<PAGE>   1

                                                                      EXHIBIT 13

Puerto Rican Cement Company, Inc.

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

This section represents Management's discussion and analysis of the Company's
consolidated financial condition and results of operations. It should be read in
conjunction with the accompanying financial statements.

RESULTS OF OPERATIONS
1997 COMPARED WITH 1996

During 1997, consolidated sales increased by $7.5 million, or 5%, to $156.8
million from $149.3 million during 1996. This increase was principally a result
of increases of 5.4% in cement sales, 7.8% in ready-mixed concrete sales, and
3.6% in paper bag sales, offset by a decrease of 14% in lime sales due to a
reduction in exports.

     Consolidated gross margins reported at 29.8% for 1997 compared favorably
with gross margins of 28.1% for 1996. The principal reasons for this increase
were improvements in inventory management and production schedules in both the
cement and bag divisions which yielded lower costs of sale. This reduction in
costs resulted in spite of brief interruptions in the clinker production related
to the plant upgrade project currently underway.

     Consolidated selling, general and administrative expenses increased by $2.7
million, or 14.1%, to $21.9 million in 1997 from $19.2 million in 1996. This
increase was principally attributable to the additional selling costs resulting
from higher sales, normal inflationary growth, and higher expenses related to
professional fees for legal, advertising and security services associated mainly
with the development of the Company's new real estate projects and related legal
proceedings for permits. These expenses will continue to impact general and
administrative expenses during 1998. The Company's new projects will not be
contributing to consolidated operations pending the granting of these permits.

     Interest and financial charges increased $1.3 million, or 28.9%, to $5.8
million in 1997 compared with $4.5 million for 1996. This increase reflects the
effect of slightly higher interest rates on the $50 million, Series A Notes
issued in January 1997 as compared to the shorter term indebtedness refinanced
with the proceeds from the issuance of these Notes, and the interest on the
additional $20 million in Series B Notes issued in July 1997. Interest income
also increased during 1997 by $900,000, or 33.3%, to $3.6 million compared with
$2.7 million in 1996. This increase resulted from additional investments in the
Company's portfolio, specifically the $70 million, zero-coupon investment
acquired for $17.6 million in December 1996.

CEMENT AND RELATED PRODUCTS SEGMENT
Cement operations. During 1997, cement dollar sales increased by 5.4 percent.
This was principally due to an increase in sales volume of 59,000 tons, or 5.7%,
to 1,097,000 tons in 1997 from 1,039,000 tons in 1996. Improved efficiencies in
inventory management and the manufacturing processes, which resulted in lower
costs, favorably impacted the cement operation's gross margins.

     Ready-mixed concrete operations. Sales in RMC represented the most
significant change in consolidated net sales. Ready-mixed concrete dollar sales
increased by $5.9 million, or 7.8%, to $81.5 million in 1997 from $75.6 million
in 1996. This was mainly a result of an increase in sales volume of 3.6 percent.
Also, RMC passed through to its clients increases in the cost and transportation
of aggregates used as raw material. The gross margins of the ready-mixed
concrete operations were favorably impacted by the increase in sales volume,
coupled with economies achieved by the merger of the Company's two ready-mix
concrete subsidiaries which took effect on January 1, 1997.

     Lime operations. Total lime sales decreased in 1997 by 7,000 tons, or
16.7%, as a result of the net effect of an increase in local sales of 2,000
tons, or 12%, offset by a decrease in export sales of 9,000 tons, or 34%.

PAPER AND PACKAGING SEGMENT
Multi-wall paper bags operations. During 1997, there was an increase in dollar
sales of multi-wall paper bags of 3.6 percent. The increase resulted mainly from
a 9.4% hike in the pasted bag division sales, offset by a slight decline in the
pocket bags division sales. Efficiencies achieved through improvements in the
inventory management and manufacturing process resulted in lower costs, which
yielded improved gross margins for the year.

1996 COMPARED WITH 1995

Fiscal year 1996, represented the first full year of operation as subsidiaries
of PRC of the two ready-mixed concrete companies acquired by the Company in
November 1995. Accordingly, most of the significant changes in the comparative
amount figures resulted from the inclusion of a full year of operation of the
ready-mixed subsidiaries during 1996 compared with less than two months of
operation in 1995.

     During 1996, consolidated net sales increased 49% to $149.3 million from
$100.2 million in 1995. This increase was principally due to $48.1 million (net
of intercompany sales) of additional sales contributed by the ready-mixed
operations. Net sales also increased by 6% and 40% on the cement and lime
operations, respectively. Export sales accounted for the lime sales increase.

     Consolidated gross margin decreased to 28% in 1996 compared with 36% in
1995. The inclusion of lower gross margins from the ready-mixed concrete
operations was the


                                       13

<PAGE>   2


Puerto Rican Cement Company, Inc.

MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)

principal reason for this decline. Cost of sales was also affected in 1996 by
the additional purchases of higher cost clinker which in turn, increased the
cost of producing cement.

     Consolidated selling, general and administrative expenses increased by $5.5
million compared with 1995, due to related expenses contributed by the
ready-mixed operations. During 1995, only the last two months of operations were
impacted by selling, general and administrative expenses from the ready-mixed
operations. Consolidated interest and financial charges increased to $4.5
million in 1996 from $2.4 million in 1995 due to interest expense related to
financial agreements entered in November 1995. Also, interest related to loans
used in the mills conversion project was charged to expense during 1996. During
the first three quarters of 1995, these expenses were capitalized as part of the
cost of this project.

CEMENT AND RELATED PRODUCTS SEGMENT
Cement operations. Cement sales increased by 6% during 1996. The increase was
principally due to a higher volume of cement sales. Cement sold in 1996 totaled
1,039,000 tons, an increase of 7% from sales of 968,000 tons in the prior year.
Sales of cement to the ready-mixed subsidiaries were 31% higher than the prior
year. Average selling price per bag of cement decreased less than 1%,
principally as a result of higher bulk sales during 1996. Gross margin decreased
from 40% in 1995 to 37% in 1996. During 1996, the Company more than doubled its
purchases of clinker when compared with 1995, in order to meet the greater
demand for cement during this year. This higher cost clinker directly impacted
cost of sales, resulting in the decrease in gross margins. Clinker production
was 2% lower in 1996 compared with 1995.

     Ready-mixed concrete operations. Results for 1996, included for the first
time a full year of operations of the Company's ready-mixed concrete
subsidiaries. Results for 1995, included only two months of the operations of
the ready-mixed subsidiaries. Gross margin for the ready-mixed operation in 1996
increased from 5% for the two-month period of operations of 1995, to 8% for the
12-months of 1996. Income from operations was $0.5 million in 1996 compared with
a loss of $0.3 million during the shorter 1995 period. Comparisons between a
complete year to a segment of less than two months are not realistic for this
particular period.

     Hydrated lime operations. Hydrated lime sales increased 40% from $3.6
million in 1995 to $5.1 million in 1996. This increase resulted from a higher
volume of export sales which increased from 10,600 tons in 1995 to 26,300 tons
in 1996. Gross margin increased from 7% in 1995 to 21% in 1996. This significant
improvement resulted from the high level of export sales which contributed to
better capacity utilization of the hydrated lime plant, thereby resulting in a
lower cost per unit produced.

PAPER AND PACKAGING SEGMENT
Paper and packaging sales (net of intercompany sales) in 1996 were $6.0 million
compared with $6.2 million in 1995, a decrease of 2%. Income from operations for
this segment increased 46% to $0.8 million due to decreases in paper cost,
improvements in inventory management and production schedules, and adjustments
in sale prices to customers.

SIGNIFICANT EVENTS
Merger
Effective January 1, 1997, the Company merged its two ready-mixed concrete
subsidiaries, Concreto Mixto, Inc. and Ready Mix Concrete, Inc. ("RMC"), being
RMC the surviving entity. This strategic step resulted in economic efficiencies
for the Company through the elimination of duplicate administrative functions
and their related costs.

Plant Upgrade Project
The Company's plant upgrade project, which core is to increase the clinker
production capacity by 30% has advanced up to the point allowed by the permits
secured. During 1997 and the first quarter of 1998 the Company performed all the
modifications allowed and is awaiting the final local agency permits to proceed.

San Juan Cement legal case
As further discussed in Note 16 to the financial statements, the Company is the
defendant in an antitrust case brought by SJC, the other cement manufacturer in
Puerto Rico. The case is currently in a stay of the proceedings, requested
jointly by PRC and SJC, and granted by the Courts in April 1997.

Other Legal Proceedings
The Company is involved in other legal proceedings related to its subsidiary RMC
which are fully discussed in Note 16 to the financial statements.

Realty / Limestone Extraction
The Company has temporarily suspended its operations at Vega Alta and Guanica
pending the conclusion of legal proceedings surrounding the permits for these
projects (please refer to Note 16 to the financial statements for more details).
The Vega Alta project consists of the development of a 300-unit, low-cost
housing project on 80 acres of real estate owned by the Company, and the Guanica
project consists of the extraction of limestone from a leased facility.


                                       14

<PAGE>   3


Puerto Rican Cement Company, Inc.

