social data and health and safety data is collected by business units and consolidated at Group level. Ernst & Young provides independent assurance on a selection of data, such as lost time injury frequency rate, environmental audit and CO2 emissions.
Ratings
Our performance is measured by various sustainability ratings and indices, including in particular the Dow Jones Sustainability Indices, which have rated Lafarge with an overall score of 78% in 2010 (compared to 76% in 2009). With this improved score we remain in the DJSI Europe Index and have also re-entered the DJSI World Index (which we left in 2006).
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8.1 SHARE CAPITAL
8.1.1 8.1.2 8.1.3
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Changes in theshare capital during the scal year ended December31,2010 118 Potential share capital atDecember31,2010 118 Changes in our share capital over the past twoscal years 118
8.2 SHARES OWNED BY THE COMPANY

8.2.1 8.2.2 8.2.3 Information on transactions completed during thescal year ending December31, 2010 Information on the share buyback program approved on May6, 2010 Information on the share buyback program tobeapproved onMay12,2011
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119 119 120
8.3 SECURITIES NON REPRESENTATIVE OFSHARECAPITAL-BONDS 8.4 AUTHORIZATIONS DELEGATED TOTHEBOARDOFDIRECTORS

8.4.1 8.4.2 Authorizations delegated to the Board of Directors by the General Meeting Authorizations to be delegated to the Board ofDirectors by the General Meeting to be held onMay12, 2011 Corporate purpose (article2) Directors Rights, preferences andrestrictions attached toshares Changes to shareholders rights Convocation and admission to Shareholders General Meetings Disclosure ofholdings exceeding certain thresholds
120 121
121
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8.5 ARTICLES OF ASSOCIATION (STATUTS)

8.5.1 8.5.2 8.5.3 8.5.4 8.5.5 8.5.6
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123 123 123 124 124 125
8.6 CHANGE OF CONTROL 8.7 MATERIAL CONTRACTS 8.8 DOCUMENTS ON DISPLAY

8.8.1 8.8.2 Documents available at theregistered ofce andtheLafarge website Annual Information Document (art. 2227 ofthegeneral regulations oftheAutorit desmarchs nanciers (AMF))
126 126 127

127
127
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8.1Share Capital
8.1 Share Capital

As at December31,2010, the Companys share capital amounted to 1,145,815,116euros divided into286,453,779fully paid-up shares, each with a nominal value of 4euros. Considering that double voting rights accrue to shares (81,193,714) held in registered form for at least 2years, the total number of voting rights attached to the shares for the purpose of computing notification thresholds amounted to 367,647,493 at December31,2010.
8.1.1 Changes in theshare capital during the fiscal year ended December31,2010
T h e C o m p a n y s s h a r e c a p i t a l a t December 31, 2009 amounted to 1,145,813,264 euros divided into 286,453,316shares, each with a nominal value of 4euros.
Since December31,2009, the Companys share capital has increased by a total of 463 shares as a result of exercice of stock-options:
NUMBER OF SHARES ISSUED SUBSCRIPTION AMOUNT (EUROS) CAPITAL SHARE PREMIUM TOTAL
Exercise of stock subscription options during the period from January1,2010 to December31,2010
463
1,852.00
24,539.00
26,391.00
8.1.2 Potential share capital atDecember31,2010

The number of shares as at December31, 2010 could be increased by a maximum of 9,099,072shares in the hypothetical scenario that stock-options granted to employees existing on that date were exercised. 5,870,238 out of these existing 9,099,072stock-options could have been exercised at December31, 2010. The remaining 3,228,834stock-options
can only be exercised upon expiry of a period of four years after their grant and subject to the performance conditions attached to some of these stock-options being fulfilled. At December31,2010, the Company had not issued any other type of security giving any right, directly or indirectly, to the Companys share capital. Our Board of Directors has received from our General Meeting held on May6,2009, the right to carry out share capital increases through
the issue of shares or other equity securities with or without preferential subscription rights for shareholders, the capitalization of reserves, the issue of employee stock subscription options or performance shares, and through the issue of shares reserved for our employees. See Section8.4 for further information on financial authorizations delegated to our Board of Directors.
8.1.3 Changes in our share capital over the past twofiscal years
2010 2009
Share capital at the beginning of the fiscal year (number of shares) Number of shares issued during the period from January1 toDecember31 as a result of payment of the dividend in shares exercise of stock subscription options exercise of stock subscription warrants increase in share capital reserved for employees issue of new shares Number of shares cancelled during the period from January1 toDecember31 Maximum number of shares to be issued in the future as a result of exercise of stock subscription options exercise of stock subscription warrants conversion of bonds Share capital at the end of the fiscal year a- euros b- number of shares
286,453,316 463 463 9,099,072 9,099,072 1,145,815,116 286,453,779
195,236,534 91,216,782 5,784 1,101,834 90,109,164 8,060,756 8,060,756 1,145,813,264 286,453,316
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8.2Shares owned by the Company
8.2 Shares owned by the Company

8.2.1 Information on transactions completed during thefiscal year ending December31, 2010
The Company held 363,558 shares with a nominal value of 4 euros, as of December31,2010, representing 0.13% of its capital stock. The value based on the purchase price of those shares is 25,767,589.35 euros. All of the 363,558shares held by the Company at December31, 2010 are assigned to cover stock-options or performance share grants. In 2010, 16,590 shares were used to cover the delivery of performance shares. None of the shares held by the Company have been reassigned to cover different objectives. The Company has not entered into any liquidity agreement with an investment service provider.
In 2010, the Company carried out the following transactions on its shares:
PURCHASES NUMBER OF SHARES PURCHASED AVERAGE PRICE
(INEUROS)
SALES AMOUNTS*
(INEUROS)
NUMBER OF SHARES SOLD
AVERAGE PRICE
(INEUROS)
AMOUNTS*
(INEUROS)
2010 fiscal year

* ** Including transaction fees. Delivered to employees as part of performance share plans.
16,590**
8.2.2 Information on the share buyback program approved on May6, 2010

The share buyback program approved by the Shareholders Meeting on May6,2010 has the following features:
Securities Maximum percentage of capital that may be authorized Maximum number of shares that may be acquired Maximum total amount of the program Maximum unit purchase price
* Which is 5% of the capital as of December31,2010, subject to adjustment to take into account treasury shares and/or shares cancelled on the date of the purchases.
Shares 5% 14,322,688* 500million euros 100 euros
Program objectives: the implementation of any Company stock-option plan under the terms of articles L. 225-177 et seq. of the Commercial Code or any similar plan; or the allotment or sale of shares to employees under the French statutory profitsharing scheme or the implementation of any employee savings plan under applicable legal conditions, in particular articles L. 3332-1 et seq. of the Labor Code; or the allotment of consideration free shares pursuant to the terms of
articles L. 225-197-1 et seq. of the Commercial Code; or the delivery of shares on the exercise of rights attached to securities giving rights to the capital by redemption, conversion, exchange, presentation of a warrant or any other means; or the cancellation of some or all of the shares purchased, pursuant to the 21stresolution approved by the Combined General Meeting on May6, 2009; or the delivery of shares (in exchange, as payment, or otherwise) in connection with acquisitions, mergers, demergers or assetfor-share exchanges; or
market-making in the secondary market or maintenance of the liquidity of Lafarge shares by an investment services provider under a liquidity contract that complies with the ethical code recognized by the Autorit des marchs financiers. Period 18 months, until November6, 2011. As indicated in the table in Section8.2.1 above, the Company has not purchased any of its own shares within the share buyback program in 2010 or until publication of this Annual Report.
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8
Securities
*
8.3Securities non representative ofsharecapital-Bonds
8.2.3 Information on the share buyback program tobeapproved onMay12,2011

The Shareholders Meeting convened on May12,2011 should be presented with the following share buyback program for approval:
Shares 5% 14,322,688* 500 million euros 100 euros Maximum percentage of capital that may be authorized Maximum number of shares that may be acquired Maximum total amount of the program Maximum unit purchase price
Which is 5 % of the capital as of December31,2010, subject to adjustment to take into account treasury shares and/or shares cancelled on the date of the purchases.
Program objectives: the implementation of any Company stock-option plan under the terms of articles L. 225-177 et seq. of the Commercial Code or any similar plan; or the allotment or sale of shares to employees under the French statutory profitsharing scheme or the implementation of any employee savings plan under applicable legal conditions, in particular articles L. 3332-1 et seq. of the Labor Code; or the allotment of consideration free shares pursuant to the terms of articles L. 225-197-1 et seq. of the Commercial Code; or
generally, to fulfil obligations linked with stock-option programmes or other share allotment schemes in favour of employees or executive officers of the Company or related entities; or the delivery of shares on the exercise of rights attached to securities giving rights to the capital by redemption, conversion, exchange, presentation of a warrant or any other means; or the cancellation of some or all of the shares purchased, pursuant to the 15thresolution approved by the Combined General Meeting on May 12, 2011; or the delivery of shares (in exchange, as payment, or otherwise) in connection with acquisitions, mergers, demergers or assetfor-share exchanges; or
market-making in the secondary market or maintenance of the liquidity of Lafarge shares by an investment services provider under a liquidity contract that complies with the ethical code recognized by the Autorit des marchs financiers. Period 18 months, until November12, 2012. As at February 28, 2011, the Company held 363,558 shares with a nominal value of 4euros representing 0.13% of its capital stock, all of which are assigned to cover stockoptions or performance share grants. The Company has no open purchase or sale positions in relation to its share buyback program approved on May6, 2010 on the date of publication of this Annual Report.
8.3 Securities non representative ofsharecapital-Bonds

To meet the Groups medium and long-term financing needs and to optimize the maturity profile of the Groups debt, Lafarge issues bonds and other related securities on a regular basis, in particular under its Euro Medium Term Notes program (EMTN). The maximal nominal outstanding amount under our EMTN program is currently 12billion euros. At December31, 2010, the Companys total nominal outstanding amount of bond issues under the EMTN program is about 9.5billion euros. Today, the available balance for new bond issues is therefore about 2.5billion euros. At December31, 2010, the total nominal outstanding amount of the Company resulting from bonds issues, including bonds issues made under the EMTN program, is about 11.3billion euros. See Section 4.4 (Liquidity and Capital Resources - Net cash provided (used in) financing activities) and Note 25 to our consolidated financial statements for more information on bond issues. Our General Meeting held on May6,2009 authorized our Board of Directors to issue up to 8billion euros of bonds and other related securities for a period of 26 months. At December31, 2010, an outstanding amount of around 2.7billion euros is available for new bonds issues until the next General Meeting (May 2011) when a new authorization will be sought. See Section8.4 for further information on financial authorizations delegated to our Board of Directors.
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8.4Authorizations delegated totheBoardofDirectors
8.4 Authorizations delegated totheBoardofDirectors

8.4.1 Authorizations delegated to the Board of Directors by the General Meeting
At March15, 2011, the Board of Directors benefited from the following authorizations upon delegation by the General Meetings held on May6,2009 and May6, 2010:
MAXIMUM AUTHORIZED AMOUNT AVAILABLE AT MARCH 15,2011 TYPE OF AUTHORIZATION MAXIMUM AMOUNTS EXPIRATION DATE
(EUROS)
General Meeting held on May6, 2010 Buy and sell its own shares (8thresolution) Up to 5% of the share capital November6, 2011 Up to 500million euros Purchase price of up to 100 euros 380million euros (nominalvalue)(1) 152million euros (nominalvalue)(2) July6, 2011 5% of the share capital 500million euros
General Meeting held on May6, 2009 Issue of shares or other equity securities with preferential subscription rights (15thresolution) Issue of shares or other equity securities without preferential subscription rights (16thresolution) Issue of shares in an offer as set forth in articleL.411-2 of the French Monetary and Financial Code (17thresolution) Issue of shares or other equity securities as payment for contributions in kind (18thresolution) Increase in the number of shares to be issued in case of a capital increase with or without preferential subscription rights (19thresolution) 380million euros
July6, 2011
152million euros
152million euros (nominalvalue)(2)(3) 76million euros (nominalvalue)(2)(3) Up to the amount applicable to the initial issue and to be applied against the global cap set forth in the 15thresolution 8billion euros (nominal value) Up to 7% of the share capital fora24-month period 100million euros (nominalvalue)
July6, 2011
152million euros
July6, 2011
76million euros
July6, 2011
Issue of bonds and other related securities (20thresolution) Reduction of share capital through cancellation of treasury shares (21stresolution) Capital increase through incorporation of premiums, reserves, profits or other items (22ndresolution) Grant of options to subscribe for and/or purchase shares (23rdresolution) Allotment of free existing or new shares (24thresolution) Issue of shares or other equity securities reserved for Group employees (25thresolution) Capital increase reserved for a category of beneficiaries as part of a transaction reserved for employees (26thresolution)
(1) (2) (3) (4) (5) Global cap for the 15th, 16th, 17th, 18th and 19thresolutions. To be applied against the global cap set forth in the 15thresolution. To be applied against the cap set forth in the 16thresolution. To be applied against the cap set forth in the 23rdresolution. To be applied against the cap set forth in the 25thresolution.
July6, 2011 July6, 2011 July6, 2011
4,699,037,690 euros 7% of the share capital 100million euros
3% of the share capital (on grant date) 1% of the share capital (on grant date)(4) 23million euros (nominalvalue)
July6, 2011 July6, 2011 July6, 2011
2.15% of the share capital 0.83% of the share capital 18,592,664 euros
23million euros (nominalvalue)(5) November6, 2010
Expired
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8.4Authorizations delegated totheBoardofDirectors
8.4.2 Authorizations to be delegated to the Board ofDirectors by the General Meeting to be held onMay12, 2011
The General Meeting to be held on May12,2011 should vote upon the following delegations:
TYPE OF AUTHORIZATION TO BE VOTED UPON MAXIMUM AMOUNTS EXPIRATION DATE
Buy and sell its own shares (7thresolution) Issue of bonds and other related securities (8thresolution) Issue of shares or other equity securities with preferential subscription rights (9thresolution) Issue of shares or other equity securities without preferential subscription rights (10thresolution) Issue of shares in an offer as set forth in articleL.411-2 of the French Monetary and Financial Code (11thresolution) Issue of shares or other equity securities as payment for contributions in kind (12thresolution) Increase in the number of shares to be issued in case of a capital increase with or without preferential subscription rights (13thresolution) Capital increase through incorporation of premiums, reserves, profits or other items (14thresolution) Reduction of share capital through cancellation of treasury shares (15thresolution) Grant of options to subscribe for and/or purchase shares (16thresolution) Allotment of free existing or new shares (17thresolution) Issue of shares or other equity securities reserved for members of Company savings plans (18thresolution) Capital increase reserved for a category of beneficiaries as part of a transaction reserved for employees (19thresolution)
(1) (2) (3) (4) (5) Global cap for the 9th, 10th, 11th, 12th, 13th and 14th resolutions. To be applied against the global cap set forth in the 9thresolution. To be applied against the cap set forth in the 10thresolution. To be applied against the cap set forth in the 16thresolution. To be applied against the cap set forth in the 18thresolution.
Up to 5% of the share capital Up to 500million euros Purchase price of up to 100 euros 8billion euros (nominal value) 560 million euros (nominal value) 160 million euros (nominal value) 160 million euros (nominal value) 112 million euros(2) (3) (nominal value) Up to the amount applicable to the initial issue 100 million euros (nominal value) Up to 10% of the share capital fora24-month period 3% of the share capital (on grant date) 1% of the share capital (4) (on grant date) 50million euros (nominalvalue) 50million euros (nominalvalue)(5)
(2) (3) (2) (3) (2) (1)
November12, 2012 July12, 2013 July12, 2013 July12, 2013 July12, 2013 July12, 2013
July12, 2013 July12, 2013
July12, 2013
July12, 2013 July12, 2013
July12, 2013
November12, 2012
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8.5Articles of Association (Statuts)
8.5 Articles of Association (Statuts)

The main provisions of our articles of association are summarized below. duties on December31 of the year in which he reaches the age of 65unless the Board of Directors decides as an exceptional measure to extend the term of office of the Chairman beyond the above-mentioned age limit for successive one-year periods provided that his term of office as Director continues for such periods. In this case, the term of office of the Chairman of the Board expires definitively on December31 of the year in which he reaches the age of67. See Section5.1 (Board of Directors) for more information on our Board of Directors.
8.5.3 Rights, preferences andrestrictions attached toshares Allocation and appropriation ofearnings
The net results of each financial year after deduction of overheads and other Company expenses, including any depreciation and provisions, constitute the Companys profit or loss for that financial year. The Company contributes 5% of this profit, as reduced by any loss carried forward from previous years, to a legal reserve fund; this contribution is no longer required if the legal reserve fund equals 10% of the Companys issued share capital and becomes compulsory again if the legal reserve fund falls below this percentage of the share capital. A contribution is also made to other reserve funds in accordance with French law. The profits remaining after these contributions constitute the profits available for distribution, as increased by any profit carried forward from the previous years, out of which an initial dividend equal to 5% of the nominal value of shares fully paid-up and not redeemed is paid to the shareholders. Such dividends cannot be carried forward from one year to another. The profits available for distribution remaining after payment of the initial dividend can be allocated to optional reserve funds or carried forward. Any profits remaining are distributed to shareholders as a super dividend. The Shareholders General Meeting may also decide to distribute part of the Companys distributable reserves. In such cases, thedecision of the shareholders must specify expressly from which reserves the distribution is to be made. In any event, dividends are to be paid first from the financial years distributable profits. If the Company has incurred losses, such losses are booked, after approval of the accounts by the shareholders, in a special balance sheet account and can be carried forward against profits in subsequent years until extinguished.
8.5.1 Corporate purpose (article2)

The Companys purpose as set out in article2 of our statuts is: 1. The acquisition and management of all industrial and nancial holdings, including, without limitation: industries relating to cement and other hydraulic binders, construction materials and products or equipment used in homes; refractory product industries; industrial plant engineering and construction; bio-industries and agri-business. 2. Research and provision of services in any of the above-mentioned elds and in any other eld where the skills of the Company and its subsidiaries may be relevant. 3. All associations or undertakings, all acquisitions of securities, and all industrial, commercial, financial, agricultural, real and movable property transactions relating directly or indirectly to any of the abovementioned purposes or such as ensure the development of Company assets.
Transactions between the Company and Directors

Agreements between the Company and any member of the Board of Directors are subject to prior approval of the Board unless these agreements are entered into at arms length in the ordinary course of business. The Director who has an interest in the agreement to be approved by the Board cannot take part in the vote of the Board of Directors. The same applies to agreements to be entered into between the Company and the Chief Executive Officer, a Chief Operating Officer, a shareholder holding more than 10% of the voting rights in the Company or, if such shareholder is a legal entity, a company controlling that shareholder.
8.5.2 Directors
The Board of Directors must have a minimum of three members and a maximum of 18members. The Directors are appointed by shareholders at a General Meeting, and their term of office is for fouryears. Directors must not be over 70years of age and must each hold at least1,143 of the Companys shares. Each Directors term of office expires at the end of the ordinary Shareholders Meeting called to approve the previous years accounts and held in the year during which the Directors term of office normally expires or during which the Director reaches the age limit of 70years. The Board of Directors elects a Chairman from among its members. The Chairman of the Board must not be over 65years of age. The Chairman automatically ceases to perform his
Directors remuneration
The Shareholders Meeting can award a fixed annual amount as compensation for the members of the Board of Directors. The Board can then distribute this amount between itsmembers as it sees fit. See Section5.4 (Compensation and benefits) for more information on the amount of compensation awarded to the Directors by the Shareholders Meeting. The Board of Directors can authorize the reimbursement of travelling expenses and expenses incurred by Directors in the interests of Lafarge. The Board may also award exceptional remuneration to Directors who are members of Committees formed from among its members or who are entrusted with specific tasks or duties.
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Payment of dividends
Our statuts provide that the General Meeting may offer shareholders a choice, with respect to all or part of any dividend to be distributed, between payment in cash and payment in new Company shares pursuant to applicable law. Shareholders may be offered the same choice with regard to the payment of interim dividends. Unclaimed dividends within five years from the date of payment are forfeited and must be paid to the French State, in accordance with French law.
in the event of a bonus issue, the rights to any fractions of a share arising from the increase are not negotiable, but the corresponding shares can be sold and the proceeds will be distributed to the holder of such rights no later than 30days after the registration in the share account of the whole number of shares allocated to him.
8.5.4 Changes to shareholders rights

Shareholders rights can only be modified if a resolution to amend our statuts is passed at an Extraordinary General Meeting of the shareholders by a two-thirds majority. Unanimity is, however, required to increase shareholders obligations. In addition to a vote at the Shareholders Extraordinary General Meeting, elimination of double voting rights requires ratification by a two-thirds majority at a special meeting of the shareholders benefiting from such rights.
Voting rights
Each holder of shares is entitled to one vote per share at any Shareholders General Meeting. Voting rights attached to shares may be exercised by the holder of the usufruct except where the holder of the usufruct and the beneficial owner agree otherwise and jointly notify the Company at least five days before the date of the meeting.
DOUBLE VOTING RIGHTS
Loyalty dividend
Any shareholder who, at the end of the fiscal year, has held registered shares for at least 2years and still holds them at the payment date of the dividend in respect of that year, is entitled to receive in respect of such shares a bonus equal to 10% of the dividend (initial and loyalty dividend) paid to other shareholders, including any dividend paid in shares. Where applicable, the increased dividend is rounded down to the nearest cent. Entitlement to the increased dividend is lost upon conversion of the registered shares into bearer form or upon transfer of the registered shares. Similarly, any shareholder who, at the end of the fiscal year, has held registered shares for at least 2years and still holds them at the date of an issue by way of capitalization of reserves, retained earnings or issue premiums of performance shares, is entitled to receive additional shares equal to 10% of the number distributed, rounded down to the nearest whole number. The number of shares giving entitlement to such increases held by any one shareholder may not exceed 0.5% of the total share capital at the relevant fiscal year-end. In the event of a share dividend or bonus issue, any additional share ranks paripassu with the shares previously held by a shareholder for the purpose of determining any increased dividend or distribution of performance shares. However, in the event of fractions: where a shareholder opts for payment of dividends in shares, he can pay a balancing amount in cash to receive an additional share provided he meets the applicable legal requirements;
8.5.5 Convocation and admission to Shareholders General Meetings Convocation of General Meetings
Shareholders General Meetings can be called by the Board of Directors or, failing which, by the auditors and any other person legally authorized for such purpose. The form of notice calling such meeting, which may be transmitted electronically, and the time limits for sending out this notice are regulated by law. The notice must specify the place of the meeting, which may be held at the registered office or any other place, and the agenda of the meeting.
Double voting rights are attached to fully paid-up shares registered for at least 2years in the name of the same shareholder. In accordance with French law, entitlement to double voting rights is lost upon conversion of the registered shares into bearer form or upon transfer of the registered shares (this does not apply to transfers resulting from inheritance or gifts). Double voting rights were introduced in our statuts over 60 years ago and are exercisable within the limitations set out below.
ADJUSTMENT OF VOTING RIGHTS
There are no restrictions on the number of voting rights held by each of our shareholders if those rights do not exceed 5% of the rights attached to all the shares comprising the Companys share capital. Above this threshold, the number of voting rights is adjusted on the basis of the percentage of the capital represented at the General Meeting rounded off to the nearest whole unit. This prevents over-representation of a shareholder when participation at a General Meeting is low, while ensuring that each of our shareholders obtains a percentage of voting rights at least equal to his stake in the Companys share capital. Where applicable, the voting rights held directly or indirectly by a shareholder are added to the voting rights belonging to any third party, with whom such shareholder is acting in concert, as defined by law. This adjustment mechanism does not apply when the quorum at the General Meeting is greater than two-thirds of the total number of voting rights.
Attendance and Voting at meetings

Shareholders General Meetings may be attended by all shareholders regardless of the number of shares they hold, provided that all calls of capital contributions due or past due with respect to such shares have been paid in full. Access to the meeting is open to such shareholders, as well as to their proxies and registered intermediaries who have provided evidence of their entitlement to attend no later than midnight (Paris time) three business days before the date of the meeting, including certification that their shares are registered in an account. It is not necessary to block shares in order to attend General Meetings. The Board of Directors may, where appropriate, present shareholders with personal admission cards and request production of the cards.
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At all General Meetings, shareholders are deemed present for quorum and majority purposes if participating in the meeting by videoconference or by a method of telecommunication that permits them to be identified. The Board of Directors organizes, in accordance with applicable laws and regulations, the participation and voting by such shareholders at the meeting by creating a dedicated site, and verifies the efficacy of the methods adopted to permit shareholder identification and to guarantee their effective participation in the meeting. Shareholders not domiciled in French territory may be represented by an intermediary registered in accordance with applicable laws. Any shareholder may be represented by proxy, even if the proxy holder is not a shareholder. Shareholders may also vote by mail in accordance with the conditions set out by law. Shareholders may, pursuant to applicable law and regulations, submit their proxy or mail voting forms in respect of any General Meeting, either in paper form or by a method of telecommunications, provided that such method is approved by the Board of Directors and published in the notices of meeting, no later than 3.00 p.m. (Paris time) the day before the date of the meeting. The Board of Directors is authorized to reduce the time limit for the receipt of such forms. Any shareholder fulfilling the required conditions set out above may attend the General Meeting and take part in the vote, and any previously submitted correspondence vote or previously granted proxy is deemed invalid.
Quorum
In Ordinary and Extraordinary General Shareholders Meetings, the calculation of the quorum is based on the total number of shares with voting rights. Ordinary General Meetings: the quorum for Ordinary General Meetings called pursuant to the first notice of the meeting is only met if the shareholders present, deemed present or represented, hold20% of the shares with voting rights. No quorum is required for a meeting called pursuant to a second notice. Extraordinary Meetings: a quorum for Extraordinary Meetings is met only if the shareholders present, deemed present or represented at a meeting called pursuant to the first notice, hold 25% of the shares with voting rights, or hold20% of the shares with voting rights at a meeting called on second notice. If the quorum is not met pursuant to the second notice, the meeting is to be postponed to a date no later than 2months after the date for which it had been called.
8.5.6 Disclosure ofholdings exceeding certain thresholds

In addition to the legal requirement to disclose holdings exceeding certain thresholds, our statuts provide that any person acting alone or in concert who becomes, directly or indirectly, the owner of 2% or more of our share capital must notify the Company therein. This notification requirement is governed by the same provisions that apply to the legal requirement. TheCompany must be notified, within the time limits provided by law, by registered mail with return receipt requested or by fax or telex, of the number of shares held, indicating whether these are held directly or indirectly and whether the shareholder is acting alone or in concert. The same notification requirement applies to each subsequent increase or decrease in ownership of 1% or whole multiples of 1%. The notification must also specify the date on which the threshold was crossed (which corresponds to the date on which the transaction resulting in the crossing of the threshold took place) and the number of shares held giving access to the share capital. If a person does not comply with this notification requirement, the provisions of the law providing for loss of voting rights apply. If this sanction is not applied automatically, one or more shareholders holding 1% or more of our share capital or voting rights may require a Shareholders General Meeting to strip the shares in excess of the relevant threshold of voting rights at all General Meetings for 2years following the date on which the owner complies with the notification requirements. This penalty is irrespective of any legal sanction that may be issued by a court upon the request of the Chairman, a shareholder or the Autorit des marchs financiers (AMF). The Company may at any time request, under the terms and conditions set forth by applicable law, the entity in charge of settlement of securities transactions to identify the holders of securities conferring immediate or future entitlement to voting rights at General Meetings and to state the number of securities held by each holder and any restrictions on such securities.
Majority Required
Resolutions at an Ordinary General Meeting of shareholders are passed by a simple majority of the votes cast by the shareholders present, deemed present or represented. Resolutions at an Extraordinary General Shareholders Meeting are passed by a two-thirds majority of the votes cast by the shareholders present, deemed present or represented. In the event of a capital increase by capitalization of reserves, profits or issue premiums, resolutions are passed in accordance with the voting requirements for Ordinary General Shareholders Meetings.
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8.6Change of control
8.6 Change of control

Within the framework of the provisions of ArticleL.225-100-3 of the Commercial Code, the Company states that it has no specific provisions which may have an incidence in the event of a call for tenders. The change of control provisions of the Companys principal financing agreements, including those presented in Section 8.7 (Material contracts), details the early reimbursement of the loans in case of a change of control. The EMTN program of the Company includes in its terms and conditions the situation of a change of control accompanied by a lowered financial rating for the Company which could bring about, at the choice of bonds holders and subject to certain conditions, the early reimbursement of bonds. In addition, for informational purposes: the structure of the Companys capital, the information on the thresholds notifications and declaration of intent are set forth in Chapter6 (Major shareholders) and certain provisions of the Articles of Association, including those regarding voting rights, are set forth in Section 8.5 (Articles of Association (Statuts); to the Companys knowledge, there are no agreements between shareholders which may give rise to restrictions to the transfer of shares and the exercise of the Companys voting rights, and the Company has not been informed of agreement clauses pursuant to ArticleL.233-11 of the Commercial Code; the severance arrangements which may be due to the Chairman and Chief Executive Officer following a change of control is set forth in Section5.4.2 (Compensation benefits paid to the Chairman and Chief Executive Officer).
8.7 Material Contracts

We are a party to a syndicated credit facility entered into on October 29, 2004, and amended successively on July 28, 2005, and July27, 2010, initially arranged by the Royal Bank of Scotland Plc., Socit Gnrale, HSBC, Citibank International Plc. and Calyon. This facility originally provided a revolving credit line in the amount of 1,850million euros, with a maturity of five years from the date of the first amendment and included two one-year extension options on the first and second anniversary date of July28,2005, subject to the banks approval. Weexercised the first option on May 5, 2006, and the second option on May14,2007. On July27, 2010 we entered into a further amendment to extend the current term of the facility by one year to July28,2013, for an amount of 1,764 millions euros, to be disbursed in euros or any other eligible currency. 110million euros remain due on July28,2012 and 86million euros of commitment have been cancelled. As a part of the acquisition of Orascom Cement, we are party to a 7,200 million euro credit facility dated December9,2007 arranged by BNP Paribas, Calyon and Morgan Stanley Bank InternationalLtd. This facility is structured in several tranches of different amounts and with maturity dates between one and five years (1,800million euros maturing in one year, 2,300million euros in 2years and 3,100millioneuros in five years, with one-year extension options for each of the tranches maturing in one and 2years). The first tranche was partially reimbursed up to 1.5billion euros in 2008. We exercised the first extension option of one year on November17, 2008 for the remaining 300million euros. During the 2009 fiscal year we made several early repayments for a total amount of 4.9billion euros. As a result a balance of 768million euros remains due under this facility as at December31, 2010, maturing on December9, 2012. We also have a significant number of contracts relating to outstanding bond issues. See Section 4.4 (Liquidity and Capital Resources) and Note 25 (Debt) to our consolidated financial statements for further information. In addition, we have entered into several agreements in relation to the significant sales and acquisitions mentioned in Section3.3.2 (Recent acquisitions, partnerships and divestitures).
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8.8Documents on Display
8.8 Documents on Display

8.8.1 Documents available at theregistered office andtheLafarge website
The Articles of Association of the Company, minutes of General Meetings as well as reports from the Board of Directors to the General Meeting, auditors reports, financial statements of the Company for the last three fiscal years, and any other document sent to or available for our shareholders in accordance with the law, are available for consultation during the validity period of this report at our registered office, 61,rue des Belles Feuilles, 75116Paris. In addition, historical financial information and regulated information relating to the Group is available on-line at www.lafarge.com.
8.8.2 Annual Information Document (art. 2227 ofthegeneral regulations oftheAutorit desmarchs financiers (AMF))
The tables below list the information which has been disclosed by Lafarge since January 1, 2010 (in addition to the data mentioned in Section8.8.1 above). Releases available on the Lafarge internet website: www.lafarge.com
DATE
TITLE
02/18/2011 02/18/2011 01/30/2011 01/06/2011 12/27/2010 11/18/2010 11/05/2010 10/29/2010 09/29/2010 09/22/2010 09/21/2010 07/30/2010 07/16/2010 07/08/2010 07/07/2010 07/02/2010 07/02/2010 05/25/2010 05/06/2010 05/05/2010 04/07/2010 04/01/2010 03/29/2010 02/24/2010 02/19/2010 02/03/2010 01/14/2010
Lafarge and Anglo American to create a joint venture in UK 2010 full year results Temporary return of some Cairo-based expatriates Lafarge Invention Awards: innovating for sustainable construction Disposal of Aggregates and Concrete Assets for 120million euros Lafarge places a 1billion euro bond 2010 third quarter results Kareen Rispal, Senior VP Sustainable Development and Public Affairs Lafarge accelerates its innovation strategy Lafarge, partner of the new Chinese architecture Batiweb and Batirenover combine their Internet activities 2010 first half year results Sale of minority interest in Lafarge Malayan Cement Berhad Alexandra Rocca appointed as Senior Vice-President, Communications Lafarge places a 550 million US dollar bond Support to the Novacem start-up: an innovative R&D strategy Potential sale of a minority interest in Lafarge Malayan Cement Berhard Lafarge and STRABAG to create a common company in Cement in Central Europe 2010 Shareholders Meeting 2010 first quarter results Lafarge places a 500million euro bond Lafarge partner of the France Pavilion for the Shanghai 2010 Expo Lafarge exceeds its target to reduce global CO2 emissions Closing of the sale of the stake in Cimpor to Votorantim 2009 annual results Sale of the stake in Cimpor to Votorantim Cimpor - denial
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8
DATE
8.8Documents on Display
Other permanent and occasional information available on the Lafarge website: www.lafarge.com
TITLE
03/08/2011 02/18/2011 01/10/2011 12/09/2010 11/08/2010 10/08/2010 09/08/2010 08/06/2010 07/12/2010 06/11/2010 05/07/2010 04/13/2010 03/10/2010 02/11/2010 01/08/2010
Declaration in accordance with article223-16 of the AMF general regulations Declaration in accordance with article223-16 of the AMF general regulations Declaration in accordance with article223-16 of the AMF general regulations Declaration in accordance with article223-16 of the AMF general regulations Declaration in accordance with article223-16 of the AMF general regulations Declaration in accordance with article223-16 of the AMF general regulations Declaration in accordance with article223-16 of the AMF general regulations Declaration in accordance with article223-16 of the AMF general regulations Declaration in accordance with article223-16 of the AMF general regulations Declaration in accordance with article223-16 of the AMF general regulations Declaration in accordance with article223-16 of the AMF general regulations Declaration in accordance with article223-16 of the AMF general regulations Declaration in accordance with article223-16 of the AMF general regulations Declaration in accordance with article223-16 of the AMF general regulations Declaration in accordance with article223-16 of the AMF general regulations
Information published in the Official Journal for Legal Compulsory Publications (Bulletin des Annonces Lgales Obligatoires) available on the website: www.journal-officiel.gouv.fr
DATE ISSUE NUMBER TITLE
03/18/2011 05/19/2010 04/21/2010 03/29/2010
(n33) (n60) (n48) (n38)
Notice of meeting of shareholders Annual accounts Notice of meeting of shareholders Notice of meeting of shareholders
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9.1 REPORT OF THE CHAIRMAN OF THE BOARD OFDIRECTORS ONINTERNAL CONTROL PROCEDURES ANDON CORPORATE GOVERNANCE(ARTICLE L.225-37 OFTHEFRENCHCOMMERCIAL CODE)
9.1.1 9.1.2 General organization of internal control andriskmanagement Procedures related to internal control overnancial reporting
130
130 132
9.2 STATUTORY AUDITORS REPORT, PREPARED INACCORDANCE WITH ARTICLE L.225-235 OFTHE FRENCH COMMERCIAL CODE (CODE DECOMMERCE) ONTHE REPORT PREPARED BYTHECHAIRMAN OFTHEBOARD OFDIRECTORS OF LAFARGE 133
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9.1Report of the Chairman of the Board ofDirectors oninternal control procedures andon corporate governance
9.1 Report of the Chairman of the Board
ofDirectors oninternal control procedures andon corporate governance(article L.225-37 oftheFrenchCommercial Code)
This report on internal control procedures and corporate governance was prepared under the responsibility of the Chairman of the Board pursuant to the articleL.225-37 of the French Commercial Code. It was drafted with the support of the Group Internal Control department and Group Audit department. It was examined by the Audit Committee in its meeting of February16, 2011 and approved by the Board of Directors in its meeting of February17, 2011 and covers Group Holding, LafargeS.A., as well as controlled companies included in the Groups scope of consolidation. The information of this report is organized as follows: general organization of internal control and of risk management; internal control procedures related to the preparation of accounting and financial information. The introduction of Chapter5 (Declaration in terms of corporate governance Governance Code of reference) and Sections2.2 (Risk Management), 5.1 (Board of Directors), 5.2 (Board and Committee rules and services), 5.4 (Remunerations and benefits) and 8.5.5 (Convocation and admission to Shareholders General Meetings) of the Annual Report are part of this report. Moreover the Annual Report includes the information pursuant to articleL.225-100-3 of the French Commercial Code (see Section8.6 (Change of control)). Internal control related to the preparation of financial and accounting information is presented below internal control over financial reporting.
9.1.1 General organization of internal control andriskmanagement Internal control framework chosen by the Group
In conformity with the definition of the Coso Report (1), which is the framework chosen by the Group, the internal control process consists of implementing and permanently adapting appropriate management systems, aiming at giving the Directors and management reasonable assurance concerning the reliability of financial reporting, compliance with laws and internal regulations, and the effectiveness and efficiency of major Company processes. One of the objectives of internal control is to prevent and monitor the risks of errors and fraud. Like all control systems, because of its inherent limitations, the internal control process cannot guarantee that all risks of errors or fraud are fully eliminated or controlled.
Group internal control environment

The Groups internal control environment is based on key documents such as the Group Principles of Action, principles of organization and Code of Business Conduct, which have to be strictly applied by Group employees: the Principles of Actions present Group commitments towards customers, employees, shareholders and other Group stakeholders, and define what the Lafarge Way is, being its management philosophy; the principles of organization define responsibilities at all levels within the organization (business units, Divisions and Group), the various components of the management cycle as well as the key principles driving performance improvement; the Code of Business Conduct defines rules of conduct and is structured as follows: compliance with the law and regulations, prevention of conflicts of interest, respect for people and the environment, the safeguarding of the Groups assets, financial disclosure, the importance of internal control, implementation of behavioral rules and appropriate sanctions. Those documents are complemented by rules and policies established by the Group defining priorities for each of the Groups principal functions. Among other things, these rules state that implementing a robust internal control process is one of the primary responsibilities of the Executive Management of each legal or operational entity. An annual assessment of the internal control environment is organized in the Group main operational units, on the basis of self-assessment questionnaires.
(1) COSO: Committee of Sponsoring Organization of the Treadway Commission.
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Risk identification and analysis

