The Board of Directors of the Company and its members guarantee that there is no false or misleading statement or material omission in this announcement and shall be severally and jointly liable for the truthfulness, accuracy and completeness of its contents.

 

I. General of the Litigation Acceptance

 

In September 2010, a dispute was produced during implementation of a cooperation agreement among Hubei Xingfa Chemical Group Co., Ltd. (hereinafter referred to as ��Xingfa��), Yichang Hongqingyuan Water and Electricity Co., Ltd. (hereinafter referred to as ��Hongqingyuan��), the Company and Wuhan Fangde Investment Co., Ltd. (hereinafter referred to as ��Fangde��).  Hence the Plaintiffs (the Company and Fangde), filed a litigation to Yichang Intermediate People's Court against the Defendants (Xingfa and Hongqingyuan), and Yichang Fanglida Building Materials Co., Ltd. (hereinafter referred to as ��Fanglida��) was the third party.  Yichang Intermediate People's Court accepted the case on September 20, 2010.

 

II. General of the Case

 

On September 19, 2003, the Company signed ��Cooperation Agreement�� with Xingfa, Fangde and Xingshan Xingfa Sanli Chemical Co., Ltd. (hereinafter referred to as ��Sanli��).  It stipulated that Fangde and Sanli establish Fanglida Company through joint venture with a cooperation term of 50 years, a 400 kt/a phosphate slag drying line would be constructed by utilizing waste phosphate slag as raw materials.  Phosphor slag would be supplied by Xingfa and Sanli within their cooperation term, and its product dry phosphate slag, which is one of the raw materials for producing cement, would be procured by the controlling subsidiary of the Company Huaxin Yichang Cement Ltd. or other controlling subsidiaries or related companies.  In order to ensure a regular production of Fanglida Company, the above four parties signed ��Agreement on Phosphor Slag Supply and Marketing�� on the same day, making it as an Annex of the ��Cooperation Agreement��.

 

After signing the Contract, completing the relevant legal procedures like project approval and environment evaluation, etc., Fanglida Company was registered and established, and its phosphate slag trying line was put into operation in February 2005.  In January 2006, Hongqingyuan acquired the equity of Fanglida that held by Sanli.  During the implementation of the above contract, Xingfa and Hongqingyuan no longer supplied phosphate slag since October 2008, then a dispute was produced accordingly and it failed to be solved through negotiation.  As the Plaintiffs, the Company and Fangde filed a litigation against Xingfa and Hongqingyuan, the detailed information is as follows:

 

1. Terminating the ��Cooperation Agreement�� and ��Agreement on Phosphate Slag Supply and Marketing�� by and between the plaintiffs and defendants.  The two defendants shall jointly and severally pay a total of 20.0168 million Yuan compensation for economic loss caused by breach of contract to the plaintiff Fangde Company.

 

2. The defendants shall bear the case identification fee, case acceptance fee, and any other litigation costs.

 

III. Proceeding of the Case

 

The case has not yet been held hearing on.  According to the court notice, the case will be trailed in court on November 30, 2010. at Yichang Intermediate People's Court

 

IV. The Company does not have any other litigation or arbitration matters that should be disclosed but without disclosure.

 

V. Impacts of the litigation on the Company

 

In this litigation, since the Company is a party of the Cooperation Agreement, and there is content of terminating the cooperation agreement in the claim; in order to prevent the related parties from thinking that the absence of parties to the litigation may lead defects in relevant proceedings, the Company hence decided to participate in the litigation as a plaintiff.

 

Since Fanglida was actually invested and established by Fangde and Sanli (now it was Hongqingyuan), the direct interest parties of phosphate slag supply and marketing relationship are Fangde, Hongqingyuan and Fanglida.  Beneficiaries of profit distribution from operating phosphate slag by Fanglida are Fangde and Hongqingyuan.  The case is indicting to the economic losses suffered by Fangde that caused by cooperation dispute.  So whether the litigation request could receive support or not, it shall not affect the interests of the Company, and has no impact on the Company.

 

VI. Documents for Inspection

1. Civil indictment;

2. Case acceptance notice;

3. Materials related to the case causes.

 

It is herewith announced.

 

Huaxin Cement Co., Ltd.

Board of Directors

 

November 4, 2010