SELECTED FINANCIAL DATA

<TABLE>
<CAPTION>
Year Ended December 31,                          1997               1996              1995              1994              1993
-------------------------------------------------------------------------------------------------------------------------------
<S>                                      <C>                <C>               <C>               <C>               <C>
Operating revenues(1)                    $156,774,092       $149,276,622      $100,231,963      $ 92,829,872      $ 84,027,588
Income before income tax                   22,805,472         21,568,030        23,049,750        21,342,365        19,145,787
Tax provision                               6,802,261          6,879,639         7,257,317         5,579,153         6,710,065
Effect of change in accounting
   for postretirement benefits
   other than pensions, net                                                                                         (1,409,400)
Cumulative effect of change in
   accounting for income tax                                                                                           853,410
Net income                                 16,003,211         14,688,391        15,792,433        15,763,212        11,879,732
Net income per share(2)                          2.91               2.66              2.90              2.76              2.14
Current assets                             81,725,557         86,800,526        78,548,232        47,298,323        51,207,564
Current liabilities                        18,924,124         30,481,303        27,977,386        16,872,039        17,273,306
Working capital                            62,801,433         56,319,223        50,570,846        30,426,284        33,934,258
Current ratio                                    4.32               2.85              2.81              2.80              2.96
Property, plant and equipment, net        158,610,632        143,088,242       142,567,213       112,299,027       107,968,603
Long-term investments                      46,367,581         46,980,338        31,228,541        42,030,507        32,512,367
Total assets                              291,051,116        281,203,510       255,014,868       201,869,754       193,283,596
Long-term debt (exclusive of
   current portion)                        76,179,792         67,023,200        57,549,475        31,696,403        26,633,080
Deferred income taxes                      35,859,657         33,323,351        30,808,654        27,722,814        26,028,233
Stockholders' equity, net                 157,064,315        147,421,046       135,805,923       122,971,336       120,675,030
Dividends per share                              0.76               0.70              0.68              0.62              0.53
Cement sales in tons                        1,097,453          1,038,798           968,188           959,561           855,540
-------------------------------------------------------------------------------------------------------------------------------
</TABLE>

(1)  Including revenue from realty operations of:1997-$99,012; 1996-$103,794;
     1995-$101,997; 1994-$97,095; 1993-$653,721.

(2)  Excluding, in 1993, the cumulative effects of changes in accounting for
     postretirement benefits and income taxes of ($0.24) and $0.15,
     respectively.

     As part of an initiative to develop the Company's real estate for various
uses, such as low-cost housing, the Company has plans to start the preparation
and leveling of land at its Vega Alta site. As a by-product, this process will
result in the incidental extraction of aggregates. The Company expects to use
these aggregates in its ready-mixed concrete subsidiary. Once the initial site
of extraction is leveled, the Company will proceed with the development of the
low-income housing project called Las Orquideas.

     The Company also leases a site in the southern town of Guanica which the
Company expects will become an important source of limestone material for the
Company's lime subsidiary, Florida Lime Corporation.

Issuance of Notes
During 1997, the Company completed the private issuance of $50 million in Series
A and $20 million in Series B Senior Secured Notes. As further discussed in Note
10 to the financial statements, proceeds from these issuances were used to repay
short- and medium-term debt, and to finance projects now under development. As a
result of this refinancing transaction, the Company's current ratio improved to
4.32 to 1 as of December 31, 1997 from 2.85 to 1 as of December 31, 1996.

Stock Repurchase
The Company repurchased 68,000 shares of its common stock for $3.3 million on
March 19, 1998 in a privately negotiated transaction approved by the Company's
Board of Directors at its January 1998 meeting.

     At its February 1998 meeting, the Company's Board of Directors
approved a program to repurchase up to 300,000, or 5.5%, of the Company's
outstanding common stock.


                                       15

<PAGE>   4


Puerto Rican Cement Company, Inc.

REPORT OF INDEPENDENT ACCOUNTANTS

PRICE WATERHOUSE

February 20, 1998


To the Board of Directors
and Stockholders of
Puerto Rican Cement Company, Inc.



In our opinion, the accompanying consolidated balance sheet and the related
consolidated statements of income and retained earnings and of cash flows
present fairly, in all material respects, the financial position of Puerto Rican
Cement Company, Inc. and its subsidiaries at December 31, 1997 and 1996, and the
results of their operations and their cash flows for each of the three years in
the period ended December 31, 1997, in conformity with generally accepted
accounting principles. 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 generally accepted auditing standards which
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 the opinion expressed above.




/s/ Price Waterhouse

Certified Public Accountants
(OF PUERTO RICO)
License No. 10 Expires Dec. 1, 1998
Stamp 1457844 of the P.R. Society of
Certified Public Accountants has been
affixed to the file copy of this report.


                                       16

<PAGE>   5


Puerto Rican Cement Company, Inc.

CONSOLIDATED STATEMENT OF INCOME AND
RETAINED EARNINGS

<TABLE>
<CAPTION>
Years Ended December 31,                                       1997                1996                1995
------------------------------------------------------------------------------------------------------------
<S>                                                    <C>                 <C>                 <C>
Net sales                                              $156,675,080        $149,172,828        $100,129,966
Revenue from realty operations, net                          99,012             103,794             101,997
------------------------------------------------------------------------------------------------------------
                                                        156,774,092         149,276,622         100,231,963
------------------------------------------------------------------------------------------------------------
Cost and expenses, including depreciation,
   depletion and amortization of $12,383,769
   (1996 - $11,111,840; 1995 - $7,320,130)
   Cost of sales                                        110,010,997         107,291,187          64,232,980
   Selling, general and administrative expenses          21,879,599          19,168,663          13,690,290
------------------------------------------------------------------------------------------------------------
                                                        131,890,596         126,459,850          77,923,270
------------------------------------------------------------------------------------------------------------
         Income from operations                          24,883,496          22,816,772          22,308,693
------------------------------------------------------------------------------------------------------------
Other charges (credits):
   Interest and financial charges, net of
      interest charged to construction                    5,765,894           4,464,152           2,423,200
   Interest income                                       (3,601,063)         (2,660,077)         (2,528,677)
   Other income                                             (86,807)           (555,333)           (635,580)
------------------------------------------------------------------------------------------------------------
         Total other charges (credits)                    2,078,024           1,248,742            (741,057)
------------------------------------------------------------------------------------------------------------
         Income before taxes                             22,805,472          21,568,030          23,049,750
------------------------------------------------------------------------------------------------------------
Provision for income taxes:
   Current income taxes                                   4,265,955           4,402,169           4,199,686
   Deferred income taxes                                  2,536,306           2,477,470           3,057,631
------------------------------------------------------------------------------------------------------------
                                                          6,802,261           6,879,639           7,257,317
------------------------------------------------------------------------------------------------------------
         Net income                                      16,003,211          14,688,391          15,792,433
Retained earnings at beginning of year                  137,047,068         126,216,785         114,140,497
Cash dividends declared, $0.76, $0.70 and $0.68
   per share in 1997, 1996 and 1995, respectively        (4,172,076)         (3,858,108)         (3,716,145)
------------------------------------------------------------------------------------------------------------
Retained earnings at end of year                       $148,878,203        $137,047,068        $126,216,785
============================================================================================================

Earnings per share:
Net income per share                                   $       2.91        $       2.66        $       2.90
============================================================================================================
</TABLE>


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


                                       17

<PAGE>   6


Puerto Rican Cement Company, Inc.

CONSOLIDATED BALANCE SHEET

<TABLE>
<CAPTION>
December 31,                                                            1997              1996
----------------------------------------------------------------------------------------------
<S>                                                             <C>               <C>
ASSETS
Cash and cash equivalents                                       $  2,995,634      $ 14,808,709
Investments available-for-sale                                     5,580,202         4,595,908
Short-term investments                                             6,967,225         1,917,616
Notes and accounts receivable, net                                28,763,683        27,410,312
Inventories                                                       32,885,743        33,443,290
Prepaid expenses                                                   4,533,070         4,624,691
----------------------------------------------------------------------------------------------
      Total current assets                                        81,725,557        86,800,526
Property, plant and equipment, net                               158,610,632       143,088,242
Long-term investments                                             46,367,581        46,980,338
Other assets                                                       4,347,346         4,334,404
----------------------------------------------------------------------------------------------
                                                                $291,051,116      $281,203,510
==============================================================================================

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
   Notes payable                                                $    668,724      $         --
   Current portion of long-term debt                               1,109,781        15,401,050
   Accounts payable                                                6,843,256         7,798,595
   Accrued liabilities                                             7,075,160         5,300,186
   Dividends payable                                               1,035,894         1,050,144
   Income taxes payable                                            2,191,309           931,328
----------------------------------------------------------------------------------------------
      Total current liabilities                                   18,924,124        30,481,303
----------------------------------------------------------------------------------------------
Long-term liabilities:
   Long-term debt, less current portion                           76,179,792        67,023,200
   Deferred income taxes                                          35,859,657        33,323,351
   Other long-term liabilities                                     3,023,228         2,954,610
----------------------------------------------------------------------------------------------
      Total long-term liabilities                                115,062,677       103,301,161
----------------------------------------------------------------------------------------------
      Total liabilities                                          133,986,801       133,782,464
----------------------------------------------------------------------------------------------
Stockholders' equity:
   Preferred stock, authorized 2,000,000 shares of $5.00
      par value each; none issued
   Common stock, authorized 20,000,000 shares of $1.00
      par value each; 6,000,000 shares issued                      6,000,000         6,000,000
   Additional paid-in capital                                     14,702,914        14,702,914
   Unrealized gain on investments available-for-sale, net            567,745           110,361
   Retained earnings                                             148,878,203       137,047,068
----------------------------------------------------------------------------------------------
                                                                 170,148,862       157,860,343
      Less - 547,926 (1996-472,926) shares of common stock
      in treasury, at cost                                        13,084,547        10,439,297
----------------------------------------------------------------------------------------------
      Total stockholders' equity                                 157,064,315       147,421,046
----------------------------------------------------------------------------------------------
Commitments and contingent liabilities
----------------------------------------------------------------------------------------------
                                                                $291,051,116      $281,203,510
==============================================================================================
</TABLE>

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


                                       18

<PAGE>   7


Puerto Rican Cement Company, Inc.