The approach implemented by the Group, relating to the identification and analysis of risks, is described in Section2.2.1. (Risk identification and analysis) of the Annual Report.
Risk management systems

A presentation of the general framework of risk management and of major risk management systems is included in Section2.2.2. (Risk management systems) of the Annual Report.
Control activities
Control activities are implemented at every level in the Group, in conformity with rules and policies described above. Internal control activities over major processes impacting the reliability of the Groups financial reporting are defined in the Group Internal Control Standards and are documented and tested as described in Section9.1.2 below.
Information and communication

The Groups key documents are available on the Groups intranet. Function leaders are responsible for disseminating the rules, policies and procedures applicable Group-wide. Controls and procedures over key processes affecting the Groups financial reporting are subject to formal documentation and test procedures described in Section9.1.2 below.
Internal control monitoring across the Group

Internal control is monitored at all levels of the Group. The roles of major stakeholders are described below.
BOARD OF DIRECTORS AND SPECIAL COMMITTEES
The Board of Directors and its special Committees, and in particular the Audit Committee, ensure implementation of the Groups internal control policy. See Sections5.1 (Board of Directors), 5.2 (Board and Committees Rules and Practices) and 5.4 (Compensations and benefits).
GROUP EXECUTIVE COMMITTEE
The Executive Committee steers the effective implementation of the Groups internal control policy, through: the monitoring and follow-up of internal control procedures performed throughout the Group, and in particular the follow-up of identified action plans; the review of the annual summary of the Groups internal audit reports.
GROUP FUNCTIONS AND DIVISIONS
With regard to processes affecting the preparation of financial reporting, Group function managers, with in particular managers of the Group Finance function, have been designated at Division and Group level, in order to: document their processes at Division and Group level and verify that the Internal Control Standards for such processes are effectively implemented; define and update the standards of internal control applicable to business units.
BUSINESS UNITS
In application of Group internal control policy, internal control is under the direct responsibility of the Executive Committee of business units. In each of the Groups major business units, Internal Control Coordinators are appointed. Their role is to continuously improve internal control and consists mainly in supporting implementation of the Groups Internal Control Standards and coordinating procedures related to internal control over financial reporting at their unit. Their activities are coordinated by the Group Internal Control department presented below.
GROUP INTERNAL AUDIT
The Group Internal Audit department (around 40auditors) is responsible for performing an independent assessment of the quality of internal control at all levels in the organization, following the annual audit plan approved by the Chairman and Chief Executive Officer and Audit Committee. Reports are issued to business units and to senior managers upon completion of the fieldwork. An annual summary of such reports is presented to the Chairman and Chief Executive Officer and to the Audit Committee, which solicits their comments on internal control, if any, from the Groups external auditors. Furthermore, follow-up assignments are organized to verify that internal audit recommendations have been put in place.
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GROUP INTERNAL CONTROL DEPARTMENT
The Group Internal Control department (12 persons) is part of the Group Finance function. This department is in charge of overseeing internal control and monitoring all procedures related to internal control over financial reporting. This department oversees the definition of Internal Control Standards mentioned above. It supports business units and the heads of Group functions in the implementation of such standards and in the documentation and tests of controls over financial reporting presented in Section9.1.2 below. More generally, it aims to support continuous improvement in processes. The Internal Control Committee chaired by the Chief Financial Officer and encompassing the key finance managers at Group level, the Group audit Director, the Group information systems Director, the Group purchasing Director, the Group legal counsel oversees the work performed on internal control over financial reporting.
9.1.2 Procedures related to internal control overfinancial reporting Key processes with an impact on the reliability of Group financial reporting
Processes with a direct impact on the production of financial reporting, for which key controls were defined as part of the analysis presented above, relate to the following areas: finance (closing process, consolidation process, legal and tax management, etc.), purchases (from the bidding process to recording and payment of invoices), sales (from orders receipt to revenue recognition and collection), IT (security management, among others), payroll and management of various employee benefits, management of tangible and intangible assets, management of inventories (physical count, valuation, etc.) and treasury and financing activities.
Documentation and testing of controls over financial reporting

The Group is committed to maintain high standards of internal control and continues to implement detailed work related to documentation and testing of internal control over financial reporting. This work is implemented by business units, Divisions and at Group level, on key controls contributing to the reliability of financial reporting and encompasses: a description of key processes affecting the reliability of the Groups financial reporting, as presented above; a detailed description of key controls defined in the Internal Control Standards presented above; tests of controls to check the operational effectiveness of such controls; the scope of such tests being defined based on the materiality and risk level of each entity; an internal certification process to review the principal action plans in progress and to confirm management responsibility at business units, Divisions and Group level on the quality of both internal control and financial reporting. This work is part of the process of continuous improvement in internal control and includes the preparation of specific action plans, identified through the activities described above, as well as through internal and external audits. The implementation of action plans is followed up by relevant senior management. The outcome of such procedures are presented to the Audit Committee.
Preparation of published financial reporting

Specific procedures are put in place to ensure the reliability of published financial reporting, as follows: a consolidation and financial reporting system is used to prepare Group financial reporting; a formal reporting, analysis and control process for other published information included in the Groups Annual Report (Document de Rfrence) is implemented. This process is monitored by the Disclosure Committee, composed of the main heads of Group functions, who verify the content of financial disclosures and reports before they are submitted to the Audit Committee and to the Board of Directors. Paris, February 18, 2011 French original signed by Bruno Lafont Chairman of the Board of Directors
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9.2Statutory auditors Report, prepared inaccordance with Article L
9.2 Statutory auditors Report, prepared inaccordance
with Article L.225-235 ofthe French Commercial Code (Code decommerce) onthe report prepared bytheChairman oftheBoard ofDirectors of Lafarge
Year ended December 31, 2010

This is a free translation into English of a report issued in the French language and is provided solely for the convenience of English-speaking readers. This report should be read in conjunction with, and construed in accordance with, French Law and professional auditing standards applicable in France. To the Shareholders, In our capacity as statutory auditors of Lafarge (the Company), and in accordance with article L. 225-235 of the French Commercial Code (Code de commerce), we report to you on the report prepared by the Chairman of the Board of Directors of your Company in accordance with article L. 225-37 of the French Commercial Code (Code de commerce) for the year ended December 31, 2010. It is the Chairmans responsibility to: prepare a report describing the internal control and risk management procedures implemented within the Company and providing the other information required by article L. 225-37 of the French Commercial Code (Code de commerce) notably relating to the corporate governance system; submit it for approval to the Board of Directors. It is our responsibility to: report to you on the information set out in the Chairmans report on the internal control and risk management procedures relating to the preparation and processing of financial and accounting information ; attest that the report contains the other information required by article L. 225-37 of the French Commercial Code (Code de commerce), knowing that we are not responsible for verifying the fairness of this other information. We performed our procedures in accordance with the relevant professional standards applicable in France.
Information concerning the internal control and risk management procedures relating to the preparation and processing of financial and accounting information The professional standards require us to perform procedures to assess the fairness of the information set out in the Chairmans report on the internal control and risk management procedures relating to the preparation and processing of financial and accounting information. These procedures notably consisted in: obtaining an understanding of the internal control and risk management procedures relating to the preparation and processing of financial and accounting information, on which the information presented in the Chairmans report is based, and the existing documentation; obtaining an understanding of the work performed to prepare this information, and the existing documentation; ensuring that any material weaknesses in internal control procedures relating to the preparation and processing of financial and accounting information that we would have detected in the course of our engagement have been properly disclosed in the Chairmans report. On the basis of these procedures, we have no matters to report in connection with the information given on the internal control and risk management procedures relating to the preparation and processing of financial and accounting information, contained in the Chairmans report, prepared in accordance with article L. 225-37 of the French Commercial Code (Code de commerce).
Other information We attest that the Chairmans report contains the other information required by article L. 225-37 of the French Commercial Code (Code de commerce). Neuilly-sur-Seine and ParisLa Dfense, February 24, 2011
The Statutory Auditors DELOITTE &ASSOCIS French original signed by Frdric Gourd Pascal Pincemin ERNST &YOUNG Audit French original signed by Christian Mouillon Nicolas Mac
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134
AUDITING MATTERS
10.1 AUDITORS 10.2 AUDITORS FEES AND SERVICES 136 137
10
135
10
AUDITING MATTERS
10.1Auditors
10.1 Auditors
STATUTORY AUDITORS DEPUTY AUDITORS
Deloitte &Associs
185, avenue Charles-de-Gaulle, F 92200 Neuilly-sur-Seine, represented by MessrsPascal Pincemin and Frdric Gourd. Date of first appointment:1994. Current appointment expires at the end of the Shareholders Meeting called to approve the financial statements for fiscal year 2011.
BEAS
7-9, villa Houssay, F 92200 Neuilly-sur-Seine. Date of first appointment:2000. Current appointment expires at the end of the Shareholders Meeting called to approve the financial statements for fiscal year 2011.
Ernst &Young Audit

11, alle de lArche, F 92400 Courbevoie, represented by MrsChristianMouillon and Nicolas Mac. Date of first appointment:2006. Current appointment expires at the end of the Shareholders Meeting called to approve the financial statements for fiscal year 2011.
AUDITEX
11, alle de lArche, F 92400 Courbevoie. Date of first appointment:2008. Current appointment expires at the end of the Shareholders Meeting called to approve the financial statements for fiscal year 2013.
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AUDITING MATTERS
10.2Auditors Fees and Services
10.2 Auditors Fees and Services

This table sets out the amount of fees billed for each of the last two fiscal years by each of our auditors, Deloitte &Associs and Ernst &Young Audit, in relation to audit services, audit-related services, tax and other services provided to us.
DELOITTE &ASSOCIS AMOUNT (EXCL. TAX)
(million euros)
ERNST &YOUNG AUDIT % AMOUNT (EXCL. TAX) 2009 2010 2009 % 2010 2009
2010
2009
2010
Audit fees Audit, review of financial statements LafargeS.A. Subsidiaries Audit-related Fees * LafargeS.A. Subsidiaries SUB-TOTAL Other fees Tax Fees** Legal and Employment Fees Information Technology Others SUB-TOTAL OTHER FEES TOTAL FEES
* **
7.4 1.8 5.6 1.3 0.4 0.9 8.7 0.1 0.1 8.8
7.8 1.9 5.9 0.9 0.6 0.3 8.7 0.1 0.1 8.8
84% 20% 64% 15% 5% 10% 99% 1% 1% 100%
89% 22% 67% 10% 7% 3% 99% 1% 1% 100%
6.4 1.5 4.9 0.7 0.1 0.6 7.1 0.2 0.2 7.3
5.8 1.4 4.4 0.5 0.3 0.2 6.3 0.7 0.7 7
88% 21% 67% 10% 1% 8% 97% 3% 3% 100%
83% 20% 63% 7% 4% 3% 90% 10% -10% 100%
Audit-related fees are generally fees billed for services that are closely related to the performance of the audit or review of financial statements. These include due diligence services related to acquisitions, consultations concerning financial accounting and reporting standards, attestation services not required by statute or regulation, information system reviews. Tax fees are fees for services related to international and domestic tax compliance, including the review of tax returns and tax services regarding statutory, regulatory or administrative developments and expatriate tax assistance and compliance.
10
137
10
AUDITING MATTERS
138
Certification
Certification
We hereby certify that, having taken all reasonable care to ensure that this is the case, the information set out in this Document de Rfrence is, to the best of our knowledge, true and accurate and that no information has been omitted that would be likely to impair the meaning thereof. We certify that, to the best of our knowledge, the financial statements have been prepared in accordance with applicable accounting standards and give a true and fair view of the assets and liabilities, and of the financial position and results of the Company and of its consolidated subsidiaries, and that the management report of the Annual Financial Report defined on page 240 provides a true and fair view of the evolution of the business, results and financial condition of the Company and of its consolidated subsidiaries, and a description of the main risks and uncertainties the Company and its consolidated subsidiaries are subject to. We have obtained from our statutory auditors, Deloitte & Associs and Ernst & Young Audit, a letter asserting that they have reviewed the information regarding the financial condition and the financial statements included in this Document de Rfrence and that they have read the whole Document de Rfrence. Our statutory auditors have established a report on the consolidated financial statements presented in this Document de Rfrence, set out on page F3. This report contains a technical observation, as the reports on the 2009 consolidated financial statements and the 2008 parent company financial statements presented respectively in the Document de Rfrence 2009 (D.10-0104) and 2008 (D.09-0122).
Paris, March 22, 2011
French original signed by Jean-Jacques Gauthier Chief Financial Officer
French original signed by Bruno Lafont Chairman and Chief Executive Officer
139
140
Consolidated nancial statements
F3
F3 F4 F F F F 5 6 7 9
STATUTORY AUDITORS REPORT ONTHECONSOLIDATED FINANCIAL STATEMENTS CONSOLIDATED STATEMENTS OF INCOME CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME CONSOLIDATED STATEMENT OF FINANCIAL POSITION CONSOLIDATED STATEMENTS OF CASH FLOWS CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
INANCIAL STATEMENTS
Notes to the consolidated nancialstatements
Note1 Note2 Note3 Note4 Note5 Note6 Note7 Note8 Note9 Note10 Note11 Note12 Note13 Note14 Note15 Note 16 Note 17 Note18 Note19 Note20 Note21 Note22 Note23 Note24 Note25 Note26 Note27 Note28 Note29 Note30 Note31 Note32 Note33 Note34 Note35 Business description Summary of signicant accounting policies Signicant events Business segment and geographic areainformation Gains on disposals, net Other operating income (expenses) Emission rights Finance (costs) income Earnings per share Goodwill Intangible assets Property, plant and equipment Investments in associates Joint ventures Other nancial assets Inventories Trade receivables Other receivables Cash and cash equivalents Equity Share based payments Income taxes Pension plans, end of service benets andotherpost retirement benets Provisions Debt Financial instruments Other payables Commitments and contingencies Legal and arbitration proceedings Related parties Employee costs and Directors andExecutive Ofcers compensation for services Supplemental cash ow disclosures Auditors fees and services Subsequent events List of signicant subsidiaries, joint ventures and investments in associates at December31,2010
F 10
F 10 F 10 F 23 F 24 F 27 F 28 F 29 F 29 F 30 F 31 F 33 F 34 F 35 F 36 F 37 F 38 F 39 F 40 F 40 F 40 F 42 F 45 F 49 F 53 F 54 F 57 F 64 F 64 F 65 F 67 F 67 F 68 F 69 F 69 F 70
F
F 1
Statutory accounts
STATUTORY AUDITORS REPORT ON THE ANNUAL FINANCIAL STATEMENTS COMMENTS ON THE INCOME STATEMENT ANDTHEBALANCE SHEET APPROPRIATION OF EARNINGS STATEMENTS OF INCOME BALANCE SHEETS STATEMENTS OF CASH FLOWS
F 73
F 73 F F F F F 74 74 75 76 78
Notes to the parent company nancial statements

Note 1 Note 2 Note 3 Note 4 Note 5 Note 6 Note 7 Note 8 Note 9 Note 10 Note 11 Note 12 Note 13 Note 14 Note 15 Note 16 Note 17 Note 18 Note 19 Note 20 Note 21 Note 22 Note 23 Note 24 Note 25 Note 26 Note 27 Note 28
F 79
F 79 F 79 F 80 F 81 F 81 F 81 F 82 F 82 F 82 F 83 F 83 F 83 F 84 F 84 F 84 F 85 F 86 F 86 F 87 F 88 F 89 F 90 F 90 F 90 F 91 F 91 F 91 F 92
Signicant events of the period Accounting policies Depreciation and amortization, operating provision (allowance) reversal Financial income from investments Interest and similar income Financial provision (allowance) reversal Interest and similar expenses Exceptional income (loss) Income tax Intangible assets and property, plant & equipment Financial assets Marketable securities Lafarge S.A. treasury shares Translation adjustments and bond redemption premiums Net equity Provisions for losses and contingencies Retirement benet obligations Financial debt Derivatives Financial commitments Maturity of receivables and liabilities at the balance sheets date Related parties Compensation of the Board of Directors andExecutive Management Average number of employees during the year Individual rights to training Deferred tax position - tax base (holding company only) Subsequent events Investments
SPECIAL REPORT OF THE STATUTORY AUDITORS ON RELATED-PARTY AGREEMENTS AND COMMITMENTS
F 94
F 2
Annual Report and Registration Document | 2010 | Lafarge
CONSOLIDATED STATEMENTS
Statutory Auditors Report ontheconsolidated financial statements
Statutory Auditors Report ontheconsolidated financial statements

This is a free translation into English of the statutory auditorsreport on the consolidated financial statements issued in the French language and is provided solely for the convenience of English-speaking users. The statutory auditors report includes information specifically required by French law in such reports, whether modified or not. This information is presented below the opinion on the consolidated financial statements and includes an explanatory paragraph discussing the auditors assessments of certain significant accounting and auditing matters. These assessments were made for the purpose of issuing an audit opinion on the consolidated financial statements taken as a whole and not to provide separate assurance on individual account captions or on information taken outside of the consolidated financial statements.This report also includes information relating to the specific verification of information given in the Groups management report.This report should be read in conjunction with, and construed in accordance with, French law and professional auditing standards applicable in France.
For the year ended December 31, 2010

To the Shareholders, In compliance with the assignment entrusted to us by your Annual General Meeting, we hereby report to you for the year ended December31, 2010 on: the audit of the accompanying consolidated financial statements of Lafarge; the justification of our assessments; the specific verification required by law. These consolidated financial statements have been approved by the Board of Directors. Our role is to express an opinion on these consolidated financial statements based on our audit.
I. OPINION ON THE CONSOLIDATED FINANCIAL STATEMENTS
We conducted our audit in accordance with professional standards applicable in France; those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. An audit involves performing procedures, using sampling techniques or other methods of selection, to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made, as well as the overall presentation of the consolidated financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. In our opinion, the consolidated financial statements give a true and fair view of the assets and liabilities and of the financial position of the Group as at December31, 2010 and of the results of its operations for the year then ended in accordance with IFRS as adopted by the European Union. Without qualifying our opinion, we draw your attention to the matter set out in note 2.1 Accounting Policies of the notes to the consolidated financial statements regarding changes in accounting methods related to the adoption of new standards and interpretations and effective as of January 1, 2010, and especially to the prospective adoption of IFRS 3 Revised Business Combinations and IAS 27 Revised Consolidated and Separate Financial Statements.
II. JUSTIFICATION OF OUR ASSESSMENTS
In accordance with the requirements of article L. 823-9 of the French commercial code (Code de Commerce) relating to the justification of our assessments, we bring to your attention the following matters: Goodwill, property plant and equipment, and intangible assets have been tested for impairment in accordance with the groups accounting policies described in note 2.12 Impairment of long-lived assets to the consolidated financial statements. The estimates are established based on currently available information at the time of their definition and are in keeping with the current economic crisis affecting some of the Groups markets, as described in note 2.3 Use of estimates and judgments to the consolidated financial statements. Therefore, as set out in note 10 Goodwill, the Group considered the impact of the economic crisis affecting some of its markets in the operational and actuarial assumptions used in future cash flows and analyzed the sensitivity of the recoverable amount (particularly with regard to a change in the discount rate and the perpetual growth rate) for the main goodwill items. Our procedures consisted in reviewing available documents, assessing the reasonableness of retained valuations and the adequacy of the information disclosed in the notes to the consolidated financial statements. These assessments were made as part of our audit of the consolidated financial statements taken as a whole, and therefore contributed to the opinion we formed which is expressed in the first part of this report.
III. SPECIFIC VERIFICATION
As required by law, we have also verified, in accordance with professional standards applicable in France, the information presented in the Groups management report. We have no matters to report as to its fair presentation and its consistency with the consolidated financial statements. Neuilly-sur-Seine and Paris-La Dfense, February 28, 2011 The statutory auditors French original signed by DELOITTE & ASSOCIS Frdric Gourd Pascal Pincemin ERNST & YOUNG Audit Christian Mouillon Nicolas Mac
F
F 3
F
REVENUE Cost of sales
Consolidated statements of income
Consolidated statements of income

YEARS ENDED DECEMBER 31,
(million euros, except per share data)
NOTES (4)
2010
2009
16,169 (12,015) (1,713)
15,884 (11,707) (1,700) 2,477 103 (330) 2,250 (1,136) 210 (18) 1,306 (260) 1,046 736 310
Selling and administrative expenses OPERATING INCOME BEFORE CAPITAL GAINS, IMPAIRMENT, RESTRUCTURING AND OTHER Gains on disposals, net Other operating income (expenses) OPERATING INCOME Finance costs Finance income Share of profit of associates INCOME BEFORE INCOME TAX EXPENSE Income tax expense NET INCOME Out of which part attributable to: Owners of the parent of the Group Non-controlling interests EARNINGS PER SHARE (EUROS) NET INCOME - ATTRIBUTABLE TO THE OWNERS OF THE PARENT COMPANY Basic earnings per share Diluted earnings per share BASIC AVERAGE NUMBER OF SHARES OUTSTANDING (IN THOUSANDS)
The accompanying notes are an integral part of these consolidated financial statements.
(4) (5) (6) (8) (8) (13) (22)
2,441 45 (317) 2,169 (1,069) 346 (16) 1,430 (316) 1,114 827 287
(9) (9) (9)
2.89 2.89 286,087
2.77 2.77 265,547
F 4
Consolidated statement of comprehensive income
Consolidated statement of comprehensive income

AT DECEMBER 31,
(million euros)
2010
2009
NET INCOME Available for sale investments Cash-flow hedge instruments Actuarial gains/(losses) Currency translation adjustments Income tax on other comprehensive income OTHER COMPREHENSIVE INCOME FOR THE PERIOD, NET OF INCOME TAX TOTAL COMPREHENSIVE INCOME FOR THE PERIOD Out of which part attributable to: Owners of the parent of the Group Non-controlling interests
1,114 (138) 12 (64) 1,175 5 990 2,104 1,712 392
1,046 381 32 (174) (77) 162 1,208 937 271
F
F 5
F
ASSETS
Goodwill
Consolidated statement of financial position
Consolidated statement of financial position

AT DECEMBER 31,
(million euros)
NOTES
2010
2009
NON CURRENT ASSETS (10) (11) (12) (13) (15) (26) (22) (16) (17) (18) (26) (19) (4) Intangible assets Property, plant and equipment Investments in associates Other financial assets Derivative instruments Deferred tax CURRENT ASSETS Inventories Trade receivables Other receivables Derivative instruments Cash and cash equivalents TOTAL ASSETS
34,752 14,327 661 17,912 422 863 78 489 7,742 1,647 1,774 971 56 3,294 42,494
32,857 13,249 632 16,699 335 1,591 43 308 6,640 1,702 1,686 1,008 24 2,220 39,497
EQUITY & LIABILITIES

Common stock Additional paid-in capital Treasury shares Retained earnings Other reserves Foreign currency translation EQUITY ATTRIBUTABLE TO OWNERS OF THE PARENT COMPANY Non-controlling interests EQUITY NON CURRENT LIABILITIES Deferred tax Pension & other employee benefits Provisions Long-term debt Derivative instruments CURRENT LIABILITIES Pension & other employee benefits Provisions Trade payables Other payables Current tax payable Short term debt and current portion of long-term debt Derivative instruments TOTAL EQUITY AND LIABILITIES
(20) (20)
1,146 9,640 (26) 5,816
1,146 9,620 (27) 5,555 (370) (947) 14,977 1,823 16,800 16,652 887 1,069 939 13,712 45 6,045 109 136 1,652 1,630 193 2,265 60 39,497
(20)
(555) 123 16,144
(20)
2,080 18,224 16,765
(22) (23) (24) (25) (26) (23) (24) (27) (25) (26) (4)
871 1,108 633 14,096 57 7,505 139 146 1,996 1,642 314 3,184 84 42,494
F 6
Consolidated statements of cash flows

(million euros)
NOTES
2010
2009
NET CASH PROVIDED (USED IN) BY OPERATING ACTIVITIES

NET INCOME Adjustments for income and expenses which are non cash or not related to operating activities, financial expenses or income taxes: Depreciation and amortization of assets Impairment of assets Share of profit of associates (Gains) on disposals, net Finance costs (income) Income tax expenses Others, net (including dividends received from equity affiliates) Change in operating working capital items, excluding financial expenses and income taxes (see analysis below) NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES BEFORE IMPACTS OF FINANCIAL EXPENSES AND INCOME TAX Cash payments for financial expenses Cash payments for income tax NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES (4) (6) (13) (5) (8) (22) 1,173 154 16 (45) 723 316 (300) 354 3,505 (919) (414) 2,172 1,123 164 18 (103) 926 260 (57) 1,029 4,406 (827) (373) 3,206 1,114 1,046
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES

Capital expenditures Investment in subsidiaries and joint ventures * Investment in associates Investment in available for sale investments Disposals ** Net decrease in long-term receivables NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES (3) / (32) (13) (4) (1,331) (27) (3) (19) 209 (73) (1,244) (1,645) (29) (10) (35) 760 (115) (1,074)
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES

Capital increase (decrease) - owners of the parent company Capital increase (decrease) - non controlling interests Changes in ownership interests with no gain/loss in control (Increase) decrease in treasury shares Dividends paid Dividends paid by subsidiaries to non controlling interests Proceeds from issuance of long-term debt Repayment of long-term debt Increase (decrease) in short-term debt NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES (20) (20) (3) (3)/(32) 26 15 139 (575) (274) 2,207 (1,174) (326) 38 1,448 86 (393) (143) 4,495 (6,829) (153) (1,489)
F
F 7
F
*

(million euros)
NOTES
2010
2009
INCREASE/(DECREASE) IN CASH AND CASH EQUIVALENTS Net effect of foreign currency translation on cash and cash equivalents and other non monetary impacts Cash and cash equivalents at beginning of year CASH AND CASH EQUIVALENTS AT END OF THE YEAR Net of cash and cash equivalents of companies acquired ** Net of cash and cash equivalents of companies disposed of Analysis of changes in operating working capital items (Increase)/decrease in inventories (Increase)/decrease in trade receivables (Increase)/decrease in other receivables excluding financial and income taxes receivables Increase/(decrease) in trade payables Increase/(decrease) in other payables excluding financial and income taxes payables
966 108 2,220 (19) 3,294 35 23 354 (16) 97 83 30 179 (35)
643 (14) 1,591 2,220 3 54 1,029 433 562 361 (236) (91)
F 8
Consolidated statements of changes in equity
Consolidated statements of changes in equity

EQUITY ATTRIBUTABLE TO THE FOREIGN OWNERS OF NON OTHER CURRENCY THE PARENT CONTROLLING RESERVES TRANSLATION COMPANY INTERESTS
(million euros)
OUTSTANDING SHARES NOTES
OF WHICH ADDITIONAL TREASURY COMMON PAID-IN SHARES STOCK CAPITAL
TREASURY SHARES
RETAINED EARNINGS
EQUITY
(number of shares)
BALANCE AT JANUARY1,2009 TOTAL COMPREHENSIVE INCOME FOR THE PERIOD Dividends paid Issuance of common stock Share based payments Treasury shares Other movements Non-controlling interests BALANCE AT DECEMBER 31, 2009 TOTAL COMPREHENSIVE INCOME FOR THE PERIOD Dividends paid Issuance of common stock Share based payments Treasury shares Changes in ownership with no gain / loss ofcontrol Other movements Non-controlling interests BALANCE AT DECEMBER 31, 2010 (20) (21) (21) (20) (20) (21) (21) (20) (20)
195,236,534
436,793
781
8,462
(40)
5,225 736 (393)
(613) 243
(905) (42)
12,910 937 (393) 1,496 27
1,725 271 (140) 86
14,635 1,208 (533) 1,582 27 -
91,216,782 (56,645)
365
1,131 27 13 (13)
(119) 1,823 392 (277) 15
(119) 16,800 2,104 (852) 15 20 (7)
286,453,316
380,148
1,146
9,620
(27)
5,555 827 (575)
(370) (185)
(947) 1,070
14,977 1,712 (575) -
463 20 (16,590) 1 (8)
20 (7)
(20)
17
17 -
118 9 2,080
135 9 18,224
286,453,779
363,558
1,146
9,640
(26)
5,816
(555)
123
16,144
F
F 9
Note1 Business description
NOTES TO THE CONSOLIDATED FINANCIALSTATEMENTS
Note1
Business description
The Groups shares have been traded on the Paris stock exchange since 1923 and have been a component of the French CAC-40 market index since its creation, and are also included in the SBF 250 index. As used herein, the terms Lafarge S.A. or the parent company refer to Lafarge a socit anonyme organized under French law, without its consolidated subsidiaries. The terms the Group or Lafarge refer to Lafarge S.A. together with its consolidated companies. These financial statements for the year ended December 31, 2010, were established and authorized for issue by the Board of Directors on February 17, 2011.
Lafarge S.A. is a French limited liability company (socit anonyme) governed by French law. Our commercial name is Lafarge. The Company was incorporated in 1884 under the name J et A Pavin de Lafarge. Currently, our by-laws state that the duration of our Company is until December 31, 2066, and may be amended to extend our corporate life. Our registered office is located at 61 rue des Belles Feuilles, BP 40, 75116 Paris Cedex 16, France. The Company is registered under the number 542105572RCS Paris with the registrar of the Paris Commercial Court (Tribunal de Commerce de Paris). The Group organizes its operations into three Divisions: Cement, Aggregates & Concrete and Gypsum (see Note4).
Note2
2.1
Summary of significant accounting policies

to January1,2010 are accordingly not restated. The main changes are the following:
changes in parents ownership interest in a subsidiary that do not result in a change of control are accounted for as changes in equity, with no effect on the net income and the other comprehensive income; step acquisitions, as well as changes in ownership interests that result in a loss of control, lead to the remeasurement at fair value through net income of the residual interest ownership held; IFRS 3 revised allows for each takeover with interest ownership below 100% to account for goodwill either on a 100% basis or on the acquired percentage ownership interests (without any subsequent change in case of additional purchase of non-controlling interests); acquisition costs incurred in transaction leading to control are expensed as incurred. The effect of these revised standards on 2010 transactions notably relates to the sale of a non-controlling interest in Malaysia (see Note3).
Basis of preparation
In accordance with the European Regulation No.1606/2002 issued July19, 2002, the consolidated financial statements of the Group for the period presented are prepared in accordance with the International Financial Reporting Standards (IFRS) as endorsed by the European Union as of December31, 2010 and available on the site http:// ec.europa.eu/internal_market/accounting/ias/index_fr.htm. The consolidated financial statements have been prepared under the historical cost convention, except for the following: derivative financial instruments measured at fair value; financial instruments at fair value through statement of income measured at fair value; available-for-sale financial assets measured at fair value; liabilities for cash-settled share based payment arrangements measured at fair value. The consolidated financial statements are presented in euros rounded to the nearest million, unless otherwise indicated. As a first time adopter of IFRS at January1, 2004, the Group has followed the specific prescriptions of IFRS1 which govern the firsttime adoption. The options selected for the purpose of the transition to IFRS are described in the following notes to the consolidated financial statements. The Group has applied the following standards and interpretations which are effective for the period beginning on or after January 1, 2010:
Standards which have an effect on the Group financial statements

IFRS 3 Business Combinations and IAS 27 Consolidated and Separate Financial Statements revised standards. These standards are applied prospectively. Transactions completed prior
IAS 7 Statement of Cash Flows, amended by revised IAS27. Cash flows arising from changes in ownership interests in a subsidiary that do not result in a loss of control are now classified as cash flows from financing activities instead of cash flows from investing activities, on a retrospective basis. This retrospective application did not lead to reclassify 2009 operations from the line Disposals in the investing activities to the line Changes in ownership interests with no gain/loss in control in the financing activities of the consolidated statement of cash flows. The effect of this revised standard on 2010 transactions notably relates to the sale of a non-controlling interest in Malaysia (see Note3).
F 10
Note2 Summary of significant accounting policies
Standards and interpretations which had no effect onthe Group financial statements
Revised IFRS1 Additional Exemptions for First-Time Adopters; Revised IFRS 2 Group Cash-settled Share-based Payment Transactions; 2010 Improvements to IFRS and amendment to IFRS 5 in 2008 improvements to IFRS; Revised IAS39 Eligible Hedged Items; IFRIC17 Distributions of Non-cash Assets to Owners; IFRIC18 Transfers of Assets from Customers. These accounting policies do not differ from the IFRS published by the IASB as the application of the following interpretations approved by the European Union and with a mandatory application date different from the application date published by the IASB have no impact on the Group consolidated financial statements: IFRIC12 Service concession Arrangements, effective for annual periods beginning from March 30, 2009; IFRIC16 Hedges on a Net Investment in a Foreign Operation, effective for annual periods beginning from July 1, 2009; IFRIC15 Agreements for the Construction of Real Estate, effective for annual periods beginning from January 1, 2010. Standards and Interpretations to existing standards that are not yet effective have not been early adopted by the Group (see Note2.27).
Special Purpose Entities (SPE) are consolidated if, based on an evaluation of the substance of its relationship with the Group and the SPEs risks and rewards, the Group concludes that it controls the SPE. All intercompany balances and transactions have been eliminated in consolidation. With respect to proportionately consolidated companies, intercompany transactions are eliminated on the basis of the Groups interest in the entity involved. Unrealized gains arising from transactions with equity accounted investees are eliminated against the investment to the extent of the Groups interest in the investee. Unrealized losses are eliminated in the same way as unrealized gains, but only to the extent that there is no evidence of impairment.
2.3
Use of estimates and judgments
a) Estimates
The preparation of financial statements in conformity with IFRS recognition and measurement principles requires the use of estimates and assumptions that affect the reported amounts of assets and liabilities and of revenues and expenses. Such estimates are prepared on the assumption of going concern, are established based on currently available information and are in keeping with the current economic crisis affecting some of the Groups markets. Changes in facts and circumstances may result in revised estimates, and actual results could differ from the estimates. The measurement of some assets and liabilities in the preparation of these financial statements include assumptions made by management particularly on the following items: impairment tests (see Note 2.12 and Note 10 d)): the determination of recoverable amounts of the CGUs/groups of CGUs assessed in the impairment test requires an estimate of their fair value net of disposal costs or of their value in use. The assessment of the recoverable value requires assumptions to be made with respect to the operating cash flows of the CGUs/groups of CGUs as well as the discount rates; deferred tax (see Note 2.23 and Note 22): the recognition of deferred tax assets requires assessment of future taxable profit; provisions for employee benefits (see Note 2.20 and Note 23): the actuarial techniques used to assess the value of the defined benefit plan involve financial assumptions (discount rate, rate of return on assets, medical costs trend rate) and demographic assumptions (salary increase rate, employees turnover rate). The Group uses the assistance of an external independent actuary in the assessment of these assumptions; provisions for environmental risks and site restoration (see Note 2.21 and Note 24): provisions for environmental risks and site restoration require assessment of the amounts that the Group will have to pay and to set assumptions in terms of phasing and discount rate; provisions for litigation (see Note24 and Note29): the litigation and claims to which the Group is exposed are assessed by the Legal department. In certain situation, the Legal department may use the assistance of external specialised lawyers.
2.2
Principles of consolidation
Investments over which the Group exercises control are fully consolidated. Control exists when the Group has the power directly or indirectly, to govern the financial and operating policies of an enterprise so as to obtain benefits from its activities. In assessing control, potential voting rights that are currently exercisable are taken into account. The financial statements of subsidiaries are included in the consolidated financial statements from the date that control commences until the date that control ceases. Investments in companies in which the Group and third party investors have agreed to exercise joint control are consolidated by the proportionate consolidation method with the Groups share of the joint venturesresults of operations, assets and liabilities recorded in the consolidated financial statements. Investments over which the Group exercises significant influence, but not control, are accounted for under the equity method. Such investees are referred to as associates throughout these consolidated financial statements. Significant influence is presumed to exist when the Group holds at least 20% of the voting power of associates. Associates are initially recognized at cost. The consolidated financial statements include the Groups share of the income and expenses after adjustments to align the accounting policies with those of the Group, from the date significant influence commences until the date that significant influence ceases. When the Groups share of losses exceeds its interest in an equity accounted investee, the carrying amount of that interest (including any long-term investments) is reduced to nil and the recognition of further losses is discontinued except to the extent that the Group has an obligation or has made payments on behalf of the investee.
F
F 11
F
2.4
b) Judgments
The accounting for certain provisions, certain financial instruments and the disclosure of financial assets, contingent assets and liabilities at the date of the consolidated financial statements is judgmental. The items subject to judgment are detailed in the correspondingdisclosures.
2) Foreign operation
As at reporting date, the assets and liabilities, including goodwill and any fair value adjustment arising on the acquisition of a foreign operation whose functional currency is not the euro, are translated by using the closing rate. Income and expenses of a foreign entity whose functional currency is not the currency of a hyperinflationary economy is translated by using the average currency rate for the period except if exchange rates fluctuate significantly. The exchange differences arising on the translation are taken directly to a separate component of equity on the line foreign currency translation. On the disposal of a foreign entity, the deferred cumulative amount recognized in equity relating to that particular foreign operation is recognized in the statement of income. The Group, as permitted by IFRS1, elected to reset to zero previous cumulative translation differences arising from the translation into euros of foreign subsidiaries financial statements denominated in foreign currencies. Translation adjustments which predate the transition to IFRS will therefore not be included when calculating gains or losses arising from the future disposal of consolidated subsidiaries, joint ventures or associates. For companies that operate in countries which have been designated as hyperinflationary, amounts in the statement of financial position not yet expressed in terms of the measuring unit current at the balance sheet date are restated by applying a general price index. Revenues and expenses in local currency are also restated on a monthly basis. Differences between original values and reassessed values are included in income. In defining hyperinflation, the Group employs criteria which include characteristics of the economic environment, such as inflation and foreign currency exchange rate fluctuations.
Translation of financial statements denominated inforeign currencies
1) Foreign currency transactions

