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.

Important Notice:

 

�� Brief of the Acquisition: Huaxin Cement Co., Ltd. (hereinafter referred to as ��the Company��) acquired 11% equity of Hubei Fangxian Zuanshi Cement Co., Ltd. (hereinafter referred to as ��Fangxian Zuanshi��) held by Hanjiang Water Conservancy and Hydroelectric Power (Group) Limited Liability Company (hereinafter referred to as ��Hanjiang Group��) with the price of 3,689,030.50 Yuan, 29% equity of Fangxian Zuanshi held by natural person Ye Jinming with the price of 9,725,625.87 Yuan, 20% equity of Fangxian Zuanshi held by Hubei Shiyan People's Mall Co, Ltd. (hereinafter referred to as ��Shiyan People's Mall��) with the price of 6,707,328.19 Yuan and 10% equity of Fangxian Zuanshi held by Danjiangkou Hanjiang Zonglian Investment Co., Ltd. (hereinafter referred to as ��Danjiangkou Zonglian Investment��) with the price of 3,353,664.10 Yuan.  The Company acquired 70% equity of Fangxian Zuanshi in total with the price of 23,475,648.67 Yuan.

 

�� This acquisition does not involve any related transaction.

 

�� This acquisition has been approved by the Nineteenth Meeting of the Sixth Board of Directors of the Company convened on November 10-11, 2010.

 

�� After this acquisition, Zuanshi Company shall become a controlling subsidiary of the Company.

 

I. General

 

1. On November 25, 2010, the Company signed Agreement with Hanjiang Group, Mr. Ye Jinming, Shiyan People's Mall and Danjiangkou Zonglian Investment, acquiring 11% equity of Fangxian Zuanshi held by Hanjiang Group with the price of 3,689,030.50 Yuan, 29% equity of Fangxian Zuanshi held by Mr. Ye Jinming with the price of 9,725,625.87 Yuan, 20% equity of Fangxian Zuanshi held by Shiyan People's Mall with the price of 6,707,328.19 Yuan and 10% equity of Fangxian Zuanshi held by Danjiangkou Zonglian Investment with the price of 3,353,664.10 Yuan.  The Company acquired 70% equity of Fangxian Zuanshi in total with the price of 23,475,648.67 Yuan.  After the equity transfer, Hanjiang Group will still hold 30% equity of the joint venture company - Huaxin Cement (Fangxian) Ltd. while the Company will hold the rest 70% equity.

 

2. This equity acquisition does not involve any related transaction.

 

3. The Nineteenth Meeting of the Sixth Board of Directors of the Company convened on November 10-11, 2010 has reviewed and adopted the Proposal in Respect of Acquiring Equity of Fangxian Zuanshi Cement Co., Ltd.  Voting Result: Affirmative: 9; Negative: 0; Abstention: 0.

 

4. This acquisition is within the decision-making limit of the Board; hence it is not necessary to be submitted to the Shareholders�� General Meeting for approval.

 

II. Introduction of Each Party

 

1. Hanjiang Water Conservancy and Hydroelectric Power (Group) Limited Liability Company, location: No.3 Huanxing Road, Danjiangkou City; legal representative: He Ping; registered capital: 1377.37 million Yuan; business scope: power generation and supply, water supply; major shareholder or actual controller: Changjiang Water Conservancy Committee.  From January to November 2010, the group achieved operating income 4901 million Yuan, total profit 284 million Yuan and tax 477 million Yuan.  Its total assets had reached 10.47 billion Yuan.

 

2. Mr. Ye Jinming, location: No. 43 Dongyue Road, Maojian District, Shiyan City.  Major business: sales of gold products.

 

3. Hubei Shiyan People's Mall Co, Ltd., location: No.1 Renmin North Road, Shiyan City; legal representative: Jia Guoqi; registered capital: 15 million Yuan; business scope: general merchandise; major shareholder or actual controller: Wuhan Wushang Group Co., Ltd.  In 2009, the company achieved sales revenue (including tax) 825 million Yuan and turned in tax 26.53 million Yuan.

 

4. Danjiangkou Hanjiang Zonglian Investment Co., Ltd., location: No.3 Huanxing Road, Danjiangkou City; legal representative: Hu Jun; registered capital: 12 million Yuan; business scope: project investment, capital operation; major shareholder or actual controller: Hanjiang Water Conservancy and Hydroelectric Power (Group) Limited Liability Company.

 

III. Basic Information of the Target Company

 

(I) Target company

 

Fangxian Zuanshi Cement Co., Ltd. was established in October 2007, locates in Hualongyan Town, Fangxian County, Hubei Province.  It has a 2500T/D new dry cement clinker production line and a wholly owned subsidiary Danjiangkou Zuanshi Cement Co., Ltd. (600 kt/a cement grinding station).  Registered capital: 80 million Yuan; of which Hanjiang Group holds 41% of its equity, natural person Ye Jinming holds 29% of its equity, Shiyan People's Mall holds 20% of its equity and Danjiangkou Zonglian Investment holds 10% of its equity.  Legal representative: Mr. He Xiaodong; business scope: manufacturing and sales of cement and clinker, operation of the necessary sub-materials for the company.

 

Equity of Fangxian Zuanshi held by Hanjiang Group, Mr. Ye Jinming, Shiyan People's Mall and Danjiangkou Zonglian Investment did not get involved in any mortgage, pledge or any other cases that may restrict the transfer, nor get involved in litigation, arbitration or seizure, freezing and other judicial measures; there was no other cases that may hinder the transfer of ownership.  Hanjiang Group, Mr. Ye Jinming, Shiyan People's Mall and Danjiangkou Zonglian Investment all agreed to give up their rights of first refusal among each other.