CONSOLIDATED STATEMENT OF CASH FLOWS

<TABLE>
<CAPTION>
Years Ended December 31,                                                        1997               1996               1995
---------------------------------------------------------------------------------------------------------------------------
<S>                                                                     <C>                <C>                <C>
Cash flows from operating activities:
   Net income                                                           $ 16,003,211       $ 14,688,391       $ 15,792,433
---------------------------------------------------------------------------------------------------------------------------
   Adjustments to reconcile net income to net cash provided (used)
      by operating activities (net of effect of acquisitions):
      Depreciation, depletion and amortization                            12,383,769         11,111,840          7,320,130
      Accretion of discounts on investments                               (2,859,626)        (1,485,257)        (2,202,236)
      Provision for deferred income taxes                                  2,536,306          2,477,470          3,057,631
      Provision for postretirement benefits                                  246,832            244,215            404,804
      Postretirement benefits paid                                          (174,899)          (153,364)          (151,522)
      Gain on sale of land and equipment                                     (30,976)          (121,800)          (420,635)
      Gain on sale of investments available-for-sale                         (50,451)           (26,630)           (22,092)
      Changes in assets and liabilities:
         (Increase) decrease in notes and accounts receivable             (1,353,371)        (2,883,927)         3,781,010
         Decrease (increase) in inventories                                  557,547         (1,220,875)        (1,793,997)
         Decrease in prepaid expenses                                         91,621            127,496            450,554
         (Increase) in other assets                                          (68,154)        (1,720,590)          (188,512)
         (Decrease) in accounts payable                                     (955,339)          (649,259)        (4,353,055)
         Increase (decrease) in accrued liabilities                        1,774,976           (464,033)          (964,873)
         Increase (decrease) in income taxes payable                       1,259,981            596,664           (329,845)
         (Decrease) in long-term liabilities                                  (3,315)            (9,671)                --
---------------------------------------------------------------------------------------------------------------------------
   Total adjustments                                                      13,354,901          5,822,279          4,587,362
---------------------------------------------------------------------------------------------------------------------------
            Net cash provided by operating activities                     29,358,112         20,510,670         20,379,795
---------------------------------------------------------------------------------------------------------------------------

Cash flows from investing activities:
   Acquisition of ready-mixed concrete operations,
      net of cash acquired                                                        --                 --         (5,793,226)
   Capital expenditures                                                  (28,028,571)       (11,662,959)       (10,249,840)
   Proceeds from sale of land and equipment                                  208,600            208,958            436,545
   Proceeds from sale of investments available-for-sale                    1,102,609            550,290         12,974,530
   Purchases of investments available-for-sale                            (1,130,294)          (550,290)                --
   Redemption of investments held-to-maturity                              1,974,000          2,390,650                 --
   Purchases of investments held-to-maturity                              (4,000,000)       (17,623,200)        (3,708,372)
---------------------------------------------------------------------------------------------------------------------------
            Net cash used in investing activities                        (29,873,656)       (26,686,551)        (6,340,363)
---------------------------------------------------------------------------------------------------------------------------
Cash flows from financing activities:
   Purchase of treasury stock                                             (2,645,250)                --         (2,181,000)
   (Decrease) in short-term borrowing                                             --                 --         (2,420,000)
   Increase in notes payable                                                 668,724                 --                 --
   Proceeds from loans                                                    70,800,000         36,168,271         38,370,962
   Payment of principal on long-term debt                                (75,934,679)       (18,943,349)       (32,323,466)
   Payment of notes payable                                                       --         (4,100,000)          (300,000)
   Dividends paid                                                         (4,186,326)        (3,739,968)        (3,700,994)
---------------------------------------------------------------------------------------------------------------------------
            Net cash (used in) provided by financing activities          (11,297,531)         9,384,954         (2,554,498)
---------------------------------------------------------------------------------------------------------------------------
(Decrease) increase in cash and cash equivalents                         (11,813,075)         3,209,073         11,484,934
Cash and cash equivalents at beginning of year                            14,808,709         11,599,636            114,702
---------------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of year                                $  2,995,634       $ 14,808,709       $ 11,599,636
===========================================================================================================================
</TABLE>


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


                                       19

<PAGE>   8


Puerto Rican Cement Company, Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Years Ended December 31, 1997 and 1996

NOTE 1.  REPORTING ENTITY AND SUMMARY OF ACCOUNTING POLICIES
The Company was organized in 1938 under the laws of the Commonwealth of Puerto
Rico. It is engaged primarily in the production and sale of cement and related
products principally within the island of Puerto Rico.

USE OF ESTIMATES IN PREPARATION OF FINANCIAL STATEMENTS
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.

SUMMARY OF ACCOUNTING POLICIES
The following summarizes the most significant accounting policies judged by
management to be the most appropriate in the circumstances to present the
Company's consolidated financial position, results of operations and cash flows
in conformity with generally accepted accounting principles.

PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of the Company and
all of its subsidiaries: Florida Lime Corporation ("FLC"), Ready Mix Concrete,
Inc. ("RMC"), Desarrollos Multiples Insulares, Inc. ("DMI") and Poly Bags and
Packaging, Inc. ("PBPI"). All material intercompany accounts and transactions
have been eliminated in consolidation.

STATEMENT OF CASH FLOWS
For purposes of the statement of cash flows, interest-bearing deposits and other
investments with maturities of less than three months at the time of acquisition
are considered cash equivalents.

REVENUE RECOGNITION
Revenue is recognized when the product is shipped in accordance with billing
terms which are generally FOB shipping point.

INVESTMENTS
Investments in equity securities that have readily determinable fair values and
all investments in debt securities are accounted for as follows:

-    Debt securities for which the Company has the positive intent and ability
     to hold to maturity are classified as investments held-to-maturity and
     reported at cost, adjusted for amortization of premiums or accretion of
     discounts. Such debt securities are reported as short-term or long-term
     investments, depending on whether the remaining term to maturity is shorter
     or longer than one year.

-    Debt and equity securities that are bought and held principally for the
     purpose of selling them in the near term are classified as trading
     securities and reported at fair value, with unrealized gains and losses
     included in earnings.

-    Debt and equity securities not classified as either held-to-maturity or
     trading securities are classified as investments available-for-sale and
     reported at fair value, with unrealized gains and losses excluded from
     earnings and reported, net of taxes, in a separate component of
     shareholders' equity.

INVENTORIES
Inventories are stated at the lower of average cost or market. Inventory cost
includes the related material, labor and overhead cost.

     Land for sale includes the original cost of land and all development costs
incurred to bring land to a salable condition.

PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are stated at cost less accumulated depreciation
and depletion. Depreciation is provided on the straight-line basis over the
estimated useful life of each type of asset. Depletion of quarries is calculated
on the units-of-production method.

     Maintenance and repair costs which do not extend the life or improve
productive capacity of the respective assets are expensed as incurred. Cost of
renewals and betterments is capitalized. When assets are sold, retired or
otherwise disposed of, their cost and related accumulated depreciation are
removed from the accounts, and any gain or loss is credited or charged to
income.

INTEREST CHARGED TO CONSTRUCTION
The Company capitalizes interest as a component of the cost of construction.
Capitalized interest totaled $812,000 in 1995. No interest was capitalized in
1997 and 1996.

GOODWILL
Goodwill, included in other assets, is amortized on a straight-line basis over
the estimated period of benefit not to exceed 30 years.

INCOME TAXES
Income taxes are accounted for following an asset and liability approach. Under
this approach, deferred taxes are recognized for temporary differences between
the tax basis and financial reporting basis of assets and liabilities, using
enacted tax laws and rates.

EMPLOYEE BENEFIT PLANS
The Company has a non-contributory retirement plan. Pension costs are computed
on the basis of accepted actuarial methods. The Projected Unit Credit method is
used to determine pension expense. Pension expense includes service cost for
benefits earned during the period, interest cost and amortization of
unrecognized prior service cost, of gains and losses on plan assets and of the
transition amount over a 15-year period. The Company's funding policy is to
contribute annually the maximum amount deductible for income tax.


                                       20

<PAGE>   9
Puerto Rican Cement Company, Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

     The Company also offers postretirement medical and life insurance benefits
to certain retired employees under an unfunded plan. The expected cost of
providing postretirement health care and other benefits to an employee or its
beneficiaries is recognized over their service period, is computed based on
accepted actuarial methods, and includes service costs for benefits earned
during the period, interest costs and amortization of actuarial gains and
losses.

EARNINGS PER SHARE
Earnings per share are computed based on the weighted average number of shares
of common stock outstanding during the year. The weighted average number of
shares outstanding for the last three fiscal years was 5,502,074 in 1997,
5,521,486 in 1996 and 5,452,204 in 1995.

     During 1997, SFAS 128, "Earnings per Share," went into effect. This
statement establishes standards for computing and presenting earnings per share
("EPS") and applies to entities with publicly held common stock or potential
common stock. It simplifies the standards for computing EPS previously found in
APB Opinion 15, "Earnings per Share," and makes them comparable to international
EPS standards. SFAS 128 replaces the presentation of primary EPS with a
presentation of basic and diluted EPS on the face of the Income Statement for
all entities with complex capital structures. The Company has a simple capital
structure, therefore, this Statement has no effect on its EPS computation.

PROFIT RECOGNITION ON SALES OF REAL ESTATE
Land and development costs are allocated proportionately to lots sold based on
area and total project cost. Income on sale of land is recognized at the time of
sale except where the collection of such income is not reasonably assured and
revenue therefore is not measurable.

RECLASSIFICATIONS
Certain reclassifications have been made to the 1996 and 1995 financial
statements to conform with the 1997 presentation.

RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
In June 1997, the Financial Accounting Standards Board ("FASB") issued SFAS 130,
"Reporting Comprehensive Income." This statement establishes standards for
reporting and display of comprehensive income and its components (revenues,
expenses, gains, and losses) in a full set of general-purpose financial
statements. Comprehensive income has been defined as the change in equity of a
business enterprise during a period from transactions and other events or
circumstances, except those resulting from investments by owners and
distributions to owners.

     This pronouncement requires that all items that are required to be
recognized under accounting standards as components of comprehensive income be
reported in a financial statement that is displayed with the same prominence as
other financial statements. The pronouncement does not require a specific format
for the financial statement but requires that an enterprise display an amount
representing total comprehensive income for the period in that financial
statement. This statement is effective for fiscal years beginning after December
15, 1997 and reclassification of financial statements for earlier periods
provided for comparative purposes is required.

     In June 1997, the FASB issued SFAS 131, "Disclosures about Segments of an
Enterprise and Related Information." This statement establishes standards for
the way that public business enterprises report information about operating
segments in annual financial statements and requires that those enterprises
report selected information about operating segments in interim financial
reports issued to shareholders. It also establishes standards for related
disclosures about products and services, geographic areas, and major customers.
This statement supersedes SFAS 14, "Financial Reporting of Segments of a
Business Enterprises," but retains the requirements to report information about
major customers. This statement is effective for financial statement for periods
beginning after December 15, 1997, and requires comparative information for
earlier years.