Transactions in foreign currencies are initially recorded in the functional currency by applying the exchange rate between the functional currency and the foreign currency at the date of thetransaction. At each balance sheet date, monetary assets and liabilities denominated in foreign currencies recorded at historical cost are retranslated at the functional currency closing rate whereas monetary assets and liabilities measured at fair value are translated using the exchange rates at the dates at which the fair value was determined. Non monetary assets and liabilities that are measured in terms of historical cost in a foreign currency are translated using the exchange rates at the dates of the initial transaction. All differences are taken to profit and loss with the exception of differences on foreign currency borrowings that provide a hedge against a net investment in a foreign entity. These are taken directly to equity, until the disposal of the net investment.
F 12
The schedule below presents foreign exchange rates for the main currencies used within the Group:
RATES
(euro)
2010 AVERAGE RATE YEAR-END RATE
2009 AVERAGE RATE YEAR-END RATE
Brazilian real (BRL) Canadian dollar (CAD) Chinese yuan (CNY) Algerian dinar (DZD) Egyptian pound (EGP) British pound (GBP) Indian rupee (INR) Iraqi dinar (IQD) Jordanian dinar (JOD) Kenyan shilling (KES) Korean won (WKR) Moroccan dirham (MAD) Malaysian ringgit (MYR) Nigerian naira (NGN) Philippine peso (PHP) Polish zloty (PLN) Romanian leu (RON) Russian rouble (RUB) U.S. dollar (USD) South African rand (ZAR)
2.3345 1.3664 8.9800 99.2034 7.4325 0.8582 60.6313 1,565.1274 0.9464 105.2271 1,532.4235 11.1856 4.2729 197.7571 59.7977 3.9950 4.2106 40.2765 1.3267 9.7132
2.2177 1.3322 8.8220 103.4710 7.7111 0.8608 59.7580 1,596.7590 0.9423 107.7472 1,499.0600 11.2040 4.0950 195.3000 58.3000 3.9750 4.2620 40.8200 1.3362 8.8625
2.7706 1.5852 9.5165 101.2053 7.7399 0.8911 67.3091 1,614.9436 0.9892 107.7786 1,772.7442 11.2818 4.9037 205.1630 66.2608 4.3299 4.2397 44.1347 1.3932 11.6862
2.5113 1.5128 9.8350 104.5995 7.9023 0.8881 67.0400 1,665.3336 1.0228 109.0884 1,666.9700 11.3500 4.9326 213.3529 66.5070 4.1045 4.2363 43.1540 1.4406 10.6660
2.5
Business combinations, acquisition of additional interests and disposal of interests
(or disposal groups) that are classified as held for sale in accordance with IFRS5 Non-current assets held for sale are recognized and measured at fair value less costs to sell. When goodwill arising from a business combination performed since January1, 2004 is determined provisionally by the end of the reporting period in which the combination is effected, the Group recognizes any adjustments to those provisional values within twelve months of the acquisition date. Comparative information which was presented for the periods before the final accounting of fair values is corrected as if the initial accounting had been completed from the acquisition date, if the adjustments to provisional values would have materially affected the presentation of the consolidated financial statements.
BUSINESS COMBINATIONS ENTERED INTO UNTIL DECEMBER 31, 2009
1) Business combinations
SPECIFIC TREATMENT RELATED TO FIRST-TIME ADOPTION OF IFRS (BUSINESS COMBINATIONS BEFORE JANUARY 1, 2004)
As permitted by IFRS1, the Group has not restated the business combinations which predate the transition date (January1, 2004). Prior to the transition date, the Group has applied the purchase method according to French GAAP to all of its business combinations since January1, 1989. The principal difference related to acquired goodwill, which was amortized over the expected period of benefit, not to exceed 40years. In addition, under French GAAP, before January 1, 2004, non-amortizable intangible assets acquired in a business combination, such as market share, have been recognized through the purchase price allocation. These assets are not considered as a separately identifiable intangible asset under IAS38, Intangible Assets (such as market share), but as a component of goodwill. They have been reclassified to goodwill as at January1, 2004.
BUSINESS COMBINATIONS AFTER JANUARY 1, 2004
The cost of acquisition is measured as the aggregate of: the fair value, at the date of exchange, of assets given, liabilities incurred or assumed, and equity instruments issued by the Group in exchange for control of the acquiree; any costs directly attributable to the business combination. Any contingent consideration assumed in a business combination is included in the cost of acquisition at acquisition date if its amount can be measured reliably and if it is probable that it will be paid. Subsequent changes in its estimated amount is accounted for with a counterpart in goodwill. Any excess of the cost of acquisition over the Groups share in the fair value of all identified assets and liabilities is recognized as goodwill. If the acquirers interest in the net fair value of the acquiree is an excess (negative goodwill), a gain is recognized immediately.
Business combinations are accounted for in accordance with the purchase method. Accordingly, its assets and liabilities and contingent liabilities are recognized in accordance with the rules set forth in IFRS3. The acquirees identifiable assets, liabilities and contingent liabilities that meet the conditions for recognition under IFRS3 are recognized at their fair value at the acquisition date, except for non-current assets
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When the Group initially acquires a controlling interest in a business, any portion of the assets and liabilities retained by minority shareholders is also recorded at its fair value. When the Group acquires a controlling interest in stages, the adjustments to the fair value of identified assets and liabilities at acquisition date relating to previously held interests are accounted for in equity.
BUSINESS COMBINATIONS FROM JANUARY 1, 2010
see. Note2.1), since there is no change on the control exercised over this entity, the difference between the acquisition cost and the carrying amount of the non-controlling interests acquired is recognised directly in equity and attributed to the owners of the parent company with no change in the consolidated carrying amount of the subsidiarys net assets and liabilities including goodwill. The cash consideration paid, net of acquisition costs, is reflected as cash flows from financing activities in the consolidated statements of cash flows.
At the acquisition date, the goodwill is measured as the difference between: the fair value of the consideration transferred to take control over the entity, including contingent consideration, plus the amount of any non-controlling interests in the acquiree, and in a business combination achieved in stages, the acquisition-date fair value of the previously held equity interest in the acquiree, accordingly re-valuated through the statements of income; and the fair value of the identifiable assets acquired and the liabilities assumed on the acquisition date. Any contingent consideration assumed in a business combination is accordingly measured at fair value at the acquisition date. After acquisition date, the contingent consideration is re-valued at fair value at each reporting date. Subsequent changes to the fair value of the contingent consideration beyond one year from the acquisition date will be recognized in the statements of income if the contingent consideration is a financial liability. A negative goodwill is recognized immediately in the statements of income. Acquisition costs are expensed and are presented in the consolidated statements of income on the line Other operating income (expenses). When a business combination is entered into with an interest ownership below 100%, IFRS 3 revised standard allows, on a transaction-by-transaction basis, to account for goodwill either on a 100% basis or on the acquired interest ownership percentage (without any subsequent change in case of additional purchase of non-controlling interests). The non-controlling interests are accordingly measured either at fair value or at the non-controlling interests proportionate share in the acquirees net identifiable assets.
3) Disposal of interests after control is obtained

DISPOSAL OF INTERESTS WITHOUT LOSS OF CONTROL
For disposals of interests performed before January 1, 2010, the difference between the fair value of the consideration received and the carrying amount of the interests disposed of at transaction date is recognised in the statements of income on the line Gains on disposals, net. For disposals of interests occurring since January 1, 2010 (IAS27 revised applies prospectively see Note2.1), since there is no change on the control exercised over this entity, the difference between the fair value of the consideration received and the carrying amount of the interests disposed of at transaction date is recognised directly in equity and attributed to the owners of the parent company with no change in the consolidated carrying amount of the subsidiarys net assets and liabilities including goodwill. The cash consideration received, net of sale costs, is reflected as cash flows from financing activities in the consolidated statements of cash flows.
DISPOSAL OF INTERESTS WITH LOSS OF CONTROL
Disposals of interests which result in a loss of control are reflected, for the cash part of the consideration received net of disposal costs and cash and cash equivalents disposed of, as investing cash flows on the line Disposals of the consolidated statements of cash flows. For disposals of interests performed before January 1, 2010, the difference between the fair value of the consideration received and the carrying amount of the interests disposed of at disposal date is recognised in the statements of income on the line Gains on disposals, net. For disposals of interests occurring since January 1, 2010 (IAS27 revised applies prospectively see Note2.1), the loss of control triggers the recognition of a gain (loss) on disposal determined on both shares sold and retained at transaction date. Any investment retained is accordingly measured at its fair value through the statements of income upon the date the control is lost.
2) Acquisition of additional interests after control isobtained

For additional acquisition of interests in a subsidiary performed before January 1, 2010, the Group has elected to adopt the following accounting treatment in the absence of specific rules: if the Group subsequently acquires an interest in the assets and liabilities from non-controlling interests, no additional fair value adjustment is recorded at that time; the difference between the purchase price and the carrying value of proportional interest in assets and liabilities acquired is recorded as goodwill. For additional acquisition of interests in a subsidiary occurring since January 1, 2010 (revised IAS27 applies prospectively
2.6
Revenue recognition
Consolidated revenues represent the value, before sales tax, of goods, products and services sold by consolidated enterprises as part of their ordinary activities, after elimination of intra-Group sales. Revenues from the sale of goods and products are recorded when the Group has transferred the significant risks and rewards of ownership of the goods to the buyer (generally at the date ownership is transferred) and recovery of the consideration is probable.
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Revenue is measured at the fair value of the consideration received or receivable net of return, taking into account the amount of any trade discounts and volume rebates allowed by the entity. Amounts billed to a customer in a sales transaction related to shipping and handling are included in Revenue, and costs incurred for shipping and handling are classified as Cost of sales.
2.8
Finance costs and income
Finance costs and income comprise: interest charges and income relating to debenture loans, the liability component of compound instruments, other borrowings including lease-financing liabilities, and cash and cash equivalents; other expenses paid to financial institutions for financing operations;
2.7
Operating income before capital gains, impairment, restructuring and other
dividends received from non-consolidated investments; impact of discounting provisions (except employee benefits) and long-term receivables; financial exchange gains and losses; gains on the disposal of available-for-sale financial assets; impairment losses recognised on available-for-sale financial assets; gains and losses associated with certain derivative instruments (except for the effective portion of derivative instruments qualified as cash flow hedge or net investment hedge); and change in value of derivative instruments held for trading.
The Group has included the subtotal Operating income before capital gains, impairment, restructuring and other on the face of the consolidated statement of income, in compliance with CNC Recommendation 2009-R03 on the format of financial statements of entities applying IFRSs. This measure excludes those elements of our operating results that are by nature unpredictable in their amount and/or in their frequency, such as capital gains, asset impairments and restructuring costs. While these amounts have been incurred in recent years and may recur in the future, historical amounts may not be indicative of the nature or amount of these charges, if any, in the future. The Group believes that the subtotal Operating income before capital gains, impairment, restructuring and other is useful to users of the Groups financial statements as it provides them with a measure of our operating results which excludes these elements, enhancing the predictive value of our financial statements and provides information regarding the results of the Groups ongoing trading activities that allows investors to better identify trends in the Groups financial performance. In addition, operating income before capital gains, impairment, restructuring and otheris a major component of the Groups key profitability measure, return on capital employed (which is calculated by dividing the sum of operating income before capital gains, impairment, restructuring and other after tax and income from associates by the average of capitalemployed). This measure is used by the Group internally to: a)manage and assess the results of its operations and those of its business segments, b)make decisions with respect to investments and allocation of resources, and c)assess the performance of management personnel. However, because this measure has limitations as outlined below, the Group limits its use to these purposes. The Groups subtotal within operating income may not be comparable to similarly titled measures used by other entities. Further, this measure should not be considered as an alternative for operating income as the effects of capital gains, impairment, restructuring and other amounts excluded from this measure do ultimately affect our operating results and cash flows. Accordingly, the Group also presents Operating income within the consolidated statement of income which encompasses all amounts which affect the Groups operating results and cash flows.
2.9
Earnings per share
Basic earnings per share are computed by dividing income available to shareholders of the parent company by the weighted average number of common shares outstanding during the year. Diluted earnings per share are computed by dividing adjusted net income available to shareholders of the parent company by the weighted average number of common shares outstanding during the year adjusted to include any dilutive potential common shares. Potential dilutive common shares result from stock-options and convertible bonds issued by the Group on its own common shares.
2.10 Intangible assets

In accordance with criteria set in IAS 38, intangible assets are recognized only if: identifiable; controlled by the entity; it is probable that the expected future economic benefits that are attributable to the asset will flow to the Group and the cost of the asset can be measured reliably. Intangible assets primarily include depreciable items such as software, mineral rights, and real estate development rights as well as certain development costs that meet the IAS 38 criteria. Intangible assets are amortized using the straight-line method over their useful lives ranging from three to five years, except for mineral rights, which are amortized based upon tonnes extracted, and real estate development rights, which are amortized over the estimated life of the development program. Depreciated expense is recorded in Cost of sales and Selling and administrative expenses, based on the function of the underlyingassets.
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Research & Development costs

According to IAS38, development expenditure is capitalized only if the entity can demonstrate: the technical feasibility of completing the intangible asset so that it will be available for use or sale; its intention to complete the intangible asset and use or sell it; its ability to use or sell the intangible asset; how the intangible asset will generate probable future economic benefits; the availability of adequate technical, financial and other resources to complete the development; its capacity to measure reliably the expenditure attributable to the intangible assets during their development. The Group is committed to improving its manufacturing process, maintaining product quality and meeting existing and future customer needs. These objectives are pursued through various programs. Within their framework, expenditure on research activities, undertaken with the prospect of gaining new scientific or technical knowledge and understanding, are recognised as expenses when incurred. Development expenditures (which have direct applications on the product offer) are capitalised only if the above-mentioned criteria are met and are amortized on a straight-line basis over five years. The expenditure capitalised includes the costs that are directly attributable to preparing the asset for its intended use. Other development costs are recognised as expenses as incurred. Intangible assets considered to have finite useful life are carried at their costs less accumulated amortization and accumulated impairment losses.
Other leases are operating leases and they are not recognized on the Groups statement of financial position. Interest on borrowings related to the financing of significant construction projects, which is incurred during development activities, is capitalized in project costs. Investment subsidies are deducted from the cost of the property, plant and equipment. The residual values are reviewed, and adjusted if appropriate, at each balance sheet date. Depreciation on property, plant and equipment is calculated as follows: land is not depreciated; mineral reserves consisting of proven and probable reserves are depleted using the units-of-production method; buildings are depreciated using the straight-line method over estimated useful lives varying from 20 years to 50 years for office properties; plant, machinery, equipment and installation costs are depreciated using the straight-line method over their estimated useful lives, ranging from 8 to 30 years. The historical cost of assets is classified into specific cost categories based upon their distinct characteristics. Each cost category represents a component with a specific useful live. Useful lives are reviewed on a regular basis and changes in estimates, when relevant, are accounted for on a prospective basis. The cost of replacing part of an item of property, plant and equipment is recognized in the carrying amount of the item if it is probable that the future economic benefits embodied within the part will flow to the Group and its cost can be measured reliably. The costs of the day-to-day servicing of property, plant and equipment are recognized in the statement of income as incurred. Depreciation expense is recorded in Cost of sales and Selling and administrative expenses, based on the function of the underlying assets.
2.11 Property, plant and equipment

Property, plant and equipment are measured at cost less accumulated depreciation and accumulated impairment losses. In accordance with IFRIC4 Determining whether an arrangement contains a lease, arrangements including transactions that convey a right to use the asset, or fulfillment of the arrangement is dependent on the use of a specific asset, are analyzed in order to assess whether such arrangements contain a lease and whether the prescriptions of IAS17 Lease Contracts have to be applied. In accordance with IAS17, the Group capitalizes assets financed through capital leases where the lease arrangement transfers to the Group substantially all of the benefits and risks of ownership. Lease arrangements are evaluated based upon the following criteria: the lease term in relation to the assets useful lives; the total future payments in relation to the fair value of the financed assets; existence of transfer of ownership; existence of a favorable purchase option; and specificity of the leased asset. Upon initial recognition the leased asset is measured at an amount equal to the lower of its fair value and the present value of the minimum lease payments. Subsequent to initial recognition, the asset is accounted for in accordance with the accounting policy applicable to that asset.
2.12 Impairment of long-lived assets 1) Goodwill

In accordance with IAS36 Impairment of Assets, goodwill is tested for impairment, whose purpose is to take into consideration events or changes that could have affected the recoverable amount of these assets, at least annually and beyond when there are some indications that an impairment loss may have occurred. In case there are some indications that an impairment loss may have occurred during interim periods, a specific analysis is then performed. The annual impairment test is performed during the last quarter of the year. The recoverable amount is defined as the higher of the fair value less costs to sell and the value in use. Our three Divisions are considered to be our three reporting/operating segments, each comprising multiple CGUs. For the purposes of the goodwill impairment test, the Groups net assets are allocated to Cash Generating Units (CGUs) or groups of CGUs. CGUs generally represent one of our three Divisions in a particular country. A CGU is the smallest identifiable group of assets generating cash inflows independently and represents the level used by the Group to organize and present its activities and results in its internal reporting. When it is not possible to allocate goodwill on a non-arbitrary basis
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to individual CGUs, goodwill can be allocated to a group of CGUs at a level not higher than the business segment, as defined in Note4. We compare in a first step the carrying value of our CGUs/groups of CGUs with a multiple of their operating income before capital gains, impairment, restructuring, other and before amortization and depreciation. For CGUs/groups of CGUs presenting an impairment risk according to this first step approach, we then determine the faire value or the value in use of the related CGU/groups of CGUs. Fair value is estimated based either on a market multiple or on discounted expected future cash flows. Value in use is estimated based on discounted cash flows over a 10-year period. This period reflects the characteristics of our activities where operating assets have a high lifespan and where technologies evolve very slowly. If the carrying value of the CGUs/group of CGUs exceeds its recoverable amount, defined as the higher of the fair value (less costs to sell) or the value in use of the related assets and liabilities, the Group records an impairment of goodwill (in Other operating expenses). Evaluations for impairment are significantly impacted by estimates of future prices for our products, the evolution of expenses, economic trends in the local and international construction sector, expectations of long-term development of growing markets and other factors. The results of such evaluation are also impacted by the discount rates and perpetual growth rates used. The Group has defined country specific discount rates for each of its CGUs/group of CGUs based on their weighted-average cost of capital. According to IAS36, impairment charges recognized for goodwill are never reversed.
2.13 Other financial assets

Other financial assets mainly consist of shares held in equity securities, loans and long-term receivables or deposits, and cash balances that are restricted from use. The Group classifies financial assets in four categories: trading (assets that are bought and held principally for the purpose of selling them in the near term), held-to-maturity (assets with fixed or determinable payments and fixed maturity that the Group has a positive intent and ability to hold to maturity), loans and receivables (assets with fixed or determinable payments that are not quoted in an active market) and available-for-sale (all other assets). The classification depends on the purpose for which the financial assets were acquired. The classification is determined at initial recognition. All financial assets are reviewed for impairment on an annual basis to assess if there is any indication that the asset may be impaired. Purchases and sales of all financial assets are accounted for at tradedate.
Financial assets held for trading

Trading investments are measured at fair value with gains and losses recorded as financial profits or expenses. Assets in this category are classified as current assets.
Financial assets held-to-maturity

Financial assets that are designated as held-to-maturity are measured at amortized cost, in accordance with the effective interest rate method.
2) Property, plant & equipment and depreciable intangible assets

Whenever events or changes in circumstances indicate that the carrying amount of tangible and intangible assets may not be recoverable, an impairment test is performed. The purpose of this test is to compare the carrying value of the asset with its recoverable value. Recoverable amount is determined for an individual asset, unless the asset does not generate cash inflows that are largely independent of those from other assets or groups of assets. In that case, recoverable amount is determined for the cash-generating unit to which the asset belongs. An assets recoverable amount is the higher of an assets fair value less costs to sell and its value in use which is the present value of the future cash flows expected to be derived from the use of the asset or its disposal. Where the carrying amount of an asset exceeds its recoverable amount, an impairment loss is recognized in the caption Other operating income and expenses. When an impairment loss is recognized for a cash-generating unit, the loss is allocated first to reduce the carrying amount of the goodwill to the cash-generating unit; and, then, to the other assets of the unit prorata on the basis of the carrying amount of each asset in the unit. After the impairment loss, the newly assessed asset is depreciated over its remaining life. Non-financial assets other than goodwill that suffered impairment are reviewed for possible reversal of the impairment at each year-end. The increase in the carrying value of the assets, revised due to the increase of the recoverable value, cannot exceed the carrying amount that would have been determined had no impairment loss been recognized for the asset in prior periods. Such reversal is recognized in the statement of income.
Loans and long-term receivables

Loans and long-term receivables accounted for at amortized cost are measured in accordance with the effective interest rate method.
Available-for-sale financial assets

Shares held in equity securities are classified as available-for-sale financial assets and are initially recognized and subsequently measured at fair value. For equity securities listed on an active market, fair value is quoted price. In absence of active market, fair value is generally determined according to the most appropriate financial criteria in each case (comparable transactions, multiples for comparable companies, discounted present value of future cash flows, estimated selling price). If such fair value cannot be reliably measured, equity securities are accounted for at cost. Gains and losses arising from changes in their fair value are recognized directly in equity (Other Reserves). When the security is disposed of, the cumulative gain or loss previously recognized in equity is included in the statement of income for the period (Finance income/costs). The Group assesses at the end of each reporting period whether there is any objective evidence that its equity securities are impaired which would lead, if this were to be the case, to recognise in the statement of income the cumulative loss previously recognized in equity. In accordance with IAS39 Financial Instruments: Recognition and Measurement, such impairment cannot subsequently be reversed.
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Factors considered by the Group to assess the objective evidence of impairment of its investments and accordingly enabling the Group to determine if the cost of its equity securities can be or not recovered, are notably: the occurrence of significant financial difficulties; the analysis of the national/local economic conditions in relation with its assets; the analysis of significant adverse changes in the technological, economic or legal environment; the existence of a significant or prolonged decline in fair value of the investment below its acquisition cost. As at December 31, 2009, the sole Groups investment that is listed on an active market with a significant investment cost is the Portuguese cement producer Cimentos de Portugal (Cimpor), with a 611 million euros investment cost and a 746 million euros market value at that date (135 million euros above investment cost). This investment was sold in February 2010 to the Group Votorantim in exchange for cement operations of Votorantim in Brazil and the dividends paid by Cimpor related to its 2009 year-end (see Note3).
2.17 Cash and cash equivalents

Cash and cash equivalents consist of cash, highly liquid investments and cash equivalents which are not subject to significant changes in value and with an original maturity date of generally less than three months from the time of purchase. Cash balances that are restricted from use (restrictions other than those linked to exchange controls or other legal restrictions in force in some countries) by the Group are excluded from cash and cash equivalents presented in the statement of financial position and in the statement of Cash flows and are classified in non-current assets on the line Other financial assets in the consolidated statement of financial position.
2.18 Equity 1) Ordinary shares

Incremental costs directly attributable to the issue of ordinary shares and share options are recognized as a deduction from equity, net of any tax effects.
2.14 Derecognition offinancial assets

Under IAS39 Financial Instruments: Recognition and Measurement, financial assets can only be derecognized when no further cash flow is expected to flow to the Group from the asset and if substantially all risks and rewards attached to the assets have been transferred. For trade receivables, programs for selling receivables with recourse against the seller in case of recovery failure (either in the form of a subordinated retained interest or a direct recourse) do not qualify for derecognition.
2) Treasury shares
Treasury shares (own equity instruments held by Lafarge S.A. or subsidiaries) are accounted for as a reduction of shareholders equity at acquisition cost and no further recognition is made for changes in fair value. When shares are sold out of treasury shares, the resulting profit or loss is recognized in equity, net of tax.
2.19 Financial liabilities and derivative instruments 1) Recognition and measurement of financial liabilities
Financial liabilities and long-term loans are measured at amortized cost calculated based on the effective interest rate method. Accrued interests on loans are presented within Other payables in the statement of financial position. Financial liabilities hedged by an interest rate swap that qualifies for fair value hedge accounting are measured in the statement of financial position at fair value for the part attributable to the hedged risk (risk related to changes in interest rates). The changes in fair value are recognized in earnings for the period of change and are offset by the portion of the loss or gain recognized on the hedging item that relates to the effective portion.
2.15 Inventories
Inventories are stated at the lower of cost and net realizable value. Cost is determined using the weighted-average method and includes expenditure incurred in acquiring the inventories. In the case of manufactured inventories and work in progress, cost includes an appropriate share of production overhead based on normal operating capacity. Net realizable value is the estimated selling price in the ordinary course of business, less the estimated costs of completion and selling expenses.
2.16 Trade receivables

Trade receivables are initially measured at fair value, and subsequently carried at amortized cost using the effective interest method less provision for impairment. A depreciation for trade receivables and others is established when there is objective evidence that the Group will not be able to collect all amounts due according to the original terms of the receivables. The amount of the depreciation is the difference between the assets carrying amount and the present value of estimated future cash flow, discounted at the original effective interest rate. Impairment loss is recognized in the statement of income.
2) Compound instruments
Under IAS32 Financial Instruments: Presentation, if a financial instrument contains components with characteristics of both liability and equity items, we classify the component parts separately according to the definitions of the various items. This includes financial instruments that create a debt and grant an option to the holder to convert the debt into equity instruments (e.g. bonds convertible into common shares).
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The component classified as a financial liability is valued at issuance at the present value (taking into account the credit risk at issuance date) of the future cash flows (including interest and repayment of the nominal value) of a bond with the same characteristics (maturity, cash flows) but without any shareholders equity derivative component as defined in IAS32. The equity component is assigned the residual carrying amount after deducting from the instrument as a whole the amount separately determined for the liability component.
value of the debt is estimated using the contract formulas or prices. When utilizing formulas based upon multiples of earnings minus debt, we use the actual earnings of the period and the debt of the subsidiary at the closing date of the estimation. The change in the fair value of the debt is recorded against non-controlling interests and against the goodwill initially recorded if the debt exceeds the carrying amount of the non-controlling interests. There is no impact on the consolidated statements of income nor on the equity attributable to the owners of the parent company. The Group did not grant such put options since January 1, 2010, starting date for the prospective application of IAS27 revised.
3) Derivative instruments andhedge relationships

The Group enters into financial derivative contracts only in order to reduce its exposure to changes in interest rates, foreign currency exchange rates and commodities prices on firm or highly probable commitments. Forward exchange contracts and foreign currency swaps are used to hedge foreign currency exchange rate exposures. The Group enters into various interest rate swaps and options to manage its interest rate exposure. The Group uses derivatives such as swaps and options in order to manage its exposure to commodity risks. Pursuant to the guidance in IAS39 and IAS32, the Group records in its financial statements financial instruments which meet the criteria for recognition as derivatives. Derivative instruments are marked to market and recorded on the statement of financial position at their fair value. The accounting for changes in fair value of a derivative depends on the intended use of the derivative and the resulting designation. The Group designates its derivatives based on the criteria established by IAS39. In case of a fair value hedge relationship, changes in fair value on the hedging item are recognized in earnings of the period of change. The part corresponding to the efficient portion of the hedge is offset by the loss or gain recognized on the hedged item. In case of a cash flow hedge relationship, changes in fair value on the hedging item that is determined to be an effective hedge are initially recognized directly in equity. The ineffective portion of the gain or loss is recognized in earnings immediately under the finance income caption. The gain or loss recognized in equity is subsequently reclassified to statement of income when the hedged exposure affects earnings. Embedded derivatives not closely related to host contracts are recorded at fair value in the statement of financial position. For embedded derivatives, the gain or loss is recognized in earnings in the period of the change in fair value.
2.20 Pensions, end of service benefits and other post-retirement benefits 1) Defined contribution plans
The Group accounts for pension costs related to defined contribution pension plans as they are incurred (in cost of sales or selling and administrative expenses based on the beneficiaries of the plan).
2) Defined benefit plans

Estimates of the Groups pension and end of service benefit obligations are calculated annually, in accordance with the provisions of IAS19 Employee Benefits, with the assistance of independent actuaries, using the projected unit credit method. This method considers best estimate actuarial assumptions including the probable future length of the employees service, the employees final pay, the expected average life span and probable turn-over of beneficiaries. The Groups obligations are discounted by country based upon appropriate discount rates. The obligations are recognized based upon the proportion of benefits earned by employees as services are rendered. Assets held by external entities to fund future benefit payments are valued at fair value at closing date. For most defined benefit plans, changes in actuarial assumptions which affect the value of the obligations and the differences between expected and actual long-term return on plan assets are accounted for as actuarial gains and losses. The current period pension expense is comprised of the increase in the obligation, which results from the additional benefits earned by employees in the period, and the interest expense, which results from the outstanding pension obligation. The amounts described above are reduced by the expected return on plan assets. The current period pension expense is recorded in cost of sales or selling and administrative expenses based on the beneficiaries of the plan. Actuarial gains and losses arising from experience adjustments and changes in actuarial assumptions are charged or credited to equity in the period in which they arise, the Group applying the option offered by the amendment to IAS19.
4) Put options on shares ofsubsidiaries (commitment to purchase non-controlling interests)

Pursuant to IAS27 and IAS32, put options granted to non controlling interests of consolidated subsidiaries are considered financial debt. For options granted to non controlling interests before January1, 2010, the Group records the put options granted to non controlling interests as a financial debt at present value of the put exercise price and as a reduction in non controlling interests in equity. When such present value of the put exercise price exceeds the carrying amount of the non controlling interest, the Group records this difference as goodwill. The
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Pension plans amendments are, in general, recognized in statement of income: in the year of the amendment for the part related to vested benefits; over the remaining service life of related employees for the portion related to non-vested benefits. In the event of overfunding of a plans liabilities by its dedicated assets, the Group applies the limitations applicable under IAS19 (asset ceiling) to the prepaid pension cost amount to be recognized on the employers statement of financial position.
3) Environmental costs
Costs incurred that result in future economic benefits, such as extending useful lives, increased capacity or safety, and those costs incurred to mitigate or prevent future environmental contamination, are capitalized. When the Group determines that it is probable that a liability for environmental costs exists and that its resolution will result in an outflow of resources, an estimate of the future remediation is recorded as a provision without the offset of contingent insurance recoveries (only virtually certain insurance recoveries are recorded as an asset in the statement of financial position). When the effect of the passage of time is not significant, the provision is calculated based on undiscounted cash flows. Environmental costs, which are not included above, are expensed as incurred.
3) Other post-retirement benefits

Certain of the Groups subsidiaries grant their employees and dependants post-retirement medical coverage or other types of postemployment benefits. These costs are calculated based upon actuarial determinations and are recorded through statement of income over the expected average remaining service lives of the employees (in cost of sales or selling and administrative expenses based on the beneficiaries of the plan).
2.22 Trade payables

Trade payables are recognized initially at fair value and subsequently measured at amortized cost using the effective interest method.
Specific treatment related to first-time adoption ofIFRS

The Group has elected to use the option available in IFRS1 under which any difference existing at January1, 2004 between defined benefit plan liabilities and the fair value of dedicated assets, not recognized in an entitys statement of financial position at that date, can be recognized through an adjustment to equity, except the non-vested portion of unrecognized prior service costs. As a consequence, actuarial gains or losses relating to pensions obligations were recognized as of January1, 2004.
2.23 Income taxes

Income tax expense comprises current and deferred tax. Income tax expense is recognised in statement of income except to the extent that it relates to items recognised directly in equity, in which case it is recognised in equity. Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted or substantively enacted at the reporting date, and any adjustment to tax payable in respect of previous years. Deferred tax is recognized using the balance sheet method, providing for temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. Deferred tax is not recognized for the following temporary differences: the initial recognition of assets or liabilities in a transaction that is not a business combination and that affects neither accounting nor taxable profit, and differences relating to investments in subsidiaries and jointly controlled entities to the extent that it is probable that they will not reverse in the foreseeable future. In addition, deferred tax is not recognized for taxable temporary differences arising on the initial recognition of goodwill. Deferred tax is measured at the tax rates that are expected to be applied to the temporary differences when they reverse, based on the laws that have been enacted or substantively enacted by the reporting date. Deferred tax assets and liabilities are offset if there is a legally enforceable right to offset current tax liabilities and assets, and they relate to income taxes levied by the same tax authority on the same taxable entity, or on different tax entities, but they intend to settle current tax liabilities and assets on a net basis or their tax assets and liabilities will be realized simultaneously. A deferred tax asset is recognized to the extent that it is probable that future taxable profits will be available against which the temporary difference can be utilized. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefit will be realized.
2.21 Provisions
The Group recognizes provisions when it has a legal or constructive obligation resulting from past events, the resolution of which would result in an outflow of resources.
1) Restructuring
Reserves for restructuring costs are provided when the restructuring plans have been finalized and approved by the Groups management, and when the Group has raised a valid expectation in those affected that it will carry out the plan either by starting to implement the plan or announcing its main features to those affected by it. These reserves only include direct expenditures arising from the restructuring, notably severance payments, early retirement costs, costs for notice periods not worked and other costs directly linked with the closure of the facilities.
2) Site restoration
When the Group is legally, contractually or constructively required to restore a quarry site, the estimated costs of site restoration are accrued and amortized to cost of sales, on a unit-of-production basis over the operating life of the quarry. The estimated future costs for known restoration requirements are determined on a site by site basis and are calculated based on the present value of estimated future costs.
F 20
A deferred tax liability is recognized for all taxable temporary differences associated with investments in subsidiaries, branches and associates, and interests in joint ventures, except to the extent that both of the following conditions are satisfied: the Group is able to control the timing of the reversal of the temporary difference (e.g. the payment of dividends); and it is probable that the temporary difference will not reverse in the foreseeable future. Accordingly, for fully consolidated companies, a deferred tax liability is only recognized in the amount of taxes payable on planned dividend distributions by these companies.
The compensation cost calculated is expensed in the period of the operation (considered as compensation for past services) if no vesting condition is attached to the shares.
2.25 Emission rights

Where the Group is involved in a cap and trade scheme, and until the IASB issues a position on the appropriate accounting treatment, the Group will account for the effects of such scheme as follows: emission rights granted by governments are not recorded in the statement of financial position, as they have a cost equal to zero; proceeds from the sale of granted emission rights are recorded as a reduction to cost of sales; purchases of emission rights on the market are recorded in Cost of sales when they cover actual emissions of the period. They are recorded as intangible assets if they cover actual emissions to be made in future periods; provisions are recorded (in cost of sales) when estimated yearly actual emissions exceed the number of emission rights granted for the period or purchased to cover actual emissions. No other impact is recorded in the statement of income or in the statement of financial position.
2.24 Share based payments

On a regular basis, the Group grants purchase or subscription share options to employees and offers employee share purchase plans. In accordance with the prescriptions of IFRS 2 Share Based Payments, the Group records compensation expense for all sharebased compensation granted to its employees. The Group granted a performance stock plan for the first time in 2007.
1) Share options granted to employees, performance stockplan and SAR (Stock Appreciation Rights)
Share options and performance stock fair value are calculated at grant date using the Black & Scholes model. However, depending on whether the equity instruments granted are equity-settled through the issuance of Group shares or cash settled, the accounting treatment differs. If the equity instrument is settled through the issuance of Group shares, the fair value of the equity instruments granted is estimated and fixed at the grant date and recorded over the vesting period based on the characteristics of the equity instruments. In addition, the expense is recorded against equity. If the equity instrument is settled in cash (applicable for SAR), the fair value of the equity instruments granted is estimated as of the grant date and is re-estimated at each reporting date and the expense is adjusted prorata taking into account the vested rights at the relevant reporting date. The expense is amortized over the vesting period based on the characteristics of the equity instruments. The expense is recorded as a non-current provision. In accordance with IFRS1 and IFRS2, only options granted after November7, 2002 and not fully vested at January1, 2004 are measured and accounted for as employee costs.
2.26 Non-current assets held for sale and discontinued activities

A fixed asset or a grouping of assets and liabilities is classified as held for sale when its carrying amount will be recovered principally through a sale transaction rather than through continuing use. For this to be the case, the asset (or groupings of assets and liabilities) must be available for immediate sale in its present condition subject only to terms that are usual and customary for sales of such assets (or groupings of assets and liabilities), and its sale must be highly probable. Such assets or groupings of assets and liabilities are presented separately in the statement of financial position, in the line Assets held for sale when they are material. These assets or grouping of assets and liabilities are measured at the lower of their carrying value and fair value less costs to sell. The liabilities directly linked to assets or grouping of assets held for sale are presented in the line Liabilities directly associated with assets held for sale on the face of the statement of financial position. A discontinued operation is a component of an entity that either has been disposed of or is classified as held for sale, and: represents a separate major line of business or geographical area of operations; is part of a single coordinated plan to dispose of a separate major line of business or geographical area of operations; or is a significant subsidiary acquired exclusively with a view to resale. Amounts included in the statements of income and the statements of cash flows related to these discontinued operations are presented separately for the current period and all prior periods presented in the financial statements if they are material. Assets and liabilities related to discontinued operations are shown on separate lines for the last period presented with no restatement for prior years.
2) Employee share purchase plans

