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 5/5/2011

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

The attached material is being furnished to the Securities and Exchange Commission pursuant to Rule 13a-16 and Form 6-K under the Securities Exchange Act of 1934, as amended.

This report contains Terniums’ notice of Annual General Meeting of Shareholders and of an Extraordinary General Meeting of Shareholders, the Shareholder Meeting Brochure and Proxy Statement and Ternium's 2010 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/ Raúl Darderes                

Name: Raúl Darderes

Title: Secretary to the Board of Directors

Dated: May 5, 2011

May 5, 2011

Dear Ternium Shareholders and ADR holders,

I am pleased to invite you to attend the Annual General Meeting of Shareholders and an Extraordinary General Meeting of Shareholders of TERNIUM S.A. (the “Company”), both to be held on Wednesday, June 1, 2011, at 29, avenue de la Porte-Neuve, L-2227, Luxembourg. The Annual General Meeting of Shareholders will begin promptly at 2:30 p.m. (Luxembourg time) and the Extraordinary General Meeting of Shareholders will be held immediately after the adjournment of the Annual General Meeting of Shareholders.

At the Annual General Meeting of Shareholders, 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. Subsequently, the Extraordinary General Meeting will resolve on the proposed amendments to the Company’s articles of association to adapt them to the abolishment of the law of July 31, 1929, and the consequent termination of the Company’s special status thereunder, and to change the date of the Annual General Meeting of Shareholders so that it be held on the first Wednesday of May of each year.

The Notice and Agenda for both meetings, the Shareholder Meeting Brochure and Proxy Statement and the Company’s 2010 annual report (which includes the Company’s consolidated financial statements as of December 31, 2010 and 2009 and for the years ended December 31, 2010, 2009 and 2008, and the Company’s annual accounts as at December 31, 2010, together with the board of directors’ and the independent auditors’ reports thereon), are available free of charge at the Company’s registered office in Luxembourg and on our website at http://www.ternium.com/en/investor/.  They may also be obtained upon request, by calling +352 26 68 31 52 or +1 800 555 2470.

Even if you only own a few shares or ADRs, I hope that you will exercise your right to vote at both meetings.  You can vote your shares personally or by proxy. If you choose to vote by proxy, you may use the enclosed dedicated proxy form. 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.

Yours sincerely,

Paolo Rocca

Chairman

                                   THE BANK OF NEW YORK MELLON

                                                                               101 Barclay Street

                                                                            New York, NY 10286

                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 and an Extraordinary General Meeting of Shareholders will be held on June 1, 2011. The Annual General Meeting of Shareholders will begin promptly at 2:30 p.m. (Luxembourg time) and the Extraordinary General Meeting of Shareholders of the Company will be held immediately after the adjournment of the Annual General Meeting of Shareholders. Both meetings will take place at 29, avenue de la Porte-Neuve, L-2227, Luxembourg.  A copy of the Company’s Notice of Annual General Meeting of Shareholders and Extraordinary General Meeting of Shareholders, which includes the agendas for such meetings, is available on the Company’s website at http://www.ternium.com/en/investor/.

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 Annual General Meeting of Shareholders and of an Extraordinary General Meeting of Shareholders, the Shareholder Meeting Brochure and Proxy Statement and the Company’s 2010 annual report (which includes the Company’s consolidated financial statements as of December 31, 2010 and 2009 and for the years ended December 31, 2010, 2009 and 2008; and the Company’s annual accounts as at December 31, 2010, together with the Board of Directors’ and independent auditors’ reports thereon), are available on the Company’s website at http://www.ternium.com/en/investor/  and may also be obtained upon request at +352 26 68 31 52 or +1-800-555-2470 (the latter number is toll free if you call from the United States). They are also available free of charge at the Company’s registered office in Luxembourg.

Each holder of ADRs as of April 29, 2011 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 Shareowner Services, P.O. Box 3549, S. Hackensack New Jersey 07606-9249, U.S.A. Attention: Proxy Processing, by 5:00 p.m., New York City time, on May 26, 2011. If the Depositary receives properly completed instructions by 5:00 p.m., New York City time, on May 26, 2011, 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 5:00 p.m., New York City time, on May 26, 2011, 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 5:00 p.m., New York City time, on May 26, 2011. 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 April 29, 2011, until May 27, 2011. 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 5:00 P.M. (NEW YORK CITY TIME) ON MAY 26, 2011. 

                                                           THE BANK OF NEW YORK MELLON

                                                                     Depositary 

May 5, 2011

New York, New York

TERNIUM S.A.

Société Anonyme

29, avenue de la Porte-Neuve

L-2227, Luxembourg

RCS Luxembourg B 98 668

_____________________

Notice of the Annual General Meeting of Shareholders to be held on June 1, 2011 at 2:30 p.m. (Luxembourg time) and of an Extraordinary General Meeting of Shareholders to be held immediately after the adjournment of the Annual General Meeting of Shareholders.

Notice is hereby given to shareholders of TERNIUM S.A. (the “Company”) that the Annual General Meeting of Shareholders of the Company will be held on June 1, 2011, at 2:30 p.m. (Luxembourg time) and an Extraordinary General Meeting of Shareholders of the Company will be held immediately after the adjournment of the Annual General Meeting of Shareholders of the Company. Both meetings (the “Meetings”) will be held at 29, avenue de la Porte-Neuve, L-2227, Luxembourg. At the Annual General Meeting of Shareholders, shareholders will vote on the items listed below under the heading “Agenda for the Annual General Meeting of Shareholders.” At the Extraordinary General Meeting of Shareholders, shareholders will vote on the items listed below under the heading “Agenda for the Extraordinary 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, 2010 and 2009 and for the years ended December 31, 2010, 2009 and 2008.  

2.                   Consideration of the Board of Directors’ and independent auditor’s reports on the Company’s annual accounts. Approval of the Company’s annual accounts as at December 31, 2010.  

3.                   Allocation of results and approval of dividend payment.

4.                   Discharge to the members of the Board of Directors for the exercise of their mandate throughout the year ended December 31, 2010.

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

6.                   Compensation of the members of the Board of Directors.

7.                   Appointment of the independent auditors for the fiscal year ending December 31, 2011 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.

Agenda for the Extraordinary General Meeting of Shareholders

1.                   Adaptation of the Company’s Articles of Association to the abolishment of the law of July 31, 1929, and the termination of the holding company status thereunder by:

(i)    the amendment of article 1 of the Company’s Articles of Association to read in its entirety as follows: “TERNIUM S.A. is a société anonyme governed by these Articles of Association and by the applicable laws and regulations of the Grand Duchy of Luxembourg”; and

(ii)   the amendment to article 2 of the Company’s Articles of Association by replacing its last paragraph with the following: “In general, the Company may carry out any permitted activities which it may deem appropriate or necessary for the accomplishment of its corporate object”. 

2.                   Change of the date of the Annual General Meeting of Shareholders so that it be held on the first Wednesday of May of each year at 2:30 p.m., and consequential amendment to article 15 of the Company’s Articles of Association by replacing its first paragraph with the following: “The annual General Shareholders’ Meeting shall meet each year in the city of Luxembourg at the place indicated in the notices of meeting on the first Wednesday of May at 2:30 p.m. (Luxembourg time). If such day falls on a legal or banking holiday in Luxembourg, the General Shareholders’ Meeting shall be held on the first business day thereafter”. 

Pursuant to the Company’s Articles of Association, resolutions at the Annual General Meeting of Shareholders will be passed by a simple majority of the votes cast, irrespective of the number of shares present or represented. The Extraordinary General Meeting of Shareholders may validly deliberate only when at least half of the share capital is present or represented. If the required quorum is not met at the Extraordinary General Meeting of Shareholders on the first call, a second call may be made by means of notices published twice, at fifteen (15) days interval and with the second notice being published not later than fifteen (15) days before the day of the meeting, in the Mémorial - Recueil des Sociétés et Associations (Luxembourg’s Official Gazette) and two newspapers in Luxembourg. Such notices shall in addition be made in accordance with the publicity requirements of the regulated markets where the shares, or other securities representing shares, are listed. On second call, the Extraordinary General Meeting of Shareholders may validly deliberate regardless of the number of shares present or represented. Either on first or second call, the Extraordinary General Meeting of Shareholders may validly adopt resolutions with a two-thirds majority of the votes of the shares present or represented.

Procedures for attending the Meetings

Any shareholder registered in the Company’s share register on May 27, 2011 (the “Record Date”), shall be admitted to the Meetings. Such shareholders may attend the Meetings in person or vote by proxy. To vote by proxy, such shareholders must file a completed proxy form with the Company not later than 5:00 p.m. (Luxembourg time) on the Record Date, 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 Meetings 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 Record Date. Certificates certifying the number of shares recorded in the relevant account as of a date other than the Record Date will not be accepted and such shareholders will not be admitted to the Meetings. Certificates must be filed with the Company not later than 4:00 p.m. (Luxembourg time) on the Record Date, 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 4:00 p.m. (Luxembourg time) on the Record Date, at the Company’s registered office in Luxembourg.

In the event of shares owned by a corporation or any other legal entity, individuals representing such entity who wish to attend the Meetings in person and vote at the Meetings on behalf of such entity, must present evidence of their authority to attend, and vote at, the Meetings 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 4:00 p.m. (Luxembourg time) on the Record Date, at the Company’s registered office in Luxembourg. The original documentation evidencing the authority to attend, and vote at, the Meetings, or a notarized and legalized copy thereof, must be presented at the Meetings.

Those shareholders who have sold their shares between the Record Date and the date of the Meetings must not attend or be represented at any of the Meetings. In case of breach of such prohibition, criminal sanctions may apply.