NOTE 2.  MERGERS AND ACQUISITIONS
On November 20, 1995, the Company purchased 100% of the outstanding shares of
RMC and Concreto Mixto, Inc. ("CMI"). These acquisitions, which were accounted
under the purchase method, were financed with the issuance of notes payable, the
reissuance of 107,874 shares of the Company's common stock held in treasury
(22,352 were issued in 1996), and cash.

     The principal business of RMC and CMI is to produce, sell and distribute
ready-mixed concrete throughout the island of Puerto Rico.

     The following is a summary of the assets acquired and liabilities assumed
from RMC and CMI at the date of their acquisition (in thousands):

<TABLE>
   <S>                                               <C>
   Current assets                                    $19,869
   Property, plant and equipment                      27,242
   Goodwill                                            1,657
   Other assets                                          782
   ---------------------------------------------------------
                                                      49,550
   ---------------------------------------------------------
   Current liabilities                                13,186
   Long-term debt                                     12,788
   ---------------------------------------------------------
                                                      25,974
   ---------------------------------------------------------
   Net assets                                        $23,576
   =========================================================
</TABLE>

     Unaudited, proforma consolidated results of operations assuming that the
acquisition of RMC and CMI had occurred as of January 1, follow (in thousands,
except per share figures):

<TABLE>
<CAPTION>
                                                          1995
--------------------------------------------------------------
<S>                                                   <C>
Net sales                                             $144,385
Net income                                              14,789
Per share                                                 2.71
</TABLE>

     The above proforma information includes amortization of goodwill,
depreciation and other adjustments related to the acquisition.


                                       21

<PAGE>   10

Puerto Rican Cement Company, Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

     The accompanying statement of income and retained earnings includes the
results of operations of RMC and CMI since November 20, 1995, the date of the
acquisitions.

     Effective January 1, 1997, the Company merged its two ready-mixed concrete
subsidiaries, RMC and CMI, in a tax-free reorganization with RMC resulting as
the surviving company. The subsidiary's manufacturing and operating facilities
were not materially affected by the merger.

NOTE 3. NOTES AND ACCOUNTS RECEIVABLE
Notes and accounts receivable at December 31, consist of:

<TABLE>
<CAPTION>
                                                  1997             1996
-----------------------------------------------------------------------
<S>                                        <C>              <C>
Notes receivable:
   Trade                                   $   452,043      $   480,124
   Other                                     1,184,949        1,168,069
-----------------------------------------------------------------------
                                             1,636,992        1,648,193
=======================================================================
Accounts receivable:
   Trade                                    27,737,244       26,713,689
   Employees and affiliated companies           77,820           49,057
   Other                                       763,596          537,958
                                            28,578,660       27,300,704
-----------------------------------------------------------------------
   LESS - Allowance for
      doubtful accounts                      1,451,969        1,538,585
-----------------------------------------------------------------------
                                            27,126,691       25,762,119
-----------------------------------------------------------------------
                                           $28,763,683      $27,410,312
=======================================================================
</TABLE>

NOTE 4.  INVENTORIES
Inventories at December 31, consist of:

<TABLE>
<CAPTION>
                                  1997             1996
-------------------------------------------------------
<S>                        <C>              <C>
Finished products          $ 1,891,283      $ 2,219,159
Work-in-process              2,973,083        4,510,088
Raw materials                3,939,004        3,544,512
Coal and fuel oil            4,015,335        2,928,482
Maintenance and
   operating supplies       19,564,436       19,738,447
Land held for sale             502,602          502,602
-------------------------------------------------------
                           $32,885,743      $33,443,290
=======================================================
</TABLE>

NOTE 5. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment at December 31, consist of:

<TABLE>
<CAPTION>
                                      Useful life
                                        in years            1997              1996
----------------------------------------------------------------------------------
<S>                                   <C>           <C>               <C>
Land and quarries                                   $ 12,576,694      $  9,912,326
Buildings and structures                    50        41,244,348        39,233,787
Machinery and equipment                   5-20       120,279,062       105,382,873
Pollution control equipment                 25        31,001,463        30,963,507
Automobiles and trucks                    3-10        20,610,177        19,301,363
Rental property                             10           653,524           653,524
Construction in progress                               6,244,405         1,803,570
----------------------------------------------------------------------------------
                                                     232,609,673       207,250,950
LESS - Accumulated
  depreciation and depletion                          73,999,041        64,162,708
----------------------------------------------------------------------------------
                                                    $158,610,632      $143,088,242
==================================================================================
</TABLE>

NOTE 6.  INVESTMENTS
The carrying and market values, and scheduled maturities of investments at
December 31, are as follows:

<TABLE>
<CAPTION>
                                                                             1997                               1996
-------------------------------------------------------------------------------------------------------------------------------
                                                                  Amortized         Market          Amortized          Market
                                                                    Cost             Value            Cost              Value
-------------------------------------------------------------------------------------------------------------------------------
<S>                                                              <C>              <C>              <C>              <C>
Investments available-for-sale, at market value:
U.S. Treasury securities
   Due within 1 year                                             $   748,064      $   749,063
   Due from 1 to 5 years                                           1,172,204        1,169,847      $ 1,838,196      $ 1,846,290
-------------------------------------------------------------------------------------------------------------------------------
                                                                   1,920,268        1,918,910        1,838,196        1,846,290
Municipal and other U.S. government agency securities
   Due from 1 to 5 years                                           1,153,996        1,165,056        1,179,127        1,169,718

Marketable equity securities                                       1,752,177        2,496,236        1,430,997        1,579,900
-------------------------------------------------------------------------------------------------------------------------------
                                                                 $ 4,826,441      $ 5,580,202      $ 4,448,320      $ 4,595,908
===============================================================================================================================
Short-term investments held-to-maturity, at amortized cost:
Municipal and other U.S. government agency securities            $ 1,050,069      $ 1,047,612      $ 1,917,616      $ 1,904,982

U.S. Treasury securities                                           5,917,156        5,885,551               --               --
-------------------------------------------------------------------------------------------------------------------------------
                                                                 $ 6,967,225      $ 6,933,163      $ 1,917,616      $ 1,904,982
===============================================================================================================================
Long-term investments held-to-maturity, at amortized cost:
U.S. Treasury securities
   Due from 1 to 5 years                                         $19,122,433      $18,700,964      $24,101,670      $23,253,296
   Due from 5 to 20 years                                         18,916,213       22,181,600       17,715,663       17,114,370
-------------------------------------------------------------------------------------------------------------------------------
                                                                  38,038,646       40,882,564       41,817,333       40,367,666
Municipal and other U.S. government agency securities
   Due from 1 to 5 years                                           8,328,935        8,488,696        5,163,005        4,986,817
-------------------------------------------------------------------------------------------------------------------------------
                                                                 $46,367,581      $49,371,260      $46,980,338      $45,354,483
===============================================================================================================================
</TABLE>


                                       22

<PAGE>   11
Puerto Rican Cement Company, Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

     The scheduled maturities of investments, based on their carrying book
values, at December 31, 1997, are summarized below:

<TABLE>
<S>                                                 <C>
Marketable equity securities, with no maturity      $ 2,496,236
Due within one year                                   7,716,288
Due within 1 to 5 years                              29,786,271
Due within 5 to 20 years                             18,916,213
---------------------------------------------------------------
                                                    $58,915,008
===============================================================
</TABLE>

     Gross and net unrealized gains and (losses) at December 31, amounted to
approximately:

<TABLE>
<CAPTION>
                                         1997                             1996
-------------------------------------------------------------------------------------------
                             Available-        Held-to-        Available-       Held-to-
                              for-sale         maturity         for-sale        maturity
-------------------------------------------------------------------------------------------
<S>                          <C>              <C>              <C>             <C>
Gross unrealized gains       $ 756,117        $3,515,767        $156,997       $     6,631
Gross unrealized losses         (2,357)         (545,560)         (9,409)       (1,645,119)
                             --------------------------------------------------------------
Net unrealized gain
  (loss)                       753,760        $2,970,207         147,588       $(1,638,488)
                                              ==========                       ===========
Deferred income taxes         (186,015)                          (37,227)
                             ---------                          --------
Net unrealized gain
  reported in
stockholders' equity         $ 567,745                          $110,361
                             =========                          ========
</TABLE>

     Gross proceeds from the sale of available-for-sale investments amounted to
$1,103,000 and $550,000 in 1997 and 1996, respectively. Gross realized gains on
the sale of these investments totaled $50,000 in 1997 and $27,000 in 1996.

NOTE 7. OTHER ASSETS
Other assets at December 31, consist of:

<TABLE>
<CAPTION>
                                        1997            1996
------------------------------------------------------------
<S>                               <C>             <C>
Investment in real estate         $   94,533      $   94,533
Goodwill, net of accumulated
   amortization of $112,212
   (1996 - $57,000)                1,541,321       1,596,533
Other long-term assets             2,711,492       2,643,338
------------------------------------------------------------
                                  $4,347,346      $4,334,404
============================================================
</TABLE>

NOTE 8. ACCRUED LIABILITIES
Accrued liabilities at December 31, consist of:

<TABLE>
<CAPTION>
                                              1997            1996
------------------------------------------------------------------
<S>                                     <C>             <C>
Accrued taxes other than on income      $  988,190      $  924,643
Accrued payroll expenses                 3,000,618       2,889,914
Accrued interest expense                 2,226,969         293,796
Other accrued liabilities                  859,383       1,191,833
------------------------------------------------------------------
                                        $7,075,160      $5,300,186
==================================================================
</TABLE>

NOTE 9.  SHORT-TERM BORROWING
The Company has lines of credit available for short-term borrowing and discount
of trade notes receivable in the aggregate amount of $20,600,000. However, under
other loan agreements with financial institutions, the Company may incur
additional unsecured short-term borrowing up to $10,000,000 and may discount
trade notes receivable up to $5,000,000 through 1999. No commitment fees are
paid on these credit facilities.

