Stock Codes: 600801, 900933 Stock abbreviations: Huaxin Cement, Huaxin B Share Ref: Lin 2011-007
Huaxin Cement Co., Ltd.
Announcement on Resolutions of the Twenty Third Meeting of the Sixth Board of Directors and Convening the Annual Shareholders’ General Meeting 2010
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.
The Twenty Third Meeting of the Sixth Board of Directors of Huaxin Cement Co., Ltd. (hereinafter referred to as “the Company”) was convened on March 28~29, 2011 in Wuhan. In principle, there should be nine Directors attend the Meeting, actually nine attended. The Company sent the Meeting Notification to all the Directors on March 18, 2011, by personal service or by fax. The Meeting was in compliance with the provisions contained in relevant laws, rules, regulations and the Articles of Association of the Company, so it was legitimate and valid.
I. Through reviewing and voting, this Board Meeting adopted the following important resolutions:
(I) Annual Report 2010 of the Company and its abstract
(Voting Result: Affirmative 9; Negative: 0; Abstention: 0);
(II) Directors’ Report 2010 of the Company
(Voting Result: Affirmative 9; Negative: 0; Abstention: 0);
For detailed information, please refer to Chapter 8 of the Annual Report disclosed on the same day.
(III) Final Financial Report 2010
(Voting Result: Affirmative 9; Negative: 0; Abstention: 0);
For detailed information, Please refer to Chapter 11 of the Annual Report disclosed on the same day.
(IV) Profit Distribution and Stock Split Proposal 2010 of the Company
(Voting Result: Affirmative 9; Negative: 0; Abstention: 0);
The net profit of the Company for 2010 was 359,596,769 Yuan (Parent Company) or 572,579,103 Yuan after consolidation. Pursuant to the relevant provisions contained in the Company Law and the Accounting Rules, 10%, i.e. 35,959,677 Yuan will be appropriated to statutory surplus common reserve fund. The allocable profit of the Parent Company is 996,650,634 Yuan by the end of December 2010.
The Board proposes that on the basis of the total 403.6 million shares, a cash dividend of 0.2 Yuan per share (incl. tax) shall be distributed to all shareholders, hence 80,720,000 Yuan shall be distributed, and the whole of the remaining shall be booked as unallocated profit.
The Board also proposes that on the basis of the total 403.6 million shares, capitalizing of common reserves will be 10 shares upon each 10 shares to the whole shareholders, totally 403.6 million Yuan capital reserve shall be converted into share capital for 2010. After the stock split, capital reserve of the Company shall reduce from the current 2,257,284,997 Yuan to 1,853,684,997 Yuan; share capital of the Company shall be increased from the current 403.6 million shares to 807.2 million shares.
The above proposal shall be approved by the Shareholders’ General Meeting. The Board also proposed the Shareholders’ General Meeting to empower the Board to handle all the relevant matters relating the implementation of profit distribution plan 2010, including but not be confined as increasing registered capital, modifying specific clauses of Articles of Association and changing the registration at the Industrial and Commercial Bureau.
(V) Proposal in Respect of Appointing the Accounting Firm and External Auditor for Internal Control
(Voting Result: Affirmative 9; Negative: 0; Abstention: 0);
As recommended by the Management of the Company, the Audit Committee to the Board of Directors proposes:
1. PricewaterhouseCoopers Zhong Tian CPAs Limited Company is appointed as the auditor of the Company for 2011. It also requests the Shareholders' General Meeting to empower the Board to decide its remuneration;
2. PricewaterhouseCoopers Zhong Tian CPAs Limited Company is appointed as the External Auditor for Internal Control in 2011.
(VI) Annual Work Report 2010 of Independent Directors
(Voting Result: Affirmative 9; Negative: 0; Abstention: 0);
(VII) Proposal in Respect of Changing Some of Vice Presidents
(Voting Result: Affirmative 9; Negative: 0; Abstention: 0);
For detailed information, please refer to Annex I.
(VIII) Proposal in Respect of Changing Some Members of Special Committees to the Sixth Board of Directors
(Voting Result: Affirmative 9; Negative: 0; Abstention: 0);
For detailed information, please refer to Annex II.
(IX) Working Plan on Internal Control Implementation
(Voting Result: Affirmative 9; Negative: 0; Abstention: 0);
For detailed information, please refer to Annex III.
(X) Proposal in Respect of Empowering the Management of the Company to Purchase Financial Products of Banks
(Voting Result: Affirmative 9; Negative: 0; Abstention: 0);
For detailed information, please refer to Annex IV.
(XI) Proposal in Respect of Convening the Annual Shareholders’ General Meeting 2010
(Voting Result: Affirmative 9; Negative: 0; Abstention: 0).