Holders of American Depositary Receipts (the “ADRs”) as of April 29, 2011, 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 Shareowner Services, P.O. Box 3549, S. Hackensack New Jersey 07606-9249, U.S.A. Attention: Proxy Processing, by 5:00 p.m., New York City time, on May 26, 2011. 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 and the Company’s 2010 annual report (which includes the Company’s consolidated financial statements as of December 31, 2010 and 2009 and for the years ended December 31, 2010, 2009 and 2008; and the Company’s annual accounts as at December 31, 2010, together with the board of directors’ and the independent auditors’ reports thereon) are available on our website at http://www.ternium.com/en/investor/  and may also be obtained upon request, by calling +352 26 68 31 52 or +1 800 555 2470. These documents are also available free of charge at the Company’s registered office in Luxembourg, between 10:00 a.m. and 5:00 p.m., Luxembourg time.

Raúl H. Darderes

Secretary to the Board of Directors

May 5, 2011

Luxembourg

TERNIUM S.A.

Société Anonyme

29, avenue de la Porte-Neuve

L-2227, Luxembourg

RCS Luxembourg B 98 668

___________________

Shareholder meeting brochure and proxy statement

Annual General Meeting of Shareholders to be held on June 1, 2011 at 2:30 p.m. (Luxembourg time) and Extraordinary General Meeting of Shareholders to be held immediately after the adjournment of the Annual General Meeting of Shareholders

This Shareholder Meeting Brochure and Proxy Statement is furnished by TERNIUM S.A. (the “Company”) in connection with the Annual General Meeting of Shareholders and an Extraordinary General Meeting of Shareholders (the “Meetings”) of the Company to be held on June 1, 2011, at 29, avenue de la Porte-Neuve, L-2227 Luxembourg, for the purposes set forth in the accompanying Notice of the Annual General Meeting of Shareholders and of an Extraordinary General Meeting of Shareholders (the “Notice”). The Annual General Meeting of Shareholders will begin promptly at 2:30 p.m. (Luxembourg time) and the Extraordinary General Meeting of Shareholders will be held immediately after the adjournment of the Annual General Meeting of Shareholders.

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). A subsidiary of the Company currently holds 41,666,666 Shares.

Each Share entitles the holder thereof to one vote at General Meetings of Shareholders of the Company. However, voting rights on the 41,666,666 Shares held by the Company’s subsidiary shall be suspended for so long as such Shares are so held.

Any shareholder registered in the Company’s share register on May 27, 2011 (the “Record Date”), shall be admitted to the Meetings. Such shareholders may attend the Meetings in person or vote by proxy. To vote by proxy, such shareholders must file a completed proxy form with the Company not later than 5:00 p.m. (Luxembourg time) on the Record Date, 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 Meetings 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 Record Date. Certificates certifying the number of shares recorded in the relevant account as of a date other than the Record Date will not be accepted and such shareholders will not be admitted to the Meetings. Certificates must be filed with the Company not later than 4:00 p.m. (Luxembourg time) on the Record Date, 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 4:00 p.m. (Luxembourg time) on the Record Date, at the Company’s registered office in Luxembourg.

In the event of shares owned by a corporation or any other legal entity, individuals representing such entity who wish to attend the Meetings in person and vote at the Meetings on behalf of such entity, must present evidence of their authority to attend, and vote at, the Meetings 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 4:00 p.m. (Luxembourg time) on the Record Date, at the Company’s registered office in Luxembourg. The original documentation evidencing the authority to attend, and vote, at the Meetings, or a notarized and legalized copy thereof, must be presented at the Meetings.

Those shareholders who have sold their shares between the Record Date and the date of the Meetings must not attend or be represented at any of the Meetings. In case of breach of such prohibition, criminal sanctions may apply.

Each holder of ADRs as of April 29, 2011, 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 Shareowner Services, P.O. Box 3549, S. Hackensack New Jersey 07606-9249, U.S.A. Attention: Proxy Processing, by 5:00 p.m., New York City time, on May 26, 2011. If the Depositary receives properly completed instructions by 5:00 p.m., New York City time, on May 26, 2011, 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 5:00 p.m., New York City time, on May 26, 2011, 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 5:00 p.m., New York City time, on May 26, 2011. 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 April 29, 2011 until May 27, 2011. However, holders of ADRs need 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 Meetings will appoint a chairperson pro tempore to preside over the Meetings. The chairperson pro tempore will have broad authority to conduct the Meetings in an orderly and timely manner and to establish rules for shareholders who wish to address the Meetings; 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 Annual General Meeting of Shareholders will be passed by a simple majority of the votes cast, irrespective of the number of Shares present or represented. The Extraordinary General Meeting of Shareholders may validly deliberate only when at least half of the share capital is present or represented. If the required quorum is not met at the Extraordinary General Meeting of Shareholders on the first call, a second call may be made by means of notices published twice, at fifteen (15) days interval and with the second notice being published not later than fifteen (15) days before the day of the meeting, in the Mémorial - Recueil des Sociétés et Associations (Luxembourg’s Official Gazette) and two newspapers in Luxembourg. Such notices shall in addition be made in accordance with the publicity requirements of the regulated markets where the Shares, or other securities representing Shares, are listed. On second call, the Extraordinary General Meeting of Shareholders may validly deliberate regardless of the number of Shares present or represented. Either on first or second call, the Extraordinary General Meeting of Shareholders may validly adopt resolutions with a two-thirds majority of the votes of the Shares present or represented.

The Annual General Meeting of Shareholders 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, 2010 and 2009 and for the years ended December 31, 2010, 2009 and 2008

The Board of Directors of the Company (the “Board”) recommends a vote FOR approval of the Company’s consolidated financial statements as of December 31, 2010 and 2009 and for the years ended December 31, 2010, 2009 and 2008, after due consideration of the reports from each of the Board and the independent auditor on such consolidated financial statements. 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, the report from the independent auditor on such consolidated financial statements and management’s discussion and analysis on the Company’s results of operations and financial condition are included in the Company’s 2010 annual report, a copy of which is available on Company’s website at http://www.ternium.com/en/investor/  and may also be obtained upon request, by calling +352 26 68 31 52 or +1 (800) 555 2470. Copies of the Company’s 2010 annual report are also available free of charge at the Company’s registered office in Luxembourg, between 10:00 a.m. and 5:00 p.m., Luxembourg time.

2. Consideration of the Board of Directors’ and independent auditor’s reports on the Company’s annual accounts. Approval of the Company’s annual accounts as at December 31, 2010

The Board recommends a vote FOR approval of the Company’s annual accounts as at December 31, 2010, after due consideration of the Board’s management report and the report from the independent auditor on such annual accounts. These documents are included in the Company’s 2010 annual report, a copy of which is available on our website at http://www.ternium.com/en/investor/  and may also be obtained upon request, by calling +352 26 68 31 52 or +1 (800) 555 2470 (the latter number is toll free if you call from the United States). Copies of the Company’s 2010 annual report are also available free of charge at the Company’s registered office in Luxembourg, between 10:00 a.m. and 5:00 p.m., Luxembourg time.

3. Allocation of results and approval of dividend payment

The Board recommends a vote FOR approval of a dividend payable in U.S. dollars on June 9, 2011, in the amount of USD 0.075 per share issued and outstanding. Accordingly, if this dividend proposal is approved, the Company will make, or cause to be made, a dividend payment on June 9, 2011, in the amount of USD 0.075 per share issued and outstanding, or USD 0.75 per ADR issued and outstanding. The aggregate amount of USD 150,355,758.15 to be distributed as dividend on June 9, 2011, is to be paid as follows: USD 101,437,293.00 from the Company’s distributable reserve account and the remaining USD 48,918,465.15 from the Company’s retained earnings reserve. The profits of the year ended December 31, 2010, would be allocated to the Company’s retained earnings account.

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

4. Discharge to the members of the Board of Directors for the exercise of their mandate throughout the year ended December 31, 2010

In accordance with applicable Luxembourg law and regulations, it is proposed that, upon approval of the Company’s annual accounts as at December 31, 2010, all who were members of the Board during the year 2010, be discharged 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

The Company’s Articles of Association provide for the annual election by the shareholders of a board of directors of not less than five and not more than fifteen members. Members of the Board have a term of office of one year, but may be reappointed.

Under the Company’s Articles of Association and applicable U.S. laws and regulations, the Company is required to have an Audit Committee comprised solely of directors who are independent.

The current Board consists of nine Directors. Three members of the Board (Messrs. Ubaldo Aguirre, Adrian Lajous and Pedro Pablo Kuczynski) qualify as independent members 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 be reduced from eleven to nine, and (ii) Messrs. Ubaldo Aguirre, Roberto Bonatti, Carlos Alberto Condorelli, Pedro Pablo Kuczynski, Adrian Lajous, Bruno Marchettini, Gianfelice Mario Rocca, Paolo Rocca and Daniel Agustin Novegil be re-elected as members of the Board.

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

1) Mr. Ubaldo Aguirre. Mr. Aguirre has served on the Board since 2006. He is a managing director of AGM/R S.A. and Aguirre y Gonzalez S.A., both Argentine banking investment firms, and also serves as a member of the board of directors and member of the audit committee of Juan Minetti S.A., a subsidiary of Holcim, the Swiss cement producer. Since 2005, he also serves as chairman of the board of directors of Permasur S.A., and since 2000 as member of the board of directors of URS Argentina S.A. Mr. Aguirre formerly served as director and chairman of the audit committee of Siderar S.A.I.C. (“Siderar”). 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 negotiator on behalf of the Republic of Argentina with the Paris Club. Mr. Aguirre, aged 62, is an Argentine citizen.

