FORM 6 - K

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Report of Foreign Private Issuer

Pursuant to Rule 13a - 16 or 15d - 16 of

the Securities Exchange Act of 1934

As of 3/30/2016

Ternium S.A.

(Translation of Registrant's name into English)

Ternium S.A.
29 Avenue de la Porte-Neuve

L-2227 Luxembourg

(352) 2668-3152

(Address of principal executive offices)

Indicate by check mark whether the registrant files or will file annual reports under cover Form 20-F or 40-F.

Form 20-F  Ö    Form 40-F     

Indicate by check mark whether the registrant by furnishing the information contained in this Form is also thereby furnishing the information to the Commission pursuant to Rule 12G3-2(b) under the Securities Exchange Act of 1934.

 Yes          No  Ö   

If “Yes” is marked, indicate below the file number assigned to the registrant in connection with Rule 12g3-2(b):

Not applicable

This report contains Terniums’ notice of Annual General Meeting of Shareholders, the Shareholder Meeting Brochure and Proxy Statement and Ternium's 2015 Annual Report.

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

TERNIUM S.A.

By: /s/ Arturo Sporleder                      

Name: Arturo Sporleder

Title: Secretary to the Board of Directors

Dated: March 30, 2016

	Ternium S.A. 29, Avenue de la Porte Neuve L-2227 Luxembourg Grand Duché de Luxembourg   00 352 26 68 31 52 500 tel 00 352 26 68 31 52 549 fax   RCS Luxembourg B 98 668

 

 

 

March 23, 2016

Dear Ternium Shareholders and ADR holders,

I am pleased to invite you to attend the Annual General Meeting of Shareholders (the “Meeting”) of TERNIUM S.A. (the “Company”), to be held on Wednesday, May 4, 2016, at the Company’s registered office in 29, avenue de la Porte-Neuve, L-2227, Luxembourg 2:30 p.m. (Luxembourg time).

At the Meeting, you will hear a report on the Company’s business, financial condition and results of operations and will be able to vote on various matters, including the approval of the Company’s financial statements, the election of the members of the board of directors and the appointment of the independent auditors.

The convening Notice and Agenda for the Meeting (which contains the procedures for attending and/or voting at the Meeting), the Shareholder Meeting Brochure and Proxy Statement, the Company’s 2015 annual report (which includes the Company’s consolidated financial statements as of December 31, 2015 and 2014 and for the years ended December 31, 2015, 2014 and 2013, together with the board of directors’ and independent auditors’ reports thereon, and the Company’s annual accounts as at December 31, 2015, together with the independent auditor’s report thereon), will be available on our website at http://www.ternium.com/irhome beginning on March 30, 2016.  Copies of such documents will also be available, free of charge, to ADR holders and shareholders registered in the Company’s share register at the Company’s registered office in Luxembourg, between 10:00 a.m. and 5:00 p.m., Luxembourg time, beginning on March 30, 2016. In addition, beginning on March 30, 2016, shareholders registered in the Company’s share register may obtain, also free of charge, electronic copies of such documents by sending an e-mail request to the following electronic address: ir@ternium.com.

Even if you only own a few shares or ADRs, I hope that you will exercise your right to vote or instruct voting at both Meeting.  If you are a holder of shares on April 28, 2016, you can attend and/or vote, personally or by proxy, at the Meeting. If you are a holder of ADRs, please see the letter from The Bank of New York Mellon, the depositary bank, or contact your broker/custodian, for instructions on how to give voting instructions in respect of the shares underlying your ADRs.

Please note the requirements you must satisfy to attend and/or vote your shares at the Meeting.

Yours sincerely,

Paolo Rocca

Chairman

         Re: TERNIUM S.A.

To:   Registered Holders of American Depositary Receipts (“ADRs”)

                for ordinary shares, USD 1.00 par value each (the “Shares”), of

                Ternium S.A. (the “Company”):

The Company has announced that its Annual General Meeting of Shareholders (the “Meeting”) will be held on May 4, 2016 at 2:30 p.m. (Luxembourg time). The Meeting will take place at the Company’s registered office in Luxembourg, located at 29, avenue de la Porte-Neuve, L-2227, Luxembourg. A copy of the Company’s Notice of Annual General Meeting of Shareholders, which includes the agenda for the Meeting, is available on the Company’s website at http://www.ternium.com/irhome.

The enclosed dedicated proxy form is provided to allow you to give voting instructions in respect of the Shares represented by your ADRs. The Notice of the Meeting, the Shareholder Meeting Brochure and Proxy Statement and the Company’s 2015 annual report (which includes the Company’s consolidated financial statements as of December 31, 2015 and 2014 and for the years ended December 31, 2015, 2014 and 2013, together with the board of directors’ and the independent auditors’ reports thereon; and the Company’s annual accounts as at December 31, 2015, together with the independent auditors’ report thereon), are available on the Company’s website at http://www.ternium.com/irhome. ADR holders may also obtain, free of charge, copies of such materials upon request at +1-800-555-2470 (toll free if you call from the United States) or at the Company’s registered office in Luxembourg, between 10:00 a.m. and 5:00 p.m. (Luxembourg time).

Each holder of ADRs as of April 4, 2016 (the “ADRs Record Date”), is entitled to instruct The Bank of New York Mellon, as Depositary (the “Depositary”), as to the exercise of the voting rights pertaining to the Shares represented by such holder’s ADRs. Any eligible holder of ADRs who desires to give voting instructions in respect of the Shares represented by such holder’s ADRs must complete, date and sign a proxy form and return it to The Bank of New York Mellon at Proxy Services, C/O Computershare, PO Box 43126, Providence, RI 02940-5138, by 12:00 p.m., New York City time, on April 28, 2016 (the “Voting Deadline”). If the Depositary receives properly completed and signed instructions by the Voting Deadline, then it shall endeavor, insofar as practicable, to vote or cause to be voted the Shares underlying such ADRs in the manner prescribed by the instructions. However, if by the Voting Deadline, the Depositary receives no instructions from the holder of ADRs, or the instructions received by the Depositary are not in proper form, then the Depositary shall deem such holder to have instructed the Depositary to give, and the Depositary shall give, a discretionary proxy to a person designated by the Company with respect to that amount of Shares underlying such ADRs to vote such Shares in favor of any proposals or recommendations of the Company (including any recommendation by the Company to vote such Shares on any issue in accordance with the majority shareholders’ vote on that issue) as determined by the appointed proxy. No instruction shall be deemed given and no discretionary proxy shall be given with respect to any matter as to which the Company informs the Depositary that (x) it does not wish such proxy given, (y) substantial opposition exists, or (z) the matter materially and adversely affects the rights of the holders of ADRs.

Any holder of ADRs is entitled to revoke or revise any instructions previously given to the Depositary by filing with the Depositary a written revocation or duly executed instructions bearing a later date at any time prior to the Voting Deadline. No instructions, revocations or revisions thereof will be accepted by the Depositary after the Voting Deadline.

In order to avoid the possibility of double vote, the Company’s ADR books will be closed for cancellations from the ADRs Record Date until the Voting Deadline. However, holders of ADRs need not have their ADRs blocked for trading on the New York stock exchange.

IF YOU WANT YOUR VOTE TO BE COUNTED, THE DEPOSITARY MUST RECEIVE YOUR VOTING INSTRUCTIONS PRIOR TO 12:00 P.M. (NEW YORK CITY TIME) ON April 28, 2016.

                                                    THE BANK OF NEW YORK MELLON

                                                                            Depositary

March 30, 2016

New York, New York

	Ternium S.A. 29, Avenue de la Porte Neuve L-2227 Luxembourg Grand Duché de Luxembourg   00 352 26 68 31 52 500 tel 00 352 26 68 31 52 549 fax   RCS Luxembourg B 98 668

Notice of the Annual General Meeting of Shareholders to be held in Luxembourg on May 4, 2016 at 2:30 p.m. (Luxembourg time).

Notice is hereby given to shareholders of TERNIUM S.A. (the “Company”) that the Annual General Meeting of Shareholders of the Company (the “Meeting”) will be held on May 4, 2016, at 2:30 p.m. (Luxembourg time) at the Company’s registered office located at 29, Avenue de la Porte Neuve, L-2227 Luxembourg. At the Meeting, shareholders will vote on the items listed below under the heading “Agenda for the Annual General Meeting of Shareholders”.

Agenda for the Annual General Meeting of Shareholders

1.                   Consideration of the Board of Directors’ and independent auditor’s reports on the Company’s consolidated financial statements. Approval of the Company’s consolidated financial statements as of December 31, 2015 and 2014 and for the years ended December 31, 2015, 2014 and 2013.

2.                   Consideration of the independent auditor’s report on the Company’s annual accounts. Approval of the Company’s annual accounts as at December 31, 2015.

3.                   Allocation of results and approval of dividend payment for the year ended December 31, 2015.

4.                   Discharge of members of the Board of Directors for the exercise of their mandate during the year ended December 31, 2015.

5.                   Election of the members of the Board of Directors.

6.                   Authorization of the compensation of the members of the Board of Directors.

7.                   Appointment of the independent auditors for the fiscal year ending December 31, 2016 and approval of their fees.

8.                   Authorization to the Board of Directors to delegate the day-to-day management of the Company’s business to one or more of its members.

9.                   Authorization to the Board of Directors to appoint one or more of its members as the Company’s attorney-in-fact.

Procedures for attending and voting at the Meeting

Any shareholder registered in the Company’s share register on April 28, 2016 (the “Shareholders Record Date”), shall be admitted to the Meeting. Such shareholder may attend the Meeting in person or vote by proxy. To vote by proxy, such shareholder must file a completed proxy form with the Company not later than 5:00 p.m. (Luxembourg time) on April 29, 2016, at the Company’s registered office in Luxembourg, located at 29, avenue de la Porte-Neuve, L-2227, Luxembourg.

Any shareholder holding shares through fungible securities accounts wishing to attend the Meeting in person must present a certificate issued by the financial institution or professional depositary holding such shares, evidencing deposit of the shares and certifying the number of shares recorded in the relevant account as of the Shareholders Record Date. Certificates certifying the number of shares recorded in the relevant account as of a date other than the Shareholders Record Date will not be accepted and such shareholder will not be admitted to the Meeting. Certificates must be filed with the Company not later than 5:00 p.m. (Luxembourg time) on April 29, 2016 at the Company’s registered office in Luxembourg.

Shareholders holding their shares through fungible securities accounts may also vote by proxy. To do so, they must present the above referred certificate, together with a completed proxy form. Such certificate and proxy form must be filed with the Company not later than 5:00 p.m. (Luxembourg time) on April 29, 2016, at the Company’s registered office in Luxembourg.

Shareholders who wish to be represented and vote by proxy at the Meeting may obtain, free of charge, a proxy form at the Company’s registered office in Luxembourg, between 10:00 a.m. and 5:00 p.m., Luxembourg time, beginning on March 30, 2016. In addition, beginning on March 30, 2016, shareholders may obtain, also free of charge, an electronic copy of such proxy form by sending an e-mail request to the following electronic address: ir@ternium.com. All proxy forms must be received by the Company, properly completed and signed, at the Company’s registered office in Luxembourg not later than 5:00 p.m. (Luxembourg time) on April 29, 2016.

In the event of shares owned by a corporation or any other legal entity, individuals representing such entity who wish to attend the Meeting in person and vote at the Meeting on behalf of such entity, must present evidence of their authority to represent the shareholder at the Meeting by means of a proper document (such as a general or special power-of-attorney) issued by the relevant entity. A copy of such power of attorney or other proper document must be filed with the Company not later than 5:00 p.m. (Luxembourg time) on April 29, 2016, at the Company’s registered office in Luxembourg. The original documentation evidencing the authority to attend, and vote at the Meeting, or a notarized and legalized copy thereof, must be presented at the Meeting.

Shareholders and proxy holders attending the Meeting in person will be required to identify themselves with a valid official identification document (e.g., identity card, passport).

Those shareholders who have sold their shares between the Shareholders Record Date and the date of the Meeting may not attend nor be represented at any of the Meeting. In case of breach of such prohibition, criminal sanctions may apply.

Holders of American Depositary Receipts (the “ADRs”) as of April 4, 2016, are entitled to instruct The Bank of New York Mellon, as Depositary, as to the exercise of the voting rights pertaining to the Company’s shares represented by such holder’s ADRs. Eligible holders of ADRs who desire to give voting instructions in respect of the shares represented by their ADRs must complete, date and sign a proxy form and return it to The Bank of New York Mellon at Proxy Services, C/O Computershare, PO Box 43126, Providence, RI 02940-5138, by 12:00 p.m., New York City time, on April 28, 2016. Holders of ADRs maintaining non-certificated positions must follow voting instructions given by their broker or custodian bank, which may provide for earlier deadlines for submitting voting instructions.

Copies of the Shareholder Meeting Brochure and Proxy Statement, the Company’s 2015 annual report (which includes the Company’s consolidated financial statements as of December 31, 2015 and 2014 and for the years ended December 31, 2015, 2014 and 2013, together with the board of directors’ and independent auditors’ reports thereon, and the Company’s annual accounts as at December 31, 2015, together with the independent auditor’s report thereon), are available on our website at http://www.ternium.com/irhome beginning on March 30, 2016.  Copies of such documents are also available, free of charge, to ADR holders and shareholders registered in the Company’s share register at the Company’s registered office in Luxembourg, between 10:00 a.m. and 5:00 p.m., Luxembourg time, beginning on March 30, 2016. In addition, beginning on March 30, 2016, shareholders registered in the Company’s share register may obtain, also free of charge, electronic copies of such documents by sending an e-mail request to the following electronic address: ir@ternium.com.