 

Hubei Daxin Certified Public Accountants has made special audit (Da Xin E Shen Zi [2011] No. 0006) on the financial situation (as of November 30, 2010) of Fangxian Zuanshi, its total assets was 379,949,833.22 Yuan, total liabilities was 357,313,192.26 Yuan, total owners�� equity was 22,636,640.96 Yuan; sales achieved in Jan-November 2010 was 159,460,256.34 Yuan, net profit was -35,386,216.81 Yuan.

 

(II) Claims and Debts Transfer Involved in the Equity Acquisition

 

After auditing and identifying, all the claims and debts of Fangxian Zuanshi that were legitimately and reasonably incurred during its production and operation process and also met the requirements contained in the Agreement shall be taken over by the Company in principle.  

 

The original shareholders of Fangxian Zuanshi shall be responsible for the debt, contingent liabilities and guarantees which are outside the scope of the audit report on the taking over day.

 

(III) Pricing

 

Book value of the net assets (as of November 30, 2010) in the audit report is 22,636,640.96 Yuan, the price of 70% equity transfer is 23,475,648.67 Yuan with a premium of 7.63 million Yuan.

.

IV. Major Content in the Agreement

 

(I) Major Articles in the Agreement

 

1. Signing Party:

Party A: the Company

Party B: Hanjiang Group

Party C: Danjiangkou Zonglian Investment

Party D: Shiyan People's Mall

Party E: Mr. Ye Jinming

 

2. Transaction Price: 23,475,648.67 Yuan

 

3. Payment Mode: (1) Party A shall pay 4 million Yuan earnest money within 10 working days after signing this Agreement.  Once this Agreement enters into force, the earnest money shall be considered as the initial equity transfer price automatically.  (2) 80% of the equity transfer price shall be paid within 7 working days after completion of the equity transaction.  (3) The remaining equity transfer price shall be paid within 6 months after completion of the equity transaction.

 

4. Timing of Delivery or Transfer: The deadline of completion of equity transfer shall be December 31st, 2010.

 

5. Conditions, Time of Taking Effect and Validity of the Agreement: "Equity Transfer Agreement" shall become effective after signed by legal representative by Party A, Party B, Party C and Party D and seal affixed, approved by the Board of Directors of Party A and signed by Party E.

 

6. Breach of Contract

 

Should any Party not fulfil its commitments or obligations stipulated in this Agreement, it should be considered as breach of contract.  Party stick to the Agreement shall have the right to claim economic losses from the Party in breach.

 

Should Party B, Party C, Party D and Party E disguise the liabilities or make a false report on the assets of Fangxian Zuanshi and its wholly owned subsidiaries, the liabilities shall be repaid by Party B, Party C, Party D and Party E, the assets shall be complemented by Party B, Party C, Party D and Party E.

 

Should Party B, Party C, Party D or Party E violate the undertakings or guarantees stipulated in this Agreement, losses and external legal liability suffered by Fangxian Zuanshi and its wholly owned subsidiaries (after the equity transfer) shall be borne by the Party in breach.  Compensation covers the repayment obligation of debt and external damages, compensation fees, breach of contract fees, fines, expenses actual losses suffered by Fangxian Zuanshi and its wholly owned subsidiaries (after the equity transfer), and lawyers�� fee, investigation fee, notarial fees, travel expenses incurred by Party A claiming damages from Party B, Party C, Party D or Party E.

 

(II) Contractual Arrangements for Protecting the Interests of the Company in the Agreement

 

Party B, Party C, Party D and Party E undertook: Should the creditor��s rights of Fangxian Zuanshi and its wholly owned subsidiaries disclosed in the Audit Report cannot be withdrawn before September 1st, 2010, Party B, Party C, Party D and Party E shall bear the corresponding losses to Fangxian Zuanshi and its wholly owned subsidiaries. f

 

V. Miscellaneous

 

In this transaction, the Company agreed that in principle to accept all full time employees currently registered in Fangxian Zuanshi (except original senior management and staff who left voluntarily); the funding for this acquisition is self-raised by the Company.

 

VI. Purpose of the Acquisition and Impact on the Company

 

Market condition of Fangxian Zuanshi is very good.  Especially, there will be more and more infrastructure key projects from 2011, which will quickly drive the consumption increase and price elevation.  In the meantime, Fangxian Zuanshi is the only company whose quarry locates beside the plant area among the 4 NSP companies in Shiyan City.  And it is close to the blind coal production area, has a good resource condition, which will benefit the Company in terms of acquiring the production cost advantage.  The acquisition of 70% equity of Fangxian Zuanshi is beneficial to the Company in terms of filling in the distribution blank in Shiyan, thus improve the overall distribution in Hubei market.

 

The 70% equity acquisition of Fangxian Zuanshi will bring in changes in the scope of consolidated financial reports and structures of assets and liability of the Company, which will pose a certain extent of impact on financial indicators of the Company.

 

VII. Documents for Inspection

 

1. Resolution of the Nineteenth Meeting of the Sixth Board of Directors of the Company.

2. Equity Transfer Agreement of Fangxian Zuanshi Cement Co., Ltd.

3. Audit Report of Fangxian Zuanshi Cement Co., Ltd., Hubei Daxin Auditing (2011) No. 0006.

4. Accreditation Certificate of Securities Industry of Hubei Daxin Certified Public Accountants Company Limited.