     Short-term borrowing amounting to $7,145,000 outstanding at December 1996
were refinanced with proceeds from the issuance of $70,000,000 long-term notes,
as further described in Note 10. As the result of this refinancing, they were
classified as long-term debt at December 31, 1996.

     The maximum aggregate short-term borrowing outstanding at any month-end was
$3,940,000 in 1997 and $7,145,000 in 1996. The approximate average aggregate
short-term borrowing outstanding during the year was $980,160 in 1997 and
$1,249,000 in 1996. The weighted average interest rate of such borrowing
computed annually was 6.27% during 1997 and 6.12% during 1996.

NOTE 10. LONG-TERM DEBT
Long-term debt at December 31, consists of:

<TABLE>
<CAPTION>
                                                     1997             1996
----------------------------------------------------------------------------
<S>                                           <C>              <C>
7.29% Series A Senior Secured Notes,
   payable in full on January 27, 2017,
   interest payable semiannually              $50,000,000
7.34% Series B Senior Secured Notes,
   payable in full on January 27, 2017,
   interest payable semiannually               20,000,000
Revolving credit facility, paid off
   during 1997                                         --      $17,623,200
Term loans and other borrowing,
   with fixed interest rates ranging
   from 6.15% to 6.56%, refinanced
   in January 1997                                     --       50,000,000
6.32% note, payable in twenty
   equal quarterly installments
   of $200,000 commencing
   February 1996, followed by
   eight equal quarterly installments
   of $500,000 in 2001 and 2002;
   interest payable monthly                     6,400,000        7,200,000
Notes, with fixed interest rates ranging
   from 5% to 6%, paid-off in
   November 1997                                       --        7,448,893
Notes payable - one non-interest bearing
   for $150,000 due on July 30, 1998,
   three for $150,000 each at 7% due in
   1999 to 2001, and one for $200,000 at
   7% due in quarterly installments
   commencing on October 1, 1997                  784,792               --
Borrowing against cash surrender value
   of life insurance policies, bearing
   interest at 5%, and other                      104,781          152,157
----------------------------------------------------------------------------
      Total                                    77,289,573       82,424,250
      Less - Current portion                    1,109,781       15,401,050
----------------------------------------------------------------------------
      Total long-term debt                    $76,179,792      $67,023,200
============================================================================
</TABLE>


                                       23

<PAGE>   12

Puerto Rican Cement Company, Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

     During 1997, the Company repaid the $17.6 million revolving credit facility
with funds generated from the operations.

     On January 27, 1997, the Company announced the private placement of $70
million in Series A & B Senior Secured Notes (the "Notes") due in 2017. Series A
Notes in the amount of $50 million were issued on that date, at an interest of
7.29% payable semiannually. Proceeds from this issuance were used to refinance
short- and medium-term debt, including certain principal payments due in 1996
which were refinanced on a short-term basis in anticipation of the issuance of
the Notes.

     On July 10, 1997, the Company issued the $20 million in Series B Notes, at
an interest of 7.34% payable semiannually. Proceeds from this issuance were used
mostly to finance the acquisition of new equipment and for the improvement and
modernization of the cement plant.

     The Notes are secured by a zero-coupon bond from the U.S. Treasury placed
as collateral. The bond was purchased in December 1996 for $17.6 million and
will accrue to $70 million shortly after the maturity of the Notes.

     The balance sheet classification of the Company's long-term debt at
December 31, 1996 is presented reflecting the effect of the issuance of the $50
million Notes.

     Aggregate maturities of long-term debt at December 31, 1997, are as
follows:

<TABLE>
<CAPTION>
      Years                                     Amount
      --------------------------------------------------
      <S>                                    <C>
      1998                                   $ 1,109,781
      1999                                     1,005,000
      2000                                     1,005,000
      2001                                     2,169,792
      2002 and thereafter                     72,000,000
      --------------------------------------------------
                                             $77,289,573
      ==================================================
</TABLE>

     In September 1985, the Company restructured the terms of all of its
outstanding debt with the Government Development Bank for Puerto Rico ("GDB").
The maturity date on the loans from GDB was extended to September 2002, and the
annual interest rate was fixed. No interest or principal payments are required
before maturity. Simultaneously, the Company placed U.S. government securities,
with a cost of $8 million and a maturity value of $49.8 million, in an
irrevocable trust. The principal and interest of these securities will be
sufficient to fund the scheduled principal and interest payments on the
Company's debt with the GDB. Accordingly, such debt was considered extinguished
in 1985 and is not included as a liability in the consolidated balance sheet.
The total balance of debt with GDB, not included in the consolidated balance
sheet, consisting of principal plus accumulated interest, amounted to $40.2
million at December 31, 1997 (1996 - $38.4 million).

     The loan agreements with banks and other financial institutions impose
certain restrictions on the Company. The most important restrictions are
limitations on unsecured short-term borrowing and on discounting with recourse
of trade paper from customers (See Note 9), maintaining working capital in
excess of certain defined minimums and limitations on funded debt and other
indebtedness. Other restrictions under such loan agreements relate to
investments in and advances to subsidiaries and other persons, disposition of
fixed assets, and payment of dividends. At December 31, 1997, the Company was in
compliance with the provisions of the loan agreements. Restrictions imposed by
the Notes issued in January and July 1997 are similar, yet more flexible, to the
restrictions contained in the loan agreements existing at December 31, 1996.

NOTE 11.  INCOME TAXES
Consolidated tax returns are not permitted under the Puerto Rico Income Tax Law;
therefore, losses, if any, of subsidiaries cannot be used to offset taxable
income of other members of the consolidated group.

     The Puerto Rico Income Tax Law allows an accelerated flexible depreciation
method for certain property purchased prior to 1996, by which a taxpayer may
claim depreciation at any rate without reference to useful lives. The
depreciation claimed was limited to an amount not greater than income before
taxes (determined without taking into consideration the depreciation deduction).
Deferred income taxes of $35,860,000 (1996 - $33,323,000) have been accumulated
primarily from using the flexible depreciation method for tax purposes only.

     The benefit available under the accelerated depreciation methods are
limited by the alternative minimum tax ("AMT") provisions of the income tax law.
The AMT is based on 22% of regular taxable income with certain adjustments for
preference items, one of which relates to the accelerated depreciation methods.
Any AMT paid may be used to reduce the regular tax liability of future years, to
the extent that the regular tax exceeds the AMT.

     A new Puerto Rico Internal Revenue Code (the "Code") was enacted in 1994.
The Code reduced the maximum corporate income tax rate from 42% to 39% for
calendar year 1996 and thereafter. Also, the Code generally provides a 100%
deduction for dividends from controlled Puerto Rico corporations.

     Other provisions of the Code include the replacement of the flexible
depreciation method for property acquired after December 31, 1995, with a new
accelerated depreciation method and the repeal of the reserve method for bad
debts with recapture of the existing reserve over a four-year period. These
provisions, effective for calendar year 1996, reduced the alternatives for
deferral of income taxes.


                                       24

<PAGE>   13
Puerto Rican Cement Company, Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

     The provision for deferred income taxes for the years ended December 31,
consists of the following:

<TABLE>
<CAPTION>
                                                                                       1997              1996              1995
--------------------------------------------------------------------------------------------------------------------------------
<S>                                                                             <C>               <C>               <C>
Income tax applicable to:
Flexible depreciation taken during the year                                                       $ 1,919,921       $ 9,565,906
Reversal of flexible depreciation taken in prior years                          $(2,483,526)       (2,643,825)       (2,342,018)
AMT credit used (generated)                                                       4,875,563         3,423,687        (4,246,939)
Postretirement benefit obligation                                                   (28,054)          (35,432)          (98,780)
Difference between pension credits and amounts deductible for tax purposes           14,955            49,467           (98,305)
Other temporary differences                                                         157,368          (236,348)          277,767
--------------------------------------------------------------------------------------------------------------------------------
                                                                                $ 2,536,306       $ 2,477,470       $ 3,057,631
================================================================================================================================
</TABLE>

     The reconciliation of the difference between the Puerto Rico statutory tax
rate on income before taxes and the consolidated effective tax rate follows:

<TABLE>
<CAPTION>
                                                              1997                        1996                        1995
------------------------------------------------------------------------------------------------------------------------------------
                                                                    % of                        % of                         % of
                                                                   pre-tax                     pre-tax                      pre-tax
                                                     Amount        income         Amount        income         Amount        income
------------------------------------------------------------------------------------------------------------------------------------
<S>                                               <C>              <C>         <C>             <C>          <C>             <C>
Computed tax provision                            $ 8,894,134       39.0       $ 8,411,532       39.0       $ 9,680,895       42.0
Increase (decrease) in taxes resulting from:
   Tax exempt income                                  (57,644)      (0.2)         (143,540)      (0.7)               --         --
   Interest earned on exempt securities            (1,317,225)      (5.8)         (941,102)      (4.4)       (1,017,843)      (4.4)
   Interest deducted for tax but not for
      financial statements                           (698,223)      (3.1)         (698,223)      (3.2)       (1,089,746)      (4.7)
   Enacted future rate changes                             --         --                --         --          (755,000)      (3.3)
   Other items                                        (18,781)      (0.1)          250,972        1.2           439,011        1.9
------------------------------------------------------------------------------------------------------------------------------------
                                                  $ 6,802,261       29.8       $ 6,879,639       31.9       $ 7,257,317       31.5
====================================================================================================================================
</TABLE>

     The deferred tax assets and liabilities at December 31, are as follows:

<TABLE>
<CAPTION>
                                                   1997                             1996
--------------------------------------------------------------------------------------------------------
                                          Deferred        Deferred         Deferred         Deferred
                                         Tax Assets    Tax Liabilities    Tax Assets     Tax Liabilities
--------------------------------------------------------------------------------------------------------
<S>                                     <C>            <C>                <C>            <C>
Current:
Prepaid pension cost                                     $ 1,094,727                      $ 1,079,772

Non-current:
AMT credit                                                                $4,995,088               --
Postretirement benefit liability        $ 1,179,059                        1,151,005               --
Property, plant and equipment                    --       35,777,522              --       38,292,875
Other                                       180,201          346,668         115,766          212,563
--------------------------------------------------------------------------------------------------------
Total deferred tax asset/liability      $ 1,359,260      $37,218,917      $6,261,859      $39,585,210
========================================================================================================
Net deferred tax liability                               $35,859,657                      $33,323,351
========================================================================================================
</TABLE>

     One of the consolidated subsidiaries enjoys a tax exemption grant under the
provisions of the Puerto Rico Tax Incentives Act of 1987. Under this grant, the
exemption rates applicable to income, property and municipal taxes range from
50% to 90% through year 2008.