Arturo Sporleder

Secretary to the Board of Directors

March 23, 2016

Luxembourg

Shareholder Meeting Brochure and Proxy Statement

Annual General Meeting of Shareholders to be held in Luxembourg on May 4, 2016 at 2:30 p.m. (Luxembourg time)

This Shareholder Meeting Brochure and Proxy Statement is furnished by TERNIUM S.A. (the “Company”) in connection with the Annual General Meeting of Shareholders of the Company (the “Meeting”) to be held on May 4, 2016, at 2:30 p.m. (Luxembourg time), at the Company’s registered office located at 29, avenue de la Porte-Neuve, L-2227 Luxembourg, for the purposes set forth in the convening Notice of the Meeting (the “Notice”).

As of the date hereof, there are issued and outstanding 2,004,743,442 ordinary shares, USD 1.00 par value each, of the Company (the “Shares”), including Shares (the “Deposited Shares”) deposited with The Bank of New York Mellon (the “Depositary”) under the Deposit Agreement, dated as of January 31, 2006 (the “Deposit Agreement”), among the Company, the Depositary and owners and beneficial owners from time to time of American Depositary Receipts (the “ADRs”) issued thereunder. The Deposited Shares are represented by American Depositary Shares, which are evidenced by the ADRs (one ADR equals ten Deposited Shares). The Company currently holds 41,666,666 Shares.

Each Share entitles the holder thereof to one vote at general meeting of shareholders of the Company. However, voting rights on the 41,666,666 Shares held by the Company shall be suspended for so long as such Shares are so held.

Any shareholder registered in the Company’s share register on April 28, 2016 (the “Shareholders Record Date”), shall be admitted to the Meeting. Such shareholder may attend the Meeting in person or vote by proxy. To vote by proxy, such shareholder must file a completed proxy form with the Company not later than 5:00 p.m. (Luxembourg time) on April 29, 2016, at the Company’s registered office in Luxembourg.

Any shareholder holding shares through fungible securities accounts wishing to attend the Meeting in person must present a certificate issued by the financial institution or professional depositary holding such shares, evidencing deposit of the shares and certifying the number of shares recorded in the relevant account as of the Shareholders Record Date. Certificates attesting the number of shares recorded in the relevant account as of a date other than the Shareholders Record Date will not be accepted and such shareholders will not be admitted to the Meeting. Certificates must be filed with the Company not later than 5:00 p.m. (Luxembourg time) on April 29, 2016, at the Company’s registered office in Luxembourg.

Shareholders holding their shares through fungible securities accounts may also vote by proxy. To do so, they must present the above referred certificate, together with a completed proxy form. Such certificate and proxy form must be filed with the Company not later than 5:00 p.m. (Luxembourg time) on April 29, 2016, at the Company’s registered office in Luxembourg.

Shareholders who wish to be represented and vote by proxy at the Meeting may obtain, free of charge, a proxy form at the Company’s registered office in Luxembourg, between 10:00 a.m. and 5:00 p.m., Luxembourg time, beginning on March 30, 2016. In addition, beginning on March 30, 2016, shareholders may obtain, also free of charge, an electronic copy of such proxy form free of charge by sending an e-mail request to the following electronic address: ir@ternium.com. All proxy forms must be received by the Company, properly completed and signed, at the Company’s registered office in Luxembourg not later than 5:00 p.m. (Luxembourg time) on April 29, 2016.

In the event of Shares owned by a corporation or any other legal entity, individuals representing such entity who wish to attend the Meeting in person and vote on behalf of such entity, must present evidence of their authority to represent the shareholder by means of a proper document (such as a general or special power-of-attorney) issued by the relevant entity. A copy of such power of attorney or other proper document must be filed with the Company not later than 5:00 p.m. (Luxembourg time) on April 29, 2016, at the Company’s registered office in Luxembourg. The original documentation evidencing the authority to attend, and vote, at the Meeting, or a notarized and legalized copy thereof, must be presented at the Meeting.

Shareholders and their proxies attending the Meeting in person will be required to identify themselves with a valid official identification document (e.g., identity card, passport).

Those shareholders who have sold their shares between the Shareholders Record Date and the date of the Meeting may not attend nor be represented at any of the Meeting. In case of breach of such prohibition, criminal sanctions may apply.

Each holder of ADRs as of April 4, 2016 (the “ADRs Record Date”), is entitled to instruct the Depositary as to the exercise of the voting rights pertaining to the Shares represented by such holder’s ADRs. Any eligible holder of ADRs who desires to give voting instructions in respect of the Shares represented by such holder’s ADRs must complete, date and sign a proxy form and return it to The Bank of New York Mellon at Proxy Services, C/O Computershare, PO Box 43126, Providence, RI 02940-5138, by 12:00 p.m., New York City time, on April 28, 2016 (the “Voting Deadline”). If the Depositary receives properly completed instructions by the Voting Deadline, then it shall endeavor, insofar as practicable, to vote or cause to be voted the shares underlying such ADRs in the manner prescribed by the instructions. However, if by the Voting Deadline, the Depositary receives no instructions from the holder of ADRs, or the instructions received are not in proper form, then the Depositary shall deem such holder to have instructed the Depositary to give, and the Depositary shall give, a discretionary proxy to a person designated by the Company with respect to that amount of Shares underlying such ADRs to vote such Shares in favor of any proposals or recommendations of the Company (including any recommendation by the Company to vote such Shares on any issue in accordance with the majority shareholders’ vote on that issue) as determined by the appointed proxy. No instruction shall be deemed given and no discretionary proxy shall be given with respect to any matter as to which the Company informs the Depositary that (x) it does not wish such proxy given, (y) substantial opposition exists, or (z) the matter materially and adversely affects the rights of the holders of ADRs.

Any holder of ADRs is entitled to revoke or revise any instructions previously given to the Depositary by filing with the Depositary a written revocation or duly executed instructions bearing a later date at any time prior to the Voting Deadline. No instructions, revocations or revisions thereof will be accepted by the Depositary after that time.

In order to avoid the possibility of double vote, the Company’s ADR books will be closed for cancellations from the ADRs Record Date until the Voting Deadline. However, holders of ADRs will not have their ADRs blocked for trading on the New York stock exchange.

Holders of ADRs maintaining non-certificated positions must follow voting instructions outlined by their broker or custodian bank, which may provide for earlier deadlines for submitting voting instructions than that indicated above.

The Meeting will appoint a chairperson pro tempore to preside over the Meeting. The chairperson pro tempore will have broad authority to conduct the Meeting in an orderly and timely manner and to establish rules, (including rules for shareholders (or proxy holders) to speak and ask questions at the Meeting); the chairperson may exercise broad discretion in recognizing shareholders who wish to speak and in determining the extent of discussion on each item of the agenda.

Pursuant to the Company’s articles of association and Luxembourg law, resolutions at the Meeting will be passed by a simple majority of the votes cast, irrespective of the number of Shares present or represented.

The Meeting is called to address and vote on the following agenda:

1.   Consideration of the Board of Directors’ and independent auditor’s reports on the Company’s consolidated financial statements. Approval of the Company’s consolidated financial statements as of December 31, 2015 and 2014 and for the years ended December 31, 2015, 2014 and 2013

The Company’s consolidated financial statements as of December 31, 2015 and 2014 and for the years ended December 31, 2015, 2014 and 2013 (comprising the consolidated balance sheets of the Company and its subsidiaries and the related consolidated income statements, consolidated statements of changes in shareholders’ equity, consolidated cash flow statements and the notes to such consolidated financial statements) and the reports from the Company’s Board of Directors (the “Board of Directors”) and the Company’s independent auditor on such consolidated financial statements are included in the Company’s 2015 annual report, a copy of which is available on the Company’s website at http://www.ternium.com/irhome beginning on March 30, 2016. Copies of the Company’s 2015 annual report are also available to ADR holders and shareholders registered in the Company’s share register, free of charge, at the Company’s registered office in Luxembourg, between 10:00 a.m. and 5:00 p.m., Luxembourg time, beginning on March 30, 2016. In addition, beginning on March 30, 2016, shareholders registered in the Company’s share register may obtain, also free of charge, an electronic copy of the Company’s 2015 annual report by sending an e-mail request to the following electronic address: ir@ternium.com.

Draft resolution proposed to be adopted: “the Meeting resolved to approve the Company’s consolidated financial statements as of December 31, 2015 and 2014 and for the years ended December 31, 2015, 2014 and 2013.”

2.   Consideration of the independent auditor’s report on the Company’s annual accounts. Approval of the Company’s annual accounts as at December 31, 2015

The Company’s annual accounts as at December 31, 2015 (comprising the balance sheet, the profit and loss account and the notes to such annual accounts) and the report from the Company’s independent auditor on such annual accounts are included in the Company’s 2015 annual report, a copy of which is available on our website at http://www.ternium.com/irhome beginning on March 30, 2016. Copies of the Company’s 2015 annual report are also available to ADR holders and shareholders registered in the Company’s share register, free of charge, at the Company’s registered office in Luxembourg, between 10:00 a.m. and 5:00 p.m., Luxembourg time, beginning on March 30, 2016. In addition, beginning on March 30, 2016, shareholders registered in the Company’s share register may obtain, also free of charge, an electronic copy of the Company’s 2015 annual report by sending an e-mail request to the following electronic address: ir@ternium.com.

Draft resolution proposed to be adopted: “the Meeting resolved to approve the Company’s annual accounts as at December 31, 2015.”

3.   Allocation of results and approval of dividend payment for the year ended December 31, 2015

In accordance with applicable Luxembourg law and the Company’s articles of association, the Company is required to allocate 5% of its annual net income to a legal reserve, until this reserve equals 10% of the subscribed capital. As indicated in the Company’s 2015 annual accounts, the Company’s legal reserve already amounts to 10% of its subscribed capital, and, accordingly, the legal requirements in that respect are satisfied.

The Board of Directors proposes that a dividend payable in U.S. dollars on May 13, 2016, in the amount of USD 0.09 per Share (or USD 0.9 per ADR), which represents an aggregate sum of approximately USD 177 million, be approved and that the Board of Directors be authorized to determine or amend, in its discretion, the terms and conditions of the dividend payment, including the applicable record date. Accordingly, if this dividend proposal is approved, the Company will make, or cause to be made, a dividend payment on May 13, 2016, in the amount of USD 0.09 per Share (or USD 0.9 per ADR).

While the Company’s annual accounts as at December 31, 2015 show a loss for 2015, the Company’s consolidated financial statements as of December 31, 2015 and 2014 and for the years ended December 31, 2015, 2014 and 2013 show a profit of 2015 of USD 59,779,000. Considering the Company’s retained earnings and other distributable reserves, the Company has distributable amounts which exceed the proposed dividend.

The aggregate amount of USD 176,676,909.84 to be distributed as dividend on May 13, 2016, is to be paid from the Company’s retained earnings reserve. The loss of the year ended December 31, 2015, would be absorbed by the Company’s retained earnings account.

Upon approval of this resolution, it is proposed that the Board of Directors be authorized to determine or amend, in its discretion, any of the terms and conditions (including payment date) of the dividend payment.

Draft resolution proposed to be adopted: “the Meeting resolved (i) to approve a dividend, payable in U.S. dollars, on May13, 2016, in the amount of USD 0.09 per share issued and outstanding (or USD 0.9 per ADR), (ii) to authorize the Board of Directors to determine or amend, in its discretion, any of the terms and conditions of such dividend payment, including the applicable record date, (iii) that the aggregate amount of USD 176,676,909.84 to be distributed as dividend on May 13, 2016, be paid from the Company’s retained earnings reserve, and (iv) that the loss of the year ended December 31, 2015, be absorbed by the Company’s retained earnings account.”

4.   Discharge of members of the Board of Directors for the exercise of their mandate during the year ended December 31, 2015

In accordance with applicable Luxembourg law and regulations, it is proposed that, upon approval of the Company’s annual accounts as at December 31, 2015, all those who were members of the Board of Directors during the year ended December 31, 2015, be discharged from any liability in connection with the management of the Company’s affairs during such year.

Draft resolution proposed to be adopted: “the Meeting resolved to discharge all those who were members of the Board of Directors during the year ended December 31, 2015, from any liability in connection with the management of the Company’s affairs during such year.”

5.   Election of the members of the Board of Directors

Pursuant to article 7 of the Company’s articles of association, the annual general meeting must elect a Board of Directors of not less than five and not more than fifteen members, who shall have a term of office of one year, but may be reappointed.

Pursuant to article 11 of the Company’s articles of association and applicable securities laws and regulations, the Company must have an audit committee (the “Audit Committee”) composed of three members who shall qualify as “independent directors”.

The current Board of Directors consists of eight Directors, three of whom (Messrs. Ubaldo Aguirre, Adrian Lajous and Vincent Robert Gilles Decalf) qualify as “independent directors” under the Company’s articles of association and applicable law, and are members of the Audit Committee. 

It is proposed that (i) the number of members of the Board of Directors be maintained at eight, and that (ii) Messrs. Ubaldo Aguirre, Roberto Bonatti, Carlos Alberto Condorelli, Vincent Robert Gilles Decalf, Adrian Lajous, Gianfelice Mario Rocca, Paolo Rocca and Daniel Agustin Novegil be re-elected as members of the Board of Directors, each to hold office until the next annual general meeting of shareholders that will be convened to decide on the Company’s 2016 annual accounts.

