annual report 2012...huaxin cement co., ltd. annual report 2012 39.88% of the total shares of the...

Huaxin Cement Co., Ltd. Annual Report 2012

Huaxin Cement Co., Ltd.

600801

Annual Report 2012


Important Notice

I. The Board of Directors of the Company and its members, Supervisory Committee of the Company and its members and members of Top Management confirm, to the best of their knowledge, that there is no false or misleading statement or material omission in this report and shall be severally and jointly liable for the truthfulness, accuracy and completeness of its contents.

II. Director Mr. Roland Koehler was unable to attend the Meeting due to the fact that he had other commitments, and authorized Vice Chairman Mr. Ian Thackwray to attend the Meeting and vote by proxy.

Independent Director Mr. Lu Mai was unable to attend the Meeting due to the fact that he had other commitments and authorized Independent Director Mr. Huang Jinhui to attend the Meeting and vote by proxy.

III. PricewaterhouseCoopers Zhong Tian CPAs Limited Company issued standard audit report with unmodified opinion for the Company.

IV. Chairman of the Company Mr. Xu Yongmo, Legal Representative and CEO Mr. Li Yeqing, CFO Ms. Kong Lingling, and Chief of Financial Department Mr. Wu Xin declare and confirm that the Financial Statements contained in the Annual Report are true and complete.

V. Profit distribution proposal for the reporting period reviewed by the Board of Directors

The net profit of the Company for 2012 was 265,936,609 Yuan (Parent Company) or 555,658,762 Yuan after consolidation. Pursuant to the relevant provisions contained in the Company Law and the Accounting Rule, 10%, i.e. 26,593,661 Yuan will be appropriated to statutory surplus common reserve fund. The allocable profit of the Parent Company is 1,517,606,662 Yuan by the end of December 2012.

The Board proposes that on the basis of the total 935,299,928 shares, a cash dividend of 0.18 Yuan per share (incl. tax) shall be distributed to all shareholders, hence 168,353,987 Yuan (accounting for 30.3% of the net profit attributable to the shareholders of the Parent Company after consolidation) shall be distributed, and the whole of the remaining shall be booked as unallocated profit.

VI. Future plan, development strategy and other forward-looking description in this Report are not essential commitments of the Company to its investors. Investors are kindly requested to Note the investment risk.

VII. There was no frequent fund occupation by the controlling shareholders or their related parties.

VIII. All the external guarantees provided by the Company are in compliance with the decision-making procedures.


Chapter 1 Interpretation and Significant Risk Warning

I. Interpretation

In this Report, unless otherwise requires, the below terms have the following meanings:

Interpretation of the common words

The Company, Company and Huaxin Cement

means Huaxin Cement Co., Ltd.

Reporting period means Year 2012

Yuan, K Yuan, 10 K Yuan, mio Yuan, 100 mio Yuan

means RMB, RMB K Yuan, RMB 10 K, RMB mio Yuan, RMB 100 mio, China’s legal currency

B2B e-business platform means Business to Business

e-business platform

B2C e-business platform means Business-to-Customer

e-business platform

CRM project means Customer Relationship

Management project

CVM project means Customer Value Management

project

SNCR system means Selective non-catalytic

reduction system

KPI means Key Performance Indicator

PMA training means Project Management Approach

training

II. Significant Risk Warning

The existing industry risks have been described in detail in this Report, please refer to the “Potential Risks and Measures” part of the “The Board's Discussion and Analysis on the Company's Future Development” in Chapter 4 - Directors’ Report.


Chapter 2 General

I. Company Information

Legal Name of the Company Huaxin Cement Co., Ltd.

Legal Abbreviation in Chinese Huaxin Cement

Name in English Huaxin Cement Co., Ltd.

Abbreviation in English HUAXINCEM

Legal Person Representative Mr. Li Yeqing

II. Liaison Information

Secretary to the Board Securities Affairs Representative

Name Mr. Wang Ximing Ms. Wang Lu

Liaison Address

5# Building, International Enterprise Centre, Special No.1 Guanggu Avenue, Hongshan District, Wuhan City, Hubei Province

5# Building, International Enterprise Centre, Special No.1 Guanggu Avenue, Hongshan District, Wuhan City, Hubei Province

Tel 02787773896 02787773898

Fax 02787773992 02787773992

E-mail [email protected] [email protected]

III. Basic Information

Registered location of the Company 897 Huangshi Avenue, Huangshi City, Hubei Province

Post code of the registered location 435002

Administrative location of the Company 5# Building, International Enterprise Centre, Special No.1 Guanggu Avenue, Hongshan District, Wuhan City, Hubei Province

Post code of the administrative location 430073

Website of the Company www.huaxincem.com

E-mail [email protected]


IV. Information Disclosure and Place Available

Press for Information Disclosure China Securities Journal, Shanghai Securities News

Annual Report available on the Internet website appointed by CSRC

www.sse.com.cn

Place available Securities Office of the Company

V. Company Stock

Company Stock

Type Place of listing Abbreviation Stock code

A share Shanghai Stock Exchange

Huaxin Cement 600801

B share Shanghai Stock Exchange

Huaxin B share 900933

VI. Changes of the registration during the reporting period

(I) Basic Information

There is no change of registration during the reporting period.

(II) Reference for the Initial Registration

For initial registration of the Company, please refer to the “Basic Information of the Company” in the Annual Report 2011.

(III) Changes of the Main Businesses since the Company Listing

At the beginning of the listing, the Company was engaging in manufacturing and sales of cement, cement technical services, research, manufacturing, installation and maintenance of cement equipment, as well as cement import and export trade. After the vertical integration, the Company expanded its businesses to manufacturing and sales of RMX, aggregates and other building materials products; contracting for overseas projects in building materials industry and international bidding projects within China; as well as dispatching laborers for the implementation of the aforesaid overseas projects.

(IV) Changes of the Controlling Shareholder since the Company Listing

On February 4, 2008, the Company issued 75.2 million A shares to Holchin B.V. through private placement. After the completion of the private placement, Holchin B.V held


39.88% of the total shares of the Company and became the largest shareholder of the Company. Before the private placement, Huaxin Group Co., Ltd. held 27.14% of the total shares of the Company (including the state-owned shares held on behalf of the State), it was the largest shareholder of the Company. Holchin B.V. held 26.11% of the total shares of the Company and it was the second largest shareholder of the Company.

VII. Other Information

Certified Public Accountants (domestic) appointed by the Company

Name PricewaterhouseCoopers Zhong Tian CPAs Limited Company

Address

11th floor, PricewaterhouseCoopers Centre, No. 202, Hubin Road, Shanghai

Appointed accountants

Lin Yupeng

Chen Wenfeng

Sponsor who fulfilled the responsibility of continuous supervision during the reporting period

Name CITIC Securities Co., Ltd.

Address CITICS Mansion, Liangmaqiao Road 48, Chaoyang District, Beijing

Appointed sponsor representatives

Mr. Mei Wanqiang, Ms. Wang Chaonan

Continuous supervision duration

From Nov 8, 2011 to Dec. 31,2012


Chapter 3 Financial Highlights

I. Financial Statements Summary and Financial Indicators for the Last Three Years

(I) Financial Statements Summary

Unit: Yuan

Item 2012 2011 Change over last year (%)

2010

After change

Before change

Sales 12,520,527,247 12,638,039,183 -0.93 8,469,426,137

Net profit attributable to shareholders of the Company

555,658,762 1,075,268,489 -48.32 572,579,103

Net profit attributable to shareholders of the Company after extraordinary items

501,581,018 1,022,756,664 -50.96 471,999,817

Net cash flow from operating activities

2,455,821,890 1,886,330,982 30.19 1,539,997,172

2012 End 2011 End

Change over last year end

(%)

2010 End

After change

Before change

Net assets attributable to shareholders of the Company

7,734,577,308 7,759,976,865 -0.33 5,024,651,015

Total assets 23,291,418,459 21,729,678,063 7.19 17,812,222,066

(II) Financial Highlights

Item 2012 2011 Change over last year (%)

2010

After change

Before change

Basic earnings per share (Yuan/share)

0.59 1.31 -54.96 0.71 1.42

Diluted earnings per share (Yuan/share)

0.59 1.31 -54.96 0.71 1.42


Basic earnings per share after extraordinary items (Yuan/share)

0.54 1.25 -56.80 0.58 1.17

Return on net assets, weighted average (%)

7.18 19

Decreased by 11.82

percentage points

11.99

Return on net assets after extraordinary items, weighted average (%)

6.48 18.07

Decreased by 11.59

percentage points

9.89

II Non-routine items and Amount

Unit: Yuan

Non-routine items 2012

Amount Notes (if applicable) 2011 Amount 2010 Amount

Gains from disposal of non-current assets

-12,143,298Mainly are the gains from disposal of fixed assets

-6,295,016 -3,732,325

Government subsidies, excluding regular fixed amount government subsidies

99,614,551

Mainly are the financial subsidies from local governments

101,389,960 67,839,359

Reversal of provisions for assets impairment of accounts

2,132,807 1,027,499 2,192,898

Income from custody operation

-16,063,832

Other non-operating income and expenditures

-12,498,428 -4,303,294 -1,499,714

Other non-routine items 53,744,954

Damages received from M&A projects

19,275,934

Impacts from minority shareholders’ interests (after tax)

-8,478,507 -9,077,713 -5,250,931

Impacts from income tax -14,549,381 -14,165,779 -31,990,889

Total 54,077,744 52,511,825 100,579,286


Chapter 4 Directors’ Report

I. The Board's Discussion and Analysis on Business Circumstances during the Reporting Period

In 2012, China's cement industry presented features of declining growth rate, rapid release of new capacity, intensifying industry competition, downside product prices and receding industry prosperity. During the year, China's cement output reached 2.21 billion tons, representing a year-on-year growth of 5.7%, 5.1 percentage points lower than the growth rate in 2011, and the cement clinker output from enterprises above designated size reached 1.279 billion tons, representing an increase of 1.04% (Source: National Bureau of Statistics). According to preliminary statistics from the China Cement Association, in 2012, there were 124 new dry cement production lines put into production throughout the country, and the newly added design capacity of cement and clinker reached 160 million tons. Against the backdrop of serious overcapacity, prices of the cement market in most of the country experienced a substantial decline.

In 2012, the average selling prices of the Company’s leading products -- cement decreased by 10.79%, bringing enormous pressure to the Company's profitability. During the year, the Company's total sales of cement and clinker realized 42.3458 million tons (financial scope), representing a year-on-year growth of 9%; the sales reached 12.521 billion Yuan, falling by 0.93%; the total profit reached 905 million Yuan, and the net profit attributable to the Parent Company's shareholders was 556 million Yuan, dropping by 43.78% and 48.32% respectively.

In 2012, the Company 1) improved the competitive strength of its plants by cost excellence; 2) built a leading system for customer relationship and value creation by customer excellence; 3) accelerated the development pace of emerging industries by carrying out industrial consolidation and overseas development; and 4) fully participated in market competition by implementing management changes and nurturing sustainable growth momentum for the Company. All these measures above has further consolidated and upgraded the overall strength of the Company.

For cost excellence, the Company deepened the maintenance reform, strengthened quality management and ingredients optimization, and further enhanced the expertise of the Company's technical personnel. the Company’s failure rate of main equipment (kiln, mill) in 2012 fell by 30% compared with 2011, and clinker heat consumption, clinker comprehensive electricity consumption and cement comprehensive electricity consumption fell by more than 3%, and cement manufacturing costs decreased by 8.23% compared with 2011.

For sales and marketing transformation, mainly by increasing "the number of customers per ten thousand tons sales", the Company steadily boosted "direct sales expansion and distribution transformation", widened the Company's marketing channels and increased the number of contracted customers. For the purpose of marketing innovation, the Company continued to implement CRM and CVM programs, and had B2B and B2C E-business platform progressed substantially, laying the foundations for enhancing the Company's market competitiveness.


For new business development, by accelerating project development and innovating environmental technologies, the Company has established a new benchmark for WTFR business. In 2012, the Company successfully signed 12 Municipal Waste and Sewage Sludge pretreatment projects with cities including Wuhan, Shanghai, Zhuhai, Zhuzhou, Xinyang, Xiangyang, Chongqing and Dengta, of which 6 MW pretreatment projects in Wuhan, Xinyang and Chibi and other cities have been under construction, and Phase-II projects for Wuhan SS and Huangshi SS have been successfully put into operation. For technological innovation, the Company vigorously carried out independent R&D and application-oriented researches on environmental friendly technologies, and set up the Sewage Sludge Research Laboratory. Currently, the Company has obtained eight invention patents and 28 utility model patents in treatment for MW, SS, contaminated soils, floating materials, industrial wastes and hazardous wastes. "Municipal Waste Pretreatment and Cement Kiln Co-processing Technology" based on Huaxin Technology has been included in the "Catalogue of Circular Economic Technology, Process and Equipment Encouraged by the State" jointly promulgated by the National Development and Reform Commission (NDRC), the Ministry of Environmental Protection (MEP) and the Ministry of Industry and Information Technology (MIIT) as well as other relevant departments.

(I) Major Operations

1. Changes of Items in the Income Statement and Cash Flow Statement

Unit: Yuan

Item Current period Same period of last year

Change (%)

Sales 12,520,527,247 12,638,039,183 -0.93

Cost of sales 9,465,894,458 9,174,347,298 3.18

Selling and distribution expenses 838,081,458 700,909,789 19.57

General and administrative expenses 723,747,919 587,527,808 23.19

Finance costs 576,330,191 514,716,636 11.97

Net cash flows from operating activities 2,455,821,890 1,886,330,982 30.19

Net cash flows from investing activities -2,419,646,062 -1,971,539,502 22.73

Net cash flows from financing activities -10,449,621 1,098,269,251 -100.95

R&D expenditures

31,899,244

31,977,782 -0.25

2. Revenue

(1) Impact factors of sales of goods

Unit: Yuan

Caused by change of sales volume

Caused by change of price

Total changes of operating income


Cement 740,586,531 -1,211,700,020 -471,113,489

Clinker 286,377,525 -294,801,545 -8,424,020

Concrete 167,352,240 21,863,976 189,216,216

Total 1,194,316,296 -1,484,637,589 -290,321,293

The decline in operating income of main products in 2012 was mainly due to the decline in prices of cement products.

(2) Key customers

Unit: Yuan

Total sales income from the top 5 customers

613,217,267 % of the Company’s total sales income

5


3. Costs

(1) Cost Analysis

Unit: Yuan

Classification according to Product

Product Cost item Current period amount % of the total cost Same period of last year % of the total cost Change (%) Remarks

Cement Raw materials 1,335,329,942 18 1,130,542,382 15 18

Fuel and power 4,551,020,623 59 4,638,639,271 60 -2

Depreciation and amortization 731,136,053 10 625,765,381 8 17

Labor and Others 981,773,952 13 1,349,541,358 17 -27

Clinker Raw materials 77,084,397 9 52,946,874 8 46

Fuel and power 572,742,422 69 469,671,260 66 22


Labor and Others 108,995,660 13 126,263,453 18 -14

Concrete Raw materials 515,889,407 87 421,221,580 89 22

Power 9,241,067 2 5,098,714 1 81


Labor and Others 52,146,412 9 34,077,338 7 53


(2) Key suppliers

Unit: Yuan

Total procurement value from the top 5 suppliers

1,434,220,257 % of the total procurement value

15.1

4. Expenses

Item Current period Last year Change (%)

Selling and distribution expenses 838,081,458 700,909,789 19.57

General and administrative expenses 723,747,919 587,527,808 23.19

Finance costs 576,330,191 514,716,636 11.97

Income tax 224,693,300 389,666,808 -42.34

During the reporting period, the income tax decreased by 165 million Yuan over the same period of last year, mainly due to the fact that the total profit declined by 705 million Yuan over the previous year.

5. R&D expenses

(1) R&D expenses

Unit: Yuan

R&D expenses calculated in expenses 31,899,244

R&D expenses calculated in assets

Total R&D expenses 31,899,244

% in net assets 0.38

% in sales 0.25

6. Cash flows

Item Current period Last year Change (%) Remarks

Net cash flows from operatingactivities

2,455,821,890 1,886,330,982 30.19

The reduction in operating receivables is greater than that of the previous year

Net cash flows from investingactivities

-2,419,646,062 -1,971,539,502 22.73

Net cash flows from financingactivities

-10,449,621 1,098,269,251 -100.95

Borrowings decreased and debt repayment increased


7. Others

(1) Remarks on the major changes of profits structure or profit source

Unit: Yuan

Item Amount % in total profit

2012 2011 2012 2011 Change

Operating profit 723,029,868 1,430,656,577 79.9% 88.9% -9.0%

Periodic expenses 2,138,159,568 1,803,154,233 236.3% 112.0% 124.3%

Investment income -1,187,206 -2,091,241 -0.1% -0.1% 0.0%

Non-operating income 212,591,718 198,061,207 23.5% 12.3% 11.2%

Non-operating expenses 30,651,534 18,995,978 3.4% 1.2% 2.2%

Total profit 904,970,052 1,609,721,806

Increase in the proportion of periodic expenses in the total profit was mainly due to the fact that cement and clinker sales volume increased by 9% over the previous year. Affected by the macro environment and market demand saturation, the price dropped significantly compared with the previous year, resulting in the decline in sales, thus leading to the total profit suffered a decrease of 705 million Yuan (44%) over the previous year. Expenses for the period increased by 342 million Yuan over the previous year (only an increase of 19%). However, the decline in total profit caused the proportion of periodic expenses in total profit even higher.

(1) Completion of Investment and Operation Plans

① Production and Operation

In 2012, in the face of intense market competition and adverse situation of significantly declining industry profits, the Company promptly adjusted its business strategies, controlled internal costs and expanded outside markets, and the completion rate of cement and clinker sales reached up to 101% by virtue of the unity, dedication and courageous diligence of all staff. However, as business and market expansion of RMX was constrained, the production of AGG was constrained, the completion rate of RMX and Aggregate sales was 71% and 47% respectively, while prices of various products experienced different degrees of decline, thus the final completion rate of the annual revenue of the Company reached 86%, failing to complete the annual target.

② Investment

In 2012, the investment in each product segment went steadily as planned, but due to the complexity of mergers and acquisitions, and delayed schedule of new project construction, the total completed investment only accounted for 77% of the budget. However from the point of structures, the completion rate of cement and clinker segments reached 118%, while the implementation of RMX, AGG and WTFR projects was slower than expected.


③ Financing

In 2012, the Company successfully issued 3.1 billion Yuan corporate bonds, which has effectively adjusted its debt structure; meanwhile, the Company also endeavored to seek new financing channels based on specific environment, for example, the Company has obtained initial acquisition loan and overseas project loans. In addition, the Company adopted a more flexible financing way to carry out factoring, supply chain financing, bill pledge loans and so on.

④ Assets Condition

Due to the decrease in investment and profits this year, the actual total assets did not fulfill the expected target, with a completion rate of 93%, and the equity and liabilities also experienced corresponding declines, but different from the budget, the debt-to-asset ratio increased slightly.

(II) Operating situation according to industry, product or region

1. Major Operation according to Industry and Product

Unit: Yuan

Classification of Major Operation according to Industry

Industry Sales Cost of sales Gross profit

%

Sales change

over the last year %

Cost of sales change over the last year %

Gross profit change over the last year %

Cement 11,156,944,534 8,435,360,088 24.39 -4.12 -0.14 Decreased by 3.01 percentage points

Concrete 773,330,723 596,309,351 22.89 32.39 25.95 Increased by 3.95 percentage points

Others 590,251,990 434,225,019 26.43 41.40 71.41 Decreased by 12.88 percentage points

Classification of Major Operation according to Product

Product Sales Cost of sales Gross profit

%

Sales change

over the last year %

Cost of sales change over the last year %

Gross profit change over the last year %

Cement 32.5

4,926,390,893 3,573,886,179 27.45 -2.41 2.19 Decreased by 3.27 percentage points


Cement 42.5 and above

5,305,400,932 4,025,374,392 24.13 -6.18 -5.22 Decreased by 0.76 percentage point

Clinker 925,152,709 836,099,517 9.63 -0.90 18.92 Decreased by 15.07 percentage points

Concrete 773,330,723 596,309,351 22.89 32.39 25.95 Increased by 3.95 percentage points

Others 590,251,990 434,225,019 26.43 41.40 71.41 Decreased by 12.88 percentage points

Total 12,520,527,247 9,465,894,458 24.40 -0.93 3.18 Decreased by 3.01 percentage points

In 2012, sales and comprehensive gross profit was lower than that of the same period last year, mainly due to the substantial decline in cement and clinker selling prices over the same period of last year.

2. Classification of Major Operation according to Regions

Unit: Yuan

Region Sales Sales change over the last year %

Hubei 6,257,622,332 -1

Hunan 1,316,943,410 -20

Chongqing 640,978,625 -21

Yunnan 930,384,989 24

Jiangsu 435,794,817 -34

Henan 509,745,416 3

Sichuan 635,762,029 34

Tibet 652,094,303 53

Anhui 252,622,615 -18

Shanghai 187,578,671 -27

Jiangxi 289,292,048 28

Guangxi 77,483,966 1

Guangdong 91,328,959 95

Zhejiang 147,781,343 428

Fujian 5,091,631 -36

Export -100

Others 90,022,093 3

Total 12,520,527,247 -1


(III) Assets and Liabilities

1. Assets and Liabilities

Unit: Yuan

Item Period end % in the total assets

Last period end % in the total assets

Fluctuation (%)

Remarks

Cash at bank and in hand 2,839,236,250 12.2 2,825,437,202 13.0 0.5

Notes receivable 816,105,992 3.5 1,152,454,185 5.3 -29.2 The bank acceptances were mature and the endorsements were transferred

Notes receivable 804,514,901 3.5 611,160,181 2.8 31.6

The Company expanded its scale, DSO increased.

Accounts receivable 99,241,890 0.4 77,815,141 0.4 27.5 Advances to suppliers

288,071,470 1.2 148,938,461 0.7 93.4 The Company paid the deposits of equity acquisition and part of the payment of equity acquisition

Other receivables 904,173,307 3.9 1,080,981,439 5.0 -16.4 Inventories 113,720,871 0.5 157,309,135 0.7 -27.7 Available-for-sale financial assets

56,016,862 0.2 33,041,120 0.2 69.5 Two items of available-for-sale financial assets were added

Long-term receivables 32,456,782 0.1 10,645,951 0.0 204.9 Business transactions raised Long-term equity investments

338,769,365 1.5 14,859,038 0.1 2,179.9 Investment in a number of associated companies was increased.

Fixed assets 12,858,979,199 55.2 12,431,758,878 57.2 3.4 Construction in progress

1,663,637,596 7.1 970,702,004 4.5 71.4 The overseas cement production lines and WTFR projects started construction

Construction materials 66,970,298 0.3 65,474,467 0.3 2.3 Fixed assets pending for disposal

84,409,724 0.4 104,536,782 0.5 -19.3

Intangible assets 1,796,517,448 7.7 1,676,653,352 7.7 7.1 Goodwill 111,154,844 0.5 111,154,844 0.5 - Long-term prepaid expenses

264,561,556 1.1 148,208,055 0.7 78.5 A subsidiary increased its cost for quarry stripping

Deferred tax assets 152,880,104 0.7 108,547,828 0.5 40.8

Timing difference of expenses and tax losses increased


Short-term borrowings 1,054,000,000 4.5 997,950,000 4.6 5.6 Notes payable 87,491,030 0.4 32,503,263 0.1 169.2 New bank acceptances increased Accounts payable 2,549,726,477 10.9 2,428,714,288 11.2 5.0 Advances from customers 325,811,627 1.4 404,466,765 1.9 -19.4 Employee benefits payable 144,229,279 0.6 143,977,781 0.7 0.2 Taxes and other levies payable

237,603,768 1.0 307,854,410 1.4 -22.8

Interests payable 104,268,504 0.4 31,830,885 0.1 227.6

Provisions of medium-term Notes and corporate bonds interests

Dividends payable 29,459,504 0.1 66,710,525 0.3 -55.8

Dividends distribution last year for minority shareholders of subsidiaries

Other payables 547,899,201 2.4 206,206,627 0.9 165.7 Equity acquisition payables increased Current portion of non-current liabilities

2,996,609,294 12.9 2,693,349,474 12.4 11.3

Long-term borrowings 2,675,077,477 11.5 4,222,803,436 19.4 -36.7

Some loans were repaid and some were transferred into long-term loans due within one year

Debentures Payable 3,682,215,000 15.8 1,197,450,000 5.5 207.5

3.1 billion Yuan corporate bonds were issued

Long-term payables 83,618,872 0.4 142,986,042 0.7 -41.5

Land payment to minority shareholders of subsidiaries, repayment of finance lease.

Provisions 105,789,380 0.5 109,158,708 0.5 -3.1 Deferred tax liabilities 50,457,541 0.2 52,451,338 0.2 -3.8 Other non-current liabilities 117,498,032 0.5 107,852,021 0.5 8.9 Share capital 935,299,928 4.0 935,299,928 4.3 Capital surplus 3,080,957,052 13.2 3,520,784,820 16.2 -12.5 Surplus reserve 346,760,490 1.5 320,166,829 1.5 8.3 Retained earnings 3,371,858,083 14.5 2,983,725,288 13.7 13.0 Converted difference in foreign currency statements

-298,245 0.0

Equity attributable to the shareholders of the Company

7,734,577,308 33.2 7,759,976,865 35.7 -0.3

Minority interests 765,086,165 3.3 823,435,635 3.8 -7.1


(IV) Core Competitiveness

Founded in 1907, the Company has a long history and profound cultural heritage. It has developed into one of China's influential enterprises engaging in building materials, showing important influence in China's building materials industry, having a strong competitive strength in the industry.

1. Advantage on R&D and Technological Innovation

The Company attaches great importance to R&D and technological innovation. While learning and using worldwide advanced technologies, and obtaining more new products and patents with independent intellectual property rights, the Company also aims to accelerate the transformation and application of scientific and technological achievements, and promote high-tech industrialization. The Company's technological innovation advantages are mainly reflected in the following aspects: Firstly, it has a full set of cement product equipment and 30 patents in equipment manufacturing and processing technologies, including two invention patents and 28 utility model patents; secondly, it has 3 invention patents in cement and RMX products; and thirdly, it has advanced integrated technology for cement co-processing, which has obtained 8 invention patents and 28 utility model patents. In addition, the Company also has 6 pretreatment platforms (namely MW, SS, FM, CS, HW and IHW) and key technologies as well as independent intellectual property rights.

2. Advantage on Industry Chain Synergies

Centering on the cement industry, the Company vertically expands its businesses in concrete and aggregate industry, environmentally friendly building materials equipment and engineering, environmental services and environmental protection engineering on cement kiln co-processing platforms, from which its advantages on industrial chain synergies are obvious. The leading cement kiln co-processing technology independently developed by the Company allows the Company to have the confidence and ability to play an important part in improving the environmental and ecological quality, and have core advantages in achieving green and sustainable development for the cement industry.

3. Advantages on Trademark and Brand

The trade name "HUAXIN CASTEL" owned by the Company is a famous trademark of China, which is also one of the oldest cement trademarks in China. All the 15 cement types have also been included in the first batch of National Quality Inspection-free Products. Likewise, the Company's trademark and brand with a hundred years old history are well-known and highly recognized in the industry.

(V) Investments


1. External equity investment

Item Current period Same period of last year

Change

Available-for-sale financial assets

56,016,862 33,041,120 69.54%

Long-term equity investments 338,769,365 14,859,038 2,179.89%

Invested party Main business Investment proportion

Tibet Gaoxin Building Materials Group Co., Ltd.

Manufacture and sales of cement

43%

Huangshi Jiuhe Trading Co., Ltd. Sales of Cement 32.69%

Zhangjiajie Tianzi Concrete Co., Ltd. Manufacture and sales of concrete

24%

Shanghai Wanan Huaxin Cement Co., Ltd.


49%

Success Eagle Cement (Hong Kong) Co., Ltd.


45%

(1) Equity Holding of Other Listed Companies

Unit: Yuan

Stock code

Stock abbreviation

Original investment

(Yuan)

Holding amount (share)

Book value at period

end (Yuan)

Profits/losses during the reporting period

Accounting title

601328 Bank of Communication

3,165,725 0.01 10,792,196 198,605 Available-for-sale financial assets

601601 China Pacific Insurance

696,000 0 13,500,000 210,000 Available-for-sale financial assets

Total 3,861,725 / 24,292,196 408,605 /


2. Entrust Management and Investment in Derivatives (1) There was no entrust management during the reporting period. (2) There was no entrusted loan during the reporting period. 3. Application of the raised funds (1) Overall Application of the raised funds

Unit: 0000 Yuan

Year Manner Total amount

Use amount in this year

Accumulative use amount

Amount not been used yet

Usage and direction for the raised funds not been used yet

2011 Private placement

174,288.76 14,858.50 151,314.68 22,974.08 Saved in special account for the raised funds and shall be continued used for the construction of the fundraising projects

(2) Projects utilizing the raised funds

Unit: 0000 Yuan

Project Change Planned injection

Injection this year

Actual injection

On schedule

Progress Estimated profit

Actual profit

In line with the estimation

Remarks on the failure

Reasons / procedures for the change

Hubei Xiangfan 7.5 MW cement kiln pure low temperature waste heat power generation project

No 1,300 1,300 Yes It reached the expected status in 2009

1,022.35 1,395.72

Yes

Hubei Xianning 7.5 MW cement kiln pure low temperature waste heat power generation project

No

3,000 3,000

Yes It reached the expected status in 2009

1,021.37 1,438.55

Yes


Tibet 7.5 MW cement kiln pure low temperature waste heat power generation project

No

4,801 4,801


1,179.07 900.8 No Note 1

Sichuan Quxian 9 MW cement kiln pure low temperature waste heat power generation project

No

4,206 4,206


1,591.64 1,282.96

No

Note 2

Sichuan Wanyuan 7.0 MW cement kiln pure low temperature waste heat power generation project

No

5,100 956.08 4,561.37


1,266.33 519.18

No

Note 3

Chongqing Fuling 9.0 MW cement kiln pure low temperature waste heat power generation project

No

5,126 163.64 5,126


1,514.09 1,128.24

No

Note 4

Hunan Zhuzhou 9.0 MW cement kiln pure low temperature waste heat power generation project

No

6,030 954.19 6,030


1,380.42 1,734.24

Yes

Hubei Zigui 7.5 MW cement kiln pure low temperature waste heat power generation project

No

4,606 4,606


908.45 1,280.95

Yes

Hunan Chenzhou 9.0 MW cement kiln pure low temperature waste heat power generation project

No

6,082 754.62 5,644.21

Yes It reached the expected status in 2010 1,801.29 1,508.96 No Note 2

Yunnan Dongchuan 4.5 MW cement kiln pure low temperature waste heat power generation project

No

3,500 638.68 3,010.10


368.22 429.55 Yes

Hunan Daoxian 7.5 MW cement kiln pure low temperature waste heat power generation project

No

5,600 757.62 4,903.62

Yes It reached the expected status in 2010 1,434 1,206.18 No Note 2

Hubei Huangshi 15.0 MW cement kiln pure low temperature waste heat power generation project

No

8,934 559.39 8,745.65

Yes It reached the expected status in 2010 2,321 2,684.30

Yes


Hubei Yichang 10.5 MW cement kiln pure low temperature waste heat power generation project

No

5,702 - 5,702

Yes It reached the expected status in 2010 1,637.68 1,815.04

Yes

Hubei Enshi 3.6 MW cement kiln pure low temperature waste heat power generation project

No

2,400 - 2,400


390.92 710.89

Yes

Yunnan Zhaotong 7.5 MW cement kiln pure low temperature waste heat power generation project

No

5,600 568.63 4,684.04


1,035.08 850.79

No

Note 2

Hubei Xiangxin 200 km3/y RMX station

No 1,561 10.7 720.24

Yes Note a 534.85 -192

No Note 5

Hubei Huanggang 200 km3/y RMX station

No 1,675 12.17 741.92

Yes Note a 480.78 -174.57

No Note 5

Hubei Daye 200 km3/y RMX station

No 1,536 31.48 956.19

Yes Note a 603.28 -40.19

No Note 5

Yunnan Dongchuan 200 km3/y RMX station

Yes 1,669 - 281.23 N/A 498.18 N/A Note 7

Sichuan Wanyuan 200 km3/y RMX station

No 1,493 44.29 737.3 Yes Note a 563.51 -66.54 No Note 5

Chongqing Fuling 300 km3/y RMX station

Yes 1,815 - - N/A 599.2 N/A Note 8

Henan Xinyang 200 km3/y RMX station

No 1,539 210.51 1,112.67

Yes Note a 171.17 -191.55 No Note 5

Hubei Yichang 300 km3/y RMX station

No 2,066 1.78 16.46

Yes Note b 631.94 N/A

Hubei Chibi 200 km3/y RMX station

No 1,824 3.76 100.54

Yes Note b 174.41 N/A

Hubei Ezhou 200 km3/y RMX station

No 1,826 93.04 967.71

Yes Note a 168.59 -19.83

No Note 5

Hubei Hanchuan 200 km3/y RMX station

No 1,747 211.49 1,188.96

Yes Note a 158.89 -164.41

No Note 5

Hubei Shishou 200 km3/y RMX station

No 1,891 17.66 885.06

Yes Note a 158.26 56.24

No Note 5

Hubei Tianmen 200 km3/y RMX station

No 1,826 736.96 946.14

Yes Note a 192.99 -1.49

No Note 5

Hubei Jiangling 200 km3/y RMX station

Yes 1,831 - - N/A 205.42 N/A Note 8

Hubei Zigui 200 km3/y No 1,831 129.19 907.67 Yes Note a 199.58 -51.85 No Note 5


RMX station

Hubei Xuan’en 200 km3/y RMX station

Yes 2,026 - 387.2

N/A164.68

N/A Note 7

Hubei Dawu 200 km3/y RMX station

Yes 1,993 - -

N/A207.97

N/A Note 7

Henan Luoshan 200 km3/y RMX station

Yes 1,831 - -

N/A191.42

N/A Note 7

Hunan Daoxian 200 km3/y RMX station

Yes 1,564 - 272.86

N/A147.79

N/A Note 9

Hunan Chenzhou 200 km3/y RMX station

Yes 1,699 - 49.65

N/A235.06

N/A Note 7

Hubei Hefeng 200 km3/y RMX station

Yes 1,752 - -

N/A195.38

N/A Note 7

Hunan Zhuzhou 200 km3/y RMX station

Yes 2,067 - -

N/A243.99

N/A Note 9

Hubei Wuhan Donghugaoxin 300 km3/y RMX station

No 2,225 357.01 930.83

Yes Note a 563.37 -434.9

No Note 5

Hubei Xianning 200 km3/y RMX station

No

2,068 1,007.80 2,037.67


163.13 -116.27

No

Note 5

Hubei Ezhou Gedian 200 km3/y RMX station

No 2,226 93.38 1,585.06

Yes Note a 163.55 -127.03

No Note 5

Hubei Yangxin 3 mt/y AGG production line

No 15,900 675.1 15,900


2,350.43 -764.28 No

Note 6

Repayment of the Company loans

No 46,000 46,000

Yes Completed

N/A N/A

Total / 179,468 8,989.17 145,445.35 / / 28,839.73 / / / /

Note a: The above concrete projects were put into commissioning after some of the main equipment installation, but the rest of the facilities have not been established completely, thus they did not officially put into operation.

Note b: The above concrete projects were under planning, the injection amount is relatively low.

Note 1: In “A-share private placement plan of 2009 (Second Revised Version)”, Tibet 7.5 MW cement kiln pure low temperature waste heat power generation project (hereinafter referred to as "Tibet WHPG”) was expected to achieve an annual total profit of 11,790.7 k Yuan. There was a big gap between the actual total profit of the above project for this year and the expected profit. It was mainly due to the fact that the Company reduced its coal consumption of clinker burning process in order to reduce the cost of production, the amount of waste heat power generation was relatively low.


Note 2: In “A-share private placement plan of 2009 (Second Revised Version)”, Sichuan Quxian 9 MW cement kiln pure low temperature waste heat power generation project, Hunan Chenzhou 9.0 MW cement kiln pure low temperature waste heat power generation project, Hunan Daoxian 7.5 MW cement kiln pure low temperature waste heat power generation project and Yunnan Zhaotong 7.5 MW cement kiln pure low temperature waste heat power generation project were expected to achieve annual total profits of 15,916.4 K Yuan, 18,012.9 k Yuan, 14,340 k Yuan and 10,350.8 Yuan respectively. The above projects achieved 81%, 84%, 84%, and 82% of the expected profits respectively, which means they basically achieved the expectation.

Note 3: In “A-share private placement plan of 2009 (Second Revised Version)”, Sichuan Wanyuan 7.0 MW cement kiln pure low temperature waste heat power generation project was expected to achieve an annual total profit of 12,663.3 k Yuan. There was a big gap between the actual total profit of the project for this year and the expected profit. It was mainly due to the fact that the sales volume was lower than the expectation, cement kiln OEE is not high, and thus the waste heat power generation system did not sufficiently work.

Note 4: In “A-share private placement plan of 2009 (Second Revised Version)”, Chongqing Fuling 9.0 MW cement kiln pure low temperature waste heat power generation project was expected to achieve an annual total profit of 15,140.9 K Yuan. The actual total profit for this year was lower than the expectation. It was mainly due to the fact that the raw material silo was tilted and had to be reconstructed, cement kiln shutdown affected the operating efficiency of the WHPG system.

Note 5: The concrete industry is still in the development and integration period, macro control, to some extent, exacerbated the disorderly competition in the market, making some of the new projects failed to achieve the expected market share and sales volume. In addition, in order to control risks, the Company implemented strict sales credit approval system, which gave definite impact on sales volume and profits.

Note 6: In “A-share private placement plan of 2009 (Second Revised Version)”, Hubei Yangxin 3 mt/y AGG production line was expected to achieve an total profit of 23,504.3 k Yuan for the first complete account year and the average annual total profit of 37,136.8 k Yuan for the production period. Since the project being put into production in November 2011, aggregate production was restricted, which affected sales volume, thus it failed to meet the expectation.

Note 7: The Second Extraordinary Shareholders’ General Meeting was convened on May 15, 2012, agreeing not to inject the raised funds in this project due to the fact that demand in target markets failed to reach the expectation.

Note 8: The Second Extraordinary Shareholders’ General Meeting was convened on May 15, 2012, agreeing not to inject the raised funds in this project due to the adjustment of the local government’s planning

Note 9: The Second Extraordinary Shareholders’ General Meeting was convened on May 15, 2012, agreeing not to inject the raised funds in this project due to the fact that profit in target markets was comparatively low.

(3) Change of Projects Utilizing the Raised Funds


Unit: 0000’ Yuan

Project Name after the Change

Original Project

Planned use of the raised funds

Investment in 2012

Accumulative investment

On seclude or not

Estimated profit

Actual profit

Progress

Achieved estimated profit or not

Remarks

Acquiring 100% assets of Jiangxi Jiangcheng New Material Co., Ltd.