     The subsidiaries' aggregate retained earnings amounted to $23,440,000 at
December 31, 1997, (1996 - $21,443,000) and arose substantially from partially
tax exempt operations. The subsidiaries' retained earnings are substantially
exempt upon distribution to the Company; therefore, no income taxes have been
provided for such earnings.

NOTE 12.  EMPLOYEE BENEFIT PLANS
The Company has a defined benefit pension plan covering substantially all
non-union employees of the Parent Company and all of its wholly-owned
subsidiaries, excluding RMC which employees are covered by a separate plan
described subsequently in this Note. The benefits are based on years of service
and the employees' average compensation during the last five years of
employment.


                                       25

<PAGE>   14

Puerto Rican Cement Company, Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)


     Net pension cost included the following components:

<TABLE>
<CAPTION>
                                           1997              1996              1995
------------------------------------------------------------------------------------
<S>                                 <C>               <C>               <C>
Service cost - benefits earned
   during the period                $   543,821       $   482,883       $   474,075
Interest cost on projected
   benefit obligation                 1,564,011         1,437,542         1,314,808
Actual return on plan assets         (6,693,175)       (1,880,634)       (1,589,649)
Deferral and amortization -
   net                                4,546,996            52,829            52,829
------------------------------------------------------------------------------------
Net periodic pension
   expense                          $   (38,347)      $    92,620       $   252,063
====================================================================================
</TABLE>

     The following table sets forth the plan's obligations and amounts
recognized in the Company's consolidated balance sheet at December 31:

<TABLE>
<CAPTION>
                                               1997               1996
-----------------------------------------------------------------------
<S>                                     <C>                <C>
Actuarial present value of
   benefit obligations -
   Accumulated benefit
      obligation, including vested
      benefits of $18,265,535
      (1996 - $18,140,655)              $20,395,714        $18,391,695
=======================================================================
Projected benefit obligation for
   service rendered to date             $23,856,631        $21,380,815
Plan assets at fair value                30,683,621         25,105,539
-----------------------------------------------------------------------
Excess of plan assets over
   projected benefit obligation           6,826,990          3,724,724
Unrecognized prior service cost           1,498,447          1,710,584
Unrecognized net gain                    (4,874,154)        (1,863,064)
Unrecognized portion of transition
   cost at January 1, 1987, being
recognized over 15 years                   (637,228)          (796,536)
-----------------------------------------------------------------------
Prepaid pension cost included in
   prepaid expenses                     $ 2,814,055        $ 2,775,708
=======================================================================
</TABLE>

     The weighted-average discount rate and rate of increase in future
compensation levels used in determining the actuarial present value of benefit
obligation and the projected benefit obligation were 7.0% and 7.25% in 1997 and
1996, respectively. The expected long-term rate of return on assets was 9% and
8% in 1997 and 1996, respectively. Investments held by the Plan include
high-grade corporate bonds, U.S. Treasury securities, and common stock,
including 160,245 shares of the Company. The plan is administered by a Board of
Trustees composed of five Directors of the Company. The Board uses two
independent money managers which, within certain established guidelines, make
investment decisions regarding the assets of the plan.

     RMC has a noncontributory defined benefit pension plan. This plan provides
coverage to substantially all the subsidiary's non-union employees. Benefits
under the plan are based on years of service and the employees' highest
consecutive five-year average compensation within the last ten completed years
of service. The plan's funded status includes an accumulated benefit obligation
of $4,035,000, including $4,008,000 of vested benefits, a projected benefit
obligation of $4,107,000 and plan assets at fair value of $4,491,000.

     The Company also provides health care and life insurance benefits to
participants of the plan after retirement. The employees, upon retirement, have
the option of continuing their participation in the Company's medical group
insurance coverage under the same terms and conditions as prescribed for active
employees. The life insurance plan coverage decreases, for a period of ten years
after age 65, at an annual rate of 7-1/2%. The Company also provides severance
benefits under the terms of collective bargaining agreements. The costs of these
benefits are not significant.

     The postretirement benefit expense included the following components:

<TABLE>
<CAPTION>
                                          1997            1996            1995
--------------------------------------------------------------------------------
<S>                                  <C>             <C>             <C>
Service cost of benefits earned      $  57,237       $  57,784       $  52,791
Interest cost                          190,010         190,830         189,058
Amortization and deferral - net           (415)         (4,397)         (4,926)
--------------------------------------------------------------------------------
Postretirement benefit expense       $ 246,832       $ 244,217       $ 236,923
================================================================================
</TABLE>

     The postretirement benefit liability includes the following components:

<TABLE>
<CAPTION>
                                                      1997             1996
-----------------------------------------------------------------------------
<S>                                             <C>             <C>
Actuarial present value of postretirement
   benefit obligations:
   Retirees                                     $1,190,992      $ 1,213,562
   Fully eligible active plan participants         618,534          609,852
   Other active plan participants                  957,904          957,899
-----------------------------------------------------------------------------
Accumulated postretirement
   benefit obligation                            2,767,430        2,781,313
Unrecognized actuarial loss (gain)                   7,076          (52,356)
-----------------------------------------------------------------------------
Postretirement benefit liability
   included in other long-term liabilities      $2,774,506      $ 2,728,957
=============================================================================
</TABLE>

     The discount rate used to determine the accumulated postretirement benefit
obligation was 7.25%. The assumed health care cost trend rate used to measure
the accumulated postretirement benefit obligation was 10.5% initially, declining
gradually to 5.25% in year 2018 and thereafter. A one-percentage-point increase
in the assumed health care cost trend rate would have increased the 1997
postretirement benefit expense by $15,781 and would have increased the 1997
accumulated postretirement benefit obligation by $133,010.


                                       26


<PAGE>   15
Puerto Rican Cement Company, Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 13.  FINANCIAL DATA BY INDUSTRIES
The Company operates in the cement and related products, and paper and packaging
industries, and in realty operations mainly within the island of Puerto Rico.
Operations in the cement and related products industry involves production and
sale of cement, lime and ready-mixed concrete. Operations in the paper and
packaging industry involve production and sale of paper and polypropylene bags.
Realty operations involve the development, sale and lease of real property.

     The Company's financial data by industries for the years ended December 31,
is as follows (in thousands):

<TABLE>
<CAPTION>
                                          1997          1996          1995
---------------------------------------------------------------------------
<S>                                   <C>           <C>           <C>
Sales to unaffiliated customers:
   Cement and related products        $150,638      $143,083      $ 93,922
   Paper and packaging                   6,036         6,090         6,208
   Realty operations                        99           104           102
---------------------------------------------------------------------------
                                      $156,773      $149,277      $100,232
===========================================================================
Inter-segment sales:
   Cement and related products        $ 30,003      $ 27,505      $  1,926
   Paper and packaging                   4,267         3,667         3,428
---------------------------------------------------------------------------
                                      $ 34,270      $ 31,172      $  5,354
===========================================================================
Operating profit:
   Cement and related products        $ 23,521      $ 21,866      $ 21,625
   Paper and packaging                   1,263           847           582
   Realty operations                        99           104           102
---------------------------------------------------------------------------
                                      $ 24,883      $ 22,817      $ 22,309
===========================================================================
Identifiable assets:
   Cement and related products        $222,695      $219,502      $204,196
   Paper and packaging                   6,353         5,152         3,978
   Realty operations                       882           879         1,226
   Corporate                            61,121        55,671        45,615
---------------------------------------------------------------------------
                                      $291,051      $281,204      $255,015
===========================================================================
Depreciation, depletion and
   amortization:
   Cement and related products        $ 12,261      $ 11,032      $  7,243
   Paper and packaging                     123            80            77
---------------------------------------------------------------------------
                                      $ 12,384      $ 11,112      $  7,320
===========================================================================
Capital expenditures:
   Cement and related products        $ 27,421      $ 11,613      $ 10,207
   Paper and packaging                     608            50            43
---------------------------------------------------------------------------
                                      $ 28,029      $ 11,663      $ 10,250
===========================================================================
</TABLE>

     Operating profit is total revenue less operating expenses. Interest expense
and income taxes have not been deducted in computing operating profit.

     Identifiable assets are those that are used in the Company's operations in
each segment. Corporate assets are principally investments and other assets not
used by any industry segment.

     None of the Company's largest customers accounted for 10% or more of total
consolidated sales in 1997. Export sales were not significant.

     As discussed in Note 1, SFAS 131, "Disclosure About Segments of an
Enterprise and Related Information," will require certain changes to the above
disclosure in the 1998 financial statements and comparative information for
earlier years must be restated.

     To reconcile industry information with consolidated amounts, the following
eliminations have been made: $34,270,000 in 1997, $31,172,000 in 1996 and
$5,354,000 in 1995 of inter-segment sales; $22,300 in 1997, $72,600 in 1996 and
$52,800 in 1995 relating to the net change in inter-segment operating profit in
beginning and ending inventories; and $15,948,000 in 1997, $15,666,000 in 1996
and $6,217,000 in 1995 of receivables arising from inter-segment sales.

NOTE 14.  LEASE COMMITMENTS
The Company and its subsidiaries lease certain facilities and equipment under
operating lease agreements. Rental expense under such agreements aggregated to
$898,000 in 1997, $781,000 in 1996 and $296,000 in 1995.

     At December 31, 1997, the approximate future minimum lease payments under
noncancellable operating leases were as follows:

<TABLE>
<CAPTION>
      Year
      --------------------------------------------------
      <S>                                     <C>
      1998                                    $  497,319
      1999                                       468,587
      2000                                       446,831
      2001                                       385,661
      2002 and thereafter                      1,120,129
      --------------------------------------------------
                                              $2,918,527
      ==================================================
</TABLE>

NOTE 15. FAIR VALUE OF FINANCIAL INSTRUMENTS
The following methods and assumptions were used to estimate the fair value of
each class of financial instrument:

CASH AND CASH EQUIVALENTS
The carrying amount of these assets approximates fair value because of the short
period of time to maturity of those instruments.