Set forth below is summary biographical information of each of the candidates:

1) Mr. Ubaldo José Aguirre. Mr. Aguirre has served on the Board of Directors since 2006. He is a managing director of Aguirre y Gonzalez S.A., an Argentine financial services firm, and serves as chairman of the board of directors and as a member of the audit committee of Holcim Argentina S.A., a subsidiary of Lagarge Holcim Group, the Swiss cement producer. Since 2005, he also serves as chairman of the board of directors of Permasur S.A., an Argentine winery, and of Editorial Sur S.A. Since 2000, he is a member of the board of directors of AECOM Argentina S.A., the Argentine subsidiary of the U.S. corporation. He is a member of the Administrative Board of Universidad Católica Argentina. Mr. Aguirre formerly served as director and chairman of the audit committee of Siderar S.A.I.C. Mr. Aguirre began his career at the World Bank in Washington, D.C. In addition, Mr. Aguirre has been a member of the boards of each of Argentina’s Central Bank —where he was responsible for that country’s external borrowing program and financial negotiations— Banco de la Nación Argentina and Banco Nacional de Desarrollo. He also served as the Republic of Argentina’s financial representative for Europe in Geneva and as negotiator on behalf of the Republic of Argentina with the Paris Club.  Mr. Aguirre, aged 67, is an Argentine citizen.

2) Mr. Roberto Bonatti. Mr. Bonatti has served as a director of the Company since 2005. Mr. Bonatti is a grandson of Agostino Rocca, founder of the Techint Group, a group of companies controlled by San Faustin. Throughout his career in the Techint group he has been involved specifically in the engineering and construction and corporate sectors. He was first employed by the Techint Group in 1976, as deputy resident engineer in Venezuela. In 1984, he became a director of San Faustin and, since 2001, he has served as its president. In addition, Mr. Bonatti currently serves as president of Sadma Uruguay S.A. He is also a member of the board of directors of Tenaris. Mr. Bonatti, aged 66, is an Italian citizen.

3) Mr. Carlos Alberto Condorelli. Mr. Condorelli has served as a director of the Company since 2005. He is also a member of the board of directors of Tenaris since 2007. He began his career within the Techint group in 1975 as an analyst in the accounting and administration department of Siderar. He has held several positions within Tenaris and other Techint group companies, including chief financial officer of Tenaris, finance and administrative director of Tubos de Acero de México, S.A. and president of the board of directors of Empresa Distribuidora La Plata S.A., an Argentine utilities company. Mr. Condorelli, aged 65, is an Argentine citizen.

4) Mr. Vincent Robert Gilles Decalf. Mr. Decalf has served as a director of the Company since September 2015. He is also a member of the board of directors of the Luxembourg Stock Exchange (Bourse de Luxembourg) and the Luxembourg Institute for Directors and Managers (Institut Luxembourgeois des Administrateurs) as well as a non-executive director of Foyer International S.A. and other private Luxembourg companies. From 1989 to 2008, Mr. Decalf held various executive positions with Société Générale and has extensive experience in the financial industry. Mr. Decalf , aged 53, is a French citizen.

5) Mr. Adrian Lajous. Mr. Lajous has served as a director of the Company since 2006. Mr. Lajous currently serves as chairman of the Oxford Institute for Energy Studies, a fellow at the Center for Global Energy Policy at Columbia University, president of Petrométrica, S.C. and non-executive director of Trinity Industries Inc. Mr. Lajous began his career teaching economics at El Colegio de México and in 1977 was appointed director general for energy at Mexico’s Ministry of Energy. Mr. Lajous joined Petróleos Mexicanos (Pemex) in 1983, where he held a succession of key executive positions including executive coordinator for international trade, corporate director of planning, corporate director of operations and director of refining and marketing. From 1994 until 1999, he served as chief executive officer of Pemex and chairman of the boards of the Pemex Group of operating companies. In addition, he served as non-executive director of Schlumberger Ltd. between 2002 and 2014.. Mr. Lajous, aged 72, is a Mexican citizen.

6)  Mr. Gianfelice Mario Rocca. Mr. Rocca has served as a director of the Company since 2006. He is a grandson of Agostino Rocca. He is chairman of the board of directors of San Faustin, a member of the board of directors of Tenaris, president of the Humanitas Group and president of the board of directors of Tenova S.p.A. In June 2013, he was elected president of Assolombarda, the largest territorial association of entrepreneurs in Italy and part of Confindustria (Italian employers’ organization). In addition, he is a member of the EIT Governing Board (European Institute of Innovation and Technology) and sits on the board of directors or executive committees of several companies, including Allianz S.p.A., Brembo, Buzzi Unicem and Bocconi University. He is a member of the Advisory Board of Allianz Group, of the Aspen Institute Executive Committee, of the Trilateral Commission and of the European Advisory Board of the Harvard Business School.Mr. Rocca, aged 68, is an Italian citizen.

7) Mr. Paolo Rocca. Mr. Rocca has served as chairman of the Board since 2005. He is a grandson of Agostino Rocca. He is also chairman and chief executive officer of Tenaris, a member of the board of directors and vice president of San Faustin, chairman of Tubos de Acero de México S.A. and a director of Techint Financial Corporation. In addition, he is a member of the Executive Committee of the World Steel Association. Mr. Rocca, aged 63, is an Italian citizen.

8) Mr. Daniel Agustin Novegil. Mr. Novegil has served as a director and chief executive officer of the Company since 2005. With almost 40-years of experience in the steelmaking industry, he was appointed managing director of Siderar in 1993 and was a member of the board of directors of Usiminas from 2012 until 2015. He is also member of the board of directors of the World Steel Association and former president of Alacero (Latin American Steel Association). Since 1999 he has been a member of the advisory board of the Sloan Masters Program at Stanford University. Mr. Novegil, aged 63, is an Argentine citizen.

The Board met eight times during 2015. On January 12, 2006, the Board of Directors created an Audit Committee pursuant to Article 11 of the Company’s articles of association. As permitted under applicable laws and regulations, the Board of Directors does not have any executive, nominating or compensation committee, or any committees exercising similar functions.

Draft resolution proposed to be adopted: “the Meeting resolved to maintain the number of members of the Board of Directors at eight and to re-appoint Messrs. Ubaldo Aguirre, Roberto Bonatti, Carlos Alberto Condorelli, Vincent Robert Gilles Decalf, Adrian Lajous,  Gianfelice Mario Rocca, Paolo Rocca and Daniel Agustin Novegil to the Board of Directors, each to hold office until the next annual general meeting of shareholders that will be convened to decide on the 2016 accounts.”

6.  Authorization of the compensation of the members of the Board of Directors

It is proposed that each member of the Board of Directors receives an amount of USD 85,000.00 as compensation for his services during the fiscal year 2016, and that the Chairman of the Board of Directors receives, further, an additional fee of USD 295,000.00. It is further proposed that each of the members of the Board of Directors who are members of the Audit Committee receive an additional fee of USD 55,000.00, and that the Chairman of such Audit Committee receives, further, an additional fee of USD 10,000.00. In all cases, the proposed compensation would be net of any applicable Luxembourg social security charges. 

Draft resolution proposed to be adopted: “the Meeting resolved that each of the members of the Board of Directors receive an amount of USD 85,000.00 as compensation for his services during the fiscal year 2016, and that the Chairman of the Board of Directors receive, further, an additional fee of USD 295,000.00; and that each of the members of the Board of Directors who are members of the Audit Committee receive an additional fee of USD 55,000.00, and that the Chairman of such Audit Committee receive, further, an additional fee of USD 10,000.00. In all cases, the approved compensation will be net of any applicable Luxembourg social security charges.”

7.   Appointment of the independent auditors for the fiscal year ending December 31, 2016 and approval of their fees

The Audit Committee has recommended the appointment of PricewaterhouseCoopers, Société coopérative, Cabinet de révision agréé (PricewaterhouseCoopers’ Luxembourg member firm) as the Company’s independent auditors for the fiscal year ending December 31, 2016, to be engaged until the next annual general meeting of shareholders that will be convened to decide on the Company’s 2016 accounts.

In addition, the Audit Committee has recommended the approval of the independent auditors’ fees for audit, audit-related and other services to be rendered during the fiscal year ending December 31, 2016, broken-down into eight currencies (Argentine Pesos, Brazilian Reais, Colombian Pesos, Euro, Mexican Pesos, Swiss Francs, Uruguayan Pesos, and U.S. Dollars), up to a maximum amount for each currency equal to ARS 18,320,607.00; BRL 22,476; COP 233,872,573.00; EUR 566,494.00; MXN 12,860,675.00; CHF 29,000.00; UYU 3,399,813.00 and USD 62,400.00. Such fees would cover the audit of the Company’s consolidated financial statements and annual accounts, the audit of the Company’s internal controls over financial reporting as mandated by the Sarbanes-Oxley Act of 2002, other audit-related services, and other services rendered by the independent auditors. It is proposed that the Audit Committee be authorized to approve any increase or reallocation of the independent auditors’ fees as may be necessary, appropriate or desirable under the circumstances.

Draft resolution proposed to be adopted: “the Meeting resolved to (i) appoint PricewaterhouseCoopers Société coopérative, Cabinet de révision agréé, as the Company’s independent auditors for the fiscal year ending December 31, 2016, to be engaged until the next annual general meeting of shareholders that will be convened to decide on the Company’s 2016 accounts; and (ii) approve the independent auditors’ fees for audit, audit-related and other services to be rendered during the fiscal year ending December 31, 2016, broken-down into eight currencies (Argentine Pesos, Brazilian Reais, Colombian Pesos, Euro, Mexican Pesos, Swiss Francs, Uruguayan Pesos, and U.S. Dollars), up to a maximum amount for each currency equal to ARS 18,320,607.00; BRL 22,476; COP 233,872,573.00; EUR 566,494.00; MXN 12,860,675.00; CHF 29,000.00; UYU 3,399,813.00 and USD 62,400.00., and to authorize the Audit Committee to approve any increase or reallocation of the independent auditors’ fees as may be necessary, appropriate or desirable under the circumstances.”

8.   Authorization to the Board of Directors to delegate the day-to-day management of the Company’s business to one or more of its members

It is proposed that the Board of Directors be authorized to delegate the management of the Company’s day-to-day business and the authority to represent and bind the Company with his sole signature in such day-to-day management to Mr. Daniel Agustin Novegil, and to appoint Mr. Novegil as chief executive officer (administrateur délégué) of the Company.

Draft resolution proposed to be adopted: “the Meeting resolved to authorize the Board of Directors to delegate the management of the Company’s day-to-day business and the authority to represent and bind the Company with his sole signature in such day-to-day management to Mr. Daniel Agustin Novegil, and to appoint Mr. Novegil as Chief Executive Officer (Administrateur Délégué) of the Company.”

9.   Authorization to the Board of Directors to appoint one or more of its members as the Company’s attorney-in-fact

In order to provide for the necessary flexibility in the management of the Company’s affairs, it is proposed to authorize the Board of Directors to appoint any or all members of the Board of Directors from time to time as the Company’s attorney-in-fact, delegating to such directors any management powers (including, without limitation, any day-to-day management powers) to the extent the Board of Directors may deem appropriate in connection therewith, this authorization to be valid until expressly revoked by the Company’s general meeting of shareholders, it being understood, for the avoidance of doubt, that this authorization does not impair nor limit in any way the powers of the Board of Directors to appoint any non-members of the Board of Directors as attorneys-in-fact of the Company pursuant to the provisions of article 10.1(iii) of the Company’s articles of association.

Draft resolution proposed to be adopted: “the Meeting resolved to authorize the Board of Directors to appoint any or all members of the Board of Directors from time to time as the Company’s attorney-in-fact, delegating to such directors any management powers (including, without limitation, any day-to-day management powers) to the extent the Board of Directors may deem appropriate in connection therewith, this authorization to be valid until expressly revoked by the Company’s general meeting of shareholders; it being understood, for the avoidance of doubt, that this authorization does not impair nor limit in any way the powers of the Board of Directors to appoint any non-members of the Board of Directors as attorneys-in-fact of the Company pursuant to the provisions of article 10.1(iii) of the Company’s articles of association.”

___________________________________

The Company anticipates that the next Annual General Meeting of Shareholders will be held on May 3, 2017. Any shareholder who intends to present a proposal to be considered at the next Annual General Meeting of Shareholders must submit the proposal in writing to the Company at the Company’s registered office located at 29, avenue de la Porte-Neuve, L-2227 Luxembourg, Grand Duchy of Luxembourg, not later than 4:00 P.M. (Luxembourg time) on February 1, 2017, in order for such proposal to be considered for inclusion on the agenda for the 2017 Annual General Meeting of Shareholders. PricewaterhouseCoopers, société coopérative, Cabinet de révision agréé, are the Company’s independent auditors. A representative of the independent auditors will be present at the Meeting.

Arturo Sporleder

Secretary to the Board of Directors

March 23, 2016

Luxembourg

Ternium S.A.

Annual Report 2015

Contents

Company Profile and Strategy

Operating and Financial Highlights

Chairman’s Letter

Management Report

Business Review

Corporate Governance

Board of Directors and Senior Management

Investor Information

2015 Results. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Consolidated Financial Statements

Company Profile and Strategy

Ternium is a leading steel producer in Latin America. We manufacture and process a broad range of value-added steel products, including galvanized and electro-galvanized sheets, pre-painted sheets, tinplate, welded pipes, hot-rolled flat products, cold-rolled products, bars and wire rods as well as slit and cut-to-length offerings through our service centers.

