2017 Annual Report Contents (I) Definitions.................................... 2 (II) Corporate Information .......................... 4 (III) Financial and Business Data Summary ............. 8 (IV) Corporate Profile .............................. 10 (V) Management Discussion and Analysis ............. 21 (VI) Report of the Directors .......................... 38 (VII) Share Capital and Shareholdings of Substantial 44 Shareholders and the Directors ................... (VIII) Basic Information on Directors, Senior Management 51 and Employees................................ (IX) Report on Corporate Governance ................. 71 (X) Major Events.................................. 90 (XI) Independent Auditor’s Report .................... 107 (XII) Consolidated Statement of Profit or Loss............ 119 (XIII) Consolidated Statement of Profit or Loss and Other Comprehensive Income ......................... 120 (XIV) Consolidated Statement of Financial Position ........ 121 (XV) Consolidated Statement of Changes in Equity........ 123 (XVI) Consolidated Statement of Cash Flows ............. 124 (XVII) Notes to the Financial Statements ................. 126 China Shanshui Cement Group Limited • 2017 Annual Report 1 (I) Definitions In this annual report, unless the context otherwise requires, the following words and expressions have the following meanings: “Company” or “China Shanshui” or China Shanshui Cement Group Limited “Shanshui Cement” “Group” or “China Shanshui Group” the Company and its subsidiaries “Reporting Period” the period from 1 January 2017 to 31 December 2017 “Board” the Board of Directors of the Company “Director(s)” the Directors of the Company “China Shanshui (HK)” China Shanshui Cement Group (Hong Kong) Company Limited “Pioneer Cement” China Pioneer Cement (Hong Kong) Company Limited “Continental Cement” Continental Cement Corporation “American Shanshui” American Shanshui Development Inc. “Shandong Shanshui” Shandong Shanshui Cement Group Company Limited “ACC” Asia Cement Corporation “CNBM” China National Building Material Company Limited “CSI” China Shanshui Investment Company Limited “Tianrui Group” Tianrui Group Company Limited “Shandong Region” business covered by Eastern Shandong Operating Region, Western Shandong Operating Region and Southern Shandong Operating Region “Eastern Shandong Operating Region” business located at the Eastern Shandong Province, including Weifang, Qingdao, Yantai and Weihai, etc “Western Shandong Operating Region” business located at the Central and Western Shandong Province, including Zibo, Jinan and Hebei Province and Tianjin, etc “Southern Shandong Operating Region” business located at the Southern Shandong Province, including Zaozhuang, Jining, Heze and Henan Province, etc 2 China Shanshui Cement Group Limited • 2017 Annual Report (I) Definitions “Northeast China Operating Region” business located at Liaoning Province, the Eastern Inner Mongolia and Jilin Province, etc “Shanxi Operating Region” business located at Shanxi Province and Shaanxi Province, etc “Xinjiang Operating Region” business located at Kashi, Xinjiang “Stock Exchange” The Stock Exchange of Hong Kong Limited “Listing Rules” the Rules Governing the Listing of Securities on the Stock Exchange “SFO” Securities and Futures Ordinance (Cap. 571) (as amended, supplemented or otherwise modified from time to time) “Shares” the ordinary shares in the share capital of the Company with a nominal value of US$0.01 each “Shareholder(s)” holder(s) of the Share(s) “Articles of Association” the amended and restated memorandum and articles of association of the Company adopted on 16 May 2014 “YOY” year on year comparison “clinker” a semi-finished product in the cement production process “Hong Kong” Hong Kong Special Administrative Region of the PRC “RMB” Renminbi, the lawful currency of the PRC, which is the currency unit used in this report, unless otherwise specified “PRC” The People’s Republic of China China Shanshui Cement Group Limited • 2017 Annual Report 3 (II) Corporate Information 1. BOARD OF DIRECTORS Executive Directors Mr. CHANG Zhangli (Chairman) Ms. WU Ling-ling Note: Mr. LI Liufa was appointed as an executive Director, the chairman of the Board, the chairman of the Nomination Committee and the chairman of the Executive Committee on 1 December 2015. Mr. LI Heping, Mr. LIU Yiu Keung, Stephen and Mr. CHONG Cha Hwa were appointed as executive Directors and members of the Executive Committee on 1 December 2015, and Mr. LIU Yiu Keung, Stephen was nominated as a member of the Nomination Committee. Mr. CHEUNG Yuk Ming was appointed as an independent non-executive Director of the Company on 1 December 2015 and was re-designated from independent non-executive Director to executive Director with effect from 2 February 2016. Mr. CHEUNG Yuk Ming retired by rotation on 17 June 2016 and was not re-appointed as Director by the shareholders at the annual general meeting, and he ceased to be a member of the Executive Committee and an authorized representative of the