HISTORY AND CORPORATE STRUCTURE HISTORY AND CORPORATE STRUCTURE Major events and milestones in the development of our business include the following: ¬ In 2003, one clinker production line with annual production capacity of 0.64 million tons was put into operation at Jinan Shijichuangxin Company Limited and construction commenced on several clinker production lines and cement grinding lines at various subsidiaries. ¬ In 2004, Shandong Shanshui increased its annual cement production capacity by 2.0 million tons. Another two clinker production lines with annual production capacity of 1.6 million tons each was put into production at Pingyin Shanshui and Zibo Shanshui Cement Company Limited, or Zibo Shanshui. Four cement grinding lines with annual production capacity of 2.0 million tons each were also put into production. ¬ In 2005, one cement grinding line at Shandong Shanshui with annual production capacity of 3.0 million tons was put into production. ¬ In 2006, Shandong Cement Factory and several other subsidiaries began implementing residual heat recovery technology and further increased their production capacity. ¬ In 2007, we acquired Ñve cement producers in Shandong and Liaoning Provinces and entered into an agreement to acquire the exploration rights to one limestone mine in Liaoning Province. Pingyin Shanshui and Zibo Shanshui also each increased its annual clinker production capacity by 1.6 million tons. Ì73Ì HISTORY AND CORPORATE STRUCTURE We are a Cayman Islands holding company and conduct substantially all of our business through our indirectly wholly owned operating subsidiary in the PRC, Shandong Shanshui. Shandong Shanshui has six branches and 28 subsidiaries in the PRC. The following diagram illustrates our corporate structure A1A29(2) immediately after completion of the Global OÅering, assuming the Over-allotment Option is not exercised (without taking into account conversion of the Convertible Notes, if any): Other China Shanshui CDH MS MS MS CDH Cement IFC CCBI Cement Public Investment(1) Construct IV II I Shareholders R8.08(1)(a) 33.49%(2) 2.33%(3) 5.24%(3) 3.95%(4) 17.48%(5) 2.00%(5) 5.75%(5) 4.76%(6) 25.00% The Company (Cayman Islands) 100% China Shanshui (Hong Kong)(7) (Hong Kong) 100% Continental 100% Cement Pioneer Cement(7) (BVI)(7) (Hong Kong) Overseas 100% 100% 100% Domestic 100% Shandong Shanshui Continental Continental (PRC)(11) Continental (Shandong) (Shandong) 50.00% (Shandong) Cement Cement Cement Mining Products 6.66% 99.00% 4.50% 25.49% (PRC)(9) (PRC)(8) Manufacturing 50.00% (PRC)(10) Shandong 24 other Cement Factory PRC (PRC)(12) subsidiaries(13) 25% 67.99% 69.77% Pingyin Shanshui Anqiu Shanshui Weihai Shanshui (PRC)(15) (PRC)(16) (PRC)(14) Notes: (1) China Shanshui Investment is held by the Management Shareholders. Out of its entire issued share capital, approximately 65.55% is held by Zhang Caikui as trustee of the Zhang Trust, 16.19% is held by Li Yanmin as trustee of the Li Trust, 4.18% is held by Dong Chengtian, 1.53% is held by Li Maohuan, 4.35% is held by Yu Yuchuan, 3.05% is held by Zhao Liping, 2.77% is held by Zhao Yongkui, 1.56% is held by Mi Jingtian and 0.82% is held by Wang Yongping. Pursuant to the trust deeds and the letters of wishes relating to the Zhang Trust and the Li Trust, Zhang Caikui and Li Yanmin have the absolute discretion to manage and administer the shares of China Shanshui Investment which are subject to the respective trusts for the beneÑt of the beneÑciaries of the trusts. (2) The entire shareholding of China Shanshui Investment will be subject to certain lock-up restrictions from the date of this prospectus pursuant to Rule 10.07(1) of the Listing Rules. For details of such lock-up arrangements, please refer to the section headed ""Underwriting'' in this prospectus. Ì74Ì HISTORY AND CORPORATE STRUCTURE (3) CDH Cement, a limited liability company incorporated in the BVI, is a wholly owned subsidiary of CDH China Fund, L.P., an exempted limited partnership organized and existing under the laws of the Cayman Islands focused on private equity investments in China. The general partner of CDH China Fund, L.P. is CDH China Holdings Company Limited, a limited liability company organized and existing under the laws of the Cayman Islands. CDH China Fund, L.P. is managed by CDH China I Management Company Limited, a limited liability company incorporated in the BVI. The Shares held by CDH Cement are counted towards the public Öoat. The principal business of CDH Cement is investment holding. CDH Construct, a limited liability company incorporated in the BVI, is a wholly owned subsidiary of CDH China Fund III, L.P., an exempted limited partnership organized and existing under the laws of the Cayman Islands focused on private equity investments in China. The