When the Group performs capital increases reserved for employees, and when the conditions offered are significantly different from market conditions, the Group records a compensation cost. This cost is measured at the grant date, defined as the date at which the Group and employees share a common understanding of the characteristics of the offer. The measurement of the cost takes into account the bonuses paid under the plan, the potential discount granted on the share price and the effect of post-vesting transfer restrictions (deducted from the discount granted).
F
F 21
2.27 Accounting pronouncements at the closing date not yet effective Standards and interpretations adopted by theEuropean Union at the closing date
Revised IFRS1 Limited Exemption from Comparative IFRS7 Disclosures for First-Time Adopters (applicable for annual periods beginning on or after July1, 2010). This pronouncement will have no impact on the Group financial statements; IFRIC 19 Extinguishing Financial Liabilities with Equity (applicable for annual periods beginning on or after July 1, 2010). This pronouncement might have an impact on the Group financialstatements; Revised IFRIC 14 Prepayments of a Minimum Funding Requirement (applicable for annual periods beginning on or after January1, 2011). This pronouncement is expected to have a limited impact on the Group financial statements; Revised IAS 24 Related Party Disclosures (applicable for annual periods beginning on or after January1 , 2011) This pronouncement is expected to have a limited impact on the Group financial statements; Revised IAS 32 Classification of Rights Issues (applicable for annual periods beginning on or after February 1, 2010). This pronouncement will have no impact on the Group financialstatements.
Standards and Interpretations issued but not yet adopted by the European Union at the closing date
Pronouncements with a potential impact on consolidated financial statements. IFRS 9 Financial instruments, issued by the IASB in November 2009 and applicable for annual periods beginning on or after January1, 2013. Pronouncements with limited impact expected on consolidated financial statements. Improvements to IFRS, issued by the IASB in May2010 and applicable depending on Standards for annual periods beginning on or after July1, 2010 or January1, 2011; Amendments to IFRS7 Disclosures Transfers of Financial assets, issued by the IASB in October2010 and applicable for annual periods beginning on or after July1, 2011; Amendments to IFRS1 Severe Hyperinflation and Removal of Fixed Dates for First-Time Adopters, issued by the IASB in December 2010 and applicable for annual periods beginning on or after July1, 2011; Amendments to IAS12 Deferred Tax Recovery of Underlying Assets, issued by the IASB in December2010 and applicable for annual periods beginning on or after January1, 2012.
F 22
Note3 Significant events
Note3
3.1
Significant events
For the period from July19, 2010 to December31, 2010, Lacim contributed to revenue and net income (part attributable to owners of the parent of the Group) for 84million euros and 18million euros, respectively.
Main divestments and acquisitions of the period
Disposal of Cimentos de Portugal (CIMPOR) andacquisition of cement operations of Votorantim inBrazil

In February 2010, the Group exchanged its 17.28% stake in Cimpor to Votorantim against cement operations of Votorantim in Brazil and the dividends paid by Cimpor related to its 2009 year-end. The cement operations received from Votorantim have been valued at 755million euros. This evaluates our sold Cimpor stake at 6.5 euros per share, which moreover equals the price for which the Portuguese constructor Teixeira Duarte sold its 22.17% Cimpor stake in mid-February2010 to the Brazilian conglomerate Camargo Correa. Based on the above and taking into account the 23million euros dividends paid by Cimpor during the second quarter of 2010, this transaction generated a non taxable gain of 161million euros, net of related costs, which is reflected on the line Finance income of the consolidated statements of income since the Cimpor investment was an available-for-sale financial asset. The cement operations in Brazil have been transferred to the Group by Votorantim on July19, 2010, which notably comprise two grinding stations, one cement plant, slag supply contracts and clinker supply to grinding stations. These operations, that have been gathered in a newly created Brazilian company called Cia de Cimento Portland Lacim (hereafter Lacim), are consolidated starting on the July19, 2010 acquisition date. The Group has made a detailed review of Lacims accounts and the evaluation process of identifiable purchased assets, liabilities and contingent liabilities assumed, as defined by the revised standard IFRS3 Business Combinations, which requires expertsappraisals (internal or external), is currently in progress at the present date. As a result, the purchase price allocation exercise and the recognition of the related goodwill will be finalized at the latest within the 12months of the acquisition date. The net assets acquired and goodwill indicated below are accordingly provisional as at December31, 2010:
(million euros)
Sale of a non-controlling interest in Lafarge Malayan Cement Berhad

Lafarge sold in July2010 11.2% of interests in Lafarge Malayan Cement Berhad (LMCB) by way of placement done on Bursa Malaysia Securities Berhad. The net proceeds of this operation amount to 141million euros. Lafarge keeps the management control of the Malayan activities and remains the majority shareholder with a 51% controlling shareholding in LMCB. Since this operation does not change the nature of control exercised by the Group over LMCB and in compliance with the revised standard IAS27(see Note2), the impact of this partial disposal of interests has been recorded in equity attributable to owners of the parent for an amount of 49million euros (141million euros of equity impact see Note20), and is reflected on the consolidated statements of cash flows within the financing activities on the line Changes in ownership interests with no gain/loss of control for an amount of 141million euros (see Note32).
Sale of the Aggregates & Concrete activities in Alsace and Switzerland

On December31, 2010, Lafarge sold its Aggregates & Concrete activities in Switzerland to Holcim Switzerland and its Aggregates & Concrete activities in Alsace to Eiffage Travaux Publics and Holcim France. The impact of these disposals is 37million euros, net of cash disposed of, on the statement of cash flows on the line Disposals and 2million euros for the net loss on disposals. Overall, the divestments operations performed as at December31, 2010 have reduced, net of selling costs, the Groups net financial debt by 364million euros, reflected on the statements of cash flows for respectively 209million euros on the line Disposals, 139million euros on the line Changes in ownership interests with no gain/loss of control, 15million euros on the line Capital increase / (decrease) non controlling interests, amounts to which should be added 1million euros of financial debt disposed of.
Purchase price consideration (settled in Cimpor shares) Provisional fair value of net assets acquired * Provisional goodwill at December 31, 2010
*
755 265 490
3.2
Bonds
Of which 231 million euros of provisional fair value of industrial assets and 30 million euros of acquired cash and cash equivalents. The figures have been converted to using the closing rate at July 19, 2010 (1 =2.3043 BRL).
During 2010, Lafarge placed two public bond issues under its EMTN program for a total amount of 1.5billion euros: 500 million euros with an 8-year maturity and a coupon of 5.0% (settlement on April13); 1billion euros with an 8-year maturity and a coupon of 5.375% (settlement on November29). On July6, 2010, the Group also placed a 550million USdollars bond on the American market, bearing a fixed interest rate of 5.5%, with a 5-year maturity (settlement on July9) (see Note25).
The goodwill is mainly attributable to market shares and expected synergies in terms of industrial performance and logistics network which are not separately recognized. It is tax deductible for an amount of 465 million euros based on exchange rate July19, 2010.
F
F 23
F
3.3
Note4 Business segment and geographic areainformation
Maturity extension of syndicated credit facility
3.4
Litigations
On July27, 2010, Lafarge signed an amendment to the 1,850million euros syndicated credit line, which purpose was to extend its maturity by one year. The new maturity has therefore been extended to July28, 2013 for an amount of 1,654million euros (the maturity of 110million euros remains unchanged on July28, 2012 and around 86million euros have matured on July28, 2010).
On June17, 2010, the European Union Court of Justice rejected Lafarges appeal against the decision of the European Commission imposing a fine on Lafarge in the amount of 249.6million euros for having colluded on market shares and prices with competitors between 1992 and 1998 for wallboard, essentially in the United Kingdom and Germany. The payment of the fine and accrued interest (additional provisions were recorded in each of our annual financial statements since 2003 in relation to the accrued interests) was made on July23, 2010, for a total amount of 338million euros (see Note29). This amount was fully reserved.
Note4
Business segment and geographic areainformation

Group management internally evaluates its performance based upon: operating income before capital gains, impairment, restructuring and other, share in net income of associates; and capital employed (defined as the total of goodwill, intangible and tangible assets, investments in associates and working capital). Group financing, notably treasury process (including finance income and finance expenses), and income taxes are managed at Group level and are not allocated to segments. The accounting policies applied to segment earnings comply with those described in Note2 of this document. The Group accounts for intersegment sales and transfers at market prices. For the geographical information, revenue is presented by region or country of destination of the revenue.
In accordance with IFRS8 Operating segments, the information presented hereafter by operating segment is the same as that reported to the Chief Operating Decision Maker (the Chief Executive Officer) for the purposes of making decisions about allocating resources to the segment and assessing its performance. The Group operates in the following three operating segments (Cement, Aggregates & Concrete and Gypsum), defined as business segments, each of which represents separately managed strategic operating segments that have different capital requirements and marketing strategies. Each segment develops, manufactures and sells distinct products: the Cement segment produces and sells a wide range of cement and hydraulic binders adapted to the needs of the construction industry; the Aggregates & Concrete segment produces and sells aggregates, ready mix concrete, other concrete products and, relating to paving activities, other products and services; the Gypsum segment mainly produces and sells drywall for the commercial and residential construction sectors. Other and holding activities, not allocated to our core operating segments, are summarized in the other segment.
F 24
a)
2010
Segment information
CEMENT AGGREGATES & CONCRETE GYPSUM OTHER TOTAL
(million euros)
STATEMENT OF INCOME
Gross revenue Less: intersegment REVENUE Operating income before capital gains, impairment, restructuring and other Gains on disposals, net Other operating income (expenses) Including impairment on assets and goodwill OPERATING INCOME Finance costs Finance income Income from associates Income taxes NET INCOME (26) 5 5 10,280 (624) 9,656 2,230 50 (249) (126) 2,031 5,093 (5) 5,088 216 (5) (28) (11) 183 1,441 (19) 1,422 58 (49) (17) 9 3 3 (63) 9 (54) 16,817 (648) 16,169 2,441 45 (317) (154) 2,169 (1,069) 346 (16) (316) 1,114
OTHER INFORMATION
Depreciation and amortization Other segment non cash income (expenses) of operating income Capital expenditures Capital employed (775) (100) 1,060 26,780 (266) 22 168 5,200 (85) (30) 64 1,511 (47) 39 271 (1,173) (108) 1,331 33,762
STATEMENT OF FINANCIAL POSITION

Segment assets Of which investments in associates Unallocated assets * TOTAL ASSETS Segment liabilities Unallocated liabilities and equity ** TOTAL EQUITY AND LIABILITIES
* ** Deferred tax assets and derivative instruments. Deferred tax liability, financial debt, derivative instruments and equity.
31,330 236
6,384 34
1,900 134
2,257 18
41,871 422 623 42,494
2,797
1,107
313
1,762
5,979 36,515 42,494
F
F 25
F
2009
(million euros)
CEMENT
AGGREGATES & CONCRETE
GYPSUM
OTHER
TOTAL
STATEMENT OF INCOME
Gross revenue Less: intersegment REVENUE Operating income before capital gains, impairment, restructuring and other Gains on disposals, net Other operating income (expenses) Including impairment on assets and goodwill OPERATING INCOME Finance costs Finance income Income from associates Income taxes NET INCOME ( 27) 2 5 2 10,105 (628) 9,477 2,343 62 (209) (152) 2,196 5,067 (3) 5,064 193 40 (41) (8) 192 1,355 (21) 1,334 38 5 (63) (4) ( 20) 9 9 ( 97) ( 4) (17) ( 118) 16,536 (652) 15,884 2,477 103 (330) (164) 2,250 (1,136) 210 (18) (260) 1,046
OTHER INFORMATION
Depreciation and amortization Other segment non cash income (expenses) of operating income Capital expenditures Capital employed (733) (133) 1,278 24,924 (265) 13 225 5,102 (81) 21 102 1,437 (44) (20) 40 373 (1,123) (119) 1,645 31,836
STATEMENT OF FINANCIAL POSITION

Segment assets Of which investments in associates Unallocated assets * TOTAL ASSETS Segment liabilities Unallocated liabilities and equity ** TOTAL EQUITY AND LIABILITIES
* ** Deferred tax assets and derivative instruments. Deferred tax liability, financial debt, derivative instruments and equity.
28,647 182
6,279 17
1,829 128
2,367 8
39,122 335 375 39,497
2,451
1,044
382
1,851
5,728 33,769 39,497
F 26
Note5 Gains on disposals, net
b)
Other information: geographic area information

Non-current assets include goodwill, intangible assets, property, plant and equipment and investments in associates.
In presenting information on the basis of geographical segments, segment revenue is based on the geographical location of customers. Non-current assets are allocated to segments based on their geographical locations.
2010
(million euros)
2009 NON CURRENT ASSETS REVENUE NON CURRENT ASSETS
REVENUE
WESTERN EUROPE Of which: France United Kingdom Spain NORTH AMERICA Of which: United States Canada MIDDLE EAST AND AFRICA Of which: Egypt Algeria CENTRAL & EASTERN EUROPE LATIN AMERICA Of which: Brazil ASIA TOTAL
4,313 2,176 906 289 3,336 1,719 1,617 3,903 714 444 1,043 894 529 2,680 16,169
6,855 2,345 1,550 1,012 6,127 4,917 1,210 12,621 2,804 3,071 2,015 1,527 1,072 4,177 33,322
4,657 2,328 833 390 3,028 1,674 1,354 4,018 704 460 1,053 791 334 2,337 15,884
6,964 2,333 1,541 1,030 5,799 4,691 1,108 11,927 2,779 3,056 1,875 710 289 3,640 30,915
c)
Major customers
The Group has no reliance on any of its customers.
Note5
(million euros)
Gains on disposals, net

2010 2009
Components of gains on disposals, net are as follows:
Gain on disposals of consolidated subsidiaries, joint ventures and associates, net Gain on sale of other long-term assets, net GAINS ON DISPOSALS, NET
33 12 45
95 8 103
The effect of the tax rate on capital gains and losses is mentioned in the Note22 (a).
F
F 27
F
2010
Note6 Other operating income (expenses)
2009
Gain on disposals of consolidated subsidiaries, joint ventures and associates, net amounts to 95 million euros and is essentially composed of: 38million euros relating to the disposal during the first semester2009 of our Aggregates & Concrete activities in the Zrich region of Switzerland and some assets of its Asphalt, Paving and Concrete activities in North America; 20million euros relating to the disposal during the third quarter 2009 of our Cement and Aggregates & Concrete activities in Chile and of our Cement activities in Venezuela; 29million euros relating to the disposal during the fourth quarter 2009 of our Cement and Aggregates & Concrete activities in Turkey; 11million euros relating to the disposal during the fourth quarter 2009 to the EBRD of 15% of our stake in our Cement operations in Russia through a non equal capital increase.
Gain on disposals of consolidated subsidiaries, joint ventures and associates, net amounts to 33million euros, and is notably composed of a 14million euros gain on the sale of an associate in Brazil.
Note6
(million euros)
Other operating income (expenses)

2010 2009
Components of other operating income (expenses) are as follows:
Impairment losses on goodwill * Impairment losses on intangible assets and property, plant and equipment IMPAIRMENT LOSSES Restructuring costs Litigations Other income Other expenses OTHER OPERATING INCOME (EXPENSES)
* Impairment losses on goodwill are detailed in Note10 (d).
(154) (154) (122) (24) 29 (46) (317)
(30) (134) (164) (155) (15) 17 (13) (330)
2010
In 2010, the Group recognized impairment of tangible and intangible assets for a total amount of 154million euros, notably relating to the assets of a closed paper plant in Sweden and to some cement assets in the Western Europe and in South Korea regions due to the impact of the economic environment. Restructuring costs include notably employee termination benefits, contract termination costs and other restructuring costs. They are, as for 2009, mainly due to our Excellence reduction cost plans and concern notably Greece (Cement) and Spain (Cement and Aggregates& Concrete).
was recorded during the second quarter 2009 for the cash generating unit Cement Chile as part of its disposal, which was effective end of August2009. Restructuring costs are mainly due to our Excellence reduction cost plans and concern notably Greece (Cement), Spain (Cement), United Kingdom (Cement) and Jordan (Cement). The amount of Litigations is mainly composed of: the cost relating to the USG litigation following an agreement entered into to resolve the disputes between the Group and USG. Under the terms of the agreement, USG will receive 105million U.S. dollars (of which 80million U.S.dollars were paid in December2009) and will grant a fully paid-up license to Lafarge North America Inc. and other Lafarge affiliates for the use of certain USG technologies. The impact of this settlement is a 47million euros loss; the reversal of the provision relating to the German competition litigation following the decision of the Court of Dsseldorf dated June 26, 2009 for an amount of 43 million euros to reduce significantly the amount of the fine (see Note29).
2009
In 2009, the Group recognized impairment of tangible assets for a total amount of 134million euros, of which mainly 90million euros on some cement assets in the Western Europe region due to plant capacity closures. In addition, an impairment loss of 30million euros
F 28
Note8 Finance (costs) income
Note7
Emission rights
The Emissions Trading Directive and its provisions apply to all our cement plants in the EU and, to a lesser extent to some of our Gypsum operations. We are operating cement plants in 10 out of the 27EU Member States. Allowances that were allocated to these facilities represented some 28million tonnes of CO2 per year over the 2008-2012 period. The Group policy is to monitor allowances not only on a yearly basis but also over the whole 2008-2012 period. Actual emissions are followed and consolidated on a monthly basis. Forecast of yearly position is updated regularly during the year. Allowances would be purchased on the market in case of actual emissions exceeding rights granted for the period and, conversely, surplus may be sold on the market. In 2010, the low level of demand in our European markets combined with our improved performance in kg of CO2 per ton of cement has led to a surplus of allowances. During 2010, excess rights over actual emissions were sold for an amount of 158 million Euros (142millionEuros in 2009). For the year 2011, based on our current production forecasts, which may evolve in case of market trends different from those expected as at today, the allowances granted by the NAP2008-2012 should exceed our needs on a consolidated basis.
The Group accounts for trade and cap schemes as described in Note2.25. In 2003, the European Union adopted a Directive implementing the Kyoto Protocol on climate change. This directive established a CO2 emissions trading scheme in the European Union: within the industrial sectors subject to the scheme, each industrial facility is allocated a certain amount of CO2 allowances. Industrial operators that keep their CO2 emissions below the level of allowances granted to their plants can sell their excess allowances to other operators that have emitted more CO2 than the allowances they were initially granted. Another provision allows European Union companies to use credits arising from investments in emission reduction projects in developing countries to comply with their obligations in the European Union. The Emissions Trading Directive came into force on January1, 2005 for an initial three-year period (2005-2007). For the second period covering the years 2008 to 2012, each Member State issued at end of 2007, after approval by the European Commission, a National Allocation Plan (NAP) defining the amount of allowances given to each industrial facility.
Note8
(million euros)
Finance (costs) income

2010 2009
Components of finance (costs) income are as follows:
Interest expense Exchange losses Other financial expenses FINANCE COSTS Interest income Dividends received from investments Exchange gains (losses), net Other financial income FINANCE INCOME NET FINANCE (COSTS) INCOME
(863) (80) (126) (1,069) 90 4 54 198 346 (723)
(879) (74) (183) (1,136) 119 27 37 27 210 (926)
2010
Interest expense is reported net of capitalized interest costs for construction projects of 68million euros and 52million euros for the years ended December31, 2010, and 2009, respectively. The interest rate used to determine the amount of capitalized interest costs is the actual interest rate when there is a specific borrowing or the Groups debt average interest rate. Net interest expense (interest expense less interest income) amounts to 773million euros as at December31, 2010 (760million euros as at December31, 2009). The decrease in 2010 of our interest expenses as compared to 2009 arises from the effect of the decrease of our average net debt, in part
offset by the effect of the increase of our average interest rate over the same period. The average interest rate on our gross debt is 5.3% in 2010, compared to 5.1% in 2009. Other financial income notably includes the gain on disposal of our available-for-sale investment in Cimentos de Portugal (CIMPOR) for an amount of 161million euros (see Note3). The amount of exchange gains and losses depends on the exchange risk exposure of loans and debts denominated in currencies different from the functional currencies of the Company that carries this loan and/or this debt. These exchange differences mainly relate to loans and debts denominated in US dollars and Algerian dinars.
F
F 29
F
2009
Note9 Earnings per share
The net (costs) income arising on derivative instruments include gain and losses on the ineffective portion of derivatives designated as hedging instruments in cash flow hedge and fair value hedge relationships. Such impacts are not material for disclosed periods.
Other financial expenses notably include the impact of the accelerated amortization of debt issuance costs linked to the early repayment of part of the Orascom acquisition facility agreement and the cancellation of an unused confirmed credit line, for a total amount of 25million euros. They also include impairment losses on financial available-forsale investments for a total amount of 23million euros. The amount of dividends received mainly relates to the dividends received from the Cimentos de Portugal (CIMPOR) investment for an amount of 22million euros in 2009. Other financial income notably includes a gain of 11million euros relating to the disposal of an available-for-sale investment in Kenya.
The amount of exchange gains and losses depends on the exchange risk exposure of loans and debts denominated in currencies different from the functional currencies of the Company that carries this loan and/or this debt. In 2009, these exchange differences mainly relate to loans and debts denominated in US dollars and Nigerian neira.
Note9
Earnings per share

2010 2009
The computation and reconciliation of basic and diluted earnings per share from continuing operations for the years ended December31, 2010 and 2009 are as follows:
NUMERATOR (MILLION EUROS)

NET INCOME - ATTRIBUTABLE TO THE OWNERS OF THE PARENT COMPANY 827 736
DENOMINATOR (THOUSANDS OF SHARES)

WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING Effect of dilutive securities - stock-options TOTAL POTENTIAL DILUTIVE SHARES WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING - DILUTED BASIC EARNINGS PER SHARE (EUROS) DILUTED EARNINGS PER SHARE (EUROS) 286,087 249 249 286,336 2.89 2.89 265,547 260 260 265,807 2.77 2.77
2010
For purposes of computing diluted earnings per share, stock-options which would have an anti-dilutive effect on the calculation of the diluted earnings per share are excluded from the calculation. In 2010, 8.40million stock-options were excluded from the diluted earnings per share calculation (7.62million in 2009).
2009
On April 28, 2009, the Group processed a right issue of 1.5billioneuros with preferential subscription rights. The set issue price represented a 46.2% discount to the closing price of the Companys shares on March30, 2009, adjusted for the 2008 expected dividend of 2.00euros per share which will not be paid on the new shares. This discount was 37% based on the theoretical ex-rights price also adjusted for the 2008 expected dividend.
Since this capital increase was performed under the form of a capital increase with preferential subscription rights at a price lower than the market price, the number of shares outstanding for the year 2009, used to compute basic and diluted earnings per share and presented above, has been adjusted by the ratio between the last price of the Companys shares before the preferential subscription right be detached (31.91euros per share) and this price after detachment of the 4.19euros right (27.72euros per share) until the date the capital increase occurs. The increase in the weighted average number of shares outstanding in 2009 related to two capital increases: 90,109,164new shares issued in April2009 as part of the 1.5billion euro capital increase referred above; 1,101,834new shares issued as part of the December11, 2009 capital increase reserved for the Groups employees.
F 30
Note10 Goodwill
Note10
a)
Goodwill
Changes in goodwill
AGGREGATES & CONCRETE
The following table displays the changes in the carrying amount of goodwill by business segment.
(million euros)
CEMENT
GYPSUM
OTHER
TOTAL
CARRYING AMOUNT AT DECEMBER 31, 2008 Cost at January 1, 2009 Accumulated impairment CARRYING AMOUNT AT JANUARY 1, 2009 Additions Disposals Reallocation of provisional goodwill Impairment losses Change in goodwill related to put options on shares ofsubsidiaries and other Translation adjustments CARRYING AMOUNT AT DECEMBER 31, 2009 Cost at January 1, 2010 Accumulated impairment CARRYING AMOUNT AT JANUARY 1, 2010 Additions Disposals Change in goodwill related to put options on shares ofsubsidiaries and other Translation adjustments CARRYING AMOUNT AT DECEMBER 31, 2010 Cost at December 31, 2010 Accumulated impairment CARRYING AMOUNT AT DECEMBER 31, 2010
10,867 11,123 (256) 10,867 4 (140) 513 (30) (76) (100) 11,038 11,308 (270) 11,038 490 (8) (12) 496 12,004 12,289 (285) 12,004
1,975 2,025 (50) 1,975 5 (22) 34 (26) 1,966 1,973 (7) 1,966 22 (26) (23) 121 2,060 2,061 (1) 2,060
243 264 (21) 243 2 245 266 (21) 245 1 17 263 285 (22) 263
289 289 289 (289) -
13,374 13,701 (327) 13,374 9 (162) 258 (30) (76) (124) 13,249 13,547 (298) 13,249 513 (34) (35) 634 14,327 14,635 (308) 14,327
Impairment losses on goodwill are as follows (see Note6):

(million euros)
2010
2009
Impairment losses
30
b) 2010
Acquisitions
2009
Lafarge did not perform any significant acquisitions in 2009. The allocation of the goodwill arising from the acquisition in 2008 of Orascom Building Materials Holding S.A.E. (Orascom Cement), amounting to 6,370million euros, is completed as at December31, 2009. This goodwill has been mainly allocated to the acquired CGUs (4,446million euros) and to the group of CGUs of the Middle East and Africa region (1,150million euros) related to the capacity provided by Orascom to the Group to increase and accelerate its development in this region, as well as to industrial synergies.
ACQUISITION OF CEMENT OPERATIONS IN BRAZIL
On July19, 2010, Lafarge acquired cement operations in Brazil from the Group Votorantim, which notably comprise two grinding stations, one cement plant, slag supply contracts and clinker supply to grinding stations. The purchase price consideration amounts to 755million euros and was settled in Cimpor shares (see Note3). The provisional goodwill arising from this transaction amounts to 490million euros (see Note3).
Other acquisitions
In addition to the acquisitions described separately in this note, several other relatively minor acquisitions throughout segments were consummated in 2010 and 2009. The aggregate cost of these acquisitions was 72million euros and 58million euros in 2010 and 2009, respectively.
F 31
F
c)
Cement
Note10 Goodwill
Breakdown of goodwill
Lafarge is composed of around one hundred CGUs or groups of CGUs as at December31, 2010 for which goodwill has been allocated. The table below presents the breakdown per business segment of the number of CGUs or groups of CGUs within the Group, along with the related goodwill amounts in million euros.
For goodwill impairment tests, goodwill arising from business combinations are allocated to Cash Generating Units (CGUs) or groups of CGUs as defined in Note2.12. These CGUs or groups of CGUs represent the lowest level at which the goodwill is monitored for internal management purposes and are not larger than the operating segment as presented in Note4 - Business Segment and Geographic Area information.
AT DECEMBER 31,
2010 BUSINESS SEGMENT NUMBER OF CGUS/ GROUPS OF CGUS GOODWILL AMOUNTS 2009 NUMBER OF CGUS/ GROUPS OF CGUS GOODWILL AMOUNTS
50 22 21 93
12,004 2,060 263 14,327
50 23 21 94
11,038 1,966 245 13,249
Aggregates & Concrete Gypsum TOTAL
d)
Impairment test forgoodwill
The Groups methodology to test its goodwill for impairment is described in Note2.12. Group Goodwill is allocated to Cash Generating Units (CGUs), generally corresponding to the activity of a segment in a country, or groups of CGUs (see Note2.12).
Apart from the main CGUs presented in the table below, the goodwill that are allocated to other CGUs or groups of CGUs do not account individually for more than 10% of total group goodwill. The discount rates are post-tax discount rates that are applied to post-tax cash flows. The use of these rates results in recoverable values that are identical to the ones that would be obtained by using pre-tax rates and pre-tax cash flows (as required by IAS36 Impairment of assets).
The discount rates and perpetual growth rates in hard currency used for the valuation of the main CGUs based on estimated discounted cash flows are as follows:
AT DECEMBER 31,
2010 CARRYING VALUE OFGOODWILL CASH GENERATING UNITS
(million euros)
2009 PERPETUAL GROWTH RATE CARRYING VALUE OFGOODWILL

(million euros)
DISCOUNT RATE
DISCOUNT RATE
PERPETUAL GROWTH RATE
Cement North America Cement Algeria Cement Egypt
1,590 1,395 1,376
7.1% 8.2% 8.2%
1.8% 3.0% 3.0%
1,473 1,376 1,343
7.6% 8.8% 8.7%
1.8% 3.0% 3.0%
The main assumptions used for the valuation of CGUs or groups of CGUs are as follows:
AT DECEMBER 31,
2010 2009
Multiples of operating income before capital gains, impairment, restructuring and other, andbeforedepreciation and amortization Discount rate Perpetual growth rate
8.3 - 11.8 6.9% - 11.7% 1.5% - 3.0%
7.7 - 9.6 7.3% - 12.5% 1.8% - 3.0%
The Group took into account, as for year-end 2009, the impact of the economic crisis affecting some of its markets in the operational and actuarial assumptions used in future cash flows.
No goodwill impairment loss was identified as neither at December31, 2010, nor at December 31, 2009 subsequent to the goodwill impairment tests. An impairment loss of 30million euros was recorded during the second quarter 2009 for the CGU Cement Chile as part of its forecasted disposal, which was effective end of August2009.
F 32
Note11 Intangible assets
The Group analyzed the sensibilities of the recoverable amounts to a reasonable possible change of a key assumption, notably to an independent change of one point in the discount rate or the perpetual growth rate. These analyses did not show a situation in which the carrying value of the main CGUs would exceed their recoverable amount, with the exception of the two CGUs referred to below.
For these two CGUs, the sensibility of the recoverable amounts to an independent change of one point in either the discount rate or the perpetual growth rate was as follows as at December31, 2010:
IMPACT OF ONE POINT INCREASE / DECREASE IN THE CASH GENERATING UNITS

(millions euros)
EXCESS OF ESTIMATED RECOVERABLE AMOUNT OVER CARRYING VALUE
DISCOUNT RATE +1 PT -1 PT
PERPETUAL GROWTH RATE +1 PT -1 PT
Cement Greece Cement Spain
77
(121) (134)
153 188
37 37
(30) (28)
Note11
(million euros)
Intangible assets
2010 2009
CARRYING AMOUNT AT JANUARY 1, Additions Disposals Amortization Impairment losses Other changes Translation adjustments CARRYING AMOUNT AT DECEMBER 31,
632 77 (13) (95) (3) 18 45 661
614 69 (4) (93) 51 (5) 632
For the years presented, no reversal of impairment charges has been recorded. The following table presents details of intangible assets:
AT DECEMBER 31,
2010 ACCUMULATED AMORTIZATION COST AND IMPAIRMENT 2009 ACCUMULATED AMORTIZATION COST AND IMPAIRMENT
(million euros)
CARRYING VALUE
CARRYING VALUE
Software Real estate development rights Mineral rights Other intangible assets TOTAL INTANGIBLE ASSETS
494 85 158 506 1,243
348 58 43 133 582
146 27 115 373 661
456 82 171 409 1,118
302 54 37 93 486
154 28 134 316 632
For the years presented, Other intangible assets include only assets with finite useful lives.
In 2010, the overall Groups spendings for product innovation and industrial process improvement was 153million euros, compared to 152million euros in 2009. The part of these spendings that are expensed as incurred were 140million euros in 2010 and in 2009.
F
F 33
F
a)
Additions Disposals
Note12 Property, plant and equipment
Note12
Property, plant and equipment

MINERAL RESERVES AND LAND MACHINERY, EQUIPMENT, FIXTURES AND FITTINGS TOTAL BEFORE INVESTMENT SUBSIDIES
Changes in property, plant and equipment

CONSTRUCTION IN PROGRESS INVESTMENT SUBSIDIES
(million euros)
BUILDINGS
TOTAL
Cost at January 1, 2009 Accumulated depreciation CARRYING AMOUNT AT JANUARY 1, 2009
2,111 (433) 1,678 35 (9) (84) (48) (3) 54 33 1,656 2,127 (471) 1,656 31 (10) 3 (18) (49) (2) 22 99 1,732 2,272 (540)
3,504 (1,600) 1,904 63 (7) (27) (220) 172 1,885 3,628 (1,743) 1,885 117 (4) 25 (6) (114) 445 99 2,447 4,380 (1,933)
17,779 (7,137) 10,642 307 (36) (316) (768) (112) 1,230 (35) 10,912 18,505 (7,593) 10,912 235 (21) 229 (11) (902) (149) 1,016 618 11,927 20,760 (8,833)
2,786 (7) 2,779 1,156 (2) (36) (19) (1,551) (13) 2,314 2,328 (14) 2,314 837 12 4 3 (19) (1,438) 165 1,878 1,905 (27)
26,180 (9,177) 17,003 1,561 (54) (463) (1,036) (134) (95) (15) 16,767 26,588 (9,821) 16,767 1,220 (23) 261 (32) (1,084) (151) 45 981 17,984 29,317 (11,333) (68) (11) 1 6 (72) 16,699 1,209 (23) 261 (31) (1,078) (151) 45 981 17,912 (76) (1) 6 3 (68) 16,927 1,560 (54) (463) (1,030) (134) (95) (12) 16,699
Other changes in scope Depreciation Impairment losses Other changes Translation adjustments CARRYING AMOUNT AT DECEMBER 31, 2009 Cost at January 1, 2010 Accumulated depreciation CARRYING AMOUNT AT JANUARY 1, 2010 Additions Disposals Main acquisitions through businesscombinations Other changes in scope Depreciation Impairment losses Other changes Translation adjustments CARRYING AMOUNT AT DECEMBER 31, 2010 Cost at December 31, 2010 Accumulated depreciation
2010
In 2010, the tangible assets with a carrying amount below their recoverable value were impaired for a total amount of 151million euros, notably relating to the assets of a closed paper plant in Sweden and to some cement assets in the Western Europe and in South Korea regions due to the impact of the economic environment (see Note6).
2009
In 2009, the tangible assets with a carrying amount below their recoverable value were impaired for a total amount of 134million euros, of which mainly 90million euros on some Cement assets in the Western Europe region due to plant capacity closures (see Note6). The other changes include mainly the impact of the 2009 disposals for a negative amount of 370million euros.
F 34
Note13 Investments in associates
b)
Depreciation and impairment
Depreciation on property plant and equipment and impairment losses from continuing operations recognized in the statement of income are as follows:
(million euros)
2010
2009
Depreciation Impairment losses TOTAL
1,078 151 1,229
1,030 134 1,164
For the years presented, no significant reversal of impairment charges has been recorded.
c)
Finance leases
on such assets amount to 52million euros and 57million euros at December31,2010, and 2009, respectively.
The cost of property, plant and equipment includes 121million euros and 116 million euros of assets under finance leases at December31,2010, and 2009, respectively. The remaining obligations
Note13
a)
Investments in associates
2010 2009
Changes in investment in associates
(million euros)
AT JANUARY 1, Income from associates Dividends received from associates New investments or share capital increases Disposals and reduction in ownership percentage Other changes AT DECEMBER 31,
*
335 (16) (11) 148 (14) (20) 422
563 (18) (10) 7 (57) (150) * 335
Mainly includes in 2009 the reclassification of goodwill that was preliminarily allocated in 2008 to investments in associates in the context of the final Orascom Cement goodwill allocation.
2010
The Group capitalized its long- term loan with an associate in Nigeria (United Cement Company Of Nigeria Limited) for an amount of 132million euros (see Note15). In 2010, the Group sold its investment of 8% in an associate in Brazil (see Note5).
2009
In November 2009, the Group sold its 35% interest in its associate Monier for a 1euro value. This disposal has no impact in the 2009 accounts, since the carrying amount of our investment was nil as at December31, 2008. Our investment in Venezuela was sold during the third quarter 2009.
Information relating to the statement of income

The following details the Groups share of the operations of associates:
(million euros)
2010
2009
Operating income before capital gains, impairment, restructuring and other Gain on disposals, net Other operating income (expenses), net Finance (costs) income Income tax INCOME FROM ASSOCIATES
10 2 2 (21) (9) (16)
19 1 (1) (29) (8) (18)
F
F 35
F
b)
Total equity
Note14 Joint ventures
Summarized combined statement of financial position and statement ofincome information of associates
Combined statement of financial position information at 100%

AT DECEMBER 31,
(million euros)
2010
2009
Non-current assets Current assets TOTAL ASSETS Non-current liabilities Current liabilities TOTAL EQUITY AND LIABILITIES
1,413 397 1,810 780 640 390 1,810
1,808 591 2,399 656 1,247 496 2,399
Combined statement of income information at 100%

(million euros)
2010
2009
Revenue Operating income before capital gains, impairment, restructuring and other Operating income Net income
701 18 30 (51)
633 42 36 (75)
Note14
Joint ventures
The following amounts are included in the Groups financial statements as a result of the proportionate consolidation of joint ventures:
The Group has several interests in joint ventures (see Note35) that are consolidated using the proportionate method as described in Note2.2.
Impact on the consolidated statement of financial position

AT DECEMBER 31,
(million euros)
2010
2009
Non-current assets Current assets Non-current liabilities Current liabilities
2,599 626 389 939
2,324 499 407 705
As of December 31, 2010 and December 31, 2009, the joint ventures mainly relate to: al Safwa Cement Company, owned at 50% in Saudi Arabia; Emirats Cement LLC, owned at 50% in United Arab Emirates; several joint ventures in Morocco for the Cement and Aggregates & Concrete activities, owned at 35%;
several joint ventures in China, notably: Lafarge Chongqing Cement Co., Ltd owned at 43.68%, Lafarge Dujiangyan Cement Company Limited owned at 41.25%, Lafarge Shui On (Beijing) Technical Services Co. Ltd owned at 55%, Sichuan ShuangMa Cement Joint Stock Co. owned at 31.25% and Yunnan Shui On Building Materials Investment Co. Ltd owned at 44%; and other joint ventures in the Middle East for the Aggregates & Concrete Division, in Bangladesh for the Cement Division and in Asia for the Gypsum Division.
F 36
Note15 Other financial assets
Impact on the consolidated statements of income

(million euros)
2010
2009
Revenue Operating income before capital gains, impairment, restructuring and other Operating income Net income
1,287 182 169 118
1,262 260 256 183
Note15
(million euros)
Other financial assets