Company. Mr. LI Liufa resigned as an executive Director, the chairman of the Board, and the chairman of both the Nomination Committee and the Executive Committee of the Company with effect from 31 May 2016. Mr. LIU Yiu Keung, Stephen was appointed as chairman of the Board, the chairman of the Nomination Committee and the chairman of the Executive Committee of the Company on 2 June 2016. Mr. HWA Guo Wai, Godwin was appointed as an executive Director of the Company on 1 December 2015, re-designated from an executive Director to a non-executive Director with effect from 2 February 2016 and re-designated from a non-executive Director to an executive Director with effect from 5 July 2016. Mr. LI Zhiqiang was appointed as an executive Director and the vice chairman of the Board of the Company on 3 November 2017. On 19 March 2018, Mr. LIU Yiu Keung, Stephen resigned as the chairman of the Board, an executive Director and the authorized representative, the chairman of the Executive Committee and the chairman of the Nomination Committee of the Board of the Company. Mr. YEN Ching Wai, David ceased to act as an alternate director of Mr. LIU Yiu Keung, Stephen. Mr. LI Zhiqiang resigned as the vice chairman of the Board, an executive Director, and a member of the Executive Committee of the Company. Mr. LI Heping resigned as an executive Director of the Company. On 19 March 2018, Mr. LI Liufa was appointed as the chairman of the Board and an executive Director, chairman of the Nomination Committee and chairman of the Executive Committee of the Board of the Company. Mr. ZHU Linhai was appointed as an executive Director, a member of the Executive Committee of the Board of the Company. Mr. HWA Guo Wai, Godwin was appointed as an authorized representative of the Company. On 23 May 2018, Mr. LI Liufa was removed as the chairman of the Board, an executive Director and the chairman of the Executive Committee. Mr. ZHU Linhai and Mr. HWA Guo Wai, Godwin were removed as executive Directors and members of the Executive Committee; and HWA Guo Wai, Godwin was removed as the authorized representative of the Company. On 23 May 2018, Mr. CHANG Zhangli was appointed as an executive Director and chairman of the Board, and Mr. WU Ling-ling was appointed as an executive Director of the Company. Non-Executive Director Note: Mr. CHONG Cha Hwa was appointed as an executive Director of the Company on 1 December 2015 and had been re-designated from executive Director to non-executive Director with effect from 2 February 2016, and he ceased to be an authorized representative and a member of the Executive Committee of the Company and resigned as a non-executive Director of the Company with effect from 8 May 2017. Mr. NG Qing Hai was appointed as a non-executive Director of the Company on 1 December 2015 and resigned as a non-executive Director of the Company with effect from 2 February 2016. Independent Non-Executive Directors Mr. CHANG Ming-cheng Mr. LI Jianwei Mr. HSU You-yuan Note: Ms. HO Man Kay Angela, Mr. LAW Pui Cheung, Stephen and Mr. CHEUNG Yuk Ming were appointed as independent non-executive Directors of the Company on 1 December 2015, Mr. CHEUNG Yuk Ming had been re-designated from independent non-executive Director to executive Director with effect from 2 February 2016, and Mr. WONG Chi Keung was appointed as an independent non-executive Director of the Company on 2 February 2016. Dr. CHING Siu Ming and Mr. LO Chung Hing were appointed as independent non-executive Directors of the Company on 5 July 2016. On 23 May 2018, Ms. HO Man Kay Angela, Mr. LAW Pui Cheung, Stephen, Mr. WONG Chi Keung, Dr. CHING Siu Ming and Mr. LO Chung Hing were removed as independent non-executive Directors, and Mr. CHANG Ming-cheng, Mr. LIN Shei-yuan and Mr. LI Jianwei were appointed as independent non-executive Directors of the Company. On 20 July 2018, Mr. LIN Shei-yuan resigned as an independent non-executive Director of the Company; and on 4 September 2018, Mr. HSU You-yuan was appointed as an independent non-executive Director of the Company. 4 China Shanshui Cement Group Limited • 2017 Annual Report (II) Corporate Information (Continued) Audit Committee Mr. CHANG Ming-cheng (Chairman) Mr. LI Jianwei Mr. HSU You-yuan Note: Mr. CHEUNG Yuk Ming was appointed as the chairman of the Audit Committee of the Company on 1 December 2015 and resigned as the chairman of the Audit Committee of the Company with effect from 2 February 2016; Ms. HO Man Kay Angela and Mr. LAW Pui Cheung were appointed as members of the Audit Committee of the Company on 1 December 2015 and was appointed as the chairman of the Audit Committee on 2 February 2016. Mr. WONG Chi Keung was appointed as a member of the Audit Committee of the Company on 2 February 2016. Dr. CHING Siu Ming and Mr. LO Chung Hing were appointed as members of the Audit Committee of the Company on 5 July 2016. On 23 May 2018, Mr. LAW Pui Cheung was removed as the chairman of the Audit Committee of the Company, Ms. HO Man Kay Angela, Mr. WONG Chi Keung, Dr. CHING Siu Ming and Mr.