Our customers range from large global companies to small businesses operating in the construction, automotive, home appliances, capital goods, container, food and energy industries. We aim to build close relationships with our customers and recognize that our success is closely linked with theirs.

Ternium has a deeply ingrained industrial culture. With approximately 16,700 employees and an annual production capacity of 11 million tons of finished steel products, Ternium has production facilities located in Mexico, Argentina, Colombia, the southern United States and Guatemala, as well as a network of service and distribution centers throughout Latin America that provide it with a strong position from which to serve its core markets.  In addition, Ternium participates in the control group of Usiminas, a leading steel company in the Brazilian steel market.

Our proximity to local steel consuming markets enables us to differentiate from our competitors by offering valuable services to our customer base across Latin America.  Our favorable access to iron ore sources and proprietary iron ore mines in Mexico provide operational flexibility, and our diversified steel production technology enables us to adapt to fluctuating input-cost conditions.

We operate with a broad and long-term perspective, and we regularly work towards improving the quality of life of our employees, their families and the local communities where we operate.

Operating and Financial Highlights

3

Chairman’s Letter

The global steel industry in 2015 was severely impacted by the continuing increase in steel exports from China, which rose 20% year on year to a new historical record of 110 million tons, an amount greater than the entire steel consumption in the USA. This increase took place in a year when global steel consumption outside China remained flat, while in China it continued to decline. Steel prices throughout the world have been affected and many producers have recorded losses for the year. Recognizing the gravity of the situation, many governments, including those in the USA and Mexico, are taking actions to limit the amount of unfairly traded imports.

Latin America imported 9.4 million tons of steel products from China in 2015, accounting for 14% of steel consumption in the region, as well as running a large imbalance in the trade of manufactured goods containing steel. Outside of Mexico, the decline of commodity prices has not been accompanied by growth in industrial activity and manufacturing employment and this is affecting the economic prospects of the region.

In this context, Ternium performed well in 2015, bolstered by its strong positioning in Mexico and the apparent stability of the Argentine economy in an election year. Net sales declined 10% year on year to $7.9 billion on lower selling prices as shipments rose 2%. EBITDA declined 27% to $1.1 billion and our EBITDA margin remained at an industry-leading level at close to 14% as we benefited from lower raw material costs and ongoing efficiency initiatives. Cash flow performance was strong with a reduction in working capital of $509 million which permitted us to reduce our net debt position to $1.1 billion at the end of the year and continue with our capital investment program to strengthen our range of high value products and the cost efficiency and safety of our operations.

In Mexico, our shipments rose 5% year on year and now represent 62% of total shipments. We continue to consolidate our position as the leading steel supplier to the automotive industry and to displace imports of high value industrial products. Following on from our investments in our cold-rolling mill and Tenigal hot-dipped galvanizing line in Pesquería, we completed the installation of a new run-out table, incorporating advanced cooling technology, in our hot strip mill in Churubusco with which we will develop an additional range of new high-strength steel products for automotive and other industrial applications.

In Argentina, shipments rose 6% year on year boosted by demand from the construction sector despite weaker demand from the industrial sector, which was affected by macroeconomic imbalances and lower exports to Brazil. With the change of government we expect a more positive development of the economy in coming years led by increased investment in infrastructure and the agricultural and oil and gas sectors.

In Colombia, we bought out the remaining minority interest in our Ferrasa subsidiary, further consolidating this operation. Our sales during the year, however, continued to be affected by low-priced imports from China.

We continue to strengthen our safety and environmental management systems, fully implementing our new safety training procedures, extending our assessment of critical production processes and through investments aimed at modernizing technology and processes at our older units such as the Guerrero plant in Mexico. We have completed the certification of our main facilities in Mexico and Argentina under the OHSAS 18001 safety management standard and we expect to complete the certification of our facilities under the ISO 14001 environmental management standard during 2016. These standards are designed to facilitate the development of the highest levels of excellence in safety and environmental management.

Our initiatives to strengthen the industrial value chain in the countries where we operate by offering support and training for small and medium enterprises (SMEs) are attracting growing interest and now have 1,130 companies participating, an increase of 20% over the previous year. These initiatives focus on developing industrial management skills with new training programs developed in Mexico and Argentina together with local institutions as well as technical services relating to the development and use of our products. One initiative, carried out in association with the Instituto Tecnológico de Buenos Aires (Buenos Aires Technology Institute) and local truck manufacturers in Argentina, contributed to the development of high-strength steel-manufactured trailers, which have a higher freight capacity and fuel efficiency than traditional models.

4

Education is a fundamental value for Ternium, an essential component of an industrial culture that identifies progress with that of the communities where we operate, providing a factor for integration and social mobility. To strengthen technical education in the community surrounding Ternium’s Mexican plants, we are constructing a purpose-built technical school in Pesquería. Scheduled for opening in August 2016, the new school will become the second Roberto Rocca Technical School and will share teacher training programs and a curriculum with the first such school established in Campana, Argentina by our sister company Tenaris.

We have written down the value of our participation in Usiminas to $240 million. This investment has been deeply affected by the deterioration in the Brazilian macro-economic climate and its impact on the outlook for steel consumption in the country. We continue to seek an acceptable solution to the unresolved dispute within the Usiminas control group and maintain our interest in developing a position to serve the industrial sector market in Brazil.

We closed the year with earnings per ADS of $0.04, after taking into account the losses we recorded on our investment in Usiminas. Considering, however, our solid operating results and financial position, we are proposing to maintain our annual dividend to shareholders at $0.90 per ADS.

During 2015, Ternium made good progress in consolidating its leading position as a supplier of high value steel products to the industrial sector in Mexico, Argentina and other Latin American countries and maintained its profitability in an industry affected by global overcapacity. Throughout the company, we are working to differentiate ourselves from our competitors and to sustain a position of leadership through industrial excellence, product development and customer service. I would like to thank our employees for their efforts and achievements during the past year. I would also like to thank our customers, suppliers and shareholders for their continuing support and confidence in our company.

Paolo Rocca

Chairman

March 29, 2016

5

Business Review

Steel consumption in the main steel markets of the Americas showed mixed performances in 2015. The Mexican steel market showed solid expansion in the year, reflecting healthy economic activity. The Argentine steel market also grew, although the economic performance of the various sectors was mixed. On the other hand, consumption in the U.S. steel market decreased in 2015 reflecting lower investments in the oil & gas industry, while steel consumption in Brazil decreased during the year in sync with a worsening economic performance. Throughout 2015, Ternium achieved record shipment volumes of 9.6 million tons and continued to be the leading supplier of flat steel products in Mexico and Argentina, and a leading supplier of steel products in Colombia.

Mexico, with shipments growth of 5.3% year-over-year, continued to gain participation in Ternium’s total steel shipments, increasing to 62% of total steel shipments in 2015, from 60% in 2014. Mexico showed a moderate acceleration in economic activity in 2015, with steel market demand expanding by 5.8% year-over-year, according to the Latin American Steel Association, reflecting a vibrant industrial sector that continued increasing exports of manufactured goods, particularly to the U.S., and an improved construction sector.

Shipments in the Southern Region increased slightly year-over-year. Argentina’s economic activity showed an uneven performance in 2015, with strong activity in the construction sector offsetting weaker activity elsewhere. Although overall steel consumption grew 4.9% year-over-year in 2015, the industrial sector was affected by macroeconomic imbalances and a less favorable external context, including a sharp contraction of the Brazilian manufacturing sector and a deflation process in the international commodity markets.

Ternium’s steel shipments in the Other Markets region decreased in 2015, including lower shipments to our main markets in Colombia, the U.S. and Central America. In Colombia and Central America, steel import penetration increased during 2015, reflecting an unprecedented level of low-priced Chinese steel exports, in many cases under unfair trade conditions. In the U.S., steel consumption decreased in 2015 as overall higher economic activity did not offset the effect of lower investments in the oil & gas sector.

The construction of Techgen’s power plant has been progressing on schedule and on budget. Techgen is a joint venture company located in the Pesquería area of the state of Nuevo León, Mexico. The 900 megawatts power plant is expected to be operational by the end of 2016 on total investment of $1.1 billion. The plant is expected to cover 100% of Ternium’s electricity requirements in Mexico.

Ternium’s support program for small- and medium-sized enterprises (SMEs) continued growing in Mexico and Argentina in 2015 and now covers approximately 1,130 companies. Throughout its more than 10 years of existence, the program has helped create an industrial network including customers, suppliers, technical schools, universities, business schools and governments, that has contributed to the improvement of the industry’s performance and to the reduction of investment barriers for our customers and suppliers. In 2015, the program continued expanding its activities in Mexico through the incorporation of new SMEs and the organization of its first annual industry convention.

Ternium’s environmental projects during 2015 focused on the improvement of air emissions and wastewater treatment and disposal, and on the reduction or elimination of hazardous products from our manufacturing processes. Of note during the year was the commissioning in our Guerrero unit in Mexico of a new briquetting facility for the recycling of metallic fines. In addition, under our ongoing ISO 14001 certification project, during 2015 Ternium obtained certificates for our Pesquería, Tenigal and Puebla units in Mexico, our Villa Nueva unit in Guatemala, and our Canning and Haedo units in Argentina.

On safety management initiatives, Ternium continued the diagnosis and identification of process hazards at the critical processes in our steelmaking and steel processing facilities in Mexico and Argentina. In addition, during 2015 this initiative was extended to our steelmaking and steel processing facilities in Colombia and to our mining operations. The program is being carried out in cooperation with Dupont, a renowned authority in industrial safety that was retained by Ternium during the second half of 2013. Furthermore, during the year we obtained certificates under the OHSAS 18001 safety standard for our main facilities in Mexico and Argentina.

6

Steel Segment

Ternium’s shipments of steel products reached 9.6 million tons in 2015, a 2.3% increase compared with the 9.4 million tons achieved in the previous year. GDP in Latin America contracted 0.3% in the year, affected by the poor performance of the Brazilian economy, compared with a 1.3% expansion rate in 2014, while the U.S. economy grew 2.5% in 2015, slightly higher than its 2.4% expansion rate in 2014.

Apparent demand for finished steel decreased 3.1% year-over-year in Latin America in 2015 reflecting a slump in steel consumption in Brazil as well as decreases in other steel markets. Mexico was, however, one of the few countries in the region that showed an expansion in apparent steel demand in 2015, once again driven by a dynamic industrial sector and also supported by a better performance of the construction sector. Elsewhere in Latin America, activity levels in the main steel markets deteriorated almost across the board in 2015. In the United States, apparent demand for finished steel decreased 3.0% year-over-year, according to October 2015 preliminary estimates, reflecting lower activity in the oil & gas sector in the country, as a result of weakening oil prices, partially offset by overall better activity in the other sectors of the economy.

7

Mexico

During 2015, Ternium was the leading supplier of flat steel products in Mexico. Shipments to this market increased 5.3% year-over-year to a new record of 5.9 million tons, representing 62% of Ternium’s total steel shipments. Mexico’s GDP increased 2.5% year-over-year in 2015 showing a moderate acceleration in economic activity versus the prior year. Apparent steel use increased 5.8% year-over-year to approximately 24.2 million tons supported by a broad expansion of the Mexican industrial sector and continued improvement in the construction sector.

Within Mexico’s industrial sector, motor vehicles production continued to outperform in 2015 with a 5.6% year-over-year growth. As showed in the chart, the automotive industry is going through an outstanding multi-year expansion cycle and, with 3.4 million units produced in 2015, Mexico ranks as the seventh largest car producer in the world. Ternium is the largest supplier to the automotive industry in the country.

The strength of Mexico’s industrial sector has helped Ternium carry out its differentiation strategy based on the development of high-end products and value-added services. In this regard, following the completion and ramp-up of our Pesquería industrial center, Ternium is now able to supply the full steel requirements of cars and pick-up trucks manufacturers in Mexico, with the new galvanizing facility (Tenigal) now entirely dedicated to serving our automotive customers. Furthermore, we have recently completed the investments necessary to enhance the processing capabilities of our Churubusco hot strip mill, which will allow us to develop high-strength advanced steel products to meet demand for high quality industrial products, especially in the automotive industry. Ternium has also developed new sophisticated steel products to support our industrial customers’ requirements, mainly in the home appliances and oil and gas sectors.

Construction activity in Mexico grew 3.2% year-over-year in 2015, better than the 1.9% expansion rate recorded in 2014, supported mainly by road infrastructure projects, and non-residential and housing building. Ternium’s efforts in this market continued focusing on offering a full range of steel products and enhancing customer services, including the development of local presence, logistics management and the introduction of new information technology tools.

8

Steel prices in the U.S., which are a significant driver of steel prices in Mexico, continued trending downward throughout 2015. Service center steel inventories in the U.S. decreased during 2015, partly as a result of lower steel consumption levels and expectations of lower steel prices. On the other hand, steel imports in the U.S. decreased during 2015 after peaking in October 2014, discouraged by lower steel prices in the local market and new U.S. government trade measures against certain steel imports, which were raised in order to prevent unfair trade practices. Similarly, during 2015 the Mexican Government increased import tariffs on several steel product groups to 15% for a period of six months, except imports from countries with which Mexico signed free trade agreements, and enacted several trade measures in response to unfair trade practices related to steel imports.

Unfair steel trade practices, which have affected steel markets globally, have been a consequence of global steel excess production capacity, mainly in China, together with decreasing steel consumption, partly as a result of a slowdown of the Chinese economy. On the other hand, lower oil prices, a stronger U.S. dollar and decreasing steel consumption globally has led to a year-long deflation trend in steel production costs, including Mexico’s.