AT DECEMBER 31,
2010 2009
Components of other financial assets are as follows:
Loans and long-term receivables Available for sale investments Prepaid pension assets Restricted cash TOTAL
490 319 5 49 863
506 1,023 12 50 1,591
a) 2010
Available for sale investments
In 2009, we also sold an investment we owned in Kenya for a net amount of 12million euros leading to a gain of 11million euros recognized as financial income in the statement of income. In compliance with the amendment to IFRS7 - Financial Instruments: Disclosures, the table below presents, for the available-forsale financial assets which are quasi exclusively the Groups equity investments in non consolidated companies, the allocation of their fair value between the three categories of the fair value hierarchy as defined by the amendment: level1: for financial assets quoted in an active market, fair value is the quoted price; level2: for financial assets that are not quoted in an active market and for which observable market data exist on which the Group can rely to measure fair value; level3: for financial assets that are not quoted in an active market and for which there is no observable market data.
The significant decrease of the Available for sale investments in 2010 mainly relates to the sale in February 2010 of our Cimpor investment to the Group Votorantim (see Note3). There was no impairment loss on financial available-for-sale investments in 2010 (23million euros in 2009).
2009
Available for sale investments as at December 31, 2009 mainly includes the market value of our investment in Cimentos de Portugal (Cimpor) for an amount of 746million euros (135million euros above acquisition cost). The variation in the net unrealized gains or losses on this investment was recognized in other reserves for 342million euros in 2009.
AT DECEMBER 31,
(million euros)
2010
2009
Level 1 Level 2 Level 3 AVAILABLE -FOR-SALE INVESTMENTS
86 233 319
782 45 196 1,023
In 2010, the Group reclassified from the level1 category to the level2 category an available-for-sale investment in Morocco which is no longer quoted (39million euros as at December31, 2010).
F
F 37
F
Acquisitions
Note 16 Inventories
For the level3 category, the reconciliation from the beginning balances to the ending balances presents as follows:
(million euros)
2010
2009
AT JANUARY 1, Gains or losses in statement of income Unrealized gains or losses in equity Other movements (including translation adjustments) Reclassification out of level 3 AT DECEMBER 31,
196 19 18 233
167 (8) 35 2 196
b)
Loans and long-term receivables
In 2010, the Group notably capitalized its long- term loan with an associate in Nigeria (United Cement Company Of Nigeria Limited) for an amount of 132million euros (see Note13). In 2009, the increase in loans and long-term receivables mainly relates to the receivable further to the disposal of our Cement
activities in Venezuela occurred end of September 2009 for an amount of 41million euros. The short-term part of this receivable (23millioneuros) is reflected in Other receivables in the consolidated statement of financial position. Loans and long-term receivables include a loan granted to an associate in Nigeria (Unicem) for an amount of 180million euros.
Note 16
(million euros)
Inventories
AT DECEMBER 31,
2010 2009
Components of inventories are as follows:
Raw materials Work-in-progress Finished and semi-finished goods Maintenance and operating supplies INVENTORIES CARRYING VALUE Depreciation INVENTORIES
409 8 705 674 1,796 (149) 1,647
370 8 674 784 1,836 (134) 1,702
The depreciation primarily relates to maintenance and operating supplies for 108million euros and 92million euros at December31,2010, and 2009, respectively. The change in the inventories is as follows:
(million euros)
2010
2009
AT JANUARY 1, Movement of the year Scope effects and other changes Translation adjustments AT DECEMBER 31,
1,702 (97) (65) 107 1,647
2,195 (433) (66) 6 1,702
F 38
Note 17 Trade receivables
Note 17
(million euros)
Trade receivables
AT DECEMBER 31,
2010 2009
Components of trade receivables are as follows:
Trade receivables, gross and advances on trade payables Valuation allowance TRADE RECEIVABLES
1,995 (221) 1,774
1,879 (193) 1,686
The change in the valuation allowance for doubtful receivables is as follows:

(million euros)
2010
2009
AT JANUARY 1, Current year addition Current year release Cancellation Other changes Translation adjustments AT DECEMBER 31,
(193) (69) 24 25 (8) (221)
(208) (65) 25 29 27 (1) (193)
Securitization programs
The Group entered into multi-year securitization agreements, with respect to trade receivables: the first one implemented in France in January 2000 for Cement and Gypsum activities, renewed twice, includes Aggregates and Concrete activities since September 2009. This is a 5-year program from June 2010; the second one implemented in September 2009 in North America (United States and Canada) for a 3-year period; the last one implemented in March 2010 both in Spain and United Kingdom, also for a 5-year period, for some of the Cement, Aggregates and Concrete activities of these 2 countries. Under the programs, some of the French, North American, British and Spanish subsidiaries agree to sell on a revolving basis, some of their accounts receivables. Under the terms of the arrangements, the subsidiaries involved in these programs do not maintain control over the assets sold and there is neither entitlement nor obligation to repurchase the sold receivables. In these agreements, the purchaser of the receivables, in order to secure his risk, only finances a part of the acquired receivables as it is usually the case for similar commercial transactions. As risks and benefits cannot be considered as being all transferred, these programs do not qualify for derecognition of receivables, and are therefore accounted for as secured financing. Trade receivables therefore include sold receivables totaling 680million euros and 745million euros at December31, 2010, and 2009, respectively. The current portion of debt includes 533million euros and 407million euros at December31, 2010, and 2009, respectively, related to these programs and the non current portion of debt (235million euros at December31, 2009, corresponding to the North American securitization agreement) has been completely reclassified in the current portion of debt as at December31, 2010. The French securitization agreements are guaranteed by subordinated deposits and units totaling 147million euros and 103million euros at December31, 2010, and 2009, respectively.
F
F 39
F
Taxes
Note18 Other receivables
Note18
Other receivables
AT DECEMBER 31,
2010 2009
Components of other receivables are as follows:

(million euros)
373 131 26 441 971
389 124 16 479 1,008
Prepaid expenses Interest receivables Other current receivables OTHER RECEIVABLES
In 2010, Other current receivables mainly include: the receivables on disposals of assets and advances paid to suppliers for an amount of 115million euros, including the short-term part of our receivable on the 2009 disposal of our Cement activities in Venezuela for 19million euros; the receivables from Groups employees for 15million euros.
In 2009, Other current receivables mainly include: the receivables on disposals of assets and advances paid to suppliers for an amount of 97million euros, including the short-term part of our receivable on the disposal of our Cement activities in Venezuela for 23million euros (see Note3); the receivables from Groups employees, notably as part of the share capital increase reserved to Groups employees (see Note20) for 29million euros.
Note19
Cash and cash equivalents

include short-term investments of 200million euros (106million euros at December31, 2009) measured at their fair value.
Cash and cash equivalents, amounting to 3,294million euros at December31,2010 (2,220million euros at December31, 2009),
Note20
a)
Equity
a 48.80euros subscription price (i.e. 4.00euros par value and a 44.80euros issue premium). The gross proceeds amount to 54million euros of which 49million euros as premium. Related costs (3million euros) have been recorded as a reduction of the issue premium.
Common stock
At December 31, 2010, Lafarge common stock consisted of 286,453,779shares with a nominal value of 4euros per share. At December31, 2010, the total number of theoretical voting rights attributable to the shares is 367,647,493 after inclusion of the double voting rights attached to registered shares held for at least two years in the name of the same shareholders.
c)
Capital decrease
There was no capital decrease in 2010 and 2009.
b)
Capital increase d) Dividends

The following table indicates the dividend amount per share the Group paid for the year 2009 as well as the dividend amount per share for 2010 proposed by our Board of Directors for approval at the Annual General Meeting of shareholders to be held on May12, 2011. Dividends on fully paid-up shares that have been held by the same shareholders in registered form for at least two years are increased by 10% over dividends paid on other shares. The number of shares eligible for this increased dividend for a shareholder is limited to 0.5% of all outstanding shares at the end of the fiscal year for which dividend is paid.
In April2009, Lafarge processed a right issue of 1.5billion euros. This right issue resulted in the creation of 90,109,164new shares with a 16.65euros subscription price (i.e. 4.00euros par value and a 12.65euros issue premium), with a ratio of 6new shares for 13 existing shares. The gross proceeds amount to 1,500 million euros, including 1,140million euros of issue premium. Related costs (55million euros) have been recorded as a reduction of the issue premium. In December 2009, as part of a capital increase reserved to Groups employees, the Group issued 1,101,834new shares with
F 40
Note20 Equity
(euros, unless otherwise indicated)
2010 *
2009
Total dividend (million) Base dividend per share Increased dividend per share
* **
288** 1.00* 1.10*
575 2.00 2.20
Proposed dividend. As this dividend is subject to approval by shareholders at the Annual General Meeting, it has not been included as a liability in these financial statements. Based on an estimation of the number of shares eligible for dividends of 286,090,221shares.
e)
Transactions on treasury shares
f)
In 2010, the treasury shares decreased by 16,590shares related to the 2008 and 2009 performance stock plans which were vested and delivered to the employees. On June15, 2009, the treasury shares decreased by 56,645shares related to the 2007 performance stock plans which were vested and delivered to the employees.
GAINS/(LOSSES) JANUARY 1, ARISING DURING 2009 THE YEAR
Other comprehensive income part attributable to the owners ofthe parent company
The roll forward of other comprehensive income, for the part attributable to the owners of the parent company, is as follows:
RECYCLING TO INCOME STATEMENT
GAINS/(LOSSES) DECEMBER 31, ARISING DURING 2009 THE YEAR
RECYCLING TO INCOME STATEMENT
DECEMBER 31, 2010
Change in unrealized gains/(losses) onavailable for sale investments Gross value Deferred taxes Change in unrealized gains/(losses) oncash flow hedge instruments Gross value Deferred taxes Change in actuarial gains/(losses) Gross value Deferred taxes TOTAL OTHER RESERVES TOTAL FOREIGN CURRENCY TRANSLATION TOTAL OTHER COMPREHENSIVE INCOME
(224) (215) (9) (59) (89) 30 (330) (487) 157 (613) (905) (1,518)
390 390 (3) (1) (2) (158) (174) 16 229 (96) 133
(6) (6) 20 35 (15) 14 54 68
160 169 (9) (42) (55) 13 (488) (661) 173 (370) (947) (1,317)
10 10 (55) (64) 9 (45) 1,078 1,033
(148) (148) 8 12 (4) (140) (8) (148)
22 31 (9) (34) (43) 9 (543) (725) 182 (555) 123 (432)
The unrealized gain on the shares of Cimentos de Portugal (CIMPOR), which amounts to 148million euros, has been transferred to the consolidated statements of income further to the sale of this asset (see Note3 and Note15).
g)
Non controlling interests
h)
At December31, 2010, the non controlling interests amount to 2,080million euros (1,823million euros at December31, 2009). In 2010, the Group notably sold on the market a minority stake representing 11.2% of interests in Lafarge Malayan Cement (see Note3). At December31, 2010 and December31, 2009, the Groups significant non controlling interests are Lafarge Cement Egypt (Egypt), Malayan Cement Berhad (Malaysia), Jordan Cement Factories Company PSC (Jordan), Lafarge Halla Cement Corporation (South Korea) and West African Portland Cement Companyplc (Nigeria). In 2009, the European Bank for Reconstruction and Development (EBRD) increased by 15% its minority stake in our cement operations in Russia.
Changes in ownership interests with no/gain loss of control
As at December31, 2010, changes in ownership interest with no gain/ loss of control amount to 135million euros, of which 141million euros related to the above mentioned partial sale of interests in Malaysia (see Note3).
F
F 41
F
a)
Note21 Share based payments
Note21
Share based payments
Compensation expense for share based payments
The Group recorded a compensation expense for share based payments that is analyzed as follows:
(million euros)
2010
2009
Employee stock-options Employee share purchase plans Performance stock plans COMPENSATION EXPENSE FOR SHARE BASED PAYMENTS
13 7 20
17 17 7 41
2010
EMPLOYEE STOCK-OPTIONS PLANS AND PERFORMANCE STOCK PLANS
The compensation cost recognized includes the fair value amortization for all outstanding and non vested plans, including the plans granted in 2010.
2009
EMPLOYEE STOCK-OPTIONS PLANS AND PERFORMANCE STOCK PLANS
The compensation cost recognized includes the fair value amortization for all outstanding and non vested plans, including the plans granted in 2009.
EMPLOYEE SHARE PURCHASE PLANS
Under the terms of the plan, the employees were entitled to purchase a maximum of 5.75million shares jointly. The purchase price was 48.8euros, 20% less than the average of Lafarges share price over the last 20days preceding the date the offer was proposed. Additionally, depending on the country, bonuses are paid on part of the shares purchased. The shares purchased cannot be sold for a period of five years (except under very specific circumstances). Under this plan, employees purchased a total of 1,101,834shares. A net expense of 17million euros (estimated in accordance with principles described in Note2.24) has been recognized on this plan in full in2009 as there are no vesting conditions attached to the shares: 14million euros related to the cash incentive; 3million euros related to the compensation expense deducted from the discount element. The expense related to share based payments is included in the statement of income as follows:
The Lafarge S.A. shares have been offered to employees in 2009, as determined by management, under the plan Lafarge in Action.
(million euros)
2010
2009
Cost of sales Selling and administrative expenses COMPENSATION EXPENSE FOR SHARE BASED PAYMENTS
7 13 20
15 26 41
Total compensation cost related to non-vested and not yet recognized stock-options plans, performance stock plans and SAR plans is 31million euros which will be recognized on a straight-line basis over the vesting period from 2011 to 2014.
or subscribe shares of the Groups common stock to executives, senior management, and other employees who have contributed significantly to the performance of the Group. The option exercise price approximates market value on the grant date. The options are vested four years and expire ten years from the grant date. Following the capital increase performed on April28, 2009 at a price lower than the markets price, the Group has adjusted the rights of the holders to maintain the fair value of the plans. This adjustment resulted in a change in the number of granted options and exercise prices.
b)
Equity settled instruments
Stock-option plans
Lafarge S.A. grants stock-option plans and employee stock purchase plans. Stock-option plans offer options to purchase
F 42
Information relating to the Lafarge S.A. stock-options granted is summarized as follows:

2010 WEIGHTED AVERAGE EXERCISE PRICE OPTIONS
(euros)
2009 WEIGHTED AVERAGE EXERCISE PRICE OPTIONS

(euros)
OPTIONS OUTSTANDING AT JANUARY 1, Options granted Adjustment of plans following capital increase Options exercised Options cancelled and expired OPTIONS OUTSTANDING AT DECEMBER 31, OPTIONS EXERCISABLE AT DECEMBER 31, Weighted average share price for options exercised during the year Weighted average share price at option grant date (for options granted during the year) Weighted average fair value of options granted during the year
8,358,955 1,203,500 (463) (448,164) 9,113,828 5,884,994
72.01 51.30 57.00 68.10 69.47 70.24 58.93 53.93 11.86
7,289,578 642,950 1,240,525 (5,784) (808,314) 8,358,955 5,330,857
87.68 35.57 (11.32) 58.51 74.68 72.01 67.75 45.48 32.74 7.34
Information relating to the Lafarge S.A. stock-options outstanding at December31,2010 is summarized as follows:
EXERCISE PRICE (euro) WEIGHTED AVERAGE REMAINING LIFE NUMBER OF OPTIONS OUTSTANDING
(months)
NUMBER OF OPTIONS EXERCISABLE
88.27 83.12 87.98 64.38 57.00 61.19 62.78 84.42 110.77 96.18 30.74 51.30
14,756 1,015,919 428,552 318,577 1,114,656 749,156 1,356,070 887,308 568,892 780,638 716,504 1,162,800 9,113,828
4 11 16 23 35 47 59 65 77 87 99 111
14,756 1,015,919 428,552 318,577 1,114,656 749,156 1,356,070 887,308 5,884,994
FAIR VALUE OF OPTIONS GRANTED
As described in Note2.24, share option fair value is calculated at the grant date using the Black & Scholes option-pricing model. Further changes in the fair value of instruments granted are not considered. The Group estimated the fair value of the options granted based on the following assumptions:
LAFARGE S.A. OPTIONS
Years ended December 31,
2010
2009
Expected dividend yield Expected volatility of stock Risk-free interest rate Expected life of the options (years)
4.3% 31.3% 3.2% 8.0
4.5% 29.5% 3.5% 8.0
The expected dividend yield assumption is based on a prospective approach, according to market expectations by 2011.
The expected volatility assumption has been determined based on the observation of historical volatility over periods corresponding to the expected average maturity of the options granted, partially smoothed to eliminate extreme deviations and better reflect long-term trends.
F 43
The Group assumes that the equivalent risk-free interest rate is the closing market rate, on the last trading day of the year, for treasury bills with maturity similar to the expected life of the options. The Lafarge S.A. stock incentive plan was introduced on November29, 1989. The Group assumes the estimated life of the outstanding option agreements based upon the number of options historically exercised and cancelled since the plan inception.
Performance stock plans

Lafarge set up a performance stock plan in 2010 and 2009. The shares are granted to executives and other employees for their contribution to the continuing success of the business. For French resident employees, these shares will be issued following a two-year vesting period after the grant date, but will remain unavailable for an additional two-year period. For non-French resident employees, the shares will be vested for four years.
Information relating to the Lafarge S.A. performance stock plans outstanding at each December31, is summarized as follows:
(million euros)
2010
2009
Shares outstanding at January 1, Shares granted Shares cancelled Shares definitely alloted Shares outstanding at December 31, Weighted average share price at option grant date
356,393 169,605 (16,848) (16,590) 492,560 53.93
194,010 230,758 (11,730) (56,645) 356,393 32.74
The Group estimated the fair value of the performance stock plan granted in 2010 and 2009 based on the following assumptions:
2010 2009
Expected dividend yield Post vesting transfer restriction discount
4.1% 3.8%
4.4% 4.9%
The expected dividend yield assumption is based on a prospective approach, according to market expectations by 2011. A discount for post vesting transfer restriction has been applied on shares granted to French resident employees for the two years following the vesting date.
c)
Cash-settled instruments
In 2007 and 2008, Lafarge granted certain U.S. employees equity instruments settled in cash, called Stock Appreciation Rights plans (SAR). SAR give the holder, for a period of 10 years after the grant date, the right to receive a cash payment based on the increase in the value of the Lafarge share from the time of the grant until the date of exercise. The SAR strike price approximates market value on the grant date. Right grants will vest at a rate of 25% each year starting on the first anniversary of the grant.
F 44
Note22 Income taxes
Information relating to the Lafarge North America Inc. Stock Appreciation Rights plan outstanding at December31 is summarized as follows:
2010 WEIGHTED AVERAGE EXERCISE PRICE SAR
(euros)
2009 WEIGHTED AVERAGE EXERCISE PRICE SAR

(euros)
SAR OUTSTANDING AT JANUARY 1, SAR granted SAR exercised SAR cancelled SAR OUTSTANDING AT DECEMBER 31, OPTIONS EXERCISABLE AT DECEMBER 31, Weighted average share price for SAR exercised during the year Weighted average share price at SAR grant date Weighted average fair value of SAR granted during the year
505,710 (9,325) 496,385 349,175
118.42 119.03 118.41 119.24 -
526,160 (20,450) 505,710 259,628
118.47 119.63 118.42 119.66 -
As described in Note2.24, share option fair value is calculated at the grant date using the Black & Scholes option-pricing model. The fair value of the plan is re-estimated at each reporting date and the expense adjusted pro rata to vested rights at the relevant reporting date.
The Group estimated at year-end the fair value of the Stock Appreciation Rights plan based on the following assumptions:

2010 2009
Expected dividend yield Expected volatility of stock Risk-free interest rate Expected life of the SAR (years)
4.0% 24.7% 4.0% 7.6
4.5% 24.7% 4.0% 7.6
The expected dividend yield assumption is based on market expectations. The expected volatility assumption has been determined based on the observation of historical volatility over periods corresponding to the
expected average maturity of the options granted, partially smoothed to eliminate extreme deviations and to better reflect long-term trends. The Group assumes that the equivalent risk-free interest rate is the closing market rate, on the last trading day of the year, for treasury bills with maturity similar to the expected life of the SAR.
Note22
a)
Income taxes
Income Tax
The Group computes current and deferred tax as described in Note2.23. The income tax expense from continuing operations for the year is detailed as follows:
(million euros)
2010
2009
CURRENT INCOME TAX French companies Foreign companies DEFERRED INCOME TAX French companies Foreign companies INCOME TAX
555 50 505 (239) (4) (235) 316
373 80 293 (113) (26) (87) 260
F 45
F
Other
Note22 Income taxes
The components of the income tax expense are as follows:

(million euros)
2010
2009
CURRENT INCOME TAX Corporate income tax for the period Adjustment recognized in the period for current tax of prior periods Withholding tax on dividends DEFERRED INCOME TAX Deferred taxes on origination or reversal of temporary differences Effect of changes in tax rates Deferred taxes assets and tax losses carryforward unrecognized Reassessment of deferred tax assets Other INCOME TAX
555 437 (7) 33 92 (239) (160) 3 (1) (81) 316
373 335 (18) 45 11 (113) (222) (6) 113 2 260
In 2010, in addition to the income tax expense charged to the statement of income, a net deferred tax income of 5million euros was recognized in equity, with a 9million euros deferred tax income relating to the actuarial gains and losses and a 4million euros deferred tax charge relating to the change in fair value of derivative instruments designated as hedging instruments in a cash flow hedge relationship. In 2009, there was no net tax impact in addition to the income tax expense charged to the statement of income, as the 16million euros deferred tax income relating to the actuarial gains and losses that was recognized in equity was compensated by a deferred tax charge
for the same amount relating to the change in fair value of derivative instruments designated as hedging instruments in a cash flow hedge relationship. An analysis of the deferred tax expense in respect of each temporary difference is presented in paragraph(c) deferred tax assets and liabilities.
Effective tax rate

The Groups effective tax rate is based on income before tax, out of the share of profit of associates. For the years ended December31, 2010 and 2009, the Groups effective tax rate is reconciled to the statutory tax rate applicable in France i.e., 34.43%, as follows:
(%)
2010
2009
Statutory tax rate Changes in enacted tax rates * Capital gains taxed at a reduced rate (*)(**) Effect of foreign tax rate differentials Changes in valuation allowance on deferred tax assets Non deductibility of the goodwill impairment loss * Other EFFECTIVE TAX RATE
*
34.4 0.3 (4.3) (14.5) 5.0 1.0 21.9
34.4 (0.5) (2.2) (21.4) 8.5 0.8 19.6
**
These items give rise to a net effect of -4.0 points in 2010 on the statutory tax rate (-1.5 points in 2009). They include non-recurring tax savings of 57 million euros (35 million euros in 2009). These tax savings arose from capital gains taxed at a lower rate. These tax savings are partially compensated by the non-deductibility of restructuring costs in Sweden (37 million euros in 2010). Excluding these non-recurring items, the effective tax rate would have been 25.9% in 2010 and 21.1% in 2009. Capital gain taxed at a lower rate notably corresponds to the disposal in 2010 of Cimentos de Portugal (Cimpor) and in 2009 of Turkey.
F 46
Note22 Income taxes
b)
Change in deferred tax assets and liabilities
Certain deferred tax assets and liabilities have been offset in accordance with the principles described in IAS12. The movements in deferred tax assets and liabilities for the reporting periods are as follows:
AT DECEMBER 31,
(million euros)
2010
2009
NET DEFERRED TAX LIABILITIES AT JANUARY 1, (Credit) charge to equity (excluding Actuarial gains and losses) Actuarial gains and losses Expense (income) Translation adjustments Other changes NET DEFERRED TAX LIABILITIES AT DECEMBER 31, Out of which: Deferred tax liabilities Deferred tax assets
579 4 (9) (239) 34 13 382 871 (489)
742 16 (16) (113) 4 (54) 579 887 (308)
c)
Deferred tax assets and liabilities

AT DECEMBER 31,
Components of the deferred tax balance are as follows:
(million euros)
2010
2009
Pensions and other post-retirement benefits Actuarial gains and losses Property, plant and equipment Provisions and other current liabilities Net operating loss and tax credit carry forwards Net capital loss carry forwards DEFERRED TAX ASSETS Valuation allowance NET DEFERRED TAX ASSETS Property, plant and equipment Other, net DEFERRED TAX LIABILITIES NET DEFERRED TAX LIABILITIES
205 181 304 294 1,212 273 2,469 (862) 1,607 1,784 205 1,989 382
180 175 248 286 784 370 2,043 (703) 1,340 1,667 252 1,919 579
Components of the deferred tax expense are as follows:

AT DECEMBER 31,
(million euros)
2010
2009
Pensions and other post-retirement benefits Property, plant and equipment Provisions and other current liabilities Net operating loss and tax credit and capital loss carry forwards Other, net TOTAL
31 (11) (17) (153) (89) (239)
16 18 25 (192) 19 (113)
The Group is in a position to control the timing of reversal of the temporary differences arising from investments in subsidiaries, hence it accounts for deferred tax liabilities on the undistributed earnings of its subsidiaries only when dividend distributions are planned.
F
F 47
F
d)
Addition Release
Note22 Income taxes
Valuation allowance on deferred tax assets

2010 2009
The change in the valuation allowance is as follows:

(million euros)
AT JANUARY 1,
703 252 (98) (16) 21 862
395 277 (6) 21 16 703
Other changes Translation adjustments AT DECEMBER 31,
e)
Tax credit and capital loss carry forwards
At December31,2010, the Group has net operating losses (NOLs) and tax credit carry forwards and capital losses carry forwards of approximately 3,602million euros and 1,001million euros, respectively, which will expire as follows:
(million euros)
NOLS AND TAX CREDITS CARRY FORWARDS
CAPITAL LOSS CARRY FORWARDS
TOTAL
2011 2012 2013 2014 2015 and thereafter TOTAL
28 33 55 95 3,391 3,602
1,001 1,001
28 33 55 95 4,392 4,603
Deferred tax assets have been recognized on all tax losses and a valuation allowance has been recorded when it is not probable that the deferred tax assets will be recoverable in a foreseeable future. As at December31, 2010 as for December31, 2009, the Group paid particular attention to the impacts that the economic crisis hitting some of its markets could have on the assessment of the recoverability of deferred tax assets positions in these markets. The analyses performed, based on the most recent forecasts approved by the management, arising from the Groups last strategic review and the Groups budget for the next year, concludes that it is probable that such assets will be recoverable in a foreseeable future, with the exception of assets of the French tax group since 2009. The deferred tax assets on the French tax credit carry forwards, along with tax assets relating to taxable temporary differences, have been depreciated in 2009 and in 2010 to limit their amount to the amounts of deferred tax liabilities, since the recoverability of these assets in a foreseeable future is not assured considering notably the current structure of the Groups indebtedness.
f)
Tax audits
The fiscal year ended December31, 2010 and prior years are open to tax audits by the respective tax authorities in the jurisdictions in which the Group has or had operations. Various tax authorities have proposed or levied assessments for additional tax in respect of prior years. The Group believes that the settlement of any or all of these assessments will not have a material and unfavorable impact on its result or financial position. In addition, the Group received in September2010 a tax reassessment notice regarding the tax exemption conditions for a portion of the disposal gain related to the 2007 sale of its Turkish Ybitas subsidiary. The Group has contested this reassessment that it believes is unfounded and has appealed to the administrative authority (Settlement Committee) which is mandated to negotiate on behalf of the Ministry of Finance.
F 48
Note23 Pension plans, end of service benefits andotherpost retirement benefits
Note23
Pension plans, end of service benefits andotherpost retirement benefits

medical plans. For these plans, the Groups obligations are estimated with the assistance of independent actuaries using assumptions, which may vary over time. The obligations related to these plans are often funded through Group and employee contributions to third party legal entities, which investments are subject to fluctuations in the financial markets. These entities are usually administered by trustees representing both employees and employer. Based on specific studies conducted by external experts, each Board of Trustees determines an appropriate investment strategy, typically designed to maximize asset and liability matching and limit investment risk by an appropriate diversification. The implementation of this investment strategy is conditioned by market opportunities and is usually conducted by external asset managers selected by trustees. Assets are mostly invested in listed instruments (shares, bonds) with limited use of derivatives or alternative asset classes. These entities do not hold any instrument issued by the Group.
The Group sponsors both defined benefit and defined contribution plans, in accordance with local legal requirements and each specific subsidiary benefit policies. For defined contribution plans, the Groups obligations are limited to periodic payments to third party organizations, which are responsible for the financial and administrative management of the funds. The pension costs of these plans, corresponding to the contribution paid, are charged in the statement of income. The total contribution paid in 2010 and 2009 (excluding mandatory social security plans organized at state level) for continuing operations is 30million euros and 31million euros, respectively. Only defined benefit plans create future obligations for the Group. Defined benefit pension plans and end of service benefits constitute 93% of the Groups post-retirement obligations. The remaining 7% relates to other post-retirement benefits, mainly post-employment
The following table shows the asset allocation of the most significant funded plans of the Group located in the United Kingdom and North America:
NORTH AMERICA
(%)
UNITED KINGDOM 2009 2010 2009
2010
Equity Bonds Others TOTAL
68 32 100
70 30 100
53 40 7 100
56 38 6 100
F
F 49
F
Service cost Interest cost
The following table shows the accounting treatment for defined benefit pension plans and end of service benefits under the column pension
benefits and the accounting treatment for other post retirement benefits under the column other benefits.
AT DECEMBER 31,
PENSION BENEFITS
(million euros)
OTHER BENEFITS 2009 2010 2009
TOTAL 2010 2009
2010
COMPONENTS OF NET PERIODIC PENSION COST

76 244 (236) (16) 51 (5) 1 115 68 228 (203) 1 51 (11) 134 8 19 (6) 2 23 9 18 (1) (5) 21 84 263 (236) (22) 53 (5) 1 138 77 246 (203) 51 (16) 155
Expected return on plan assets Amortization of past service cost Special termination benefits Curtailment (gain) Settlement loss NET PERIODIC PENSION COST
CHANGE IN DEFINED BENEFIT OBLIGATION

DEFINED BENEFIT OBLIGATION AT JANUARY 1, Foreign currency translations Service cost Interest cost Employee contributions Plan amendments * Curtailments Settlements ** Business combinations/Divestitures Special termination benefits Benefits paid Actuarial (gain) loss related to change in assumptions Actuarial (gain) loss related to experience effect DEFINED BENEFIT OBLIGATION AT DECEMBER 31,
* **
4,117 210 76 244 8 (17) (5) (44) 51 (314) 239 3 4,568
3,493 191 68 228 8 3 (11) (9) (16) 51 (287) 573 (175) 4,117
282 27 8 19 3 (6) 2 (20) 1 10 326
257 2 9 18 3 (5) (2) (21) 25 (4) 282
4,399 237 84 263 11 (23) (5) (44) 53 (334) 240 13 4,894
3,750 193 77 246 11 3 (16) (9) (18) 51 (308) 598 (179) 4,399
In 2010: change in pension indexation in the UK and renegociation of medical coverage in Jordan. Change in defined contributions plans of Brazilian pension plans in 2009.
F 50
AT DECEMBER 31,
PENSION BENEFITS
(million euros)
TOTAL 2010 2009
2010
CHANGE IN PLAN ASSETS

FAIR VALUE OF PLAN ASSETS AT JANUARY 1, Foreign currency translations Expected return on plan assets Actuarial gain/loss related to experience effect Employer contributions * Employee contributions Benefits paid Settlements Business combinations/Divestitures FAIR VALUE OF PLAN ASSETS AT DECEMBER 31, Actual return on plan assets 3,236 165 236 185 85 8 (208) (53) 3,654 421 2,761 185 203 233 62 8 (201) (11) (4) 3,236 436 3,236 165 236 185 85 8 (208) (53) 3,654 421 2,761 185 203 233 62 8 (201) (11) (4) 3,236 436
RECONCILIATION OF PREPAID (ACCRUED) BENEFIT COST

FUNDED STATUS OF THE PLAN Unrecognized actuarial past service cost Unrecognized asset due to asset ceiling limitations PREPAID (ACCRUED) PENSION COST AT DECEMBER 31, Of which prepaid pension cost at December 31 Of which accrued pension cost at December 31
*
(914) 6 (5) (913) 5 (918)
(881) 7 (6) (880) 12 (892)
(326) (3) (329) (329)
(282) (4) (286) (286)
(1,240) 3 (5) (1,242) 5 (1,247)
(1,163) 3 (6) (1,166) 12 (1,178)
Including: exceptional contributions to the UK pension plan of 10 millions British pound in 2009 and 12 millions British pound in 2010.
Amounts recognized in equity are presented in the table below (before tax and non-controlling interests):
PENSION BENEFITS
(million euros)
TOTAL 2010 2009
2010
STOCK OF ACTUARIAL GAINS/(LOSSES) RECOGNIZED ATDECEMBER 31, AMOUNTS RECOGNIZED IN THE PERIOD Of which Actuarial Gains/(Losses) Of which Asset ceiling impact
(757) (54) (52) (2)
(699) (154) (165) 11
(4) (10) (10) -
8 (20) (20) -
(760) (64) (62) (2)
(691) (174) (185) 11
The Group did not recognize any reimbursement right as an asset for the years presented. The defined benefit obligation disclosed in the table above arises from:
AT DECEMBER 31,
(million euros)
2010
2009
2008
2007
2006
Plans wholly unfunded Plans wholly or partially funded TOTAL DEFINED BENEFIT OBLIGATION Actuarial (Gain) Loss related to experience effect Actuarial (Gain) Loss in % of obligation at December 31 TOTAL FAIR VALUE OF PLAN ASSETS Gain (Loss) related to experience effect Gain (Loss) in % of fair value of asset at December 31
865 4,028 4,894 13 0% 3,654 185 5%
770 3,629 4,399 (179) (4%) 3,236 233 7%
699 3,051 3,750 83 2% 2,761 (839) (30%)
630 4,140 4,770 112 2% 4,148 (26) (1%)
665 4,593 5,258 45 1% 4,201 76 2%
F
F 51
F
%
The primary assumptions made to account for pensions and end of service benefits are as follows:
UNITED STATES CANADA UNITED KINGDOM EURO ZONE
2010
Discount rate at December 31 Salary increase at December 31 Expected return rate on assets at January 1 5.30 4.00 8.00 5.10 4.50 7.75 5.40 4.90 7.00 4.75 2.50 to 4.00 4.75 to 5.25
2009
Discount rate at December 31 Salary increase at December 31 Expected return rate on assets at January 1 5.80 4.00 8.00 5.80 4.50 8.00 5.70 5.00 6.90 5.00 to 5.25 2.50 to 4.75 4.25 to 4.75
The expected rates of investment return on pension assets and the discount rates used to calculate the Groups pension related obligations are established in close consultation with independent advisors. The expected long-term rate of investment return on pension plan assets is based on historical performance, current and long-term outlook and the asset mix in the pension trust funds. The impact of decreasing the expected rate of return on assets by one percentage point for 2010 for the most significant benefits plans located in the United Kingdom and North America would have been to increase the net periodic pension expense by approximately 28million euros. Discount rates reflect the rate of long-term high-grade corporate bonds. They are selected based on external indexes, usually considered as references for discounting pension obligations. The Group was specifically attentive to the relevance of those indexes. The impact of decreasing the discount rate assumption by one percentage point at December31, 2010 for the valuation of the most significant benefit plans located in the United Kingdom and North America would have been to increase the total benefit obligation by approximately 675million euros. For the fiscal year 2011, the expected return rates on assets are as follows:
United States Canada United Kingdom Euro zone 7.75 7.50 7.00 4.75
every three years, based on plan valuation made by independent actuaries. Funding of the obligation is based upon both local minimum funding requirements as well as long-term funding objectives to settle the future statutory pension obligations. Based on the triennial valuation of the plan as at June30, 2006, additional contributions of 10million British pounds were called in 2009. The triennial valuation of the plan as at June30, 2009 has led to review the schedule of additional contributions: based on the funding situation of the plan every end of June, an additional contribution of 12million British pounds can be called in 2011, as it was in 2010. Required employer contributions in 2011 are expected to be at around 13.9million British pounds (excluding a possible additional contribution). At the end of 2010, approximately 53% of the pension fund assets are invested in equity instruments, which is consistent with the long-term nature of the pension obligations, approximately 40% are invested in bond portfolios and 7% in cash instruments and real estate. In the United States and Canada, defined pension benefits are granted through various plans. Contributions are based upon required amounts to fund the various plans as well as tax-deductible minimum and maximum amounts. Group obligations granted through these funds are currently managed to limit further accruals of rights by closing some funds to new entrants and to optimize administrative and management costs and processes by merging some of them. At the end of 2010, 68% of the pension fund assets were invested in equity instruments and 32% in bond portfolios. Required employer contributions in 2011 are expected to be 130million U.S.dollars. In conformity with the Groups accounting policies (see Note2.20), the difference between actual and expected returns on fund assets is treated as actuarial gains and losses. As described in Note2.20, the adoption of IFRS led to the immediate recognition through equity of all accumulated unrecognized actuarial losses as of January1, 2004.
a)
Pension plans
The main defined benefit pension plans provided to employees by the Group are mainly in the United Kingdom and North America (The United States of America and Canada). The related pension obligations represent 55% and 34%, respectively, of the Groups total defined benefit plan obligations. In the United Kingdom, pension related obligations are principally administered through a unique pension fund, governed by an independent Board. Pension entitlements are calculated based on final carried salaries and the number of service years accomplished with the Group according to benefit formulas which are usually linear. This pension fund receives employer and employee contributions, based on rates determined, within the framework of the UK pension regulation
b)
End of service benefits
End of service benefits are generally lump sum payments based upon an individuals years of credited service and annual salary at retirement or termination of employment. The primary obligations for end of service benefits are in France, Greece and Korea. In France, the pension reform at the end of 2010 did not impact significantly the obligation.
F 52
Note24 Provisions
c)
Other post-retirement benefits
In North America, and to a lesser extent in France and Jordan, certain subsidiaries provide healthcare and insurance benefits to retired employees. These obligations are unfunded, but the federal subsidies expected in the coming years in the United States (Medicare Act) have significantly reduced Group obligations. The health care reform in the United States did not led to significant impact on the obligation of the U.S. plans at the end of 2010.
In North America, the assumed healthcare cost trend rate used in measuring the accumulated postretirement benefit obligation differs between U.S. and Canadian plans. At the end of 2010, the rate used was 8% in the U.S. plan, decreasing to 5% in 2017, and 8% in the Canadian plan, decreasing to 5% in 2018. At the end of 2009, the used rate was 8.5% in the U.S. plan, decreasing to 5% in 2017, and 8.2% in the Canadian plan, decreasing to 5% in 2018. The assumed rate for Medicare healthcare cost trends was the same for U.S. and Canadian plans.
Assumed healthcare costs trend rates have a significant effect on the amounts reported for the healthcare plans. A one-percentage-point increase or decrease in assumed healthcare cost trend rates would have the following effects:
ONE-PERCENTAGE-POINT
(million euros)
INCREASE
DECREASE
Increase (decrease) in defined benefit obligation at December 31, 2010 Increase (decrease) in the total of service and interest cost components for 2010
33 3
(29) (3)
Note24
(million euros)
Provisions
RESTRUCTURING PROVISIONS SITE RESTORATION AND ENVIRONMENTAL PROVISIONS OTHER PROVISIONS TOTAL
AT JANUARY 1, 2009 Current year addition Current year release Cancellation Other changes Translation adjustments AT DECEMBER 31, 2009 Current portion Non-current portion AT JANUARY 1, 2010 Current year addition Current year release Cancellation Other changes Translation adjustments AT DECEMBER 31, 2010 Current portion Non-current portion
56 85 (72) (3) 8 74
230 8 (7) (2) (7) 7 229
855 144 (100) (121) (18) 12 772
1,141 237 (179) (126) (17) 19 1,075 136 939
74 40 (60) (4) 1 4 55
229 33 (25) (4) 5 13 251
772 142 (396) (71) 8 18 473
1,075 215 (481) (79) 14 35 779 146 633
The restructuring provisions mainly include the employee termination benefits, the contract termination costs and other restructuring costs.
F
F 53
Note25 Debt
Other provisions include: a provision related to the risk arising from the competition litigation risk of 26million euros at December31, 2010 (357million euros at December31, 2009, including 83million euros of late-payment interests). The variation in 2010 essentially relates to the reversal of the provision relating to the Gypsum competition litigation further to the fine payment of 338million euros in July2010. The variation of the provision in 2009 notably relates to the reversal of provision (43million euros) further to the June26, 2009 decision of the Court of Dsseldorf to significantly reduce the fine. Also see Note29 Legal and arbitration proceedings; provisions related to the other litigations for an amount of 54million euros (45million euros at December31, 2009. The variation of the provision in 2009 notably relates to the reversal of the USG provision (25million U.S.dollars) further to the agreement settled in December2009 between both parties; insurance and re-insurance reserves for an amount of 107million euros at December31, 2010 (99million euros at December31,2009).
Note25
(million euros)
Debt
AT DECEMBER 31,
2010 2009
The debt split is as follows:
Long-term debt excluding put options on shares of subsidiaries Put options on shares of subsidiaries, long-term LONG-TERM DEBT Short-term debt and current portion of long-term debt excluding put options on shares of subsidiaries Put options on shares of subsidiaries, short-term SHORT-TERM DEBT AND CURRENT PORTION OF LONG-TERM DEBT Total debt excluding put options on shares of subsidiaries Total put options on shares of subsidiaries TOTAL DEBT
14,033 63 14,096 2,980 204 3,184 17,013 267 17,280
13,634 78 13,712 2,033 232 2,265 15,667 310 15,977
a)
Analysis of debt excluding put options on shares of subsidiaries by type offinancing