Yunnan Dongchuan 200 km3/y RMX Station Project, Chongqing Fuling 300 km3/y RMX Station Project, Hubei Jiangling 200 km3/y RMX Station Project, Hubei Xuanen 200 km3/y RMX Station Project, Hubei Dawu 200 km3/y RMX Station Project, Henan Luoshan 200 km3/y RMX Station Project ， Hunan Daoxian 200 km3/y RMX Station Project, Hunan Chenzhou 200 km3/y RMX Station Project, Hubei Hefeng 200 km3/y RMX Station Project, Hunan Zhuzhou 200 km3/y RMX Station Project

3,850 2,646.09 2,646.09 Yes 1,419 936.77

Reached the expected usable status in 2012

No Note 1

Acquiring 100% assets of Xiaogan Yongtai Concrete Co., Ltd.

1,397 749.88 749.88 Yes 265 -145.31


No Note 1

Acquiring 100% assets of Xiangyang Longtai Mortar Concrete Engineering Co., Ltd.

1,430 410 410 Yes 435 455.39


Yes

Acquiring 100% assets of Xiangyang Xinglongtai New Building Material Science & Technology Co., Ltd.

1,044 491.50 491.50 Yes 271 -23.24


No Note 1

Acquiring 100% assets of Nanzhang Longtai Concrete Engineering Co., Ltd.

1,250 773 773 Yes 221 5.21


No Note 1

Huaxin Jianshan cooperation project

2,285 No 1,613 2,482.59


Yes

Huaxin Aggregate (Yangxin) Co., Ltd. Phase II project 1000 tph production line

6,000.06 798.86 798.86 Yes 1,158 N/A Initial stage of construction

N/A N/A

Total / 17,256.06 5,869.33 5,869.33 / 5,382 / / / /

Note 1: After the change of the usage of raised funds, the raised funds were used on the RMX assets acquisition projects. Those projects are under the stage of internal integration and new markets adaptation; thus they failed to achieve the expected profits.


4. Analysis on Major Subsidiaries and Equity Holding Companies

Name Business range Registered

Capital Total Assets Net Assets Sales Net Profit

Huaxin Cement (Yangxin) Ltd. Manufacture and sales of cement 500,000,000 1,140,852,599 597,141,901 1,047,548,377 44,411,867

Huaxin Cement (Wuxue) Ltd. Manufacture and sales of cement 300,000,000 1,098,338,540 620,694,734 974,434,695 55,595,296

Huaxin Cement (Xiangyang) Ltd. Manufacture and sales of cement 140,000,000 967,676,742 462,510,270 850,427,204 118,500,752

Huaxin Cement (Yichang) Ltd. Manufacture and sales of cement 150,000,000 833,752,085 373,334,811 681,232,514 110,606,147

Huaxin Cement (Tibet) Ltd. Manufacture and sales of cement 50,000,000 1,056,107,798 449,760,310 646,845,414 215,264,612


5. Funds of Other Sources Unit: 0000’ Yuan

Project Planned

investment Progress

Investment in 2012

Accumulated investment

Lengshuijiang 4500 t/d clinker and cement production line

689,080,000 It started construction on Feb 26, 2011, and was put into commissioning on Dec 24, 2012.

438,264,690 664,763,841

Huaxiang Environmental Protection 1200 kt/y comprehensive usage of iron and steel slag

272,243,297 It started construction on May 26, 2011, and was put into commissioning on Sep 8, 2012.

112,403,166 223,418,260

Sangzhi 2500 t/d cement production line (continue construction)

400,630,000

It started construction on Dec 27, 2011. As at Dec 30, 2012, it is at the bidding stage. It is estimated to be put into commissioning in March 2014.

40,885,954 40,885,954

Tajikistan 3000 t/d clinker and cement production line

687,165,021

It started construction on Sep 15, 2011, and it is now under installation, the accumulative installation is 60%. It is estimated to be put into commissioning in Jul 2013.

533,173,462 533,173,462

Total 2,049,118,318 / 1,124,727,272 1,462,241,517

II. The Board's Discussion and Analysis on the Company's Future Development

(I) Industry Competition Pattern and Development Trend

The cement industry is a basic raw material industry, and plays an irreplaceable role in the socio-economic development; the cement industry is a cyclical industry, and its development is closely linked with the national economy situation and the total fixed assets investment; the cement industry is a high energy consumption industry, and is significantly influenced by national policies on energy saving, environmental regulations and industrial policy; on the other hand, unique technical features of the modern cement industry not only allows it to clean and co-process IHW, MW and SS, but also has the potential to transform from high energy consumption industry to clean-energy industry.

Since the 12th "Five-Year Plan", China has continued to promote the transformation of economic growth, strengthen the protection of the ecological environment, and maintain macroeconomic policies for stable economic development. At the same time, the industrial policies of "accelerating the transformation of development mode, vigorously promoting energy-saving and emission-reduction, mergers and acquisitions and boosting cement industrial transformation and upgrading" have been progressively implemented. As no substantial changes took place in the development trend or market competition pattern of China's cement industry, the Company still holds the same views and opinions stated in Annual Report 2010 and 2011.

(II) Development Strategy

Currently, the cement industry is faced with growing overcapacity and the country's increasingly strict environmental protection policies, which, for the Company, are both a challenge and an opportunity. By adhering to the mission of "Clean our living environment, provide reliable building materials", the Company will speed up the pace of transformation and development. In the coming years, the Company will enhance the


development of environmental projects on co-processing platform. The Company increases its efforts to open up the cement business of China's neighboring countries, and continues to play a role in promoting the domestic cement industry consolidation, and improve the profitability of the enterprise by safeguarding the overall interests of the industry.

(III) Business Plan

1. Business Plan

In 2013, the Company planned sales volume of cement and clinker is 48.16 million tons, increasing by approximately 14% compared with 2012; sales volume of RMX is 6.63 million cubic meters, increasing by approximately 82%; sales volume of aggregate is 2.92 million tons, increasing by approximately 43%; the total disposal amount of WTFR business is 518,000 tons. Operating income is expected to achieve an increase of about 20% compared with 2012, in which cement and clinker sales revenues is expected to reach 12.048 billion Yuan, representing an increase of more than 9% over the previous year; RMX sales revenue is expected to reach 1.839 billion Yuan, increasing by more than 140%.

2. Strategies and Measures

In order to realize the business objectives in 2013, the Company will take the following initiatives:

Cost Excellence: The Company will reduce its production costs by strengthening management of raw materials and coal procurement, repairing and reusing spare parts, and exercising self-maintenance and other measures. The Company will also adhere to the strategy of "one policy for one plant" to optimize the production process programs, reduce consumption, integrate procurement and logistics supply chain, and pay close attention to the value chain of procurement.

Customer Excellence: The Company takes initiatives to fully promote customer relationship management project and online shopping mall in Hubei. In addition, the Company will continue to implement customer value management project to enhance customer value.

Optimize the operation efficiency of WTFR plants, increase the amount of co-processing, and maximize the substitution effects from co-processing.

Vigorously promote changes in marketing mode of RMX and take effective measures to control the risk of accounts receivables. Continuously boost M&A and market consolidation in order to secure cement channels by enhancing our position in RMX channels.

(IV) Capital Demand for Maintaining Existing Business and Completing


Construction in Progress

In 2013, there will be an obvious increase in CAPEX and total investments of the Company. Growth can be seen in Cement, RMX&AGG, as well as WTFR business. The details are as follow:

Unit: million Yuan Long-term assets investment Budget 2013 Cement & clinker 1,577 RMX & AGG 352 WTFR, E&E and others 1,486 Total 3,416

In order to meet the capital need of the development of the Company, the Company will strive to improve its financing ability, broaden its financing channels, and adjust the debt structure. In 2013, the debt plan is 11.6 billion Yuan.

(V) Potential Risks

1. Increasing Market Competition Risk Caused by Overcapacity

From 2010 to 2012, China's total new design capacity of cement and clinker has reached 732 million tons (Source: China Cement Association), and the growth rate of cement production capacity is much higher than that of the demand for cement, resulting in obvious overcapacity. Although China has introduced a number of policies to control the cement production capacity, and those regulations on the cement industry have gradually shifted from encouraging NSP cement development to the optimization and upgrading of deep-going industrial structure, considering the industry is experiencing an overall overcapacity, "de-capacity" will be a long course. The risks of cement price declining and industrial competition still remain, which will bring huge pressure on the Company's production and operation.

Countermeasures: 1) Resolutely implement low-cost strategy to reduce plant operating costs and win initiatives in competition; 2) establish a convenient, efficient and constantly optimized B2C platform to effectively solve "pain points" of customers and fulfill customer value creation and effective transmission; and 3) change the mode of development, vigorously develop new business and create supporting points and profit growth for new business.

2. CAPEX Risk

In recent years, the Company's main business has experienced rapid development, and there are more and more projects under construction, which require continuous capital investment. In addition, continuous investments are also needed for cement M&A and consolidation, RMX, AGG, co-processing for MW and SS, information construction, technological innovation and so on. It is expected that the total investment in the next three years will be more than 10 billion Yuan. Because the aforesaid capital expenditures are quite huge and the Company's debt-to-asset ratio has already reached


63.5%, the Company may have financial risks that the capital funds and future cash flows are not sufficient to cope with the Company's CAPEX.

Countermeasures: 1) Comprehensively and reasonably arrange the Company's financing according to the progress and capital need of projects to avoid liquidity risk; 2) enhance the Company's profitability and management of the accounts receivable and payable.

3. Risk of Changes in Environmental Standards

The cement industry is a high-energy-consumption industry placing heavy load on the environment. In November 2012, the Ministry of Environmental Protection released 4 drafts for national cement standards including Emission Standard of Air Pollutants for Cement Industry, in which the targets of cement particulate matter and nitrogen oxides emissions were increased dramatically. The state has made strong determination to improve the quality of the environment, which will directly increase the environmental pressure on and input of the cement industry.

Countermeasures: The Company has fully adopted the NSP engineering, IW utilization technology and WHR technology with advanced emissions and energy consumption; in designing the production line, the Company has also adopted new burners and new burning technology in the decomposing furnace, so as to reduce the concentration of nitrogen oxides emissions, ensure that all emission targets are in line with national standards, and actively fulfill corporate social responsibility.

III. Board of Directors’ Explanation on Non-standard Audit Report from the CPAs (I) Board of Directors and Board of Supervisors’ Explanation on Non-standard Audit Report from the CPAs √Not applicable (II) Board of Directors’ Explanation on Reasons and Impact of Changing Account Policies, Account Estimation or Accounting Method √Not applicable (III) Board of Directors’ Explanation on Reasons and Impact of Correction of Important Account Mistakes √Not applicable IV. Profit Distribution or Stock Split Proposal (I) Establishment and Implementation of Profit Distribution Article 158 stipulated in the Articles of Association of Huaxin Cement Co., Ltd.: Profit distribution of the Company shall mainly take the form of cash, so that the accumulative profit distributed or to be distributed in cash for the last 3 years shall not be less than 30% of the annual average distributable profit realized for the last 3 years. The Company conducted the profit distribution strictly abiding by the Articles of Association.


(II) During the reporting period, the Company’s profit and undistributed profit of the Parent Company are positive, but do not propose a cash dividend distribution plan, the Company should disclose the reasons in detail and the purpose and usage plan of undistributed profit √Not applicable (III) Dividend distribution for the last 3 years

Unit: Yuan

Year

Bonus share for 10 shares (share)

Dividends for 10 shares (Yuan) (incl. tax)

Stock split for 10 shares (share)

Cash dividends amount (incl. tax)

Net profit attributable to the shareholders of the Company in the Consolidated Financial Statement

% in Net profit attributable to the shareholders of the Company in the Consolidated Financial Statement

2012 1.8 168,353,987 555,658,762 30.32011 1.5 140,294,989 1,075,268,489 13.02010 2 10 80,720,000 572,579,103 14.1

V. Situation of Corporate Social Responsibility (I) Corporate Social Responsibility The CSR Report 2012 of the Company shall be published through other approach.

(II) Description of Environmental Protection of Listed Companies and Their Subsidiaries in Heavy Polluting Industries Provided by National Environmental Protection Departments

During the reporting period, no environmental pollution accidents in association with the Company have occurred, and the Company has not subject to any form of administrative punishments due to environment protection.

During the reporting period, the Company has actively promoted clean production, lowered the use of energy and resources from sources and reduced emissions. The Company's emissions of dusts, SO2 and other pollutants have also met the standards. A total of 11 plants have passed the clean production inspection. During the reporting period, new projects strictly enforce the requirement of environmental protection, and high-efficient dust collectors are installed at the point of dust production to meet national standards.

While introducing, digesting and absorbing advanced denitrification technologies, the Company also focuses on independent R&D, emphasizes technological innovation. It adopted low-NOx combustion technology to reduce the generation of nitrogen oxides and installed SNCR system to give end-of-pipe controls on exhaust gases. During the reporting period, kiln plant denitrification projects of Xiangyang (Hubei), Quxian (Sichuan), Daoxian and Zhuzhou (Hunan) have been completed, fulfilling the requirements of national and local environmental protection department for nitrogen oxides emission reduction.


The Company's plants have worked out contingency plans for environmental emergencies, set up a leading group for environmental pollution emergency, and carried out trainings and drills for contingency plans on a regular basis, so that incidents can be promptly controlled in the event of unexpected environmental accidents to reduce damage and loss caused by such accidents.


Chapter 5 Major Events

I. Material Lawsuit, Arbitration or Events Widely Concerned by the Media

(I) Lawsuit, arbitration or events widely concerned by the Media that had been disclosed in extraordinary announcements and had no further progress

Events summary and type Reference

Equity transfer dispute between the Company and shareholders of Guanghan Sanxingdui Cement Co., Ltd.

www.sse.com.cn

Half Year Report 2012 of the Company

Dispute on compensation for the property damage of Sichuan Wutong Road & Bridge Engineering Bureau by Huaxin Cement (Chenzhou) Co., Ltd.

www.sse.com.cn

Half Year Report 2012 of the Company

(II) Lawsuit and arbitration that was not disclosed in extraordinary announcements or that had further progress

Unit: 0000 Yuan

Plaintiff Appellee Type Basic information Amount Progress

Hubei Guoxin Real Estate Co., Ltd.

Huaxin (Concrete) Wuhan Ltd.

Contract dispute

In October 2009, the Plaintiff and the Appellee signed the concrete sales contract on concrete supply to “Shangcheng International Project” developed by Guoxin Real Estate. During the implementation of the contract, both party had disputes on the on-time supply of concrete and the quality of concrete and failed to reach an agreement through negotiation. In December 2012 the Plaintiff lodged a complaint, requiring the Appellee to compensate his direct losses of 31,381,673.56 Yuan and indirect losses of 5 million Yuan.

3,638.17

The court will be held on March 18, 2013



Contract dispute

In October 2009, the Plaintiff and the Appellee signed the concrete sales contract on concrete supply to “Shangcheng International Project” developed by Guoxin Real Estate. On January 9, 2013, the Plaintiff lodged a complaint, requiring the appellee to return the purchase price of about 4.9 million Yuan

490

The court will be held on March 18, 2013

II. Capital occupation and debts clearing up progress during the reporting period

√ Not applicable

III. There was no restructuring after bankruptcy of the Company during the reporting period.


IV. Assets transaction and business combination

(I) Events that were not disclosed in extraordinary announcements or that had further progress

1. Assets Acquisition

Unit: Yuan

Trading party or final controlled party

Acquired assets Purchasing

day Acquisition

price

Net profit contributed to the Company

from the acquisition day to the year end

Related transaction

Pricing principle

Whether the property right has been transferred

Whether the claims and debts have been

diverted

Enping Huagang Building Materials Co., Ltd.

0.2% shareholding of Enping Success Eagle Building Materials Co., Ltd.

Oct 18, 2012 HKD 680,000 -1,946 No Negotiation Yes

Feng Zhuofan 15% shareholding of Success Eagle Cement (Hongkong) Limited

Nov 1, 2012 HKD

48,000,000 -160,151 No

NegotiationYes

Li Jianli 5% shareholding of Success Eagle Cement (Hongkong) Limited

Oct 30, 2012HKD

16,500,000 -53,384 No Negotiation

Yes

Starry Cosmos Group Limited

25% shareholding of Success Eagle Cement (Hongkong) Limited

Dec 24, 2012HKD

82,500,000 -

No Negotiation

Yes

Wanyuan State Asset Operation & Investment Management Co., Ltd.

100% shareholding of Wanyuan Dabashan Cement Co., Ltd.

Nov 30, 2012RMB

61,500,000 -1,697,870

No Negotiation

No Yes


V. Equity Incentive of the Company and its impacts

√ Not applicable

VI. Important Related Transaction

(I) Related Transactions in Connection with Daily Operation

1. Items that were not disclosed in extraordinary announcements

Unit: Yuan

Related party

Relation Type Content Pricing

principle Amount

% in same transaction

type Payment

Huaxin Group Ltd.

Equity holding shareholder

Receiving labour service

Comprehensive service fee

Based on agreement

6,000,000 73 Cash


Affiliated company Receiving

labour service

Comprehensive service fee

Based on agreement

2,200,528 27

Cash

Holcim Group Support Ltd.

Other related party


Technical consultation fee

Based on agreement

USD 1,000,000

100 Cash

Holcim Management Services (China) Ltd.

Other related party


Management and technical service fee

Based on agreement

5,903,671 100

Cash


Affiliated company

Selling products

Selling cement

Based on agreement

9,800,322 100

Cash

Huangshi Jiuhe Trading Co., Ltd.

Affiliated company Selling

products Selling clinker

Based on agreement

54,849,820 100

Cash

(II) Related Transactions caused by assets acquisition or selling

1. Events that had been disclosed in extraordinary announcements but had further progress or changes

On March 21, 2012, the Company signed an agreement with Yidu Fangde Investment Co., Ltd., acquiring 30% equity in Huaxin Cement (Yichang) Ltd. from Yidu Fangde.

On March 21, 2012, the Company signed an agreement with Huangshi Yiruida Investment Co., Ltd. acquiring 20% equity in Huaxin Cement (Yangxin) Ltd. from Yiruida.


The above transactions were completed during the reporting period.

(III) Related Claims and Debts

1. Events that were not disclosed in extraordinary announcements

Unit: Yuan

Related party

Relationship

Provide capital to the related party Related party provides capital to the Company

Period beginning

Actual amount

Outstanding Period beginning

Actual amount

Outstanding

Huaxin Group Ltd.

Equity holding shareholder

500,000 500,000

Tibet Gaoxin Building Materials Group Ltd.

Affiliated company

14,525,518 -14,525,518 0 0 935,451 935,451

Huangshi Yiruida Investment Ltd.

Other related party

21,566,521 -21,566,521 0

Huangshi Jiuhe Trading Co., Ltd.

Affiliated company

0 2,040,806 2,040,806

Enping Success Eagle Building Materials Co., Ltd.

Affiliated company

0 13,533,000 13,533,000

Total 14,525,518 -992,518 13,533,000 22,066,521 -18,590,264 3,476,257

VII. Major Contracts and Implementation

(I) Trust, contract or leasing.

√ Not applicable

(II) Guarantee

Unit: Yuan


Guarantee provided by the Company (excluding guarantee for its subsidiaries)

Total guarantee amount during the reporting period (excluding guarantee for subsidiaries)

-8,000,000

Guarantee amount left at the reporting period end (A) (excluding guarantee for subsidiaries)

0

Guarantee provided by the Company for its controlling subsidiaries

Guarantee amount for subsidiaries occurred during the reporting period

-557,617,888

Guarantee amount for subsidiaries left at the reporting period end (B)

2,424,659,673

Total guarantee amount (including guarantee for its subsidiaries)

Total guarantee amount (A+B) 2,424,659,673

% in net assets of the Company 31

Including:

Guarantee amount provided to the shareholders, actual controller and its related parties (C)

0

Debt guarantee amount provided directly or indirectly to subjects whose debt ratio is over 70% (D)

1,597,302,802

Guarantee amount exceeded 50% of the net assets (E) 0

Total guarantee amount of the above three (C+D+E) 1,597,302,802

(III) There was no other significant contract during the reporting period.

VIII Execution of Commitments

√ Not applicable

IX Appointment of Certified Public Accountants

Unit: Yuan

Change of CPA： No

Original Current

Name of domestic CPA PricewaterhouseCoopers Zhong Tian CPAs Limited Company

PricewaterhouseCoopers Zhong Tian CPAs Limited Company

Payment of domestic CPA 3,400,000 3,850,000

Age of domestic CPA 7 8


Name Payment

External Auditor for Internal Control


480,000

X. The Company, its Directors, Supervisors, Senior Management, shareholders and actual controller have not been queried, penalized, criticized through issuance of notifications by CSRC, or reproached publicly by the Shanghai Stock Exchange during the reporting period.

XI. Other Major Events

During the reporting period, there were no other major events.


Chapter 6 Changes in Share Capital and Shareholders

I. Changes in Capital Structure

(I) Changes in the Share Capital

1. Changes in the Share Capital

Unit: Share

Before the change Change during the period +/- After the change

Shares (%) Issue

amountBonus issue

Capital reserves to share

Others Sub-total Shares %

I. Shares subject to conditional sales

128,099,928 13.70 -77,011,892 -77,011,892 51,088,036 5.46

1.State-owned shares

2. Shares held by State legal person

3. Shares held by other domestic investors

77,011,892 8.24 -77,011,892 -77,011,892 0 0

Including: Shares held by domestic legal persons

77,011,892 8.24 -77,011,892 -77,011,892 0 0

Shares held by domestic natural persons

4. Shares held by foreign investors

51,088,036 5.46 51,088,036 5.46

Including: Shares held by foreign legal persons

51,088,036 5.46 51,088,036 5.46

Shares held by foreign natural persons

II. Shares not subject to conditional sales

807,200,000 86.30 77,011,892 77,011,892 884,211,892 94.54

1.RMB ordinary shares

479,200,000 51.23 77,011,892 77,011,892 556,211,892 59.47

2.Domestic 328,000,000 35.07 328,000,000 35.07


listed foreign investment shares

3. Overseas listed foreign investment shares

4. Others

III. Total 935,299,928 100 935,299,928 100

(II) Changes of Shares subject to Conditional Sales

Unit: Share

Shareholder

Amount of shares

subject to conditional

sales at year beginning

Shares releasing

from conditional sales this

year

Increased shares

subject to conditional sales this

year

Shares subject to conditional

sales at year end

Reasons for the conditional sales

Date for releasing

from conditional

sales

Holchin B.V. 51,088,036 51,088,036

Subscribing shares from the private placement of the Company

Nov 8, 2014

Ningbo Qingchun Investment Co., Ltd.

28,593,718 28,593,718 -


Nov 14, 2012

Jiangsu Winfast Investment Holding Group Co., Ltd.

10,713,775 10,713,775 -


Nov 14, 2012

Taikang Asset Management Co., Ltd.

10,345,610 10,345,610 -


Nov 14, 2012

Tianjin Shengxi Equity Investment Fund (LP)

8,612,919 8,612,919 -


Nov 14, 2012

Shanxi Trust Co., Ltd.

8,598,857 8,598,857 -


Nov 14, 2012

Cinda Securities

Co., Ltd. 8,600,000 8,600,000 -


Nov 14, 2012

Guohua Life

Insurance

Co., Ltd.

1,547,013 1,547,013 -


Nov 14, 2012

Total 128,099,928 77,011,892 51,088,036 / /

II. Securities Issuance and Listing

(I) Securities Issuance in the Last Three Years


Unit: share in RMB

Type of the share or its derivative securities

Issuing date Issuing price Issuing amount Listing date Approved listing amount

A share Nov 8, 2011 14.01 51,088,036 Nov 8, 2014

A share Nov 8, 2011 14.01 77,011,892 Nov 14, 2012 77,011,892

Corporate bonds 2012 (phase 1)

May 17, 2012 100 20,000,000 June 7, 2012 20,000,000

Corporate bonds 2012 (phase 2)

November 9, 2012

100 11,000,000 December 21,

2012 11,000,000

Corporate bonds 2012 (Phase I) had two types (5-year and 7-year). The issuance amount of the 5-year bonds was 1 billion Yuan with the coupon rate of 5.35%; the issuance amount of the 7-year bonds was 1 billion Yuan with the coupon rate of 5.65%.

Corporate bonds 2012 (Phase II) was 7-year bonds, the issuance amount was 1.1 billion Yuan with the coupon rate of 5.90%.

(II) During the reporting period, there is no change of total shares and share structure of the Company caused by bonus share or allotment.

(III) There are no staff shares during the reporting period.

III General Information of Shareholders and Actual Controller

(I) Number of Shareholders and Share Holding

Unit: Share

Total numbers of shareholders at the end of reporting period 44,118

Total numbers of shareholders at the end of the 5 trading days before the disclosure day of the Annual Report 50,372

Top ten shareholders

Names of Shareholders Shareholder

type %

Total Shares hold

Change during the reporting

period

Shares subject to conditional

sales

Mortgage or frozen

Holchin B.V. Foreign corporation

39.88 373,010,636 51,088,036 nil

State-owned Shares (held by Huaxin Group Co., Ltd.)

State 13.74 128,501,296

nil

GAOLING FUND, L.P. Unknown

5.50 51,449,782 37,160

nil


HOLPAC LIMITED Unknown

1.99 18,612,430 2,171,094

nil

Huaxin Group Co., Ltd. State Corporation

1.87 17,452,464 nil

ABERDEEN GLOBAL-CHINESE EQUITY FUND

UBS AG

Unknown

1.40 13,050,775 2,877,901

nil

BOSERA Value Growth Securities Investment Fund

Unknown 1.20 11,227,279 11,227,279

nil

Ningbo Qingchun Investment Co., Ltd.

Unknown 1.09 10,200,000 -18,393,718

nil

Shanxi Trust Co., Ltd. Unknown

0.91 8,540,000 58,857

nil

ICBC - The Southern Blue Growth Securities Investment Fund

Unknown 0.83 7,800,000 7,800,000

nil

Top ten holders of shares not subject to conditional sales

Names of Shareholders Names of Shareholders

Names of Shareholders

Holchin B.V.

150,400,000 RMB ordinary shares

171,522,600Domestic listed foreign

investment shares

State-owned Shares (held by Huaxin Group Co., Ltd.) 128,501,296 RMB ordinary shares

GAOLING FUND, L.P. 51,449,782Domestic listed foreign

investment shares

HOLPAC LIMITED 18,612,430Domestic listed foreign

investment sharesRMB

Huaxin Group Co., Ltd. 17,452,464 RMB ordinary sharesDome

in

ABERDEEN GLOBAL-CHINESE EQUITY FUND

UBS AG 13,050,775

Domestic listed foreign investment shares

RMB

BOSERA Value Growth Securities Investment Fund 11,227,279 RMB ordinary shares

Ningbo Qingchun Investment Co., Ltd. 10,200,000 RMB ordinary shares

Shanxi Trust Co., Ltd. 8,540,000 RMB ordinary shares

ICBC - The Southern Blue Growth Securities Investment Fund 7,800,000 RMB ordinary shares

Remarks on relationship or concerted actions of the above shareholders

1. Holpac Limited is the party act in concert with Holchin B.V.

2. Huaxin Group Co., Ltd. held state shares on behalf of the State. 3. It is unknown to the Company whether there is any relationship among the shareholders or any concerted persons referred in the “Administrative Measures of Disclosing Changes in Shareholding for Listed Companies”.


Top ten holders of shares subject to conditional sales

Unit: Share

No.

Names of Shareholders Number of shares

Trading of shares

ConditionsTradable Time

Increment of tradable shares

1 Holchin B.V. 51,088,036 Nov 8, 2014 51,088,036

IV. General Information of the Largest Shareholder and Its Actual Controller

(I) Largest Shareholder

1. Corporation

Unit: Euro

Name Registered

capital Date of

incorporation Business range

Holchin B.V.

100,000 Jun 16, 1998

Setting up companies and other enterprises; acquiring, administrating, monitoring and transferring equity and other rights and interests of corporations, companies or enterprises.

(II) Actual Controller

1. Corporation

Unit: CHF

Name Registered

capital Date of

incorporation Business range

Holcim Ltd.

654,172,752 July 26, 1930 Manufacture and sales of Cement, Aggregate (gravel and sand) and RMX


2. Ownership and Controlling Relationship between the Company and the Controller

Holcim Ltd. Switzerland

100% 100%

Holderfin B.V.

the Netherlands

Holpac Limited

The Bermuda

100%

Holchin B.V.

the Netherlands 1.99%

39.88%


V. Other Corporation Shareholders Holding over 10% Shares

Unit: Yuan

Name Legal Representative

Registered capital

Date of incorporation

Registered Number of the Representative Business License

Business range

Huaxin Group Co., Ltd.

Mr. Liu Fengshan

340,000,000Nov 14, 1996

17843892—3 Manufacture and sales of cement product, parts of machines, development of real estate, commerce, service, etc.


Chapter 7 Directors, Supervisors and Senior Management I. Shareholding and Remuneration Information (I) Shareholding and Remuneration Information of Directors, Supervisors and Senior Management

Unit: Share

Name Position Gender Age Starting Ending

Shares held at

year begin

Shares held at

year endchange

Reasonfor

change

Payment from the Company(k Yuan)

before tax

Remuneration/ allowance

from shareholder company or other related

Company Xu Yongmo Chairman M 56 Apr 20, 2012 Apr 20, 2015 445IanThackwray Vice Chairman M 54 Apr 20, 2012 Apr 20, 2015 165Li Yeqing Director/CEO M 48 Apr 20, 2012 Apr 20, 2015 108,084 108,084 3299.8Liu Fengshan Director/VP M 47 Apr 20, 2012 Apr 20, 2015 500Roland Koehler

Director M 59 Apr 20, 2012 Apr 20, 2015 165

Paul Thaler Director M 46 Apr 20, 2012 Apr 20, 2015 165

Lu Mai Independent Director

M 65 Apr 20, 2012 Apr 20, 2015 165

Huang Jinhui Independent Director

M 48 Apr 20, 2012 Apr 20, 2015 165

Wang Qi Independent Director

M 55 Apr 20, 2012 Apr 20, 2015 135

Zhou Jiaming Chairman of the Board of Supervisors

M 58 Apr 20, 2012 Apr 20, 2015 61,800 71,800 10,000Market purchasing

1881.2

Liu Yunxia Supervisor F 44 Apr 20, 2012 Apr 20, 2015 610.4Fu Guohua Supervisor M 49 Apr 20, 2012 Apr 20, 2015 27 184.8Yu Yousheng Supervisor M 49 Apr 20, 2012 Apr 20, 2015 227.9Zhanglin Supervisor M 40 Apr 20, 2012 Apr 20, 2015 256.6Ji Changhua VP M 58 Apr 20, 2012 Apr 20, 2015 70,320 70,320 1840.6

Wang Ximing VP/Secretary to the Board

M 53 Apr 20, 2012 Apr 20, 2015 65,000 65,000 1595.4

Peng Qingyu VP M 52 Apr 20, 2012 Apr 20, 2015 71,150 71,150 1937.5Kong Lingling VP F 48 Apr 20, 2012 Apr 20, 2015 62,520 62,520 1897.2Ke Youliang VP M 47 Apr 20, 2012 Apr 20, 2015 42,200 42,200 1428.6


Liu Xiaofeng VP M 49 Apr 20, 2012 Apr 20, 2015 1386.6Ian Riley VP M 54 Apr 20, 2012 Apr 20, 2015 Hu Zhenwu VP M 44 Apr 20, 2012 Apr 20, 2015 1537.3Chen Musen Chairman M 63 Apr 3, 2009 Apr 3, 2012 126,820 126,820 1899.8Winson Wong Supervisor M 51 Apr 3, 2009 Apr 3, 2012 6Hu Limin Supervisor M 50 Apr 3, 2009 Apr 3, 2012 407.5Yang Hongbing Supervisor M 40 Apr 3, 2009 Apr 3, 2012 999.2

Total / / / / / 607,894 617,894 10,000 / 23,143.6 184.8


1. Mr. Xu Yongmo, born in April 1956, Master of Engineering, Doctor and Post Doctorate who had studied in UK; Post Doctorate researcher of London University. 1982 ~ 1983, assistant engineer of Plasterboard Subsidiary of Beijing New Building Material Plant (BNBM Group); 1986 ~ 1988, the principal of RMX laboratory of Concrete and Housing Building Materials Institute of China Building Materials Academy; 1988~1991, vice director of Technical Information Centre of China Building Materials Academy; 1998 ~ 2002, VP of China Building Materials Academy; from April 2002 till now, VP of China Building Materials Federation; from June 2006 till now, president of China Concrete & Cement Product Association; from March 2007 till now, president of China Construction Units Association; from October 2007 till now, VP of China Cement Association; from December 2011, president of China Silicate Association. He became Independent Director of the Company from April 2009. He became the Chairman of the Company from April 2012. 2. Mr. Ian Thackwray, born in February 1958, British. Ian Thackwray holds an MA (Hons) in Chemistry from Oxford University and is also a chartered accountant. After his studies, he joined Price Waterhouse and handled major corporate accounts in Europe. In 1985, he started a career with Dow Corning Corporation, serving in various management roles in Europe, North America and particularly in Asia. From 2004 to 2006, he served as Dow Corning's Asian/Pacific President based out of Shanghai. Between 2006 and 2010 he was CEO of Holcim Philippines. Since the beginning of 2010, he has been a member of the Executive Committee. His area of responsibility spans the companies in East Asia (including China), Philippines & Oceania; and Holcim Trading. He became Director of the Company from April 2010. He became the Vice Chairman of the Company from June 2012. 3. Mr. Li Yeqing, born in February 1964, doctor, senior engineer. He currently takes the positions of CEO, Secretary of the Party committee of both the Company and Huaxin Group Co., Ltd.. From July 1984, Mr. Li Yeqing successively graduated from Silicate Major of Wuhan Building Material Institute as Bachelor of Engineering, Industrial Management Major of Wuhan University of Technology as Master of Engineering; and Management Science and Engineering Major of Huazhong University of Science and Technology as Doctor of Business Administration. July 1984 ~ October 1987, Wuhan University of Technology Portland Engineering Department, teacher, League Committee vice secretary. He entered Huaxin Cement Plant (former name of the Company) in November 1987, taking position of quality control engineer of Central Lab, vice manager of Limestone Quarry, vice director of Extension Office and manager of production technology, and became vice manager of Huaxin Cement Plant in January 1993, he became Deputy General Manager of the Company at June 1994, General Manager of the Company in December 1999 (he was renamed as CEO of the Company since March 2004). He took the position of Director of the Company from April 1994. He concurrently took the positions of Vice Chairman of China Building Materials Federation since March 2009 and Vice Chairman of China Cement Association since May 2000. 4. Mr. Liu Fengshan, born in November 1965, master degree of public relations from Singapore Nanyang Technological University. Mr. Liu graduated from Kunming Engineering College in July 1987 and got bachelor degree of engineering. From 1987 to August 1998, he took the position of technician of Chimashan Quarry, workshop manager, deputy quarry manager, quarry manager and secretary of the Party Committee of Daye Non-ferrous Metal Company successively. From August 1998 to August 1999, he took the positions of quarry manager of Tonglushan Quarry and secretary of Party Committee


of Daye Non-ferrous Metal Company. From August 1999 to January 2002, he was deputy secretary of Party Committee and secretary of Discipline Inspection Committee of Daye Non-ferrous Metal Company. From January 2002 to April 2004, he took the position of deputy secretary of Discipline Inspection Commission of Huangshi City. From April 2004 to October 2006, he was the deputy secretary of Daye Municipal Party Committee and Mayor of Daye. From October 2006 to November 2006, he was deputy secretary general of Huangshi Municipal Party Committee. From November 2006 to September 2011, he took the positions of director general and secretary of Leading Party Group of Bureau of Civil Affairs of Huangshi City. Since September 2011, he took the positions of Chairman and General Manager of Huaxin Group Co., Ltd., as well as deputy secretary Party Committee of both Huaxin Group Co., Ltd. and Huaxin Cement Co., Ltd.. He became Director of the Company from April 2012. He became VP of the Company from June 2012. 5. Mr. Roland Koehler, born in December 1953, Swiss. He is a graduate in business administration from the University of Zurich, joined building materials group Hunziker (Switzerland) in 1988 as Head of Finance and Administration and transferred to Holcim as a management consultant in 1994. From 1995 to 1998, he was Head of Corporate Controlling and from 1999 to end 2001 Head of Business Risk Management. Since 2002, he headed Corporate Strategy & Risk Management. Effective January 1, 2005 Roland Koehler was promoted to Corporate Functional Manager responsible for Corporate Strategy & Risk Management. Roland Koehler became a member of the Executive Committee of Holcim Ltd, effective March 15, 2010. He is responsible for business in Europe from January 2012. He became Director of the Company from December 2010. 6. Mr. Paul Thaler, born in June 1966, lawyer, Swiss. He is Master of Law and Doctor of Law of Zurich University and research scholar of Beijing University. He was a foreign lawyer of a Law Firm in Beijing from 1997 to 1998; from 1995 to 2006 he has been associate and partner of the Swiss law firm Wenger & Vieli and from 2007 Managing Partner of Wenfei Attorneys-at-law Ltd. and responsible for its offices in Beijing and Shanghai. He became Director of the Company from May 2001. 7. Mr. Lu Mai, born in March 1947, MPA of Harvard Kennedy School, Bachelor of Economics Major of Beijing Correspondence Economics College. In 1968, Mr. Lu Mai started working. Since 1986, he has taken many roles successively, such as director of Market Research Office of Development Research Institution of Rural Development Research Centre of the State Council, the vice director of Connection Office of Rural Development Research Centre of the State Council, vice chief and chief of Rural Reform Pilot Site Office, member of Economic Mechanism Reform Office and Circulation Mechanism Reform Team of the State Council. He once took the positions of vice researcher of International Development Research Institute of Harvard University and vice researcher of the Government Department and top researcher of China Business Centre of Hongkong Polytechnic University. He joined Development Research Centre of the State Council and took the position of researcher of Development Research Centre of the State Council. He once took the position of deputy director of International Cooperation Bureau. Since 1998, he took the positions of deputy secretary and secretary successively of China Development Research Foundation. He became Independent Director of the Company from April 2009. 8. Mr. Huang Jinhui, born in October 1964, doctor of University of Management and Technology (UMT). He is a part-time professor for BIBT Economic Management