During 2015, Ternium continued running its integrated steelmaking facilities in Mexico at close to full capacity, while achieving new record production levels in several facilities. We continued maximizing the use of direct reduced iron in the metallic mix of our steel shops (produced in our natural gas-based iron ore direct reduction units), which continued to be a cost efficient input despite decreasing steel scrap prices during the year, helped by decreasing transportation, energy and labor costs in U.S. dollar terms. Our re-rolling facilities saw higher production levels in 2015 compared with those of the previous year, as demand for our steel products continued expanding.

Ternium’s capital expenditures in the steel segment in Mexico amounted to $211 million in 2015. The main investments carried out during the period included those made for the improvement of environmental and safety conditions at certain facilities of the Guerrero and Puebla units, and for the mentioned upgrade and expansion of the hot strip mill of the Churubusco unit. Ternium’s ongoing investment plan in the steel segment in Mexico continues focusing on projects aimed at enhancing quality and productivity, reducing costs and improving environmental and safety conditions.

Looking forward, steel consumption in Mexico is expected to continue expanding in 2016, supported by a solid performance of the industrial sector, in part as a result of the strength of the U.S. market demand for goods manufactured in Mexico, and better activity levels in the construction sector. In this context, during 2016 Ternium expects to achieve new record shipment levels in the country and increase the utilization rates of its re-rolling facilities.

9

Southern Region

The Southern Region encompasses the steel markets of Argentina, Bolivia, Chile, Paraguay and Uruguay. During 2015, Ternium was the leading supplier of flat steel products in Argentina.  Shipments in the Southern Region reached 2.6 million tons in 2015, slightly higher than shipment levels in 2014, representing 27% of Ternium’s consolidated steel shipments.

Economic sectors in Argentina showed a mixed performance in 2015. A dynamic construction sector on the bright side, with record activity levels in residential, infrastructure, road, and energy related construction, but continued weakness in the industrial sector, being of note a 12% decrease in motor vehicle production. All in all, apparent steel demand increased 4.9% year-over-year to approximately 5.2 million tons, leading to a 6.0% increase of Ternium’s shipments in the country.

Our efforts in Argentina continued focusing on fostering steel demand, through our program to help SMEs in the steel industry value chain to grow, and to further strengthen our offering of steel products and related services so as to fulfill our customers’ current and emerging requirements. Besides our developments for the home appliances and oil and gas sectors, we certified new steel products for automotive manufacturers in Argentina and bolstered our customer service program to foster the use of high-end steel products in replacement of less sophisticated steel products.

Ternium’s shipments to the Paraguayan and Bolivian markets decreased in 2015, while shipments to the Chilean and Uruguayan markets remained relatively stable compared to shipment levels in the previous year. The economies of these countries expanded in 2015, with GDP growth rates of between 2.3% and 4.1% year-over-year.

In 2015, Ternium maintained relatively stable steel production levels in Argentina compared with those in 2014. We blew-down the smaller blast furnace for programmed maintenance by mid-November of 2015, increased production rates at our largest blast furnace and consumed pig iron inventories in the steel shop to compensate for the shortfall in pig iron production. In the finishing facilities, production rates increased moderately compared with those of the previous year, driven mainly by increased demand in the local Argentine market, which entails higher processing requirements compared to those required by exports.

Ternium’s capital expenditures in the Southern Region, mainly in Argentina, amounted to $188 million in 2015. During the year, we made progress on several projects, including those for the revamping of the hot-rolling mill, the expansion and enhancement of the coking facilities, the upgrading of the steel shop facilities and the improvement of environmental and safety conditions.

10

Looking forward, the steel industry value chain in Argentina is expected to face internal and external challenges during 2016. Local prices and costs are trending down, as part of a broader adjustment of the Argentine economy, while local apparent steel demand is expected to decrease compared to 2015. A recession in Brazil and a sharp depreciation of the Brazilian Real has affected our local customers’ manufactured products exports to that country. Lower domestic demand in Brazil may also incentivize the export of manufactured products from that country, in a context in which costs in Brazil continue to be lower than in Argentina, an imbalance that might not turn around in the short term. In addition, previously described unfair trade practices in the international steel markets may add to challenges to the Argentine steel market in 2016.

Due to the mentioned programmed maintenance stoppage of one blast furnace, our steel production volume in Argentina is expected to decrease year-over-year in 2016. Our capital expenditures will continue focusing on projects aimed at increasing steel processing capacity and operating efficiency, enhancing process technology and reliability, broadening our product range and improving environmental and safety conditions in our facilities.

Other Markets

Ternium’s sales to the rest of the world are shown under “Other Markets”, including major shipment destinations such as Colombia, the United States and Central America. During 2015, Ternium was a leading supplier of steel products in Colombia. In addition, Ternium continued serving customers in southern United States, Central America and in other regions throughout Latin America. Shipments to these markets, which represent 12% of Ternium’s total steel shipments, decreased 10.0% year-over-year in 2015, to 1.1 million tons.

In the Colombian steel market, Ternium’s steel shipments decreased slightly in 2015 when compared with the prior year. Finished steel production at our local facilities remained relatively stable while crude steel production decreased 10% year-over-year. Colombia’s GDP continued growing in 2015, with relatively good performance in the construction and manufacturing sectors, but lower activity in the oil & gas sector as a result of falling oil prices on international markets. Steel prices decreased in Colombia in 2015, reflecting aggressive steel import offers during the year. In this context, the Colombian Government increased import tariffs on coated steel products to 21% for a period of one year, excluding those countries with which Colombia has free trade agreements in place such as Mexico and the U.S., and, in response to unfair trade practices, enacted trade measures against imports of Chinese steel wire rod.

In the U.S. steel market, Ternium’s shipments were lower year-over-year in 2015. Apparent steel use decreased, affected by a slump in the oil & gas activity. However, the U.S. economy continued expanding during 2015 with better performance elsewhere reflected in a GDP growth rate of 2.5%. Ternium’s shipments in Central American steel markets also decreased in 2015, affected by increased steel imports penetration and aggressive steel pricing, as the economic activity in the region continued expanding year-over-year.

Mining Segment

Ternium has iron ore production facilities in Mexico. We conduct our mining activities through Las Encinas, a company in which we have a 100% equity interest, and Consorcio Peña Colorada, a company in which we have a 50% interest (with ArcelorMittal having the other 50% interest). ArcelorMittal and Ternium each receive 50% of total iron ore production of Consorcio Peña Colorada. Most of our iron ore production is consumed internally at Ternium’s steelmaking facilities in Mexico. In 2015, Ternium’s mining segment reported shipments of 3.6 million tons of iron ore, a 6% decrease compared to 2014 due to lower iron ore production at Las Encinas and Consorcio Peña Colorada.

Las Encinas

11

Las Encinas produces iron ore pellets and magnetite concentrate. As of the end of 2015, Las Encinas was operating the Aquila open pit iron ore mine, located in Michoacán, while the operation of the El Chilillo open pit iron ore mine, a small body located in Jalisco, was ended during the year following the completion of its mining plan. The Las Encinas facilities include two crushing plants located close to each of the Aquila and El Encino mines, and a concentration and pelletizing plant located in Alzada, Colima.

Las Encinas’ saleable production (pellets and concentrates) reached 1.9 million tons in 2015, a decrease compared to the 2.1 million tons achieved in 2014, mainly as a result of lower ore extraction at the Aquila mine. Iron ore reserves as of December 31, 2015 were 24 million tons on a run-of-mine basis (with a 40% average iron grade). Las Encinas’ combined active mines life was estimated at 8 years as of the end of 2015.

Capital expenditures during the year amounted to $9 million, mainly related to maintenance activities. During 2016, Las Encinas expects to start operations at the Las Palomas open pit iron ore mine, a small body located in Jalisco, in order to compensate the effects on our iron ore extraction rates of the El Chilillo closure.

Consorcio Peña Colorada

Consorcio Peña Colorada produces iron ore pellets and magnetite concentrate. As of the end of 2015, it was operating the Peña Colorada open pit iron ore mine, located in Colima. The Consorcio Peña Colorada facilities include a concentration plant located at the mine and a two-line pelletizing plant located near the Manzanillo seaport on the Pacific coast in Colima.

Consorcio Peña Colorada’s saleable production was 3.5 million tons in 2015, slightly lower than the 3.6 million tons achieved in 2014, mainly as a result of a decrease in the average ferrous content of the iron ore. Iron ore reserves as of December 31, 2015 were 226 million tons on a run-of-mine basis (with a 22% average iron grade). Consorcio Peña Colorada’s combined active mines life was estimated at 16 years as of the end of 2015.

Ternium’s share in Peña Colorada’s capital expenditures during the year amounted to $46 million, mainly related to maintenance and upgrade of equipment, as well as exploration activities. During 2016, Consorcio Peña Colorada is expected to complete the investments required to increase the processing capacity of its crushing, grinding and concentration facilities to raise iron ore concentrate production levels back to 4.5 million tons per year.

Support Program for Small- and Medium-Sized Enterprises

As it has been doing for several years, with the aim at bolstering growth of its domestic steel markets, Ternium continued sponsoring a SME support program called ProPymes. The program is focused on helping SMEs in the steel industry’s value chain grow through the enhancement of competitiveness and the stimulus of investments in this sector. To achieve this, ProPymes provides a variety of services, including training, industrial assistance, institutional assistance, commercial support and financial aid. Through these means, ProPymes has helped create an industrial network that encourages the professionalization and quest for excellence of SMEs which, based on knowledge sharing, reciprocal learning and exchange of experiences, aims at the implementation along the whole value chain of the best practices utilized in the industry. ProPymes currently assists approximately 1,130 SMEs in Mexico and Argentina.

Ternium supervises the execution of the ProPymes programs through two departments operating under local management supervision in Mexico and Argentina.

Mexico

ProPymes in Mexico selects participating SMEs according to their ability to increase their products’ competitiveness as suppliers, along with their capability to add value to steel products and their potential to increase exports or substitute imports as customers. Approximately 350 Mexican SMEs participate in ProPymes.

12

During 2015, the first cohort of SMEs’ middle managers, supervisors, technicians and workers completed a new training program focused on leadership and occupational training. This program has been organized in conjunction with a local institution and sponsored by the Instituto Nacional del Emprendedor (National Entrepreneur Institute), or INADEM, and ProPymes. In addition, the sixth edition of a training program designed for SMEs’ managers was completed, a program that has been organized in conjunction with a local institution and has also been sponsored by INADEM and ProPymes.

ProPymes continued with its industrial assistance programs under the new cooperation agreement with INADEM. In this regard, certain SMEs received financial aid to fund capital expenditure projects, aimed at expanding capacity and upgrading technology, and for training programs and consultancy services. In addition, the recently established Development Committee, which ProPymes jointly leads with the manufacturing industry’s chamber and Monterrey´s center for competitiveness, selected a first group of SMEs to be developed as suppliers of companies participating in the chamber and funded the program’s expenses in items such as consultancy services and training programs. Furthermore, ProPymes continued participating in selected conferences and conventions intended to facilitate new commercial ties between SMEs and potential customers in the automotive sector and other industries in the steel industry value chain.

In June 2015, ProPymes organized its first annual convention in Mexico, with the participation of approximately 400 businessmen and representatives from the government, universities and industrial clusters and chambers. This initiative seeks to foster know-how sharing, reciprocal learning and experiences exchanges among representatives of participating SMEs and other parties.

In 2016, ProPymes will continue to focus on the sponsoring of SME employee training programs and industrial and commercial assistance programs, and on further strengthening its ties with other sponsoring bodies such as the government and industrial clusters and chambers. In addition, ProPymes will seek to further expand the number of participating SMEs.

Argentina

Approximately 780 Argentine SMEs participate in ProPymes. Even though the program’s activities were carried out under a less favorable environment for the industry during 2015, activity remained at good levels during the year compared to those of previous years. It is worth mentioning that the programs related to SME personnel training achieved new record-high participation levels during the year.

In 2015, ProPymes continued consolidating activities related to its corporate social responsibility program, an initiative aimed at helping SMEs build and consolidate long-term community relations, and the development of a qualified labor force in the medium-term. Under this program, SMEs offered internships and training to students and teachers, respectively, from selected technical schools, with the aim of improving overall technical education. The program, launched in 2013 at five technical schools with the sponsoring of nine SMEs, continued growing solidly during 2015, reaching the participation of nineteen technical schools and forty-four sponsoring SMEs, with more than twice as many internships offered compared to those available during the first year the program was in effect.

ProPymes continued updating and expanding its offer of training activities, both those performed in-house and at local educational institutions. These programs comprise a broad range of management requirements and target SME employees of all levels. Specifically during 2015, ProPymes launched a new seminar on industrial companies’ management, aimed at helping companies in our value chain to improve management practices, and a new seminar on media relations, aimed at fulfilling emerging requirements that stemmed from the growing public exposure of certain SME managers. The approximately 3,500 participants in ProPymes’ training activities during 2015 represented a 15% increase compared to the record level achieved in the previous year.

13

The program’s consulting area, one of ProPymes’ pillars, continued preparing diagnostic reports and performing assistances, reaching activity levels that were close to those recorded during 2014. Subjects during 2015 continued to be related to the use of automation technology, the development of health and safety protocols, the development of tools for training and human resources management, the implementation of management control systems, assistance for the utilization of competitive financing lines and the implementation of maintenance management, a program launched in 2014 that has achieved exceptional acceptance.