2010 2009
(million euros)
Debenture loans Bank loans and credit lines Commercial paper Other notes Other TOTAL DEBT EXCLUDING PUT OPTIONS ON SHARES OF SUBSIDIARIES
11,323 3,591 724 688 687 17,013
9,263 3,488 936 1,168 812 15,667
Debenture loans and other notes

The Group has a Euro Medium-Term Note (EMTN) program, which allows for a maximum issuable amount of 12,000million euros (maximum issuable amount increased from 9,000millions euros to 12,000million euros on April23, 2010). At December31, 2010, 9,498million euros had been issued under the EMTN program, including 8,885million euros of debenture loans and 613million euros of private placements included under Other notes. As of December 31, the weighted average interest rate of EMTN issues is 5.9% with maturities ranging from 2011 to 2020.
During 2010, Lafarge placed two public bond issues under its EMTN program for a total amount of 1.5billion euros: 500million euros with an 8-year maturity and a coupon of 5.0% (settlement on April13); 1billion euros with an 8-year maturity and a coupon of 5.375% (settlement on November29). On July6, 2010, the Group also placed a 550million USdollars bond on the American market, bearing a fixed interest rate of 5.5%, with a 5-year maturity (settlement on July9).
F 54
Note25 Debt
At December31, 2010, debenture loans consist of bonds issued mainly in euros, U.S. dollars and British pounds with a weighted average interest rate of 6.1% (6.3% at December31, 2009). Their maturities range from 2011 to 2036, with an average maturity of 5years and 10months (i.e. being 2016). Other notes mainly consist of notes denominated in euros and in U.S. dollars with a weighted average interest rate of 6.3% at December31, 2010 (4.0% at December31, 2009).
euros. The average interest rate on these drawdowns is approximately 1.5% at December31, 2010.
Commercial paper
The Groups euro denominated commercial paper program at December 31, 2010 allows for a maximum issuable amount of 3,000million euros. Commercial paper can be issued in euros, U.S.dollars, Canadian dollars, Swiss francs or British pounds. At December31, 2010, commercial paper issued under this program totaled 724million euros. This commercial paper bears an average interest rate close to the European inter-bank offer rate (Euribor) for maturities generally ranging from 1 to 6months. As of December31, 2010, the weighted average interest rate of the euro denominated commercial paper is 1.1% (0.9% at December31, 2009).
Bank loans
At December31, 2010, bank loans total 2,810million euros and are primarily comprised of loans to Group subsidiaries in their local currencies. The weighted average interest rate on these bank loans is approximately 5.8% at December31, 2010 (5.7% at December31, 2009).
b)
Committed long and medium-term credit lines

Drawdowns on long and medium-term committed credit lines amount to 13million euros (excluding the acquisition credit facility) out of a maximum amount available of 3,852million euros equivalent at December31, 2010 (including 3,788million euros at Lafarge S.A. level which are fully undrawn). The average interest rate of these drawdowns, mainly denominated in U.S.dollars, is approximately 5.3% at December31, 2010. The credit lines are used primarily as a back-up for the short-term financings of the Group and contribute to the Groups liquidity. The average non-utilization fee of these credit lines stands at 46basis points at December31, 2010 (23basis points at December31, 2009). The outstanding amount of the three remaining tranches of the Orascom Cement acquisition credit facility put in place on December9, 2007 did not change during2010 and therefore still stands at 768million
Analysis of debt excluding put options on shares of subsidiaries by maturity
At December31, 2010, 724million euros of short-term debt have been classified as long-term based upon the Groups ability to refinance these obligations on a medium and long-term basis through its committed credit facilities. This short-term debt that the Group can refinance on a medium and long-term basis through its committed credit facilities is classified in the statement of financial position under the section Long-term debt. The net variation of this short-term debt is shown in the cash flow statement in proceeds from issuance of long-term debt when it is positive, and in repayment of long-term debt when it is negative. At December31, 2010, the net variation of this debt amounted to a decrease of 212million euros (compared to a decrease of 1,088million euros at December31, 2009).
AT DECEMBER 31,
(million euros)
2010
2011 H1 2011 H2 2012 2013 2014 2015 Beyond 5 years TOTAL DEBT EXCLUDING PUT OPTIONS ON SHARE OF SUBSIDIARIES
1,878 1,102 1,831 1,579 2,090 1,807 6,726 17,013
This repayment schedule results from the schedules of groups loan contracts, without any discount rate nor netting.
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c)
Euro (EUR) Other TOTAL
Note25 Debt
Analysis of debt excluding put options on shares of subsidiaries bycurrency

2010 BEFORE SWAPS AFTER SWAPS 2009 BEFORE SWAPS AFTER SWAPS
AT DECEMBER 31,
(million euros)
10,836 3,068 1,543 434 100 52 980 17,013
10,467 3,999 830 434 79 189 1,015 17,013
10,172 2,607 1,435 315 108 77 953 15,667
8,102 4,647 1,189 315 287 195 932 15,667
U.S. dollar (USD) British pound (GBP) Chinese yuan (CNY) Canadian dollar (CAD) Indian rupee (INR)
d)
Analysis of debt excluding put options on shares of subsidiaries by category and type of interest rate
2010 BEFORE SWAPS AFTER SWAPS 2009 BEFORE SWAPS AFTER SWAPS
AT DECEMBER 31,
(million euros)
Floating rate Fixed rate below 6% Fixed rate between 6% and 10% Fixed rate 10% and over TOTAL
4,455 6,544 5,831 183 17,013
5,723 5,150 5,957 183 17,013
5,145 4,626 5,703 193 15,667
5,049 4,622 5,803 193 15,667
The average spot interest rate of the debt after swaps, as at December31, 2010, is 5.5% (5.3% as at December31, 2009). The average yearly interest rate of the debt after swaps in 2010 is 5.3% (5.1% in 2009).
The other loan contracts do not require any compliance with certain financial covenants.
Change of control clauses

Change of control clauses are included in the acquisition credit facility dedicated to the acquisition of Orascom Cement and in several of the Groups committed credit facilities contracts, which amount to 4,555million euros, i.e. 100% of the total outstanding credit facilities contracted at parent company level. As a consequence, in the event of a change in control, these facilities will be automatically cancelled if undrawn or, if drawn upon, will require immediate repayment. Change of control clauses are also included in some debenture loans and private placements issued under the EMTN program, which amount to 7,031million euros. In case of a change in control, the holders of these notes would be entitled, under certain conditions, to request their repayment.
e)
Particular clauses infinancing contracts
Financial covenants
At December31, 2010, the financing contracts of Lafarge S.A. do not contain any financial covenants. Loan contracts requiring compliance with certain financial covenants existed in some of our subsidiaries. These subsidiaries are located in the following countries: Algeria, Bangladesh, China, Ecuador, India, Indonesia, Jordan, Nigeria, Qatar, Saudi Arabia, Syria, Thailand, United Arab Emirates, United Kingdom and Vietnam. Debt with such financial covenants represents approximately 8% of the total Group debt excluding put options on shares of subsidiaries. For most of them, they have a low probability of being triggered. Our agreements and those of our subsidiaries also include cross-acceleration clauses. If we, or under certain conditions, our material subsidiaries, fail to comply with our or their covenants, then our lenders could declare default and accelerate a significant part of our indebtedness. Given the split of these contracts on various subsidiaries and the quality of the Group liquidity protection through its access to committed credit lines, the existence of such clauses cannot materially affect the Groups financial situation.
f)
Put options on shares ofsubsidiaries
As part of the acquisition process of certain entities, the Group has granted third party shareholders the option to require the Group to purchase their shares at predetermined conditions. These shareholders are either international institutions, such as the European Bank for Reconstruction and Development, or private investors, which are essentially financial or industrial investors or former shareholders of the acquired entities.
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Note26 Financial instruments
Assuming that all of these options were exercised, the purchase price to be paid by the Group, including debt and cash acquired, would amount to 283million euros at December31, 2010 (345million euros at December31, 2009). Out of the outstanding put option at year-end 2010, 220million euros can be exercised in 2011. The remaining 63million euros can be exercised for part starting 2014 and for part starting 2015. As explained in Note2.19, put options granted to non controlling interests of subsidiaries are classified as debt. Out of the total options granted by the Group, the options granted to non controlling interests amounted to 267million euros and 310million euros at December31,
2010 and December31, 2009, respectively, the remaining options were granted on shares of joint ventures. This specific debt is recorded by reclassifying the underlying non controlling interests and recording goodwill in an amount equal to the difference between the carrying value of non controlling interests and the value of the debt (128million euros and 163million euros at December31, 2010, and December31, 2009, respectively). Put options on shares of joint ventures are presented in Note28 (c) as Other commitments.
Note26
a)
Financial instruments
Certain derivative instruments are designated as hedging instruments in a cash flow or fair value hedge relationship in accordance with IAS39 criteria. Other derivatives, which are not documented under IAS39 as it would translate into an unfavorable cost-benefit ratio, are not designated as hedges for accounting purposes. Changes in fair value of these derivatives are recorded directly in statement of income, as required by IAS39.
Designation of derivative instruments for hedge accounting
The Group uses derivative financial instruments to manage market risk exposures. Such instruments are entered into by the Group solely to hedge such exposures on anticipated transactions or firm commitments. The Group does not enter into derivative contracts for speculative purposes.
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b)
ASSETS
Fair values
FINANCIAL INSTRUMENTS IN THE CONSOLIDATED STATEMENT OF FINANCIAL POSITION
The following details the cost and fair values of financial instruments:
AT DECEMBER 31,
(million euros)
2010 IAS 39 CATEGORY FAIR VALUE CATEGORY CARRYING AMOUNT NET FAIR VALUE
2009 CARRYING AMOUNT NET FAIR VALUE
Cash and cash equivalents Trade receivables Other receivables Other financial assets Held-to-maturity investments Available for sale investments Loans and long-term receivables Prepaid pension assets Restricted cash Derivative instruments - assets
Financial assets at fair value recognized instatement of income Loans and Receivables at amortized cost Loans and Receivables at amortized cost Held-to-maturity investments at amortized cost Available for sale investments at fair value recognized in equity Loans and Receivables at amortized cost (excluding the IAS 39 scope) Financial assets at fair value recognized instatement of income Refer below See Note15
3,294 1,774 971 863 319 490 5 49 134
3,294 1,774 971 863 319 490 5 49 134
2,220 1,686 1,008 1,591 8 1,023 498 12 50 67
2,220 1,686 1,008 1,591 8 1,023 498 12 50 67
LIABILITIES
Short-term bank borrowings * Trade payables Other payables Debenture loans Other long-term financial debt (includingcurrent portion) Put options on shares of subsidiaries Derivative instruments - liabilities Financial liabilities at amortized cost Financial liabilities at amortized cost Financial liabilities at amortized cost Financial liabilities at amortized cost Financial liabilities at amortized cost Lev 2 Refer below 4,654 267 141 4,706 267 141 5,814 310 105 5,892 310 105 Lev 2 1,036 1,996 1,642 11,323 1,036 1,996 1,642 11,722 590 1,652 1,630 9,263 590 1,652 1,630 9,704
DERIVATIVE INSTRUMENTS
Interest rate derivative instruments Designated as hedging instruments incash flow hedge relationship Designated as hedging instruments infair value hedge relationship Not designated as hedges for accounting purposes Foreign exchange derivative instruments Designated as hedging instruments incash flow hedge relationship Designated as hedging instruments infair value hedge relationship Not designated as hedges for accounting purposes Commodities derivative instruments Designated as hedging instruments incash flow hedge relationship Other derivative instruments Equity swaps not designated as hedges foraccounting purposes Embedded derivatives not designated ashedges for accounting purposes Lev 2 Lev 2 Lev 2 Lev 2 Lev 2 Lev 2 Lev 2 (5) 24 9 (38) (3) 1 (8) 4 1 1 (5) 24 9 (38) (3) 1 (8) 4 1 1 1 5 5 (9) (33) (4) (3) (26) (6) (6) 1 5 5 (9) (33) (4) (3) (26) (6) (6) -
* Of which 209million euros of bank overdraft as at December31, 2010 (377million euros of bank overdrafts as at December31, 2009) and 533million euros of securitization. Level 1: quoted on financial markets (Note15). Level 2: based on market observable data (Note15). Level 3: based on internal assumptions (Note15).
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The fair value of financial instruments has been estimated on the basis of available market quotations or the use of various valuation techniques, such as present value of future cash flows. However, the methods and assumptions followed to disclose fair value are inherently judgmental. Thus, estimated fair value does not necessarily reflect amounts that would be received or paid in case of immediate settlement of these instruments. The use of different estimations, methodologies and assumptions could have a material effect on the estimated fair value amounts. The methodologies used are as follows: cash and cash equivalents, trade receivables, trade payables, short-term bank borrowings: due to the short-term nature of these balances, the recorded amounts approximate fair value; other financial assets: Marketable securities quoted in an active market (mainly Cimpor as at December31, 2009, which was sold in 2010 See Note3) are carried at market value with unrealized gains and loss recorded in a separate component of equity. The fair value of securities that are not quoted in an active market and for which there is no observable market data on which the Group can rely to measure their fair value (233million euros as at December31, 2010 and 196million euros as at December 31, 2009) is determined according to the most appropriate financial criteria in each case (discounted present value of cash flows, estimated selling price). If such fair value cannot be reliably measured, securities are carried at acquisition cost; debenture loans: the fair values of the debenture loans were estimated with internal models that rely on market observable data, at the quoted value for borrowings listed on a sufficiently liquid market; other long-term financial debt: the fair values of long-term debt were determined by estimating future cash flows on a borrowingby-borrowing basis, and discounting these future cash flows using a rate which takes into account the Groups spread for credit risk at year end for similar types of debt arrangements;
derivative instruments: the fair values of foreign exchange, interest rate, commodities and equity derivatives was calculated using market prices that the Group would pay or receive to settle the related agreements.
c)
Foreign currency risk
In the course of its operations, the Groups policy is to hedge all material operational foreign currency exposures arising from its transactions using derivative instruments as soon as a firm or highly probable commercial and/or financial commitment is entered into or known. These derivative instruments are limited to forward contracts, foreign currency swaps and options, with a term generally less than one year. This policy is implemented in all of the Groups subsidiaries, which are required to ensure its monitoring. When allowed by local regulations and when necessary, Group subsidiaries have to hedge their exposures with the corporate Treasury department. A follow up of risks related to foreign exchange financial instruments is regularly done through internal reporting provided to the management. The Groups operating policies tend to reduce potential financial foreign currency exposures by requiring all liabilities and assets of controlled companies to be denominated in the same currency as the cash flows generated from operating activities, the functional currency. The Group may amend this general rule under special circumstances in order to take into account specific economic conditions in a specific country such as, inflation rates, interest rates, and currency related issues such as convertibility and liquidity. When needed, currency swaps are used to convert debts most often raised in euros, into foreign currencies. See Section2.1.2 (Financial and market risks) for more information on our exposure to foreign currency risk.
Foreign currency hedging activity

At December31, 2010, most forward contracts have a maturity date of less than one year. The nominal amount of foreign currency hedging instruments outstanding at year-end is as follows:
AT DECEMBER 31,
(million euros)
2010
2009
FORWARD CONTRACT PURCHASES AND CURRENCY SWAPS

U.S. dollar (USD) British pound (GBP) Other currencies TOTAL 600 888 307 1,795 300 402 325 1,027
FORWARD CONTRACT SALES AND CURRENCY SWAPS

U.S. dollar (USD) British pound (GBP) Other currencies TOTAL 1,526 62 334 1,922 2,414 122 268 2,804
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ASSETS
Details of the statement of financial position value of instruments hedging foreign currency risk
At December31, 2010 and 2009, most of the Groups foreign currency derivatives were not designated as hedges for accounting purposes (see Note26 (a) (Designation of derivative instruments for hedge accounting)). Changes in fair value were recorded directly in the consolidated statement of income.
AT DECEMBER 31,
(million euros)
2010 DERIVATIVES FAIRVALUE UNDERLYING REEVALUATION NET IMPACT DERIVATIVES FAIRVALUE
2009 UNDERLYING REEVALUATION NET IMPACT
42 6 39 (3)
4 (4)
42 6 39 4 (7)
18 2 49 (33)
(24) 24
18 2 49 (24) (9)
Non-current derivative instruments Current derivatives instruments Net reevaluation of financial loans and borrowings denominated in foreign currencies
LIABILITIES
Non-current derivative instruments Current derivative instruments Net reevaluation of financial loans and borrowings denominated in foreign currencies NET IMPACT ON EQUITY
d)
Interest rate risk
The Group is primarily exposed to fluctuations in interest rates based upon the following: price risk with respect to fixed-rate financial assets and liabilities. Interest rate fluctuations impact the market value of fixed-rate assets and liabilities; cash flow risk for floating rate assets and liabilities. Interest rate fluctuations have a direct effect on the financial income or expense of the Group.
In accordance with established policies, the Group seeks to mitigate these risks using, to a certain extent, interest rate swaps and options. A follow up of risks related to interest rate financial instruments is regularly done through internal reporting provided to the management. Interest rate risk derivatives held at December31, 2010 were mainly designated as hedging instruments in: cash flow hedge relationship for derivatives used to hedge cash flow risk; fair value hedge relationship for derivatives used to hedge price risk. See Section2.1.2 (Financial and market risks) for more information on our policy and procedure to interest rate risk.
Interest rate hedging activity

AT DECEMBER 31, 2010
(million euros)
LESS THAN ONE YEAR

FIXED RATE FLOATING RATE
1 TO 5 YEARS
MORE THAN 5 YEARS

TOTAL
Debt * Cash and cash equivalents NET POSITION BEFORE HEDGING Hedging instruments NET POSITION AFTER HEDGING
*
1,294 1,294 202 1,496
1,686 (3,294) (1,608) (202) (1,810)
4,648 4,648 (1,471) 3,177
2,659 2,659 1,471 4,130
6,616 6,616 6,616
110 110 110
12,558 12,558 (1,269) 11,289
4,455 (3,294) 1,161 1,269 2,430
Debt excluding put options on shares of subsidiaries.
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The notional value of interest rate derivative instruments at year-end is as follows:

MATURITIES OF NOTIONAL CONTRACT VALUES AT DECEMBER31, 2010 *
(million euros)
AVERAGE RATE
2011
2012
2013
2014
2015
> 5 YEARS
TOTAL
Pay fixed (designated as cash flow hedge) Euro Other currencies Pay floating (designated as fair value hedge) Euro Other currencies Other interest rate derivatives Euro Other currencies TOTAL
*
4.5% 5.4%
120
70 31
58 71
42 108
170 337
1.2% 1.5% 2.0%
218 338
1,200 20 1,321
300 75 331 835
232 382
1,500 307 569 2,883
The notional amounts of derivatives represent the face value of financial instruments negotiated with counterparties. Notional amounts in foreign currency are expressed in euros at the year-end exchange rate.
MATURITIES OF NOTIONAL CONTRACT VALUES AT DECEMBER 31, 2009 *

(million euros)
AVERAGE RATE
2010
2011
2012
2013
2014
> 5 YEARS
TOTAL
Pay fixed (designated as cash flow hedge) Euro Other currencies Pay floating (designated as fair value hedge) Euro Other currencies Other interest rate derivatives Euro Other currencies TOTAL
*
4.5% 5.4%
108
70 26
58 55
42 102
170 297
3.3% 2.4% 1.2%
225 5 181 417
218 326
19 115
70 307 490
144
295 5 725 1,492
The notional amounts of derivatives represent the face value of financial instruments negotiated with counterparties. Notional amounts in foreign currency are expressed in euros at the year-end exchange rate.
Details of the statement of financial position value of instruments hedging interest rate risk
AT DECEMBER 31,
(million euros)
2010 IMPACT ON DERIVATIVES IMPACT ON UNDERLYING NET IMPACT IMPACT ON DERIVATIVES
2009 IMPACT ON UNDERLYING NET IMPACT
ASSETS
Non-current derivative instruments Current derivative instruments 78 5 78 5 37 2 37 2
LIABILITIES
Long-term debt Non-current derivative instruments Current derivative instruments NET IMPACT ON EQUITY 51 37 (5) 9 (9) 9 51 37 (14) 32 6 1 5 (5) 5 32 6 (4)
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e)
Commodity risk
The Group is subject to commodity risk with respect to price changes mainly in the electricity, natural gas, petcoke, coal, oil refined products and sea freight markets.
The Group uses, from time to time, financial instruments to manage its exposure to these risks. At December31,2010, and 2009, these derivative instruments were mostly limited to swaps and options. A follow up of risks related to commodity financial instruments is regularly done through internal reporting provided to the management. See Section2.1.2 (Financial and market risks) for more information on our commodity risk hedging policy and procedure.
Commodities hedging activity

The notional value of commodity derivative instruments at year-end is as follows:
MATURITIES OF NOTIONAL CONTRACT RESIDUAL VALUES AT DECEMBER31, 2010 *
(million euros)
2011
2012
2013
2014
2015
> 5 YEARS
TOTAL
Natural Gas (NYMEX) Heating Oil (NYMEX) Sea freight (PANAMAX) Others TOTAL
*
10 19 19 29 77
10 19 19 29 77
The notional residual amounts of derivatives represent the residual value at December 31 of financial instruments negotiated with counterparties. Notional amounts in foreign currency are expressed in euros at the year-end exchange rate.
MATURITIES OF NOTIONAL CONTRACT RESIDUAL VALUES AT DECEMBER 31, 2009 *

(million euros)
2010
2011
2012
2013
2014
> 5 YEARS
TOTAL
Natural Gas (NYMEX) Heating Oil (NYMEX) Sea freight (PANAMAX) Others TOTAL
*
12 14 18 26 70
3 18 21
15 14 36 26 91
The notional residual amounts of derivatives represent the residual value at December 31 of financial instruments negotiated with counterparties. Notional amounts in foreign currency are expressed in euros at the year-end exchange rate.
Details of the statement of financial position value of instruments hedging commodities risk
Commodities derivative instruments held at December31, 2010, and 2009 were all designated as hedging instruments in cash flow hedge relationship. Statement of financial position values of commodity derivative instruments are as follows:
AT DECEMBER 31,
(million euros)
2010
2009
ASSETS
Non-current derivative instruments Current derivative instruments 9 6 4
LIABILITIES
Non-current derivative instruments Current derivative instruments NET IMPACT ON EQUITY 8 1 11 5 (6)
f)
Counterparty risk for financial operations
criteria (rating assigned by rating agencies, assets, equity base) as well as transaction maturities. The Groups exposure to credit risk is limited and the Group believes that there is no material concentration of risk with any single counterparty. The Group does not anticipate any third party default that might have a significant impact on the Groups financial statements.
The Group is exposed to credit risk in the event of a counterpartys default. The Group implemented policies to limit its exposure to counterparty risk by rigorously selecting the counterparties with which it executes financial agreements. These policies take into account several
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g)
Liquidity risk
The Group implemented policies to limit its exposure to liquidity risk. As a consequence of this policy, a significant portion of our debt has a long-term maturity. The Group also maintains committed credit lines with various banks which are primarily used as a back-up for the debt maturing within one year as well as for the short-term financings of the Group and which contribute to the Groups liquidity. See Section4.4 (Liquidity and capital resources) and Note25 for more information on our exposure to liquidity risk.
In accordance with common market practices, in managing its financial structure, the Group strives to maintain the cash flow from operations to net debt ratio within a predefined range. Based on the 2010 financial statements, the cash flow from operations to net debt ratio was 13.0%, compared to 15.8% at year-end 2009. In section 4.1 Overview of the present Annual Report, the sub-heading Reconciliation of our non-GAAP financial measures presents the Groups definition of the indicators net debt, equity and cash flow from operations. In section4.4 Liquidity and capital resources of the present Annual Report, the sub-heading Net debt and net debt ratios presents the net-debt-to-equity ratio and the cash flow from operations to net debt ratio for each of the periods presented.
h)
Capital risk management
The Group manages equity from a long-term perspective taking the necessary precautions to ensure its sustainability, while maintaining an optimum financial structure in terms of the cost of capital, the Return On Equity for shareholders and security for all counterparties with which it has ties. Within this framework, the Group reserves the option, with the approval of shareholders, to issue new shares or to reduce its capital. The Group also has the power to adapt its dividend distribution policy. The Group wishes to adjust its dividend distribution to its financial performances, notably to earnings per share.
i)
Credit risk
Credit risk is defined as the risk to the counterparty to a contract failing to perform or pay the amounts due. The Group is exposed to credit risks in its operations. The Groups maximum exposure to credit risk as of December31, 2010 on its short-term receivables is presented in the following table:
AT DECEMBER 31,
(million euros)
2010
Clients (see Note17) Other receivables (see Note18) TOTAL
1,774 971 2,745
The Group considers that the credit risk on overdue and not depreciated receivables is not material. In fact, the Group sells its products to thousands of customers, and customers usually order quantities to meet their short-term needs. Outstanding amounts per customer are, on an individual basis, not significant. The general terms of payment are different across countries however, the Group average days of payment is around 45 to 60days.
The Group has implemented procedures for managing and depreciating receivables, which are set by each Division. A monthly review of the operating working capital is performed at both Division and Group level, aiming to verify that the monitoring of trade receivables, through the days receivable ratio, is compliant with the Groups commercial policies. In addition, the Group has loans and long-term-receivables for a total amount of 490million euros and 506million euros as at December31, 2010 and 2009, respectively (see Note15).
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Other taxes
Note27 Other payables
Note27
(million euros)
Other payables
AT DECEMBER 31,
2010 2009
Components of other payables are as follows:
Accrued payroll expenses Accrued interest Payables to suppliers of fixed assets Other accrued liabilities OTHER PAYABLES
402 333 200 258 449 1,642
382 286 167 300 495 1,630
Other accrued liabilities include payables to suppliers for non-operating services and goods, and payables to associates. It included as at December31, 2009 the remaining amount to be paid further to the USG litigation settlement for an amount of 25million U.S.dollars, which was paid in 2010.
Note28
a)
Commitments and contingencies
The procedures implemented by the Group allow all the major commitments to be collated and prevent any significant omissions.
Pledges and other guarantees

AT DECEMBER 31,
The following details securities and assets pledged and other guarantees provided by the Group:
(million euros)
2010
2009
Securities pledged Assets pledged Guarantees given TOTAL
263 775 147 1,185
315 795 136 1,246
The pledges of assets provided by the Group at December31,2010 are as follows:

(million euros)
AMOUNT OF ASSETS PLEDGED
TOTAL STATEMENT OF FINANCIAL POSITION
% PLEDGED
TANGIBLE ASSETS Less than one year Between one and five years More than 5 years
775 84 586 105
17,912
4%
In addition, as part of its divestment of assets transactions, the Group has granted indemnification commitments, for which the exposure is considered remote, for a total maximum amount still in force at December31, 2010 of 395million euros, a part of which is counterguaranteed by the minority shareholders in the 2009 Venezuelan transaction. As part of its acquisition of assets transactions, the Group received indemnification commitments for a maximum amount of: 2,240million euros relating to the acquisition of Orascom Cement in 2008;
116million euros relating to the acquisition L&T Concrete in India in 2008; 140million euros relating to the acquisition of cement operations in Brazil from Votorantim in 2010. The Group in addition received specific warranties to cover specific assets, properties and agreements related to the transaction. Besides, the Group received an indemnification commitment unlimited in amount further to the acquisition in 2008 of 50% of Grupo GLA from the former partners of Orascom Cement.
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Note29 Legal and arbitration proceedings
b)
Contractual obligations
PAYMENTS DUE PER PERIOD AT DECEMBER 31,
2010 2009
The following details the Groups significant contractual obligations:

LESS THAN 1YEAR MORE THAN 5YEARS
(million euros)
1 TO 5 YEARS
Debt (1) Of which finance lease obligations Scheduled interest payments Operating leases Capital expenditures and other purchase obligations Other commitments TOTAL
(2)
2,980 11 886 11 206 515 309 4,907
7,307 29 2,523 5 480 533 133 10,981
6,726 12 1,572 288 158 22 8,766
17,013 52 4,981 16 974 1,206 464 24,654
15,667 56 4,879 59 940 1,447 373 23,365
Net scheduled obligation on interest rate swaps (3)
(1) Debt excluding put options on shares of subsidiaries (see Note25). (2) Scheduled interest payments associated with variable rate are computed on the basis of the rates in effect at December 31. Scheduled interest payments include interest payments on foreign exchange derivative instruments. (3) Scheduled interest payments of the variable leg of the swaps are computed based on the rates in effect at December 31.
The Group leases land, quarries, building and equipment. Total rental expense under operating leases was 202million euros and 201million euros for the years ended December31, 2010, and 2009, respectively for continuing operations. Future expected funding requirements or benefit payments related to our pension and post retirement benefit plans are not included in
the above table because future long-term cash flows in this area are uncertain. Refer to the amount reported under the current portion of pension and other employee benefits liabilities in the statements of financial position or in Note23 for further information on these items.
c)
Other commitments
AT DECEMBER 31,
The following details the other commitments of the Group:

(million euros)
2010
2009
Commitments received Unused confirmed credit lines and acquisition lines Commitments made Put options to purchase shares in joint-ventures 16 35 3,839 3,457
In addition, the European Bank for Reconstruction and Development (EBRD) increased late 2009 by 15% its minority stake in our cement operations in Russia. Starting from December2015, the Group will have the right to buy back this additional minority stake at fair market
value. Assuming that this call option is not exercised, the Group could be induced to sell all or part of its own stake to a third party or to the EBRD.
Note29
Legal and arbitration proceedings

Europe Gypsum: On July8, 2008, the Court of First Instance in Luxembourg confirmed the decision of the European Commission imposing a fine on Lafarge in the amount of 249.6million euros for having colluded on market shares and prices with competitors between 1992 and 1998 for wallboard, essentially in the United Kingdom and Germany. On June17, 2010, the European Union Court of Justice rejected Lafarges appeal against this decision. Therefore, the payment of the fine and accrued interest (additional provisions were recorded in each of our annual financial statements since 2003 in relation to the accrued interests) has been made on July23, 2010, for a total amount of 338million euros. This amount was fully reserved.
In the ordinary course of its business, Lafarge is involved in a certain number of judicial and arbitral proceedings. Lafarge is also subject to certain claims and lawsuits which fall outside the scope of the ordinary course of its business, the most significant of which are summarized below. Provisions for the charges that could result from these procedures are not recognized until they are probable and their amount can be reasonably estimated. The amount of provisions made is based on Lafarges assessment of the level of risk on a case-by-case basis and depends on its assessment of the basis for the claims, the stage of the proceedings and the arguments in its defense, it being specified that the occurrence of events during proceedings may lead to a reappraisal of the risk at any moment.
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Note29 Legal and arbitration proceedings
Germany Cement: following investigations on the German cement market, the German competition authority, the Bundeskartellamt, announced on April14, 2003, that it was imposing fines on the major German cement companies, including one in the amount of 86million euros on Lafarge Zement, our German cement subsidiary for its alleged anti-competitive practices in Germany. Considering that the amount of the fine was disproportionate in light of the actual facts, Lafarge Zement has brought the case before the Higher Regional Court, the Oberlandesgericht, in Dsseldorf. Moreover, on August15, 2007, Lafarge Zement partially withdrew its appeal. Consequently Lafarge Zement paid an amount of 16million euros on November2, 2007 and reduced the related provision of the same amount. Finally, the Courts decision related to the remaining part of the appeal has been given on June26, 2009, exempting Lafarge Zement partly and reducing the remaining fine very significantly to 24million euros. Lafarge Zement has appealed to the Supreme Court on the basis of legal grounds. The decision of the Supreme Court should be given in the year 2011. Assessment on the merits of a potential civil action brought by third parties to obtain damages may depend on the outcome of the above mentioned procedure. There has been no development on this potential civil action at this stage further to the decision of the Dsseldorf Appeal Court. The global provision in connection with this case amounts to 24million euros as at December31, 2010. Competition: also on competition matters, there are 2 industry-wide inquiries which do not constitute legal proceedings and for which no provision has been recorded: In November2008, the major European cement players, including Lafarge, were investigated by the European Commission for alleged anti-competitive practices. By a letter dated 6December 2010, the Commission notified the parties of the opening of an official investigation, while reminding them that at that stage, it did not have conclusive evidence. The alleged offences, which will be the subject of the detailed investigation, involve restrictions of commercial trade in or upon entry to the EEA, market sharing, and coordination of prices on the cement and related markets. In the case of Lafarge, six (6) countries are quoted: France, the United Kingdom, Germany, Spain, the Czech Republic and Austria. The Commissions investigation is ongoing. The date of its closure is unknown. No conclusion can be drawn at this stage. In South Africa, an inquiry on the cement industry was opened by the competition authorities in 2009. In the absence of new procedural step at that date, the level of risk cannot be appreciated at this stage. Should the Competition Commission of South Africa decide to refer the matter to the Competition Court, this case will be reassessed. United States of America Hurricane Katrina: in late 2005, several class action and individual lawsuits were filed in the United States District Court for the Eastern District of Louisiana. In their Complaints, plaintiffs allege that our subsidiary, Lafarge North AmericaInc., and/or several other defendants including the federal government, are liable for death, bodily and personal injury and property and environmental damage to people and property in and around New Orleans, Louisiana. Some of the referenced complaints claim that these damages resulted from a barge under contract to Lafarge North AmericaInc. that allegedly
breached the Inner Harbor Navigational Canal levee in New Orleans during or after Hurricane Katrina. On May21, 2009, the Court denied plaintiffs Motion for Class Certification. At this stage, only individual cases may be tried. The Judge trial involving the first few plaintiffs commenced in late June, 2010 and briefing to the Court closed in October. In a ruling dated January20, 2011, the Judge ruled in favor of our subsidiary, Lafarge North America Inc. Additionally, in connection with this litigation, one of Lafarge North AmericaInc.s insurers, the American Steamship Owners Mutual P&I Association, filed a suit against it in the United States District Court for the Southern District of New York seeking a judgment that these claims are not covered under its insurance policy. Lafarge North AmericaInc. lodged an appeal against the Courts decision, which had found that this claim was not covered under the insurance policy. Finally, some of Lafarge North AmericaInc.s other insurers (the Other Insurers) filed two suits in the same court seeking a judgment that they are not required to indemnify our subsidiary for these claims and the expenses incurred in connection therewith. The lower court granted judgment on these claims largely in favor of our subsidiary. All three insurance cases were then consolidated before the United States Court of Appeals for the Second Circuit and, on March15, 2010 the Court upheld the decision in favor of the American Steamship Owners Mutual P & I Association and also found that while the Other Insurers policies of insurance applied to the incident, the Other Insurers did not have to reimburse Lafarge North America Inc for its legal fees and other litigations costs incurred prior to the Courts ruling (in the event our subsidiary is found to be liable by a court of final review, the policy limits available from the Other Insurers insurance is approximately 50million USdollars). Lafarge North America Inc. did not lodge a request to the Supreme Court against the decision of the Court of Appeals. Lafarge North AmericaInc. vigorously defends itself in these actions. Lafarge North AmericaInc. believes that the claims against it are without merit and that these matters will not have a materially adverse effect on its financial condition. India/Bangladesh: the Group holds, jointly with Cementos Molins, 59% of Lafarge Surma Cement which is operating a cement plant in Bangladesh. This cement plant is supplied by its Indian affiliate with limestone extracted from a quarry in the Meghalaya region of India. These operations in Bangladesh are consolidated under the proportionate method and contribute to the Groups total assets for an amount of 95million euros as at December31, 2010. At a hearing on February5, 2010, the Supreme Court of India decided to suspend the mining activities of the quarry, due to the fact that its location is today regarded as a forest area, making it necessary to obtain a new mining permit. The procedure for obtaining the new permit continues before the Indian Supreme Court. Having regard to the progress of the hearings before the Supreme Court, it is difficult to determine the date of the decision. Finally, certain Group subsidiaries have litigation and claims pending in the normal course of business. The resolution of these matters should not have any significant effect on the Companys and/or the Groups financial position, results of operations and cash flows. To the Companys knowledge, there are no other governmental, legal or arbitration proceedings which may have or have had in the recent past significant effects on the Company and/or the Groups financial position or profitability.
F 66
Note31 Employee costs and Directors andExecutive Officers compensation for services
Note30
Related parties
Within the scope of the purchase of Orascom Building Materials Holding SAE (OBMH) in 2008, the holding company of the cement activities of Orascom construction industrie SAE (OCI), Lafarge S.A. has received indemnification guarantee (see Note28) and entered into a cooperation agreement with OCI. Mr. Nassef Sawiris is Chief Executive Officer of OCI and Director of both OCI and Lafarge S.A., and Mr. Jrme Guiraud is Director of both OCI and Lafarge S.A. The cooperation agreement dated December9, 2007 aims to allow OCI to participate in tenders in respect of the construction of new and cement plants in countries where OCI has the capability to meet certain of Lafarges construction needs. At this stage, the construction agreements entered into with the OCI Group are considered to be arms length business transactions, intervening within the framework of consortia, OCI being one of the members. There is no conflict of interest between Mr. Sawiris and Lafarge on this subject. Under these agreements, the outstanding balances with OCI Group are not significant as at December31, 2010. From time to time Directors of the Group, or their related entities, may purchase goods from the Group. These purchases are on the same terms and conditions as those entered into by other Group employees or customers.
Lafarge has not entered into any transaction with any related parties as defined under paragraph9 of IAS24, except for information described hereafter and in paragraph b) disclosed in Note31. Transactions with associates and with joint ventures were not material for the years presented except for a loan granted to our associate in Nigeria (Unicem) amounting to 74million euros as at December31, 2010 (180million euros as at December31, 2009). Transactions with other parties or companies related to the Group are as follows: Mr. Pbereau is Director of Lafarge S.A. and Chairman of BNP Paribas, and Mrs. Ploix is Director of both Lafarge S.A. and BNP Paribas. Lafarge S.A. has and will continue to have an arms length business relationship with BNP Paribas, including for the conclusion of mandates in the context of acquisitions and/or divestments, financings, credit facilities and agreements relating to securities offerings. In compliance with French law on regulated transactions (conventions rglementes), and when applicable, these agreements are approved by the Board of Directors of Lafarge S.A. and communicated to the auditors and shareholders.
Note31
a)
Employee costs and Directors andExecutive Officers compensation for services

AT DECEMBER 31,
2010 2009
Employees and employee costs
Management staff Non-management staff TOTAL NUMBER OF EMPLOYEES * Of which: companies accounted for using the proportionate method
*
12,859 54,177 67,036 9,123
12,882 55,883 68,765 9,949
The headcounts at 100% of our fully consolidated and proportionately consolidated subsidiaries amounted to 75,677 as of December 31, 2010; 77,994 as of December 31, 2009.