2) Mr. Roberto Bonatti. Mr. Bonatti has served as a director of the Company since 2005. He is a grandson of Agostino Rocca, founder of the Techint group, a group of companies controlled by San Faustin S.A. (“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 Faustín, and since 2001 he has served as its president. In addition, Mr. Bonatti currently serves as president of Techint Compañía Técnica Internacional S.A.C.I. and Tecpetrol S.A. (“Tecpetrol”). He is also a member of the board of directors of Tenaris S.A. (“Tenaris”), Siderca S.A.I.C. (“Siderca”) and Siderar. Mr. Bonatti, aged 61, is an Italian citizen.

3) Mr. Carlos Alberto Condorelli. Mr. Condorelli has served as a director of the Company since 2005. He is currently a member of the board of directors of Tenaris.  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 administration director of Tubos de Acero de México, S.A. (“Tamsa”), and president of the board of directors of Empresa Distribuidora La Plata S.A., an Argentine utilities company. Mr. Condorelli, aged 60, is an Argentine citizen.

4) Mr. Pedro Pablo Kuczynski. Mr. Kuczynski has served as a member of the Board since 2007. He was Prime Minister of Peru in 2005-2006 and prior to that he was the Minister of Economy and Finance from 2001.  He was the Republic of Peru’s Minister of Energy and Mines in 1980-82. He was president until 2001 of a private equity firm he founded in 1992 after spending ten years as Chairman of First Boston International (today Credit Suisse) in New York.  Since 2007, he is Senior Advisor to the Rohatyn Group, a firm specializing in emerging markets.  He ran a bauxite mining company affiliated with Alcoa between 1977 and 1980.  He began his career at the World Bank in 1961 and was in the 1970s head of its Policy Planning Division, Chief Economist for Latin America and Chief Economist of IFC. He was born in Peru in 1938 and educated in Peru and at Oxford and Princeton.  Mr. Kuczynski, aged 72, is an U.S. and Peruvian national.  

5) Mr. Adrian Lajous. Mr. Lajous has served as a director of the Company since 2006. Mr. Lajous currently serves as the senior energy advisor to McKinsey & Company, chairman of the Oxford Institute for Energy Studies, president of Petrométrica, S.C. and non-executive director of Schlumberger, Ltd. and 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 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. Mr. Lajous, aged 67, is a Mexican citizen.

6) Mr. Bruno Marchettini. Mr. Marchettini has served on the Board since 2006. Mr. Marchettini is senior advisor in technological matters for the Techint group. Mr. Marchettini has retired from executive positions and is presently engaged as a consultant by Siderar. Mr. Marchettini is a director of San Faustin. Mr. Marchettini, aged 69, is an Italian citizen.

7) 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 Faustín, a member of the board of directors of Tenaris, president of the Humanitas Group, honorary president of the board of directors of Techint Compagnia Tecnica Internazionale S.p.A. and president of the board of directors of Tenova S.p.A. In addition, he sits on the board of directors or executive committees of several companies, including Allianz S.p.A, RCS Quotidiani and Buzzi Unicem. He is vice president of Confindustria, the leading association of Italian industrialists. He is a member of the Advisory Board of Allianz Group, of the Trilateral Commission and of the European Advisory Board of the Harvard Business School. Mr. Rocca, aged 63, is an Italian citizen.

8) 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 and chairman of the board of directors of Tamsa. In addition, he is a member of the board of directors and vice president of San Faustín and a director of Techint Financial Corporation N.V.  Mr. Rocca is vice-chairman of the World Steel Association and a member of the International Advisory Committee of NYSE Euronext (New York Stock Exchange). Mr. Rocca, aged 58, is an Italian citizen.

9) Mr. Daniel Agustin Novegil. Mr. Novegil has served as a director and chief executive officer of the Company since 2005. Mr. Novegil joined Propulsora Siderurgica in 1978 and was appointed as its general director in 1991. In 1993, following the merger of the privatized company Somisa with Propulsora, he was appointed managing director of Siderar. In 1998, after the acquisition of Sidor, Mr. Novegil was appointed chairman and chief executive officer of Sidor. In March 2003, Mr. Novegil was designated executive vice-president of the Techint Flat and Long Steel Division, with executive responsibilities over Siderar and Sidor. He became president of Siderar in May 2005. Mr. Novegil, aged 58, is an Argentine citizen.

Each elected director will hold office until the next Annual General Meeting of Shareholders. Should the proposed amendment to the Company’s articles of association be approved by the Extraordinary General Meeting of Shareholders to be held after the adjournment of the 2011 Annual General Meeting of Shareholders, the next Annual General Meeting of Shareholders would be held on May 2, 2012.

The Board met seven times during 2010. On January 12, 2006, the Board created an Audit Committee pursuant to Article 11 of the Articles of Association of the Company. As permitted under applicable laws and regulations, the Board does not have any executive, nominating or compensation committee, or any committees exercising similar functions.

6. Compensation of the members of the Board of Directors 

It is proposed that each member of the Board receive an amount of USD 80,000.00 as compensation for his services during the fiscal year 2011, and that the Chairman of the Board receive, further, an additional fee of USD 280,000.00. It is further proposed that each of the members of the Board who are members of the Audit Committee receive an additional fee of USD 50,000.00, and that the Chairman of such committee receive, 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. 

7. Appointment of the independent auditors for the fiscal year ending December 31, 2011 and approval of their fees

Based on the recommendation from the Audit Committee, the Board recommends a vote FOR the appointment of PricewaterhouseCoopers S.àr.l., Réviseur d'entreprises agréé (member firm of PricewaterhouseCoopers) as the Company’s independent auditors for the fiscal year ending December 31, 2011, to be engaged until the next Annual General Meeting of Shareholders that will be convened to decide on the 2011 accounts.

In addition, the Board recommends a vote FOR approval of the independent auditors’ fees for audit, audit-related and other services to be rendered during the fiscal year ending December 31, 2011, broken-down into seven currencies (Argentine Pesos, Colombian Pesos, Euro, Mexican Pesos, Swiss Francs, Uruguayan Pesos and U.S. Dollars), up to a maximum amount for each currency equal to ARS 6,796,783.00; COP 222,052,596.00; EUR 570,145.00; MXN 12,624,936.00; CHF 25,000.00; UYU 1,617,061.00 and USD 100,000.00. 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.

The Board also recommends a vote FOR the granting of an authorization to its Audit Committee for it 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 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.

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 to appoint any or all members of the Board 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 may deem appropriate in connection therewith, this authorization to be valid until expressly revoked by the Company’s General Shareholders Meeting, it being understood, for the avoidance of doubt, that this authorization does not impair nor limit in any way the powers of the Board to appoint any non-members of the Board as attorneys-in-fact of the Company pursuant to the provisions of article 10.1(iii) of the Articles of Association of the Company.

___________________________________

The Extraordinary General Meeting of Shareholders is called to address and vote on the following agenda:

1.   Adaptation of the Company’s Articles of Association to the abolishment of the law of July 31, 1929, and the termination of the holding company status thereunder by:

(i)      the amendment of article 1 of the Company’s Articles of Association to read in its entirety as follows: “TERNIUM S.A. is a société anonyme governed by these Articles of Association and by the applicable laws and regulations of the Grand Duchy of Luxembourg”; and

(ii)           the amendment to article 2 of the Company’s Articles of Association by replacing its last paragraph with the following: “In general, the Company may carry out any permitted activities which it may deem appropriate or necessary for the accomplishment of its corporate object”.

Following the abolishment of the law of July 31, 1929, and the termination of Luxembourg’s 1929 holding company regime under which the Company was originally established, the Board recommends that the Company’s Articles of Association be amended to eliminate references in article 1 and article 2 thereof to the law of July 31, 1929. Accordingly, the Board recommends a vote FOR the adaptation of the Company’s Articles of Association to the abolishment of the law of July 31, 1929, and the termination of the Company’s special status thereunder, by the amendment of the Company’s Articles of Association as set forth above.

2.   Change of the date of the Annual General Meeting of Shareholders so that it be held on the first Wednesday of May of each year at 2:30 p.m., and consequential amendment to article 15 of the Company’s Articles of Association by replacing its first paragraph with the following: “The annual General Shareholders’ Meeting shall meet each year in the city of Luxembourg at the place indicated in the notices of meeting on the first Wednesday of May at 2:30 p.m. (Luxembourg time). If such day falls on a legal or banking holiday in Luxembourg, the General Shareholders’ Meeting shall be held on the first business day thereafter”. 

The Board recommends changing the date of the Annual General Meeting of Shareholders so that it is held on the first Wednesday of May of each year at 2:30 p.m., Luxembourg time. Accordingly, the Board recommends a vote FOR the amendment of article 15 of the Company’s Articles of Association as set forth above.

___________________________________

The Company expects that the Extraordinary General Meeting of Shareholders to be held after the adjournment of the 2011 Annual General Meeting of Shareholders will approve the proposed amendment to the Company’s Articles of Association to change the date of the Annual General Meeting of Shareholders. Accordingly, the Company anticipates that the next Annual General Meeting of Shareholders would be held on May 2, 2012. 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 registered office of the Company, 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 3, 2012, in order for such proposal to be considered for inclusion on the agenda for the 2012 Annual General Meeting of Shareholders.

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PricewaterhouseCoopers are the Company’s independent auditors. A representative of the independent auditors will be present at the Annual General Meeting of Shareholders to respond to questions.