As for ProPymes’ commercial and institutional assistance efforts, during 2015 the program continued coordinating business meetings among SMEs representatives, oil and gas industry experts and governmental financing arms, although weakness in oil prices during the year reduced project development opportunities.

In 2016, ProPymes intends to launch new training programs specialized in innovation, aimed at fostering the implementation of innovative initiatives within the companies. Also, it intends to expand its management development program and its industrial company management program. In addition, ProPymes intends to intensify its assistance to companies with an export-oriented profile.

Product Research and Development

Product research and development activities at Ternium are conducted through a central Product Development Department in coordination with local teams that operate in several of our facilities. Applied research efforts are carried out in-house and in conjunction with universities and research centers, as well as through participation in international consortiums. Applied research efforts seek to strengthen fundamental knowledge that enables the development of innovative products. Ternium also develops new products and processes in cooperation with its industrial customers, prioritizing an early involvement scheme.

Ternium’s product research and development activities continued to focus mainly on the development of high-end flat steel products, aimed at consolidating our market positioning in the automotive, transportation, home appliance, agricultural and oil & gas sectors.

Industrial Products

During 2015, Ternium completed several projects aimed at increasing our product portfolio for our customers in the automotive, metal mechanic, home appliances, oil & gas and electric motors industries. These projects included the development of high-strength steel products for the automotive and metal mechanic industries, a new range of paint systems for the home appliance industry and new steel qualities suitable for coiled tubing and high-strength steel products for welded pipes applications for the oil & gas industry.

Ternium developed and certified certain steel products in Mexico and Argentina to supply vehicle manufacturers, for current and new models. The initiative enabled Ternium to increase its share in the high-end steel market by replacing imported supplies. With that same purpose, Ternium developed new products with high nitrogen content to be used in post heat-treatment condition, double-phase steels and special steel qualities for hydroforming.

During the year, Ternium developed new paint systems for home appliances manufacturers in Mexico and Argentina, aimed at yielding aesthetically pleasing results for applications in the high-end appliance market and new paint systems aimed at optimizing the manufacturing process.

14

With the aim of satisfying the demand derived from the operation of non-conventional natural gas fields, Ternium developed new steel qualities and expanded the size range of its product portfolio related to natural gas distribution projects.

In addition, to meet Ternium México’s slab supply requirements, we completed the development of new steel slab qualities to be produced at our new continuous casting facilities in Argentina.

Ternium bolstered its technology service program, which aims to strengthen the competitiveness of our metal-mechanic industry customers vis-à-vis imported products. These programs, carried out in combination with ProPymes, the Argentine Instituto Tecnológico de Buenos Aires (Buenos Aires Technology Institute) and truck trailer manufacturers, contributed to the development of high-strength steel-manufactured trailers.  The new models are lighter and have a higher freight capacity than traditional models, which leads to increased fuel consumption efficiency and vehicle amortization. In addition, together with a plate processor and its customer companies, Ternium is developing high-strength steel plates with the aim of enabling the design of ships and diverse capital goods with better performance.

Applied Research

Ternium’s product research and development plans are based on a continuing assessment of steel product performance and the emerging requirements of the industry, carried out in close collaboration with leading steel customers and institutions. Based on customer needs, we improve, adapt and create new applications and define future technology requirements at our facilities.

During 2015, we continued developing high-strength steel together with the Colorado School of Mines and the University of Pittsburgh, for applications in the pipe manufacturing and automotive industries. Moreover, Ternium continued with research projects together with the International Zinc Association and Canadian McMaster University on steel coatings performance. Developments included new coating technologies for several applications in the automotive industry and the optimization of processes through improvements in the galvanizing bath. Ternium also continued developing several projects together with the Mexican Centro de Investigación en Materiales Avanzados (Advanced Materials Research Center) seeking the development of new coatings, the Mexican Centro de Investigaciones y Estudios Avanzados (Advanced Research and Investigation Center) seeking improved hot-stamped steel coatings performance and electric steel efficiency performance, and the Instituto Argentino de Siderurgia (Argentine Steel Institute) for the development of high-strength steel casting and hot rolling processes for use in the automotive, transportation, agricultural and oil & gas industries.

Ternium also supported university research initiatives focused on the development of fundamental knowledge, which aims at acquiring the required know-how for the improvement of products and the development of new ones. During 2015, thirty students pursuing master and doctorate degrees in metallurgy participated in the development of different thesis and disserted in symposiums organized by Ternium. Joint projects together with universities included the Mexican Universidad Autónoma de Nuevo León (Nuevo León Autonomous University) basic research on steel and steel coatings mechanical and chemical performance, and the Mexican Universidad Autónoma de San Luis Potosí (San Luis Potosí Autonomous University) basic research on phase transformation of advanced steels.

Prospective Developments

During 2016, Ternium will continue focusing on the optimization of its current product range and the expansion of its market coverage, mainly for the industrial sector, and will intensify its early-involvement strategy.

During the fourth quarter of 2015, we completed the installation of a state-of-the-art run-out table in the hot-strip mill of the Churubusco unit. With this new cooling technology, Ternium will begin the development of new high-strength advanced steel products for the automotive industry in order to expand its hot-rolled steel product range for automotive, transportation and oil & gas industries applications, and to reduce production costs by purchasing less sophisticated slabs, enabled by the new configuration of the mill.

15

Human Resources and Communities

Ternium had approximately 16,700 employees as of December 31, 2015, a figure slightly lower than that at year-end 2014. During 2015, the company continued its medium-term personnel recruitment plans in the different regions, leaning mainly on the program for recently- graduated professionals, a program that has contributed a majority of our current management and technologist positions. In addition, a number of students from various Latin American universities continued carrying out internships in different areas of the organization. The purpose of these internships is to offer students and the universities a professional experience within an actual business environment, and to serve as a tool to identify talent and to promote acquaintance between the company and its potential employees.

Ternium continued investing in diverse training programs aimed at satisfying specific needs of different business areas. Of note in this period was the consolidation of our safety training program, an activity launched during 2014 involving all of Ternium’s areas and ranks, in order to ensure a proactive profile of safety behavior for our personnel. Ternium also carried on with the implementation of the continuous improvement and energy savings training programs, launched in 2014, and its leaders training program, an activity initiated in 2013 aimed at the development of specific skills required by personnel in leadership positions. Furthermore, during the year Ternium continued funding postgraduate studies in management and technology to meet the requirements of employees’ career plans.

With the purpose of fostering professional networks among Ternium employees, we incorporated a new activity to the training program for recently-graduated professionals. The activity promotes the gathering of youngsters who have already completed the program in order to help them enhance their professional network and at the same time recapitulate and consolidate the lessons learned. We consider these conferences a valuable tool to further enhance the profile of our future managers, technologists and experts.  With the same purpose, Ternium launched during the year a training activity for supervisors, focused on the analysis of the new features of their role, which allowed them to foster professional networks and a first-hand interaction with the company’s top managers. Furthermore, networking was also encouraged among college undergraduates, through the organization, during 2015 of plant tours and the hosting of conferences at different universities.

Ternium continued promoting financial support and contributions to various joint industry and university programs, including the endowment of Chairs at certain universities and the funding of scholarships and fellowship grants to talented undergraduate and graduate students of engineering and applied sciences in selected countries. Throughout the year, the company continued to host various courses for graduate and undergraduate students and fostered conferences on technical subjects related to the steel industry.

Ternium continued its work attendance program in Argentina, aimed at increasing work attendance and strengthening workers’ commitment and industrial culture. During the year, attendance indicators continued to improve with a consolidated 15% increase compared with attendance indicators recorded upon the program’s initiation in 2012. During 2015, Ternium expanded its flexible working programs, among other initiatives, to foster the quality of life of its employees inside and outside the workplace. The initiative included the construction of a new office for remote connection and the incorporation of a new day with flexible timetable, which now encompasses every Monday and Friday during summertime. Moreover, the company continued with its sports fostering programs, clinical examination and disease prevention campaigns, scholarship and leisure programs for the employees’ children, and loan programs for home improvement and special situations.

16

During November 2015, Ternium set up a new labor climate survey. Eighty-five percent of our white-collar employees and supervisors participated in the initiative. This tool brought about the opportunity for collective consideration of our working conditions, which allows identifying strengths and opportunities and, therefore, to feed our labor climate improvement programs. During the year Ternium set up its first labor climate survey for blue collar workers at its Colombian and Guatemalan units.

Community Relations

Ternium’s community development programs in 2015 kept their focus on deepening the company’s ties with neighboring communities and on helping them strengthen. We work together with local institutions to determine priorities and develop projects in the areas of education and social integration, health and sports, and culture dissemination.

During 2015, Ternium launched a project to build a technical school near its new Pesquería unit in Monterrey, Mexico. The land has already been bought and official proceedings have started before the educational authorities of the state of Nuevo León. The school is expected to open during August 2016. In addition, during the year a Ternium-sponsored technical module continued to be taught in some technical schools of the state of Nuevo León. This module has been designed to teach the skills required to perform operational and maintenance works in steelmaking facilities and other industries. In addition, Ternium continued supporting local technical schools, including activities such as the upgrading of teachers’ skills and school management, and improvements in school infrastructure and equipment. All these initiatives aim at securing Ternium’s access to a trained labor force in the medium term.

Likewise, in the Ramallo and Ensenada industrial areas of Argentina, Ternium continued supporting a program aimed at strengthening local technical schools, an endeavor initiated in 2006 involving the Argentine government, Ternium, and several technical schools near Ternium’s facilities, that resulted in a significant improvement of the graduates’ skills in connection with the required profile for the industrial labor market. Under this program, Ternium continued providing technical scholarships at its workshops and training at its operating areas in the industrial centers, and carried on technical training programs in the schools. In addition, the company continued cooperating with school infrastructure improvement activities together with the Hermanos Agustín y Enrique Rocca foundation, including the expansion and equipment of workshops, classrooms and administrative offices.

Ternium continued financing programs aimed at the improvement of basic education. In Mexico, we supported basic schools located in San Nicolás de los Garza and Pesquería, and workshop academies in Pihuamo, Aquila and Alzada. Likewise, in Argentina, Ternium continued supporting a program launched in 2013 in a basic school located in Ramallo. Furthermore, during 2015 Ternium continued a volunteer program, launched in 2014, to restore and refurbish several community educational centers in Pesquería, Mexico, in San Nicolás and Florencio Varela, Argentina, and in Villa Nueva, Guatemala. Works under these programs included maintenance, restoration and enhancement of school infrastructure with the participation of Ternium’s employees and the involvement of the schools’ teachers and managers, students’ relatives, and neighbors. During 2016 we expect to launch this same volunteer program in the cities of Barranquilla and Manizales, Colombia. The program was supported and financed by Ternium and the Hermanos Agustín y Enrique Rocca foundation, as well as by other companies operating in the steel industry value chain.

Also, together with the Hermanos Agustín y Enrique Rocca foundation, Ternium continued supporting the financing of scholarships for high performance students from local communities in several countries. During 2015, this program was also implemented in Villa Nueva, Guatemala.

During 2015, Ternium organized health fairs in different cities aimed at increasing the community’s awareness and basic understanding of how to prevent and take care of various health issues. In addition, Ternium continued supporting a basic health care unit in Aquila, Mexico. Among other activities the company organized, together with local institutions, its annual local marathons, cinema festivals and sport championship leagues involving schools in neighboring communities.

17

Environment, Health and Safety

Ternium reaffirms environmental protection and the individual’s health and safety as a paramount value, holding its personnel responsible for the observance of this value and encouraging the promotion and sharing of related policies with the company’s value chain and with the communities where it operates. Ternium’s environment, health and safety policies abide by the World Steel Association’s policy statement and its principles for excellence in safety and occupational health, and by the ISO 14000 environmental management international standard directives.

Ternium participates in the World Steel Association (worldsteel) forums. These forums, which are focused on sustainable development, environment, safety and occupational health, develop consistent measurements, statistics and databases of selected variables aiming to enable steelmaking companies to benchmark performance, share state-of-the-art best practices and ultimately set industrial process improvement plans. These forums include the Climate Change Policy, Life Cycle Assessment, Carbon Dioxide Data Collection Program, Water Management, Sustainability Reporting, and Safety and Occupational Health Committee groups and their working subgroups. During 2015, activities continued in relation to the sharing of best practices among Ternium’s facilities.

Ternium’s operations in Mexico revalidated in 2015 their clean industry certificates under the Mexican Government’s National Environmental Voluntary Program, including its steel and in-use mining facilities. In addition, we made progress on our environmental and safety investment plan at our Guerrero unit and obtained ISO 14001 certificates for several facilities in Mexico, Argentina and Guatemala. Furthermore, during the year, we completed some projects under our recently launched energy efficiency program, while several others continue advancing. During the year, we extended the diagnosis and identification of process hazards at critical processes, now encompassing our steel and mining facilities in Mexico, Argentina and Colombia, and obtained certificates under the OHSAS 18001 safety standard for our main facilities in Mexico and Argentina.

Environmental and safety investment plan at Ternium’s Guerrero unit

During 2015, Ternium continued advancing its investment plan at our Guerrero unit. Launched in 2013, this plan encompasses improvements in industrial safety and environmental sustainability, as well as facility overhauls. These investments were designed to enhance safety and environmental measures in order to bring the Guerrero plant up to the most stringent norms and standards in the world.