(million euros)
2010
2009
TOTAL EMPLOYEES COSTS Of which: companies accounted for using the proportionate method
2,542 127
2,303 95
F
F 67
F
b)
TOTAL
Note32 Supplemental cash flow disclosures
Directors and executive officers compensation for services
The table below presents the compensation allocated by Lafarge S.A. and its subsidiaries to executives who are, at closing date or have been during the period, members of the Board of Directors or of the Group Executive Committee. The Group Executive Committee is composed as defined at section5.2 - Executive Officers of the Annual Report:
(million euros)
2010
(1)
2009
Board of Directors Senior Executives
0.7 24.4 11.0 8.8 4.6 25.1

(2)
0.6 17.8 8.1 4.0 5.7 18.4
Short-term benefits (fixed salary and variable) Post-employment benefits Share-based payments (3)
(1) Directors fees. (2) Change for the year in post-employment benefit obligation. (3) Expense of the year estimated in accordance with principles described in Note2.24.
Note32
a)
Supplemental cash flow disclosures

The cash flows from disposal of assets include the selling price, net of disposal costs and less the cash disposed of. The impact of the disposals in the statement of income is detailed in Note5. The main disposals in 2010 are more fully described in Note3.
AT DECEMBER 31,
2010 2009
Cash flow information related to investing activities
The cash flows from investments in subsidiaries and joint venture include the purchase price consideration paid for the acquisitions less the cash acquired. No significant acquisition settled in cash occurred in 2010 and in 2009.
CASH FLOWS FROM DISPOSALS OF ASSETS Including: Disposal of our investment in Chile Disposal of some of our Asphalt, Paving and Concrete activities in North America Disposal of our investment in Turkey Disposal of our investment in Venezuela Disposal of some of our Aggregates & Concrete activities in Switzerland Disposal of our Cimpor investment in Portugal Disposal of our Aggregates & Concrete activities in Alsace (France) and Switzerland Others
209 22 21 37 129
760 288 152 126 52 50 92
b)
Cash flow information related to financing activities
c)
The line Changes in ownership interests with no gain/loss in control reflects the cash impact of acquisition and disposal of non-controlling interests (see Note2), net of related acquisition/disposal related costs. In 2010, Changes in ownership interests with no gain/loss in control amount to 139million euros and essentially include the cash proceeds arising from the disposal of non-controlling interests in Malaysia for an amount of 141million euros. The impact of partial disposal of interests on equity is described in Note3.
Main transactions with no impact on the Groups statement of cash flows
In 2010, the main transaction with no cash impact relates to the acquisition of the cement operations of Votorantim in Brazil for a purchase price consideration of 755million euros which was settled in our Cimpor investment (see Note3). This purchase price consideration is not reflected in the statement of cash flows.
F 68
Note34 Subsequent events
Note33
Auditors fees and services

DELOITTE & ASSOCIS
AMOUNT (EXCL. TAX) % 2010 2009
This table sets out the amount of fees billed for each of the last two fiscal years by each of our auditors, Deloitte & Associs and Ernst & Young Audit, in relation to audit services, audit-related services, tax and other services provided to us.
ERNST & YOUNG AUDIT
AMOUNT (EXCL. TAX) 2010 2009 % 2010 2009
(million euros)
2010
2009
AUDIT FEES
Audit, review of financial statements LafargeS.A. Subsidiaries Audit-related Fees * LafargeS.A. Subsidiaries SUB-TOTAL 7.4 1.8 5.6 1.3 0.4 0.9 8.7 7.8 1.9 5.9 0.9 0.6 0.3 8.7 84% 20% 64% 15% 5% 10% 99% 89% 22% 67% 10% 7% 3% 99% 6.4 1.5 4.9 0.7 0.1 0.6 7.1 5.8 1.4 4.4 0.5 0.3 0.2 6.3 89% 21% 68% 8% 1% 7% 97% 83% 20% 63% 7% 4% 3% 90%
OTHER FEES
Tax Fees ** Legal and Employment Fees Information Technology Others SUB TOTAL OTHER FEES TOTAL FEES
* **
0.1 0.1 8.8
0.1 0.1 8.8
1% 1% 100%
1% 1% 100%
0.2 0.2 7.3
0.7 0.7 7
3% 3% 100%
10% -10% 100%
Audit-related fees are generally fees billed for services that are closely related to the performance of the audit or review of financial statements. These include due diligence services related to acquisitions, consultations concerning financial accounting and reporting standards, attestation services not required by statute or regulation, information system reviews. Tax fees are fees for services related to international and domestic tax compliance, including the review of tax returns and tax services regarding statutory, regulatory or administrative developments and expatriate tax assistance and compliance.
Note34
Egypt
Subsequent events
Agreement between Lafarge and Anglo American
On February18, 2011, the Group and Anglo American plc announced their agreement to combine their cement, aggregates, ready-mixed concrete, and asphalt & contracting businesses in the United Kingdom, comprising Lafarge Cement UK, Lafarge Aggregates and Concrete UK (Lafarge UK) and Tarmac Quarry Materials (Tarmac UK). The completion of this transaction, which will form a 50:50 joint venture, is conditional upon regulatory approvals.
Industrial and sales operations were temporarily halted in Egypt at the end of January and restarted as of the 6 of February. The Groups plant, which is located outside of Cairo, has remained secure and is operating with normal staffing levels. For 2010, Egypts revenues represented 4% of total Group revenues and long-term fundamentals remain strong.
F
F 69
F
COMPANIES
Note35 List of significant subsidiaries, joint ventures and investments in associates at December31,2010
Note35
List of significant subsidiaries, joint ventures and investments in associates at December31,2010
The companies listed below are consolidated using the full method, the proportionate method or the equity method based on the principles of consolidation described in Note2.2 and meet the following criteria: over 25million euros contribution to the Group revenue; or over 250million euros contribution to the Group total assets.
AGGREGATES AND CONCRETE
COUNTRIES
CEMENT
GYPSUM
OTHERS
OWNERSHIP %
CONSOLIDATION METHOD
Lafarge Aggregates South Africa (Pty.) Ltd. Lafarge Gypsum (Pty.) Ltd. Lafarge Industries South Africa (Pty.) Ltd. Lafarge Industries South Africa (Pty.) Ltd. Algerian Cement Company S.P.A. Algerian Concrete Technologies Ciment Blanc dAlgrie S.P.A. Lafarge Gips GmbH Lafarge Zement Karsdorf GmbH Lafarge Zement Wssingen GmbH Al Safwa Cement Company Lafarge Plasterboard Pty. Ltd. Lafarge Perlmooser GmbH Lafarge Beton GmbH Lafarge Surma Cement Limited GROUPEMENT SCB LAFARGE Central Beton LTDA Indstria E Comrcio De Extrao De Areia Khouri LTDA Cia De Cimento Portland Lacim Cimenteries du Cameroun Lafarge Canada Inc. Lafarge Chongqing Cement Co., Ltd. Lafarge Dujiangyan Cement Company Limited Yunnan State Assets Cement Honghe Co., Ltd. Lafarge Halla Cement Corporation Lafarge Plasterboard System Co., Ltd. Lafarge Cement Egypt SAE Lafarge Ready Mix SAE National Bag Company Lafarge Emirates Cement LLC Lafarge Cementos SA Lafarge Aridos y Hormigones S.A. Lafarge Cementos S.A. Blue Circle North America Inc. Lafarge North America Inc. Bton Chantiers de Bretagne Granulats Bourgogne Auvergne
South Africa South Africa South Africa South Africa Algeria Algeria Algeria Germany Germany Germany Saudi Arabia Australia Austria Austria Bangladesh Bnin Brazil Brazil Brazil Cameroon Canada China China China Korea Korea Egypt Egypt Egypt U.A Emirates Ecuador Spain Spain USA USA France France
100.00 100.00 100.00 100.00 99.99 99.50 99.99 100.00 100.00 100.00 50.00 100.00 100.00 100.00
Full Full Full Full Full Full Full Full Full Full Proportionate Full Full Full Proportionate Proportionate Full Full Full Full Full Proportionate Proportionate Proportionate Full Proportionate Full Full Full Proportionate Full Full Full Full Full Full Full
29.44 50.00 94.95 94.95 94.95
54.73 100.00 43.68 41.25 44.00
71.47 50.00 53.70 100.00 75.00
50.00 98.57 100.00 100.00 100.00
100.00
58.28 70.00
F 70
COMPANIES
COUNTRIES
CEMENT

GYPSUM
OTHERS
OWNERSHIP %
Lafarge Btons de lOuest Lafarge Btons Sud Est Lafarge Btons Sud Ouest Lafarge Btons Valle de Seine Lafarge Ciments Lafarge Ciments Distibution Lafarge Ciments Runion Lafarge Granulats Btons Runion Lafarge Granulats Ouest Lafarge Granulats Seine Nord Lafarge Granulats Sud Lafarge (Mauritius) Cement Ltd Lafarge Pltres Lafarge Pltres Commercialisation Socit des Ciments Antillais Heracles General Cement Company S.A. Lafarge Beton Industrial Commercial SA Lafarge Cementos de C.V. Lafarge India PVT Limited Lafarge Aggregates and Concrete PVT Ltd. PT Lafarge Cement Indonesia Bazian Cement Company Ltd. United Cement Corporation Lafarge Gessi S.P.A. Arabian Concrete Supply Company Jordan Cement Factories Company PSC Bamburi Cement Ltd. CMCM Perniagaan SND BHD Lafarge Malayan Cement Berhad Lafarge Cement sdn bhd Lafarge Concrete (Malaysia) sdn bhd Lafarge Cement Malawi Ltd. Lafarge Betons Lafarge Cementos Lafarge Ciments Lafarge Cementos S.A. de C.V. Lafarge Ciment (Moldova) SA Atlas Cement Company Ltd. United Cement Company of Nigeria Ltd. Lafarge cement WAPCO Nigeria Plc. Hima Cement Ltd. Pakistan Cement Company Lafarge Gips B.V. Lafarge Philippines Lafarge Cement S.A.
France France France France France France France France France France France France France France France Greece Greece Honduras India India Indonesia Iraq Iraq Italy Jordan Jordan Kenya Malaysia Malaysia Malaysia Malaysia Malawi Morocco Morocco Morocco Mexico Moldavia Nigeria Nigeria Nigeria Uganda Pakistan Netherlands Philippines Poland
100.00 100.00 100.00 100.00 100.00 100.00 82.92 93.34 100.00 100.00 100.00 58.36
Full Full Full Full Full Full Full Full Full Full Full Full Full Full Full Full Full Full Full Full Full Full Full Full Full Full Full Full Full Full Full Full Proportionate Proportionate Proportionate Full Full Full Equity Full Full Full Full Full Full
99.97 99.97 69.44 88.99 88.99 53.11 94.38 100.00 100.00 70.00 60.00 100.00 25.64
50.28 58.60 51.00 51.00 51.00 31.49 75.17
34.64 34.32
34.93 100.00 95.31 100.00 35.92 60.00 71.01 73.22 100.00 100.00 100.00
F 71
F
COMPANIES
COUNTRIES
CEMENT
GYPSUM
OTHERS
OWNERSHIP %
Lafarge Gips SP. Z O.O. Lafarge Kruszywa i Beton Lafarge Betoes SA Readymix Qatar W.L.L. Lafarge Cement AS Lafarge Arcom GIPS Lafarge Ciment (Romania) S.A. Lafarge Aggregates Limited Lafarge Cement UK PLC Lafarge Plasterboard Limited Redland Readymix Holdings Limited OAO Lafarge Cement Lafarge Beocinska Fabrika Cementa Lafarge Cement D.D. Lafarge Mahawelli Cement (Private) Limited Cementia Trading AG Marine Cement AG/Ltd.. Syrian Cement Company Mbeya Cement Company Limited Siam Gypsum Industry (Saraburi) OJSC Mykolaivcement Lafarge Cement Zambia PLC
Poland Poland Portugal Qatar Czech Republic Romania Romania United Kingdom United Kingdom United Kingdom United Kingdom Russia Serbia Slovenia Sri Lanka Switzerland Switzerland Syria Tanzania Thailand Ukraine Zambia
100.00 100.00 100.00 49.00
Full Full Full Proportionate Full Full Full Full Full Full Full Full Full Full Full Full Full Full Full Proportionate Full Full
97.12 88.82 98.56 100.00 100.00 100.00 100.00
75.00 50.00 55.92 85.08 100.00 100.00 98.67 62.76 35.50 79.41 84.00
F 72
STATUTORY ACCOUNTS
Statutory Auditors Report on the annual financial statements
STATUTORY ACCOUNTS DECEMBER 31, 2010

This is a free translation into English of the statutory auditors report issued in the French language and is provided solely for the convenience of English-speaking users. The statutory auditors report includes information specifically required by French law in such reports, whether modified or not. This information is presented below the opinion on the annual financial statements and includes an explanatory paragraph discussing the auditors assessments of certain significant accounting and auditing matters. These assessments were considered for the purpose of issuing an audit opinion on the annual financial statements taken as a whole and not to provide separate assurance on individual account captions or on information taken outside the annual financial statements. This report also includes information relating to the specific verification of information given in the management report. This report should be read in conjunction with, and construed in accordance with, French law and professional auditing standards applicable in France.
Statutory Auditors Report on the annual financial statements

For the year ended December31, 2010
To the Shareholders, In compliance with the assignment entrusted to us by your Annual General Meeting, we hereby report to you for the year ended December 31, 2010 on: the audit of the accompanying annual financial statements of Lafarge; the justification of our assessments; the specific verifications and information required by law. These annual financial statements have been approved by the Board of Directors. Our role is to express an opinion on these financial statements based on our audit.
I. OPINION ON THE ANNUAL FINANCIAL STATEMENTS
We conducted our audit in accordance with professional standards applicable in France; those standards require that we plan and perform the audit to obtain reasonable assurance about whether the annual financial statements are free of material misstatement. An audit involves performing procedures, using sampling techniques or other methods of selection, to obtain audit evidence about the amounts and disclosures in the annual financial statements. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made, as well as the overall presentation of the annual financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. In our opinion, the annual financial statements give a true and fair view of the assets and liabilities and of the financial position of the Company as of December 31, 2010 and of the results of its operations for the year then ended, in accordance with French accounting principles.
II. JUSTIFICATION OF OUR ASSESSMENTS
In accordance with the requirements of Article L. 823-9 of the French Commercial Code (Code de commerce) relating to the justification of our assessments, we bring to your attention the following matters: Note2.3 Financial assets to the annual financial statements details the accounting principles and methods applied to investments and mentions that the earnings outlooks are established based on currently available information and are in keeping with the current economic crisis affecting some of the Groups markets. Our procedures consisted in reviewing available documents and assessing the reasonableness of retained valuations. The assessments were made as part of our audit of the annual financial statements taken as a whole, and therefore contributed to the opinion we formed, which is expressed in the first part of this report.
III. SPECIFIC VERIFICATIONS AND INFORMATION
We have also performed, in accordance with professional standards applicable in France, the specific verifications required by French law. We have no matters to report as to the fair presentation and the consistency with the annual financial statements of the information given in the management report of the Board of Directors and in the documents addressed to shareholders with respect to the financial position and the annual financial statements. Concerning the information given in accordance with the requirements of article L. 225-102-1 of the French Commercial Code (Code de commerce) relating to remunerations and benefits received by the directors and any other commitments made in their favor, we have verified its consistency with the annual financial statements, or with the underlying information used to prepare these annual financial statements and, where applicable, with the information obtained by your company from companies controlling your company or controlled by it. Based on this work, we attest the accuracy and fair presentation of this information. In accordance with French law, we have verified that the required information concerning the identity of the shareholders and holders of the voting rights has been properly disclosed in the management report. Neuilly-sur-Seine and Paris-La Dfense, February28, 2011 The Statutory Auditors French original signed by DELOITTE & ASSOCIS Frdric Gourd Pascal Pincemin ERNST & YOUNG Audit Christian Mouillon Nicolas Mac
F 73
STATUTORY ACCOUNTS
Comments on the income statement andthebalance sheet
Comments on the income statement andthebalance sheet

The financial statements for the year ended December31, 2010 show net income of 49million euros compared to 254million euros the previous year. These results reflect the following events:
the slight increase in operating income of 11million euros; the decrease in dividends collected (-202million euros) and the near stability of net nancial expenses (-1million euros) explain the decrease in net nancial income of 203million euros; exceptional income reported a loss of 8million euros in 2010 and mainly comprised a provision to cover the new performance share allocation plan; nally, income tax includes 107million euros already received or receivable from subsidiaries included in the Group tax regime. the decrease in provisions of 338million euros corresponds to the reversal of the provision for competition risk. This amount was paid to the European Commission on July23, 2010; the net decrease of 148million euros in short and long-term loans, borrowings and current accounts granted to Group companies; the decrease in equity of 321million euros before prot or loss, resulting from the appropriation of the previous years net income (254million euros) and a dividend payment (-575million euros); the increase in net debt of 731million euros which stood at 12,984million euros at year-end 2010.
The main trends in the balance sheet reflect the following:

the change in the gross value of investments (down 45millioneuros) may be explained by, in particular: the Lafarge North America capital increase (+1,255millioneuros), the Sabel capital decrease (-1,300million euros);
As of December31, 2010, gross debt was composed of bonds for 11,347million euros, negotiable debt instruments of 1,361million euros, borrowings from Group companies for 399million euros and other bank borrowings for 1,760million euros.
Appropriation of earnings
It will be proposed to the General Meeting an appropriation of the earnings for fiscal year 2010 that allows a normal dividend of 1.00 euro per share and a loyalty dividend of 1.10 euro per share, as follows:
ORIGINS
Earnings Retained earnings* TOTAL

APPROPRIATION
49,031,533.70 1,942,314,548.80 1,991,346,082.50 2,451,576.69 57,218,044.20 228,872,176.80 1,849,475.20 287,939,696.20 1,700,954,809.61 1,991,346,082.50
Legal reserve Dividend - First dividend (5% of the par value of the share) - Additional dividend (total dividend - first dividend) - Maximum amount of the 10% increase - Total Dividend Retained Earnings TOTAL
* After inclusion: - the dividends received on treasury shares, which total 32,940.00 euros; - the 10% increase not collected on the registered shares transferred in to a bearer account between January 1 and June 30, 2010, i.e., 332,309.00euros.
We remind the Shareholders Meeting that the dividends distributed in previous years were as follows:
YEAR 2009 2008 2007
Number of shares Normal dividend per share Loyalty dividend per share
286,453,316 2.00 2.20
195,236,534 2.00 2.20
172,564,575 4.00 4.40
F 74
STATUTORY ACCOUNTS
Statements of income
Statements of income
(million euros)
NOTES
2010
2009
Production sold (services) Provision reversals Operating Revenue Other purchases and external charges Duties and taxes Employee expenses Depreciation and amortization Provision allowance Operating expenses OPERATING INCOME Income from investments Interest and similar income Foreign exchange gains Provision reversals Financial Income Interest and similar expenses Foreign exchange losses Provision allowance Financial Expenses NET FINANCIAL INCOME/(COST) CURRENT OPERATING INCOME BEFORE TAX EXCEPTIONAL INCOME/(LOSS) Income tax credit/(expense) NET INCOME 8 9 6 7 6 4 5 3 3 3
422 23 445 (386) (2) (141) (21) (21) (571) (126) 791 51 19 89 950 (815) (9) (19) (843) 107 (19) (8) 76 49
397 15 412 (385) (5) (113) (22) (24) (549) (137) 998 82 16 1,096 (732) (25) (29) (786) 310 173 (38) 119 254
F
F 75
F
ASSETS Investments
STATUTORY ACCOUNTS
Balance sheets
Balance sheets
AT DECEMBER 31,
2010 DEPRECIATION, AMORTIZATION, IMPAIRMENT 2009
(million euros)
NOTES
GROSS AMOUNT
NET AMOUNT
NET
NON-CURRENT ASSETS
Intangible assets and property, plant and equipment Financial assets * Long-term receivables from investments Other financial assets 10 11 28 21 208 26,479 24,854 1,611 14 26,687 104 9 5 4 113 104 26,470 24,849 1,607 14 26,574 106 26701 24895 1792 14 26807
CURRENT ASSETS
Other receivables Marketable securities Cash and cash equivalents Debenture redemption premiums Cumulative translation adjustments TOTAL ASSETS
* Of which less than one year
21 12
3,508 26 1,303 4,837
113
3,508 26 1,303 4,837 58 421 31,890

488
3933 27 541 4501 65 492 31865

281
14 14
58 421 32,003
F 76
STATUTORY ACCOUNTS
Balance sheets
EQUITY AND LIABILITIES (BEFORE APPROPRIATION)

(million euros)
AT DECEMBER 31,
NOTES 2010 2009
NET EQUITY Common stock Additional paid-in capital Revaluation reserves Legal reserve Other reserves Retained earnings Net income for the year Tax-driven provisions PROVISIONS FOR LOSSES AND CONTINGENCIES FINANCIAL DEBT Debenture issues Bank borrowings * Other loans and commercial paper Tax and employee-related liabilities Other liabilities LIABILITIES ** Cumulative translation adjustments TOTAL EQUITY AND LIABILITIES
* Of which current bank overdrafts ** Of which less than one year
15 1,146 9,828 88 91 649 1,942 49 2 13,795 16 18 11,347 1,206 1,760 14,313 48 21 3,089 17,450 14 541 31,890
56 1,936
1,146 9,828 88 78 649 2,276 254 2 14,321 420
104
9,255 1,168 2,398 12,821 44 3,547 16,412 712 31,865

70 988
F
F 77
F
Investments
STATUTORY ACCOUNTS
Statements of cash flows

(million euros)
2010
2009
CASH FLOW FROM OPERATIONS * Change in working capital NET CASH FROM OPERATING ACTIVITIES (I) Capital expenditure Repayment of investments Net decrease in loans and miscellaneous Disposals of assets NET CASH FROM INVESTING ACTIVITIES (II) Proceeds from issuance of common stock Dividends paid NET CASH USED IN/FROM CAPITAL TRANSACTIONS (III) INCREASE/(DECREASE) IN NET DEBT (I +II +III) Net debt at year end Debt Marketable securities Cash and cash equivalents
*
(235) (132) (367) (28) (1,255) 1,300 185 9 211 (575) (575) (731) 12,984 14,313 (26) (1,303)
325 723 1,048 (24) (11,006) 3,855 (225) 8,458 1,058 1,496 (393) 1,103 3,209 12,253 12,821 (27) (541)
Cash flow from operations mainly comprises net income (+ 49 million euros) before depreciation and amortization (34 million euros), provisions (320 million euros) and a gain on investment disposal (2 million euros).
F 78
STATUTORY ACCOUNTS
Note 2 Accounting policies
NOTES TO THE PARENT COMPANY FINANCIAL STATEMENTS
Note 1
Significant events of the period

Commission. This amount had been fully provided for in the accounts (Note16). Lafarge S.A. then carried out three bond offerings totaling 1.9billion euros (Note18) in order to refinance its short-term debt.
Following the dismissal on June17, 2010 of the appeal lodged before the Court of Justice of the European Union, Lafarge S.A. paid a fine, including accrued interest, of 338million euros, to the European
Note 2
Accounting policies
value is determined taking into account the share of net equity held, the earnings outlook or the quoted market price, if relevant. The earnings outlook is determined using either an estimate cash flows approach or a market approach (multiple of gross operating income). It is established based on currently available information and is in keeping with the current economic crisis affecting some of the Groups markets. When the Companys share in the net equity of the investment is negative, a provision for contingencies is recorded, if justified.
The financial statements have been prepared in accordance with the provisions set forth in the French General Chart of Accounts (Plan Comptable Gnral CRC regulation 99-03). The accounting policies applied by the Company are described below:
2.1
Intangible assets
Intangible assets are recorded at acquisition cost and mainly include purchased software and related development costs. These assets are amortized on a straight-line basis over five to seven years from the date of commissioning.
Long-term receivables from investments

These are long-term loans granted to companies held directly or indirectly by Lafarge S.A.. Long-term receivables from investments are recorded at their nominal value. Long-term receivables from investments are distinguished from current accounts received or granted to subsidiaries, used for daily cash management. An impairment loss is recognized in the event of risk of non-recovery.
2.2
Property, plant and equipment
Property plant and equipment are recorded at historical cost, except for those items purchased before December31, 1976 that have been recorded based on their revalued amounts (legal revaluation). Depreciation is recorded using the straight-line method (except for computer hardware, which is depreciated using the declining balance method) over the estimated useful life of items of property, plant and equipment as follows: buildings: 25years; equipment: 3 to 10years; vehicles: 4years. Accelerated depreciation classified in the balance sheet under tax driven provisions is recorded when the fiscally authorized period is less than the estimated useful life or when the depreciation method is different.
Treasury shares
Lafarge S.A. treasury shares are classified as Financial assets in the balance sheet except when they are earmarked to cover purchase option plans and performance share plans.
2.4
Marketable securities
Shares are valued in accordance with CRC regulation 2008-15. Lafarge S.A. treasury shares are classified as Marketable securities in the balance sheet when they are earmarked to cover purchase option plans and performance share plans. When plans are likely to be exercised and a cash outflow is probable, a provision for contingencies is recorded for the corresponding shares, equal to the difference between the value of shares allocated to the plans and the exercise price of each of the plans. For Lafarge S.A. employees, this provision is spread out over the vesting period. When plans are not likely to be exercised, an impairment loss is recognized for the corresponding shares if the marketprice of the sharesis lower than the gross value.
2.3
Financial assets
Investments
The gross value of investments is equal to the purchase price excluding acquisition costs, after the 1976 revaluation adjustment for investments purchased before this date. Acquisition costs are expensed in the fiscal year. When the current value is less than the gross value, a provision for impairment is recognized in the amount of the difference. The current
F
F 79
F
2.5 2.6
Note 3 Depreciation and amortization, operating provision (allowance) reversal
Foreign currency denominated transactions
2.9
Provisions for losses andcontingencies
Payables and receivables denominated in foreign currencies are translated into euros using the period end closing exchange rate. The resulting unrealized exchange gains or losses are recorded in the translation adjustment accounts in the balance sheets. Unrealized exchange losses are provided in full, except when offset by unrealized foreign exchange gains on payables and receivables or on off-balance sheet commitments expressed in the same currency and with similar maturities.
A provision is recognized when an obligation which is probable or certain will result in an outflow of resources with no offsetting entry.
2.10 Income tax

Lafarge S.A., together with its French subsidiaries held directly or indirectly more than 95%, has elected to report income tax under the tax group regime as defined in Article223A and following of the French General Tax Code (CGI). The tax savings resulting from the difference between the income tax recorded separately for each of the consolidated entities and the income tax calculated based on the taxable results of the consolidated group is recorded at Lafarge S.A. Lafarge S.A. is liable to the French Treasury for the full tax charge calculated based on the profits and losses of all tax group companies.
Interest rate derivatives
Gains and losses on these contracts are calculated and recognized to match the recognition of income and expenses on the hedged debt.
2.7
Bond issue and redemption premiums
Bond issues to be redeemed with a premium are recognized in liabilities on the balance sheet for their total amount, including redemption premiums. An offsetting entry is then made for redemption premiums which are recognized in assets and amortized on a straight-line basis over the term of the bond issue. Other expenses and commission relating to these bonds are expensed in the fiscal year incurred.
2.11 Retirement Benefit Obligation

Provisions are recognized to cover end-of-service benefits and other post-retirement benefits. These provisions are based on periodic actuarial valuations performed using the projected unit credit method. This method takes into account seniority, life expectancy and Company employee turnover, as well as salary increase and discounting assumptions. Actuarial gains and losses resulting from a change in actuarial assumptions or experience adjustments are recognized when they exceed a corridor corresponding to 10% of the value of obligations. They are amortized over the average expected remaining service lives of the plans beneficiaries.
2.8
Net equity
Expenses relating to capital increases are deducted from additional paid-in capital.
Note 3
3.1
Depreciation and amortization, operating provision (allowance) reversal

2010 2009
Depreciation and amortization
(million euros)
DEPRECIATION AND AMORTIZATION Intangible assets Property, plant and equipment (17) (4) (21) (18) (4) (22)
3.2
Operating provision (allowance) reversal

2010 2009 REVERSAL ALLOWANCE REVERSAL ALLOWANCE
(million euros)
Pensions obligations and end-of-service benefits Other operating provisions
(21) (21)
19 4 23
(19) (5) (24)
12 3 15
F 80
Note 6 Financial provision (allowance) reversal
Note 4
(million euros)
Financial income from investments

2010 2009
DIVIDEND RECEIVED Dividend received from French subsidiaries Dividend received from foreign subsidiaries INCOME ON LONG-TERM RECEIVABLES FROM INVESTMENTS TOTAL FINANCIAL INCOME FROM INVESTMENTS 530 171 701 90 791 870 33 903 95 998
Note 5
(million euros)
Interest and similar income

2010 2009
Interest and similar income breaks down as follows:

INTEREST AND SIMILAR INCOME Revenue from current account advances to Group companies Other 38 13 51 76 6 82
Note 6
(million euros)
Financial provision (allowance) reversal

2010 ALLOWANCE REVERSAL 2009 ALLOWANCE REVERSAL
Financial provision (allowances) reversals break down as follows:
IMPAIRMENT OF ASSETS Investments PROVISIONS FOR LOSSES AND CONTINGENCIES Accrued penalties Treasury shares Foreign exchange loss Other REDEMPTION PREMIUMS TOTAL
In 2009, the impairment of investments was related to Lafarge Zement.
(6) (6) (13) (19)
89 89 89
(4) (4) (12) (1) (13) (12) (29)
F
F 81
STATUTORY ACCOUNTS
Note 7 Interest and similar expenses
Note 7
(million euros)
Interest and similar expenses

2010 2009
Interest and similar expenses break down as follows:
INTEREST AND OTHER EXPENSES ON INVESTMENTS Expenses on payables related to investments Expenses on current account advances from Group companies OTHER INTEREST AND SIMILAR EXPENSES Interest on bond issues Interest on bank borrowings Interest on negotiable debt instruments Other interest and financial expenses TOTAL INTEREST AND SIMILAR EXPENSES
Other interest and similar expenses include the payment of accrued interest (89 million euros) on the competition fine (see Note16).
(20) (26) (46) (602) (21) (53) (93) (769) (815)
(19) (37) (56) (463) (155) (53) (5) (676) (732)
Note 8
(million euros)
Exceptional income (loss)

2010 2009
Gain (loss) on the disposal of investments Termination of the share liquidity agreement Risk related to performance share allotment plan Risk related to the competition litigation Other net exceptional items
(1) (6) 250 (251) (8)
(5) (24) (9) (38)
In 2010, this item includes the payment of the competition fine for 249.6million euros and the reversal of the corresponding provision. (See Note16).
Note 9
(million euros)
Income tax
2010 2009
INCOME TAX Gain or (loss) from tax group regime Income tax, withholding tax, other
At December31, 2010, tax loss carry forwards attributable to the Group totaled 1,425million euros.
107 (31) 76
127 (8) 119
F 82
STATUTORY ACCOUNTS
Note 12 Marketable securities
Note 10
(million euros)
Intangible assets and property, plant & equipment

DECEMBER 31, 2009 INCREASE DECREASE DECEMBER 31, 2010
The change in intangible assets and property, plant and equipment in the period breaks down as follows:
INTANGIBLE ASSETS Gross amount Accumulated amortization Net amount PROPERTY, PLANT & EQUIPMENT Gross amount Accumulated amortization Net amount TOTAL
No impairment is recorded for intangible assets and property, plant and equipment.
138 (69) 69 68 (31) 37 106
25 (17) 8 3 (4) (1) 7
19 (17) 2 8 (1) 7 9
144 (69) 75 63 (34) 29 104
Note 11
(million euros)
Financial assets
DECEMBER 31, 2009 INCREASE DECREASE DECEMBRE 31, 2010
Investments (1) Long-term receivables from investments Other financial assets Other investment securities Security deposit Lafarge S.A. treasury shares (2) Other
24,895 1,792 10 4 0 14
1,255 97 1,352
1,300 282 1,582
24,849 1,607 10 4 14 26,470
FINANCIAL ASSETS
26,701
(1) The list of subsidiaries and investments is presented in Note28 Investments. (2) See Note13 Lafarge S.A. treasury shares for more information.
The increase in investments primarily concerns the capitalization of our subsidiary, Lafarge North America Inc. for 1,255million euros. The capital decrease of Sabelfi SNC for 1,300million euros explains the decrease.
Long-term receivables comprise short and long-term loans granted to directly or indirectly-held affiliated companies. In 2010, Lafarge Cementos (Spain), Lako Ltd. et Lafarge Vostok repaid their loans which had reached maturity for respectively 231million euros, 7million euros and 8million euros.
Note 12
(million euros)
Marketable securities
DECEMBER 31, 2009
(1)
INCREASE
DECREASE
DECEMBER 31, 2010
Lafarge S.A. treasury shares MARKETABLE SECURITIES
27 27
1 1
26 26
(1) See Note13 Lafarge S.A. treasury shares for more information.
F
F 83
STATUTORY ACCOUNTS
Note 13 Lafarge S.A.
Note 13
(number of shares)
Lafarge S.A. treasury shares

DECEMBER 31, 2009 INCREASE DECREASE RECLASSIFICATION DECEMBER 31, 2010
LONG-TERM INVESTMENTS Share purchase option plan Performance share plans Shares available for allotment MARKETABLE SECURITIES
356,393 23,755 380,148
(16,590) (16,590)
23,755 (23,755) -
363,558 363,558
(in million euros)
DECEMBER 31, 2009
INCREASE
DECREASE
RECLASSIFICATION
DECEMBER 31, 2010
LONG-TERM INVESTMENTS Share purchase option plan Performance share plans Shares available for allotment MARKETABLE SECURITIES
26 1 27
(1) (1)
1 (1) -
26 26
The 363,558 Lafarge S.A. treasury shares earmarked to hedge the share purchase option and performance share plans had a market value of 17million euros as of December31, 2010.
Note 14
(million euros)
Translation adjustments and bond redemption premiums

2010 2009
ASSETS Bond redemption premiums Cumulative translation adjustments LIABILITIES Cumulative translation adjustments 541 712 58 421 65 492
Bond redemption premiums total 58million euros as of December31, 2010 compared to 65million euros as of December31, 2009. The decrease of 7million euros may be explained by a 13million euro depreciation and amortization expense and premiums totaling 6million euros related to the three new bond issues.
Cumulative translation adjustments result from the remeasurement of trade receivables, trade payables, loans and borrowings in local currencies at the end of fiscal year 2010.
Note 15
Net equity
15.1 Share capital

On December31, 2010, the Companys share capital amounted to 1,145,815,116euros, divided into 286,453,779fully paid-up shares with a nominal value of foureuros each. Taking into account double voting rights accruing to shares held in registered form for at least two years (81,193,714), the total number of voting rights attaching to the shares was 367,647,493 at December31, 2010.
F 84
STATUTORY ACCOUNTS
Note 16 Provisions for losses and contingencies
Changes in the share capital during the fiscal year ended December 31, 2010
The Companys share capital at December31, 2009 amounted to 1,145,813,264euros, divided into 286,453,316shares with a nominal value of foureuros each. Since December31, 2009, the Companys share capital has increased by a total of 463shares as a result of the following:
AMOUNT OF SUBSCRIPTIONS OR DEDUCTIONS (EUROS)
NUMBER OF SHARES ISSUED CAPITAL SHARE PREMIUM TOTAL
Share subscription options exercised between January 1, 2010 and December 31, 2010 TOTAL AT DECEMBER 31, 2010
463 463
1,852 1,852
24,539 24,539
26,391 26,391
Potential Share capital at December 31, 2010

The number of shares as at December31, 2010 could be increased by a maximum of 9,099,072shares in the hypothetical scenario that stockoptions granted to employees existing on that date were exercised. 5,870,238 out of these existing stock-options could have been exercised at December31, 2010. The remaining 3,228,834stock-options can only be exercised upon expiry of a period of four years after their grant and subject to the performance conditions attached to some of these stock-options being fulfilled.
15.2 Change in net equity