Raúl H. Darderes

Secretary to the Board of Directors

Ternium

2010 Annual Report

Ternium 2010 Annual Report Contents

Company Profile & Strategy

Operating and Financial Highlights

Chairman’s Letter

Management Report

Business Review

Corporate Governance

Board of Directors and Executive Officers

Investor Information

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

Financial Statements

Company Profile & 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, and hot-rolled and cold-rolled steel, as well as slit and cut-to-length offerings through our service centers.  We also produce long steel products, such as bars and wire rod.

Our customers range from large global companies to small businesses operating in the construction, home appliances, capital goods, container, food, energy and automotive 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 an annual production capacity of approximately 10 million tons of finished steel products and approximately 15,900 employees, 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 in Latin America that provide it with a strong position from which to serve its core markets.

Our favorable access to iron ore sources and proprietary mines, diversified steel production technology and proximity to local steel consuming markets enable us to reduce logistic costs, adapt to fluctuating input-cost conditions, and differentiate from our competitors by offering valuable services to our customer base.

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.

Note:   Ternium S.A. is a Luxembourg company and its securities are listed on the New York Stock Exchange (NYSE: TX). We refer to Ternium S.A. and its consolidated subsidiaries as “we,” “our” or “Ternium.”

Operating and Financial Highlights

The financial and operational information contained in this annual report is based on the consolidated financial statements of Ternium S.A. (the “Company”), prepared in accordance with International Financial Reporting Standards (IFRS) and presented in US dollars and metric tons.

⁽¹⁾        EBITDA is calculated as operating income plus depreciation and amortization, and impairment charges.

⁽²⁾        Discontinued Operations include the results of Sidor (a Venezuelan subsidiary nationalized in April 2009) through the second quarter of 2009 and of non-core US assets in the second half of 2007 and first quarter of 2008.

⁽³⁾        Free cash flow is calculated as net cash provided by operating activities, less capital expenditures.

⁽⁴⁾        Each ADS represents 10 shares.

⁽⁵⁾        Shares outstanding were 2,004,743,442 as of December 31 of each year.

Chairman’s Letter

Ternium recovered strongly in 2010 from the global financial and economic crisis that affected our industry in 2009. Shipments rose 27% to a record level of 8.1 million tons and EBITDA rose to USD1.4 billion on sales of USD7.4 billion, with EBITDA per ton rising 60% to a more sustainable level of USD178. With its focus in the Americas and a net cash position, Ternium is well positioned to take advantage of markets that are growing strongly today and have solid long-term growth prospects.  

With the recovery of industrial production throughout the Americas and healthy growth in the construction sector in South America, our markets grew strongly during 2010. The recovery in the automotive sectors of Mexico and Argentina, both of which grew in excess of 30% year on year, has been particularly impressive. Throughout the Americas, the value of competitive and integrated regional supply chains is increasingly recognized and this will be a major factor driving growth in our markets in the coming years.

In 2010, we moved forward with our plans for regional expansion, increasing the value added in our products and competitive differentiation. In Mexico, we began construction of new cold rolling and hot dip galvanizing facilities near Monterrey, which will begin producing high-quality galvanized and galvannealed steel sheets for Mexico’s automotive industry in 2013. To construct and operate the galvanizing facility, which will have an annual capacity of 400,000 tons, we have formed a joint venture company with Nippon Steel, who will provide proprietary technology. At the same time, we are investing in setting up new warehouses and service and distribution centers in strategic locations throughout Mexico to improve our service to the retail sector.

In Colombia, we acquired a 54% interest in Ferrasa, a steel processing and distribution concern with steelmaking capacity for long products and are moving quickly to integrate its operations, increasing capacity and productivity. Colombia today is our third largest single country market and demand for flat and long products is growing strongly. Here and in Central America we are focused on strengthening the value chain and consequently our competitive position.

In Argentina, we completed the relining of our second blast furnace and were able to operate at close to full capacity. Our expansion plans are focused on the growing automotive and construction markets, for which we are planning to revamp the cold rolling mill and install a new galvanizing line.

Our support for small and medium enterprises, both suppliers and customers, in our main markets remains an integral part of our strategy to develop sustainable growth. The program is now in its ninth year and now encompasses more that 600 companies. By improving the competitiveness of these entities through the transferring of managerial and technical skills, we help to strengthen the industrial value chain in our markets and, accordingly, sustain and increase demand for our products.  Recently, the program gained recognition from the Mexican government for its commitment to the development of Mexican enterprises and contribution to the country’s economic growth.

Our safety indicators continue to improve, but we remain short of our objective to create a working environment where accidents do not happen. This can only be done by a relentless focus on safety in all our work processes and the active participation and awareness of all employees. This year, we renewed our safety policy and adopted a comprehensive medium-term safety program, which includes traditional and innovative tools inspired by steel industry best practices, as part of our commitment to continuously improving our safety performance. 

We also renewed our environment policy this year, reinforcing our commitment to meeting the highest standards in environmental management and efficient use of energy and natural resources and to a continuous improvement in our performance. At the same time, we remain active participants in World Steel Association programs on climate change issues as we believe that this is a critical issue which should be addressed by the whole steel industry with full transparency and accountability. Our efforts to reduce and capture emissions at our Guerrero steel shop in Monterrey were recognized this year by the Mexican government.

Usiminas, after accompanying us for the past seventeen years in the growth and development of Ternium, decided to divest its participation to concentrate on other growth opportunities. In a transaction that was concluded in February 2011, the divested shares were acquired partly by Techint, partly by Ternium and the remainder were placed in the market. As a result, Ternium free float has increased to 24%. I would like to thank Usiminas for the continuous support they have given us over the years.

Despite the improvement in operating results, earnings per ADS declined 13% to USD3.10 in 2010 compared to the previous year, as there were no contributions from discontinued operations. However, in consideration of Ternium’s strong financial position and the recovery in market conditions, we propose to increase the annual dividend to USD0.75 per ADS for this year. If approved by shareholders, this would be distributed in June.

In 2010, Ternium responded rapidly to the recovery in its main markets, positioning the company for further growth. I would like to congratulate our employees for their efforts in another demanding year. I would also like to welcome our new colleagues from Ferrasa and to thank our customers, suppliers and shareholders for their continued support and confidence in our company.

Paolo Rocca

Chairman

Business Review

In 2010, business conditions in Ternium’s steel markets improved significantly from the challenging conditions experienced in 2009. As Latin American economies recovered during the year, so did sales of capital goods and consumer durables, and construction activity in South America, while construction activity remained subdued in Mexico. All in all, our core markets saw a significant expansion in steel consumption in 2010.

The increase in apparent steel demand in Ternium’s markets allowed us to achieve, by year-end, utilization rates similar to those prevailing before the global economic downturn. We operated our crude steel production facilities at relatively high utilization rates in 2010, and we also increased utilization rates at our re-rolling facilities in Mexico.

During 2010, Ternium began work for the construction of a new facility in the vicinity of Monterrey City, Mexico, which will include a cold-rolling mill and a hot-dip galvanizing plant, the latter under a joint development with Nippon Steel.  This new facility is expected to serve the demanding requirements of the automotive industry in Mexico and to achieve further integration at Ternium’s steel processing facilities in the southern United States and Guatemala. In addition, in 2010 Ternium expanded its business and commercial presence in Colombia through the acquisition of a 54% ownership interest in Colombia-based Ferrasa, a flat steel processor and long steel producer with annual sales of approximately 300,000 tons. Colombia has experienced significant growth recently and is presently the fourth largest steel consuming market in Latin America.

The improved market conditions in 2010 allowed Ternium to increase its shipments by 27% year-over-year to 8.1 million tons, and to increase EBITDA by 103% year-over-year to USD1.4 billion. For the current year, we expect the NAFTA region to accelerate its growth rate, with higher industrial activity in Mexico driving local demand for steel products.  We also anticipate that South America’s economies will continue to grow during the year.

North America Region

During 2010, Ternium was the leading supplier of flat steel products in Mexico and was also active in the southern United States.

Ternium’s shipments in the North America Region were higher in 2010 than in the previous year. Steel demand in the region grew at the beginning of 2010 and remained relatively flat for the rest of the year. Steel prices in North America increased during the first half of 2010, gradually declined during most of the second half of the year as steel demand was not strong enough to digest capacity restarts and additions mainly in the United States, and rebounded by year-end supported by an increase in apparent steel demand.

The economies in the North America Region expanded gradually during 2010. GDP in Mexico grew 5.3% in the year, following a strong downturn in 2009, while the US economy grew 2.9% in 2010 after falling 2.6% in 2009.

Apparent steel use in Mexico increased 13% year-over-year in 2010 to approximately 16.1 million tons. In the entire North America Region it increased 33%, as steel consumption rates in the United States and Canada showed strong recoveries following steep drops in 2009. Mexican export-oriented industries were particularly favored by the recovery of economic activity in the United States.  In contrast, the construction sector in Mexico remained subdued during most of 2010 and only showed evidence of improvement by year-end.

Construction activity in Mexico decreased an estimated 0.7% year-over-year in 2010, while activity in the automotive sector increased an estimated 39.0% year-over-year, recovering from the decrease in 2009.  Mexico’s growth in motor vehicle production reflected the recovery of the Mexican auto market and the strength of auto exports to the United States.

Construction – Mexico1 Growth(% year/ year)

Motor vehicles - Mexico1 Growth(% year/ year)

During 2010 Ternium continued running its integrated steel making facilities in the region at close to full capacity and, as steel markets recovered, increased utilization rates at its re-rolling facilities.  Overall, by year-end Ternium’s Mexican facilities achieved utilization rates that were similar to those achieved before the global economic downturn. Ternium continued maximizing the use of direct reduced iron (DRI) over steel scrap in the metallic mix of its steel shops in Mexico, benefiting from relatively low natural gas prices in North America.