Collage. Mr. Huang is a CPA with the qualification for practicing the securities’ and futures’ businesses, a CPV and a CTA, Judicial Appraiser, Senior Accountant. At present, Huang Jinhui takes more than a dozen of social roles, such as: executive member of All China Federation of Industry & Commerce (ACFIC), chief supervisor of the Chamber of Commerce directly under ACFIC, vice chairman of China Private Enterprises Confederation, director of Chinese Institute of Certified Public Accountants (CICPA). Mr. Huang had worked in the Ministry of Foreign Trade and Economic Cooperation, China National Complete Plant Import & Export Corporation (Group) and its overseas branch from Sept. 1983 to Dec. 1993. He has worked, studied and researched in over 40 Asian, European, American and African countries. He joined Reanda Certified Public Accountants in January 1994 and successively held the role of department manager, vice-chief accountant. He is now the Chairman of Reanda CPA Firm, Chief Accountant and Managing Partner. He became Independent Director of the Company from April 2009. 9. Mr. Wang Qi, born in February 1957, is Researcher, Director, and Chief Scientist of Institute of Solid Waste Pollution Control Technology of Chinese Academy of Environmental Sciences. He is also a Doctoral supervisor. In November 1982, Mr. Wang Qi obtained a Bachelor's Degree in Environmental Engineering from the School of Civil and Environmental Engineering of Tsinghua University. From November 1982 to November 1990, he started his career as a lecturer in Department of Chemical Engineering and Director of Environmental Engineering Laboratory, Beijing Institute of Light Industry. From November 1990 to now, Mr. Wang Qi was at the Chinese Academy of Environmental Sciences. During his career, he has also served as the head of Solid Waste Pollution Prevention Office of Sino-Japanese Friendship Center for Environmental Protection, Vice-Chairman of Medical Treatment and Environmental Protection Committee under the jurisdiction of the Center for the International Promotion of Exchange of Healthcare, member of Environmental Sanitation of Committee of Public Utility Sectors of the Ministry of Construction. In addition, he was also appointed a member of expert group of Propellant Technology of the General Armament Department, a member of Coordinating Expert Panel for the China’s Implementation of the Stockholm Convention, a member of state-level Environmental Emergency Expert Group. Finally, Mr. Wang Qi is a part-time professor and Doctoral supervisor in Beijing Normal University and Beijing University of Science and Technology. He became Independent Director of the Company from April 2012. 10. Mr. Zhou Jiaming, born in May 1954, University Graduate, Engineer, Senior Economist. Mr. Zhou Jiaming entered Huaxin Cement Plant in November 1971, he used to take position of vice director and director of Central Lab and was DGM of the Company from April 1997 to February 2000. From February 2000 he has been Secretary of Discipline Committee, Chairman of Labor Union and Chairman of Supervisory Committee. 11. Ms. Liu Yunxia, born in September 1968, MBA, Senior Engineer. She entered the Company in July 1989, she use to be a teacher of the Trade School of the Company, engineer of the Engineering Department, section chief, assistant manager, vice manager and manager of the Planning and Development Department. She was now the Head of the Development Department of the Company and the General Manager of Tajikistan Yavon Company. She took the position of Supervisor from April 2009. 12. Mr. Fu Guohua, born in July 1963, Bachelor, Statistician, China Commerce Operating


Manager (CCOM). He entered Huaxin Cement Plant (former name of the Company) in July 1983, he successively took the positions of comprehensive statistician and investment planner of the Planning Department, Chief of Assets Management Division of the Planning and Development Department. He joined Huaxin Group Co., Ltd. in January 2001 and successively took the positions of vice director and director of the General Office, Secretary of the General Party Branch. He once concurrently took the position of Manager of the Huaxin Group Real Estate Development Co., Ltd.. He took the position of Supervisor from April 2012. 13. Mr. Yu Yousheng, born in July 1963, Bachelor, Political Engineer. He entered the Company in October 1989, served as secretary to the Party Committee Office, secretary to the Company Office, Chief of Policy Research Office; assistant administration manager, administration manager, vice Party secretary, Chiarman of labor union of Xiangfan Company; vice director of Party Office, director of Labor Union Office, manager of corporate social responsibility team. Currently, he is the deputy secretary to the Displine Committee, vice director of Supervisory Office, chairman of Labor Union of the headquarter. He took the position of Supervisor from April 2012. 14, Mr. Zhang Lin, born in September 1972, MBA, CPA. He graduated from Hangzhou Business School, Zhejiang Business Administration University, majoring in accounting in June 1995; graduated from Huazhong University of Science and Technology, majoring in Business Administration in December 2002. He joined the company in July 1995, served as the Company's accountant, Chief of Plan and Finance Department of Xiantao Company and Yichang, assistant director of Financial Center and Assistant General Manager of Zhaotong Company, vice manager of ERP Department. He is currently the Chief of the Internal Control Department of the Company. He took the position of Supervisor from April 2012. 15. Mr. Ji Changhua, born in November 1954, Bachelor of Law, Senior Political Engineer. Mr. Ji Changhua entered Huaxin Cement Plant (former name of the Company) at February 1972 and took position of vice secretary, vice director, director and secretary of Mechanic Workshop; he became Deputy General Manager of Huaxin Group Co., Ltd. from 1997. He was the Director of the Company from Feb 2001 to Apr 2012. He became the Vice Secretary of Party Committee of the Company from February 2000. He became Vice Present of the Company from April 2009. 16. Mr. Wang Ximing, born in October 1959, MBA, Senior Economist. He graduated from Chemistry Major of Wuhan Steel Institute (Wuhan University of Science) and got Bachelor of Science in February 1982; he graduated from Business Administration Major of Renming University of China and got MBA degree in 1993. Mr. Wang Ximing entered Huaxin Cement Plant in 1982 and used to be teacher in Huaxin Technique School, vice secretary of Youth League Committee of Huaxin Cement Co., Ltd., cadre of Organization Department of CPC Huangshi Committee, Vice manager of Labor and Personnel Department of Huaxin Cement Plant, Vice Manager of Planning Department, Vice Manager, Manager of Securities Department of the Company, Secretary to the Board. He took position of DGM and Secretary to the Board of the Company from April 2000. He became Vice Present and Secretary to the Board of the Company from March 2004. 17. Mr. Peng Qingyu, born in June 1960, Senior Economist. He graduated from Western Economics Major of Central China University of Science and got Master degree of Economics at April 2004. Mr. Peng Qingyu entered Huaxin Cement Plant at January


1979 and used to be Chief in Sales Department, Vice Manager and Manager of Huaxin Nantong Trading Company, Director of Shanghai Office, Manager of Sales Department of the Company and vice manager of Sales Company. He took position of DGM of the Company and manager of Sales Company from April 2000. He became Vice Present of the Company from March 2004. 18. Ms. Kong Lingling, born in June 1964, Master of Economics, Senior Economist. She graduated from Wuhan University of Technology and got Bachelor degree of Science in 1985; and graduated from Enterprise Administration Major of Fudan University and got Master degree of Economic in 1992. Ms. Kong Lingling entered Huaxin Cement Plant at July 1985 and used to be engineer in Research Firm of Huaxin Cement Plant, vice secretary of Youth League Committee, Vice Manager of Financial Department, Vice Manager of Planning Department and Manager of Financial Department. She became DGM of the Company from April 2000 and VP of the Company from March 2004. 19. Mr. Ke Youliang, born in April 1965, Doctor of Management, Senior Economist. He graduated from Industry and Corporate Administration major of Huangshi University of Technology in July 1985, and graduated from Industry Economy Administration major of Zhongnan University of Finance and Economics in 1992, graduated from Industry Economy Administration major of Wuhan University of Science and got Master Degree of economy, graduated from Management Science and Engineering of Wuhan University of Science and got Doctor Degree of Management in 2007. Mr. Ke Youliang entered Huaxin Cement Plant in 1985 and used to be assistant manager of Investment Department, manager of Engineering Administration Department, vice manager of Comprehensive Administration Department of Engineering Division and manager of Planning and Development Department. He was appointed Assistant GM and Manager of Planning and Development Department at November 2001 and DGM of the Company from April 2003. He became VP of the Company from March 2004. 20. Mr. Liu Xiaofeng, born in September 1963, MBA. He graduated from Wuhan University of Technology with a Bachelor Degree in Engineering in 1985, and graduated from Asia Institute of Technology with a MBA degree in May 2001. From Aug 1985 to Feb 1993, he worked in China Building Materials Academy as Assistant Engineer, Engineer, and Deputy Director of Automation; from Feb 1993 to May 2001, he worked in Saraburi Cement Co., Ltd., Chaipinyo Co., Ltd., and Myanmar Asia Cement, as Assistant Managing Director, Technical Supervisor, Director of Strategic Development and Business Department, Senior Project Manager, and Production Manager; from May 2001 to Oct 2003, he worked in Cemex as Director of Engineering in Cemex Thailand, member of Culture Change Steering Committee, Senior Assistant President in Cemex Asia; from Oct 2003 to Feb 2011, he worked as the Chief Representative in Cemex Beijing Office; from Sep 2009 to Feb 2011, he was appointed the CEO of CEMEX RMX China and Chairman of the CEMEX Tianjin and CEMEX Qingdao. He became VP of the Company from March 2011. 21. Mr. Ian Riley, born in March 1958, British, Engineering Master from Cambridge University, England. From December 1998 to May 2000, he was appointed Managing Director in Tenbridge Ltd. (Shanghai), mainly responsible for project planning and business strategy. From May 2000 to February 2003, he was appointed as CEO of Asialink Technologies (Shanghai). From April 2003-September 2006, he was appointed as General Manager Consulting in SIP (Shanghai), mainly responsible for a range of foreign investment projects in various industries. From September 2006 to June 2008,


he was appointed CIO of Huaxin Cement, responsible for implementing SAP ERP and related projects. From July 2008 to Feb 2011, he was appointed AVP in Huaxin Cement, responsible for Holcim activities in China and a member of the Huaxin executive team responsible for manufacturing business and CSR. He became VP of the Company from March 2011. 22. Mr. Hu Zhenwu, born in September 1968, Master and Senior Engineer. Mr. Hu Zhenwu majored in silicate engineering in Wuhan Building Material Institute (now renamed as Wuhan University of Technology), where he obtained a Bachelor Degree in Engineering in 1991; and later Master Degree in Materials Engineering from Wuhan University of Technology in 2002. Mr. Hu Zhenwu joined Huaxin Cement Plant (former name of the Company) in 1991, taking the positions of Assistant Processing Engineer, Processing Engineer, Head of Technical Department in Engineering Department, and head of Engineering Department, Deputy Director of Technical Center; he was appointed as assistant to the CEO in Sep 2006. He became VP of the Company from March 2011. 23. Mr. Chen Musen, born in October 1949, university graduate, Senior Economist. Mr. Chen Musen was the Chairman of the Company from November 1999 to April 2012. From November 1999 to September 2011, Mr. Chen Musen is also the Chairman of Huaxin Group Co., Ltd., one shareholder of the Company. 24. Mr. Winson Wong, born in September 1961, Master of Business Administration of York University (Toronto, Canada), Certified Public Accountant (CPA) of USA, Certified General Accountant (CGA) of Canada. Chief Financial Officer of Shanghai Shared Data Network Co. Ltd. (1994 to 1997). Chief Financial Officer of Suzhou Golden Cat Cement Co. Ltd. (1998 to 2001). Regional Controller of Holcim Group Support (Zurich) Ltd from 2002 to 2006. Chief Financial Officer of Holcim Management Services (China) Ltd (2007 to now). He was supervisor of the Company from April 2006 to April 2012. 25. Mr. Hu Limin, born in May 1962, Master of Engineer, Senior Engineer. He graduated from Hubei Building Materials Technical School with cement technics background in July 1982 and Wuhan University of Technology as a Master of Materials Science in December, 2001. He entered in Huaxin at July 1982, first as a technician in Central Laboratory, and then assistant to Lab Manager, Deputy Lab Manager, Lab Manager, Quality Department Manager, Quality Director, manager of the Planning and Development, Executive Manager of Huaxin Concrete (Wuhan) Company, General Manager of Huaxin Cement (Wuhan) Company, Deputy Manager of Technical Center and manager of Product Devolopment department, DGM of RMX & AGG Business Department, Deputy Manager of Technical Center and Quality Director, and now is Yunan Regional Manager in Southwest Cement BU and Executive Manager of Zhaotong company. He was supervisor of the Company from April 2009 to April 2012. 26. Mr. Yang Hongbing, born in September 1972, University Graduate, Engineer. When graduated as a Forging major from School of Mechanics of Huazhong University of Technology in June 1995, he joined in Huaxin as a technician in Mechanics and Power department, assistant engineer and enginner in Production and Technical department, Mechanics manager and deputy chief engineer of Dry Processing plant, Equipment and Technical department manager, General manager assistant, deputy general manager, executive manager of Huaxin Yichang company, Regional Production manager (Western), and now he works the as General Manager of Hubei Southwest Cement BU. He was supervisor of the Company from April 2009 to April 2012.


II. Positions of Director, Supervisor and Senior Management (I) Position at Shareholder Company

Name Name of shareholder Company

Position Starting Ending

IanThackwray HolchinB.V. Director June 30, 2010 Li Yeqing Huaxin Group Co., Ltd. Party Secretary Sep 7, 2001 Liu Fengshan Huaxin Group Co., Ltd. Chairman/GM Sep 21, 2011 Ji Changhua Huaxin Group Co., Ltd. DGM Apr 2, 1997

Zhou Jiaming Huaxin Group Co., Ltd.

Chairman of Labour Union/ Secretary to the Disciplinary Committee

Feb 22, 2000

(II) Positions at Other Companies/Units Directors Mr. Xu Yongmo, Mr. Ian Thackwray, Mr. Roland Kohler and Mr. Paul Thaler, Independent Directors Mr. Lu Mai, Mr. Huang Jinhui and Mr. Wang Qi have their positions respectively at other companies/units (please see the above career experiences of Directors). III. Remuneration for Directors, Supervisors and Senior Management

Decision procedures of remuneration for Directors, Supervisors and Senior Management

Remunerations for Senior Management shall be proposed by the Remuneration and Assessment Committee of the Board, discussed and decided by the Board of Directors; annual remuneration for Directors and Supervisors shall be approved by the Shareholders' General Meeting.

Basis for deciding remunerations for Directors, Supervisors and Senior Management

Based on the allowances for Directors and Supervisors, basic salary and Short-term Incentives for Senior Management approved by the Board Meeting and Shareholders’ General Meeting, combined with the operating performance actually fulfilled by the Company, the Remuneration and Assessment Committee formulated the allowances for Directors and Supervisors, basic salary and Short-term Incentives for Senior Management as well as the increment ratio, and then submitted them to the Board for approval. Proposal in Respect of Adjusting Remunerations of Directors and Supervisors reviewed and adopted by the Thirty Fifth Meeting of the Sixth Board of Directors convened on March 21, 2012 and the Annual Shareholders’ General Meeting 2011 of the Company convened on April 20, 2012 adjusted the remuneration for the Directors and Supervisors of the Company. Proposal in Respect of 2011 Short-term Incentives for Senior Management and Proposal in Respect of 2012 KPIs for Senior Management of the Company were reviewed and adopted by the Thirty Fifth Meeting of the Sixth Board of Directors convened on March 21, 2012.


The above-mentioned proposals clarified 2011 short term incentives, 2012 basic salaries and KPIs for the Senior Management. The above-mentioned proposals also set the remuneration for the Directors, Supervisors and Senior Management of the Company in a scientific and objective way.

Remuneration payable of Directors, Supervisors and Senior Management

At the end of the reporting period, remuneration payable of Director, Supervisor and Senior Management is 19,711.9 thousand Yuan.

Actual Payment of Remuneration of Directors, Supervisors and Senior Management

At the end of the reporting period, actual payment of remuneration of Directors, Supervisors and Senior Management is 19,831.1 thousand Yuan (Short-term incentive 2011 for Senior Management of the Company has been distributed during the reporting period).

IV. Changes of Directors, Supervisor or Senior Management

Name Position Change Reason Liu Fengshan Director/VP Appointed Change of terms Wang Qi Independent Director Appointed Change of terms Fu Guohua Supervisor Appointed Change of terms Yu Yousheng Supervisor Appointed Change of terms Zhang Lin Supervisor Appointed Change of terms Chen Musen Chairman Leave Change of terms Ji Changhua Director Leave Change of terms Winson Wong Supervisor Leave Change of termsHu Limin Supervisor Leave Change of terms Yang Hongbin Supervisor Leave Change of terms

V. Core Technical Teams or Key Technical Staff of the Company During the reporting period, there is no big change in core technical team or key technical staff of the Company. VI. Employees of the Parent Company and Subsidiaries (I) Employees Employees at Parent Company 1,369Employees at major subsidiaries 11,535Total Employees 12,904Pension Employees 1,496

Major Structure Type Number

Production staff 8,563Sales staff 886Technique staff 868Financial staff 473Administrative staff 1,955Others 159

Total 12,904


Education Education level Number

Master Graduate and above 145University Graduate 1,489Institute Graduate 2,842Senior High / Technique School Graduate 6,397Others 2,031

Total 12,904 (II) Remuneration Policy During the reporting period, the Company further improved its payroll management approach, aiming at enhancing staff skills and quality, enhaning technical level, and improving labor productivity. The revised "Staff Remuneration Management Approach" increased the proportion of short-term incentives and long-term incentives of employees, thus encouraging them to improve their performance, and have the return they deserve. The reform of annual salary adjustment approach is mainly focusing on the grassroots positions and outstanding employees; the average increase of emplyees whose salary has been adjusted was 16.44%. (III) Training Plan Due to the rapid development of the Company, the Company's annual expenses on training venues, training tools and software, as well as training programs was more than 10 million Yuan for the past three years. During the reporting period, the Company completed the construction of corporate training base. Now the Company has a large training room which can accommodate about 150 people, and 6 training rooms which can accommodate about 50 people. Through online learning platform, the Company carried out training courses on management knowledge, management tools, expertise, and English and etc.. The Company also completed the following on-site training programs: cement manufacturing courses, executive management seminars, management tools training of systematically solving problems, PMA training, team building training, training of trainers, training of new investment projects. (IV) Structure Chart


Type

Production,8563, 66%

Administration,1955, 15%

Sales 886, 7%

Technical 868, 7%

Finace473, 4%

Others, 159, 1%

Production Sales Technicals Finance Administration Others

(V) Education Level Chart

财务会计工程技术营销生产其他

Education

Senior High/TechniqueSchool Graduate, 6397,

49%

Institute Graduate, 2842,22%

Middle School andbelow, 2031, 16%

Master Graduate andabove, 145, 1%

University Graduate,1489, 12%


Chapter 8 Corporate Governance I. Company Governance and Insider Information Registration During the reporting period, the Company sorted all the rules and regulations approved and adopted by the Board of Directors. Amendments were made on Information Disclosure Affairs Management Rules, Implementing Rules on the Shareholders’ General Meeting Cumulative Voting System, Insider Information Registration System, Administrative Regulations on Related Party Transactions, Internal Control System and Insider Information Registration System. Corporate governance structure of the Company was in accordance with the requirements of the modern enterprise system and Governance Rules of Listed Companies. In strict compliance with the requirements of the rules and regulations in Company Law, Securities Law, Governance Rules of Listed Companies and Stocks-Listing Rules of SSE, and combined with the actual situation, the Company continuously improved its corporate governance structure and operated regularly. II. Shareholders’ General Meeting

Name Day Name of Proposals Resolution Disclosing Newspaper

Disclosing Date

2012 1st ESGM

Feb 6, 2012

1. Proposal in Respect of Issuing Domestic Corporate Bonds 2. Performance Unit Incentives Plan of Huaxin Cement Co., Ltd.

All approved www.sse.com.cn Feb 7, 2012

ASGM 2011

April 20, 2012

1. Directors’ Report 2011 of the Company 2. Supervisors’ Report 2011 of the Company 3. Final Financial Report 2011 and Financial Budget Report 2012 of the Company 4. Profit Distribution Plan 2011 of the Company 5. Proposal in Respect of Appointing the Accounting Firm 6. Annual Work Report 2011 of Independent Director Mr. Lu Mai 7. Annual Work Report 2011 of Independent Director Mr. Xu Yongmo 8. Annual Work Report 2011 of Independent Director Mr. Huang Jinhui 9. Proposal in Respect of Electing Mr. Li Yeqing as One of the Directors for the Seventh Board of Directors 10. Proposal in Respect of Electing Mr. Liu Fengshan as One of the Directors for the Seventh Board of Directors

All approved www.sse.com.cnApril 21, 2012


11. Proposal in Respect of Electing Mr. Ian Thackwray as One of the Directors for the Seventh Board of Directors 12. Proposal in Respect of Electing Mr. Roland Kohler as One of the Directors for the Seventh Board of Directors 13. Proposal in Respect of Electing Mr. Paul Thaler as One of the Directors for the Seventh Board of Directors 14. Proposal in Respect of Electing Mr. Xu Yongmo as One of the Directors for the Seventh Board of Directors 15. Proposal in Respect of Electing Mr. Lu Mai as One of the Independent Directors for the Seventh Board of Directors 16. Proposal in Respect of Electing Mr. Huang Jinhui as One of the Independent Directors for the Seventh Board of Directors 17. Proposal in Respect of Electing Mr. Wang Qi as One of the Independent Directors for the Seventh Board of Directors18. Proposal in Respect of Electing Mr. Zhou Jiaming as One of the Supervisors for the Seventh Board of Supervisors 19. Proposal in Respect of Electing Ms. Liu Yunxia as One of the Supervisors for the Seventh Board of Supervisors 20. Proposal in Respect of Electing Mr. Fu Guohua as One of the Supervisors for the Seventh Board of Supervisors 21. Proposal in Respect of Amending the “Articles of Association” of the Company 22. Implementing Rules on the Shareholders’ General Meeting Cumulative Voting System of Huaxin Cement Co., Ltd. 23. Proposal in Respect of Providing Guarantees for Credit Business of Subsidiaries 24. Proposal in Respect of Adjusting Remuneration for Directors and Supervisors 25. Proposal in Respect of Major Related Transaction of Acquisition of Equity Interests of Yidu Fangde and Yiruida in Yichang and Yangxin

2012 2nd ESGM

May 15, 2012

Proposal in Respect of Changing the Use of the Raised Funds for Some Projects of the Private Placement

All approved www.sse.com.cnMay 16, 2012


III. Performance of Functions by Directors (I) Directors Present at Board Meetings and Shareholders’ General Meetings

Name Independent

Director or not

Present at BM Present at SGM

Meeting number should attend

Present in person

Present in circular resolution

Present by proxy

Absent

Absent or present by

proxy successively for 2 times or

not

Present at SGM

Xu Yongmo No 12 12 7 No 2 IanThackwray No 12 12 7 No 1 Li Yeqing No 12 12 7 No 2 Liu Fengshan No 9 9 5 No 3 Roland Koehler No 12 8 7 4 No 0 PaulThaler No 12 12 7 No 1 Lu Mai Yes 12 12 7 No 1 Huang Jinhui Yes 12 12 7 No 1 Wang Qi Yes 9 8 5 1 No 1 Chen Musen No 3 3 2 No 1 Ji Changhua No 3 3 2 No 3

Board Meetings convened in 2011 12Including: Meetings on-site 5

Meetings in circular resolution 7Meetings On-site plus circular resolution 0

(II) Objection from Independent Director on Relevant Issues of the Company During the reporting period, Independent Director did not raise any objections on proposals of Board Meetings and other issues. IV. Main Comments and Suggestions from the Special Committees to the Board during the Reporting Period Director (I) Main Comments and Suggestions from the Auditing Committee to the Board during the Reporting Period On March 13, 2012, the Company convened the Auditing Committee Meeting. During the Meeting, the following proposals were reviewed and adopted: (1) Resolution in Respect of Appointing the Accounting Firm and External Auditor for Internal Control; (2) Resolution in Respect of Agreeing to Submit the Draft of Internal Control Assessment Report Issued by the CPA to the Board; (3) Resolution in Respect of Agreeing to Submit the Draft of Auditor’s Report Issued by the CPA to the Board. On August 15, 2012, the Company convened the Auditing Committee Meeting. During the Meeting, the Resolution in Respect of Submitting the Half Year Report to the Board for Reviewing reviewed and adopted.

On December 3, 2012, the Company convened the Auditing Committee Meeting. During the Meeting, audit plan and main issues were reviewed, comments and suggestions were made on the audit of Annual Report 2012.


(II) Main Comments and Suggestions from the Remuneration and Assessment Committee to the Board during the Reporting Period On March 14, 2012, the Company convened the Remuneration and Assessment Committee Meeting. During the Meeting, the following proposals were reviewed and adopted: (1) Proposal in Respect of Adjusting Remunerations of Directors and Supervisors; (2) Proposal in Respect of 2011 Short-term Incentives for Senior Management; (3) Proposal in Respect of 2012 KPIs for Senior Management of the Company. (III) Main Comments and Suggestions from the Nominating Committee to the Board during the Reporting Period On March 12, 2012, the Company convened the Nominating Committee Meeting. During the Meeting, Resolution in Respect of Approving the Candidates for the Seventh Board of Directors was reviewed and adopted. On May 31, 2012, the Company convened the Nominating Committee Meeting. During the Meeting, the following proposals were reviewed and adopted: (1) Resolution in Respect of Approving the Nomination of Mr. Ian Thackwray as Vice Chairman of the Seventh Board of Directors; (2) Resolution in Respect of Approving the Appointment of Mr. Liu Fengshan as Vice President of the Company. V. Risks of the Company Discovered by the Board of Supervisors The Board of Supervisors achieved unanimity on the monitoring issues of the Company. VI. Senior Management Assessment and Incentive Mechanism According to Proposal in Respect of 2011 Salary Adjustment for Senior Management, Proposal in Respect of 2011 Short-term Incentives for Senior Management and Proposal in Respect of 2012 KPIs for Senior Management of the Company adopted by the Board Meeting, the Remuneration and Assessment Committee to the Board assessed the performance of the Senior Management combined with the actual annual operating performance of the Company, submitted it to the Board for approval and then implement it.


Chapter 9 Internal Control

I. Declaration on the Responsibility of Internal Control & Establishment and Improvement of Internal Control System of the Company

Board of Directors of the Company is responsible for the establishment, improvement and effective implementation of the Internal Control System. It accepts supervision by the Board of Supervisors. The objective of the internal control is to ensure the legal compliance of the Company's operation and assets security, as well as to ensure the truthful, complete nature of financial reports and other related information. Thus it will improve our operation efficiency and effectiveness and enhance the achievement of the sustainable development strategy. Due to intrinsic limitations in the internal control, the Board can only provide reasonable assurance to the aforesaid objective.

Based on the requirements in Basic Norms of Enterprises Internal Control and related set of guidelines, the Company focused on important business issues and high-risk areas, maintained the balance among governance structure, department establishment, responsibilities allocation, as well as business processes while taking into account the operational efficiency. The Company’s Internal Control Specification Manual was updated annually and implemented. Annual internal control assessment was also conducted.

To ensure the truthful, complete nature of financial reports and avoiding any significant errors or material omission, the company implemented 55 key control activities. Those controls are divided into categories as entity level, IT and business process controls which include Purchase to Pay, Order to Cash, Book to Report and Hire to Retire. The Internal Control Department supervised the routine operation of these key controls, and the Internal Audit Department conducted audit on the effectiveness of these key controls.

The Company has not found any material weaknesses during the internal control self-assessment. The Annual Internal Control Self-assessment Report was approved by Board of Directors of the Company and was disclosed at the same time as the Annual Report 2012. For detailed information, please log on the website of Shanghai Stock Exchange: www.sse.com.cn.

II. Statement of Internal Control Audit Report

PWC appointed by the Company conducted audit on the effectiveness of internal control focusing on financial reports, and issued an unqualified opinion.

The Annual Internal Control Audit Report was disclosed at the same time as the Annual Report 2012. For detailed information, please log on the website of Shanghai Stock Exchange: www.sse.com.cn.

III. Accountability System for Material Errors of Annual Report Disclosure and the


implementation

Board of Directors of the Company has formulated the Accountability System for Material Errors of Annual Report Disclosure.

During the reporting period, the Company did not have any correction of important account mistakes, supplement of material information omission or amendment of Expected Growth of Operating Results.


Chapter 10 Financial Statements The Annual Consolidated Financial Report 2011 of the Company has been audited by PricewaterhouseCoopers Zhong Tian CPAs Limited Company, which has issued the Audit Report without reserved comments. CPAs Lin Yupeng and Chen Wenfeng signed their names on the Audit Report.

Report of the Auditor

PwC ZT Shen Zi (2013) No.10062

To the Shareholders of Huaxin Cement Co., Ltd.

We have audited the accompanying financial statements of Huaxin Cement Co., Ltd. (hereinafter “the Company”), which comprise the consolidated and company balance sheets as at 31 December 2012, and the consolidated and company income statements, the consolidated and company statements of changes in shareholder’s equity and the consolidated and company cash flow statements for the year then ended, and the Notes to the financial statements.

Management’s Responsibility for the Financial Statements

Management of the Company is responsible for the preparation and fair presentation of these financial statements in accordance with the requirements of Accounting Standards for Business Enterprises, and for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

Auditor’s Responsibility

Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with China Standards on Auditing. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation of the financial statements in order to design audit procedures that are appropriate in the circumstances. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.


We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Opinion

In our opinion, the accompanying financial statements present fairly, in all material respects, the consolidated and company’s financial position of the Company as at 31 December 2012, and their financial performance and cash flows for the year then ended in accordance with the requirements of Accounting Standards for Business Enterprises.


Shanghai, the People’s Republic of China

22 March 2013


CONSOLIDATED BALANCE SHEET AS AT 31 DECEMBER 2012 (All amounts in Renminbi yuan unless otherwise stated) [English Translation for Reference Only]

ASSETS Notes31 December 2012 31 December 2011

Consolidated ConsolidatedCurrent assets

Cash at bank and in hand V(1) 2,839,236,250 2,825,437,202Notes receivable V(2) 816,105,992 1,152,454,185Accounts receivable V(3) 804,514,901 611,160,181Advances to suppliers V(5) 99,241,890 77,815,141Other receivables V(4) 288,071,470 148,938,461Inventories V(6) 904,173,307 1,080,981,439Other current assets V(7) 113,720,871 157,309,135

Total current assets 5,865,064,681 6,054,095,744 Non-current assets

Available-for-sale financial assets V(8) 56,016,862 33,041,120Long-term receivables 32,456,782 10,645,951Long-term equity investments V(9) 338,769,365 14,859,038Fixed assets V(10) 12,858,979,199 12,431,758,878Construction in progress V(11) 1,663,637,596 970,702,004Construction materials V(12) 66,970,298 65,474,467Fixed assets pending for disposal V(13) 84,409,724 104,536,782Intangible assets V(14) 1,796,517,448 1,676,653,352Goodwill V(15) 111,154,844 111,154,844Long-term prepaid expenses V(16) 264,561,556 148,208,055Deferred tax assets V(17) 152,880,104 108,547,828

Total non-current assets 17,426,353,778 15,675,582,319 TOTAL ASSETS 23,291,418,459 21,729,678,063


CONSOLIDATED BALANCE SHEET AS AT 31 DECEMBER 2012 (All amounts in Renminbi yuan unless otherwise stated) [English Translation for Reference Only]

LIABILITIES AND OWNER’S EQUITY Notes 31 December 2012 31 December 2011

Consolidated ConsolidatedCurrent liabilities

Short-term borrowings V(19) 1,054,000,000 997,950,000Notes payable V(20) 87,491,030 32,503,263Accounts payable V(21) 2,549,726,477 2,428,714,288

Advances from customers V(22)

325,811,627 404,466,765Employee benefits payable V(23) 144,229,279 143,977,781Taxes and other levies payable V(24) 237,603,768 307,854,410Interests payable V(25) 104,268,504 31,830,885Dividends payable V(26) 29,459,504 66,710,525

Other payables V(27)

547,899,201 206,206,627Current portion of non-current liabilities V(28) 2,996,609,294 2,693,349,474

Total current liabilities 8,077,098,684 7,313,564,018 Non-current liabilities

Long-term borrowings V(29) 2,675,077,477 4,222,803,436 Debentures Payable V(30) 3,682,215,000 1,197,450,000

Long-term payables V(31) 83,618,872 142,986,042Provisions V(32) 105,789,380 109,158,708Deferred tax liabilities V(17) 50,457,541 52,451,338Other non-current liabilities V(33) 117,498,032 107,852,021

Total non-current liabilities 6,714,656,302 5,832,701,545 Total liabilities 14,791,754,986 13,146,265,563

OWNERS’ EQUITY

Share capital V(34) 935,299,928 935,299,928Capital surplus V(35) 3,080,957,052 3,520,784,820Surplus reserve V(36) 346,760,490 320,166,829Retained earnings V(37) 3,371,858,083 2,983,725,288Translation reserve (298,245) -

Equity attributable to the shareholders of the Company 7,734,577,308 7,759,976,865

Minority interests V(38) 765,086,165 823,435,635Total owners’ equity 8,499,663,473 8,583,412,500

TOTAL LIABILITIES AND OWNERS’

EQUITY

23,291,418,459 21,729,678,063

The accompanying Notes form an integral part of these financial statements.

Legal representative: Mr.Li Yeqing

Principal in charge of accounting: Ms.Kong Lingling

Head of accounting department: Mr.Wu Xin


COMPANY BALANCE SHEET AS AT 31 DECEMBER 2012 (All amounts in Renminbi yuan unless otherwise stated) [English Translation for Reference Only]

ASSETS Notes 31 December 2012 Company

31 December 2011 Company

Current assets Cash at bank and in hand 1,123,878,387 1,338,890,945Notes receivable 147,781,022 179,678,902Accounts receivable XV(1) 216,479,995 231,422,176Advances to suppliers 62,219,468 6,967,600Dividends receivable 176,800,000 -Other receivables XV(2) 4,134,865,927 2,710,419,649Inventories 71,362,369 86,304,204Current portion of non-current assets 4,855,490 -Other current assets 16,614,647 -

Total current assets 5,954,857,305 4,553,683,476 Non-current assets

Available-for-sale financial assets 36,016,862 33,041,120Long-term receivables 27,995,506 383,522Long-term equity investments XV(3) 6,034,291,722 4,783,229,469Fixed assets 615,849,103 680,308,482Construction in progress 35,483,161 8,749,684Construction materials 79,409 174,417Fixed assets pending for disposal 82,613,565 102,656,702Intangible assets 106,541,955 149,965,068Long-term prepaid expenses 5,168,032 6,276,860Deferred tax assets 44,425,330 13,805,307

Total non-current assets 6,988,464,645 5,778,590,631 TOTAL ASSETS 12,943,321,950 10,332,274,107


COMPANY BALANCE SHEET AS AT 31 DECEMBER 2012 (All amounts in Renminbi yuan unless otherwise stated) [English Translation for Reference Only]

LIABILITIES AND OWNER’S EQUITY Notes 31 December 2012 Company

31 December 2011 Company

Current liabilities Accounts payable 145,942,552 159,921,772Advances from customers 291,710,161 47,644,390Employee benefits payable 49,872,062 31,596,376Taxes and other levies payable 37,544,361 46,833,274Interests payable 95,982,679 21,448,911Dividends payable 576,326 576,326Other payables 214,859,172 117,253,524Current portion of non-current liabilities 1,433,405,640 1,098,585,695

Total current liabilities 2,269,892,953 1,523,860,268 Non-current liabilities

Long-term borrowings 670,691,094 1,414,257,536 Debentures Payable 3,682,215,000 1,197,450,000Provisions 20,522,985 29,496,531Deferred tax liabilities 5,107,618 4,362,882Other non-current liabilities 25,872,083 21,702,500

Total non-current liabilities 4,404,408,780 2,667,269,449 Total liabilities 6,674,301,733 4,191,129,717

OWNERS’ EQUITY

Share capital 935,299,928 935,299,928Capital surplus 3,469,353,137 3,466,980,180Surplus reserve 346,760,490 320,166,829Retained earnings 1,517,606,662 1,418,697,453

Total owners’ equity 6,269,020,217 6,141,144,390 TOTAL LIABILITIES AND OWNERS’

EQUITY 12,943,321,950 10,332,274,107

The accompanying Notes form an integral part of these financial statements. Legal representative: Mr.Li Yeqing




CONSOLIDATED INCOME STATEMENT FOR THE YEAR ENDED 31 DECEMBER 2012 (All amounts in Renminbi yuan unless otherwise stated) [English Translation for Reference Only]

Items Notes 2012 2011Consolidated Consolidated

Sales V(39) 12,520,527,247 12,638,039,183Less: Cost of sales V(39) (9,465,894,458) (9,174,347,298) Taxes and surcharges V(40) (174,074,705) (154,680,639) Selling and distribution expenses V(41) (838,081,458) (700,909,789)

General and administrative expenses

V(42)

(723,747,919) (587,527,808)

Finance costs - net V(43)

(576,330,191) (514,716,636)

Asset impairment losses V(44) (18,181,442) (73,109,195)

Add: Investment income V(45)

(1,187,206) (2,091,241)

Including: Share of results of associates (1,827,931) (2,340,962)

Operating profit 723,029,868 1,430,656,577Add: Non-operating income V(46) 212,591,718 198,061,207Less: Non-operating expenses V(47) (30,651,534) (18,995,978)

Including: Loss on disposal of

non-current assets (14,721,226) (9,191,339) Profit before tax 904,970,052 1,609,721,806Less: Income tax expenses V(48) (224,693,300) (389,666,808) Net profit 680,276,752 1,220,054,998

Attributable to shareholders of the Company 555,658,762 1,075,268,489

Minority interests 124,617,990 144,786,509 Earnings per share Basic earnings per share V(49) 0.59 1.31 Diluted earnings per share V(49) 0.59 1.31 Other comprehensive income V(50) 1,454,488 (2,482,725) Total comprehensive income/(loss) 681,731,240 1,217,572,273

Attributable to shareholders of the

Company 557,594,724 1,072,785,764 Minority interests 124,136,516 144,786,509





INCOME STATEMENT OF THE COMPANY FOR THE YEAR ENDED 31 DECEMBER 2012 (All amounts in Renminbi yuan unless otherwise stated) [English Translation for Reference Only]

Items Notes 2012 2011Company Company

Sales XV(4) 1,677,011,237 1,672,115,679Less: Cost of sales XV(4) (1,311,901,744) (1,249,590,318) Taxes and surcharges (24,695,824) (24,469,501) Selling and distribution expenses (43,749,498) (46,434,354) General and administrative expenses (207,641,263) (174,524,191) Finance costs - net (160,214,801) (137,952,175) Asset impairment losses (3,491,475) (87,031,691)Add: Investment income XV(5) 320,023,954 613,314,649 Including: Share of results of associates (1,615,412) (2,340,962) Operating profit 245,340,586 565,428,098Add: Non-operating income 8,287,082 11,321,707Less: Non-operating expenses (1,389,319) (2,943,186)

Including: Loss on disposal of

non-current assets (1,280,074) (2,923,033) Profit before tax 252,238,349 573,806,619Less: Income tax expenses 13,698,260 (14,490,432) Net profit 265,936,609 559,316,187 Other comprehensive income/(loss) 2,234,207 (2,482,725) Total comprehensive income 268,170,816 556,833,462





CONSOLIDATED CASH FLOW STATEMENT FOR THE YEAR ENDED 31 DECEMBER 2012 (All amounts in Renminbi yuan unless otherwise stated) [English Translation for Reference Only]