Guerrero’s direct reduction units improved their process control standards and achieved higher processing yields during 2015, following the completion of the technological upgrade of its iron ore feeding systems and the commissioning of a new briquetting facility for the recycling of metallic fines. Other environmental-improvement projects advanced during the year included a new hydrochloric acid regeneration plant, which stores and processes acid used by the pickling lines of the cold-rolling mills, and the installation of a secondary de-dusting system in the steel shop, which enhances emission control.

In addition, we made progress on improvement projects related to the processing and handling of steel slag in the steel shop. Other ongoing complementary investments include the replacement of pickling tanks, improvement in the treatment of sludge and upgrading of raw material storage yards, as well as safety improvement for vehicular traffic.

ISO 14001 certification project

Under our ISO 14001 certification project, Ternium obtained during the year certificates for its Pesquería, Tenigal and Puebla units in Mexico, its Villa Nueva unit in Guatemala, and its Canning and Haedo units in Argentina. Ternium expects to further obtain ISO 14001 certificates during 2016 for its Guerrero, Norte and Universidad units in Mexico, its Manizales unit in Colombia and its San Nicolás unit in Argentina. By year-end 2016, we expect to achieve an ISO 14001 completion rate of approximately 90%. The standard was created by ISO, the International Organization for Standardization, an international network of national standardization institutes that work together with governments, the industry and consumer representatives, with the purpose of supporting the implementation of an environment management plan in any public and private organization.

18

¹⁴ Injuries frequency rate refers to total quantity of injuries per million of hours worked.

¹⁵ Lost time injuries frequency rate refers to quantity of day-loss injuries per million of hours worked.

Emissions Control

As part of its ongoing program to reduce dust emissions, during 2015 Ternium commissioned new equipment in several facilities in Argentina, including, in the coking batteries, a new smokeless coal charging car that reduces particulate matter emissions during the coal charging process and, in the blast furnaces, new equipment for emissions abatement during the pig iron pouring process.

Originally expected to be commissioned during 2015, Ternium expects to commission during 2016 a new de-dusting system for the slag pouring process of torpedo ladle cars used in the transportation of liquid pig iron from the blast furnaces to the steel shop in Argentina. In addition, Ternium intends to commission a new scrap shredder for our scrap-based steel shop in Colombia, which is expected to enable a reduction in emissions through a higher availability of cleaner and dimensioned steel scrap.

These activities are part of an ongoing program that monitors our facilities, aimed at maximizing the efficient use of energy resources, the re-use of by-products and the appropriate treatment and disposal of wastes, air emissions and wastewater.

20

Corporate Governance

The Company

The Company is a public limited liability company (société anonyme) organized under the laws of the Grand-Duchy of Luxembourg. Its object and purpose, as set forth in Article 2 of its articles of association, is the taking of interests, in any form, in corporations or other business entities, and the administration, management, control and development thereof. The Company is registered under the number B98 668 in Luxembourg’s Registre du Commerce et des Sociétés.

Shares; Shareholders’ Meetings

The Company’s authorized share capital is fixed by the Company’s articles of association, as amended from time to time, with the approval of shareholders at an extraordinary general shareholders’ meeting. The Company has an authorized share capital of a single class of 3.5 billion shares having a nominal value of $1.00 per share. The general extraordinary meeting of shareholders held on May 6, 2015, renewed the validity of the Company’s authorized share capital until 2020. As of December 31, 2015, there were 2,004,743,442 shares issued and outstanding.

The Company’s articles of association authorize the board of directors or any delegate(s) duly appointed by the board of directors, to issue shares within the limits of its authorized share capital against contributions in cash, contributions in kind or by way of incorporation of available reserves, at such times and on such terms and conditions as the board of directors or its delegates may determine. The extraordinary general meeting of shareholders held on May 6, 2015 renewed this authorization through 2020.

Under Luxembourg law, the Company’s existing shareholders have a pre-emptive right to subscribe for any new shares issued for cash. The Company’s shareholders have authorized the board of directors to waive, suppress or limit such pre-emptive subscription rights and related procedures to the extent it deems such waiver, suppression or limitation advisable for any issue or issues of shares within the authorized share capital. However, our articles of association provide that, if and from the date the Company’s shares are listed on a regulated market (and only for as long as they are so listed), any issuance of shares for cash within the limits of the authorized share capital shall be subject to the pre-emptive subscription rights of the then-existing shareholders, except in the following cases (in which cases no pre-emptive rights shall apply):

21

Our articles of association provide that our annual ordinary general shareholders’ meetings must take place in Luxembourg on the first Wednesday of every May at 2:30 p.m., Luxembourg time. At these meetings, our annual financial statements are approved and the members of our board of directors are elected. No attendance quorum is required at annual ordinary general shareholders’ meetings and resolutions are adopted by a simple majority vote of the shares represented at the meeting. There are no limitations currently imposed by Luxembourg law on the rights of non-resident shareholders to hold or vote the Company’s shares.

On May 6, 2015, the annual general meeting of shareholders of Ternium S.A. authorized the board of directors to delegate the management of the Company’s day-to-day business and the authority to represent and bind the Company with his sole signature in such day-to-day management to Mr. Daniel Agustin Novegil, and appointed Mr. Novegil as chief executive officer (administrateur délégué) of the Company. Following the adjournment of such annual general meeting, the board of directors resolved to delegate such management and representation authority to Mr. Novegil and to reappoint Mr. Novegil as chief executive officer (administrateur délégué) of the Company.

American Depositary Shares (ADSs)

Each ADS represents ten shares. Holders of ADSs only have those rights that are expressly granted to them in the deposit agreement dated January 31, 2006, among the Company, The Bank of New York Mellon (formerly The Bank of New York), as depositary, and all owners and beneficial owners from time to time of ADRs of the Company. ADS holders may not attend or directly exercise voting rights in shareholders’ meetings, but may instruct the depositary how to exercise the voting rights for the shares which underlie their ADSs. Holders of ADSs maintaining non-certificated positions must follow instructions given by their broker or custodian bank.

Share and ADS Repurchases

The Company may repurchase its own shares in the cases and subject to the conditions set by the Luxembourg law of August 10, 1915, as amended. The ordinary general shareholders’ meeting held on May 6, 2015 authorized the Company and the Company’s subsidiaries to acquire shares of the Company, including shares represented by American Depositary Shares, or ADSs, at such times and on such other terms and conditions as may be determined by the board of directors of the Company or the board of directors or other governing body of the relevant Company subsidiary, provided that, among other conditions, the maximum number of shares, including shares represented by ADSs, acquired pursuant to the authorization may not exceed 10% of the Company’s issued and outstanding shares or, in the case of acquisitions made through a stock exchange in which the shares or ADSs are traded, such lower amount as may not be exceeded pursuant to any applicable laws or regulations of such market, and that the purchase price per ADS to be paid in cash may not exceed 125% (excluding transaction costs and expenses), nor may it be lower than 75% (excluding transaction costs and expenses), in each case of the average of the closing prices of the ADSs in the New York Stock Exchange during the five trading days in which transactions in the ADSs were recorded in the New York Stock Exchange preceding (but excluding) the day on which the ADSs are purchased. In the case of purchases of shares other than in the form of ADSs, the maximum and minimum per share purchase prices shall be equal to the prices that would have applied in case of an ADS purchase pursuant to the formula above divided by the number of underlying shares represented by an ADS at the time of the relevant purchase.

As of the date of this report, Ternium held 41,666,666 of its own shares. Those shares were purchased from Usiminas on February 15, 2011, concurrently with the closing of an underwritten public offering by Usiminas of Ternium ADSs.

Board of Directors

The Company’s articles of association provide for a board of directors consisting of a minimum of five members (when the shares of the Company are listed on a regulated market, as they currently are) and a maximum of fifteen. The board of directors is vested with the broadest powers to act on behalf of the Company and accomplish or authorize all acts and transactions of management and disposition that are within its corporate purpose and are not specifically reserved in the articles of association or by applicable law to the general shareholders’ meeting.

22

The board of directors is required to meet as often as required by the interests of the Company and at least four times per year. In 2015, the Company’s board of directors met eight times. A majority of the members of the board of directors in office present or represented at each board of directors’ meeting constitutes a quorum, and resolutions may be adopted by the vote of a majority of the directors present or represented. In case of a tie, the chairman is entitled to cast the deciding vote.

Directors are elected at the annual ordinary general shareholders’ meeting to serve one-year renewable terms, as determined by the general shareholders’ meeting. The general shareholders’ meeting may dismiss all or any one member of the board of directors at any time, with or without cause, by resolution passed by a simple majority vote. The Company’s current board of directors is composed of eight directors, three of whom are independent directors.

Audit Committee

The board of directors has an audit committee consisting of three independent directors. The members of the audit committee are not eligible to participate in any incentive compensation plan for employees of the Company or any of its subsidiaries. Under the Company’s articles of association and the audit committee charter, the audit committee:

• assists the board of directors in fulfilling its oversight responsibilities relating to the integrity of the financial statements of the Company, including periodically reporting to the board of directors on its activity and the adequacy of the Company’s systems of internal control over financial reporting;

• is responsible for making recommendations for the appointment, compensation, retention and oversight of, and assessment of the independence of the Company’s independent auditors;

• reviews material transactions between the Company or its subsidiaries with related parties (other than transactions that were reviewed and approved by the independent members of the board of directors or other governing body of any subsidiary of the Company) to determine whether their terms are consistent with market conditions or are otherwise fair to the Company and its subsidiaries; and

• performs such other duties imposed by applicable laws and regulations of the regulated market or markets in which the shares of the Company are listed, as well as any other duty entrusted to it by the board of directors.

The audit committee has the authority to conduct any investigation appropriate to fulfilling its responsibilities, and has direct access to the Company’s internal and external auditors as well as the Company’s management and employees and, subject to applicable laws, its subsidiaries.

Auditors

The Company’s articles of association require the appointment of at least one independent auditor chosen from among the members of the Luxembourg Institute of Independent Auditors. Auditors are appointed by the general shareholders’ meeting, on the audit committee’s recommendation, through a resolution passed by a simple majority vote. Shareholders may determine the number and the term of the office of the auditors at the ordinary general shareholders’ meeting, provided however that an auditor’s term shall not exceed one year and that any auditor may be reappointed or dismissed by the general shareholders’ meeting at any time, with or without cause. As part of their duties, the auditors report directly to the audit committee.

23

PricewaterhouseCoopers, Société coopérative (formerly PricewaterhouseCoopers S.àr.l.), Cabinet de révision agréé, was appointed as the Company’s independent auditor for the fiscal year ended December 31, 2015, at the ordinary general shareholders’ meeting held on May 6, 2015.

24

Board of Directors and Senior Management

Board of Directors

Chairman

Paolo Rocca

Ubaldo Aguirre (*)

Roberto Bonatti

Carlos Condorelli

Vincent Decalf (*)

Adrián Lajous (*)

Daniel Novegil

Gianfelice Rocca

Secretary

Arturo Sporleder

(*) Audit Committee Members

Senior Management

Chief Executive Officer

Daniel Novegil

Chief Financial Officer

Pablo Brizzio

Mexico Area Manager

Máximo Vedoya

Siderar Executive Vice President

Martín Berardi

International Area Manager

Héctor Obeso Zunzunegui

Planning and Operations General Director

Oscar Montero

Engineering and Environment Director

Ricardo Miguel Alí

Human Resources Director

Rodrigo Piña

Chief Information Officer

Roberto Demidchuck

Quality and Product Director

Rubén Herrera

25

Investor Information

26

Management’s Discussion and Analysis of Financial Condition and Results of Operations

The review of Ternium’s financial condition and results of operations is based on, and should be read in conjunction with, the Company’s consolidated financial statements as of December 31, 2015 and 2014 and for the years ended December 31, 2015, 2014 and 2013 (including the notes thereto), which are included elsewhere in this annual report.

The financial and operational information contained in this annual report is based on the operational data and consolidated financial statements of the Company, which were prepared in accordance with IFRS and IFRIC interpretations as issued by IASB and adopted by the EU, and presented in U.S. dollars ($) and metric tons.

Overview

Apparent steel use in Mexico increased 5.8% year-over-year to approximately 24.2 million tons in 2015, supported by a broad expansion of the Mexican industrial sector and continued improvement of the construction sector during the year. Mexico’s GDP increased 2.5% year-over-year, evidencing a moderate acceleration in economic activity versus the prior year. In Argentina, apparent steel use increased 4.9% year-over-year to approximately 5.2 million tons, supported by an improved construction sector, partially offset by continued weakness in the industrial sector.  In Colombia, GDP continued growing in 2015, although at a lower pace, with relatively good performance in the construction and manufacturing sectors, and lower activity in the oil & gas sector.

Ternium’s operating income in 2015 was $639.3 million, $416.8 million lower than operating income in 2014. Steel shipments increased by 219,000 tons year-over-year, mainly as a result of a 301,000 ton increase in Mexico and a 41,000 ton increase in the Southern Region, partially offset by a 124,000 ton decrease in Other Markets. Operating margin decreased, mainly reflecting $108 lower steel revenue per ton, partially offset by $70 lower operating cost per ton. Steel revenue per ton decreased as a result of lower steel prices in Ternium’s main steel markets, partially offset by a higher value added product mix. The decrease in operating cost per ton was mainly due to lower purchased slabs, raw material and energy costs.

Net income in 2015 was $59.8 million, compared to a $104.2 million net loss in 2014. Both years were affected by impairments to the recoverable value of Ternium’s investment in Usiminas, of $191.9 million and $739.8 million in 2015 and 2014, respectively. The $164.0 million higher result in the year-over-year comparison was mainly due to the above mentioned lower impairment of Ternium’s investment in Usiminas and to lower income tax expenses, partially offset by lower operating income and higher net financial expenses.