Ternium continued with its efforts to increase market share in Mexico’s industrial steel market by developing new products and customers and leveraging its extended network of service centers to serve one of 2010’s most dynamic sectors, which also records a relatively high participation of imports.  New products included those developed for leading customers in the automotive sector’s car assembling, wheel and hydro-formed tubes manufacturers.

By year end, Ternium began works for the construction of a new facility in the vicinity of Monterrey City in Mexico, which will include a cold-rolling mill and a hot-dip galvanizing plant expected to have an annual production capacity of one million metric tons and 400,000 metric tons, respectively. With these investments, Ternium expects to serve the demanding requirements of the automotive industry in Mexico for hot-dip galvanized and galvannealed steel sheets and to expand the supply of cold rolled coils to the market and to its galvanizing facilities in the southern United States and Guatemala. In addition, the supply of hot-rolled coils to the new cold-rolling mill should enable Ternium to increase utilization rates at its hot strip mills. The galvanizing plant is being developed by Tenigal S.R.L. de C.V., a joint venture company owned 51% by Ternium and 49% by Nippon Steel. Ternium expects that the galvanizing plant will require a total investment of approximately USD350 million, while the cold-rolling mill will involve an investment of approximately USD700 million. The facility is expected to commence production in 2013.

Ternium’s capital expenditures in the region amounted to USD161 million in 2010. In addition to maintenance capital expenditures, during the year the company upgraded its cold-strip mill and invested in the development of mining activities in Mexico, among other projects.

In 2010, Ternium made progress in its plan of strengthening its distribution network in Mexico, which is aimed at increasing market share in the retail steel market segment in the country through the reinforcement and expansion of its service center and distribution infrastructure, as well as through the development of agreements with regional distributors. As part of this plan, Ternium purchased an industrial building in Mexico’s central area to develop a new warehouse and service center, and expects to complete construction of a new warehouse in Guadalajara in the first half of 2011.

In 2011, Ternium expects the NAFTA region to accelerate its growth rate.  Apparent steel use is expected to grow 6.6% in Mexico in the period, with higher industrial activity driving local demand for steel products.  In addition, the company expects to increase capital expenditures in the region mainly due to the development of the abovementioned new cold-rolling and hot-dip galvanizing facility.

South and Central America Region

During 2010, Ternium was the leading supplier of flat steel products in Argentina, Paraguay Uruguay, Bolivia and Central America, and kept a significant commercial presence in Chile.  In addition, Ternium increased its presence in Colombia with the acquisition of Ferrasa and continued serving customers mainly in Peru and Ecuador.

Ternium’s shipments in the South and Central America Region grew in 2010, as demand for steel products recovered throughout the year. The economic activity in the region expanded during 2010, supported by strong commodity prices, recovering from subdued economic activity in 2009.

GDP performance – Latin America²

Growth(% year/ year)

Finished steel apparent demand in our main markets in the region recovered strongly in 2010, reaching levels seen before the global economic downturn. Apparent steel use in South and Central America increased an estimated 36.4% year-over-year in 2010.  Construction activity returned to solid growth rates and the automotive sector, which was among the most affected sectors in 2009, significantly expanded in 2010.

Apparent steel use – South and Central America² 

^{All products (million tons)}

In Argentina, GDP increased an estimated 9.4% year-over-year in 2010, reflecting a rise in consumption and capital investment. Apparent steel demand increased 43.5% to about 4.6 million tons in the period, reflecting the recovery of that country’s economy.  Construction activity increased an estimated 7.2% year-over-year in 2010, and activity in the automotive sector increased an estimated 39.8% year-over-year.  Growth in motor vehicle production benefited from a stronger domestic auto market and higher exports, mainly to Brazil.

Finished steel apparent demand also increased in Bolivia, Chile, Paraguay and Uruguay.  Although the economies of these countries expanded in 2010, with GDP growth rates of between 4.2% and 15.3% year-over-year, higher demand in Argentina in 2010 constrained our supplying capabilities to some of these markets.

Apparent steel demand in Colombia, Peru and Ecuador was also strong.  The economies of these countries expanded in 2010, recording GDP growth rates of between 3.2% and 8.8% year-over-year.  During 2010, Ternium increased its business and commercial presence in Colombia through the acquisition of a 54% ownership interest in Colombia-based Ferrasa.  Ferrasa has a 100% ownership interest in Sidecaldas, Figuraciones and Perfilamos del Cauca.  These companies have combined annual sales of approximately 300,000 tons, including a long steel making and rolling facility with annual production capacity of approximately 140,000 tons. Ternium concurrently acquired a 54% ownership interest in Ferrasa Panamá, a long steel products processor and distributor based in Panama.

As the steel markets recovered throughout the year, in July 2010 Ternium raised the level of activity at the steel shop in Argentina to full capacity with the fire-up of a second blast furnace.  Overall, Ternium’s subsidiary Siderar kept its facilities working at relatively high utilization rates during 2010.

Ternium’s capital expenditures in the region amounted to USD189 million in 2010. During the year Ternium’s subsidiary Siderar carried out several projects, including the relining of a blast furnace, progress in the capacity increase of the hot-strip mill, progress in repairs and enhancements at its coking facilities, the construction of a river port for barges, and the expansion of two service centers.

Siderar was recognized with the 2010 edition of the Argentine government’s national quality prize, granted to companies excelling in fields such as leadership, management systems, quality performance, operating performance, customer service, technology, productivity, community relations and environment care.

This year South America’s economies are expected to show strong growth. Apparent steel use in the region is expected to increase approximately 6.6% year-over-year. In addition we expect to continue growing our presence in Colombia with the full integration of Ferrasa.

Iron Ore Mining

Ternium’s mining activities are aimed at securing the supply of iron ore for our facilities in Mexico for at least a 20-year operating period. Surplus production of iron ore is commercialized to partially hedge the iron ore procurement requirements of Ternium’s facilities in Argentina.

The extraction, processing and production of iron ore is organized under two operating companies: Las Encinas, which is wholly owned by Ternium; and Peña Colorada, which is 50% owned by Ternium and 50% by ArcelorMittal.  As of year-end 2010, the mining activities had a combined annual production capacity of 5.9 million tons of pellets and 0.4 million tons of concentrate surplus.

Las Encinas

The Las Encinas mining facilities include a pelletizing plant located in the community of Alzada, in Mexico’s state of Colima, which has a production capacity of 1.9 million tons per year.  As of year-end 2010, Las Encinas had two active iron ore mines in Mexico: Aquila, located in Michoacán, and El Encino, located in Jalisco. During 2010 the company launched a project to revamp its grinding facilities.  The works are expected to be completed during the current year.

During 2010, Ternium continued its exploration activities in its concessions in Jalisco, in an area close to Las Encinas’ current facilities. As these activities were successful, the company is currently evaluating the development of the site and the expansion of the processing facilities.

Peña Colorada

The Peña Colorada mining facilities include a two-line pelletizing plant in the Manzanillo port in Colima, with an annual production capacity of 4.0 million tons of pellets and 0.4 million tons of concentrate surplus.  Of these totals, ArcelorMittal and Ternium are each entitled to receive 50% of production.  The pelletizing plant is fed from a mine in the Minatitlán municipality, located in Colima. Peña Colorada continued its exploration activities in 2010 at the existing mine’s nearby areas and succeeded at increasing its iron ore resources.

In 2011, we intend to continue running Las Encinas and Peña Colorada mining facilities at full capacity, as they represent a low-cost raw material option for the production of steel.  We plan to continue pursuing the expansion of our iron ore resources through exploration activities, mainly in the Jalisco and Colima areas.

Support Program for Small- and Medium-Sized Enterprises

Ternium sponsors, as it has done for many years, a small- and medium-sized enterprise (SME) support program called “ProPymes.”  Created by the Techint group in 2002, the program is focused on helping SMEs in the steel industry’s value chain to grow.  The program’s ultimate goal is to enhance SMEs’ competitiveness and to stimulate investments in the steel industry’s value chain.  To achieve this, ProPymes provides a diversity of services including training, business advisory, institutional assistance, commercial support and financial aid.  In 2010, ProPymes assisted approximately 640 SMEs in Mexico and Argentina.

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

Mexico

Approximately 150 Mexican SMEs, including customers and suppliers, participate in ProPymes.  While suppliers are selected according to their ability to competitively increase domestic value content to their products, customers are selected according to their ability to add value to the steel products and to their potential to increase exports or substitute imports.

In 2010, ProPymes strengthened the institutional network necessary for developing SMEs, increasing contact with the national government, educational bodies, industrial chambers and local economic development secretariats where Ternium’s operations are carried out.  The program continued focusing on management training and industrial assistance, including the technological upgrading of facilities under the cooperation of and support from the Mexican SMEs program and ProPymes.  Furthermore, ProPymes continued promoting business conventions in selected cities in Mexico in coordination with local industrial chambers in order to identify and promote new companies that are apt for being developed as steel industry suppliers.

Ternium’s efforts through ProPymes have been recognized by the secretariat of economy of Mexico, in relation to its cooperation with the under secretariat of SMEs, as an outstanding socially responsible sponsoring company committed to the development of Mexican small and mid-sized businesses and contributing to the country’s overall economic growth.

In 2011, ProPymes’ activities in Mexico are expected to continue focusing on programs aimed at strengthening SMEs’ competitiveness and ultimately helping them increase their capacity utilization rates.  In addition, ProPymes plans to support projects aimed at sustainable growth and environmental management in collaboration with the Mexican government and educational bodies.