Items Notes 2012 2011Consolidated Consolidated

1.Cash flows from operating activities Cash generated from sales of goods or rendering of

services 14,878,708,171 13,849,610,130 Refund of taxes and surcharges 176,496,173 145,152,778 Cash received relating to other operating activities V(51)(a) 75,175,736 84,677,198 Sub-total of cash inflows 15,130,380,080 14,079,440,106 Cash paid for goods and services (9,991,638,865) (9,681,589,313)Cash paid to and on behalf of employees (989,502,510) (863,522,085)Payments of taxes and surcharges (1,272,057,372) (1,273,261,037)Cash paid relating to other operating activities V(51)(b) (421,359,443) (374,736,689)Sub-total of cash outflows (12,674,558,190) (12,193,109,124)Net cash flows from operating activities V(52)(a) 2,455,821,890 1,886,330,9822. Cash flows from investing activities Cash received from returns on investments 638,594 249,721Net cash received from disposal of fixed assets and intangible assets 25,879,055 4,369,696 Net cash received from disposal of subsidiaries and other business units - 214,715,500 Cash received relating to other investing activities V(51)(c) 40,720,000 52,413,536 Sub-total of cash inflows 67,237,649 271,748,453 Cash paid to acquire fixed assets, intangible assets and

other long-term assets (2,093,995,693) (1,860,579,396)Cash paid to acquire investments (143,366,962) - Net cash paid to acquire subsidiaries and other business

units V(52)(b) (14,324,182) (362,708,559)Cash paid relating to other investing activities V(51)(d) (235,196,874) (20,000,000)Sub-total of cash outflows (2,486,883,711) (2,243,287,955)Net cash flows from investing activities (2,419,646,062) (1,971,539,502)3. Cash flows from financing activities Cash received from capital contributions 47,554,500 1,799,460,086 Cash received from borrowings 2,569,724,216 2,569,150,000 Cash received from issue of debenture 3,081,400,000 - Cash received from other financing activities V(51)(e) 87,000,000 163,030,000Sub-total of cash inflows 5,785,678,716 4,531,640,086Cash repayments of borrowings (4,233,857,734) (2,620,921,929)Cash payments for interest expenses and distribution of

dividends or profits (821,049,206) (692,566,366)Cash payments relating to other financing activities V(51)(f) (741,221,397) (119,882,540)Sub-total of cash outflows (5,796,128,337) (3,433,370,835)Net cash flows from financing activities (10,449,621) 1,098,269,251 4. Effect of foreign exchange rate changes on cash 11,124 (25,905)5. Net increase in cash V(52)(a) 25,737,331 1,013,034,826 Add: Opening balance of cash 2,768,997,723 1,755,962,897 6. Ending balance of cash V(52)(c) 2,794,735,054 2,768,997,723





CASH FLOW STATEMENT OF THE COMPANY FOR THE YEAR ENDED 31 DECEMBER 2012 (All amounts in Renminbi yuan unless otherwise stated) [English Translation for Reference Only]

Items Notes 2012 2011

Company Company1.Cash flows from operating activities Cash generated from sales of goods or rendering of

services 1,991,091,209 1,698,150,479 Refund of taxes and surcharges 4,361,824 5,592,673 Cash received relating to other operating activities 233,114,057 550,290,440 Sub-total of cash inflows 2,228,567,090 2,254,033,592 Cash paid for goods and services (1,300,559,721) (1,608,907,339)Cash paid to and on behalf of employees (132,427,000) (119,395,286)Payments of taxes and surcharges (112,914,114) (140,405,903)Cash paid relating to other operating activities (101,621,530) (137,289,409)Sub-total of cash outflows (1,647,522,365) (2,005,997,937)Net cash flows from operating activities XV (6)(a) 581,044,725 248,035,6552. Cash flows from investing activities Cash received from returns on investments 196,891,654 718,039,682Net cash received from disposal of fixed assets and intangible assets 20,124,262 7,441,381 Net cash paid to acquire subsidiaries and other business

units - 214,715,500 Cash received relating to other investing activities 19,060,000 8,450,000 Sub-total of cash inflows 236,075,916 948,646,563 Cash paid to acquire fixed assets, intangible assets and

other long-term assets (47,257,277) (49,628,378)Net cash paid to acquire subsidiaries and other business

units (1,194,180,141) (705,273,077)Cash paid relating to other investing activities (1,518,402,506) (1,415,111,664)Sub-total of cash outflows (2,759,839,924) (2,170,013,119)Net cash flows from investing activities (2,523,764,008) (1,221,366,556)3. Cash flows from financing activities： Cash received from capital contributions - 1,750,960,086Cash received from borrowings 598,833,341 700,000,000Cash received from issue of debenture 3,081,400,000 -Sub-total of cash inflows 3,680,233,341 2,450,960,086 Cash repayments of borrowings (1,607,776,021) (463,366,079)Cash payments for interest expenses and distribution of

dividends or profits (341,406,095) (282,636,988)Cash payments relating to other financing activities - (16,287,600)Sub-total of cash outflows (1,949,182,116) (762,290,667)Net cash flows from financing activities 1,731,051,225 1,688,669,4194. Effect of foreign exchange rate changes on cash 10,039 (25,905)5. Net (decrease) /increase in cash XV(6)(b) (211,658,019) 715,312,613Add: Opening balance of cash 1,333,767,407 618,454,7946. Ending balance of cash 1,122,109,388 1,333,767,407





CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 31 DECEMBER 2011 (All amounts in Renminbi yuan unless otherwise stated) [English Translation for Reference Only]

Items

2011

Attributable to the shareholders of the Company

Share capital Capital surplus

Less: Treasury

share

Specific reserve

Surplus reserve

General risk

provision

Retained earnings

Others Minority interests

Total owners’ equity

Notes V(34) V(35) V(36) V(37) V(38) 1. As at 31 December 2010 403,600,000 2,310,740,640 - 264,235,211 2,046,075,164 - 623,497,131 5,648,148,146

Changes in accounting policies - - - - - - -

Correction of prior period errors - - - - - - -

Others - - - - - - -

2. As at 1 January 2011 403,600,000 2,310,740,640 - 264,235,211 2,046,075,164 - 623,497,131 5,648,148,146

3. Increase/(decrease) (1)Profit for the year - - - - 1,075,268,489 - 144,786,509 1,220,054,998 (2)Other comprehensive income - (2,482,725) - - - - - - - (2,482,725) Subtotal of items (1) and (2) - (2,482,725) - - - - 1,075,268,489 - 144,786,509 1,217,572,273 (3)Increase/(decrease) in capital

Capital contribution by the owners 128,099,928 1,615,160,158 - - - - - - 124,090,135 1,867,350,221 Share-based payment charged to equity - - - - - - - - Others - - - - - - - - - -

(4) Appropriation Transfer to surplus reserve - - - - 55,931,618 - (55,931,618) - - - General risk provision - - - - - - - - - - Dividends - - - - - - (80,720,000) (68,938,140) (149,658,140) Others - - - - - - - - - -

(5)Transfer within equity From capital surplus to share capital 403,600,000 (403,600,000) - - - - - - - - From surplus reserve to share capital - - - - - - - - - - From surplus reserve to accumulated - - - - - - - - - - Others - 966,747 - - - - (966,747) - - -

(6)Specific reserve Accrual - - - - - - - - - - Utilisation - - - - - - - - - -

4. As at 31 December 2011 935,299,928 3,520,784,820 - - 320,166,829 - 2,983,725,288 - 823,435,635 8,583,412,500


CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 31 DECEMBER 2012 (All amounts in Renminbi yuan unless otherwise stated) [English Translation for Reference Only]

Items

2012

Attributable to the shareholders of the Company

Share capital Capital surplus Less: Treasury

share

Specific reserve

Surplus reserve

General risk

provision

Retained earnings

Others Minority interests


Notes V(34) V(35) V(36) V(37) V(38) 1. As at 31 December 2011 935,299,928 3,520,784,820 - - 320,166,829 - 2,983,725,288 - 823,435,635 8,583,412,500

Changes in accounting policies - - - - - - - - - - Correction of prior period errors - - - - - - - - - - Others - - - - - - - - - -

2. As at 1 January 2012 935,299,928 3,520,784,820 - - 320,166,829 2,983,725,288 - 823,435,635 8,583,412,500 3. Increase/(decrease) (1)Profit for the year - - - - - - 555,658,762 - 124,617,990 680,276,752 (2)Other comprehensive income - 2,234,207 - - - - - (298,245) 1,454,488 Subtotal of items (1) and (2) - 2,234,207 - - - - 555,658,762 (298,245) 124,136,516 681,731,240 (3)Increase/(decrease) in capital

Capital contribution by the owners - - - - - - - - 132,257,090 132,257,090 Share-based payment charged to equity - - - - - - - - - - Others - (442,699,292) - - - - - - (223,270,749) (665,970,041)

(4) Appropriation Transfer to surplus reserve - - - - 26,593,661 - (26,593,661) - - - General risk provision - - - - - - - - - - Dividends - - - - - - (140,294,989) (91,472,327) (231,767,316) Others - - - - - - - - - -

(5)Transfer within equity From capital surplus to share capital - - - - - - - - - - From surplus reserve to share capital - - - - - - - - - - From surplus reserve to accumulated - - - - - - - - - - Others - 637,317 - - - - (637,317) - - -

(6)Specific reserve Accrual - - - - - - - - - - Utilisation - - - - - - - - - -

4. As at 31 December 2012 935,299,928 3,080,957,052 - - 346,760,490 - 3,371,858,083 (298,245) 765,086,165 8,499,663,473 The accompanying Notes form an integral part of these financial statements. Legal representative: Mr.Li Yeqing



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STATEMENT OF CHANGES IN EQUITY OF THE COMPANY FOR THE YEAR ENDED 31 DECEMBER 2011 (All amounts in Renminbi yuan unless otherwise stated) [English Translation for Reference Only]

Items

2011

Share capital

Capital surplus Less: Treasury

share

Specific reserve

Surplus reserve

General risk

provision

Retained earnings


1. As at 31 December 2010 403,600,000 2,257,284,997 - - 264,235,211 - 996,650,634 3,921,770,842

Changes in accounting policies - - - - - - - -

Correction of errors - - - - - - - -

Others - - - - - - - -

2. As at 1 January 2011 403,600,000 2,257,284,997 - - 264,235,211 - 996,650,634 3,921,770,842

3. Increase/(decrease)

(1)Profit for the year - - - - - - 559,316,187 559,316,187

(2)Other comprehensive income - (2,482,725) - - - - - (2,482,725)

Subtotal of items (1) and (2) - (2,482,725) - - - - 559,316,187 556,833,462

(3)Increase/(decrease) in capital Capital contribution by the

owners 128,099,928 1,615,160,158 - - - - - 1,743,260,086Share-based payment charged

to equity - - - - - - - -

Others - - - - - - - -

(4) Appropriation

Transfer to surplus reserve - - - - 55,931,618 - (55,931,618) -

General risk provision - - - - - - - -

Dividends - - - - - - (80,720,000) (80,720,000)

Others - - - - - - - -

(5)Transfer within equity From capital surplus to share

capital 403,600,000 (403,600,000) - - - - - -From surplus reserve to share

capital - - - - - - - -From surplus reserve to

accumulated losses - - - - - - - -

Others - 617,750 - - - - (617,750) -

(6)Specific reserve

Accrual - - - - - - - -

Utilisation - - - - - - - -

4. As at 31 December 2011 935,299,928 3,466,980,180 - - 320,166,829 - 1,418,697,453 6,141,144,390

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STATEMENT OF CHANGES IN EQUITY OF THE COMPANY FOR THE YEAR ENDED 31 DECEMBER 2012 (All amounts in Renminbi yuan unless otherwise stated) [English Translation for Reference Only]

Items

2012

Share capital

Capital surplus Less: Treasury

share

Specific

reserve

Surplus reserve

General risk

provision

Retained earnings


1. As at 31 December 2011 935,299,928 3,466,980,180 - - 320,166,829 - 1,418,697,453 6,141,144,390

Changes in accounting policies - - - - - - - -

Correction of errors - - - - - - - -

Others - - - - - - - -

2. As at 1 January 2012 935,299,928 3,466,980,180 - - 320,166,829 - 1,418,697,453 6,141,144,390

3. Increase/(decrease)

(1)Profit for the year - - - - - - 265,936,609 265,936,609

(2)Other comprehensive income - 2,234,207 - - - - - 2,234,207

Subtotal of items (1) and (2) - 2,234,207 - - - - 265,936,609 268,170,816

(3)Increase/(decrease) in capital Capital contribution by the

owners - - - - - - - -Share-based payment charged

to equity - - - - - - - -

Others - - - - - - - -

(4) Appropriation

Transfer to surplus reserve - - - - 26,593,661 - (26,593,661) -

General risk provision - - - - - - - -

Dividends - - - - - - (140,294,989) (140,294,989)

Others - - - - - - - -

(5)Transfer within equity From capital surplus to share

capital - - - - - - - -From surplus reserve to share

capital - - - - - - - -From surplus reserve to

accumulated losses - - - - - - - -

Others - 138,750 - - - - (138,750) -

(6)Specific reserve

Accrual - - - - - - - -

Utilisation - - - - - - - -

4. As at 31 December 2012 935,299,928 3,469,353,137 - - 346,760,490 - 1,517,606,662 6,269,020,217




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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR END 31 DECEMBER 2012

(All amounts in Renminbi yuan unless otherwise stated)

[English Translation for Reference Only]

I General information

Huaxin Cement Co., Ltd. (the “Company”) is a joint stock limited company established and domiciled in the People's Republic of China (the “PRC”). In 1994, as approved by the Hubei Provincial People’s Government, the Company’s shares were listed on the Shanghai Stock Exchange. In 2006, as approved by Ministry of Commence of the PRC, the legal status of Company was changed to a Sino-foreign joint stock limited company. In May 2011, additional 403,600,000 shares were allotted at par from the capital surplus of the Company. As a result, the share capital of the Company increased to RMB807,200,000. On 4 November 2011, a placement in A share was completed in which additional 128,099,928 shares were issued to designated investors. As a result, the total shares of the Company increased to 935,299,928, comprising 607,299,928 A shares and 328,000,000 B shares.

The Company and its subsidiaries (together, the “Group”) are principally engaged in manufacturing and sales of cement. The Group’s businesses are mainly carried out in the PRC. The address of the Company’s registered office is 897 Huangshi Avenue, Huangshi City, Hubei Province.

The financial statements were authorised for issue by the board of directors of the Company on 22 March 2013.

II Summary of significant accounting policies and accounting estimates

(1) The basis of preparation of the financial statements

The Group adopted the Basic Standard and 38 specific standards of the Accounting Standards for Business Enterprises issued by the Ministry of Finance on 15 February 2006, and the Application Guidance for Accounting Standard for Business Enterprises, Interpretations of Accounting Standards for Business Enterprises and other relevant regulations issued thereafter (hereafter referred to as “the Accounting Standard for Business Enterprises” or “CAS”).

Management of the Company is of the view that the Group will be able to settle its financial obligations as they fall due and carry on its business without a significant curtailment of operations in the twelve months from the balance sheet date, and thus has prepared the consolidated financial statements on a going concern basis.

(2) Statement of compliance with the Accounting Standards for Business Enterprises

The consolidated financial statements of the Group for the year ended 31 December 2012 truly and completely present the financial position of the Group and the Company as of 31 December 2012 and the operating results and cash flows of the Group and the Company for the year then ended in accordance with the CAS.

(3) Accounting period

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The Group’s accounting year starts on 1 January and ends on 31 December.

(4) Functional currency

Items included in the financial statements of each of the group’s entities are measured using the currency of the primary economic environment in which the entity operates (‘the functional currency’). The consolidated financial statements are presented in Renminbi (“RMB”), which is the company’s functional and the group’s presentation currency.

(5) Business combinations

(a) Business combinations involving enterprises not under common control

The cost of combination and identifiable net assets obtained by the acquirer in a business combination are measured at the fairvalue at the acquisition date. Where the cost of the combination exceeds the acquirer’s interest in the fair value of the acquiree’s identifiable net assets, the difference is recognised as goodwill; where the cost of combination is lower than the acquirer’s interest in the fair value of the acquiree’s identifiable net assets, the difference is recognised in income statement. Costs directly attributable to the combination are included in profit or loss in the period in which they are incurred.

(b) Changes in ownership interests in subsidiaries without change of control

Transactions with non-controlling interests that do not result in loss of control are accounted for as equity transactions – that is, as transactions with the owners in their capacity as owners. The difference between fair value of any consideration paid and the relevant share acquired of the carrying value of net assets of the subsidiary is recorded in equity. Gains or losses on disposals to non-controlling interests are also recorded in equity.

(6) Basis of preparation of consolidated financial statements

The scope of consolidation includes the Company and all of its subsidiaries.

Subsidiaries are consolidated from the date on which control is transferred to the Group and are de-consolidated from the date that such control ceases.

The financial statements of subsidiaries are adjusted in accordance with the accounting policies of the Company during the preparation of the consolidated financial statements, where the accounting policies and the accounting periods are inconsistent between the Company and subsidiaries. For subsidiaries acquired in a business combination involving enterprises not under common control, the individual financial statements of the subsidiaries are adjusted based on the fair value of the identifiable assets and liabilities at the acquisition date.

All significant inter-group balances, transactions and unrealised profits are eliminated in the consolidated financial statements. The portion of equity and net profits or losses of a subsidiary not belonging to the Company is recognised as minority interests and separately presented in equity and net profits respectively.

(7) Cash and cash equivalents

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For the purpose of the cash flow statement, cash and cash equivalents comprise cash in hand, deposits held at call with bank and short-term and highly liquid investments that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value. The restricted cash is excluded from cash and cash equivalents in cash flow statement.

(8) Foreign currency translation

(a) Foreign currency transactions

Foreign currency transactions are translated into the functional currency of each of the group’s entities are measuring, using the exchange rates prevailing at the dates of the transactions.

At the balance sheet date, monetary items denominated in foreign currency are translated into RMB using the spot rate of the balance sheet date. Exchange differences arising from these translations are recognised in profit or loss for the current period, except for those attributable to foreign currency borrowings that have been taken out specifically for the acquisition or construction of qualifying assets, which are capitalised as part of the cost of those assets. Non-monetary items denominated in foreign currency that are measured in terms of historical cost are translated into RMB at the balance sheet date using the spot rate at the date of the transactions. The effect of exchange rate changes on cash is presented separately in the cash flow statement.

(b) Foreign currency financial statements translations

Assets and liabilities, which are oversea operating, are translated into RMB using the spot rate of the balance sheet date. Items in Consolidated Statement of Changes in Equity are translated into RMB using the spot rate at the date of the transactions, except for the retained earnings. Incomes and expenses items, which are oversea operating, are translated into RMB using the spot rate at the date of the transactions. The translation differences of foreign currency transactions are presented separately in shareholders’ equity. Cash flow items, which are oversea operating, are translated into RMB using the spot rate at the date of the cash in or cash out. The effect of exchange rate changes on cash is presented separately in the cash flow statement.

(9) Financial Instruments

(a) Financial assets

(i) Classification

Financial assets are classified into the following categories at initial recognition: financial assets at fair value through profit or loss, receivables, available-for-sale financial assets and held-to-maturity investments. The classification of financial assets depends on the Group’s intention and ability to hold the financial assets.

The financial assets in the Group include receivables and available-for-sale financial assets.

Receivables

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Receivables, including accounts receivable and other receivables, are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market (Note II(10)).

Available-for-sale financial assets

Available-for-sale financial assets are non-derivative financial assets that are designated to be available for sale upon initial recognition and financial assets not classified in any other categories. Available-for-sale financial assets are included in other current assets if management intends to dispose of them within 12 months from balance sheet date.

(ii) Recognition and measurement

Financial assets are recognised at fair value on the balance sheet when the Group becomes a party to the contractual provisions of the financial instrument. In the case of financial assets at fair value through profit or loss, the related transaction costs incurred at the time of acquisition are recognised in profit or loss for the current period. For other financial assets, transaction costs that are attributable to the acquisition of the financial assets are included in their initially recognised amounts.

Available-for-sale financial assets are subsequently measured at fair value. Investments in equity instruments are measured at cost when they do not have a quoted market price in an active market and whose fair value cannot be reliably measured. Receivables are measured at amortised cost using the effective interest method.

Gains or losses arising from change in fair value of available-for-sale financial assets are recognised directly in equity, except for impairment losses and foreign exchange gains and losses arising from translation of monetary financial assets. When such financial assets are derecognised, the cumulative gains or losses previously recognised directly into equity are recycled into profit or loss for the current period. Cash dividends declared by the investee on available-for-sale investments in equity instruments are recognised as investment income, which is recognised in profit or loss for the period.

(iii) Impairment of financial assets

The Group assesses the carrying amount of financial assets other than those at fair value through profit or loss at each balance sheet date. If there is objective evidence that the financial asset is impaired, an impairment loss is provided for.

The objective evidence, of which provided for available-for-sale equity instruments being impaired, includes an investment in an equity instrument with serious or prolonged decline. The Group assesses available-for-sale equity instruments at each balance sheet date. If the fair value of equity instruments is less than its initial investment cost of more than 50% (including 50%), or less than the duration of its initial investment cost of more than one year (including one year), it indicates that the equity instruments are impaired. If the fair value of equity instruments is less than its initial investment cost of more than 20% (including 20%) to 50% (not including 50%), the Group will consider other relevant factors to judge that whether equity instruments are impaired.

When an impairment loss on a financial asset carried at amortised cost has been incurred, the amount of loss is measured at the difference between the asset’s carrying amount and the present value of estimated future cash flows (excluding future credit losses that have

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not been incurred). If there is objective evidence that the value of the financial asset recovered and the recovery is related objectively to an event occurring after the impairment was recognised, the previously recognised impairment loss is reversed and the amount of reversal is recognised in profit or loss.

When an impairment loss on available-for-sale financial assets incurred, the cumulative losses arising from the decline in fair value that had been recognised directly in equity are transferred out from equity and into impairment loss. For an investment in debt instrument classified as available-for-sale on which impairment losses have been recognised, if, in a subsequent period, its fair value increases and the increase can be objectively related to an event occurring after the impairment loss was recognised in profit or loss, the previously recognised impairment loss is reversed into profit or loss for the current period. For an investment in an equity instrument classified as available-for-sale on which impairment losses have been recognised, the increase in its fair value in a subsequent period is recognised directly in equity.

If an impairment loss incurred on an investment in an equity instrument not quoted in an active market and whose fair value cannot be reliably measured, the amount of loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows discounted at the current market rate of return for a similar financial asset.

(iv) Derecognition of financial assets

Financial assets are derecognised when: i) the contractual rights to receive the cash flows from the financial assets have expired; or ii) all substantial risks and rewards of ownership of the financial assets have been transferred; or iii) the control over the financial asset has been waived even if the Group does not transfer or retain nearly all of the risks and rewards relating to the ownership of a financial asset.

On derecognition of a financial asset, the difference between the carrying amount and the aggregate of consideration received and the accumulative amount of the changes of fair value originally recorded in the owner’s equity is recognised in the profit or loss.

(b) Financial liabilities

Financial liabilities are classified into the following categories at initial recognition: the financial liabilities at fair value through profit or loss and other financial liabilities. The financial liabilities in the Group mainly comprise of other financial liabilities, including payables, borrowings and debentures payable.

Payables comprise accounts payable and other payables, which are recognised initially at fair value and measured subsequently at amortised cost using the effective interest method.

Borrowings and debentures payable are recognised initially at fair value, net of transaction costs incurred, and subsequently carried at amortised costs using the effective interest method.

Other financial liabilities are classified as current liabilities if they mature within one year (one year included); others are classified as non-current liabilities; non-current liabilities due for repayment within one year since the balance sheet date are classified as current portion of non-current liabilities.

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A financial liability (or a part of financial liability) is derecognised when and only when the obligation specified in the contract is discharged or cancelled. The difference between the carrying amount of a financial liability (or a part of financial liability) extinguished and the consideration paid is recognised in profit or loss.

(c) Determination of the fair value of the financial instruments

The fair value of a financial instrument that is traded in an active market is determined at the quoted price in the active market. The fair value of a financial instrument for which the market is not active is determined by using a valuation technique. Valuation techniques include using prices of recent market transactions between knowledgeable, willing parties, reference to the current fair value of another financial asset that is substantially the same with this instrument, and discounted cash flow analysis. When a valuation technique is used to establish the fair value of a financial instrument, management uses market data as much as possible and avoids use of data that is particularly related to the Group.

(10) Receivables

Receivables comprise Notes receivable, accounts receivable and other receivables. Accounts receivable arising from sale of goods or rendering of services are initially recognised at fair value of the contractual payments from the buyer or service recipients.

(a) The recognition criteria and method of provision for impairment of receivables that are individually significant:

Receivables that are individually significant are subject to separate impairment assessment. A provision for impairment of the receivable is recognised if there is objective evidence that the Group will not be able to collect the full amounts according to the original terms.

The criteria for individually significant receivables: the amount of account receivable is individually more than RMB3,000,000 and other receivable is individually more than RMB2,000,000.

The provision for impairment of the receivables that are individually significant is established at the difference between the carrying amount of the receivable and the present value of estimated future cash flows.

(b) The recognition criteria and method of provision for impairment of receivables that are not individually significant, but grouped on the basis of similar credit risk

Receivables that are not individually significant are grouped on the basis of similar credit risk. The impairment losses are determined by considering the current conditions and the experience of bad debt for the groups of receivables with the similar credit risk.

The basis of similar credit risk group: the ageing of receivables, excluding the receivables assessed separately.

A provision for impairment of the receivables is made based on the ageing of receivables at the following percentage:

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Provision as a percentage of receivables

Between 1 and 2 years 10%

Between 2 and 3 years 20%

Over 3 years 40%

(c) The recognition criteria and method of provision for impairment of receivables that are not individually significant:

Receivables that are not individually significant are subject to separate impairment assessment if there is objective evidence that the Group will not be able to collect the full amounts according to the original terms.

The provision for impairment of the receivables is established at the difference between the carrying amount of the receivables and the present value of estimated future cash flows.

(11) Inventories

(a) Classification

Inventories include raw materials, work in progress, finished goods, spare parts, auxiliary materials and turnover materials, and are presented at the lower of cost and net realisable value.

(b) Determination of cost

Cost is determined on the weighted average method. The cost of finished goods and work in progress comprises raw materials, direct labour and an allocation of all production overhead expenditures incurred based on normal operating capacity.

(c) The determination of net realisable value and the method of provisions for impairment of inventories

Provisions for declines in the value of inventories are determined at the carrying value of the inventories net of their net realisable value. Net realisable value is determined based on the estimated selling price in the ordinary course of business, less the estimated costs to completion and estimated costs necessary to make the sale and relevant taxes.

(d) The Group adopts the perpetual inventory system.

(e) Spare parts, auxiliary materials and turnover materials

Turnover materials include low value consumables and packing materials. Spare parts, auxiliary materials and turnover materials are expensed upon issuance.

(12) Long-term equity investments

Long-term equity investments comprise the Company’s long-term equity investments in its

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subsidiaries and the Group’s long-term equity investments in its associates.

Subsidiaries are all entities over which the Company is able to control. Associates are all entities over which the Group has significant influence, but not control, on their financial and operating policies.

Investments in subsidiaries are measured using the cost method in the Company’s financial statements, and adjusted by using the equity method when preparing the consolidated financial statements. Interests in associates are accounted for using the equity method.

(a) Initial recognition

For long-term equity investments acquired through a business combination: for long-term equity investment acquired through a business combination involving enterprises not under common control, the investment cost shall be the combination cost.

For long-term equity investments acquired not through a business combination: for long-term equity investment acquired by payment in cash, the initial investment cost shall be the purchase price actually paid;

(b) Subsequent measurement and recognition of related profit and loss

For long-term equity investments accounted for using the cost method, they are measured at the initial investment costs, and cash dividends or profit distribution declared by the investees are recognised as investment income in profit or loss.

For long-term equity investments accounted for using the equity method, where the initial investment cost of a long-term equity investment exceeds the Group’s share of the fair value of the investee’s identifiable net assets at the acquisition date, the long-term equity investment is measured at the initial investment cost; where the initial investment cost is less than the Group’s share of the fair value of the investee’s identifiable net assets at the acquisition date, the difference is included in profit or loss and the cost of the long-term equity investment is adjusted upwards accordingly.

For long-term equity investments accounted for using the equity method, the Group recognises the investment income according to its share of net profit or loss of the investee. The Group discontinues recognising its share of net losses of an investee after the carrying amount of the long-term equity investment together with any long-term interests that, in substance, form part of the investor’s net investment in the investee are reduced to zero. However, if the Group has obligations for additional losses and the criteria with respect to recognition of provisions under the accounting standards on contingencies are satisfied, the Group continues recognising the investment losses and the provisions. For changes in owners’ equity of the investee other than those arising from its net profit or loss, the Group records its proportionate share directly into capital surplus, provided that the Group’s proportion of shareholding in the investee remains unchanged. The carrying amount of the investment is reduced by the Group’s share of the profit distribution or cash dividends declared by an investee. The unrealised profits or losses arising from the intra-group transactions amongst the Group and its investees are eliminated in proportion to the Group’s equity interest in the investees, and then based on which the investment gains or losses are recognised. For the loss on the intra-group transaction amongst the Group and its investees attributable to asset impairment, any unrealised loss is not eliminated.

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(c) Basis for determing existence of control or significant influence over investees

Control is the power to govern the financial and operating policies of the investee so as to obtain benefits from its operating activities. When determining whether to control the investees or not, the potential voting rights, of which convertible bonds and executable warrants issued by the investees in current period, should be considered as well.

Significant influence is the power to participate in the financial and operating policy decisions of the investee, but is not control or joint control over those policies.

(d) Impairment of long-term equity investments

The carrying amount of long-term equity investments in subsidiaries and associates is reduced to the recoverable amount when the recoverable amount is less than the carrying amount (Note II(18)). Once the impairment loss is recognised, it will not be reversed for the value recovered in the subsequent periods.

(13) Fixed assets

(a) Recognition and initial measurement of fixed assets

Fixed assets comprise buildings, machinery and equipment, office equipment, and motor vehicles.

Fixed assets are recognised when it is probable that the related economic benefits will flow to the Group and the costs can be reliably measured. Fixed assets purchased or constructed by the Group are initially measured at cost at the acquisition date.

Subsequent expenditures incurred for fixed assets are included in the cost of the fixed assets when it is probable that the associated economic benefits will flow to the Group and the related costs can be reliably measured. The carrying amount of the replaced part is derecognised. All the other subsequent expenditures are recognised in profit or loss in the period in which they are incurred.

(b) Depreciation

Fixed assets are depreciated using the straight-line method to allocate the cost of the assets to their estimated residual values over their estimated useful lives. For the fixed assets being provided for impairment loss, the related depreciation charge is prospectively determined based upon the adjusted carrying amounts over their remaining useful lives.

The estimated useful lives, estimated residual values expressed as a percentage of cost and annual depreciation rates are as follows:

Estimated

useful lives Estimated residual value

Annual

depreciation rate

Buildings 25-40 years 4% 2.4% to 3.8%

Machinery and equipment 5-18 years 4% 5.3% to 19.2%

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Office equipment and fixtures 5-10 years 4% 9.6% to 19.2%

Motor vehicles 4-12 years 4% 8% to 24%

The estimated useful life, the estimated net residual value of a fixed asset and the depreciation method applied to the asset are reviewed, and adjusted as appropriate at least at each year-end.

(c) The carrying amount of fixed assets is reduced to the recoverable amount when the recoverable amount is less than the carrying amount (Note II(18)).

(d) Basis for identification of fixed assets held under finance leases and related measurement

A lease that in substance transfers substantially all the risks and rewards incidental to ownership of an asset is a finance lease. The leased asset is recognised at the lower of the fair value of the leased asset and the present value of the minimum lease payments. The difference between the recorded amount of the leased asset and the minimum lease payments is accounted for as unrecognised finance charge (Note II(25)(b)).

Fixed assets held under a finance lease is depreciated on a basis consistent with the depreciation policy adopted for fixed assets that are self-owned. When a leased asset can be reasonably determined that its ownership will be transferred at the end of the lease term, it is depreciated over the period of expected use; otherwise, the leased asset is depreciated over the shorter period of the lease term and the period of expected use.

(e) Disposal

A fixed asset is derecognised on disposal or when no future economic benefits are expected from its use or disposal. The amount of proceeds on sale, transfer, retirement or damage of a fixed asset net of its carrying amount and related taxes and expenses is recognised in profit or loss.

(14) Construction in progress

Construction in progress is measured at actual cost. Actual cost comprises construction costs, installation costs, borrowing costs that are eligible for capitalisation and other costs necessary to bring the fixed assets ready for their intended use. Construction in progress is transferred to fixed assets when the assets are ready for their intended use, and depreciation begins from the following month. The carrying amount of construction in progress is reduced to the recoverable amount when the recoverable amount is less than the carrying amount (Note II(18)).

(15) Borrowing costs

The borrowing costs that are directly attributable to the acquisition and construction of a fixed asset that needs a substantially long period of time for its intended use commence to be capitalised and recorded as part of the cost of the asset when expenditures for the asset and borrowing costs have been incurred, and the activities relating to the acquisition and construction that are necessary to prepare the asset for its intended use have commenced. The capitalisation of borrowing costs ceases when the asset under acquisition or construction becomes ready for its intended use, the borrowing costs incurred thereafter are recognised in profit or loss. Capitalisation of borrowing costs is

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suspended when the acquisition or construction of a fixed asset is interrupted abnormally and the interruption lasts for more than 3 months, until the acquisition or construction is resumed.

For the specific borrowings obtained for the acquisition or construction of a fixed asset qualifying for capitalisation, the amount of borrowing costs eligible for capitalisation is determined by deducting any interest income earned from depositing the unused specific borrowings in the banks or any investment income arising on the temporary investment of those borrowings during the capitalisation period.

For the general borrowings obtained for the acquisition or construction of a fixed asset qualifying for capitalisation, the amount of borrowing costs eligible for capitalisation is determined by applying the weighted average effective interest rate of general borrowings, to the weighted average of the excess amount of cumulative expenditures on the asset over the amount of specific borrowings. The effective interest rate is the rate at which the estimated future cash flows during the period of expected duration of the borrowings or applicable shorter period are discounted to the initial amount of the borrowings.

(16) Intangible assets

Intangible assets include land use rights, mining rights, mine restoration fees, trademarks, computer softwares and technology patents, which initially recognised at cost, and amortised on the straight-line basis over their estimated useful lives.

For an intangible asset with a definite useful life, their useful life and amortisation method are reviewed at each year-end and adjusted when necessary.

The carrying amount of intangible assets is reduced to the recoverable amount when the recoverable amount is less than the carrying amount (Note II(18)).

(17) Long-term prepaid expenses

Long-term prepaid expenses include mine development cost, railway improvement cost and other prepayments that should be amortised over more than one year. Long-term prepaid expenses are amortised on the straight-line basis over the expected beneficial period and are presented at cost net of accumulated amortisation.

Mine development costs means reaching the mining rights, in order that mine can be exploited to achieve state of the surface of earth and rock mine clearance occurred, trees, stripping the non-mineral ore surface impurities of raw materials and infrastructure such as quasi-spin-off expenses, at the time to be capitalised.

(18) Impairment of long-term assets

Fixed assets, construction in progress and intangible assets with finite useful lives, and long-term equity investments in subsidiaries and associates are tested for impairment if there is any indication that an asset may be impaired at the balance date. If the result of the impairment test indicates that the recoverable amount of the asset is less than its carrying amount, a provision for impairment and an impairment loss are recognised for the amount by which the asset’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs to sell and the present value of the future cash flows expected to be derived from the asset. A provision for asset impairment is determined and recognised on an individual asset basis. If it is not possible

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to estimate the recoverable amount of an individual asset, the recoverable amount of the group of assets to which the asset belongs is determined. A group of assets is the smallest group of assets that is able to generate independent cash inflows.

Goodwill that is separately presented in the financial statements is tested at least annually for impairment, irrespective of whether there is any indication that the asset may be impaired. During the test, the carrying value of goodwill is allocated to the related assets or groups of assets which is expected to benefit from the synergies of the business combination. If the result of the test indicates that the recoverable amount of an asset or groups of assets including the allocated goodwill is lower than their carrying amount, the corresponding impairment loss is recognised. The impairment loss is first deducted from the carrying amount of goodwill that is allocated to the asset group or group of asset groups, and then deducted from the carrying amounts of other assets within the asset groups or groups of asset groups in proportion to the carrying amounts of assets other than goodwill.

Once the above asset impairment loss mentioned above is recognised, it will not be reversed for the value recovered in the subsequent periods.

(19) Employee benefits

Employee benefits mainly include wages or salaries, bonuses, allowances and subsidies, staff welfare, social security contributions, housing funds, labour union funds, employee education funds and other expenditures incurred in exchange for service rendered by employees.

Where the Group terminates the employment relationship with employees before the end of the employment contract or offers compensation for encouraging employees to accept voluntary redundancy, a provision for termination benefits for the compensation arising from termination of the employment relationship with employees is recognised, with a corresponding charge to profit or loss when the Group has made a formal plan for termination of the employment relationship or an offer for voluntary redundancy which will be implemented immediately and cannot be withdrawn by the Group unilaterally.

Except for the compensation to employees for termination of the employment relationship, the employee benefits are recognised in the accounting period in which the service has been rendered by the employees, and as costs of assets or expenses to whichever the employee service is attributable.

(20) Profit distribution

Cash dividends distribution is recognised as a liability in the period in which the dividends are approved by the shareholders’ meeting.

(21) Provisions

Provisions for employee benefits and mine restoration are recognised when the Group has a present obligation, and it is probable that an outflow of economic benefits will be required to settle the obligation, and the amount of the obligation can be measured reliably.

A provision is initially measured at the best estimate of the expenditure required to settle the related present obligation. Factors surrounding a contingency such as the risks, uncertainties and the time value of money are taken into account as a whole in reaching

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the best estimate of a provision. Where the effect of the time value of money is material, the best estimate is determined by discounting the related future cash outflows. The increase in the discounted amount of the provision arising from passage of time is recognised as interest expense.

The carrying amount of provisions is reviewed at each balance sheet date and adjusted to reflect the current best estimate.

(a) Provision for employee benefits

Provision for employee benefits are recognised as liabilities by discounting the payment with the rate of national bond and considering factors, such as number of retirees, retiring age, average life of retiree, and annual increase rate of average salary.

(b) Mine restoration

Pursuant to relevant government regulations, the Group is required to remediate the area that it mines. The Group estimates the remediation obligation on the basis of expected future payment on the remediation efforts and recognised a liability accordingly.

(22) Revenue recognition

The amount of revenue is determined in accordance with the fair value of the consideration received or receivable for the sale of goods and services in the ordinary course of the Group’s activities. Revenue is shown net of discounts and returns.

Revenue is recognised when the economic benefits associated with the transaction will flow to the Group, the relevant revenue can be reliably measured and specific revenue recognition criteria have been met for each of the Group’s activities as described below:

(a) Sales of goods

The Group is engaged in manufacturing and sales of cement. Revenue from sales of goods is recognised when the goods are delivered, significant risks and rewards of ownership of the goods are transferred to the customers, the Group retains neither continuing managerial involvement to the degree usually associated with the ownership nor effective control over the goods sold, relevant consideration or the documents which grant the right to receive the relevant consideration has been received, and related costs can be measured reliably.

(b) Service income

Service income is recognised when related service is rendered to customers.

(c) Interest income

Interest income is recognised on a time-proportion basis using the effective interest method.

(23) Government grants

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Government grants are the monetary asset that the Group receives from the government for free, including tax refund, financial subsidies, etc.

A government grant is recognised when the conditions attached to it can be complied with and the government grant can be received. For a government grant in the form of transfer of monetary assets, the grant is measured at the amount received or receivable.

A government grant related to an asset is recognised as deferred income, and evenly amortised to profit or loss over the useful life of the related asset.

For government grants related to income, where the grant is a compensation for related expenses or losses to be incurred by the Group in the subsequent periods, the grant is recognised as deferred income, and included in profit or loss over the periods in which the related costs are recognised; where the grant is a compensation for related expenses or losses already incurred by the Group, the grant is recognised immediately in profit or loss for the current period.

Deferred income is included in non-current liabilities in balance sheet.