INVESTMENTS
The fair values of investments are estimated based on their quoted market prices
or those of similar investments.

LONG-TERM DEBT
The fair value of the Company's long-term debt is estimated using discounted
cash flows based on the current rates offered to the Company for debt of the
same remaining maturities.


                                       27

<PAGE>   16

Puerto Rican Cement Company, Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

     The carrying amount and estimated fair values of these financial
instruments at December 31, are as follows (in thousands):

<TABLE>
<CAPTION>
                                            1997                      1996
----------------------------------------------------------------------------------
                                   Carrying       Fair       Carrying       Fair
                                    Amount        Value       Amount        Value
----------------------------------------------------------------------------------
<S>                                <C>           <C>         <C>           <C>
Cash and cash equivalents           $ 2,996      $ 2,996      $14,809      $14,809
Investments available-for-sale        5,580        5,580        4,596        4,596
Short-term investments                6,967        6,933        1,918        1,905
Long-term investments                46,368       49,371       46,980       45,354
Long-term debt                       77,290       78,059       82,424       81,999
</TABLE>

NOTE 16.  CONTINGENT LIABILITIES AND OTHER COMMITMENTS

The Company is obligated to purchase, under a long-term supply contract, a
minimum of 100,000 metric tons of coal annually through the year 2000. The
purchase price is negotiated annually. Coal purchases have exceeded the minimum
amount required by the contract. Purchases under the contract amounted to
$6,729,000 in 1997, $6,337,000 in 1996 and $6,543,000 in 1995.

     In November 1995, San Juan Cement Company, Inc. ("SJC") filed a claim
against the Company and its two ready-mixed concrete subsidiaries, RMC and CMI,
in the United States District Court of Puerto Rico. SJC claimed that the
acquisition of these two ready-mixed companies by the Company, in November 1995,
violated the federal antitrust laws, specifically the Clayton Act, claiming that
it tends to substantially lessen competition. After the acquisition, the
complaint was amended to include the rescission of the agreement, the
divestiture of such companies and, the naming of a trustee to manage the assets
of the acquired companies. On April 15, 1997, the Court granted a joint motion
requesting a temporary stay of the proceedings in an attempt to reach a mutual
understanding that may lead to a voluntary dismissal of this litigation; the
case has remained under this stay since then.

     While there can be no certainty, the Company believes, based on the advice
of its legal counsel, that an adverse final ruling in the lawsuit brought by SJC
is not reasonably likely to have a material adverse effect on the Company's
financial condition or results of operations. In addition, the Company believes
that the cost of the defense of such litigation will not have a material adverse
effect on the Company's financial condition or results of operations.

     RMC is also the defendant in a complaint filed before the Puerto Rico's
Public Service Commission (the "Commission") by an independent truckers'
association (the "Association"). The Association initially requested the
prospective payment of freight tariff for the handling of aggregates approved by
the Commission in 1988. The subsidiary was paying the tariff based on
individually negotiated contracts at rates different from those approved by the
Commission.

     In August 1996, the Association amended their complaint to include
back-charges for the difference between the 1988 tariff and the amount actually
paid by RMC.

     In September 1996, the San Juan Superior Court entered a partial decision
upholding the validity of the 1988 tariff. The Company immediately filed an
appeal as to the validity of this tariff, with a motion for reconsideration
pending before the Court at the date of these statements. Pending the final
decision of the Court, the Company is currently paying the 1988 tariff.

     The Association's complaint before the Commission with respect to the
retroactive payment of the amount not paid is still pending a resolution of the
Commission. While there can be no certainty, the Company believes based on the
advice of its legal counsel, that it is likely to prevail on this matter. In any
event, the Company believes that an adverse outcome of such proceedings should
not have a material adverse effect on the Company's financial position or
results of operations.

     Because of disputes with the Government of Puerto Rico, as more fully
described below, the Company has suspended the development of a 300-unit housing
project at Vega Alta and the work at its limestone extraction operation at
Guanica.

     On July 8, 1997, the Puerto Rico Planning Board (the "Planning Board")
issued a temporary cease and desist order against the housing project, asserting
that the Company does not have the permits needed to extract and process sand
and gravel from the site. The Company had previously received permits to build a
housing project there, including a "temporary aggregate permit" which the
Company believes


                                       28

<PAGE>   17
Puerto Rican Cement Company, Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

was properly obtained and is sufficient to conduct the planned
operations. The Planning Board held public hearings on the dispute on August 25,
and September 23 and 24, 1997. The hearings have concluded and the Planning
Board upheld their position. The Company is in the process of filing an appeal
to the decision before the Puerto Rico Appellate Circuit Court.

     On July 11, 1997, the Puerto Rico Permits and Regulations Administration
(the "Administration"), revoked a permit granted to the Company to operate a
limestone extraction operation at its Guanica site. A permit had been granted by
the Administration's Ponce office. The Company has appealed this decision before
the Puerto Rico Circuit Court of Appeals and is awaiting a decision.

     Management believes, based on the advice of its legal counsel, that the
outcome of these matters will not have a material adverse effect on the
Company's financial position or results of operations.

     On June 27, 1997, the Company filed a lawsuit against the Puerto Rico
Department of Consumer Affairs (the "Department") in response to a Department's
investigation of the Company's labeling of bags of cement during 1995 and 1996.
The Department has asserted that the bags should have disclosed that the cement
was manufactured utilizing some imported clinker. The lawsuit was based on the
Company's belief that the Department did not have the legal authority with
respect to this matter. However, it was determined that the Department had the
authority to investigate disclosure of clinker content and Company's labels.
Administrative hearings were held on January 8, 14 and 29, and March 13, 1998 by
an independent judge named by the Department. On March 16, 1998, the independent
judge issued a favorable decision on the case which held that the Company did
not violate any Department rule. This decision could be appealed by the
Department within a 30-day period.

     Management believes, based on the advice of its legal counsel, that the
outcome of these matters will not have a material adverse effect on the
Company's financial position or results of operations.

     The Company is a defendant in a number of other legal proceedings arising
in the normal course of business. Management believes, based on the opinion of
legal counsel, that the final outcome of these matters will not significantly
affect the Company's financial position or results of operations.

NOTE 17.  STOCKHOLDERS' EQUITY
During 1997, the Company purchased 75,000 shares of its outstanding stock for
$2,645,250. The Company purchased these shares for future corporate purposes and
does not intend to retire or cancel them. In April 1996, the Company reissued
22,352 shares of its common stock held in treasury to complete the acquisition
of RMC.

     The changes in the treasury stock and additional paid-in-capital components
of shareholders' equity are detailed below:

<TABLE>
<CAPTION>
                                                   Treasury          Additional
                                    Number         stock at           paid-in
                                  of shares           cost            capital
--------------------------------------------------------------------------------
<S>                               <C>             <C>               <C>
Balance at December 31, 1995       495,278        $10,967,229       $14,482,054
Treasury stock reissued            (22,352)          (527,932)          220,860
--------------------------------------------------------------------------------
Balance at December 31, 1996       472,926         10,439,297        14,702,914
Treasury stock purchased            75,000          2,645,250                --
--------------------------------------------------------------------------------
Balance at December 31, 1997       547,926        $13,084,547       $14,702,914
================================================================================
</TABLE>

NOTE 18. SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash was paid during the year for:

<TABLE>
<CAPTION>
                                   1997            1996            1995
------------------------------------------------------------------------
<S>                          <C>             <C>             <C>
Interest (net of amount
  capitalized)               $3,833,000      $4,377,000      $2,603,000
========================================================================
Income taxes                 $3,535,000      $3,805,000      $4,501,000
========================================================================
</TABLE>


                                       29


<PAGE>   18


Puerto Rican Cement Company, Inc.

CONSOLIDATED FOURTH QUARTER RESULTS

(000's Omitted, Except Per Share Amounts)

<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------
                                                    Three months ended           Twelve months ended
                                                        December 31,                 December 31,
                                                  ---------------------------------------------------
                                                     1997          1996           1997           1996
-----------------------------------------------------------------------------------------------------
<S>                                               <C>           <C>           <C>            <C>
Operating revenues                                $36,977       $37,193       $156,774       $149,277
Cost of sales                                      26,569        26,538        110,011        107,291
-----------------------------------------------------------------------------------------------------
Gross margin                                       10,408        10,655         46,763         41,986
Selling, general and administrative expenses        6,390         5,264         21,880         19,169
-----------------------------------------------------------------------------------------------------
Income from operations                              4,018         5,391         24,883         22,817
-----------------------------------------------------------------------------------------------------
Other charges (credits):
   Interest and financial charges                   1,524         1,105          5,766          4,464
   Interest income                                   (973)         (760)        (3,601)        (2,660)
   Other income                                      (159)          (85)           (87)          (555)
-----------------------------------------------------------------------------------------------------
                                                      392           260          2,078          1,249
-----------------------------------------------------------------------------------------------------
Income before income taxes                          3,626         5,131         22,805         21,568
Tax provision                                         884         1,536          6,802          6,880
-----------------------------------------------------------------------------------------------------
Net income                                        $ 2,742       $ 3,595       $ 16,003       $ 14,688
=====================================================================================================
Earnings per share of common stock*               $  0.51       $  0.65       $   2.91       $   2.66
=====================================================================================================
</TABLE>


FINANCIAL RESULTS BY QUARTERS

<TABLE>
<CAPTION>
(000's Omitted, Except Per Share Amounts)
----------------------------------------------------------------------------------------------------------------------------------
Three Months Ended    Mar. 31    June 30    Sept. 30   Dec. 31      1997      Mar. 31    June 30    Sept. 30   Dec. 31      1996
----------------------------------------------------------------------------------------------------------------------------------
<S>                   <C>        <C>        <C>        <C>        <C>         <C>        <C>        <C>        <C>        <C>
Operating revenues    $37,212    $43,429    $39,156    $36,977    $156,774    $37,403    $41,010    $33,671    $37,193    $149,277
==================================================================================================================================
Gross profit           10,649     13,775     11,931     10,408      46,763     10,363     11,914      9,054     10,655      41,986
==================================================================================================================================
Income before
   income tax           5,289      7,947      5,943      3,626      22,805      5,305      6,867      4,265      5,131      21,568
Tax provision           1,346      2,801      1,771        884       6,802      1,612      2,362      1,370      1,536       6,880
----------------------------------------------------------------------------------------------------------------------------------
Net income            $ 3,943    $ 5,146    $ 4,172    $ 2,742    $ 16,003    $ 3,693    $ 4,505    $ 2,895    $ 3,595    $ 14,688
==================================================================================================================================
Per share*            $  0.71    $  0.93    $  0.76    $  0.51    $   2.91    $  0.67    $  0.82    $  0.52    $  0.65    $   2.66
==================================================================================================================================
</TABLE>

*    Based on weighted average number of outstanding shares of 5,502,074 in 1997
     and 5,521,486 in 1996.