Argentina

Approximately 490 Argentine SMEs, including customers and suppliers, participate in ProPymes.  These companies were selected to take part in the program based upon their management skills, their exporting profile and their growth potential, among other attributes.  In 2010, the program focused on business advisory, financial aid and training.  The program’s consulting area, one of ProPymes’ pillars, continued its assistance related to, among other activities, plant lay-out, production planning, quality assurance and ISO 9000 and ISO 14000 certifications.  In addition, in response to the increasing demand for specialized services, the program launched consultancy services in supply audits and, for the first time beyond the industrial field, in human resources and information technology.

The program’s financial assistance to SMEs in Argentina continued in 2010 and was aimed at supporting capital expenditure plans favoring improvements in productivity, increases in production capacity and updates in technology.

With the addition of special workshops in response to increasingly demanding requirements in Argentina, training activities are gradually growing in complexity.  ProPymes’ training programs, comprised of SMEs employees in every category, reached a record level of attendees in 2010.

In 2011, ProPymes in Argentina intends to intensify tailored training programs to address the specific requirements of local SMEs.  In addition, the program intends to strengthen its business advisory services in connection with human resources and information technology.

Product Research & 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 the participation in international consortia.  Ternium also develops new products and processes in cooperation with its industrial customers.

In 2010, Ternium’s product research and development activities focused on increasing the industrial integration of its newly acquired facilities in Colombia and on the development of products aimed at increasing market share and adding value to our products.  Ternium continued carrying out its medium-term product research and development plan, encompassing foreseen product requirements and associated new equipment, which it considers a key input for the design of Ternium’s capital expenditure projects and differentiating strategies.

Integration of Processes

In 2010, Ternium continued the development of processing routes aimed at integrating and increasing utilization rates at its production units and, ultimately, at replacing steel products procured from third parties with products manufactured in-house and developing new markets.  For example, hot-rolled, cold-rolled and coated coils manufactured in our production units in Mexico were further processed in our recently acquired facilities in Colombia, targeting the Andean steel market for structural products, pressure vessels, white goods and enameled products. In addition, billets manufactured in our production units in Mexico were further processed in our hot-rolling mill in Colombia to supply the local construction steel market.

Construction Products

During 2010, Ternium developed new products for certain construction steel markets in Central America, including various types of reinforcing bars and billets.  In addition, the company developed large diameter bars for the Andean market for use in mountain road infrastructure development.

Ternium expanded the product range of pre-engineered metal buildings through the development of manufacturing processes of heavy structures used in large industrial buildings.  In addition, the company developed structural high-toughness hot-rolled steel for use in a mining project in Argentina.

During the year the company developed new panels in compliance with the Montreal Protocol regulations and is now able, ahead of its schedules, to manufacture panels without using foaming agents that could potentially damage the ozone layer.

Industrial Products

In 2010 we continued certifying our products with existing customers in the automotive industry in Mexico and Argentina, related to newly defined standards and new car models to be produced in these countries.  In this regard, the company gained market share upon receiving customer approval of our electro-galvanized products for exposed surface and hot-rolled and cold-rolled low-carbon drawing grade steels. We also received customer approval for hot-rolled pickled and oiled structural grades for use in the wheel and hydro-formed tubes market segments. 

Other products we developed in 2010 included novel silicon-killed wire rod steel grades with enhanced toughness for the manufacturing of high resistance springs used in light and heavy vehicles, hot-rolled grades for welded pipes applied in boilers and heat exchangers, painted galvanized steel sheets for air conditioners, and high strength painted cold-rolled steel for lighting fixtures.

Applied Research

Ternium’s medium-term 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.  Based on customer needs, we improve, adapt and create new applications and define future technology requirements at our facilities.

With the aim at further developing our metallurgical knowledge and its applications, we continued participating in various medium-term projects, including those relating to high-quality low-inclusion steel in association with Mexican Cinvestav; applications for the automotive industry through consortiums associated with Canadian McMaster University and the International Zinc Association, as well as in direct association with US Pittsburgh University and the Argentine Steel Institute; applications for buildings through a consortia associated with the French Corrosion Institute; and applications for the canning industry through a consortia associated with the International Tin Research Institute.

Prospective Developments

In 2011, Ternium plans to expand its product range for the automotive, pressure vessels, heavy machinery and agricultural sectors through the development of high-strength steel grades, mainly to increase market share and the value added to our products.  In addition, the company expects to complete an ongoing project aimed at manufacturing high-quality low-inclusion bars for the oil and gas industry, a new product family for seamless pipe manufacturing, and expects to explore product development opportunities for application in oil and gas wells aimed at participating in the high-end coiled tubing market.

In addition, Ternium expects to implement an IT system in Mexico fully integrating product and processing route specifications among its plants.  This effort should enable significant optimization in our processes and products, including increasing opportunities for productivity enhancement, cost reduction and inventory optimization.

In applied research, Ternium intends to continue developing ongoing projects with focus on several developments for the automobile and electric motor sectors, and plans to launch projects aimed at developing continuous casting processes for ultra-low carbon steel grades for application in the automobile sector.  These developments should allow it to assess future technology requirements as well as to incorporate, within its product range, a new family of high-end finished steel products.

Human Resources & Communities

The improved business conditions in Ternium’s steel markets during 2010 allowed us to resume our medium-term personnel recruitment plans during that period.  In addition, the acquisition of a controlling interest in Ferrasa on August 25, 2010 required introducing Ferrasa’s employees to Ternium’s human resources management directives, including payroll unification, medium-term personnel recruitment plans, management procedures and code of conduct.  The number of Ternium’s employees increased to approximately 16,000 at year-end 2010, or 2,000 more employees than at year-end 2009, mainly as a result of the Ferrasa acquisition and higher activity levels.

Ternium’s training and recruiting activities during the year were mostly based on our ongoing program for recent graduates, a program that has already contributed a majority of our current management positions.  Ternium’s training programs are intended to create a unique managerial profile that combines the ability to integrate into a regional culture with a global approach to business.  As part of the recently launched medium-term safety program, in 2010 the training program incorporated a one-to-two month assignment to our safety department for graduates completing their initial training activities.

In addition, Ternium continued carrying out several customized courses focused on leadership, performance and technical knowledge, targeted at management, staff and operating employees.  These courses are designed to train employees in the latest concepts and tools in their relevant fields, and to encourage them to achieve the highest possible levels of productivity and operating efficiency.

We also continued strengthening our financial support and contribution to key joint industry and university programs.  Current initiatives include the funding of scholarship and fellowship grants and the endowed Chair sponsoring at targeted universities.  Throughout the year we hosted various courses for graduate and undergraduate students and fostered conferences on technical subjects.

To complete efforts towards the excellence in its human resources, Ternium combined professional and technical training and development programs with initiatives aimed at ensuring the quality of life of its employees, in and out of the workplace.  These efforts included sports and fitness fostering programs, clinical examination and disease prevention campaigns, scholarship and leisure programs for employees’ children, loan programs for home improvement and special situations, and special programs designed for employees willing to complete basic education.

Community Relations

During 2010, with a view towards consolidating long-term sustainable relationships in the communities where we operate, Ternium continued supporting a select number of high-impact programs adapted to the social and economic realities of the mining and industrial areas where we operate.

In the mining areas in Mexico, we continued financing educational infrastructure and initiatives aimed to children and adults and supporting training programs for teachers and school managers.  Additionally, we continued supporting skill academies and fostering agricultural activities in order to promote the labor insertion of underprivileged community members.  Among its healthcare initiatives, in 2010 the company concluded the Ternium Hospital’s third construction stage.  The facility now offers general and dental health treatment, including medicine prescription services.  Ternium also continued fostering activities at local communities through its sport facilities.

Ternium designed, in coordination with the Mexican national board of technical education, a technical module for the schools’ syllabus aimed at enhancing skills required in the steel industry among young technicians.  In addition, the company financed infrastructure projects of educational facilities in the Monterrey area and fostered sports and cultural activities among its employees, their families and the broader community.

In Argentina, Ternium’s subsidiary Siderar continued supporting programs aimed at improving public schools located in marginal areas in the country.  In addition, the company continued its program intended to reduce student drop-out rates within the communities that are located near its facilities and granted scholarships for students at risk of dropping out.

In the Ramallo and Ensenada industrial areas in Argentina, Siderar maintained its support of a program initiated in 2006 aimed at strengthening specific technical schools.  This endeavor, which includes five technical schools near the facilities, focuses on the enhancement of these institutions’ technical education to match the increasingly demanding requirements of the industrial labor market.  Under this program, during 2010 Siderar continued providing scholarships at its workshops as well as training in associated centers and schools.

Also, in the Ramallo industrial area, the company committed its support for the remodeling and expansion works at a medical care unit devoted mainly to the assistance of rural population in the area.  Siderar also granted scholarships for high performance students and fostered sports and cultural activities for children, as well as among its employees, their families and the broader communities.

Environment, Health & Safety

During 2010, Ternium continued improving its environment, health and safety policies, reaffirming environmental protection and 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 these 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, the Occupational Health and Safety Administration’s (OHSA) 18000 and ISO 14000 environmental management international standard directives.

In 2010, we continued participating in the World Steel Association forums.  These forums, which are focused on sustainable development, environment, safety and occupational health, are in the process of developing 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 improvement plans for its processes. These forums include the Climate Change Policy, Life Cycle Assessment, CO2 Data Collection Program, Water Management, Sustainability Reporting, and Safety and Occupational Health Committee groups and their working subgroups.