(24) Deferred tax assets and deferred tax liabilities

Deferred tax assets and deferred tax liabilities are calculated and recognised based on the differences arising between the tax base of assets and liabilities and their carrying amount (temporary differences). Deferred tax asset is recognised for the tax losses that can be carried forward to subsequent years for deduction of the taxable profit in accordance with the tax law. No deferred tax liability is recognised for a temporary difference arising from the initial recognition of goodwill. No deferred tax asset or deferred tax liability is recognised for the temporary differences resulting from the initial recognition of assets or liabilities due to a transaction other than a business combination, which affects neither accounting profit nor taxable profit (or deductible loss). At the balance sheet date, deferred tax assets and deferred tax liabilities are measured at the tax rates that are expected to apply to the period when the asset is realised or the liability is settled.

Deferred tax assets are only recognised for deductible temporary differences, deductible losses and tax credits to the extent that it is probable that taxable profit will be available in the future against which the deductible temporary differences, tax losses and tax credits can be utilised.

Deferred tax liabilities are recognised for temporary differences arising from investments in subsidiaries and associates, unless the Group is able to control the timing of the reversal of the temporary difference, and it is probable that the temporary difference will not reverse in the foreseeable future. When it is probable that the temporary differences arising from investments in subsidiaries and associates will be reversed in the foreseeable future and that the taxable profit will be available in the future against which the temporary differences can be utilised, the corresponding deferred tax assets are recognised.

Deferred tax assets and liabilities are offset when:

The deferred taxes are relate to the same tax payer within the Group and the same taxation authority, and;

That tax payer has a legally enforceable right to offset current tax assets against current tax liabilities.

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(25) Leases

A finance lease is a lease that transfers substantially all the risks and rewards incidental to ownership of an asset. An operating lease is a lease other than a finance lease.

(a) Operating lease

Lease payments under an operating lease are recognised on a straight-line basis over the period of the lease, and are either capitalised as part of the cost of related assets, or charged as an expense for the current period.

(b) Finance lease

The leased asset is recognised at the lower of the fair value of the leased asset and the present value of the minimum lease payments. The difference between the recorded amount of the leased asset and the minimum lease payments is accounted for as unrecognised finance charge and is amortised using the effective interest method over the period of the lease. A long-term payable is recorded at the amount equal to the minimum lease payments less the unrecognised finance charge.

(26) Segment information

The Group identifies operating segments based on the internal organisation structure, management requirements and the internal reporting system, and discloses segment information of reportable segments determined on the basis of operating segments.

An operating segment is a component of the Group that satisfies all of the following conditions: (1) the component is able to earn revenues and incur expenses from its ordinary activities; (2) whose operating results are regularly reviewed by the Group’s management to make decisions about resources to be allocated to the segment and to assess its performance, and (3) for which the information on financial position, operating results and cash flows is available to the Group. If two or more operating segments have similar economic characteristics, and satisfy certain conditions, they are aggregated into a single operating segment.

(27) Critical accounting estimates and assumptions

The Group continually evaluates the critical accounting estimates and key judgments applied based on historical experience and other factors, including expectations of future events that are believed to be reasonable.

The critical accounting estimates and key assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are outlined below:

(a) Estimation on impairment of goodwill

The Group tests annually whether goodwill has suffered any impairment. The recoverable amount of asset groups and groups of asset groups is the present value of the future cash flows expected to be derived from them. These calculations require use of estimates (Note V(15)).

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If management revises the gross margin that is used in the calculation of the future cash flows of asset groups and groups of asset groups, and the revised gross margin is lower than the one currently used, the Group would need to recognise further impairment against goodwill, and property, plant and equipment.

If management revises the pre-tax discount rate applied to the discounted cash flows, and the revised pre-tax discount rate is higher than the one currently applied, the Group would need to recognise further impairment against goodwill and property, plant and equipment.

If the actual gross margin/pre-tax discount rate is higher/lower than management’s estimates, the impairment loss of goodwill previously provided for is not allowed to be reversed by the Group.

(b) Estimated impairment of fixed assets

Fixed assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. The recoverable amounts of fixed assets have been determined based on value-in-use calculations. These calculation and valuations require the use of judgment and estimates, such as gross margin, sales, growth rate and discount rate.

If the Group revises the gross margin, sales growth rate or discount rate that is used in the calculation of the future cash flows of fixed assets, and the revised factor is lower/higher than the one currently used, the Group would need to recognise further impairment against fixed assets.

If the actual gross margin, sale growth rate or discount rate is higher/lower than management’s estimates, the impairment loss of fixed assets previously provided for is not allowed to be reversed by the Group.

(c) Depreciation and amortisation

Fixed assets (exclude the estimated residual values), intangible assets and long-term prepaid expenses are depreciated or amortised on the straight-line basis or the exploitation basis over their estimated useful lives. Management estimated useful lives of fixed assets based on the experience and expected technical innovations periodically to determine the related depreciation and amortisation expenses for the reporting period. When the previous estimate changes significantly, the depreciation and amortisation expenses would be adjusted in future periods.

(d) Estimation of provision of retirement benefits

The carrying amount of provision for employee benefits is reviewed by the Group at each balance sheet date. The carrying value of provision is determined based on generally accepted valuation procedures and practices which depend on a number of estimation (Note V(32)(a)), not all of which can be easily quantified or ascertained. If the increase of average wage or the average life expectancy after retirement is higher than expectation, the provision of retirement benefits would increase accordingly and be charged to profit or loss when it occurred.

(e) Income taxes

The Group is subject to income taxes in different jurisdictions. There are many

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transactions and events for which the ultimate tax determination is uncertain during the ordinary course of business. Significant judgment is required from the management in determining the provision for income taxes in each of these jurisdictions. The Group recognises income taxes in each jurisdiction based on estimates. Where the final tax outcome of these matters is different from the amounts that were initially recorded, such differences will impact the income tax and deferred tax provisions in the period in which such determination is made.

(f) Deferred taxation

Deferred tax assets arising from the unutilised tax losses and other deductible temporary differences have been recognised at balance sheet date. Realisation of the deferred tax assets depends on whether there is sufficient taxable profit in future. If actual future profit is less than what is expected, deferred tax assets may have been impaired. The provision of deferred tax assets will be charged to income statement when deferred tax assets are impaired.

III Tax

The types and rates of taxes applicable to the Group are set out below:

Type Tax rates Tax base

Corporate income tax

15% or 25% Taxable income

Value-added tax 17% Taxable value added amount (tax payable represents output VAT calculated using the taxable sales amount multiplied by the effective tax rate less deductible input VAT)

Business tax 3% or 5% Taxable service income

The corporate income tax rate applicable to the Company and the subsidiaries is 25%, except for the subsidiaries as below:

Huaxin Cement (Tibet) Co., Ltd. is a manufacturing enterprise established in western development zone of the PRC. Pursuant to the circular issued by local ethical authority, the applicable corporate income tax rate of Huaxin Cement (Tibet) Co., Ltd. is 15% from 2012 to 2020.

Huaxin Cement Chongqing Fuling Co., Ltd. and Huaxin Cement (Enshi) Co., Ltd. are manufacturing enterprises established in western development zone of the PRC. Pursuant to circulars issued by local municipal authority, the applicable corporate income tax rate of these companies for 2012 is reduced to 15%.

Hunan Huaxin Environment Engineering (Wuxue) Co., Ltd. has obtained an approval from Wuxue Municipal State Tax Administration for the tax exemption as protecting environment and saving both energy and water. The corporate income tax will be exempted in the first three years and allowed a 50% reduction from the fouth year to the sixth year. The tax exemption is effective from 2012.

95

IV Business combination and consolidation (1) Significant Subsidiaries Amounts are in RMB thousand unless otherwise stated (a) Subsidiaries established by the Group

Direct or

indirect holding

Place of registration

Nature of business

Registered capital

Principal activities

Legal status

Legal representative

Organisation code

Year-end balance of investment

Other assets

constitute investment

in substance

Attributable equity

interest

Voting right

Consolidated or not

Minority interests

Loss shared

by minority

interests

Huaxin Cement (Yangxin) Co., Ltd.(Note i)

Direct Yangxin Manufacturing 500,000 Production and sale of

cement

Limited company

Du Ping 75703303-1 653,713 - 100% 100% Yes - -

Huaxin Cement (Wuxue) Co., Ltd.

Direct Wuxue Manufacturing 300,000 Production and sale of

cement

Limited company

Du Ping 79059172-1 300,000 - 100% 100% Yes - -

Huaxin Cement (Chibi) Co., Ltd.

Direct Chibi Manufacturing 140,000 Production and sale of

cement

Limited company

Du Ping 66225936-1 140,000 - 100% 100% Yes - -

Huaxin Cement (Nantong) Co., Ltd.

Direct Nantong Manufacturing 108,000 Production and sale of

cement

Limited company

Du Ping 60830542-7 89,680 - 85% 85% Yes 20,199 -

Huaxin Cement (Macheng) Co.,Ltd.

Direct Macheng Manufacturing 65,000 Production and sale of

cement

Limited company

Du Ping 67369296-1 65,000 - 100% 100% Yes - -

Wuhan Wugang Huaxin CementCo., Ltd.

Direct Wuhan Manufacturing 40,000 Production and sale of

cement and

Limited company

Wang Pinggang

71792121-0 20,000 - 50% 50% Yes 50,836 -

Huaxin Cement (Xiantao) Co., Ltd.

Direct Xiantao Manufacturing 23,900 Production and sale of

cement

Limited company

Du Ping 18166708-1 14,658 - 80% 80% Yes 7,967 -

Huaxin Cement (Wuhan) Co., Ltd. (Note i)

Direct and

indirect

Wuhan Manufacturing 60,000 Production and sale of

cement

Limited company

Du Ping 77819219-7 60,000 - 100% 100% Yes - 206

Huaxin Cement (Xiangyang) CoLtd.

Direct Xiangyang Manufacturing 140,000 Production and sale of

cement

Limited company

Yuan Dezu 78817723-0 140,000 - 100% 100% Yes - -

Huaxin Cement Xiangyang Xiangcheng Co

Direct Xiangyang Manufacturing 40,000 Production and sale of

cement

Limited company

Yuan Dezu 67976818-9 40,000 - 100% 100% Yes - -

Huaxin Cement (Henan XinyangCo., Ltd.

Direct Xinyang Manufacturing

200,000 Production and sale of

cement

Limited company

Yuan Dezu 67168057-X 200,000 - 100% 100% Yes - -

96

Huaxin Cement (Yichang) Co.,

Direct Yichang Manufacturing


cement

Limited company

Yang Hongbing

73271423-6 505,590 - 100% 100% Yes - -

Huaxin Cement (Enshi) Co., Ltd. (Note iii)

Direct and

indirect

Enshi Manufacturing


cement

Limited company

Yang Hongbing

75340368-0 60,000 - 100% 100% Yes - -

Huaxin Cement (Zigui) Co., Ltd.

Direct Zigui Manufacturing


cement

Limited company

Yang Hongbing

67039829-X 240,000 - 100% 100% Yes - -

Huaxin Cement (Sangzhi) Co., Ltd.

Direct Zhang jiajie Manufacturing


cement

Limited company

Yang Hongbing

58701870-0 24,000 - 80% 80% Yes 6,000 -

Huaxin Cement (Zhuzhou) Co Ltd

Direct Zhuzhou Manufacturing


cement

Limited company

Mei Xiangfu 67555088-7 280,000 - 100% 100% Yes - -

Huaxin Cement (Chenzhou) Co., Ltd.

Direct Chenzhou Manufacturing


cement

Limited company

Mei Xiangfu 67356549-5 220,000 - 100% 100% Yes - -

Huaxin Cement (Daoxian) Co., Ltd.

Direct Daoxian Manufacturing


cement

Limited company

Mei Xiangfu 68743901-6 180,000 - 100% 100% Yes - -

Hunan Huaxin Xianggang Cement Co., Ltd

Direct Xiangtan Manufacturing


cement

Limited company

Peng Qingyu 79032869-1 85,500 - 60% 60% Yes 126,328 -

Huaxin Cement (Lengshuijiang) Co Ltd

Direct Leng shuijiang

Manufacturing


cement

Limited company

Mei Xiangfu 55073830-9 180,000 - 90% 90% Yes 20,000 -

Huaxin Cement (Yueyang) Co., Ltd. (Note iii)

Direct and

indirect

Yueyang Manufacturing


cement

Limited company

Mei Xiangfu 76802175-7 25,000 - 100% 100% Yes - -

Huaxin Cement (Quxian)

Direct Quxian Manufacturing


cement

Limited company

Zhang Xunwei 68042342-8 200,000 - 100% 100% Yes - -

Huaxin Cement (Wanyuan)

Direct Wanyuan Manufacturing


cement

Limited company

Zhang Xunwei

69480082-9 127,000 - 100% 100% Yes - -

Huaxin Cement Chongqing Fuling Co

Direct Fuling Manufacturing


cement

Limited company

Zhang Xunwei

68147643-3 200,000 - 100% 100% Yes - -

Huaxin Cement (Zhaotong) Co., Ltd. (Note iii)

Direct and

indirect

Zhaotong Manufacturing


cement

Limited company

Hu Limin 76706928-1 75,000 - 100% 100% Yes - -

Huaxin Cement (Kunming Dongchuan)

Direct Kunming Manufacturing


cement

Limited company

Hu Limin 67873303-X 120,000 - 100% 100% Yes - -

Huaxin Cement (Tibet) Co., Ltd.

Direct Tibet Manufacturing


cement

Limited company

Chai Jianpin 74191102-0 50,000 - 79% 79% Yes 104,397 -

Huaxin Concrete (Wuhan)

Direct Wuhan Manufacturing


concrete

Limited company

Liu Xiaofeng 77139116-9 80,502 - 100% 100% Yes - -

97

Huaxin Concrete Co., Ltd.

Direct Wuhan Manufacturing


concrete

Limited company

Liu Xiaofeng 59451997-6 50,000 - 100% 100% Yes - -

Huaxin Aggregate (Yangxin)

Direct Yangxin Manufacturing

60,000 Production and sale of Aggregate

Limited company

Liu Xiaofeng 56270636-3 60,000 - 100% 100% Yes - -

Huaxin Cement (Huangshi) Equipment Manufacturi

C L d

Direct Huangshi Maintenance and

installation

130,000 Manufacturing, maintenance

and installation of Mechanical &

El i l l

Limited company

Li Yeqing 67978032-1 130,000 - 100% 100% Yes - -

Huangshi Huaxin Packaging Co., Ltd.

Direct Huangshi Manufacturing 60,000 Production and sale of packaging materials

Limited company

Peng Qingyu 75342219-5 60,230 - 100% 100% Yes - -

Huaxin Cement (Huangshi) Logistics Co., Ltd.

Direct Huangshi Transportation 20,000 Load, unload, storage and transport of

bulk and bagged

t

Limited company

Peng Qingyu 67646979-X 20,000 - 100% 100% Yes - -

Huaxin Cement Technology Management (Wuhan) C Ltd

Direct Wuhan Consulting service

20,000 R&D and consulting

service

Limited company

Peng Qingyu 67277551-1 20,000 - 100% 100% Yes - -

Huaxin Cement Scientific Research and Design C L d

Direct Huangshi Technology service

1,000 Designing of cement

project and consulting service for

Limited company

Hu Zhenwu 87843625-9 990 - 99% 99% Yes 25 -

Huaxin Environment Engineering Co., Ltd. (Note iv)


cement addictives

Limited company

Li Yeqing 58245435-1 150,000 - 100% 100% Yes - -

Huaxin Zhongya Investment (Wuhan) Co., Ltd. (N )

Direct Wuhan Technology service

100,000 Investment in construction

materials enginerring, designing of

Limited company

Li Yeqing 57829133-4 51,000 - 51% 51% Yes 48,445 465

Huaxin Aggregate Co., Ltd.

Direct Huangshi Manufacturing 50,000 Production and sale of Aggregate

Limited company

Liu Xiaofeng 05261442-6 50,000 - 100% 100% Yes - -

Huaxin New Building Material Co., Ltd.


Constructiion

Limited company

Liu Xiaofeng 05203354-1 50,000 - 100% 100% Yes - -

98

Huaxin Equipment Engineering Co., Ltd.

Direct Wuhan Technology service

60,000 Manufacturing and

installation of Mechanical

and Electrical i t

Limited company

Hu Zhenwu 05572487-4 60,000 - 100% 100% Yes - -

Huaxin (Hong Kong) International Holdings Co., Ltd.

Direct Hongkong Investment service

HKD 65,180

Service and sale of

Investment and

Engineering

Limited company

Li Yeqing N/A 52,907 - 100% 100% Yes - -

Huaxin Gayur Cement Co., Ltd

Indirect Tajikistan Manufacturing TJS98,200

Production and sale of

cement

Limited company

Liu Yunxia N/A 73,650 38.25% 38.25% Yes 23,637 -

99

(i) The Company acquired the 20% minority equity interest in Huaxin Cement (Yangxin) Co., Ltd. on 8 May 2012. Therefore, the Company’s equity interest in Huaxin Cement (Yangxin) Co., Ltd. Increased from 80% to 100%. Meanwhile, the Company’s equity interest in Huaxin Cement (Wuhan) Co., Ltd., which was jointly established by Huaxin Cement (Yangxin) Co., Ltd. and the Company, increased from 94% to 100%.

(ii) Wugang Huaxin Cement Co.,Ltd. is a subsidiary of the Company as the Company can control its operating decision.

(iii) The Company acquired the 30% minority equity interest in Huaxin Cement (Yichang) Co., Ltd. on 17 May 2012. Therefore, the Company’s equity interest in Huaxin Cement (Yichang) Co., Ltd. Increased from 70% to 100%. Meanwhile the Company’s equity interest in Huaxin Cement (Enshi) Co., Ltd., Huaxin Cement (Yueyang) Co., Ltd. and Huaxin Cement (Zhaotong) Co., Ltd., which was jointly established by Huaxin Cement (Yichang) Co., Ltd. and the Company, increased from 90.1% to 100%, 97% to 100% and 88% to 100% respectively.

(iv) The Company hold 100% equity interest in Huaxin Aggregate Co., Ltd. The Company made additional capital contributions of RMB100,000,000 to Huaxin Aggregate Co., Ltd. on 12 January 2012. The paid-in capital and registered capital of Huaxin Aggregate Co., Ltd. both increased to RMB150,000,000.

(v) The Company, Huaxin Group Construction & Installation Co., Ltd. and Nanjing Gede Cement Technology & Engineering Co., Ltd. made additional capital contributions of RMB50,000,000 to Huaxin Zhongya Investment (Wuhan) Co., Ltd. proportionately on 28 May 2012. The paid-in capital and registered capital of Huaxin Aggregate Co., Ltd. both increased to RMB100,000,000. The Company, Huaxin Group Construction & Installation Co., Ltd. and Nanjing Gede Cement Technology & Engineering Co., Ltd. hold 51%, 29% and 20% equity interest in Huaxin Zhongya Investment (Wuhan) Co., Ltd. respectively.

100

(b) Subsidiaries acquired through business combination not under common control

Direct orIndirectholding


Nature of business

Registered capital


Legal status

Legal represent-ative

Organisation code

Year-end balance of investment

Other assets

constitute investment

in

Attributable equity

interest

Voting right

consolidated or not

Minority nterests

Loss shared

by minority interestsHuaxin Cement

Suizhou Co., Ltd.

Direct Suizhou Manufacturing 41,000 Production and sale

of cement

Limited company

Yuan Dezu 67978787-3 24,600 - 60% 60% Yes 17,869 -

Huaxin Cement (Changyang) Co., Ltd.

Direct Chang yang

Manufacturing 170,000 Production and sale

of cement

Limited company

Yang Hongbing

75342762-3 117,591 - 100% 100% Yes - -

Huaxin Cement (Jingzhou) Co., Ltd.

Direct Jingzhou Manufacturing 70,800 Production and sale

of cement

Limited company

Yang Hongbing

69176084-1

70,800 - 100% 100% Yes - -

Huaxin Cement (Shishou) Co., Ltd.

Direct Shishou Manufacturing 19,800 Production and sale

of cement

Limited company

Yang Hongbing

68265941-8 10,890 - 55% 55% Yes 10,107 -

Huaxin Cement (Hefeng) National Materials Co., Ltd.

Direct Hefeng

Manufacturing 47,640 Production and sale

of cement

Limited company

Yang Hongbing

76067953-8 24,300 - 51% 51% Yes 31,590 -

Huaxin Cement (Diqing) Co., Ltd.

Direct Diqing Manufacturing 95,000 Production and sale

of cement

Limited company

Ke Youliang 66550354-2 65,550

- 69% 69% Yes 30,427 606

Huaxin Hongta Cement (Jinghong) Co., Ltd.

Direct Jinghong Manufacturing 179,610 Production and sale

of cement

Limited company

Ke Youliang 66825757-8 91,601 - 51% 51% Yes 96,469 -

Huaxin Cement (Fangxian) Co., Ltd.

Direct Fangxian Manufacturing 80,000 Production and sale

of cement

Limited company

Yuan Dezu 66765299-8 30,125 - 70% 70% Yes 20,009 -

Huaxin Jinlong Cement (Yunxian) Co., Ltd.

Direct Yunxian Manufacturing 80,000 Production and sale

of cement

Limited company

Yuan Dezu 76742480-2 363,802 - 80% 80% Yes 64,226 -

Wanyuan Dabashan Cement Co., Ltd.

indirect Wanyuan Manufacturing 50,000 Production and sale

of cement

Limited company

Wang Yongyu 70907311-9 61,500 - 100% 100% Yes - -

101

(2) New subsidiaries included in the scope of consolidation in the current year (a) New subsidiaries included in the scope of consolidation in the current year

31 December 2012Net assets

Net profit/(loss)

Huaxin Concrete Co., Ltd. (Note i)

49,992,051 (7,949)Huaxin Aggregate Co., Ltd. (Note ii)

49,968,097 (31,903)Huaxin New Building Material Co., Ltd.

(Note iii) 49,974,480 (25,520)Huaxin Equipment Engineering Co., Ltd.

(Note iv) 59,969,574 (30,426)Huaxin (Hong Kong) International

Holdings Co., Ltd. (Note v) 52,442,832 (464,620)Huaxin Gayur Cement Co., Ltd. (Note vi)

118,127,394 -Wanyuan Dabashan Cement Co., Ltd.(Note IV(3)) 59,802,130 (1,697,870)

(i) The Company established Huaxin Concrete Co., Ltd. on 2 May 2012, of which the

registered capital is RMB50,000,000 and operating period is 50 years. (ii) The Company established Huaxin Aggregate Co., Ltd. on 28 August 2012, of which the

registered capital is RMB50,000,000 and operating period is 50 years. (iii) The Company established Huaxin New Building Material Co., Ltd. on 12 September 2012,

of which the registered capital is RMB50,000,000 and operating period is 50 years. (iv) The Company established Huaxin Equipment Engineering Co., Ltd. on 5 November 2012,

of which the registered capital is RMB60,000,000 and operating period is 50 years. (v) The Company established Huaxin (Hong Kong) International Holdings Co., Ltd. on 17

September 2012, of which the registered capital is HKD65,180,000, equivalent to RMB52,907,000.

(vi) The Company’s wholly owned subsidiary, Huaxin Zhongya Investment (Wuhan) Co., Ltd.

and Gayur Limited Liability Company established Huaxin Gayur Cement Co., Ltd., of which the registered capital is TJS98,200,000, equivalent to RMB118,907,000. Huaxin Zhongya Investment (Wuhan) Co., Ltd. and Gayur Limited Liability Company hold 75% and 25% equity interests in Huaxin Gayur Cement Co., Ltd. respectively.

(3) Business combination involving entities not under common control

Goodwill Calculation of Goodwill

102

Wanyuan Dabashan Cement Co., Ltd. (Note (a))

- Goodwill is recognised at the excess of the cost of the business combination over the acquirer’s interest in the net fair value of the acquirees’ identifiable net assets acquired in the business combination as at the acquisition date. No Goodwill is recognised in this acquisition.

(a) On 30 November 2012, the Company’s wholly owned subsidiary, Huaxin Cement (Wanyuan) Co., Ltd. acquired 100% equity interest in Wanyuan Dabashan Cement Co., Ltd. The acquisition date is 30 November 2012, which is the date when the Company effectively obtains the power to control Wanyuan Dabashan Cement Co., Ltd. Details of net assets acquired and goodwill are as follows:

Consideration －Cash paid 35,480,000－Consideration to be paid 26,020,000Total cost of combination

61,500,000

Less: fair value of net assets acquired

(61,500,000)

Goodwill

-

The identifiable assets and liabilities of Wanyuan Dabashan Cement Co., Ltd. at the acquisition date and the cash flows relating to the acquisition are as follows:

Fair value Carrying amount Acquisition

dateAcquisition

date 31 December

2011 Cash at bank and in hand 497,311 497,311 2,155,514Accounts receivable 17,837 17,837 474,719Advances to suppliers 320,794 320,794 941,915Other receivable 5,265,265 5,265,265 29,121,000Inventories 8,229,229 8,229,229 13,993,928Fixed assets 121,495,314 118,063,662 126,568,513Construction in progress - - 2,292,050Intangible assets 13,225,009 - 4,199,157Long-term prepaid expenses - - 1,771,231Less: Accounts payable (27,853,207) (27,853,207) (10,058,588)

Advances from customers (851,381) (851,381) (1,157,338)Employee benefits payable (1,291,913) (1,291,913) (2,053,377)Taxes and other levies payable 411,461 411,461 143,869Interests payable (378,584) (378,584) (10,278,226)Other payables (13,902,970) (13,902,970) (13,272,867)Current portion of non-current

liabilities (39,520,000) (39,520,000) -Long-term borrowings - - (109,095,000)Deferred tax liabilities (4,164,165) - -

Net assets 61,500,000 49,007,504 35,746,500

103

Consideration settled in cash － Cash paid in previous years 35,000,000－ Cash paid in the current year 480,000－ Cash to be paid 26,020,000Less: cash in the subsidiary acquired (497,311)Net cash outflow on acquisition of a subsidiary 61,002,689

Revenue, net profit and cash flows of Wanyuan Dabashan Cement Co., Ltd. for the period from the acquisition date to 31 December 2012 are as follows:

Revenue 286,660Net loss (1,697,870)Cash outflows from operating activities (74,109)Net cash outflows (273,676) The Group applies various valuation techniques to determine the fair value of assets and liabilities of Wanyuan Dabashan Cement Co., Ltd. at the acquisition date. The evaluation methods and key assumptions of major assets are as follows:

The evaluation method of fixed assets is the replacement costs method which is the current replacement cost of assets less depreciation and other factors of “wear and tear”. The calculation formula of the value is equal to replacement price multiplied by integrated depreciation rate.

Intangible assets are mainly land-use rights, which apply the method of base price of land coefficient modification - the management benchmark land price with modification of remaining useful life, region, market and other factors.

V Notes to the significant items in the consolidated financial statements (1) Cash at bank and in hand 31 December 2012 31 December 2011 Foreign

currencies balances

Exchange rate

Denominated in RMB

Foreign currencies

balances

Exchange rate

Denominated in RMB

Cash in hand

RMB - - 733,708 - - 126,430USD 20 6.2855 126 20 6.3009 126EUR 1,538 8.3176 12,792 2,738 8.1625 22,349SFR 5 6.8219 34 5 6.7287 34HKD 9,915 0.8108 8,039 9,915 0.8107 8,038SGD 43 5.0929 219 43 4.8679 209TJS 7,366 1.3086 9,639 - - -

764,557 157,186Cash at bank

RMB - - 2,414,805,407 - - 2,768,786,665USD 60,105,755 6.2855 377,794,723 8,550 6.3009 53,872HKD 1,018,802 0.8108 826,045 - - -TJS 415,958 1.3086 544,322

2,793,970,497 2,768,840,537Restricted

cash RMB - - 44,501,196 - - 56,439,479

2,839,236,250 2,825,437,202

104

As at 31 December 2012, restricted cash of RMB44,501,196 (31 December 2011:

RMB56,439,479) includes bank deposits of RMB18,288,372, RMB26,211,915 and RMB909 that have been pledged to banks as letters of guarantee, bank acceptance Notes and letter of credit respectively. The restricted cash is not regarded as cash and cash equivalents when preparing the cash flow statements.

(2) Notes receivable

31 December 2012 31 December 2011 Trade acceptance Notes 10,000,000 500,000Bank acceptance Notes 806,105,992 1,151,954,185 816,105,992 1,152,454,185

As at 31 December 2012, Notes receivable of RMB30,000,000 (31 December 2011:

RMB126,387,738) was pledged as collateral for the Group’s short-term borrowings of RMB30,000,000 (31 December 2011: RMB119,200,000) (Note V(19)(a) (i)). The five largest amounts of the pledged Notes receivable and other analysis are as follows: Issuer Issue date Maturity date Amount

Issuer A 20 July 2012 20 January 2013 2,000,000Issuer B 19 July 2012 19 January 2013 1,000,000Issuer C 20 July 2012 20 January 2013 1,000,000Issuer D 17 August 2012 17 February 2013 1,000,000Issuer E 31 August 2012 28 February 2013 1,000,000

6,000,000

As at 31 December 2012, bank acceptance Notes that are not mature and have been endorsed to third parties amounted to RMB1,044,610,442 (31 December 2011: RMB967,086,771). The top five endorsed Notes which are not mature are set out below: Issuer Issue date Maturity date Amount Issuer F 29 September 2012 29 March 2013 13,810,000Issuer G 23 August 2012 23 February 2013 8,000,000Issuer H 24 August 2012 24 February 2013 7,500,000Issuer I 16 July 2012 16 January 2013 5,750,000Issuer J 18 December 2012 18 June 2013 5,000,000 40,060,000

(3) Accounts receivable

31 December 2012 31 December 2011

Accounts receivable 825,155,953 624,608,290Less: bad debt provision (20,641,052) (13,448,109) 804,514,901 611,160,181

105

(a) The ageing of accounts receivable is analysed below:

31 December 2012 31 December 2011 Within 1 year 742,549,423 580,893,016Between 1 and 2 years 57,985,712 21,890,957Between 2 and 3 years 11,443,009 15,756,861Over 3 years 13,177,809 6,067,456 825,155,953 624,608,290

(b) Accounts receivable classified by nature:

31 December 2012 31 December 2011 Carrying amount Bad debt provision Carrying amount Bad debt provision Amount % Amount % of

provisionAmount % Amount % of

provision Debtors with

significant balance 357,640,894 44% - - 222,817,216 36% - -

Others with insignificant balance but assessed individually 12,033,605 1% (12,033,605) 100% 9,102,581 1% (9,102,581) 100%

Debtors with insignificant balance and grouped by credit risk 455,481,454 55% (8,607,447) 2% 392,688,493 63% (4,345,528) 1%

825,155,953 100% (20,641,052) 3% 624,608,290 100% (13,448,109) 2%

(c) As at 31 December 2012, accounts receivable with amounts that are not individually

significant but that the related provision for bad debts is provided on the individual basis are analysed as follows:

Amounts Bad debt provision%

of provision ReasonClient A 2,833,146 (2,833,146) 100% Unlikely to be recoverableClient B 2,271,762 (2,271,762) 100% Unlikely to be recoverableClient C 1,653,242 (1,653,242) 100% Unlikely to be recoverableOthers 5,275,455 (5,275,455) 100% Unlikely to be recoverable 12,033,605 (12,033,605)

(d) Accounts receivable which are individually insignificant and grouped on the basis of

similar credit risk are analysed as below:

31 December 2012 31 December 2011 Carrying amount Bad debt provision Carrying amount Bad debt provision

Amount % Bad debt

provisions% of

provisionAmount % Bad debt

provisions % of

provision

Within 1 year 384,873,151 84.5% - - 361,857,047 92.1% - -Between 1

and 2 years 57,854,386 12.7% (5,785,439) 10% 20,555,990 5.2% (2,055,599) 10%

Between 2 and 3 years 11,397,784 2.5% (2,279,557) 20% 8,965,904 2.3% (1,766,029) 20%

106

Over 3 years 1,356,133 0.3% (542,451) 40% 1,309,552 0.4% (523,900) 40% 455,481,454 100% (8,607,447) 2% 392,688,493 100% (4,345,528) 1%

(e) Accounts receivable that the related provision for bad debts had been provided in full amount

or in large proportion in previous years, but are collected or reversed in full amount or in large proportion in the current year are as follows: Reason for

reversalBasis of original

provision Reversed provision

Amounts received

Client D

Received parts of receivable

Unlikely to be recoverable 1,485,049 1,485,049

Client E


Unlikely to be recoverable 269,585 269,585

Client F



Others



2,124,986 2,124,986 (f) As at 31 December 2012, the write-off amount of accounts receivable was RMB

1,200,172(31 December 2011: RMB 851,037). (g) As at 31 December 2012, there was no amount due from shareholders who individually

hold more than 5% (including 5%) shares of the Company (31 December 2011: nil).

(h) As at 31 December 2012, amounts due from top five accounts are analysed as below:

Relationship with the Group

Amounts Ageing % of total balance

Client G Third party 29,256,672 Within 1 year 4%Client H Third party 21,498,172 Within 1 year 3%Client I Third party 11,908,565 Within 1 year 1%Client J Third party 10,718,112 Within 1 year 1%Client K Third party 9,485,193 Within 1 year 1% 82,866,714 10%

(i) As at 31 December 2012, there was no amount due from the related parties of the Group

(31 December 2011: nil). (j) As at 31 December 2012, there were no amounts denominated in foreign currencies (31

December 2011: nil). (4) Other receivables


Advances to staff

10,779,619 10,971,344Deposits 126,146,008 80,807,780Payments to other companies (Note (a)) 85,676,874 -

107

Others 71,228,603 59,965,718 293,831,104 151,744,842 Less: bad debt provision (5,759,634) (2,806,381) 288,071,470 148,938,461

(a) Payments to other companies:

As at 31 December 2012, the payments represented interest-bearing payments related to various companies in project corporation with the Group which included the payment to a company with short term portion of RMB45,000,000 and long term portion of RMB30,000,000(31 December 2011: nil).

(b) The ageing of other receivables are analysed as follows:

31 December 2012 31 December 2011 Within 1 year 255,778,253 97,271,826Between 1 and 2 years 23,425,809 7,922,297Between 2 and 3 years 7,868,993 39,747,854Over 3 years 6,758,049 6,802,865 293,831,104 151,744,842

(c) Other receivables classified by nature:

31 December 2012 31 December 2011 Carrying amount Bad debt

provisions Carrying amount Bad debt provisions

Amount % Bad debt provision

% of provision

Amount % Bad debt provision

% of provision

Debtors with significant

balance 260,679,461 88.7% - - 109,366,415 72.1% - -Others with

insignificant balancebut assessedindividually 3,192,484 1.1% (3,192,484) 100% 1,740,319 1.1% (1,740,319) 100%

Debtors withinsignificant balanceand grouped bycredit risk 29,959,159 10.2% (2,567,150) 9% 40,638,108 26.8% (1,066,062) 3%

293,831,104 100% (5,759,634) 2% 151,744,842 100% (2,806,381) 2%

(d) As at 31 December 2012, other receivables with amounts that are individually significant

and that the related provision for bad debts is provided on the individual basis are analysed as follows:

Amount

Bad debt provision

% of provision

Reason

Company L 500,000 (500,000) 100% Unlikely to be recoverable

Company M

350,000

(350,000) 100% Unlikely to be recoverableCompany N 370,000 (370,000) 100% Unlikely to be recoverableCompany O 195,838 (195,838) 100% Unlikely to be recoverable

108

Others

1,776,646

(1,776,646) 100% Unlikely to be recoverable

3,192,484 (3,192,484)

(e) Other receivables which are individually insignificant and grouped on the basis of similar

credit risk are analysed as below:


Carrying amount Bad debt provisions Carrying amount Bad debt provisions

Amount % Bad debt

provision % of


provision % of

provisionWithin 1 year 13,976,692 46% - - 35,753,186 88% - -Between 1 to

2 years

10,053,091 34% (1,005,309) 10% 2,456,258 6% (245,626) 10%Between 2 to

3 years

4,047,493 14% (809,499) 20% 755,153 2% (151,032) 20%

Over 3 years

1,881,883 6% (752,342) 40% 1,673,511 4% (669,404) 40%

29,959,159 100% (2,567,150) 9% 40,638,108 100% (1,066,062) 3%

(f) There was no other receivables which had been provided in full or by significant portion

but were received in full or by significant portion in the current year. (g) As at 31 December 2012, there was no significant write-off of other receivable. (h) As at 31 December 2012, there was no amount due from shareholders who individually

hold more than 5% (including 5%) shares of the Company (31 December 2011: nil). (i) As at 31 December 2012, the top five accounts are analysed as below:

Relationshipwith the Group

Amount Aging % of totalbalance

Company P Third party 45,000,000 Within 1 year 15%Company Q Third party 30,000,000 Within 1 year 10%Company R Third party 29,285,714 Within 1 year 10%Company S Third party 20,487,094 Between 1 and 2 years 7%Company T Third party 18,580,000 Between 1 and 2 years 6%

143,352,808 48%

(j) As at 31 December 2012, the amount of other receivables due from the related parties of

the Group amounted to RMB13,533,000(31 December 2011: RMB14,525,518) (Note VII (6)).

(k) Other receivables denominated in foreign currency are set out below:


Foreign currency

Exchange rate

Denominated in RMB

Foreign currency

Exchange rate

Denominated in RMB

TJS 1,430,612 1.3086 1,872,099 - - -USD 2,470,924 6.2855 15,530,993 500,000 6.3009 3,150,450 17,403,092 3,150,450

(5) Advances to suppliers

109

(a) The ageing of advances to suppliers is analysed as follows:

31 December 2012 31 December 2011 Amount % of total

balanceAmount % of total

balance Within 1 year 95,917,820 97% 75,326,334 97%Between 1 and 2 years 3,109,615 3% 1,842,108 2%Between 2 and 3 years

29,917 -

497,428 1%Over 3 years

184,538 -

149,271 - 99,241,890 100% 77,815,141 100%

As at 31 December 2012, advance to suppliers with ageing over one year amounted to

RMB3,324,070(31 December 2011: RMB2,488,807), mainly comprising the prepayments for raw materials for which the Group is still reconciling the balances with the suppliers.