Net Sales

Net sales in 2015 were $7.9 billion, 10% lower than net sales in 2014. The following table shows Ternium’s consolidated net sales for 2015 and 2014. For a discussion on the drivers of the increase or decrease of sales in each region, see “Business Review.”

27

Cost of sales

Cost of sales was $6.5 billion in 2015, a decrease of $447.9 million compared to 2014. This was principally due to a $477.2 million, or 9%, decrease in raw material and consumables used, mainly reflecting lower iron ore, coking coal, scrap, energy and purchased slabs costs, partially offset by a 2% increase in shipments; and to a $29.3 million increase in other costs, including a $23.0 million increase in maintenance expenses and a $17.9 million increase in depreciation of property, plant and equipment and amortization of intangible assets, partially offset by a $9.1 million decrease in services and fees and a $2.9 million decrease in insurance expenses.

Selling, general and administrative expenses

Selling, General & Administrative (SG&A) expenses in 2015 were $770.3 million, or 9.8% of net sales, a decrease of $46.2 million compared to 2014, mainly as a result of lower labor cost, freight and transportation expenses, and services and other expenses.

Other net operating income

Other net operating income in 2015 was a $9.5 million gain, lower than the $71.8 million gain in 2014. Other net operating income in 2014 included a $57.5 million income recognition on insurance recovery related to Ternium’s subsidiary Siderar.

Operating income

Operating income in 2015 was $639.3 million, or 8.1% of net sales, compared to operating income of $1.1 billion, or 12.1% of net sales, in 2014.

28

Steel reporting segment

The steel segment’s operating income was $670.7 million in 2015, a decrease of $340.7 million compared to 2014, reflecting lower net sales and the above mentioned lower other net operating income, partially offset by lower operating cost.

Net sales of steel products in 2015 decreased 9% compared to 2014, reflecting a $108 decrease in steel revenue per ton shipped, partially offset by a 219,000 ton increase in shipments. Revenue per ton decreased, reflecting lower steel prices in Ternium´s main steel markets, partially offset by a better product mix in Mexico. The increase in shipments in 2015 was mainly due to higher shipments in Mexico and the Southern Region, partially offset by lower shipments in Other Markets.

Operating cost decreased 7% due to a 9% decrease in operating cost per ton, partially offset by a 2% increase in shipments. The decrease in operating cost per ton was mainly due to lower raw material, purchased slabs and energy costs.

Mining reporting segment

The mining segment’s operating result was a loss of $24.5 million in 2015, compared to a $42.3 million gain in 2014, mainly reflecting lower iron ore sales, partially offset by a lower operating cost.

Net sales of mining products in 2015 were 35% lower than in 2014, reflecting a 31% lower revenue per ton and 6% lower shipments.

29

Operating cost decreased 16% year-over-year, mainly due to the above mentioned 6% decrease in shipment volumes and an 11% decrease in operating cost per ton. The decrease in operating cost per ton was mainly the result of lower energy costs and freight and transportation expenses.

EBITDA

EBITDA in 2015 was $1.1 billion, or 13.6% of net sales, compared with $1.5 billion, or 16.9% of net sales, in 2014.

Net financial results

Net financial results were a $99.4 million loss in 2015, compared with a $69.5 million loss in 2014. Ternium’s net interest results totaled a loss of $81.5 million in 2015, compared to a loss of $110.2 million in 2014, reflecting lower average indebtedness and weighted average interest rates.

Net foreign exchange results were a loss of $5.2 million in 2015 compared to a gain of $26.7 million in 2014. The loss in 2015 was primarily associated with the negative impact of the Argentine Peso’s 34% depreciation against the U.S. dollar on Ternium’s Argentine subsidiary Siderar’s net short U.S. dollar position as above mentioned (Siderar’s functional currency is the Argentine Peso), partially offset by the effect of the Mexican Peso’s 14% depreciation against the U.S. dollar on a net short local currency position in Ternium’s Mexican subsidiaries (Ternium’s Mexican subsidiaries’ functional currency is the U.S. dollar).

Change in fair value of financial instruments included in net financial results was a $10.2 million loss in 2015 compared with a $17.8 million gain in 2014.

Equity in results of non-consolidated companies

Equity in results of non-consolidated companies was a loss of $272.8 million in 2015, compared to a loss of $751.8 million in 2014. Both years were affected by impairments to the recoverable value of Ternium’s investment in Usiminas, of $191.9 million and $739.8 million in 2015 and 2014, respectively. For further information on our investment in Usiminas, see note 3 to our consolidated financial statements included elsewhere in this annual report.

Income tax expense

Income tax expense in 2015 was $207.3 million, compared to an income tax expense of $339.1 million in 2014. The relatively high effective tax rate on both periods was mainly due to non-taxable losses stemming from the investment in Usiminas and to the depreciation of the Mexican peso against the U.S. dollar, which reduces, in U.S. dollar terms, the tax base used to calculate deferred tax at our Mexican subsidiaries (which have the U.S. dollar as their functional currency), among other non-cash effects on deferred taxes.

Net gain attributable to non-controlling interest

Net gain attributable to non-controlling interest in 2015 was $51.7 million, compared to a net gain of $94.6 million in 2014, mainly due to a lower result attributable to non-controlling interest in Ternium’s subsidiary Siderar.

30

Liquidity and capital resources

We obtain funds from our operations, as well as from short-term and long-term borrowings from financial institutions. These funds are primarily used to finance our working capital and capital expenditures requirements, as well as our acquisitions. We hold money market investments, time deposits and variable-rate or fixed-rate securities. During 2015 we decreased our financial indebtedness, from $2.2 billion at the end of 2014 to $1.5 billion at the end of 2015.

Management believes that funds from operations will be sufficient to satisfy our current working capital needs, service our debt in the foreseeable future and pay approved dividends. In December 2014, Consorcio Peña Colorada negotiated a $200 million loan with Nacional Financiera S.A., a Mexican development bank, maturing in March 2025. Disbursements under this facility began in March 2015. Ternium has not negotiated additional committed credit facilities. However, Ternium has negotiated non-committed credit facilities and management believes it has adequate access to the credit markets. Management also believes that our liquidity and capital resources give us adequate flexibility to manage our planned capital spending programs and to address short-term changes in business conditions.

The following table shows the changes in our cash and cash equivalents for each of the periods indicated below:

During 2015, Ternium’s primary source of funding was cash provided by operating activities and cash on hand. Cash and cash equivalents as of December 31, 2015 were $151.5 million, a $61.8 million decrease from $213.3 million at the end of the previous year. In addition to cash and cash equivalents, as of December 31, 2015, we held other investments with maturity of more than three months for a total amount of $237.2 million, increasing $87.2 million compared with December 31, 2014.

Operating activities

Net cash provided by operating activities was $1.3 billion in 2015, higher than the $505.8 million recorded in 2014, including a decrease in working capital of $509.1 million in 2015 and an increase in working capital of $551.0 million in 2014.

The decrease in working capital during 2015 was the result of a $349.7 million decrease in inventories, an aggregate $125.7 million net decrease in trade and other receivables and an aggregate $33.8 million net increase in accounts payable and other liabilities.

31

Inventories decreased as shown in the following table:

Investing activities

Net cash used in investing activities in 2015 was $572.1 million, primarily attributable to the following:

•  capital expenditures of $466.6 million;

•  $85.9 million increase in other investments; and

•  Investment in, and loans granted to, Techgen totaling $20.0 million

Financing activities

Net cash used in financing activities was $809.6 million in 2015, primarily attributable to the following:

•  net repayments of borrowings of $557.1 million in 2015;

•  total dividend payments of $209.4 million ($176.7 million to the Company’s shareholders and $32.7 million to non-controlling interest); and

•  a payment of $74.0 million for the acquisition of the remaining minority stake in Ferrasa

Principal sources of funding

Funding policy

Management’s policy is to maintain a high degree of flexibility in operating and investment activities by maintaining adequate liquidity levels and ensuring access to readily available sources of financing. We obtain financing primarily in U.S. dollars, Argentine pesos and Colombian pesos. Whenever feasible, management bases its financing decisions, including the election of currency, term and type of the facility, on the intended use of proceeds for the proposed financing and on costs. For information on our financial risk management please see note 28 “Financial risk management” to our consolidated financial statements included in this annual report.

Financial liabilities

Our financial liabilities consist of loans with financial institutions and some pre-accorded overdraft transactions. As of December 31, 2015, these facilities were mainly denominated in U.S. dollars (89.0% of total financial liabilities) and Argentine pesos (7.3% of total financial liabilities). Total financial debt (inclusive of principal and interest accrued thereon) decreased by $643.8 million in the year, from $2.2 billion as of December 31, 2014, to $1.5 billion as of December 31, 2015. As of December 2015, current borrowings were 60.1% of total borrowings, none of which corresponded to borrowings with related parties. Net financial debt (total financial debt less cash and cash equivalents plus other investments) decreased by $669.2 million in 2015, from $1.8 billion as of December 31, 2014, to $1.1 billion as of December 31, 2015. Net financial debt as of December 31, 2015, equaled 1.1 times 2015 EBITDA.

32

Ternium’s weighted average interest rate for 2015 was 3.37%, compared to 4.64% in 2014. This rate was calculated using the rates set for each instrument in its corresponding currency and weighted using the U.S. dollar-equivalent outstanding principal amount of each instrument as of December 31, 2015.

Most significant borrowings and financial commitments

Our most significant borrowings as of December 31, 2015 were those incurred under Ternium México’s 2013 syndicated loan facility, intended to improve our debt profile, and under Tenigal’s syndicated loan facility, in order to finance the construction of a hot-dipped galvanizing mill in Pesquería, Mexico.

$ million

The main covenants in our syndicated loan agreements are limitations on liens and encumbrances, limitations on the sale of certain assets and compliance with financial ratios (e.g., leverage ratio and interest coverage ratio). As of December 31, 2015, we were in compliance with all covenants under our loan agreements.

Our most significant financial commitments as of December 31, 2015, were

·         A corporate guarantee covering 48% of the obligations of Techgen under a syndicated loan agreement. Proceeds from the syndicated loan were used by Techgen for the construction of its facilities. As of December 31, 2015, the $800 million loan was fully disbursed, being Ternium S.A.’s guaranteed amount approximately $384 million. The main covenants under the corporate guarantee are limitations on the sale of certain assets and compliance with financial ratios (e.g. leverage ratio). As of December 31, 2015, Techgen and Ternium S.A. were in compliance with all of their covenants under this syndicated loan agreement.

·         A corporate guarantee covering 48% of the outstanding value of transportation capacity agreements entered into by Techgen with Kinder Morgan Gas Natural de Mexico, S. de R.L. de C.V. and Kinder Morgan Tejas Pipeline LLC for a natural gas purchasing capacity of 150,000 million btu per day starting on June 1, 2016 and ending on May 31, 2036. As of December 31, 2015, the outstanding value of this commitment was approximately $285 million. Our exposure under the guarantee in connection with these agreements amounts to $136.7 million, corresponding to 48% of the outstanding value of the agreements as of December 31, 2015.

For further information on our derivative financial instruments, borrowings and financial commitments please see notes 22, 23, 24 and 28 to our consolidated financial statements included in this annual report.

Recent Developments

Annual Dividend Proposal

On February 23, 2016, the Company’s board of directors proposed that an annual dividend of $0.09 per share ($0.90 per ADS), or approximately $180.4 million in the aggregate, be approved at the Company’s annual general shareholders’ meeting, which is scheduled to be held on May 4, 2016. If the annual dividend is approved, it will be paid on May 13, 2016.

INDEX TO THE CONSOLIDATED FINANCIAL STATEMENTS

Audit report

To the Shareholders of

Ternium S.A.

Report on the consolidated financial statements

We have audited the accompanying consolidated financial statements of Ternium S.A. and its subsidiaries, which comprise the consolidated statement of financial position as at 31 December 2015, and the consolidated income statement, consolidated statement of comprehensive income, consolidated statement of changes in equity and consolidated statement of cash flows for the
year then ended, and a summary of significant accounting policies and other explanatory information.

Board of Directors’ responsibility for the consolidated financial statements

The Board of Directors is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with International Financial Reporting Standards as issued by
the International Accounting Standards Board and as adopted by the European Union, and for such internal control as the Board of Directors determines is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.

Responsibility of the “Réviseur d’entreprises agréé”

Our responsibility is to express an opinion on these consolidated financial statements based on our audit. We conducted our audit in accordance with International Standards on Auditing as adopted for Luxembourg by the “Commission de Surveillance du Secteur Financier”. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on the judgment of the “Réviseur d’entreprises agréé” including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, the “Réviseur d’entreprises agréé” considers internal control relevant to the entity’s preparation and fair presentation of the consolidated financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the Board of Directors, as well as evaluating 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.

 

Opinion

In our opinion, these consolidated financial statements give a true and fair view of the consolidated financial position of Ternium S.A. and its subsidiaries as of 31 December 2015, and of its consolidated financial performance and its consolidated cash flows for the year then ended in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board and as adopted by the European Union.

Report on other legal and regulatory requirements

The management report, which is the responsibility of the Board of Directors, is consistent with the consolidated financial statements.

PricewaterhouseCoopers, Société coopérative                                                 Luxembourg, 29 March 2016

Represented by

Mervyn R. Martins

Consolidated Income Statements

The accompanying notes are an integral part of these consolidated financial statements.

Consolidated Statements of Comprehensive Income