Ternium’s commitment toward environmental programs has once again been recognized by the World Steel Association and by GEI Mexico, a public-private nonprofit organization, for our participation in their respective greenhouse gas emission reporting programs.  As of year-end 2010, all of our steelmaking and steel processing facilities in Mexico were registered with the Mexican Government’s National Environmental Voluntary Program.  Under this program, two of our certified facilities were nominated within the outstanding Mexican facilities for their environmental performance.  In Argentina, Ternium revalidated the ISO 14001 certificates for its local facilities as well as its clean industry certificates for selected operations.

Health and safety programs results have been encouraging.  In 2010, Ternium’s average injuries frequency rate³ (IFR) and lost-time injuries frequency rate⁴ (LTIFR) continued improving, reaching new lows of 4.0 and 2.2, respectively.  These measurements cover all of Ternium’s facilities and both our personnel and the personnel of third-party contractors operating in our facilities.

In 2010, Ternium took steps to improve its medium-term safety program, including some innovative techniques.  Under the program, the company standardized safety practices across the production units, trained managers in the newly adopted best-in-industry management safety tools, and reassessed contractor obligations towards pre-defined safety programs.  Inspired by the steel industry’s best safety practices, the program includes training programs, information campaigns, progressive enhancement teams and “safety hour” events, requiring managers to tour the facilities according to a predefined schedule, in order to detect unsafe conditions or practices and listen to personnel’s comments and suggestions.

Likewise, the company took steps to improve its medium-term environmental program.  The new program, also inspired by the steel industry’s best practices, introduces environmental accountability of managers and includes personnel training as well as information campaigns.

Emissions Control

During 2010, we launched a project to enhance the dust collection and handling system at one steel shop in Mexico.  The project is expected to be completed in 2011.  In Argentina, we launched a project to reduce defuse emissions encompassing all three basic oxygen furnaces at our steel shop in that country.  With two basic oxygen furnaces already enclosed during 2010, the project is expected to be concluded during 2011.  In Colombia, we concluded infrastructure works to minimize the generation of waste water and we expect to start the development of a dust emission control project at Ferrasa’s steel shop in 2011. These activities are encompassed in an ongoing program that monitors and reviews the 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 waste water.

Greenhouse Gas Emissions

The accompanying graph shows Ternium’s estimated emission of carbon dioxide (CO₂) per ton of liquid steel produced, as reported to the World Steel Association.  We support the steel industry’s ongoing effort to develop innovative solutions to reduce greenhouse gas (GHG) emissions over the lifecycle of steel products.  According to the Intergovernmental Panel on Climate Change (IPCC), the steel industry accounts for approximately 3% to 4% of total world GHG emissions.

Carbon Dioxide Emission

(ton/ton of liquid steel)

Our steel production facilities in Mexico have achieved GHG-specific emission levels that are close to the theoretical minimum.  In Argentina, Siderar’s GHG-specific emission levels are close to the industry average for blast furnace technology.  Our Guerrero steel production unit in Mexico has been recognized by the state government for its high GHG capture levels.

Other Initiatives

In Mexico, the company implemented a flora and fauna rescue plan in preparation for the construction of a new plant.  The works were carried out in collaboration with a local university and specialists, and in compliance with the resolutions issued by Mexican environmental authorities.

Corporate Governance

Shares

The Company has a single class of shares, each having a nominal value of USD1.00 per share and equal economic and voting rights, including the right to vote at its general shareholders’ meetings.  Our articles of association provide that our annual ordinary general shareholders meetings must take place in Luxembourg on the first Wednesday of every June 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 present or 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.

The Company has an authorized share capital of USD3.5 billion, of which USD2,004,743,442 was issued and outstanding as of December 31, 2010.  The Company’s articles of association currently authorize the board of directors, for a period that ends on July 14, 2015, to issue shares within the limits of its authorized share capital at such times and on such terms and conditions as the board of directors or its delegates may determine.  Accordingly, until July 14, 2015, shares may be issued up to the authorized share capital limit of USD3.5 billion by a decision of the board of directors.  The Company’s shareholders have authorized the board of directors to waive, suppress or limit any pre-emptive subscription rights of shareholders provided for by law to the extent it deems such waiver, suppression or limitation advisable for any issue or issues of shares within the authorized share capital.  However, with the exception of certain cases set out in the articles of association, any issuance of shares for cash within the limits of the authorized share capital shall be, as long as the Company’s shares are listed on a regulated market, subject to the pre-emptive subscription rights of the then-existing shareholders.

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 June 2, 2010 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 Ternium shares.  Those shares were purchased from Usinas Siderúrgicas de Minas Gerais S.A. – Usiminas (“Usiminas”) on February 15, 2011, concurrently with the closing of an underwritten public offering by Usiminas of Ternium ADSs.

American Depositary Shares (ADSs)

Holders of ADSs only have those rights that are expressly granted to them in the deposit agreement dated as of 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.

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.

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.  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 nine 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 to it by applicable laws and regulations of the regulated market or markets on 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.

PricewaterhouseCoopers was appointed as the Company’s independent auditor for the fiscal year ended December 31, 2010, at the ordinary general shareholders’ meeting held on June 2, 2010.

Board of Directors and Executive Officers

Board of Directors

Chairman  

Paolo Rocca

Ubaldo Aguirre (*)

Roberto Bonatti

Carlos Condorelli

Pedro Pablo Kuczynski (*)

Adrián Lajous (*)

Bruno Marchettini

Daniel Novegil

Gianfelice Rocca

Secretary  

Raúl Darderes

(*) Audit Committee Members

Senior Management

Chief Executive Officer

Daniel Novegil

Chief Financial Officer

Pablo Brizzio

North Region Area Manager

Julián Eguren

Siderar Executive Vice President

Martín Berardi

Planning and Operations General Director

Oscar Montero

Engineering and Environment Director

Luis Andreozzi

Brazil General Director

Paolo Bassetti

Human Resources Director

Miguel Angel Punte

Chief Information Officer

Roberto Demidchuck

Quality and Product Director

Rubén Herrera

Investor Information

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, 2010 and 2009 and for the years ended December 31, 2010, 2009 and 2008 (including the notes thereto), which are included elsewhere in this annual report.

The Company prepares its consolidated financial statements in conformity with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board and adopted by the European Union.  Financial and operational information is presented in US dollars and metric tons.

Net results

The following table sets forth, for the periods indicated, selected financial data from the Company’s consolidated income statement.

Net sales

Net sales in 2010 were USD7.4 billion, 49% higher than net sales in 2009.  Shipments of flat and long products were 8.1 million tons in 2010, up 27% compared to shipments in 2009.  Revenue per ton shipped was USD895 in 2010, an 18% increase compared to 2009, mainly as a result of higher prices.  Shipments and revenue per ton in 2009 were significantly impacted by the global economic downturn during the period.

In 2010, steel consumption in the North American market increased 31% year-over-year.  The economies in the NAFTA region expanded gradually during the year with a 4.0% GDP growth in Mexico and a 2.9% GDP growth in the US.  Mexican export-oriented industries were particularly favored by the recovery of the economic activity in the United States.  In contrast, the construction sector in the country remained subdued during most of 2010 and only showed evidence of improvement by year-end.

Likewise, the steel markets in Central and South America showed an estimated 28% year-over-year increase in apparent steel use during 2010.

  The economic activity in the region expanded during 2010, including a 7.5% GDP growth in Argentina and a 4.7% GDP growth in Colombia.  Construction activity in the region returned to solid growth rates and the automotive sector, which was among the most affected sectors in 2009, significantly expanded in 2010.

Sales of flat products in 2010 totaled USD6.4 billion, a 50% increase compared to 2009.  Net sales increased as a result of higher shipments and revenue per ton.  Shipments of flat products totaled 6.8 million tons in 2010, an increase of 28% compared to 2009 mainly due to a recovery from the 2009 global economic downturn.  Revenue per ton shipped increased 18% to USD942 in 2010 compared to 2009, mainly due to higher steel prices in Ternium’s main steel markets.

Sales of long products were USD833.1 million in 2010, an increase of 45% compared to 2009, mainly due to higher volumes and prices.  Shipments of long products totaled 1.3 million tons in 2010, a 22% increase versus 2009.  Revenue per ton shipped was USD649 in 2010, an increase of 20% compared to 2009 due to higher prices.

Sales of other products totaled USD172.5 million in 2010, compared to USD136.1 million during 2009, an increase of 27%.  The increase includes the effect of higher iron ore prices.

Sales of flat and long products in the North America Region were USD4.1 billion in 2010, an increase of 42% versus 2009 due to higher shipments and prices.  Shipments in the region totaled 4.8 million tons in 2010, or 19% higher than 2009, as a result of higher demand.  Revenue per ton in the North Region increased 19% to USD851 in 2010 over 2009, mainly due to higher prices.

Flat and long product sales in the South & Central America Region were USD3.1 billion in 2010, an increase of 72% versus 2009, due to higher shipments and prices.  Shipments in the region totaled 3.1 million tons in 2010, or 55% higher than in 2009, mainly due to a recovery from the 2009 global economic downturn.  Revenue per ton shipped was USD973 in 2010, an increase of 11% compared to 2009.

Cost of sales

Cost of sales was USD5.7 billion in 2010, compared to USD4.1 billion in 2009.  Cost of sales increased mainly as a result of higher shipments and higher cost per ton.  Cost per ton in 2010 increased compared to 2009 mainly due to higher raw material and purchased slab prices, as well as higher labor, services and maintenance costs.

Energy prices for our operations in Mexico, mainly natural gas and electricity, increased year-over-year in 2010 following the trend in the US energy markets. Energy prices for our operations in Argentina, mainly coal, petroleum coke and to a lesser extent natural gas, decreased year-over-year in 2010 primarily due to a significant reduction in contractual coal prices in the second half of 2009 and first half of 2010. Our operations in Argentina are less exposed to electricity prices as they have self-generating capabilities for a large share of its consumption.