(b) As at 31 December 2012, the top five advances to suppliers are analysed as below:

Relationship with the Group

Amount % of totalbalance

Prepayment time

Reason of unsettlement

Supplier A Third party 10,820,564 11% December

2012Prepayment for materials

Supplier B Third party 10,000,000 10% December 2012

Prepayment for materials

Supplier C Third party 2,773,315 3% December 2012

Prepayment of utility charges

Supplier D Third party 2,771,543 3% December 2012


Supplier E Third party 2,340,000 2% December 2012


28,705,422 29%

(c) As at 31 December 2012, there was no advance to shareholders who individually hold

more than 5% (including 5%) of the Company’s shares (31 December 2011: nil). (d) As at 31 December 2012, there was no advance to related parties of the Group (31

December 2011: nil). (e) As at 31 December 2012, advance to suppliers denominated in foreign currency are analysed

as below:

31 December 2012 31 December 2011 Foreign

currencies balances

Exchange rate

Denominated in RMB

Foreign currencies

balances

Exchange rate

Denominated in RMB

EUR 105,000 8.3176 873,348 - - -

(6) Inventories Inventories classified by nature:


110

Book value Provision for

write-down

Net bookValue

Book value Provision for

write-down

Net bookValue

Raw materials 250,377,869 - 250,377,869 367,029,067 - 367,029,067Work in progress 197,287,754 - 197,287,754 247,130,501 - 247,130,501Finished goods 234,653,918 - 234,653,918 263,434,776 - 263,434,776Low-value consumables 38,646,192 - 38,646,192 29,027,948 - 29,027,948Auxiliary

materials 93,236,741 (2,538,390) 90,698,351 74,813,915 (1,761,523) 73,052,392Spare parts 112,195,362 (19,686,139) 92,509,223 117,152,169 (15,845,414) 101,306,755 926,397,836 (22,224,529) 90,698,351 1,098,588,376 (17,606,937) 1,080,981,439

Provisions for write-down of inventories are analysed as below:

31

December 2011

Increase Decrease 31

December 2012

Provision for

write-downAcquisition of

subsidiaries Write-back Write-off Auxiliary

materials 1,761,523 843,700 - (66,833) - 2,538,390Spare parts 15,845,414 6,200,413 1,060,522 (150,494) (3,269,716) 19,686,139 17,606,937 7,044,113 1,060,522 (217,327) (3,269,716) 22,224,529

As at 31 December 2012, provisions for write-down of inventories are determined at the

excess amount of the carrying amounts of the inventories over their net realisable value. The amounts of provision write-off mainly resulted from the sale of inventories.

(7) Other current assets Amount represents deductible value-added-tax. (8) Available-for-sale financial assets


Available-for-sale liability

instruments(Note (a))Note

20,000,000 3,200Available-for-sale equity instruments (Note (b))Note 38,792,462 35,813,520

- measured at fair value (Note (b)(i))Note 24,292,196

21,313,254

- measured at cost method (Note (b)(ii))Note 14,500,266

14,500,266

Less: provision for impairment (2,775,600) (2,775,600) 56,016,862 33,041,120

As at 31 December 2012, the available-for-sale financial assets of the Group were

denominated in RMB. The available-for-sale are analysed as below: (a) Available-for-sale liability instruments

As at 31 December 2012, The available-for-sale liability instruments are the Group’s

111

investment in two concrete enterprises and charged at fixed return on the investment amount. The investment cost is RMB14,000,000 and RMB6,000,000 respectively.

(b) Available-for-sale equity instruments (i) Amounts represented investments in equity securities of two A share listed companies. These investments are stated at fair value by reference to the market prices of the equity securities. The accumulated gain from changes in fair value as at 31 December 2012 amounted to RMB20,430,471 (31 December 2011: RMB17,451,529) and the net impact after the provision for deferred tax liabilities was recognised in capital surplus. (ii) Amounts mainly comprised an investment in equity instruments of an unlisted local electric power supply enterprise which is controlled by China Huadian Corporation. The investment as at 31 December 2011 was stated at cost of RMB11,724,466. The equity interest held by the Company is 1.50%.

As at 31 December 2012, provision of RMB2,775,600 had been made for certain investments, based on the assessment of operating results of the investees (31 December 2011: RMB2,775,600).



Associates - without quoted price 338,769,365 14,859,038

The long-term equity investments of the Group are not subject to material restriction on

conversion into cash.

112

Associate Legal status



Organisation code


Registeredcapital

Share holding

Voting right

31 December 2012 2012

Total assetTotal

liability

Net assets belonging to

the parent Sales Net loss Tibet High-Tech

Building Materials Co., Ltd.

Limited company Tibet Wu Zhenhua 68681113-0


Cement 200,000,000 43.0% 43.0% 46,881,930 14,288,027 32,593,903 25,113,030 (3,462,000) Huangshi Jiuhe

Trading Co., Ltd.Limited

company Huangshi Peng Qingyu 58823536-0Sale of

Cement 18,355,000 32.69% 32.69% 20,922,888 2,955,627 17,967,261 55,123,432 (387,739) Shanghai Wanan

Huaxin Cement CO., Ltd.

Limited company Shanghai Kuang Hong 13420564-2


Cement 100,000,000 49.0% 49.0% 481,364,790 118,804,742 362,560,048 93,069,195 113,492

Zhangjiajie Tianzi Concrete Co., Ltd.

Limited company Zhangjiajie Xiong Zhen 59759424-2


Concrete 10,000,000 30.0% 30.0% 16,974,844 7,150,341 9,824,503 - (175,497)

Shide Jinying (Hong Kong) Co., Ltd.

Limited company Hongkong Li Jianli N/A


Cement HKD10,000 45.0% 45.0% 343,007,497 225,517,318 117,490,179 - (1,067,674)

Movement

Associate Accounting

method Initial

investment

31 December

2011Increase

in investmentShare of

profit or (loss) Cash

dividendOther equity

movement

31 December

2012Share

holdingVoting

rightImpairment

balance

Impairment provided in the current

year (Note V(45)) Tibet High-Tech Building Materials

Co., Ltd. Equity

method 17,200,000 14,859,038 - (1,488,660) - - 13,370,378 43.0% 43.0% - -

Huangshi Jiuhe Trading Co., Ltd. Equity

method - - 6,000,000 (126,752) - - 5,873,248 32.69% 32.69% - - Shanghai Wanan Huaxin Cement

CO., Ltd. Equity

method - - 196,768,921 55,611 - - 196,824,532 49.0% 49.0% - -

Zhangjiajie Tianzi Concrete Co., Ltd. Equity

method - - 3,000,000 (52,649) - - 2,947,351 30.0% 30.0% - - Shide Jinying (Hong Kong) Co., Ltd.

and other subsidiaries Equity

method - - 119,969,337 (215,481) - - 119,753,856 45.0% 45.0% - - 17,200,000 14,859,038 325,738,258 (1,827,931) - - 338,769,365

- 113 -

(10) Fixed assets

31 December

2011

Acquisition of subsidiaries (Note IV(3)) Addition Disposal

31 December 2012

Cost 16,364,911,205 186,079,542 1,404,134,122 (58,633,492) 17,896,491,377Buildings 6,997,782,128 68,801,424 543,654,567 (11,496,772) 7,598,741,347Machinery and equipment 8,742,472,158 116,052,013 744,694,191 (33,234,820) 9,569,983,542Motor vehicles 450,867,770 922,718 40,353,660 (9,309,529) 482,834,619Office equipment and fixtures 173,789,149 303,387 75,431,704 (4,592,371) 244,931,869 Accumulated depreciation (3,856,232,791) (64,584,228) (1,077,311,572) 37,306,653 (4,960,821,938)

Buildings (952,082,204) (16,610,599) (263,365,647) 2,465,922 (1,229,592,528)Machinery and equipment (2,631,991,443) (47,013,836) (704,959,912) 25,654,128 (3,358,311,063)Motor vehicles (197,255,253) (820,618) (67,829,575) 6,611,657 (259,293,789)Office equipment and fixtures (74,903,891) (139,175) (41,156,438) 2,574,946 (113,624,558) Net book value 12,508,678,414 12,935,669,439Buildings 6,045,699,924 6,369,148,819Machinery and equipment 6,110,480,715 6,211,672,479Motor vehicles 253,612,517 223,540,830Office equipment and fixtures 98,885,258 131,307,311 Provision for impairment loss (76,919,536) - -

229,296 (76,690,240)

Buildings (21,428,506) - -

- (21,428,506)Machinery and equipment (55,491,030) - - 229,296 (55,261,734)

Motor vehicles - - -

- -Office equipment and fixtures - - -

- -

Net book value after impairment 12,431,758,878 12,858,979,199Buildings 6,024,271,418 6,347,720,313Machinery and equipment 6,054,989,685 6,156,410,745Motor vehicles 253,612,517 223,540,830Office equipment and fixtures 98,885,258 131,307,311

(a) As at 31 December 2012, buildings and equipment with net book value of

RMB2,655,714,927(original cost of RMB3,601,918,096) (31 December 2011: net book value of RMB2,835,844,958, original cost of RMB3,627,925,725), have been pledged as security for bank borrowings (Note V(19)(a)(ii)) and Note V(29)(a)(i)).

(b) Depreciation charges for the years ended 31 December 2012 and 2011 were recognised in the following items of the consolidated income statements:

31 December 2012 31 December 2011 Cost of sales 977,809,971 846,383,942General and administrative expenses 52,217,852 36,244,842Selling and distribution expenses 47,283,749 42,022,934 1,077,311,572 924,651,718

(c) In 2012, the transfer from construction in progress to fixed assets amounted to RMB1,298,828,399

(2011: RMB1,677,819,724).

- 114 -

(d) As at 31 December 2012, a fixed asset with a carrying amount of RMB144,877,006 (original cost:

RMB163,030,000) was held under finance lease (31 December 2011: carrying amount of RMB157,699,519, original cost of RMB163,030,000)(Note XI). Detailed analysis is as follows:

Original costAccumulated depreciation

Provision for impairment

Carrying amount

Machinery and equipment 163,030,000 (18,152,994) - 144,877,006 (e) Fixed assets with pending ownership certificate: As at 31 December 2012, ownership certificate of certain buildings with net book value of RMB

183,515,741 (original cost of RMB199,990,742) (31 December 2011: net book value of RMB283,777,163, original cost of RMB307,243,373) were not yet obtained.

Reason Estimated Obtain Time Buildings of Huaxin Cement (Nantong) Co., Ltd. In the process of application December 2013Buildings of Huaxin Concrete (Jiujiang) Co., Ltd. In the process of application June 2013Buildings of Huaxin Xiangyang New Building Material Co.,

Ltd. In the process of application

April 2013Buildings of Huaxin Xiangyang Xiangheng New Building

Material Co., Ltd. In the process of application

April 2013 Buildin of Huaxin Fengdan Concrete Co.,Ltd In the process of application December 2013Buildings of Huaxin Xiangyang Jianshan New Material

Co.Ltd Xiangcheng Branch In the process of application

April 2013Buildings of Huaxin Xiangyang Jianshan New Material

Co.Ltd Panggong Branch In the process of application

April 2013 Buildings of Huaxin Cement (Kun Ming Dongchuan) Co.,

Ltd. In the process of application

December 2013 Huaxin Cement (Huangshi) Equipment Manufacturing

Co., Ltd. In the process of application

December 2013 Buildings of Huaxin Cement (Quxian) Co., Ltd. In the process of application June 2013Buildings of Huaxin Cement Chongqing Fuling Co., Ltd. In the process of application June 2013Buildings of Huaxin Cement (Lengshuijiang) Co., Ltd. In the process of application December 2013 Buidlings of Huaxin Concrete Xiangyang Fancheng

Co.Ltd In the process of application

April 2013Buidlings of Huaxin Concrete Xiangyang Nanzhang

Co.Ltd In the process of application

April 2013

- 115 -

(11) Construction in progress


Book value

Provision for

impairmentNet

book value Book valueProvision for

impairment Net

book value Huaxin Cement (Lengshuijiang) Co., Ltd. - 4500t/d Production Line 662,894,959 662,894,959 226,499,151 226,499,151 Huaxin Gayur Cement Co., Ltd. – 3000t/d Production Line 533,173,462 533,173,462 - - Huaxin Concrete RMX Station Project (Self-built project) 67,795,297 67,795,297 31,659,975 31,659,975 Huaxin Environment Engineering Co., Ltd. - Wuhan Refuse Disposal Project 44,522,079 44,522,079 915,262 915,262 Huaxin Environment Engineering Co., Ltd. Chibi Branch - Refuse Disposal Project 27,578,779 27,578,779 - - Huaxin Cement Co., Ltd. – Energy Management Center Project 24,329,909 24,329,909 - - Huaxin Cement (Sangzhi) Co., Ltd. – 2500t/d Production Line 16,964,051 16,964,051 - - Huaxin Cemment (Zhuzhou) Co., Ltd. – Staff Dormitory Project 14,740,731 14,740,731 - - Huaxin Cemment (Yangxin) Co., Ltd. – Cement Storage Warehouse Project 14,526,797 14,526,797 958,216 958,216 Huaxin Cement (Changyang) Co., Ltd. - Cogeneration Project - - - 7,120,405 - 7,120,405 Huaxin Cemment (Wuxue) Co., Ltd. – Limestone Heap shed Project 8,675,394 8,675,394 Huaxin Environment Engineering Co., Ltd. – Wuhan Sludge Disposal Project 12,480 12,480 Huaxin Envronment Engineering (Wuxue) Co., Ltd. – Polluted Soil Conservation Project 60,899,546 60,899,546 Huaxin Hongta Cement (Jinghong) Co., Ltd. – 2000t/d Production Line 367,390,992 367,390,992 Hunan Huaxiang Environmental Enterprise Developing Co.,Ltd.- 1,200,000t/d Mineral

Residue Comprehensive Application Project

-

-

- 103,734,610

- 103,734,610 Huaxin Envronment Engineering (Huangshi) Co., Ltd. – Sludge Disposal Project 3,243,810 3,243,810 Others 257,111,532 257,111,532 159,592,163 159,592,163 1,663,637,596 1,663,637,596 970,702,004 970,702,004

(a) Movement of significant construction in progress:

Project name Budget 31 December

2011Addition Transferred out 31 December

2012 Cost

incurred out of

budget

Construction progress

Accumulatedborrowing

cost capitalised

Borrowingcost

capitalisedin the current

year

Weighted average

interest rate

Financed by

Huaxin Cement (Lengshuijiang) Co., Ltd. - 4500t/d Production Line 689,080,000 226,499,151 438,264,690 (1,868,882) 662,894,959 96% 96% 17,910,178 16,620,226 6.40%

Working capital and borrowings

Huaxin Gayur Cement Co., Ltd. – 3000t/d Production Line 687,165,021 - 533,173,462 - 533,173,462 78% 78% 2,965,040 2,965,040 6.10%


Huaxin Concrete RMX Station Project (Self-built project) 476,565,000 31,659,975 54,887,640 (18,752,318) 67,795,297 37% 37% - - - Working capital Huaxin Environment Engineering Co., Ltd. - Wuhan Refuse Disposal Project 95,000,000 915,262 43,606,817 - 44,522,079 47% 47% 597,333 597,333 6.40%


Huaxin Environment Engineering Co., Ltd. Chibi Branch - Refuse 38,000,000 - 27,578,779 - 27,578,779 73% 73% - - - Working capital

- 116 -

Disposal Project Huaxin Cement Co., Ltd. – Energy Management Center Project 77,138,869 - 24,329,909 - 24,329,909 32% 32% - - - Working capital Huaxin Cement (Sangzhi) Co., Ltd. – 2500t/d Production Line 400,630,000 - 40,885,954 (23,921,903) 16,964,051 10% 10% - - - Working capital Huaxin Cemment (Zhuzhou) Co., Ltd. – Staff Dormitory Project 24,000,000 - 14,740,731 - 14,740,731 61% 61% - - - Working capital Huaxin Cemment (Yangxin) Co., Ltd. – Cement Storage Warehouse Project 24,373,100 958,216 13,568,581 - 14,526,797 60% 60% - - -

Working capital Huaxin Cement (Changyang) Co., Ltd. - Cogeneration Project 68,561,521 7,120,405 52,383,844 (59,504,249) - 100% 100% - - -

Working capital

Huaxin Cemment (Wuxue) Co., Ltd. – Limestone Heap shed Project 18,587,755 8,675,394 11,265,998 (19,941,392) - 100% 100% - - -

Working capital

Huaxin Environment Engineering Co., Ltd. – Wuhan Sludge Disposal Project 15,000,000 12,480 16,357,683 (16,370,163) - 100% 100% 42,412 42,412 6.40%


Balance carried forward 275,840,883 1,271,044,088 (140,358,907) 1,406,526,064 21,514,963 20,225,011

Project name Budget 31 December2011

Addition Transferred out 31 December 2012

Cost incurred

out of budget

Construction progress

Accumulated capitalised borrowing

cost

Borrowing cost

capitalised in the current

year

Weighted average interest

rate

Financed by

Balance brought forward 275,840,883 1,271,044,088 (140,358,907) 1,406,526,064 21,514,963 20,225,011 Huaxin Envronment Engineering (Wuxue) Co., Ltd. – Polluted Soil Conservation Project 75,000,000 60,899,546 11,006,729 (71,906,275) - 100% 100% - - -

Working capital Huaxin Hongta Cement (Jinghong) Co., Ltd. - 2000t/d Production Line 398,258,100 367,390,992 28,819,420 (396,210,412) - 100% 100% 13,201,788 6,142,312 6.86%


Hunan Huaxiang Environmental Enterprise Developing Co.,Ltd.- 1,200,000t per year Mineral Residue Comprehensive Application Utilisation Project 272,243,297 103,734,610 112,403,166 (216,137,776) - 100% 100% 3,323,398 2,083,390 7.24%


Huaxin Envronment Engineering (Huangshi) Co., Ltd. – Sludge Disposal Project 38,000,000 3,243,810 12,046,905 (15,290,715) - 100% 100% - - -

Working capital Others 159,592,163 604,435,256 (506,915,887) 257,111,532 13,698,759 780,683

970,702,004 2,039,755,564 (1,346,819,972) 1,663,637,596 51,738,908 29,231,396

- 117 -

(b) In 2012, there was no impairment provision for construction in progress.

(c) As at 31 December 2012, the progress for significant constructions are analysed as below:

Progress Notes Huaxin Cement (Lengshuijiang) Co., Ltd.

- 4500t/d Production Line 96% Construction went into the trial production stage.Huaxin Gayur Cement Co., Ltd. –

3000t/d Production Line 78% Main body of production line is under construction.Huaxin Environment Engineering Co.,

Ltd. - Wuhan Refuse Disposal Project 47% Main body of production line is under construction.Huaxin Environment Engineering Co.,

Ltd. Chibi Branch - Refuse Disposal Project 73% Main body of production line is under construction.

Huaxin Cement Co., Ltd. – Energy Management Center Project 32% Main body of production line is under construction.

Huaxin Cement (Sangzhi) Co., Ltd. – 2500t/d Production Line 10% Construction is in the preparatory period.

Huaxin Cemment (Zhuzhou) Co., Ltd. – Staff Dormitory Project 61% Construction is in the preparatory period.

Huaxin Cemment (Yangxin) Co., Ltd. – Cement Storage Warehouse Project 60% Main body of production line is under construction.

Huaxin Cement (Changyang) Co., Ltd. - Cogeneration Project 100%

Construction has been finished and transferred to fixed Assets.

Huaxin Cemment (Wuxue) Co., Ltd. – Limestone Heap shed Project 100%


Huaxin Environment Engineering Co., Ltd. – Wuhan Sludge Disposal Project 100%


Huaxin Envronment Engineering (Wuxue) Co., Ltd. – Polluted Soil Conservation Project 100%


Huaxin Hongta Cement (Jinghong) Co., Ltd. - 2000t/d Production Line 100%


Hunan Huaxiang Environmental Enterprise Developing Co.,Ltd.- 1,200,000t per year Mineral Residue Comprehensive Application Utilisation Project 100%


Huaxin Envronment Engineering (Huangshi) Co., Ltd. – Sludge Disposal Project 100%


- 118 -

(12) Construction materials

31 December 2011 Addition Decrease 31 December 2012

Machinery and equipment 65,474,467 91,749,043 (90,253,212) 66,970,298

(13) Fixed assets pending for disposal

31 December 2012

31 December 2011 Reason for disposal

Relocation of the north area of Huangshi Branch of the Company (NoteNote (a))

83, 449,390 103,449,390

The government has signed an agreement with the Group to acquire the land use right where this project is located. The related fixed assets were in the progress of disassembly and disposal.

Others 960,334 1,087,392

84,409,724 104,536,782

(a) As the local government has not yet finalised the future development plan of the area, the

relevant disposal works were suspended. Management is of the view that the consideration agreed by government net of the estimated disposal expenses would not be lower than the carrying amounts of the fixed assets and land use rights. In 2012, the fluctuation of Fixed assets pending for disposal was because Huaxin Cement Co., Ltd. Huangshi Branch has received RMB20,000,000 from the local government.

- 119 -

(14) Intangible assets

31 December

2011

Acquisition of subsidiaries(Note IV (3)) Addition Disposal

31 December 2012

Original cost 1,888,091,985 13,225,009 169,651,739 - 2,070,968,733Land use rights 1,348,866,595 13,225,009 104,630,444 - 1,466,722,048Trademarks 3,706,820 - - - 3,706,820Mining rights 283,412,262 - 60,159,922 - 343,572,184Mine restoration fees 119,177,986 - 1,470,000 - 120,647,986Softwares 124,928,322 - 3,191,373 - 128,119,695Patents & non-patented

technology 8,000,000 - 200,000 - 8,200,000 Accumulated amortisation (211,438,633) - (63,012,652) - (274,451,285)

Land use rights (121,264,988) - (26,417,754) - (147,682,742)

Trademarks (3,706,820) - - - (3,706,820)Mining rights (19,189,048) - (8,132,535) - (27,321,583)Mine restoration fees (26,269,909) - (3,083,217) - (29,353,126)Softwares (39,157,868) - (24,779,146) - (63,937,014)Patents & non-patented

technology (1,850,000) - (600,000) - (2,450,000) Net book value 1,676,653,352 1,796,517,448Land use rights 1,227,601,607 1,319,039,306Trademarks - -Mining rights 264,223,214 316,250,601Mine restoration fees 92,908,077 91,294,860Softwares 85,770,454 64,182,681Patents & non-patented

technology 6,150,000 5,750,000 Impairment - - - - - Net book value after impairment 1,676,653,352 1,796,517,448Land use rights 1,227,601,607 1,319,039,307Trademarks - -Mining rights 264,223,214 316,250,601Mine restoration fees 92,908,077 91,294,860Softwares 85,770,454 64,182,680Patents & non-patented

technology 6,150,000 5,750,000

(a) In 2012, the amortisation of intangible assets amounted to RMB63,012,652 (2011: RMB61,608,656).

(b) As at 31 December 2012, land use rights with net book value of RMB700,943,786 (original cost of RMB910,560,812) (31 December 2011: net book value of RMB171,036,745, original cost of RMB194,780,340) have been pledged to the banks as security for bank borrowings (NoteNote V(19)(a)(ii) and NoteNote V(29)(a)(i)).

(c) As at 31 December 2012, land use rights of RMB15,909,944 (original cost of RMB22,717,840)

was pending for disposal to local government pursuant to the relocation agreement entered into between the Company and local government (NoteNote V(13)(a)).

(15) Goodwill

31 December 2011 and

31 December 2012

Goodwill - Huaxin Cement (Nantong) Co., Ltd. 9,469,146Huaxin Jinlong (Yunxian) Cement Co., Ltd. 101,685,698

111,154,844

The recoverable amount of asset groups and groups of asset groups is calculated using the

- 120 -

estimated cash flows determined according to the five-year budget approved by management. The cash flows beyond the five-year period are calculated based on the following estimated growth rates. The main assumptions applied in calculating discounted future cash flows are as follows:

Huaxin Nantong Cement Co., Ltd. Huaxin Jinlong (Yunxian) Cement Co., Ltd.Growth rate 3.8% 3.8%Gross margin 16% 27%Discount rate 20.4% 17.9%

Management determines budgeted gross margin and growth rates based on past experience and forecast on future market development. The discount rates used by management are the pre-tax interest rates that are able to reflect the risks specific to the related asset groups and groups of asset groups. The above assumptions are used to assess the recoverable amount of asset group.

(16) Long-term prepaid expenses

31 December 2011 Addition Amortisation

31 December 2012

Mine development cost 145,178,641 130,906,827 (14,110,934) 261,974,534

Others 3,029,414 183,000 (625,392) 2,587,022

148,208,055 131,089,827 (14,736,326) 264,561,556

(17) Deferred tax assets and liabilities (a) Deferred tax assets without taking into consideration the offsetting of balances


Deferred tax assets

Deductibletemporary

differences and taxlosses

Deferred tax assets

Deductible temporary

differences and tax losses

Provision for assets impairment 13,824,821 57,334,015 12,129,287 48,517,148Accrued expenses 70,122,480 285,803,449 45,086,875 184,004,915Unrealised profit arising

from elimination of inter-company transactions 21,269,475 85,077,900 18,914,090 75,656,360

Tax losses 50,547,866 218,053,145 34,247,278 136,989,112Provision for employee benefits 2,859,954 11,439,816 4,141,429 16,565,716Capitalisation of gain incurred in

trial run 861,175 3,444,700 947,293 3,789,172

159,485,771 661,153,025 115,466,252 465,522,423

(b) Deferred tax liabilities without taking into consideration of the offsetting of balances


Deferred

tax liabilities

Taxabletemporary difference

Deferred tax liabilities

Taxabletemporary difference

Capitalisation of loss incurred in trial run 1,097,505 4,390,020 1,518,798 6,075,196

Capitalisation of borrowing cost 7,824,085 31,296,340 8,812,998 35,251,992Long-term payables measured

at amortised cost 472,823 1,891,292 741,315 2,965,260Change in fair value of

available-for-sale financial assets 5,107,618 20,430,471 4,362,883 17,451,528

Appreciation of assets from business combination involving entities not under common control 42,561,177 170,244,708 43,933,768 175,735,072

57,063,208 228,252,831 59,369,762 237,479,048

- 121 -

(c) Deductible temporary differences and tax losses which are not recognised as deferred tax

assets are analysed as below:


Deductible temporary differences 67,981,440 62,380,976Tax losses 107,493,723 45,405,002 175,475,163 107,785,978

(d) The tax losses for which deferred tax assets are not recognised will expire in the following years:

31 December 2012

Year 2013 -Year 2014 23,901,189Year 2015 14,330,502Year 2016 6,332,940Year 2017 62,929,092 107,493,723

(e) As at 31 December 2012, deferred tax assets and deferred tax liabilities of RMB6,605,667 have

been offset with each other (31 December 2011: RMB6,918,424). Net amounts of deferred tax assets and liabilities taking into consideration the offsetting of

balances are set out as follows:

31 December 2012 31 December 2011 Deferred tax

assets or liabilities, net

Deductible or taxable

temporary differences, net

Deferred tax assets or

liabilities, net

Deductible or taxable

temporary differences, net

Deferred tax assets, net 152,880,104 634,730,357 108,547,828 437,848,727Deferred tax liabilities, net 50,457,541 201,830,164 52,451,338 209,805,352

(18) Provision for impairment of assets

31 December 2011

Addition Decrease 31 December 2012

Acquisition of subsidiaries Accrual Write back Write off

Bad debt provision 16,254,490 - 13,487,463 (2,132,807) (1,208,460) 26,400,686-Accounts receivable 13,448,109 - 10,518,101 (2,124,986) (1,200,172) 20,641,052

-Other receivables 2,806,381 - 2,969,362 (7,821) (8,288) 5,759,634Write-down of

inventories 17,606,937 1,060,522 7,044,113 (217,327) (3,269,716) 22,224,529Impairment provisionfor available-for-salefinancial assets 2,775,600 - - - - 2,775,600

Impairment provision for fixed assets 76,919,536 - - - (229,296) 76,690,240

113,556,563 1,060,522 20,531,576 (2,350,134) (4,707,472) 128,091,055

- 122 -

(19) Short-term borrowings (a) Short-term borrowings classified by nature

Currency 31 December 2012 31 December 2011

Pledged bank borrowings (Note (i)) RMB 30,000,000 119,200,000Guaranteed bank borrowings (Note RMB 42,000,000 158,000,000

Unsecured bank borrowings (Note (iii)) RMB 982,000,000 720,750,000

1,054,000,000 997,950,000

(i) As at 31 December 2012, bank borrowings of RMB30,000,000 (31 December 2011:

RMB119,200,000) were pledged by Notes receivable of RMB30,000,000 (31 December 2011: RMB126,387,738) (Note V(2)).

(ii) As at 31 December 2012, bank borrowings of RMB42,000,000 (31 December 2011:

RMB158,000,000) were secured by certain buildings, equipments and land use rights (Note V (10)(a) and V (14)(c)).

(iii) As at 31 December 2012, bank borrowings of the subsidiaries of RMB615,000,000 (31

December 2011: RMB450,750,000) were guaranteed by the Company. (b) As at 31 December 2012, no short-term borrowing of the Group was past due. (c) The weighted average interest rate of short-term borrowings as at 31 December 2012 was

6.39% per annum (31 December 2011: 5.93% per annum).

(20) Notes payable


Bank acceptances 87,491,030 32,503,263

As at 31 December 2012, Notes payable due within one year amounted to RMB87,491,030 (31

December 2011: RMB32,503,263). (21) Accounts payable


Payables for raw materials

1,347,485,297 1,358,797,939 Payables for construction and equipment

1,007,045,787 939,891,495

Payables for transportation costs

117,895,517 70,026,204

Payables for utility charges

51,134,982 37,297,887

Others

26,164,894 22,700,763 2,549,726,477 2,428,714,288

(a) As at 31 December 2012, RMB500,000 was payable to shareholders who individually hold more

than 5% (including 5%) (a related party of the Group) of the Company’s shares (31 December 2011: RMB500,000)(Note VII(6)).

(b) As at 31 December 2012, accounts payable with ageing over 1 year amounted to

RMB243,173,436 (31 December 2011: RMB230,107,356), which mainly comprised of payables for construction projects and purchase of equipment. The amounts will be settled after

- 123 -

completion of the quality verification of the respective projects. (c) As at 31 December 2012, no accounts payables were denominated in foreign currency.


Foreign

currency Exchange

rate RMBForeign

currencyExchange

rate RMB USD - - - 299,335 6.3009 1,886,080EUR - - - 94,700 8.1625 772,989Total - 2,659,069

(22) Advances from customers


Advances for sales of goods 325,811,627 404,466,765

(a) As at 31 December 2012, there was no advance payment made by shareholders who

individually hold more than 5% (including 5%) of the Company’s share (31 December 2011: nil). (b) As at 31 December 2012, advances from related parties of the Group amounted to

RMB2,976,257 (31 December 2011: nil)(Note VII(6)). (c) As at 31 December 2012, advances from customers with ageing over 1 year amounted to

RMB11,467,351 (31 December 2011: RMB6,993,921), which are mainly advances for sales of cement products. As the reconciliation of transactions with the related customers have not been completed, the advances were not yet been settled.

(d) As at 31 December 2012, advances from customer denominated in foreign currency are

analysed as below:

31 December 2012 31 December 2011 Foreign

currencies balances

Exchange rate

Denominated in RMB

Foreign currencies

balances

Exchange rate

Denominated in RMB

USD 13,600,000 6.2015 84,340,400 - - -

(23) Employee benefits payable

31 December 2011

Addition Decrease 31 December 2012

Salaries, bonuses and

allowances 118,506,498 579,034,934 (581,736,240) 115,805,192

Staff welfare

131,114 115,623,425 (115,062,010) 692,529Social insurance

13,779,146 222,549,872 (221,079,838) 15,249,180-Pension insurance

7,741,789 136,646,947 (135,268,343) 9,120,393-Unemployment insurance

1,367,634 10,699,916 (10,751,921) 1,315,629-Employment injury insurance

384,013 7,925,065 (7,459,995) 849,083-Medical insurance

4,048,102 63,952,678 (64,344,761) 3,656,019

-Maternity insurance

237,608 3,325,266 (3,254,818) 308,056

Housing fund

5,101,697 74,137,642 (71,624,422) 7,614,917Labour union funds and

employee education fee

6,459,326 8,215,473 (9,807,338) 4,867,461

- 124 -

143,977,781 999,561,346 (999,309,848) 144,229,279

As at 31 December 2012, there were no overdue payroll and welfare payables (31 December

2011: nil). The balance of employee benefits payable comprise a three-year (2011 ~ 2013) incentives bonus plan. Management accrued the incentive bonus plan balance at each year end base on the actual operating result and the estimated result of future operation. This incentives bonus will be settled in 2014. Other balances of payroll and welfare payables will be settled in 2013.

- 125 -

(24) Taxes and other levies payable


Corporate income tax 91,388,918 123,654,219Value-added-tax 67,082,167 97,836,591Business tax 8,881,335 8,849,503Resource tax 15,301,751 15,547,284Civil infrastructure maintenance and

construction fee 6,084,692 5,732,748Education fee 3,494,173 4,577,748Flood prevention fee payable 22,535,681 21,500,460Others 22,835,051 30,155,857 237,603,768 307,854,410

(25) Interests payable

31 December 2012 31 December 2011 Interest for corporate bonds 77,262,500 -Interest for medium-term

debenture 15,867,226 16,943,938Interest for long-term

borrowings 8,784,930 13,021,355Interest for short-term

borrowings 2,353,848 1,865,592 104,268,504 31,830,885

(26) Dividends payable

31 December 2012 31 December 2011 Minority interests - Huangshi Yiruida Investment Co.,

Ltd. - 13,608,521 - Yidu Fangde Investment Co., Ltd. - 37,500,000 - Tibet Changsheng Road & Bridge

Construction Co., Ltd 27,568,810 8,368,810 - Others 1,314,368 6,656,868Shareholders of the Company (Note

(a)) 576,326 576,326 29,459,504 66,710,525

(b) The balances have not been settled as these enterprises did not provide the correct contact

information.

(27) Other payables

31 December 2012 31 December 2011 Freight charges 82,790,992 47,540,660Deposits 57,215,542 46,028,818Payables for acquisitions of equity interests 241,378,239 20,679,421Amounts due to government 85,000,000 -Amounts due to minority shareholders 31,650,000 31,650,000Others 49,864,428 60,307,728 547,899,201 206,206,627

- 126 -

(a) As at 31 December 2012, the payables are mainly included the acquisition payable of the associates amounted to RMB202,371,296 (31 December 2011: nil).

(b) As at 31 December 2012, there was no payable to shareholders who hold more than 5%

(including 5%) shares of the Company (31 December 2011: nil). (c) As at 31 December 2012, there was no balance payable to related parties of the Group (31

December 2011: nil). (d) As at 31 December 2012, other payables with ageing over one year amounted to

RMB63,551,070 (31 December 2011: RMB30,723,277), which mainly comprised the amounts due to minority shareholders, the deposits made by carriers and large construction projects.

(e) As at 31 December 2012, there was no accounts payable denominated in foreign currency (31

December 2011: nil).

(28) Current portion of non-current liabilities


Current portion of long-term borrowings (Note

(a)) 2,359,381,136 2,636,434,820Current portion of debentures payable (Note

(b)) 598,800,000 -Current portion of long-term payables (Note

(c)) 38,428,158 56,914,654 2,996,609,294 2,693,349,474

(a) Current portion of long-term borrowings


Pledged bank borrowings

(Note V29 (a)(i)) RMB

753,180,000 339,200,000Guaranteed bank borrowings

(Note V29(a)(ii)) RMB

215,000,000 102,000,000 DKK 1,455,640 1,435,695Unsecured bank borrowing

(Note V29(a)(iii)) RMB

1,344,130,000 2,163,180,000 USD 45,615,496 30,619,125 2,359,381,136 2,636,434,820

Top five of the current portion of long-term borrowings:

Beginning date Maturity date Currency Rate (%) 31 December

2012 Bank A 18 June 2010 17 May 2013 RMB 5.76% 140,000,000Bank B 25 June 2010 24 June 2013 RMB 5.76% 100,000,000Bank A 4 February 2010 3 February 2013 RMB 5.99% 100,000,000Bank C 15 March 2010 14 March 2013 RMB 5.99% 100,000,000

Bank A 25 September

2009 15 December 2013 RMB 6.40% 90,000,000 530,000,000

As at 31 December 2012, there was no current portion of long-term borrowing being overdue. (b) Current portion of debentures payable

- 127 -

Pursuant to the relevant regulation and approval from National Association of Financial Market Institutional Investors, the Company issued medium bonds with aggregated nominal value of RMB600,000,000 on 8 September 2010. The maturing term is 3 years. The due date of the debentures payable will be on 8 September 2013. The bond applies a simple interest methodology, and the weighted average interest rate is 5.03%, with the interest being paid once a year. In addition, the underwriting fee is of RMB1,800,000 per year.

(c) Current portion of long-term payables

Period Principal Interest rate (%)

Interest payable

balance Payment schedule

Jianxin Finance Leasing Co., Ltd. 5 years 163,030,000 5.76% 7,625,958 38,428,158

The principal and interest are to be repaid according to the contract within 5 years

(29) Long-term borrowings

(a) Classification of long-term borrowings:


Pledged bank borrowings (Note (i)) RMB 464,876,633 907,540,000Guaranteed bank borrowings (Note (ii)) RMB 389,500,000 620,500,000 DKK 8,381,094 8,457,536Unsecured bank borrowings (Note (iii)) RMB 1,444,618,000 2,640,960,000 USD 367,701,750 45,345,900 2,675,077,477 4,222,803,436

(i) As at 31 December 2012, long-term bank borrowings denominated in RMB of RMB464,876,633

(31 December 2011: RMB907,540,000) and current portion of long-term bank borrowings denominated in RMB of RMB753,180,000 (31 December 2011: RMB339,200,000) (Note V(28)(a)) were secured by pledge of certain fixed assets and land use right (Note V(10)(a) and V(14)(b)). These bank borrowings are to be repaid in the period from 2013 to 2015.

(ii) As at 31 December 2012, long-term guaranteed bank borrowings of RMB197,000,000 (31 December 2011: RMB235,000,000), and the current portion of guaranteed long-term bank borrowings of RMB62,000,000 (31 December 2011: RMB50,000,000) were guaranteed by Huaxin Group Co., Ltd., the second major shareholder of the Company, of which the principal has to be repaid in the period from 2013 to 2017. As at 31 December 2012, 30% and 70% of long-term guaranteed bank borrowings of RMB80,000,000 (31 December 2011: RMB160,000,000) and the current portion of guaranteed long-term bank borrowings of RMB60,000,000 (31 December 2011: nil) were guaranteed by Hanjiang Water & Hydroelectric Co., Ltd. and the Company respectively, of which the principal and interest has to be repaid in the period from 2013 to 2014. As at 31 December 2012, 49% and 51% of long-term guaranteed bank borrowings of RMB112,500,000 (31 December 2011: RMB175,500,000) and the current portion of long-term guaranteed bank borrowings of RMB63,000,000 (31 December 2011: RMB52,000,000) were guaranteed by Yunnan Hongta Dianxi Cement Co., Ltd. and the Company respectively, of which the principal and interest has to be repaid in the period from 2013 to 2014.

- 128 -

As at 31 December 2012, current portion of long-term guaranteed bank borrowings of RMB30,000,000 (31 December 2011: RMB50,000,000) were guaranteed by Yunxian Electric Power Co., Ltd. ,of which the principal is to be repaid in 2013.

As at 31 December 2012, long-term bank borrowings denominated in Denmark Kroner of RMB8,381,094 (31 December 2011: RMB8,457,536) and current portion of bank borrowings denominated in Denmark Kroner of RMB1,455,640 (31 December 2011: RMB1,435,695) were jointly guaranteed by Hubei Construction Bank and Hubei Government, of which the principal has to be repaid by installment in the period from 2013 to 2021.

(iii) As at 31 December 2012, long-term unsecured borrowings of RMB1,121,009,750 (31 December

2011: RMB1,104,505,900), and current portion of long-term unsecured borrowings of RMB368,595,496 (31 December 2011: RMB945,149,125) of the subsidiaries of the Group were guaranteed by the Company, of which the principal has to be repaid by installment in the period from 2013 to 2017.

The weighted average interest rate of long-term borrowings as at 31 December 2012 was 6.29% per annum (31 December 2011: 5.72% per annum).