                                       30


<PAGE>   19


Puerto Rican Cement Company, Inc.

FIVE-YEAR STATISTICAL COMPARISON

<TABLE>
<CAPTION>
December 31,                                   1997              1996              1995              1994              1993
---------------------------------------------------------------------------------------------------------------------------
<S>                                    <C>               <C>               <C>               <C>               <C>
BALANCE SHEET SUMMARY
Cash and equivalents                   $  2,995,634      $ 14,808,709      $ 11,599,636      $    114,702      $    431,293
Investments available-for-sale            5,580,202         4,595,908         4,473,536
Short-term investments                    6,967,225         1,917,616           974,073                             520,000
Accounts receivable-net                  28,763,683        27,410,312        24,526,385        14,358,827        13,626,159
Inventories                              32,885,743        33,443,290        32,222,415        28,916,950        33,141,836
Prepaid expenses                          4,533,070         4,624,691         4,752,187         3,907,844         3,488,276
---------------------------------------------------------------------------------------------------------------------------
   CURRENT ASSETS -- TOTAL               81,725,557        86,800,526        78,548,232        47,298,323        51,207,564

Property, plant and equipment-net       158,610,632       143,088,242       142,567,213       112,299,027       107,968,603
Other assets                              4,347,346         4,334,404         2,670,882           241,897         1,595,062
Long-term investments                    46,367,581        46,980,338        31,228,541        42,030,507        32,512,367
---------------------------------------------------------------------------------------------------------------------------
                                       $291,051,116      $281,203,510      $255,014,868      $201,869,754      $193,283,596
===========================================================================================================================

Notes payable (includes current
   portion of long-term debt
   and short-term borrowing)           $  1,778,505      $ 15,401,050      $ 11,749,853      $  8,598,571      $  7,491,735
Accounts payable and
   accrued liabilities                   17,145,619        15,080,253        16,227,533         8,273,468         9,781,571
---------------------------------------------------------------------------------------------------------------------------
   CURRENT LIABILITIES -- TOTAL          18,924,124        30,481,303        27,977,386        16,872,039        17,273,306

Long-term debt (exclusive
   of current portion)                   76,179,792        67,023,200        57,549,475        31,696,403        26,633,080
Deferred income taxes                    35,859,657        33,323,351        30,808,654        27,722,814        26,028,233
Postretirement benefit liability          3,023,228         2,954,610         2,873,430         2,607,162         2,673,947
Capital stock (1)(2)                      7,618,367        10,263,617         9,514,825         8,830,839        18,783,431
Unrealized gain on investments
   available-for-sale                       567,745           110,361            74,313
Retained earnings                       148,878,203       137,047,068       126,216,785       114,140,497       101,891,599
---------------------------------------------------------------------------------------------------------------------------
                                       $291,051,116      $281,203,510      $255,014,868      $201,869,754      $193,283,596
===========================================================================================================================

STATISTICAL DATA
Book value per share                   $      28.81      $      26.67      $      24.67      $      22.38      $      20.78
Shares outstanding at year-end            5,452,074         5,527,074         5,504,722         5,494,200         5,807,700
Number of stockholders                          597               622               655               684               705
Average number of employees                   1,015               969               939               552               533
Capital expenditures(3)                $ 28,028,571      $ 11,662,959      $ 10,249,840      $ 11,256,763      $  9,136,968
===========================================================================================================================
</TABLE>

(1)  Includes the purchase of 75,000 in 1997, 75,000 shares in 1995, and 313,500
     shares in 1994 of the Company's outstanding stocks for $2,645,250,
     $2,181,000, and $9,953,000, respectively.

(2)  Also includes the issuance of 107,874 shares of the Company's common stock
     held in treasury for the acquisition of RMC.

(3)  Includes expenditures in kiln capacity increase project in 1997, and mill
     conversion in 1995, 1994, and 1993.


                                       31


<PAGE>   20

Puerto Rican Cement Company, Inc.

DIRECTORS AND OFFICERS

DIRECTORS

ANTONIO LUIS FERRE
Chairman of the Board of the Company and President of
El Dia, Inc. (Newspaper Publishing Group)

ALBERTO M. PARACCHINI
Vice Chairman of the Board of the Company and Director
of Banco Popular de Puerto Rico (Commercial Bank)

HECTOR DEL VALLE
Vice Chairman of the Board of the Company

MIGUEL A. NAZARIO
President and Chief Executive Officer of the Company

ANTONIO LUIS FERRE RANGEL
Executive Vice President

WALDEMAR DEL VALLE ARMSTRONG
Attorney-at Law, Partner of Parra, Del Valle, Frau & Limeres

JOSE J. SUAREZ
Consultant to the Company

ESTEBAN D. BIRD
President of Bird Construction Company (General Contractors)

OSCAR A. BLASINI
President of G.B. Investments, Inc.
(Real Estate Development and Investments)

ROSARIO J. FERRE
Second Vice President of Luis A. Ferre Foundation, Inc.

EMILIO J. VENEGAS
President of Sanson Corporation (Rock and Concrete Products)
and Secretary of Venegas Construction Corporation (General Contractors)

FEDERICO F. SANCHEZ
President of Federico F. Sanchez and Company, Inc. and Interlink
Group, Inc. (Real Estate Consultants, Brokers and Developers)

JORGE L. FUENTES
Chairman of the Board and Chief Executive Officer of
Gabriel Fuentes, Jr. Construction Company, Inc. and
Chairman of the Board and Chief Executive Officer of
Fuentes Concrete Pile, Inc. (Concrete Pile Foundations)

JUAN A. ALBORS
President and General Partner of Albors Development Corp.
(Real Estate Developers and Investors)

LUIS ALBERTO FERRE RANGEL
Co Director, El Dia, Inc. (Newspaper Publishing Group)

CARLOS DEL RIO
Senior Vice President and Chief Operating Officer - MOVA
Pharmaceutical Corporation (Pharmaceutical Products
Manufacturer)


OFFICERS

MIGUEL A. NAZARIO
President and Chief Executive Officer

ANTONIO LUIS FERRE RANGEL
Executive Vice President

JOSE O. TORRES
Assistant Secretary, Vice President of Finance and Treasurer

JUAN R. TARAZA
Vice President - Sales and Marketing

ANGEL M. AMARAL
Vice President and Controller

BENITO DEL CUETO
Vice President - Real Estate

EUFEMIO TOUCET
Vice President and General Manager
St. Regis Paper and Bag Division

RENE DI CRISTINA
President Ready Mix Concrete, Inc.

ETIENNE TOTTI DEL VALLE
Secretary


                                       32


<PAGE>   21


Puerto Rican Cement Company, Inc.

STOCKHOLDER INFORMATION

STATUTORY OFFICES
Ponce, Puerto Rico

EXECUTIVE OFFICES
Guaynabo, Puerto Rico

SUBSIDIARIES*
Florida Lime Corporation
Ready Mix Concrete, Inc.
Poly Bags & Packaging, Inc.
Desarrollos Multiples Insulares, Inc.
Limestone Materials, Inc.
*All Subsidiaries are 100% owned

REGISTRAR AND TRANSFER AGENT
ChaseMellon Shareholder Services
New York, New York

INDEPENDENT ACCOUNTANTS
Price Waterhouse
San Juan, Puerto Rico

PUBLIC RELATIONS
Gavin Anderson & Company
New York, New York

LEGAL COUNSEL
Totti & Rodriguez Diaz
San Juan, Puerto Rico

FORM 10-K
A copy of the Annual Report as filed with the Securities and Exchange Commission
on Form 10-K will be mailed upon request made to Mr. Jose O. Torres, Vice
President of Finance and Treasurer, Puerto Rican Cement Company, Inc., PO Box
364487, San Juan, Puerto Rico 00936-4487.

PUERTO RICAN CEMENT COMPANY, INC.
ANNUAL MEETING
The Annual Meeting of Stockholders of Puerto Rican Cement Company, Inc. will be
held at the office of the Company, Amelia Industrial Park, Guaynabo,
Puerto Rico, Wednesday, May 6, 1998 at 10:00 a.m.


COMMON SHARE PRICES
AND DIVIDEND PER SHARE
The Company's common stock is listed on the New York Stock Exchange (trading
symbol:PRN). The following table sets forth the high and low sales price per
share of the common stock.

<TABLE>
<CAPTION>
Price per share ($)               1997                     1996
-------------------------------------------------------------------------
                            High         Low          High        Low
-------------------------------------------------------------------------
<S>                       <C>           <C>          <C>         <C>
First Quarter             28 3/4        28 5/8       34          32 1/8
Second Quarter            32 11/16      32 1/4       33 3/4      31 1/8
Third Quarter             40 1/8        39 7/8       31 7/8      28 5/8
Fourth Quarter            50 9/16       50 3/16      31 3/8      28 1/8
Full Year                 50 9/16       28 5/8       34          28 1/8

Dividends per share               $0.76                    $0.70
</TABLE>

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                                                                             PRN
                                                                          LISTED
                                                                            NYSE


                                       33