Selling, general and administrative (SG&A) expenses

SG&A expenses in 2010 were USD665.3 million, or 9% of net sales, compared to USD531.5 million, or 11% of net sales, in 2009.  The USD133.8 million increase in SG&A was mainly due to higher freight expenses and taxes related to higher activity levels, higher labor costs and the effect of the consolidation of Ferrasa on August 25, 2010, partially offset by lower personnel reduction charges.

Operating income and EBITDA ^[6]

Operating income in 2010 was USD1.1 billion, or 14% of net sales, compared to an operating income of USD296.4 million, or 6% of net sales, in 2009. The increase was mainly due to higher sales prices and volumes, partially offset by higher costs of sales.  EBITDA in 2010 was USD1.4 billion, or 20% of net sales, compared to USD708.5 million, or 14% of net sales, in 2009.  The increase in Ternium’s EBITDA margin in 2010 as compared to 2009 was mainly the result of higher steel prices, partially offset by higher operating costs per ton.

Net financial results

Ternium recorded a net financial gain of USD130.5 million in 2010, compared to a $132.9 million gain in 2009.

In 2010, Ternium’s net interest expenses were USD45.6 million, compared to USD84.7 million in 2009, mainly as a result of lower net indebtedness and cost of debt.

Ternium had a net foreign exchange gain of USD123.7 million in 2010, compared to a gain of USD83.1 million in 2009.  The 2010 gain was primarily due to the impact of the Mexican Peso’s 5.4% revaluation on Ternium’s Mexican subsidiary’s US dollar denominated debt.  This result is non-cash when measured in US dollars and is offset by changes in Ternium’s net equity position in the currency translation adjustments line, as the value of Ternium México’s US dollar denominated debt is not altered by the Mexican Peso’s fluctuation when stated in US dollars in Ternium’s consolidated financial statements.  In accordance with IFRS, Ternium México prepares its financial statements in Mexican Pesos and records foreign exchange results on its net non-Mexican Peso positions when the Mexican Peso revaluates or devaluates relative to other currencies.

Interest income on the Sidor financial asset recognized in connection with the transfer of Sidor shares on May 7, 2009, was USD61.0 million in 2010, compared to USD136.0 million in 2009.

Income tax expense

Income tax expense for 2010 was USD406.7 million, or 34% of income before income tax, discontinued operations and non-controlling interest, compared to USD91.3 million in 2009, or 21% of income before income tax, discontinued operations and non-controlling interest.  The 2009 result included a non-recurring gain of USD35.4 million due to a favorable resolution of a tax-related dispute in Mexico.

Net result of discontinued operations

There were no results of discontinued operations in 2010, while 2009 included a USD428.0 million gain as a result of the transfer of Sidor shares to the Venezuelan government on May 7, 2009.

Income attributable to non-controlling interest

Income attributable to non-controlling interest in 2010 was USD157.4 million, higher than income attributable to non-controlling interest of USD49.7 million in 2009, mainly due to a higher result attributable to non-controlling interest in Siderar and Ternium México.

Liquidity and financial resources

Ternium’s financing strategy is to maintain adequate financial resources in hand and access to additional liquidity to achieve its objective of maximizing financial flexibility at a reasonable cost. On August 25, 2010, Ternium acquired a controlling interest in Ferrasa.  Other capital expenditures in the period were limited to brown-field projects.  During the year, Ternium only accessed the banking market to obtain short-term bank financing for working capital purposes, relying largely on cash flow from operations as it principal source of funding.

We are confident that our cash flow from operations and our access to external borrowings are sufficient to meet our needs for working capital and that we have ample debt coverage to service our obligations for the foreseeable future.  We believe that our liquidity and access to capital and international bank markets give us significant flexibility to execute our planned capital expenditures and to carry out strategic acquisitions if such opportunities arise.

Ternium holds money market investments and variable-rate or fixed-rate securities from investment grade issuers. The company concentrates cash in major financial centers, mainly New York.  Ternium holds cash primarily in US dollars and limits its holdings of other currencies to the minimum required to fund its cash operating needs.  Liquid financial assets as a whole represented 23.6% of its total assets at the end of 2010 or USD2.6 billion.

Historical cash flow

Operating activities

Net cash provided by operating activities in 2010 was USD806.8 million, compared to USD1.2 billion in 2009.  While operating income was USD757.6 million higher in 2010 than in 2009, there also was a USD448.0 million increase in working capital in 2010 compared to a USD635.2 million decrease in working capital in 2009.  The increase in working capital in 2010 included an increase of USD497.4 million in inventory and an aggregate USD149.3 million increase in trade and other receivables, partially offset by an aggregate USD198.7 million increase in accounts payable and other liabilities.  Inventories increased in 2010, reflecting higher costs as a result of higher input prices, as well as higher inventory volume of finished goods, goods in process and raw materials as a result of increased operating activity.  The decrease in working capital in 2009 included a USD429.1 million decrease in inventories and an aggregate USD308.9 million decrease in trade and other receivables, partially offset by an aggregate USD102.9 million increase in accounts payable and other liabilities.  Inventories decreased in 2009 as a result of lower input costs, as well as lower inventory volume of finished goods, goods in process and raw materials.

Investing activities

Net cash used in investing activities during 2010 was USD470.1 million, compared to net cash provided by investing activities of USD791.2 million in 2009.  Net cash used in investing activities in 2010 consisted mainly of USD767.4 million proceeds from the Sidor financial asset, less USD350.1 million used in capital expenditures and USD887.4 million used in other investing activities, mainly investments with maturity of more than three months.  Net cash provided by investing activities in 2009 consisted mainly of USD953.6 million proceeds from the Sidor financial asset, less USD208.6 million used in capital expenditures.

Capital expenditures in 2010 included the following main investments:

• Mexico: upgrading of a cold-strip mill and development of mining activities.
• Argentina: relining of a blast furnace, progress in the expansion of the hot-strip mill, progress in repairs and enhancements in the coking facilities, construction of a river port for barges and expansion of two service centers.

Ternium’s capital expenditures in 2009 included the following main investments:

• Mexico: investments in iron ore mining and processing activities, and upgrading of a hot-strip mill.

• Argentina: relining of a blast furnace and revamping and expansion of coking facilities.

Financing activities

Net cash used by financing activities in 2010 was USD654.1 million, compared to USD922.6 million in 2009. Proceeds from borrowings during 2010 amounted to USD35.4 million, mainly short-term debt used for working capital needs. Repayments of borrowings in 2010 reached USD555.9 million, mostly related to the scheduled repayments of Ternium México’s outstanding debt associated with the Grupo Imsa transaction.  The Company paid dividends of USD100.2 million in 2010.  Proceeds from borrowings during 2009 amounted to USD219.0 million, mainly short-term debt used for working capital needs. Repayments of borrowings in 2009 reached USD1.1 billion related to maturities of long-term debt and prepayments on bank facilities associated with the Grupo Imsa transaction.

Principal sources of funding

Funding policy

Ternium’s policy is to maintain a high degree of flexibility in operating and investing activities by maintaining adequate liquidity levels and ensuring access to readily available sources of financing.  Most of Ternium’s financing is conducted in US dollars.  Ternium selects the type of facility, associated rate and term after considering the intended use of proceeds.

Financial liabilities

Ternium’s borrowings as of December 31, 2010, consisted mainly of different bank loans and facilities.  Outstanding financial debt amounted to USD1.9 billion at year end, compared to USD2.3 billion as of December 31, 2009, a decrease of USD0.4 billion.  Ternium’s net cash position of USD0.7 billion as of December 31, 2010 (cash and cash equivalents plus other investments of USD2.6 billion less borrowings of USD1.9 billion) increased by USD0.9 billion compared to net debt of USD0.2 billion as of December 31, 2009.

At December 31, 2010, Ternium’s outstanding financial debt US dollar-denominated portion and floating-rate portion were 92.1% and 99.3%, respectively.  Ternium entered into derivative instruments to manage the impact of the floating interest rate changes on its financial debt.  At December 31, 2010, these instruments, consisting of interest rate collars and knock-in swaps for an aggregate contractual amount of USD894.8 million, had an aggregate negative fair value of USD54.7 million.  At December 31, 2010, the weighted average interest rate of Ternium’s outstanding financial debt, including the cost related to derivative instruments, was 3.29%.  For additional information on the amounts, tenor and main characteristics of these instruments, please see note 25 (Derivative financial instruments) to the Company’s consolidated financial statements included elsewhere in this annual report.

TERNIUM S.A.

CONSOLIDATED FINANCIAL STATEMENTS

As of December 31, 2010 and 2009 and

for the years ended December 31, 2010, 2009 and 2008

46a, Avenue John F. Kennedy, 2^nd floor

L – 1855

R.C.S. Luxembourg : B 98 668

TERNIUM S.A.

Index to financial statements

Consolidated Financial Statements

Report of Independent Registered Public Accounting Firm

To the Board of Directors and Shareholders of

Ternium S.A.: 

In our opinion, the accompanying consolidated statements of financial position and the related consolidated statements of income, comprehensive income, changes in shareholders’ equity and cash flows present fairly, in all material respects, the financial position of Ternium S.A. and its subsidiaries at December 31, 2010 and 2009, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2010 in conformity with International Financial Reporting Standards as issued by the International Accounting Standards Board and in conformity with International Financial Reporting Standards as adopted by the European Union. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

Buenos Aires, Argentina

May 4, 2011

CONSOLIDATED INCOME STATEMENT