(b) Top five of long-term borrowings:

Beginning date Maturity date

Currency Interest rate (%)

31 December 2012

Bank B 27 December 2012 20 October 2017 USD 5.80% 367,701,750Bank C 29 September

2011 29 September

2016 RMB 6.40% 235,800,000Bank D 18 September

2012 20 September

2017 RMB 6.08% 198,850,000Bank C 5 January 2009 9 January 2017 RMB 5.07% 160,000,000Bank C

11 October 2012 23 September

2017 RMB 6.40% 123,560,000 1,085,911,750

(30) Debentures Payable

31 December 2012 31 December 2011 Medium debenture matured in 2013 (Note

(a)) - 598,800,000Medium debenture matured in 2015 (Note

(a)) 598,650,000 598,650,000Corporate bonds of first phase matured in

2017 (Note (b)) 995,235,714Corporate bonds of first phase matured in

2019 (Note (b)) 994,764,286Corporate bonds of second phase matured

in 2019 (Note (b)) 1,093,565,000 3,682,215,000 1,197,450,000

Information of debentures payable is analysed as below: Nominal value Issuance date Period Amount Annual

issuance cost Distribution fee

Medium debenture

matured in 2013 600,000,000 8 September 2010 3 years 600,000,000 1,800,000 -Medium debenture

matured in 2015 600,000,000 25 October 2010 5 years 600,000,000 1,800,000 -Corporate bonds of

first phase matured in 2017 1,000,000,000 17 May 2012 3 years 1,000,000,000 - 6,000,000

Corporate bonds of first phase matured in 2019 1,000,000,000 17 May 2012 5 years 1,000,000,000 - 6,000,000

- 129 -

Corporate bonds of second phase matured in 2019 1,100,000,000 9 November 2012 5 years 1,100,000,000 - 6,600,000

Interest payable on debentures is analysed as follows:

Interest payable 31 December 2011 Accrual Payment 31 December 2012

Medium debenture

matured in 2013 10,268,869 30,835,069 (31,200,000) 9,903,938 Medium debenture

matured in 2015 6,675,069 34,088,219 (34,800,000) 5,963,288 Corporate bonds of first

phase matured in 2017 - 33,687,500 - 33,687,500 Corporate bonds of first

phase matured in 2019 - 35,462,500 - 35,462,500 Corporate bonds of

second phase matured in 2019 - 8,112,500 - 8,112,500

16,943,938 142,185,788 (66,000,000) 93,129,726

(a) Pursuant to the relevant regulation and approval from National Association of Financial Market

Institutional Investors, the Company issued medium bonds, both with aggregated nominal value of RMB600,000,000, at face value on 8 September 2010 and 25 October 2010 respectively. The maturing terms are 3 years and 5 years respectively and the interest would be settled annually. In 2012, the interest rates of the two medium bonds were 5.03% and 5.72%.

(b) Pursuant to the relevant approval from China Securities Regulatory Commission, the Company

issued the corporate bonds of two phases on 17 May 2012 and 9 November 2012 respectively. On 17 May 2012, the Company issued the corporate bonds of first phase with aggregated nominal value of RMB2,000,000,000 of which RMB1,000,000,000 is a 5-years 5.35% interest-rate bond with nominal interest rate option & investor put option at the 3rd year end and the other RMB 1,000,000,000 7-years 5.65% interest-rate bond with nominal interest rate option & investor put option at the 5th year end. The interest would be settled annually. On 9 November 2012,the Company issued the corporate bonds of second phase with aggregated nominal value of RMB1,100,000,000. The maturing term is 7 years with nominal interest rate option and investor put option at the 5th year end. The interest would be settled annually. In 2012, the interest rates of the two corporate bonds were 5.90%.

(31) Long-term payables

31 December 2012 31 December 2011 Land premium payables - 35,054,409Borrowings from local government - 23,699,350Payable for the finance lease(Note(a)) 122,047,030 141,146,937 122,047,030 199,900,696Less： (38,428,158) (56,914,654) - current portion of land premium

payables - (4,855,490) - current portion of borrowings from local government - (23,699,350)

- current portion of payable for the finance lease(Note(a)) (38,428,158) (28,359,814)

83,618,872 142,986,042

(a) Long-term payables is analysed as follows:


- 130 -

Payable for Jianxin Finance Leasing Co., Ltd. 83,618,872 112,787,123

Period PrincipalInterest rate(%)

Interest payable balance Payment schedule

Jianxin Finance Leasing Co., Ltd. 5 years 163,030,000 5.76% 7,061,918 83,618,872

Based on the contract’s schedule, the principal and

interest are to be repaid within 5 years

Payable for finance lease represents the minimum lease payments for the Group’s fixed assets held under finance lease less unrecognised finance charges (Note XI).

(32) Provisions

31 December 2011

Addition Decrease 31 December

2012 Provision for mine

restoration

85,355,028 2,165,066 (3,288,220) 84,231,874Provision for employee

benefits (Note (a))

23,803,680 3,009,193 (10,118,076) 16,694,797Others - 4,862,709 - 4,862,709

109,158,708 10,036,968 (13,406,296) 105,789,380

(a) Provision for employee benefits Pension scheme: Pursuant to the Group’s policies, the Company and its certain subsidiaries are

obliged to pay allowances to certain retired and early retired employees until they pass away. Employee benefit plans within retirement employee: Pursuant to the Group’s policies, the

Company and certain subsidiaries are obliged to pay the basic wage and social insurance payments to former employees, until the employee reached the mandatory retirement age.

Post-employment medical benefit plans: Pursuant to the local medical insurance regulations, the

Company and certain subsidiaries are obligated to contribute an amount based on the certain percentage of average salary of employee to local government as a fund to finance the payments of medical expenses of eligible employees of these companies for a certain period.

The management determine the provision for employee benefits by the related discounted future

cash flows.

The principal assumptions used in discounted future cash flow method are set out below:

Annual increase rate of average salary rate 10%Discount rate (government bond) 3.23%The average life span of male after retirement at the age of 60 10The average life span of female after retirement at the age of 50 20

(33) Other non-current liabilities

31 December

2012 31 December

2011 Government grants related to assets: - Construction of cement production lines 51,875,384 53,714,374- Construction of energy-saving &

environmental projects 65,622,648

54,137,647 117,498,032 107,852,021

- 131 -

(34) Share capital

31 December 2011 Increase/decrease in the year 31 December 2012Note (a)

Listed shares with restriction of trading: A shares held by the State

77,011,892 (77,011,892) - A shares held by foreign legal persons 51,088,036 - 51,088,036 128,099,928 (77,011,892) 51,088,036 Listed shares without restriction of trading: A shares, listed 479,200,000 77,011,892 556,211,892 B shares, listed 328,000,000 - 328,000,000 807,200,000 77,011,892 884,211,892 Total share capital 935,299,928 - 935,299,928

31 December 2010

Increase/decrease in the year

31 December

2011From

reserveFrom new

issues Others Subtotal

Listed shares with restriction of trading:

A shares held by the State

- - 77,011,892 -

77,011,892 77,011,892 A shares held by foreign legal persons

75,200,000 - 51,088,036 (75,200,000)

(24,111,964) 51,088,036B shares held by foreign legal persons

85,761,300 - - (85,761,300)

(85,761,300) -

160,961,300 - 128,099,928 (160,961,300) (32,861,372) 128,099,928 Listed shares without restriction of trading:

A shares, listed

164,400,000 239,600,000 - 75,200,000 314,800,000 479,200,000 B shares, listed

78,238,700 164,000,000 - 85,761,300 249,761,300 328,000,000

242,638,700 403,600,000 - 160,961,300 564,561,300 807,200,000

Total share capital 403,600,000 403,600,000 128,099,928 - 531,699,928 935,299,928

(a) The Company made an additional fund raising from Holchin B.V. and other 7 domestic

designated investors on 4 November 2011. Pursuant to the relevant regulation, the other 7 designated investors mentioned above are restricted from trading for the share of 77,011,892 within one year until 14 November 2012.

(35) Capital surplus

31 December 2011 Addition Decrease

31 December 2012

Share premium (Note (a)) 3,415,215,050 - (442,699,292) 2,972,515,758Other Capital surplus

-Change in fair value of available-for-sale financial assets 13,088,646 2,234,207 - 15,322,853

-Transfer of capital surplus recognised under the previous accounting system

(Note (b)) 42,108,405 637,317 - 42,745,722-Compensation from government for

plant relocation 7,553,919 - - 7,553,919-Government grants (Note (c)) 42,818,800 - - 42,818,800

3,520,784,820 2,871,524 (442,699,292) 3,080,957,052

31 December

2010 Addition Decrease 31 December

2011 Share premium (Note(a)) 2,203,654,892 1,615,160,158 (403,600,000) 3,415,215,050Other Capital surplus

-Change in fair value of available-for-sale financial assets 15,571,371 - (2,482,725) 13,088,646

-Transfer of capital surplus recognised under the previous accounting system

(Note (b)) 41,141,658 966,747 - 42,108,405-Compensation from government for

plant relocation 7,553,919 - - 7,553,919

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-Government grants (Note (c)) 42,818,800 - - 42,818,800 2,310,740,640 1,616,126,905 (406,082,725) 3,520,784,820

(a) In 2011, the company, to the end of 2010, the total share capital of 403,600,000 shares as the

base, to all shareholders 10 shares for every 10 shares transferred out of a total of RMB403,600,000 of the capital fund. In the same year, the company completed the original shareholders of non-public offering Holchin BV and seven other domestic legal entities, resulting in capital reserves (share premium) RMB1,615,160,158. In 2012, the Company has purchased the minority equity interests of Huaxin Cement (Yichang) Co., Ltd., Huaxin Cement (Yangxin) Co., Ltd., Huaxin Chibi Packaging Co., Ltd. and Huaxin Yidu Packaging Co., Ltd respectively. The amount of the difference of RMB442,699,292 between the fair value of consideration paid and the relevant share acquired of the carrying value of net assets of the subsidiary was recorded in equity.

(b) The amount transferred from undistributed profits to capital surplus represent government grants

of RMB637,317 recognised in income statement for the year (2011: RMB966,747). In accordance with the relevant PRC regulations, such government grant cannot be distributed to shareholders of the Company for profit appropriation.

(c) Amounts represent the government subsidies received by the Group for the energy-saving

technological transformation projects.

(36) Surplus reserve

31 December 2011 Addition 31 December 2012

Statutory surplus reserve 256,586,500 26,593,661 283,180,161Discretionary surplus reserve 63,580,329 - 63,580,329 320,166,829 26,593,661 346,760,490

31 December 2010 Addition 31 December 2011

Statutory surplus reserve 200,654,882 55,931,618 256,586,500Discretionary surplus reserve 63,580,329 - 63,580,329 264,235,211 55,931,618 320,166,829

In accordance with the Company Law of the PRC, the Company’s Articles of Association and the

resolution of board of directors of the Company, appropriations of 10% of net profit should be made to the statutory surplus reserve, after offsetting accumulated losses from prior years, until the accumulated statutory surplus reserve reaches 50% of the share capital. Statutory surplus reserve can be used to make up losses or to increase share capital. Pursuant to the resolution of board of directors of the Company, the Company appropriated RMB26,593,661, 10% of net profit for the year ended 31 December 2012, to the statutory surplus reserve (2011: 10% of net profit, RMB55,931,618).

The amount of appropriation to the discretionary surplus reserve should be proposed by the board of directors of the Company and approved by general meeting of shareholders. Discretionary surplus reserve can be used to make up losses or to increase share capital after certain approval. The Company has not made any appropriation to discretionary surplus reserves in 2012 (2011: nil).

(37) Retained earnings

2012 2011 Amount Appropriation

rateAmount Appropriation

rate

Opening balance of retained earnings 2,983,725,288 - 2,046,075,164 -

Add: net profit attributable to the shareholders of the Company 555,658,762 - 1,075,268,489

-

- 133 -

Less: Appropriation of statutory surplus reserve (26,593,661) 10% (55,931,618) 10% Appropriation of discretionary surplus

reserve - -

Dividends (Note(a)) (140,294,989)RMB1.5 per

10 shares (80,720,000) RMB2 per 10 shares

Transfer of capital surplus recognised under the previous accounting system

- Transfer to capital surplus (637,317) (966,747) Ending balance of retained earnings 3,371,858,083 2,983,725,288

(a) Pursuant to the resolution at the Annual General Meeting on 20 April 2012, cash dividends in

respect of 2011 of RMB140,294,989 (RMB1.5 per 10 shares) was paid based on the issued shares of 935,299,928.

Pursuant to the resolution of board of directors of the Company on 22 March 2013, cash dividends

in respect of 2012 of RMB168,353,987 (RMB1.8 per 10 shares) was proposed based on the issued shares of 935,299,928. This proposed dividend is subject to the approval of the Annual General Meeting.

(38) Minority Interests

Minority interests are analysed as below:

31 December 2012

31 December 2011

Huaxin Hongta Cement (Jinghong) Co., Ltd. 96,468,969 86,977,507Huaxin Cement (Tibet) Co., Ltd. 104,396,734 73,394,097Hunan Huaxin Xianggang Cement Co., Ltd. 126,327,779 126,661,265Huaxin Jinlong Cement (Yunxian) Co., Ltd. 64,226,376 58,997,672Wuhan Wugang Huaxin Cement Co., Ltd. 50,836,429 53,329,916Xiangyang Jianshan New Materials Co., Ltd. 57,609,461 -Huaxin Zhongya Investment(Wuhan) Co., Ltd. 48,445,325 24,409,465Huaxin Cement (Hefeng) National Materials Co., Ltd. 31,589,733 25,804,386Huaxin Cement (Diqing) Co., Ltd. 30,426,974 31,032,624Huaxin Gayur Cement Co., Ltd. 23,637,215 -Huaxin Cement (Nantong) Co., Ltd. 20,198,677 19,077,950Huaxin Cement (Lengshuijiang) Co., Ltd. 20,000,000 20,000,000Huaxin Cement Suizhou Co., Ltd. 17,868,812 17,734,697Xianning Huaxin Fengdan Concrete Co., Ltd. 23,154,606 -Huaxin Cement (Fangxian) Co., Ltd. 20,008,861 12,294,187Huaxin Cement (Yangxin) Co., Ltd. - 117,422,322Huaxin Cement (Yichang) Co., Ltd. - 94,429,254Others subsidiaries 29,890,214 61,870,293Total 765,086,165 823,435,635

(39) Sales and cost of sales

2012 2011

Revenue from main operations 12,445,439,861 12,587,342,600Other operating income 75,087,386 50,696,583 12,520,527,247 12,638,039,183 2012 2011 Cost of main operations 9,402,442,035 9,139,348,419Other operating expenses 63,452,423 34,998,879 9,465,894,458 9,174,347,298

- 134 -

(a) Revenue and cost of main operations Revenue and cost of main operations analysed by product are set out below:

2012 2011 Revenue from

main operationsCost of main

operationsRevenue from

main operations Cost of main

operations Sales of cement 10,231,791,825 (7,599,260,571) 10,702,905,314 (7,744,488,391)Sales of clinker 925,152,709 (836,099,517) 933,576,730 (703,061,588)Sales of concrete 773,330,723 (596,309,351) 584,114,507 (473,466,026)Others 515,164,604 (370,772,596) 366,746,049 (218,332,414) 12,445,439,861 (9,402,442,035) 12,587,342,600 (9,139,348,419)

(b) Other operating income and expenses

2012 2011 Other operating

incomeOther operating

expensesOther operating

income Other operating

expenses Sales of materials 13,091,185 (9,045,746) 22,564,074 (8,371,649)Others 61,996,201 (54,406,677) 28,132,509 (26,627,230) 75,087,386 (63,452,423) 50,696,583 (34,998,879)

(c) Top five customers are analysed as follows:

The sales to top five customers of the Group totaled RMB613,217,267 (2011: RMB730,668,732),

which accounted for 5% (2011: 6%) of the total revenue from main operations. Details are set out below:

Sales % of total sales of the

Group Client U 156,821,502 1%Client V 124,364,048 1%Client W 120,877,069 1%Client X 112,405,255 1%Client Y 98,749,393 1% 613,217,267 5%

(40) Taxes and surcharges

2012 2011 Levy rate Resource tax 83,496,815 67,965,912 RMB2/tonCivil infrastructure maintenance and

construction fee 36,159,095

33,669,482 1%、5% or 7%Education fee 23,368,758 21,709,655 3%Business tax 12,648,944 12,244,502 3% or 5%Flood prevention fee 6,470,599 6,826,032 2%Others 11,930,494 12,265,056 174,074,70

5154,680,63

9

(41) Selling and distribution expenses

2012 2011 Material cost 292,433,533 258,622,018 Staff costs 138,998,374 125,920,937 Transportation 127,127,124 81,580,778

- 135 -

Promotion expenses 77,867,047 58,249,934 Cartage fees 56,213,635 47,822,499 Utilities 53,256,134 40,182,414 Depreciation 47,283,749 42,022,934 Repairing and maintenance 22,188,675 20,818,050 Others 22,713,187 25,690,225

838,081,458 700,909,789

(42) General and administrative Expenses

2012 2011 Staff costs 316,470,112 247,139,416Depreciation and amortisation 83,585,014 65,338,205Tax expenses 41,709,291 36,023,854Entertainment expenses 31,559,073 25,784,854Office & meeting expenses 32,442,975 34,584,882Drainage expenses 25,485,876 22,683,355Advisory and audit fees 28,194,787 28,546,693Outsourcing labor expenses 15,184,570 11,369,143Transportation 18,638,742 11,537,403Traveling expenses 21,427,935 22,359,443Fire security expenses 13,394,653 11,819,430Utilities 7,858,533 8,217,770Services fee charged by Huaxin Group Co., Ltd. 6,000,000 6,000,000Others 81,796,358 56,123,360 723,747,919 587,527,808

(43) Financial expenses - net

2012 2011 Interest expenses 587,613,719 519,964,098Less: interest income (26,391,468) (15,958,860)Exchange losses 2,257,363 1,367,933Less: exchange gains (2,297,044) (6,314,692)

r Other financial expenses 15,147,621 15,658,157 576,330,191 514,716,636

(44) Asset impairment losses

2012 2011 Provision for bad debts

11,354,656

8,669,530 Provision of write-down of inventory

6,826,786

2,577,319 Provision for impairment of fixed assets - 61,862,346 18,181,442 73,109,195

(45) Investment loss

2012 2011 Income from available-for-sale financial assets 640,725 249,721Share of loss in an associated company (1,827,931) (2,340,962) (1,187,206) (2,091,241)

There is no significant restriction on the remittance of investment income to the Group.

- 136 -

(46) Non-operating income

2012 2011 Non-routine items

Gain on disposal of fixed assets

2,577,928 2,896,323 2,577,928

Government grants (Note (a))

206,581,910 189,663,539 99,614,551

Others

3,431,880 5,501,345 3,431,880 212,591,718 198,061,207 105,624,359

(a) Government grants:

2012 2011 Tax refund from sales of goods having utilised

waste natural materials 106,967,359 88,273,579Subsidy from local government (Note(i)) 75,337,902 84,399,879Others 24,276,649 16,990,081 206,581,910 189,663,539

(i) Amounts mainly comprised the financial incentives from the local government. (47) Non-operating expenses

2012 2011 Non-routine items

Losses on disposal of fixed assets 14,721,226 9,191,339 14,721,226Donation 4,487,887 4,075,388 4,487,887Others 11,442,421 5,729,251 11,442,421 30,651,534 18,995,978 30,651,534

(48) Income tax expenses

2012 2011

Current income tax 275,928,273 410,873,460Deferred income tax (51,234,973) (21,206,652) 224,693,300 389,666,808

The reconciliation from income tax calculated based on applicable tax rates and total profit

presented in the consolidated financial statements to the income tax expenses is as follows:

2012 2011 Profit before tax 904,970,052 1,609,721,806Income tax calculated at applicable tax rates 196,492,796 384,036,167Loss not subject to tax 296,802 522,810Tax emption (Note (a)) (4,325,981) (33,924,075)Tax losses for which no deferred income tax asset was

recognised 15,732,273 1,583,235Deductable temporary differences for which no deferred

income tax asset was recognised 1,400,116 15,465,586Write-off of deferred income tax asset for tax losses

recognized in previous years - 5,447,554

- 137 -

Effect of changes in tax rate 611,899 -Expenses not deductible for tax purposes 14,485,395 16,535,531Income tax expenses 224,693,300 389,666,808

(a) Tax exemption (i) In September 2011, Hunan Huaxin Xianggang Cement Co., Ltd. had obtained an approval from

Xiangtan Municipal State Tax Administration for the tax exemption for utilising wasted materials in production of goods. Accordingly, Hunan Huaxin Xianggang Cement Co., Ltd reduced the provision for income tax amounted to RMB3,964,540 in 2012.

(ii) In May 2012, Huaxin Cement (Hefeng) National Materials Co., Ltd. had obtained an approval from Hefeng Municipal State Tax Administration for the tax exemption for the portion of tax income that was belonged to local retained. Accordingly, the provision of income tax of RMB361,441 for 2011 has been reversed in the current year.

(49) Earnings per share (a) Basic earnings per share

Basic earnings per share is calculated by consolidated net profit attributable to shareholders of the Company divided by the weighted average number of ordinary shares outstanding:

2012 2011

Consolidated net profit attributable to shareholders of the

Company 555,658,762 1,075,268,48

9Weighted average number of ordinary shares outstanding 935,299,928 817,874,994 Basic earnings per share 0.59 1.31

(b) Diluted earnings per share Diluted earnings per share is calculated by dividing net profit attributable to ordinary

shareholders of the Company adjusted based on the dilutive potential ordinary shares by the adjusted weighted average number of ordinary shares outstanding. As there were no dilutive potential ordinary shares in 2012 (2011: nil), diluted earnings per share equal to basic earnings per share.

(50) Other comprehensive gain/(loss)

2012 2011 Changes in fair value of available-for-sale financial assets 2,978,942 (3,310,300)Less: tax impact of changes in fair value of available-for-sale

financial assets (744,735) 827,575Foreign currency translation reserve (779,719) -

1,454,488 (2,482,725)

(51) Notes to consolidated cash flow statement

(a) Cash received relating to other operating activities

2012 2011

Receipt of deposits 21,110,634 21,865,955Government grants 16,477,939 37,929,038Interest income 26,391,468 15,958,860Others 11,195,695 8,923,345 75,175,736 84,677,198

- 138 -

(b) Cash paid relating to other operating activities 2012 2011

Selling and traveling expenses 116,067,160 92,146,780Deposits 111,209,629 69,531,465Entertainment expenses 31,559,073 25,784,854Office expenses 32,442,975 32,838,124Drainage expenses 25,485,876 22,683,355Training, fire security and greenery expenses 19,266,261 17,958,316Insurance premiums 12,596,347 19,835,916Labor union funds and employee education fee 9,807,336 10,171,305Advertising expenses 9,126,632 7,725,587Low value consumables 18,371,679 17,637,648Others 35,426,475 58,423,339 421,359,443 374,736,689

(c) Cash received relating to other investing activities

2012 2011

Return of deposit for potential acquisitions 20,000,000 -Government grants related to construction projects 20,720,000 52,413,536 40,720,000 52,413,536

(d) Cash paid relating to other investing activities

2012 2011 Payment for acquisition 39,520,000 -Deposits paid for potential acquisition 80,000,000 20,000,000Payment for intercompany corporation 115,676,874 - 235,196,874 20,000,000

(e) Cash received from other financing activities

2012 2011 Receivable from non-financial enterprises 87,000,000 -Receivable from the sale and lease back - 163,030,000 87,000,000 163,030,000

(f) Cash payments relating to other financing activities

2012 2011 Payments for acquisitions of minority interests 619,867,000 -Repayments of non-financial borrowings 103,157,450 93,613,090Repayments for finance lease liability 18,196,947 Margins and commissions for finance lease - 25,269,450Payments to Huaxin Group for guarantee - 1,000,000 741,221,397 119,882,540

(52) Supplementary information of cash flow statements (a) Supplementary information of cash flow statements

Reconciliation of net profit to cash flows from operating activities

- 139 -

2012 2011

Net profit 680,276,752 1,220,054,998Adjustments: Provision for asset impairment 18,181,442 73,109,195

Depreciation of fixed assets 1,077,311,572 924,651,718Amortisation of intangible assets 63,012,651 61,608,656Amortisation of long-term prepaid expenses 14,736,326 11,435,904Amortisation of deferred incomes (11,073,989) (7,202,090)Loss on disposal of fixed assets 12,143,298 6,295,016Investment Loss 1,187,206 2,091,241Finance expenses 593,336,038 526,088,502Non-operating income (1,699,350) -Deferred income tax (51,234,973) (21,206,652)Decrease/(Increase) in inventories 179,907,851 (154,783,573)Decrease/(Increase) in operating

receivables 145,878,263 (1,070,533,036)(Decrease)/Increase in operating payables (266,141,197) 314,721,103

Net cash flows from operating activities 2,455,821,890 1,886,330,982 Non-cash transactions:

2012 2011

Non-cash investment from minority shareholders 84,702,590 -

Net changes in cash:

2012 2011

Ending balance of cash 2,794,735,054 2,768,997,723Less: beginning balance of cash (2,768,997,723) (1,755,962,897)Increase in cash 25,737,331 1,013,034,826

(b) Acquisition of subsidiaries

2012 2011

The cash consideration of acquisition 35,480,000 375,773,077Less: Advance cash payment in previous years (35,000,000) (4,000,000) Cash in subsidiaries acquired (497,311) (9,064,518)Payment of considerations for acquisition incurred in prior years 14,341,493 -Net cash paid for acquisition of subsidiaries 14,324,182 362,708,559

Net assets of subsidiaries acquired 2012 2011

Current assets 15,467,995 102,977,134Non-current assets 134,720,323 863,509,291Current liabilities (84,524,153) (388,265,552)Non-current liabilities (4,164,165) (217,038,519) 61,500,000 361,182,354

(c) Cash 31 December

201231 December

2011 Cash at bank and in hand 2,839,236,250 2,825,437,202Less: restricted cash (44,501,196) (56,439,479)Ending balance of cash 2,794,735,054 2,768,997,723

- 140 -

Including: Cash in hand 764,557 157,186 Cash at bank without restriction 2,793,970,497 2,768,840,537

VI Segment reporting Sales, expenses, assets and liabilities of the Group are primarily attributable to manufacturing

and sales of cement and related products. Less than 10% of the Group’s consolidated sales and results are attributable to the market outside the PRC. No segment information of the Group is presented considering the internal organisation and management structure and the system of internal financial reporting to key management personnel. VII Related party relationships and significant related party transactions

(1) Major shareholders of the Company

(a) General information of major shareholders of the Company

Legal status

Registered address

Relationship with the Company


Organization code

Principal business

Holchin B.V. Limited

companyAmsterdam,

Holland The first major

shareholderN/A N/A Investment holdings


Limited company

Huangshi City, the PRC

The second major shareholder

Chen Musen 17843892-3 Production and sales of cement, related machinery and spare parts, real estate development, trading and rendering of service etc.

Holchin B.V. is an investment holding company and its ultimate holding shareholder is Holcim

Ltd.

(b) Registered capital and changes in registered capital of major shareholders of the Company

31 December 2011 and 31 December 2012

Holchin B.V. Euro 100,000Huaxin Group Co., Ltd. RMB 340,000,000

(c) Interest and voting rights held by the major shareholders

31 December 2012 31 December 2011 percentage

ofequity interests

percentage of

voting right

percentage of equity

interests

percentage of

voting right Holchin B.V. (including shares held

by parties acting in concert) 41.87% 41.87% 41.62% 41.62%Huaxin Group Co., Ltd. (including

shares held on behalf of the State) 15.61% 15.61% 15.61% 15.61%

(2) Subsidiaries of the Company

The general background and other related information of the subsidiaries are set out in Note IV.

(3) Associates

The general background and other related information of the associates are set out in Note V(9).

- 141 -

(4) Other related parties

Relationship with the Company Organisation Code

Holcim Ltd. Ultimate holding company of Holchin B.V. N/AHuangshi Yiruida Investment Co., Ltd. Controlled by Huaxin Group Co., Ltd. 74766270-7Holcim Group Support Ltd. Controlled by Holcim Ltd. N/AHolcim New Zealand Ltd. Controlled by Holcim Ltd. N/AHolcim Management Consulting (China)

Co., Ltd. Controlled by Holcim Ltd. 66840595-6

(5) Related party transactions

(a) Sales/Purchase of goods and services received/provided

Related party Type of transaction

Nature of transaction Pricing policies

2012 2011Amount % of same

transaction Amount % of same

transaction


Services received

Group integrated service charge

Per contract

RMB 6,000,000

73% RMB 6,000,000

100%

Tibet High-Tech Building Materials Group Co., Ltd.

Services received

Group integrated service charge

Per contract RMB

2,200,528 27% - -Holcim Group Support Ltd.

Services received

Consultancy services

Per contract

USD1,000,000 100%

USD 1,000,000 100%

Holcim New Zealand Ltd.

Sales of goods

Sales of equipments Per contract - -

USD 257,557 100%

Holcim Management Services (China) Co. Ltd

Services received

Administration and management service

Per contract

RMB 5,903,671 100%

RMB 1,666,880 100%

Tibet High-Tech Building Materials Group Co., Ltd.

Sales of goods

Sales of Cement Per contract RMB

9,800,322 100% - -Huangshi Jiuhe

Trading Co., Ltd. Sales of

goods Sales of Clinker Per

contractRMB

54,849,820 100% - -

(b) Guarantees provided by related party

Guarantor Guarantee Amount Beginning date of guarantee

contract

Maturity date of guarantee

contract

Guarantee obligation

expiredHuaxin Group Co.,Ltd Huaxin Cement (Tibet) Co.,Ltd

200,000,000 9 July2009

1 July 2017

No

Huaxin Group Co.,Ltd Huaxin Cement (Tibet) Co.,Ltd 35,000,000 15 June2011

15 June 2014

No

Huaxin Group Co.,Ltd Huaxin Cement (Tibet) Co.,Ltd 24,000,000 24 December 2012

24 December 2015

No

(c) Charges for guarantee

2012 2011

Huaxin Group Co., Ltd. - 1,000,000

(d) Salaries of key management

2012 2011

Payment of salaries of key management 22,183,500 34,178,766

(e) Purchase of subsidiaries’ minority equity interest

- 142 -

2012 2011 Huangshi Yiruida Investment Co., Ltd. 253,713,479 -

(6) Receivables from and payables to related parties

Item Related party 31 December

2012 31 December

2011 Other receivables Tibet High-Tech Building

Materials Co., Ltd. - 14,525,518 Other receivables Enping Shide Jinying

Building Materials Co., Ltd. 13,533,000 - Advances from customers

Huangshi Jiuhe Trading Co., Ltd. 2,040,806 -

Advances from customers

Tibet High-Tech Building Materials Co., Ltd. 935,451 -

Accounts payable Huaxin Group Co., Ltd. 500,000 500,000 Long-term payables

(including currentportion)

Huangshi Yiruida Investment Co., Ltd.

21,566,521

(7) Commitments in relation to related parties

The commitments in relation to related parties contracted for but not recognised in the balance sheet are as follows:

Investment commitments


Tibet High-Tech Building Materials Co., Ltd. 68,800,000 68,800,000

On 30 October 2009, the Company entered into an agreement with Tibet Tianlu Co., Ltd., Tibet

Gaozheng (Group) Co., Ltd., Tibet Autonomous Region Investment Co., Ltd. and Shannan Xingye Cement Co., Ltd. for establishment of Tibet High-Tech Building Materials Co., Ltd. Pursuant to the agreement, the Company should contribute capital of RMB86,000,000 representing 43% of equity interests in Tibet High-Tech Building Materials Co., Ltd. As at 31 December 2012, the Company has invested RMB17,200,000. The outstanding contribution of RMB68,800,000 has been made in January 2013.

VIII Contingencies

(1) According to an equity acquisition agreement (the "Agreement") entered by the Company and

shareholders of Guanghan Sanxingdui Cement Co., Ltd. (the “Sanxingdui ”) on t 24 February 2012, the Company would acquire 100% shares of Sanxingdui. A deposit of RMB30,000,000 was made. Following completion of a due diligence, the Company proposed a supplemental agreement to be entered. The shareholders of Sanxingdui considered the proposed supplemental agreement breached original the Agreement, and thus filed a lawsuit against the Company. The Company has decided to take legal action to raise claims against the shareholders of Sanxingdui. At this stage, the court received both lawsuits and still is under the information collecting process. Based on the current situation, Management believe the result

- 143 -

will be favourable to the Company. (2) In August 2012, Hubei Guoxin Real Estate Co., Ltd. (the "Guoxin") filed a lawsuit against Huaxin

Cement (Wuhan) Co., Ltd., a subsidiary of the Company, and pursued a compensation amounting to RMB36,381,674 due to the quality of concrete provided by Huaxin Cement (Wuhan) Co., Ltd. Management of the Company believe there is no quality problem of the concrete produced by the Group, and the concrete was checked and received by Guoxin. At this stage, the case is still under the information collecting process and not yet on trial. Based on the current situation, Management believe it is difficult to predict the result of the lawsuit.

(3) In May 2011, Sichuan Engineering Bureau of Wutong Roads & Bridges (the "Wutong") filed a

lawsuit against Huaxin Cement (Chenzhou) Co., Ltd., a subsidiary of the Company, and pursue a compensation amounting to RMB12,345,401, on the ground that the construction in progress of Huaxin Cement (Chenzhou) Co., Ltd. resulted in the loss of a tunnel construction of Wutong. At this stage, the case is still under the information collecting process and not yet on trial. Based on the current situation, Management believe it is difficult to predict the result of the lawsuit. IX Commitments

(1) Capital commitments Capital expenditures contracted for at the balance sheet date but not recognised in balance

sheet are anaylsed as follows:


Buildings, machinery and equipment 591,725,837 458,588,918

(2) Investment commitments

On 23 November 2012, 30 November 2012 and 21 January 2013, the Company signed the “Share Purchase Agreement”, “Supplement Agreement I” and “Supplement Agreement II” with Wuhan Huayu Building Materials Group Co., Ltd. (Thereafter as “Huayu Company”), Mr Liao Binkui and Mr Liao Guoshu (Guarantor) respectively. Pursuant to the agreements, the Company will acquire 50% and 20% equity interest in Hubei Huaxiang Cement Co., Ltd. from Huayu Company and Mr Liao Binkui, at a total consideration of RMB420,100,800. As at 31 December 2012, the Company has invested RMB40,000,000 and not yet possessed substantial control on Hubei Huaxiang Cement Co., Ltd.

On 23 November 2012 and 21 January 2013, the Company signed the “Share Purchase

Agreement” and “Supplement Agreement I” with Wuhan Huachang Silicate Product Co., Ltd. (Thereafter as “Huachang Company”), Mr Liao Guoshu, Huayu Company(Guarantor) and Mr.Liaobinkui(Guarantor) respectively. Pursuant to the agreements, the Company will acquire 60% and 10% equity interest in Hubei Huaxiang Cement (E’zhou) Co., Ltd. from Huachang Company and Mr Liao Guoshu, at a total consideration of RMB99,437,000. As at 31 December 2012, the Company has invested RMB10,000,000 and not yet possessed substantial control on Hubei Huaxiang Cement (E’zhou) Co., Ltd.

(3) Guarantee commitments

On 1 August, 2012, the Company and Cambodia Cement Charkrey Ting Factory Co., Ltd. (Thereafter as "CCC") entered into the design, procurement, installation and commissioning contract, the Company, as a contractor, undertake the construction project of 3200TPD cement production line. The construction consideration amounted to USD 68 million. On 13 October 2012, the Company and Cambodia Cement Charkrey Ting Factory Co., Ltd. (Thereafter as "CCC") entered into an in conditions effect attached "Facility Agreement" (Thereafter as the "Agreement”).The Company commit to provide the unconditional and irrevocable joint and several liability guarantee to the debt amounted to USD 67 million under the

- 144 -

Loan Agreement between CCC and the Bank of China Phnom Penh Branch.

(4) Fulfillment of commitments for the previous period The Group has fulfilled the capital and operating lease commitments as at 31 December 2011.

On 16 January 2009, the Company signed an agreement with Wanyuan State-owned Assets Management and Investment Co., Ltd (“Wanyuan State-owned Company”). Pursuant to the agreement, the Company will acquire 68.2% equity interests in Wanyuan Dabashan Cement Co.,Ltd. (“Dabashan”) at a consideration of RMB45,500,000, provided that certain preconditions are fulfilled within the two years from the agreement date. As at 31 December 2012, the conditions set out in the above agreement have been met. Pursuant to the supplemental agreement signed in August 2012, the Company acquired 100% equity interest in Dabashan from Wanyuan State-owned Company, at a consideration of RMB61,500,000.

X Events after balance sheet date

(1) Profit distribution after balance sheet date

Pursuant to the resolution of board of directors of the Company on 22 March 2013, cash dividends in respect of 2012 of RMB168,353,987 were proposed. The above appropriations are subject to the approval of the Shareholders’ General Meeting.

XI Leasing

The Group acquired certain fixed assets through finance leasing (Note V(10) (d)), the rent to be paid in the future is as follows:


Within 1 year 46,054,116 28,359,814 Between 1 and 2 years 46,054,116 46,426,728 Between 2 and 3 years 44,626,674 46,426,728 Over 3 years - 45,167,886 136,734,906 166,381,156

As at 31 December 2012, the balance of unrecognised financing charge amounted to RMB14,687,876 (31 December 2011: RMB25,234,219) (Note V(31) (a)).

XII Business combination Please refer to Note IV (3).

- 145 -

XIII Financial instrument and risk

The Group's activities expose it to a variety of financial risks: market risk (primarily foreign exchange risk and interest rate risk), credit risk and liquidity risk. The Group's overall risk management program focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on the Group's financial performance.

(1) Market risk

(a) Foreign exchange risk

The Group’s major operational activities are carried out in Mainland China and a majority of the transactions are denominated in RMB. The Group is primarily exposed to foreign exchange risk arising from borrowings nominated in foreign currencies, primarily in USD. The Group did not use any hedging instruments to mitigate the foreign exchange risk.

As at 31 December 2012 and 2011, the carrying amounts in RMB equivalent of the Group’s assets

and liabilities denominated in foreign currencies are summarised below:

31 December 2012 USD Other TotalFinancial assets denominated in foreign

currency -

Cash at bank and in hand 377,794,84

9 1,401,090 379,195,939Other receivables 15,530,993 1,872,099 17,403,092 393,325,84

2 3,273,189 396,599,031 Financial liabilities denominated in

foreign currency - Current portion of long-term borrowings 45,615,496 1,455,640 47,071,136

Long-term borrowings 367,701,75

0 8,381,094 376,082,844Interest payables 302,499 - 302,499 413,619,74

5 9,836,734 423,456,479

31 December 2011 USD Other TotalFinancial assets denominated in foreign

currency -

Cash at bank and in hand 53,998 30,630 84,628Other receivables 3,150,450 - 3,150,450 3,204,448 30,630 3,235,078

Financial liabilities denominated in

foreign currency - Accounts payable 1,886,080 772,989 2,659,069Current portion of long-term borrowings 30,619,125 1,435,695 32,054,820Long-term borrowings 45,345,900 8,457,536 53,803,436Interest payables 3,059,957 - 3,059,957

80,911,06210,666,22

0 91,577,282

- 146 -

As at 31 December 2012, if RMB had strengthened/weakened by 10% against the USD while all other variables had been held constant, the Group’s net profit for the year would have been approximately RMB1,522,000 (31 December 2011: approximately RMB5,828,000) higher/lower for various financial assets and liabilities denominated in USD.