general partner of CDH China Fund III, L.P. is CDH III Holdings Company Limited, a limited liability company organized and existing under the laws of the Cayman Islands. CDH China Fund III, L.P. is managed by CDH III Management Company Limited, a limited liability company incorporated in the BVI. The Shares held by CDH Construct are counted towards the public Öoat. The principal business of CDH Construct is investment holding. (4) IFC is an inter-governmental organization aÇliated with the World Bank and established under the Articles of Agreement with 179 member countries as current signatories. It was established to further economic development in less developed member countries by investing in productive private enterprises in association with private investors. IFC does not have any shareholders but the 179 current member countries provide its authorized share capital and collectively determine its policies and approve investments. The Shares held by IFC are counted towards the public Öoat. (5) MS I, a limited liability company incorporated in the Cayman Islands, is controlled by Morgan Stanley Private Equity Asia L.P. (""MSPEA''), a fund managed by the private equity arm of Morgan Stanley. The general partner of MSPEA is Morgan Stanley Private Equity Asia, L.L.C. (""MSPEA GP''), the managing member of which is Morgan Stanley Private Equity Asia, Inc., a wholly owned subsidiary of Morgan Stanley. The principal business of MS I is investment holding. MS II, a limited liability company incorporated in the Cayman Islands, is controlled by MSPEA GP (through its control of MS III Limited, another limited liability company incorporated in the Cayman Islands). MSPEA GP is the general partner of a fund managed by the private equity arm of Morgan Stanley, and the managing member of which is Morgan Stanley Private Equity Asia, Inc., a wholly owned subsidiary of Morgan Stanley. The principal business of MS II is investment holding. MS IV, a limited liability company incorporated in the Cayman Islands, is jointly controlled by MSPEA and Morgan Stanley Private Equity Asia III, L.P. (through their respective control of Morgan Stanley Private Equity Holdings (Cayman) Limited and Morgan Stanley Private Equity Asia III Holdings (Cayman) Limited), which are funds managed by the private equity arm of Morgan Stanley. The general partners of such funds are MSPEA GP and Morgan Stanley Private Equity Asia III, L.L.C. (""MSPEA III GP''), respectively. The managing members of MSPEA GP and MSPEA III GP are Morgan Stanley Private Equity Asia, Inc. and Morgan Stanley Private Equity Asia III, Inc., respectively, both of which are wholly owned subsidiaries of Morgan Stanley. The principal business of MS IV is investment holding. The MS Investors, the CDH Investors and IFC will not be viewed as a group or parties acting in concert in respect of their interests in our Group on the grounds that each of them is independent from each other in terms of ultimate control and decision- making process. They have not entered into any formal or informal agreement or understanding in relation to consolidating control or voting rights of our Company. (6) CCBI Cement is a wholly owned subsidiary of CCB International Asset Management Limited, which is ultimately indirectly wholly owned by China Construction Bank Corporation, a company listed on the main board of the Stock Exchange (stock code: 939) and the Shanghai Stock Exchange (stock code: 601939). The shareholding of CCBI Cement is counted towards the public Öoat. (7) Its principal business is investment holding. (8) Its principal businesses are manufacturing, storing, transporting and selling of limestone. (9) Its principal businesses are production of clinker, semi-Ñnished cement products, and sale of the aforesaid self-made products. (10) Its principal businesses are production of cement products and components for cement-related machines, and sale of the aforesaid products. (11) Its principal businesses are designing, manufacturing and sale of cement, cement products, and construction materials. Ì75Ì HISTORY AND CORPORATE STRUCTURE (12) The remaining 1% equity interest is held by Jinan Shanshui. Its principal businesses are manufacturing of cement and slag Ñne powder. (13) The details of the 24 subsidiaries directly or indirectly owned by Shandong Shanshui are as follows: Subsidiary Shareholders Principal businesses Liaocheng Shanshui Cement Company Shandong Shanshui holding 99% of the Manufacturing and sale of cement and Limited ( ) equity interest; Jinan Shanshui holding cement-related products and new 1% of the equity interest construction materials Dongying Shanshui Cement Company Shandong Shanshui holding 99% of the Manufacturing and sale of cement, Limited ( ) equity interest; Jinan Shanshui