(million euros)
COMMON STOCK
ADDITIONAL PAID-IN CAPITAL OTHER RESERVES
RETAINED EARNINGS
NET INCOME
TOTAL
NET EQUITY AS OF DECEMBER 31, 2009 (Before appropriation of 2009 income) Appropriation of 2009 income Net income for 2010 NET EQUITY AS OF DECEMBER 31, 2010 (Before appropriation of 2010 income)
1,146 1,146
9,828 9,828
817 13 830
2,276 (334) 1,942
254 (254) 49 49
14,321 (575) 49 13,795
Note 16
(million euros)
Provisions for losses and contingencies

DECEMBER 31, 2009 ADDITION UTILIZATION REVERSAL DECEMBER 31, 2010
Change in provisions for losses and contingencies break down as follows:
Provision related to Competition litigation * Provisions for retirement benefit obligations ** Provision for share-based payment Other provisions for losses and contingencies PROVISIONS FOR LOSSES AND CONTINGENCIES Of which employee expenses Of which operating Of which financial Of which exceptional Of which Tax
*
332 51 24 13 420
6 20 8 13 47 1 20 6 7 13 47
338 19 1 5 363 1 19 89 250 4 363
52 31 21 104
**
On December3, 2002, the European Commission fined Lafarge 249.6million euros on the grounds that certain of its subsidiaries had allegedly colluded with competitors in fixing wallboard market shares and prices between 1992 and 1998, mainly in the United Kingdom and Germany. On July8, 2008, the Court of First Instance confirmed the decision of the European Commission. Lafarge then lodged an appeal before the Court of Justice of the European Commission. On June17, 2010, the Court of Justice dismissed this appeal. As a result, on July23, 2010, Lafarge paid the fine and accrued interest totaling 338million euros. See Note 17 Retirement benefit obligations for more information.
In November2008, the major European cement players, including Lafarge, were investigated by the European Commission for alleged anti-competitive practices. By a letter dated 6December 2010, the Commission notified the parties of the opening of an official
investigation, while reminding them that at that stage, it did not have conclusive evidence. The alleged offences, which will be the subject of the detailed investigation, involve restrictions of commercial trade in or upon entry to the EEA, market sharing, and coordination of prices
F 85
STATUTORY ACCOUNTS
Note 17 Retirement benefit obligations
on the cement and related markets. In the case of Lafarge, six (6) countries are quoted: France, the United Kingdom, Germany, Spain, the Czech Republic and Austria. The Commissions investigation is
ongoing. The date of its closure is unknown. No conclusion can be drawn at this stage.
Note 17
Retirement benefit obligations

2009. In accordance with French Regulations, the insurer guarantees pension indexation up to the amount of technical gains allocated to the contract, with any residual cost of pension indexation remaining with the Company. Obligations for supplementary pension regimes and end-of service benefits were valued using the projected unit credit method.
Lafarge S.A.s pension obligation comprises supplementary pension regimes and end-of-service benefits. In 2007, the Company transferred its obligation relating to the supplementary defined benefit pension schemes of current retirees through an insurance contract with Cardif Assurance Vie. The premium paid amounted to 15million euros in 2010 against 12million euros in The main assumptions underlying these valuations are outlined below:
2010
2009
Discount rate Wage increase Long-term return expected on pension fund assets Discounted value of the obligation Fair value of pension fund assets Actuarial gains/losses and impact of plan modifications not recognized PROVISION FOR RETIREMENT BENEFIT OBLIGATIONS
4.00 - 4.75% 2 5.5% 153 (101) 52
5.00 - 5.25% 2 5.5% 128 (77) 51
Note 18
Financial debt
AMOUNT OUTSTANDING AT DECEMBER 31, 2009 OTHER MOVEMENTS * AMOUNT OUTSTANDING AT DECEMBER 31, 2010
18.1 Financial debt by nature

(million euros)
INCREASE
DECREASE
BOND ISSUES Bond issues (excluding accrued interest) Accrued interest on bond issues BANK BORROWINGS OTHER FINANCIAL DEBT Other loans and commercial paper Long-term payables from investments TOTAL FINANCIAL DEBT
* Of which translation adjustments.
9,014 241 9,255 1,168
1,912 281 2,193 55
241 241 17
140 140 -
11,066 281 11,347 1,206
2,057 341 2,398 12,821
13 58 71 2,319
709 10 719 977
10 10 150
1,361 399 1,760 14,313
The loans secured by Lafarge S.A. do not contain any clause requiring continuous compliance with certain financial ratios. However, the loans secured by some subsidiaries of the Group contain that type of
clause. If we, or under certain conditions our material subsidiaries, fail to comply with our or their covenants, then our lenders could declare default and accelerate a significant part of our indebtedness.
F 86
STATUTORY ACCOUNTS
Note 19 Derivatives
18.2 Bond issues

(million euros)
CURRENCY
INITIAL AMOUNT
RATE
MATURITY
AMOUNT OUTSTANDING ATDECEMBER 31, 2010
AMOUNT OUTSTANDING ATDECEMBER 31, 2009
2001 bond 2002 bond 2003 bond 2004 bond 2005 bond 2005 bond 2006 bond 2006 bond 2006 bond 2007 bond 2008 bond 2008 bond 2009 bond 2009 bond 2009 bond 2009 bond 2010 bond 2010 bond 2010 bond Accrued interest on bond issues BOND ISSUES
GBP GBP EUR EUR EUR EUR USD USD USD EUR EUR EUR EUR GBP EUR EUR USD EUR EUR
538 307 500 612 500 500 444 444 592 500 750 750 1,000 411 750 750 412 500 1,000
6.875% 6.625% 5.448% 5.000% 4.250% 4.750% 6.150% 7.125% 6.500% 5.375% 5.750% 6.125% 7.625% 8.750% 5.500% 7.625% 5.500% 5.000% 5.375%
11 years 15 years 10 years 10 years 11 years 15 years 5 years 30 years 10 years 10 years 3 years 7 years 5 years 8 years 10 years 7 years 5 years 8 years 8 years
407 232 500 612 500 500 449 449 599 500 750 750 1,000 406 750 750 412 500 1,000 11,066 281 11,347
394 225 500 612 500 500 417 417 555 500 750 750 1,000 394 750 750 9,014 241 9,255
18.3 Bank borrowings

As of December31, 2010, bank borrowings amount to 1,206million euros and include draw-downs of 768million euros, maturity 2012, on the credit facility set-up to finance the OBMHE acquisition.
Note 19
Derivatives
hedge the currency risk incurred by the Groups subsidiaries (firm commitments and highly probable transactions), bearing in mind that contracts negotiated with subsidiaries are hedged in exactly the same manner in the interbank market and do not give rise to a currency position for Lafarge S.A. At December31, 2010, most forward exchange contracts had a maturity date of less than one year.
19.1 Currency risk

Lafarge S.A. uses forward purchases and sales of currencies and currency swaps to: refinance loans and borrowings granted to subsidiaries in a currency other than the euro;
F
F 87
STATUTORY ACCOUNTS
Note 20 Financial commitments
The nominal and fair values of derivatives at the balance sheet date were as follows:
(million euros)
AT DECEMBER 31, 2009 FAIR VALUE * NOTIONAL FAIR VALUE *
NOTIONAL
FORWARD PURCHASES ANDCURRENCYSWAPS

US dollar (USD) British pound (GBP) Other currencies 205 887 79 1,171 1 (16) 1 (14) 162 402 86 650 3 4 7
FORWARD SALES AND CURRENCY SWAPS

US dollar (USD) British pound (GBP) Other currencies
*
699 44 131 874
6 1 (1) 6
947 7 157 1,111
(20) (3) (23)
The fair value of currency derivatives was calculated using market prices that Lafarge S.A. would pay or receive to unwind these positions.
19.2 Interest-rate risk

Lafarge S.A.s exposure to interest rate fluctuations comprises two types of risk: a fair value risk arising from fixed-rate financial assets and liabilities: interest-rate fluctuations have an influence on their market value;
a cash flow risk arising from floating-rate financial assets and liabilities: fluctuations in interest rates have a direct impact on the Companys future earnings. As part of its general policy, Lafarge S.A. manages these two risk categories using, if necessary, interest-rate swaps.
The notional and fair values of interest rate derivatives at the balance sheet date were as follows:
NOTIONAL VALUE OF DERIVATIVES BY EXPIRY DATE *

AVERAGE INTEREST RATE 2011 2012 2013 2014 2015 > 5 YEARS TOTAL FAIR VALUE **
INTEREST RATE SWAP

Fixed-rate payer Fixed-rate receiver Other interest-rate derivatives AT DECEMBER 31, 2009
4.5% 1.2% -
70 1,200 -
58 300 -
42 -
170 1,500 -
(11) 2 -
NOTIONAL VALUE OF DERIVATIVES BY EXPIRY DATE *

AVERAGE INTEREST RATE 2010 2011 2012 2013 2014 > 5 YEARS TOTAL FAIR VALUE **
INTEREST RATE SWAP

Fixed-rate payer Fixed-rate receiver Other interest-rate derivatives
* **
4.5% 9.7%
10
70 -
58 -
42 -
170 10
(11) 1
The notional value of derivatives represents the nominal value of financial instruments traded with counterparties. The fair value of interest-rate swaps was calculated using market prices that Lafarge S.A. would have to pay or receive to unwind the positions.
Note 20
Financial commitments
Commitments given for 1,697million euros include financial guarantees given for 1,637million euros and vendor warranties given in connection with asset sales for 60million euros. As of December31, 2010, there are no securities or assets pledged.
F 88
STATUTORY ACCOUNTS
Note 21 Maturity of receivables and liabilities at the balance sheets date
Note 21
Maturity of receivables and liabilities at the balance sheets date

NET AMOUNT AT DECEMBER 31, 2010 FALLING DUE IN LESS THAN ONE YEAR BETWEEN 1 AND 5 YEARS OVER 5 YEARS
RECEIVABLES
NON-CURRENT RECEIVABLES Long-term receivables from investments Other financial assets Current receivables Loans and current accounts granted tosubsidiaries Other 3,455 53 3,508 5,129 3,455 53 3,508 3,996 670 463 1,607 14 1,621 488 488 670 670 449 14 463
LIABILITIES
Financial Debt Bond issues Bank borrowings Negotiable debt instruments Long-term payables owed to investments TAX AND EMPLOYEE-RELATED LIABILITIES OTHER LIABILITIES Borrowings and current accounts received from Group companies Other 2,955 134 3,089 17,450 2,955 134 3,089 5,073 5,790 6,587 11,347 1,206 1,361 399 14,313 48 1,480 57 399 1,936 48 3,680 1,149 961 5,790 6,187 400 6,587 -
Settlement periods: Law no.2008-776 of August4, 2008 on the modernization of the economy, known as the LME, and Decree no.2008-1492 of December30, 2008 rendered for the application of ArticleL144-6-1 of the French Commercial Code. The 134million euros of other liabilities include trade payables for an amount of 26.1million euros as of December31, 2010 (French and foreign suppliers). The following schedule presents trade payables from the invoice date:
DEBT DUE AT YEAR END 30 DAYS FROM INVOICE DATE BETWEEN 31 AND 60 DAYS FROM INVOICE DATE > 61 DAYS FROM INVOICE DATE TOTAL AT DECEMBER 31,2010
(million euros)
Trade payables (including debt to suppliers of fixed assets)
0.0
DEBT DUE AT YEAR END
4.0
18.5
3.6
> 61 DAYS FROM INVOICE DATE
26.1
TOTAL AT DECEMBER 31,2009
(million euros)
BETWEEN 31 AND 30 DAYS FROM 60 DAYS FROM INVOICE DATE INVOICE DATE
Trade payables (including debt to suppliers of fixed assets)
0.2
3.7
8.6
0.0
12.5
F
F 89
F
Investments
STATUTORY ACCOUNTS
Note 22 Related parties
Note 22
(million euros)
Related parties
NET AMOUNT OF WHICH RELATED PARTIES OF WHICH OTHER INVESTMENTS
FINANCIAL ASSETS 24,849 1,607 24,849 1,607 Long-term receivables from investments FINANCIAL DEBT Other loans and commercial paper OTHER RECEIVABLES Loans and current accounts Other receivables OTHER LIABILITIES Borrowings and current accounts Other NET INCOME FROM INVESTMENTS INTEREST AND SIMILAR INCOME INTEREST AND SIMILAR EXPENSES 2,955 134 791 51 (815) 2,954 65 791 38 (46) 1 3,455 53 3,452 23 3 1,760 399
Pursuant to new regulations of the ANC, the French standard-setting body, and ArticleR.123-198 11 of the French Commercial Code, on related parties, Lafarge S.A. hereby reports that it did not enter into any transaction covered by these regulations during 2010.
Note 23
(million euros)
Compensation of the Board of Directors andExecutive Management

2010 2009
Board of Directors Executive Management*

* Executive Management comprises 10members, including the Chief Executive Officer as of December 31.
0.61 10.01
0.61 7.89
Note 24
Management
Average number of employees during the year

2010 2009
356 124 22 502
338 121 11 470
Supervisors and technicians Other employees TOTAL EMPLOYEES
F 90
STATUTORY ACCOUNTS
Note 27 Subsequent events
Note 25
Individual rights to training
In compliance with recommendation 2004F issued by the Urgent Issues Task Force of the French National Accounting Council (CNC) concerning accounting for individual rights to training, Lafarge did not record any provisions for training rights in the financial statements for the year ended December31, 2010. Rights acquired at year-end 2010 are estimated at 35,436hours.
Note 26
(million euros)
Deferred tax position - tax base (holding company only)

2010 2009
DEFERRED TAX LIABILITIES Tax-driven provisions Capital gains rolled over - Long-term DEFERRED TAX ASSETS Provision for pensions Other provisions Temporarily non-deductible expenses TAX LOSSES CARRIED FORWARD Tax group losses Revaluation account (1976) - tax free 1,425 88 921 88 52 4 26 51 7 42 2 1,764 2 1,764
Note 27
Subsequent events
There are no subsequent events to report.
F
F 91
STATUTORY ACCOUNTS
Note 28 Investments
Note 28
Investments
BOOK VALUE OF SHARES HELD (C) RESERVES AND RETAINED EARNINGS
(A) (B)
Subsidiaries and investments at December 31, 2010

GUARAN TEES & ENDOR NET NET SEMENTS INCOME GIVEN REVENUES BY THE EXCLUDING (PROFIT OR TAX AT LOSS) AT COMPANY (C) CLOSING (A) CLOSING (A) DIVIDENDS RECEIVED BY THE COMPANY OVER THE YEAR (C)
(in million of currencyunit)
CURRENCY
COMMON STOCK (A)
SHARE OFCAPITAL HELD %
GROSS
LOANS AND ADVANCES GRANTED AND NET NOT REPAID (C)
A. DETAILED INFORMATION ON SUBSIDIARIES (1) AND INVESTMENTS (2) ET (3) BELOW

1. SUBSIDIARIES (OVER 50% OF CAPITAL HELD BY THE COMPANY) Sofimo Lafarge Ciments * Lafarge Ciments Distribution* Lafarge Gypsum International * Sabelfi Cimento Portland Lacim Lafarge North America Inc. Ciments du Cameroun Lafarge Zement GmbH EUR EUR EUR EUR EUR BRL USD CFA EUR 5,600 26 1,041 135 17 798 3,273 1,312 16,711 219 18 45 36 5,318 16,663 34 100.00 16,469 16,469 99.99 99.99 99,99 99,99 56.43 80.43 43.65 10.00 162 45 934 3,280 341 3,565 15 29 162 45 934 3,280 341 3,565 15 25 1,939 131 224 23 542 484 783 775 4,389 93,338 535 25 121 31 139 97 (39) 8,098 19 344 38 143 126 41 3 -
2. INVESTMENTS (10 TO 50% OF CAPITAL HELD BY THE COMPANY)
3. INVESTMENTS (LESS THAN 10% OF CAPITAL HELD BY THE COMPANY)
B. GENERAL INFORMATION CONCERNING OTHER SUBSIDIARIES AND INVESTMENTS

1. SUBSIDIARIES NOT INCLUDED UNDER A.1) French subsidiaries (total) Foreign subsidiaries (total) 2. INVESTMENTS NOT INCLUDED UNDER A.2) AND A.3) French (total) Foreign (total) TOTAL
(A) (B) (C) *
8 5 1
8 5 -
2,859
6 701
24,854 24,849
In local currency for foreign subsidiaries. Before appropriation of net income and interim dividend. In million euros. The value of these investments includes the 1976 revaluation of Lafarge Ciments for 67 million euros, of Lafarge Ciments Distribution for 18 million euros and of Lafarge Gypsum Int for 2 million euros.
F 92
STATUTORY ACCOUNTS
Change in the financial income of the company during the last five years (articles R225-81, R225-83, R225-102 of the French Commercial Code)
2010 2009 2008 2007 2006
1. CAPITAL STOCK
Capital stock (in euros) Number of existing shares of common stock Maximum number of future shares to be created through conversion of bonds through exercise of stock-options 9,099,072 8,060,756 7,033,553 6,502,420 6,957,586 1,145,815,116 1,145,813,264 286,453,779 9,099,072 286,453,316 8,060,756 780,946,136 195,236,534 7,033,553 690,258,300 172,564,575 6,502,420 706,500,568 176,625,142 6,957,586
2. TRANSACTIONS FOR THE YEAR (in thousands ofeuros)

a) Gross sales revenues (1) b) Income before taxes, profit-sharing andamortization, depreciation and provisions c) Income taxes d) Employee profit-sharing owed for the year e) Income after taxes, profit sharing and amortization, depreciation and provisions f) Income distributed including 10% increase Earnings per share (in euros) a) Income after taxes, employee profit-sharing but beforeamortization, depreciation and provisions b) Income after taxes, employee profit-sharingand amortization, depreciation and provisions c) Net dividend Net loyalty dividend (0.85) 0.17 1.000 1.100 1.16 0.89 2.000 2.200 4.41 4.00 2.000 2.200 3.78 3.88 4.000 4.400 12.50 12.06 3.000 3.300
(2)
1,322,722 (320,834) 76,060
1,625,520 213,495 118,439
1,878,341 709,856 151,900
1,634,956 492,565 159,648
1,232,191 2,055,625 152,584
49,032 287,940 1,849
254,309 575,207 3,028
780,352 392,654 2,942
668,817 784,026 5,524
2,129,712 521,087 3,872
3. PERSONNEL
Number of employees at December 31 Payroll (in thousands of euros) (3) Social benefits (in thousands of euros) (4) Bonuses and profit-sharing paid (in thousands of euros) 510 92,799 48,098 2,142 485 78,315 35,088 1,592 448 87,421 33,261 3,382 435 91,934 37,383 2,806 447 87,679 34,715 1,903
(1) Gross sales revenues represent the revenues from ordinary activities, which include the sold production (services) and finance income. For 2008, only income and expenses on interest rate financial instruments are net. On the same basis, gross sales revenues for the previous years would have been as follows : 1,856,807 in 2007; 1,385,570 in 2006. (2) Increase in the dividend for registered shares held for more than two years. (3) including retirement indemnities, provision for performance shares grants. (4) Social organizations, charitable projects and other employee costs for impatriates, etc.
F
F 93
Special Report of the Statutory Auditors on Related-Party Agreements and Commitments

This is a free translation into English of a report issued in the French language and is provided solely for the convenience of English-speaking users. This report should be read in conjunction with, and construed in accordance with, French law and professional auditing standards applicable in France.
Year ended December 31, 2010

To the Shareholders, In our capacity as statutory auditors of your company, we hereby report on certain related-party agreements and commitments. We are required to inform you, on the basis of the information provided to us, of the terms and conditions of those agreements and commitments indicated to us, or that we may have identified in the performance of our engagement. We are not required to comment as to whether they are beneficial or appropriate or to ascertain the existence of any such agreements and commitments. It is your responsibility, in accordance with Article R. 225-31 of the French commercial code (Code de Commerce), to evaluate the benefits resulting from these agreements and commitments prior to their approval. In addition, we are required, where applicable, to inform you in accordance with Article R. 225-31 of the French commercial code (Code de Commerce) concerning the implementation of the agreements and commitments already approved by the General Meeting of Shareholders. We performed those procedures which we considered necessary to comply with professional guidance issued by the French national auditing body (Compagnie Nationale des Commissaires aux Comptes) relating to this type of engagement. These procedures consisted in verifying that the information provided to us is consistent with the documentation from which it has been extracted.
Agreements and commitments submitted for approval by the General Meeting of Shareholders
Agreements and commitments authorized during the year
In accordance with Article L. 225-40 of the French commercial code (Code de commerce), we have been advised of certain related-party agreements and commitments which received prior authorization from your Board of Directors.
With Orascom Construction Industries SAE

Board members concerned
Mr. Nassef Sawiris, a director of your company, is also the Chairman and CEO of Orascom Construction Industries SAE. Mr. Jrme Guiraud, a director of your company, is also a director of Orascom Construction Industries SAE. Amendment to the Agreement for the sale and purchase of the share capital of Orascom Building Materials Holding SAE reached between Lafarge and Orascom Construction Industries SAE on December 9, 2007. At its meeting on February 18, 2010, the Board of Directors authorized the signature of this amendment dated as of February 22, 2010. Under the agreement dated December 9, 2007, your company acquired 50% of a joint venture in Saudi Arabia (Alsafwa Cement Company). The agreement also stipulated that Orascom Construction Industries SAE would transfer various licenses and authorizations, as well as shares and rights on land and tangible assets, as required for the companys activity to the joint venture. Your company also benefited from a guarantee; pursuant to which a claim has been filed. The purpose of the amendment, dated February 22, 2010, is (i) to set the general framework for the steps that your company has to implement to further develop the joint venture and (ii) stipulate that these steps will be implemented without any prejudice to the rights and claims of each party to the Agreement, which are preserved and maintained.
Agreements and commitments already approved by the General Meeting of Shareholders

Agreements and commitments approved in prior years
In accordance with Article R. 225-30 of the French Commercial Code (Code de commerce), we have been advised that the following agreements and commitments, already approved in prior years by the Shareholders Meeting, remained effective during this financial year.
With BNP Paribas

Board members concerned
Mr. Michel Pbereau and Ms. Hlne Ploix.

a. Domiciliation agent agreement
At its meeting on May 24, 2006, the Board of Directors authorized the domiciliation agent agreement between your company and BNP Paribas concerning the commercial paper program. The amounts paid by your company in 2010 in respect of this agreement totaled 12,225.
F 94
b. Loan of 2.4 billion guaranteed by BNP Paribas for the acquisition of Orascom Building Materials Holding
At its meeting on December 9, 2007, the Board of Directors authorized a loan agreement totaling 7.2 billion between your company and BNP Paribas and two other financial institutions to finance the acquisition of the share capital of the Egyptian company Orascom Building Materials Holding. BNP Paribas had originally guaranteed to finance an amount of 2.4 billion. Under this agreement, the costs relating to the set-up of this line of credit correspond to the 13.8 million in commissions paid by your company to BNP Paribas in 2007. As a result of this commitment, a 78 million debt payable to BNP Paribas was recorded in your companys balance sheet as at December 31, 2010.
c. Transfer of retirement plans for French executives, senior executives and members of the Executive Committee to Cardif Assurance Vie, a subsidiary of BNP Paribas
The Board of Directors authorized the conclusion of insurance contracts between your company and Cardif Assurance Vie, a subsidiary of BNP Paribas, the purpose of which was to transfer defined-benefit retirement plans. These agreements were authorized by the Board of Directors at its meetings of August 1, 2007 and November 6, 2008 and approved by the Shareholders Meetings of May 7, 2008 and of May 6, 2009. As these agreements remained in effect in 2010, the total amount of contributions (allocated to retirement capital, expenses and other taxes) paid by your company in respect of the three current contracts with Cardif Assurances amounted to 16.1 million for the financial year ended December 31, 2010.
d. Agreement covering the management of its investments department with BNP Paribas Securities Services, a subsidiary of BNP Paribas
At its meeting on September 8, 2004, the Board of Directors authorized an agreement covering the management of its investments department, shareholders meetings, employee shareholding plans and stock-option plans with BNP Paribas Securities Services, a wholly owned subsidiary of BNP Paribas. The amounts paid by your company in 2010 in respect of this agreement totaled 7.5 million.
2. With Mr. Bruno Lafont

a. Supplementary pension plan of Mr. Bruno Lafont
At its meeting on December 16, 2005, the Board of Directors authorized an amendment to Mr. Bruno Lafonts employment contract, whereby he would benefit from a supplementary pension plan guaranteeing a pension based on his salary as a Director. The employment contract was suspended as from January 1, 2006, the date of Mr. Bruno Lafonts appointment as Chief Executive Officer. However, as a Director, he will continue to benefit from the supplementary retirement benefit. Moreover, at its meeting on November 6, 2008, the Board of Directors authorized the amendment of two supplementary benefit plans. One of these amendments consists in including the companys Directors as potential beneficiaries of these benefit plans, which would provide, under certain conditions, a retirement payment based on the last salaries received, irrespective of any other legal retirement benefits received by the retired individual. The Shareholders Meeting of May 6, 2009 approved this agreement which is not yet in force.
b. Amendment to Mr. Bruno Lafonts suspended employment contract and severance indemnity
At its meeting on May 7, 2008, the Board of Directors authorized an amendment to Mr. Bruno Lafonts employment contract, whereby he would undertake to remain in the company until June 30, 2011. At its meeting on February 19, 2009, and in addition to the decisions made at its meeting on May 7, 2008, the Board of Directors authorized the amendment to Mr. Bruno Lafonts employment contract, for the purpose of adapting the severance indemnity to the Afep Medef recommendations regarding the compensation of Executive Directors. Mr. Bruno Lafonts employment contract thus specifies (i) the conditions governing the guarantee to maintain the employment contract until June 30, 2011, (ii) the conditions under which he would benefit from a contractual severance indemnity (change of control or a change in strategy on the part of your company and performance conditions based on three criteria), in the event he were to benefit from his employment contract at the end of his term as Chairman and Chief Executive Officer, and upon a dismissal and (iii) the calculation methodology and the maximum amount of this potential severance indemnity (limited to a maximum of two years of the total gross remuneration received). This agreement is not yet in force. Neuilly-sur-Seine and Paris-La Dfense, February 28, 2011 The Statutory Auditors French original signed by DELOITTE & ASSOCIS Frdric Gourd Pascal Pincemin ERNST & YOUNG Audit Christian Mouillon Nicolas Mac
F
F 95
F 96
AMF Cross-reference table

In order to facilitate the reading of the present document as the form of the Document de Rfrence, the cross-reference table below is used to identify the corresponding Sections.
Items of Annex I to EC Regulation 809/2004 Location in this Report Page
1 2
PERSONS RESPONSIBLE STATUTORY AUDITORS 2.1 2.2 Name and address Resignation or removal of statutory auditors Selected historical financial information Selected financial information for interim periods
Certification 10.1 Auditors
139 136 8 12 24 36 36 37 38 25 25 38 25 39 F70 36 36 114 44 49 61 F40 61 61 61 15 61
Not applicable 1 2 3 3.2.4 3.2.5 Selected financial data Risk factors Information on Lafarge - General presentation Summary of our capital expenditures in 2010 and 2009 Capital expenditures planned for 2011 History and development of the Group Recent acquisitions, partnerships and divestitures Our businesses Our businesses Recent acquisitions, partnerships and divestitures Our businesses Organizational structure (List of significant subsidiaries, joint ventures and investments in associates at December 31, 2010) Summary of our capital expenditures in 2010 and2009 Capital expenditures planned for 2011 Environment Overview Results of operations for the fiscal years ended December 31, 2010 and 2009 Liquidity and capital resources (Equity) Liquidity and capital resources Liquidity and capital resources Liquidity and capital resources Financial risks and market risks Liquidity and capital resources
SELECTED FINANCIAL INFORMATION 3.1 3.2 Not applicable
4 5
RISK FACTORS INFORMATION ABOUT LAFARGE
5.1 5.2 6 6.1 6.2 6.3 6.4 6.5 7 7.1 7.2 8
History and development of the Company Investments Principal activities Principal markets Exceptional factors Dependency of the issuer Competitive position Description of the Group List of the issuers significant subsidiaries
3.3.1 3.3.2 3.2 3.2 3.3.2 3.2 3.3.3 Note 35
BUSINESS OVERVIEW
Not applicable
ORGANIZATIONAL STRUCTURE
PROPERTY, PLANTS AND EQUIPMENT 8.1 8.2 Existing or planned material tangible fixed asset Environment Financial condition Operating results 3.2.4 3.2.5 7.3 4.1 4.3
OPERATING AND FINANCIAL REVIEW 9.1 9.2
10
CAPITAL RESOURCES 10.1 Equity capital 10.2 Cash flows 10.3 Financing and liquidity 4.4 Note 20 4.4 4.4
10.4 Information regarding any restrictions on the use of capital resources that have materially affected, or could materially 4.4 affect, the issuers operations 2.1.2 10.5 Information regarding the anticipated sources of funds needed to fulfil certain commitments 4.4
237
Items of Annex I to EC Regulation 809/2004
Location in this Report
Page
11 12 13 14
RESEARCH & DEVELOPMENT, PATENTSANDLICENCES TREND INFORMATION PROFIT FORECASTS OR ESTIMATES ADMINISTRATIVE, MANAGEMENT, ANDSUPERVISORY BODIES ANDSENIORMANAGEMENT 14.1 Information on the members of administrative and management bodies 14.2 Conflicts of interests
3.3.4 4.1.2
Innovation Trend information and 2011 perspectives
39 44 -
Not applicable
5.1.2 5.3 5.1.3 5.3 5.4 Note 31 5.4 5.1.2 5.1.3 5.2.2
Information on Directors Executive Officers Independent Directors Executive Officers Compensation and benefits (Employees costs and Directors and Executive Officers compensation for services) Compensation and benefits Information on Directors Independent Directors The Committees
66 90 79 90 92 F67 92 66 79 82 66 112 97 101 142 107 104 106 108
15
REMUNERATION AND BENEFITS 15.1 Remuneration and benefits granted 15.2 Retirement plans
16
BOARD PRACTICES 16.1 Term of office of the Directors 16.2 Service contracts providing for the grant of future benefits 16.3 The Committees 16.4 Declaration in terms of corporate governance
Declaration in terms of corporate governance - Governance Code of reference 7.2 5.5.2 5.6.1 Social information Stock-option plans Directors, Corporate Executive Officers and Executive Committee members share ownership Long-term incentives (stock-options and performance shares plans) Employee share ownership Major shareholders and share capital distribution Threshold notifications imposed by law and declarations of intent Other information Rights, preferences and restrictions attached to shares Shareholder agreement with the Sawiris family and NNS Holding Srl Threshold notifications imposed by law and declarations of intent Change of control
17
EMPLOYEES 17.1 Number of employees
17.2 Shareholdings and stock-options 5.5 17.3 Employees share ownership in the issuers capital 18 MAJOR SHAREHOLDERS 18.1 Share capital distribution 6.1 6.3 6.4
18.2 Voting rights
6.5 8.5.3 6.2 6.3
123 105 106 126
18.3 Information on the control of share capital 18.4 Change of control 8.6
238
Items of Annex I to EC Regulation 809/2004
Location in this Report
Page
19 20
RELATED PARTY TRANSACTIONS FINANCIAL INFORMATION 20.1 Historical financial information 20.2 Pro forma financial information 20.3 Financial statements 20.4 Auditing of historical annual financial information 20.5 Age of latest financial information 20.6 Interim and other financial information 20.7 Dividend policy 20.8 Legal and arbitration proceedings
Note 30
(Related parties)
F67 F4 F4 F3 F4 F40 F65 F69
Consolidated financial statements Not applicable Consolidated financial statements Consolidated financial statements - statutory auditors report Consolidated financial statements Not applicable Note 20 Note 29 (Equity) Legal and arbitration proceedings Subsequent events
20.9 Significant change in the issuers financial or trading position Note 34 21 ADDITIONAL INFORMATION 21.1 Share capital

Share capital Securities not representing capital History of the capital Corporate purpose Statutory provisions or other with respect to the members of administrative and management bodies Rights, preferences and restrictions attached to the shares Changes to shareholder rights
8.1 8.3 8.2 8.1 8.5 8.5.1 8.5.2 8.5.3 8.5.4 8.5.5 8.6 8.5.6 8.7
Share capital Securities non representative of share capital - Bonds Shares owned by the Company Share capital Articles of Association (statuts) Corporate purpose Directors Rights, preferences and restrictions attached to the shares Changes to Shareholder rights Convocation and admission to the Shareholders GeneralMeetings Change of control Disclosure of holdings exceeding certain thresholds Material contracts
118 120 119 118 123 123 123 123 124 124 126 125 126 127 39
Shares owned by the Company
21.2 Memorandum and articles of association

Convocation and admission to the Shareholders GeneralMeetings
Change of control The crossing of thresholds
22 23 24 25
MATERIAL CONTRACTS THIRD-PARTY INFORMATION, ANDSTATEMENTBYEXPERTS ANDDECLARATIONSOFANYINTEREST DOCUMENTS ON DISPLAY INFORMATION ON HOLDINGS
Not applicable 8.8 3.3.3 Documents on display Organizational structure
239
The table below identifies the sections of the annual financial report (Article 451-1-2 of the Monetary and Financial Code and article 222-3 of the General Regulations of the AMF) incorporated in the present Annual Report.
Location in this Report Page
1. Selected financial data 2. Risk factors 3. Information on Lafarge 4. Operating and financial review and prospects 8. Additional information Consolidated financial statements Statutory auditors report on the consolidated financial statements Lafarge S.A. statutory accounts Statutory auditors report on Lafarge S.A. financial statements Certification
8 12 24 44 118 F4 F3 F74 F73 139
The introduction of Chapter 5 and Sections 2.2, 5.1, 5.2, 5.4, 8.5.5 and 9.1 of this Annual Report constitute the Chairmans report provided for by article L. 225-37 of the Commercial Code regarding the terms of preparation and organization of the Board of Directors, the rules set for remuneration and benefits granted to senior management and the internal control procedures implemented by the Company. The Group management report for the purposes of the Commercial Code is comprised of (i) the information presented in this Annual Report under Chapters 1 to 6 and 8, (ii) the data on health and safety, environment and employees contained in Chapter 7 and in our Sustainable Development Report, (iii)
comments on the statutory accounts of Lafarge S.A. set out in page F74 and (iv) note 21 (Maturity of receivable and liabilities at the balance sheet dates) to the statutory accounts of Lafarge S.A. pageF89. In accordance with article 28 of Commission rule (EC) n 809/2004, the following information has been incorporated for reference in this Document de Rfrence: consolidated financial statements for the financial year ending December 31, 2009, including the notes to the financial statements and the reports of the statutory auditors, set out on pages F-3 to F-78 of the 2009 Document de Rfrence filed with the Autorit des marchs financiers on March 10, 2010 under number D.10.0104;
consolidated financial statements for the financial year ending December 31, 2008, including the notes to the financial statements and the reports of the statutory auditors, set out on pages F-3 to F-86 of the 2008 Document de Rfrence filed with the Autorit des marchs financiers on March 26, 2009 under number D.09.0122. The sections of the Document de Rfrence 2009 and 2008 which have not been incorporated by reference are either not significant for the investor or already covered in another section of the present Document de Rfrence.
240
GROUPE LAFARGE 61, rue des Belles-Feuilles BP 40 75782 Paris Cedex 16 France Tl. : + 33 1 44 34 11 11 Fax : +33 1 44 34 12 00 www.lafarge.com

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ANNUAL REPORT

SOCIAL AND ENVIRONNEMENTAL RESPONSABILITY

2.1 2.2 2.3

OPERATING ANDFINANCIAL REVIEW ANDPROSPECTS 43

CORPORATE GOVERNANCE AND COMPENSATIONS

MAJOR SHAREHOLDERS AND LISTING

AMF CROSS-REFERENCE TABLE GLOSSARY

at December 31, 2010

REVENUES in million euros

2010 | Annual Report and Registration Document | Lafarge

Key figures by Division and Geographic Area

GROUP REVENUES BY DIVISION

GROUP REVENUES BY GEOGRAPHIC AREA

Lafarge | Annual Report and Registration Document | 2010

Cement World Leader

REVENUES in million euros

Aggregates & Concrete No. 2 & No. 3 Worldwide

REVENUES in million euros

Gypsum No. 3 Worldwide

REVENUES in million euros

GROUP EMPLOYEES BY DIVISION

GROUP EMPLOYEES BY GEOGRAPHIC AREA

2010 | Annual Report and Registration Document | Lafarge

in million euros 2,441 2,477 3,542

in million euros 2,151(2) 2,834 2,113

in million euros 13,993 13,795 16,884

in million euros 827 736 1,598

in euros 2.89 2.77 7.19 (3)

in euros 1.00 (4) 2.00 2.00

Lafarge | Annual Report and Registration Document | 2010

Lafarge Board of Directors

Lafarge Executive Committee

2010 | Annual Report and Registration Document | Lafarge

Lafarge | Annual Report and Registration Document | 2010

2010 | Annual Report and Registration Document | Lafarge

KEY FIGURES FOR THE GROUP

CONSOLIDATED STATEMENTS OF INCOME

Basic earnings per share (euros)

2.89 2.89 286,087

2.77 2.77 265,547

7.19 7.16 222,350

CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

34,752 7,742 42,494 16,144 2,080 16,765 7,505 42,494

32,857 6,640 39,497 14,977 1,823 16,652 6,045 39,497

32,928 7,680 40,608 12,910 1,725 17,043 8,930 40,608

CONSOLIDATED STATEMENTS OF CASH FLOWS

Lafarge | Annual Report and Registration Document | 2010

ADDITIONAL FINANCIAL INDICATORS(1)

2,151(2) 5.8 13,993

2,834 6.0 13,795

2,113 8,8 16,884

(euros, unless otherwise indicated)

2010 | Annual Report and Registration Document | Lafarge

Lafarge | Annual Report and Registration Document | 2010

2.2 RISK MANAGEMENT

2.3 INSURANCE AND RISK COVERAGE

2010 | Annual Report and Registration Document | Lafarge

2.1 Presentation of the principal risks

Seasonality and weather