(b) Interest rate risk

The Group's interest rate risk mainly arises from long-term interest bearing borrowings including

long-term borrowings and debentures payable. Financial liabilities issued at floating rates expose the Group to cash flow interest rate risk. Financial liabilities issued at fixed rates expose the Group to fair value interest rate risk. The Group determines the relative proportions of its fixed rate and floating rate contracts depending on the prevailing market conditions. As at 31 December 2012, the Group’s long-term interest bearing borrowings were mainly RMB-denominated with floating rates, amounting to RMB3,875,077,000 (31 December 2011: RMB5,414,346,000)(Note V(29) and (30)).

Increases in interest rates will increase the cost of new borrowing and the interest expenses with

respect to the Group’s outstanding floating rate borrowings, and therefore could have a material adverse effect on the Group’s financial position. The Group’s finance department at its headquarters continuously monitors the interest rate position of the Group and makes decisions with reference to the latest market conditions. The Group may enter into interest rate swap agreements to mitigate its exposure to interest rate risk. During 2012 and 2011, the Group did not enter into any interest rate swap agreements.

As at 31 December 2012, if interest rates on the floating rate borrowings had been 10%

higher/lower while all other variables had been held constant, the Group’s net profit would have decreased/increased by approximately RMB33,294,000 (31 December 2011: approximately RMB34,270,000).

(2) Credit risk

Credit risk is managed on a Group basis. Credit risk mainly arises from cash at bank and in hand,

accounts receivable, other receivables, notes receivable etc.

The Group expects that there is no significant credit risk associated with cash at bank since they are deposited at state-owned banks and other medium or large size listed banks. Management does not expect that there will be any significant losses from non-performance by these counterparties.

In addition, the Group has policies to limit the credit exposure on accounts receivable, other receivables and notes receivable. The Group assesses the credit quality of and sets credit limits

on its customers by taking into account their financial position, the availability of guarantee from third parties, their credit history and other factors such as current market conditions. The credit history of the customers is regularly monitored by the Group. In respect of customers with a poor credit history, the Group will use written payment reminders, or shorten or cancel credit periods, to ensure the overall credit risk of the Group is within a controllable extent.

(3) Liquidity risk

Cash flow forecasting is performed by each subsidiary of the Group and aggregated by the Group’s finance department in its headquarters. The Group’s finance department at its headquarters monitors rolling forecasts of the Group's short-term and long-term liquidity requirements to ensure it has sufficient cash and securities that are readily convertible to cash to meet operational needs, while maintaining sufficient headroom on its undrawn committed borrowing facilities from major financial institution so that the Group does not breach borrowing limits or covenants on any of its borrowing facilities to meet the short-term and long-term liquidity requirements.

The financial assets and liabilities of the Group at the balance sheet date are analysed by their

maturity date below at their undiscounted contractual cash flows:

- 147 -

31 December 2012 Within 1 year 1 to 2 years 2 to 5 years Over 5 years TotalFinancial assets Cash at bank and in hand

2,839,236,250 - - - 2,839,236,250

Receivables 1,620,620,893 - - - 1,620,620,893Available-for-sale financial assets

- - - 56,016,862 56,016,862

Long-term receivables

1,845,000 31,737,375

2,456,782 -

36,039,157

Other receivables 288,071,470 - - - 288,071,470

4,749,773,613 31,737,375

2,456,782 56,016,862 4,839,984,632Financial liabilities Borrowings and interests

3,714,716,664 1,358,290,886 1,710,148,834 257,401,588 7,040,557,972

Payables* 3,260,630,328 46,054,116 44,341,011 - 3,351,025,455

Debenture payables 815,630,000 206,700,000 2,124,339,167 2,300,677,222 5,447,346,389 7,790,976,992 1,611,045,002 3,878,829,012 2,558,078,810 15,838,929,816

31 December 2011 Within 1 year 1 to 2 years 2 to 5 years Over 5 years TotalFinancial assets Cash at bank and in hand

2,825,437,202 - - - 2,825,437,202

Receivables 1,763,614,366 - - - 1,763,614,366Available-for-sale financial assets

- - - 33,041,120 33,041,120

Long-term receivables

1,638,718 6,272,000 2,735,233 - 10,645,951

Other receivables 148,938,461 - - - 148,938,461 4,739,628,747 6,272,000 2,735,233 33,041,120 4,781,677,100Financial liabilities Borrowings and interests

4,016,070,991 2,742,534,585 1,704,057,961 50,377,876 8,513,041,413

Payables* 2,791,049,357 51,282,218 106,178,790 56,880,000 3,005,390,365

Debenture payables 52,500,000 645,258,333 652,560,000 - 1,350,318,333 6,859,620,348 3,439,075,136 2,462,796,751 107,257,876 12,868,750,111 *The payables exclude taxes and other levies payable and employee benefits payable.

(4) Fair value

(a) Financial instruments not measured at fair value Financial assets and liabilities not measured at fair value mainly represent receivables,

short-term borrowings, payables, long-term borrowing and debentures payable. The carrying amount of the financial assets and liabilities not measured at fair value is a

reasonable approximation of their fair value.

(b) Financial instruments measured at fair value Based on the lowest level input that is significant to the fair value measurement in its entirety, the

fair value hierarchy has the following levels: Level 1: Quoted prices (unadjusted) in active markets for identical assets or liabilities. Level 2: Inputs other than quoted prices included within level 1 that are observable for the asset

or liability, either directly (that is, as prices) or indirectly (that is, derived from prices). Level 3: Inputs for the asset or liability that are not based on observable market data (that is,

unobservable inputs). As at 31 December 2012, the financial assets measured at fair value by the above three levels

are analysed below: Level 1 Level 2 Level 3 TotalFinancial assets - Available-for-sale equity

instruments 24,292,196 - - 24,292,196

- 148 -

As at 31 December 2011, the financial assets measured at fair value by the above three levels

are analysed below:

Level 1 Level 2 Level 3 TotalFinancial assets - Available-for-sale equity

instruments 21,313,254 - - 21,313,254

The fair value of a financial instrument that is traded in an active market is determined at the

quoted price in the active market.

XIV Assets stated at fair value

31 December 2011

Additional investment in

the reporting period

Fair value changes in the

reporting period

31 December 2012

Accumulated fair value changes recognised in

equity(excluding deferred

tax)Financial assets - Available-for-sale financial assets 21,313,254 - 2,978,942 24,292,196 15,322,853

XV Notes to the material items in the Company financial statements

(1) Accounts receivable

31 December 2012 31 December 2011 Accounts receivable 221,294,633 234,063,727Less: bad debt provision (4,814,638) (2,641,551) 216,479,995 231,422,176

(a) The ageing of accounts receivable is analysed below:

31 December 2012 31 December 2011 Within 1 year 183,523,102 226,364,354Between 1 and 2 years 35,153,561 4,851,124Between 2 and 3 years 281,923 502,202Over 3 years 2,336,047 2,346,047 221,294,633 234,063,727

(b) Accounts receivable categorised by nature:

31 December 2012 31 December 2011 Book value Provision for bad debt Book value Provision for bad debt Amount % Bad debt

provision% of


provision % of

provision Debtors with

significant balance 159,448,457 72% - - 186,944,318 80% - -Others with

insignificant balance but assessed individually 2,336,047 1% (2,336,047) 100% 2,346,047 1% (2,346,047) 100%

Debtors with insignificant balance grouped by credit risk 59,510,129 27% (2,478,591) 4% 44,773,362 19% (295,504) 1%

221,294,633 100% (4,814,638) 2% 234,063,727 100% (2,641,551) 1%

- 149 -

(c) As at 31 December 2012, accounts receivable with amounts that were not individually significant but that the related provision for bad debts was provided on the individual basis are analysed as follows:

Amount Bad debt

provision% of provision Reason

Client Z 530,000 (530,000) 100% Unlikely to be recoverable Client AA 726,472 (726,472) 100% Unlikely to be recoverable Others 1,079,575 (1,079,575) 100% Unlikely to be recoverable 2,336,047 (2,336,047)

(d) Accounts receivable which are individually insignificant and grouped on the basis of similar credit

risk are analysed as below:

31 December 2012 31 December 2011 Book value Provision for bad debt Book value Provision for bad debt

Amount % Bad debt

provision% of


provision % of

provision Within 1 year 35,006,140 59% - - 42,320,520 95% - -Between1 and 2 years 24,222,066 40% (2,422,206) 10% 1,950,640 4% (195,064) 10%Between 2 and 3 years 281,923 1% (56,385) 20% 502,202 1% (100,440) 20% 59,510,129 100% (2,478,591) 4% 44,773,362 100% (295,504) 1%

(e) There is no accounts receivable with full provision or with high percentage of provision being significantly written-off or reversed this year.

(f) As at 31 December 2012, there was no amount due from shareholders who individually hold

more than 5% (including 5%) shares of the Company (31 December 2011: nil). (g) Amounts due from top five accounts are analysed as below:

Relationship

with the Company

Amount Ageing % of total balance

Huaxin Gayur Cement Co., Ltd. Subsidiary 100,121,406 Within 1 year 45.2%Huaxin Environmental Engineering

(Wuxue) Co., Ltd. Subsidiary 12,298,477 Within 1 year 5.6%Client X Third party 9,229,288 Within 1 year 4.2%Client AB Third party 6,618,781 Within 1 year 3.0%Client AC Third party 6,012,464 Within 1 year 2.7% 134,280,416 60.7%

(h) Amounts due from related parties are analysed as below:

31 December 2012 31 December 2011 Relation-s

hip Amount % of

total balance

Bad debt provisions

Amount % of total

balance

Bad debt provisions

Huaxin Gayur

Cement Co., Ltd.

Subsidiary

100,121,406 45.2% - - - -Huaxin

Environment Engineering (Wuxue) Co., Ltd.

Subsidiary

12,298,477 5.6% - 10,931,495 4.7% -Wuhan Wugang


Subsidiary

3,784,130 1.7% - 7,887,686 3.4% -Huaxin Cement

(Yueyang) Co., Ltd.

Subsidiary

3,486,579 1.6% - - - -Huaxin Cement

Chongqing Fuling Co., Ltd.

Subsidiary

4,173,598 1.9% - - - -

- 150 -

Huaxin Cement (Wuxue) Co., Ltd.

Subsidiary

- - - 30,371,795 13.0% -Huaxin Cement

(Yichang) Co., Ltd.

Subsidiary

- - - 19,822,962 8.5% -Huaxin Cement

(Daoxian) Co., Ltd.

Subsidiary

- - - 14,379,553 6.1% -Huaxin Cement

(Changyang) Co., Ltd.

Subsidiary

- - - 12,446,584 5.3% -Huaxin Cement

(Zigui) Co., Ltd.

Subsidiary

- - - 8,186,120 3.5% -Huaxin Cement

(Nantong) Co., Ltd.

Subsidiary

- - - 8,072,966 3.4% -Huaxin Cement

(Yangxin) Co., Ltd.

Subsidiary

- - - 6,917,344 3.0% -Other related

parties 14,847,580 6.7% - 30,169,279 12.8% - 138,711,770 62.7% - 149,185,784 63.7% -

(i) As at 31 December 2012, there were no amounts denominated in foreign currencies (31

December 2011: nil).

(2) Other receivables

31 December 2012 31 December 2011 Amounts due from subsidiaries (Note (i)) 4,084,244,813 2,690,974,108Deposits 89,910,355 59,042,137Others 8,758,114 7,045,141 4,182,913,282 2,757,061,386Less: bad debt provision (48,047,355) (46,641,737) 4,134,865,927 2,710,419,649

(a) The aging of other receivables is analysed as follows:

31 December 2012 31 December 2011 Within 1 year 3,560,781,841 2,246,784,765Between 1 and 2 years 508,818,225 111,246,418Between 2 and 3 years 69,510,107 396,482,664Over 3 years 43,803,109 2,547,539 4,182,913,282 2,757,061,386

(b) Other receivables categorised by nature:

31 December 2012 31 December 2011 Book value Provision for bad debt Book value Provision for bad debt Amount % Bad debt

provision% of

provision Amount % Bad debt

provision % of

provisionDebtors with significan

balance 4,168,606,032 99.6% (44,383,694) 1.1% 2,745,195,608 99.6% (44,383,694) 1.6%Others with insignifican

balance but assessedindividually 2,632,686 0.1% (2,632,686) 100% 1,419,530 0.1% (1,419,530) 100%

Debtors with insignificanbalance grouped bycredit risk 11,674,564 0.3% (1,030,975) 8.8% 10,446,248 0.3% (838,513) 8%

4,182,913,282 100% (48,047,355) 1.1% 2,757,061,386 100% (46,641,737) 1.7%

(c) As at 31 December 2012, bad debt provisions for other receivable which were individually

significant are analysed as below:

- 151 -

Amount Bad debt provision % of provision Huaxin Cement (Wuhan) Co., Ltd. 163,136,728 (44,383,694) 27%

As operating strategy and planning changed, the future benefits of Huaxin Cement (Wuhan) Co., Ltd. are in significant uncertainty. The Company assessed the recoverability of other receivable of the subsidiary and has made provision for bad debts.

(d) As at 31 December 2012, bad debt provision for other receivables which are individually insignificant but having been specifically assessed for impairment are analysed as below:

Amount Bad debt

provision% of

provisionReason

Client L 500,000 (500,000) 100% Unlikely to be recoverableClient M 350,000 (350,000) 100% Unlikely to be recoverableClient N 370,000 (370,000) 100% Unlikely to be recoverableClient O 195,838 (195,838) 100% Unlikely to be recoverableOthers 1,216,848 (1,216,848) 100% Unlikely to be recoverable 2,632,686 (2,632,686)

(e) Other receivable which were individually insignificant and grouped on the basis of similar credit

risk are analysed as below:

31 December 2012 31 December 2011 Book value Provision for bad debt Book value Provision for bad debt

Amount % Bad debt

provision % of

provision Amount % Bad debt

provision % of

provisionWithin 1 year 7,015,246 60% - - 6,622,602 63% - -Between 1 and

2 years 2,107,806 18% (210,780) 10% 1,969,213 19% (196,921) 10%Between 2 and

3 years 1,000,000 9% (200,000) 20% 500,912 5% (100,183) 20%Over 3 years 1,551,512 13% (620,195) 40% 1,353,521 13% (541,409) 40% 11,674,564 100% (1,030,975) 9% 10,446,248 100% (838,513) 8%

(f) There was no other receivables which had been provided in full or by significant portion but were

received in full or by significant portion in the current year.

(g) As at 31 December 2012, there was no amount due from shareholders who individually hold more than 5% (including 5%) shares of the Company (31 December 2011: nil).

(h) The top five accounts are analysed as below:

Relationshipwith the

Company

Amount Ageing % of totalbalance

Huaxin Concrete (Wuhan) Co., Ltd. Subsidiary 556,831,811 Within 1 year 13%Huaxin Cement (Zhuzhou) Co., Ltd. Subsidiary 325,486,860 Within 1 year 8%Huaxin Cement Chongqing Fuling Co., Ltd. Subsidiary 312,591,407 Within 1 year 7%Huaxin Cement (Quxian) Co., Ltd. Subsidiary 237,212,387 Within 1 year 6%Huaxin Cement (Changyang) Co., Ltd. Subsidiary 192,208,523 Within 1 year 5% 1,624,330,988 39%

(i) Other receivables due from related parties are analysed as below:

31 December 2012 31 December 2011 Relation-s

hip Amount % of total

balanceBad debt provision

Amount % of total balance

Bad debt provision

Huaxin Concrete

(Wuhan) Co., Ltd. Subsidiary 556,831,811 13% - 203,118,397 7% -

Huaxin Cement (Zhuzhou) Co.,Ltd Subsidiary 325,486,860 8% - 250,335,933 9% -

Huaxin Cement Chongqing Fuling Co., Ltd. Subsidiary 312,591,407 7% - 175,139,807 6% -

Huaxin Cement (Quxian) Co.,Ltd Subsidiary 237,212,387 6% - 144,159,506 5% -

Huaxin Cement (Changyang) Co.,Ltd Subsidiary 192,208,523 5% - 106,646,486 4% -

- 152 -

Huaxin Cement (Xiangyang) Co.,Ltd Subsidiary 182,153,572 4% - 134,991,107 5% -

Huaxin Cement (Chenzhou) Co.,Ltd Subsidiary 167,122,026 4% - 133,061,009 5% -

Huaxin Cement (Chibi) Co., Ltd. Subsidiary 163,540,825 4% - 173,719,841 6% -

Huaxin Cement (Wuhan) Co.,Ltd Subsidiary 163,136,728 4% (44,383,694) 159,846,249 6% (44,383,694)

Huaxin Cement (Wanyuan) Co.,Ltd Subsidiary 144,567,765 3% -

57,592,674 2% -

Huaxin Cement (Zigui) Co.,Ltd Subsidiary 139,283,728 3% -

86,127,409 3% -

Huaxin Cement (Kunming Dongchuan) Co.,Ltd Subsidiary 131,309,066 3% -

24,233,881 1% -

Huaxin Cement (Daoxian) Co.,Ltd Subsidiary 127,695,135 3% -

6,188,415 0% -

Huaxin Cement (Wuxue) Co.,Ltd Subsidiary 122,572,239 2% -

55,052,755 2% -

Enping Shide Jinying Building Materials Co., Ltd.

Affiliated company

13,533,000 1% - - - -Other related parties Subsidiary 1,104,999,741 27% -

980,760,639 36% -

4,084,244,813 97% (44,383,694) 2,690,974,108 98% (44,383,694)

(j) As at 31 December 2012, there were no amounts denominated in foreign currencies (31 December 2011: nil).


31 December 2012 31 December 2011 Subsidiaries (Note (a)) 5,859,729,939 4,810,370,431Associates - without quoted price (Note V(9)) 216,561,783 14,859,038 6,076,291,722 4,825,229,469Less ： Impairment provision for long-term

equity investment (Note (b)) (42,000,000) (42,000,000) 6,034,291,722 4,783,229,469

The long-term equity investments of the Company are not subject to restriction on conversion

into cash.

- 153 -

(a) Subsidiaries

Accounting method

Initial investment cost

31 December 2011

Increase in investment cost

31 December 2012

% of share

holding

% of voting

rightImpairment

provision


year

Cash dividends in the current

year Huaxin Cement (Xiantao) Co.,

Ltd. Cost method 14,658,136 14,658,136 - 14,658,136 80% 80% - - 2,400,000 Huaxin Cement (Nantong) Co.,

Ltd. Cost method 89,680,203 89,680,203 - 89,680,203 85% 85% - - - Huangshi Huaxin Packaging Co.,

Ltd. Cost method 7,870,000 60,229,647 - 60,229,647 100% 100% - - - Wuhan Wugang Huaxin Cement

Co., Ltd. Cost method 20,000,000 20,000,000 - 20,000,000 50% 50% - - 10,000,000 Huaxin Cement (Yichang) Co.,

Ltd. Cost method 105,000,000 105,000,000 400,589,562 505,589,562 100% 100% - - 73,034,861

Huaxin Cement (Enshi) Co., Ltd. Cost method 40,200,000 40,200,000 - 40,200,000 100% 100% - - - Huaxin Cement Scientific

Research and Design Co., Ltd. Cost method 990,000 990,000 - 990,000 99% 99% - - -

Huaxin Cement (Tibet) Co., Ltd. Cost method 30,000,000 50,000,000 - 50,000,000 79% 79% - - 94,800,000 Huaxin Cement (Zhaotong) Co.,

Ltd. Cost method 45,000,000 45,000,000 - 45,000,000 100% 100% - - 24,000,000 Huaxin Cement (Yueyang) Co.,

Ltd. Cost method 22,500,000 22,500,000 - 22,500,000 100% 100% - - - Huaxin Cement (Yangxin) Co.,

Ltd. Cost method 400,000,000 400,000,000 253,713,479 653,713,479 100% 100% - - 41,905,259 Balance carried forward 775,898,339 848,257,986 654,303,041 1,502,561,027 - - 246,140,120

- 154 -

Accounting method

Initial investment cost

31 December 2011

Increase in investment cost

31 December 2012

% of share

holding

% of voting

rightImpairment

provision


year


year Balance brought forward 775,898,339 848,257,986 654,303,041 1,502,561,027 - - 246,140,120Huaxin Cement (Wuhan) Co.,

Ltd. Cost method 42,000,000 42,000,000 - 42,000,000 100% 100% (42,000,000) - - Huaxin Concrete (Wuhan) Co.,

Ltd. Cost method 80,502,159 80,502,159 - 80,502,159 100% 100% - - - Huaxin Cement (Xiangyang) Co.,

Ltd. Cost method 140,000,000 140,000,000 - 140,000,000 100% 100% - - - Hunan Huaxin Xianggang

Cement Co., Ltd. Cost method 36,000,000 85,500,000 - 85,500,000 60% 60% - - 18,000,000 Huaxin Cement (Wuxue) Co.,

Ltd. Cost method 200,000,000 300,000,000 - 300,000,000 100% 100% - - -

Huaxin Cement (Chibi) Co., Ltd. Cost method 140,000,000 140,000,000 - 140,000,000 100% 100% - - - Huaxin Cement (Henan Xinyang)

Co., Ltd. Cost method 140,000,000 200,000,000 - 200,000,000 100% 100% - - 40,000,000 Huaxin Environment

Engineering Co., Ltd. Cost method 50,000,000 50,000,000 100,000,000 150,000,000 100% 100% - - - Huaxin Cement Technology

Management (Wuhan) Co., Ltd. Cost method 20,000,000 20,000,000 - 20,000,000 100% 100% - - -

Huaxin Cement (Hefeng) National Materials Co., Ltd. Cost method 24,300,483 24,300,483 - 24,300,483 51% 51% - - -

Huaxin Cement (Zigui) Co., Ltd. Cost method 160,000,000 240,000,000 - 240,000,000 100% 100% - - - Huaxin Cement (Chenzhou) Co.,

Ltd Cost method 160,000,000 220,000,000 - 220,000,000 100% 100% - - - Balance carried forward 1,968,700,981 2,390,560,628 754,303,041 3,144,863,669 (42,000,000) - 304,140,120

- 155 -

Accounting

methodInitial investment

cost31 December

2011Increase in

investment cost 31 December

2012

% of share

holding

% of voting

rightImpairment

provision

Impairment provided in the

current year


year Balance brought forward 1,968,700,981 2,390,560,628 754,303,041 3,144,863,669 (42,000,000) - 304,140,120

Huaxin Cement (Zhuzhou) Co. Ltd Cost method 200,000,000 280,000,000 - 280,000,000 100% 100% - － -

Huaxin Cement (Macheng) Co., Ltd. Cost method

40,000,000 65,000,000 - 65,000,000 100% 100% - － - Huaxin Cement (Huangshi) Logistics

Co., Ltd. Cost method

20,000,000 20,000,000 - 20,000,000 100% 100% - － - Huaxin Cement (Kunming Dongchuan)


30,000,000 120,000,000 - 120,000,000 100% 100% - － - Huaxin Cement Xiangyang Xiangcheng


40,000,000 40,000,000 - 40,000,000 100% 100% - － 10,000,000

Huaxin Cement (Quxian) Co., Ltd. Cost method

160,000,000 200,000,000 - 200,000,000 100% 100% - － - Huaxin Cement (Huangshi) Equipment

Manufacturing Co., Ltd. Cost method

60,000,000 130,000,000 - 130,000,000 100% 100% - － 4,290,485 Huaxin Cement Chongqing Fuling Co.,

Ltd Cost method

160,000,000 200,000,000 - 200,000,000 100% 100% - － -

Huaxin Cement Suizhou Co., Ltd. Cost method

24,600,000 24,600,000 - 24,600,000 60% 60% - － 1,358,036

Huaxin Cement (Shishou) Co., Ltd. Cost method

10,890,000 10,890,000 - 10,890,000 55% 55% - － 1,210,000

Huaxin Cement (Daoxian) Co., Ltd. Cost method

140,000,000 180,000,000 - 180,000,000 100% 100% - － -

Huaxin Cement (Wanyuan) Co., Ltd. Cost method

100,000,000 127,000,000 - 127,000,000 100% 100% - － -

Huaxin Cement (Diqing) Co., Ltd. Cost method

16,415,244 65,550,000 - 65,550,000 69% 69% - － -

Huaxin Cement (Jingzhou) Co., Ltd. Cost method

70,800,000 70,800,000 - 70,800,000 100% 100% - － - Huaxin Cement (Lengshuijiang) Co.,

Ltd. Cost method

36,000,000 180,000,000 - 180,000,000 90% 90% - － - Huaxin Hongta Cement (Jinghong) Co.,

Ltd. Cost method

45,442,000 91,601,080 - 91,601,080 51% 51% - － - Huaxin Aggregate (Yangxin) Co., Ltd.

Cost method60,000,000 60,000,000 - 60,000,000 100% 100% - － -

Huaxin Cement (Changyang) Co., Ltd. Cost method

27,590,806 117,590,806 - 117,590,806 100% 100% - － -

Huaxin Cement (Fangxian) Co., Ltd. Cost method

23,475,649 23,475,649 6,649,015 30,124,664 70% 70% - － - Huaxin Jinlong Cement (Yunxian) Co.,

Ltd. Cost method

363,802,268 363,802,268 - 363,802,268 80% 80% - － - Huaxin Zhongya Investment (Wuhan)


25,500,000 25,500,000 25,500,000 51,000,000 51% 51% - － -

Huaxin Cement (Sangzhi) Co., Ltd. Cost method

24,000,000 24,000,000 24,000,000 80% 80% - － - Balance carried forward 647,216,948 4,810,370,431 786,452,056 5,596,822,487 (42,000,000) - 320,998,641

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Accounting

methodInitial investment

cost31 December

2011Increase in

investment cost 31 December

2012

% of share

holding

% of voting

rightImpairment

provision

Impairment provided in the

current year


year Balance brought forward 3,647,216,948 4,810,370,431 786,452,056 5,596,822,487 (42,000,000) - 320,998,641 Huaxin Concrete Co., Ltd. Cost method - - 50,000,000 50,000,000 100% 100% - - - Huaxin Aggregate Co., Ltd. Cost method - - 50,000,000 50,000,000 100% 100% - - - Huaxin New Building Material Co., Ltd.

Cost method- - 50,000,000 50,000,000 100% 100% - - -

Huaxin Equipment Engineering Co., Ltd.

Cost method- - 60,000,000 60,000,000 100% 100% - - -

Huaxin (Hong Kong) International Holdings Co., Ltd.

Cost method- - 52,907,452 52,907,452 100% 100% - - -

3,647,216,948 4,810,370,431 1,049,359,508 5,859,729,939 (42,000,000) - 320,998,641

- 117 -

(b) Impairment provision for long-term equity investments

31 December 2011 and

31 December 2012Subsidiary-

Huaxin Cement (Wuhan) Co., Ltd. 42,000,000

The Company has performed assessment on the investments on Huaxin Cement (Wuhan) Co., Ltd. and recognised impairment provision of RMB42,000,000 because of the new operating plan and uncertainty in business performance.

(4) Sales and cost of sales

2012 2011 Revenue from main operations 1,326,788,129 1,186,136,660Other operating income 350,223,108 485,979,019 1,677,011,237 1,672,115,679 2012 2011 Cost of main operations 1,115,904,770 905,497,450Other operating expenses 195,996,974 344,092,868 1,311,901,744 1,249,590,318

(a) Revenue and cost of main operations Analysed by product:

2012 2011 Revenue from

main operations

Cost of main operations

Revenue from main

operations Cost of main

operations Sales of cement 764,413,285 (574,105,413)

1,076,530,550 (809,666,329)

Sales of clinker 66,543,646 (61,738,358) 55,320,079 (46,526,715)Others 495,831,198 (480,060,999) 54,286,031 (49,304,406) 1,326,788,12

9 (1,115,904,770)1,186,136,66

0 (905,497,450)

(b) Other operating income and expenses

2012 2011

Other operating income

Other operating expenses

Other operating

income Other operating

expenses Sales of materials 190,579,106 (189,638,608) 331,469,650 (325,027,609)Trade mark

charges 145,663,078 - 147,862,112 -Others 13,980,924 (6,358,366) 6,647,257 (19,065,259) 350,223,108 (195,996,974) 485,979,019 (344,092,868)

(c) Top five customers are analysed as follows: The top five customers of the Company totaled to RMB659,953,800 (2011: RMB309,006,882),

- 118 -

which accounted for 40% (2011: 18%) of the total sales revenue. Details are set out below:

Sales

% of total sales revenue from of the

Company Huaxin Gayur Cement Co., Ltd. 458,234,209 27%Client X 112,405,255 7%Wuhan Wugang Huaxin Cement Co., Ltd. 31,654,477 2%Client AD 30,924,121 2%Client AE 26,735,738 2% 659,953,800 40%

(5) Investment income

2012 2011 Income from long-term equity investment under cost

method(Note (a)) 320,998,641 615,405,890Loss from long-term equity investment under equity

method

(1,615,412)

(2,340,962) Income earned during the holding period of

available-for-sale financial assets

640,725 249,721 320,023,954 613,314,649

There is no significant restriction on the investment income remittance to the Company. (a) Investment income from long-term equity investment under cost method Investment income from top five investees or amounted to over 5% of total profit are analysed

as below:

2012 2011 Reason of fluctuation Huaxin Cement (Tibet) Co.,Ltd.

94,800,000 - Dividends declared in 2012

Huaxin Cement (Yichang) Co.,Ltd.

73,034,861 87,500,000 Dividends declared in 2012 is less than 2011

Huaxin Cement (Yangxin) Co.,Ltd.


Huaxin Cement (Henan Xinyang) Co.,Ltd.


Huaxin Cement (Zhaotong) Co.,Ltd.


273,740,120

246,100,000

(6) Notes to cash flow statement (a) Reconciliation of net profit to cash flows from operating activities

2012 2011 Net profit 265,936,609 559,316,187Adjustments: Provision for assets impairment 3,491,475 87,031,691

Depreciation of fixed assets 74,578,546 70,580,204Amortisation of intangible assets 25,637,102 22,022,525Amortisation of long-term prepaid

expenses 1,108,828 271,234Amortisation of deferred income (1,490,417) (1,159,417)

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Loss on disposal of fixed assets and intangible assets 1,129,500 864,828

Finance expenses 165,235,147 141,515,548Investment income (320,023,954) (613,314,649)Deferred income tax (30,620,023) (1,865,911)Decrease/ (Increase) in inventories 16,300,730 (14,758,794)Decrease in operating receivables 180,076,305 249,297,087Increase/(Decrease) in operating

payables 199,684,877 (251,764,878)Net cash flows from operating activities 581,044,725 248,035,655

(b) Changes in cash:

2012 2011

Ending balance of cash 1,122,109,388 1,333,767,40

7

Less: beginning balance of cash (1,333,767,407

) (618,454,794

)(Decrease)/Increase in cash (211,658,019) 715,312,613

- - 1 - -

SUPPLEMENTARY TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR END 31 DECEMBER 2012 (All amounts in Renminbi yuan unless otherwise stated)

[English Translation for Reference Only]

I Non-routine items Income is presented as positive and loss is presented as negative.

2012 2011 Net loss on disposal of non-current assets (12,143,298) (6,295,016) Government grants recognised in profit or loss for the

current period 99,614,551 101,389,960Other operating expenses - (16,063,832) Reversal of the provision on receivables assessed

for impairment on an individual basis 2,132,807 1,027,499 Non-operating income and expenses other than

aforesaid items (12,498,428) (4,303,294) 77,105,632 75,755,317 Effect of income tax (14,549,381) (14,165,779) Effect of minority interest (after tax) (8,478,507) (9,077,713) 54,077,744 (52,511,825)

Basis for preparation of statement of non-recurring profit or loss

Under the requirements in Explanatory announcement No. 1 on information disclosure by companies offering securities to the public – non-recurring profit or loss [2008] from CSRC, non-recurring profit or loss refer to those arises from transactions and events that are not directly relevant to ordinary activities, or that are relevant to ordinary activities, but are extraordinary and not expected to recur frequently that would have an influence on users of financial statements making economic decisions on the financial performance and profitability of an enterprise.

II Return on equity and earnings per share

Weighted average

return on equity (%)

Earnings per share Basic earnings per

share Diluted earnings per

share 2012 2011 2012 2011 2012 2011

Consolidated net profit attributable to ordinary shareholders of the Company 7.18 19.00 0.59 1.31 0.59 1.31

Consolidated net profit attributable to ordinary shareholders of the Company, excluding non-routine items 6.48 18.07 0.54 1.25 0.54 1.25

- - 2 - -

III Notes for significant fluctuation of major accounts in financial statements

Fluctuation with 30% or above, and balance accounting for 5% or above of total assets or transaction accounting for 10% or above of profit before tax are analysed as below:

Consolidated Balance Sheet：

31 December

201231 December

2011Increase/

(decrease)

Fluctuation Notes Cash at bank and in hand 2,839,236,250 2,825,437,202 13,799,048 0% (1)Accounts receivable 804,514,901 611,160,181 193,354,720 32% (2)Other receivables 288,071,470 148,938,461 139,133,009 93% (3)Available-for-sale financial assets 56,016,862 33,041,120 22,975,742 70% (4)Long-term receivables 32,456,782 10,645,951 21,810,831 205% (5)Long-term equity investments 338,769,365 14,859,038 323,910,327 2180% (6)Fixed assets 12,858,979,199 12,431,758,878 427,220,321 3% (7)Construction in progress 1,663,637,596 970,702,004 692,935,592 71% (8)Intangible assets 1,796,517,448 1,676,653,352 119,864,096 7% (9)Long-term prepaid expenses 264,561,556 148,208,055 116,353,501 79% (10)Deferred tax assets 152,880,104 108,547,828 44,332,276 41% (11)Short-term borrowings 1,054,000,000 997,950,000 56,050,000 6% (12)Notes payable 87,491,030 32,503,263 54,987,767 169% (13)Accounts payable 2,549,726,477 2,428,714,288 121,012,189 5% (14)Interests payable 104,268,504 31,830,885 72,437,619 228% (15)Dividends payable 29,459,504 66,710,525 (37,251,021) -56% (16)Other payables 547,899,201 206,206,627 341,692,574 166% (17)Current portion of non-current

liabilities 2,996,609,294 2,693,349,474 303,259,820 11% (18)Long-term borrowings 2,675,077,477 4,222,803,436 (1,547,725,959) -37% (19)Debentures Payable 3,682,215,000 1,197,450,000 2,484,765,000 208% (20)Long-term payables 83,618,872 142,986,042 (59,367,170) -42% (21)Capital surplus 3,080,957,052 3,520,784,820 (439,827,768) -12% (22)Retained earnings 3,371,858,083 2,983,725,288 388,132,795 13% (23)

2012 2011 Increase/ (decrease) Fluctuation Notes

Sales 12,520,527,247 12,638,039,183 (117,511,936) -1% (24)Cost of sales 9,465,894,458 9,174,347,298 291,547,160 3% (24)Taxes and surcharges 174,074,705 154,680,639 19,394,066 13% (25)Selling and distribution

expenses 838,081,458 700,909,789 137,171,669 20% (26)General and administrative

expenses 723,747,919 587,527,808 136,220,111 23% (27)

Finance costs - net

576,330,191 514,716,636 61,613,555 12% (28)Asset impairment loss 18,181,442 73,109,195 (54,927,753) -75% (29)

Investment income

1,187,206 2,091,241 (904,035) -43% (30)Non-operating income 212,591,718 198,061,207 14,530,511 7% (31)Non-operating expenses 30,651,534 18,995,978 11,655,556 61% (32)Income tax expenses 224,693,300 389,666,808 (164,973,508) -42% (33)Minority interests 124,617,990 144,786,509 (20,168,519) -14% (34)

Notes:

(1) The yearend balance of cash and bank was stable and there was no obvious fluctuation compared to previous year.

Consolidated Income Statement：

- - 3 - -

(2) Increase in accounts receivable was mainly due to the period of receipt of sales lengthened in

the current year. (3) Increase in other receivables was mainly due to equity acquisition and business transactions

raised in the current year. (4) Increase in available-for-sale financial assets was mainly due to the purchase for

available-for-sale financial assets in the current year. (5) Increase in long-term receivables was mainly due to business transactions raised in the current

year. (6) Increase in long-term equity investments was mainly due to the Group invested in new affiliated

business. (7) Increase in fixed assets was mainly due to the completion of construction and cogeneration

projects. (8) Increase in construction in progress was mainly due to the new construction lines. (9) Increase in intangible assets was mainly due to the increase in land use rights. (10) Increase in long-term prepaid expenses was mainly due to increase in mine stripping fee. (11) Increase in deferred tax assets was due to the recognition of deductible loss and temporary

expenses difference. (12) Increase in short-term borrowings was mainly due to the expansion of Group and growing

demand for operating capital.

(13) Increase in Notes payable was mainly the increase in Notes payment in the year-end.

(14) Increase in accounts payable was mainly due to the increase in transportation expenses.

(15) Increase in interests payable was mainly due to the increase in debentures payable. (16) Decrease in dividends payable was mainly due to the payment for dividend distribution to

minority shareholders of the subsidiaries. (17) Increase in other payable was mainly due to the increase in purchase of equity acquisition. (18) Increase in current portion of non-current liabilities was mainly due to the increase in current

portion of long-term borrowings. (19) Decrease in long-term borrowings was mainly due to the repayment and transfer of long-term

borrowings to current portion of non-current liabilities. (20) Increase in debentures payable was mainly due to the Company which issued the corporate

bonds in the current year. (21) Decrease in long-term payables was mainly due to the payment of land funds and government

borrowing. (22) Decrease in capital surplus was mainly due to acquisition of minority equity interest in the

current year.

(23) Increase in retained earnings was mainly due to the increase in profits this year.

- - 4 - -

(24) Decrease in sales was mainly due to the decrease in sale prices. Increase in sales of cost was mainly due to the increase in sales volume.

(25) Increase in taxes and surcharges is mainly due to the mining exploration, which resulted in the

increase in resources tax. (26) Increase in selling and distribution expenses is mainly due to the increase in material

consumption and transportation fee. (27) Increase in general & administrative expenses was mainly due to the increase in staff costs. (28) Increase in financial expenses was mainly due to the increase in borrowings and interest rate.

(29) Decrease in asset impairment loss was mainly due to that there is no provision of impairment for

the certain fixed assets in the current year. (30) Decrease in investment loss was mainly due to the decrease in loss from affiliated

businesses.

(31) Increase in non-operating income was mainly due to the increase in tax rebate for comprehensive utilization of resouses.

(32) Increase in non-operating expenses was mainly due to the more losses from disposal of fixed

assets.

(33) Decrease in income tax expenses was mainly due to the decrease in profits this year. (34) Decrease in minority interest was mainly due to the decrease in profits and minority equity

acquisition in subsidiaries.

- 5 -

Chapter 11 Documents for Inspection

1. Financial Statements carrying the signatures of the legal representative, administrative leader of accounting and chief of accounting department. 2. Original Auditors’ Report, audited and signed by the CPAs. 3. All original copies of the public notice and documents that were published on presses designated by CSRC.

Chairman: Xu Yongmo


March 26, 2013