II. Notice regarding Convening the Annual Shareholders’ General Meeting 2010
1. Time of the Meeting: 9:00 am, April 22, 2011 (Friday)
2. Share registration date
(1) A-share Registration Date: April 12, 2011
(2) B-share Registration Date: April 18, 2011 (Last trading date is April 12)
3. Place of the Meeting: Meeting Room No.1 on the first floor of the Business Centre of the Company in Wuhan, Building No.5, International Enterprise Centre, Special No.1 Guanggu Avenue, Wuhan City, Hubei, China
4. Convenor of the Meeting: Board of Directors of the Company
5. Manner of Voting: on-site voting
6. Proposals of the Meeting:
1) To review the Directors’ Report 2010 of the Company;
(For detailed information, please refer to Chapter 8 of the Annual Report disclosed on the same day.)
2) To review the Supervisors’ Report 2010 of the Company;
(For detailed information, Please refer to Chapter 9 of the Annual Report disclosed on the same day.)
3) To review the Final Financial Report 2010 and Financial Budget Report 2011 of the Company;
4) To review the Profit Distribution and Stock Split Proposal 2010 of the Company;
5) To review the Proposal in Respect of Appointing the Accounting Firm and External Auditor for Internal Control;
6) To review the Annual Work Report 2010 of Independent Directors;
7) To review the Report on Utilization of the Funds Raised from Previous Offering.
(For detailed information, please refer to the Announcement (Lin 2011-004) disclosed on March 1st, 2011.)
For detailed information of the above proposals, please refer to the website of SSE --
www.sse.com.cn one week before the Annual Shareholders’ General Meeting.
7. Attendees of the Meeting
(1) Directors, Supervisors and Senior Management of the Company.
(2) Lawyers engaged by the Company.
(3) All A-shareholders registered in China Securities Registration & Clearing Co. Ltd SH Branch at 3 o’clock of April 12, 2011 and all B-shareholders registered in China Securities Registration & Clearing Co. Ltd SH Branch at 3 o’clock of April 18, 2011 (April 12 being the last trading day of B-shares). Presence by proxy is allowed in case presence in person is impossible, subject to the presentation of a Power of Attorney. For the format of the Power of Attorney, please refer to Annex V
All shareholders have the right to attend this meeting.
8. Registration of the Meeting
(1) Registration Period: 09:00-11:30 am, 14:00-17:00 pm, April 21, 2011;
08:00-9:00 am, April 22, 2011.
(2) Registration Place: First floor of the Business Centre of the Company in Wuhan, Building No.5, International Enterprise Centre, Special No.1, Guanggu Avenue, Wuhan, Hubei, China.
(3) Registration Method: The legal representative of a corporate shareholder shall present his ID, valid document evidencing his capacity as legal representative; the proxy of a corporate shareholder shall present his ID, PoA issued by the legal representative and chopped by the company and shareholding certificate.
Individual shareholders shall present their ID cards or other valid documents evidencing their identity, their share account cards; the proxies of individual shareholders shall present their ID cards and PoAs.
The shareholders may as well register by mail or fax.
9. Others
(1) Senior Management will communicate with shareholders and investors in 10:00~11:00 during the ASGM.
(2) The Meeting is expected to last for a half day. The shareholders present at the Meeting shall pay the accommodation and travelling costs by themselves.
(3) Contacts: Ms. Wang Lu, Mr. Peng Puxin
Tel: 027-87773898
Fax: 027-87773962
Postal Code: 430073
It is herewith announced.
Huaxin Cement Co., Ltd.
Board of Directors
March 31, 2011
Annex I
Proposal in Respect of Changing Some of Vice Presidents
In order to meet the demand of business expansion strategy and organization restructuring, Nominating Committee to the Board of Directors, according to the nomination by CEO Mr. Li Yeqing,
agree to appoint Mr. Frank Liu, Mr. Ian Riley and Mr. Hu Zhenwu to be Vice Presidents of the Company, and the term of office shall be the same with current Senior Management.
agree that Mr. Feng Dongguang to be no longer in the position of Vice President
The Nominating Committee now presents Proposal in Respect of Changing Some of Vice Presidents to the Board for reviewing.
Encl: Résumé of Mr. Frank Liu, Mr. Ian Riley and Mr. Hu Zhenwu
Mr. Frank Liu
Frank Liu, 48 years old, MBA. Frank Liu 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 Technical Supervisor, Director of Strategic Development and Business Department, Senior Project Manager, and Production Manager; from May 2010 to Oct 2003, he worked in Cemex as Director of Engineering in Cemex Thailand, Executive Assistant to Asia President in Cemex Asia, Steering Committee member of Culture Change Program; from Oct 2003 to now, he is the Chief Representative in Cemex Beijing Representative Office; from Sep 2009 to now, he was appointed the Country Director of Cemex RMX China and Chairman of the CEMEX Tianjin and CEMEX Qingdao.
Mr. Ian Riley
Mr. Ian Riley, 53 years old, 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 Jan 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.
Mr. Hu Zhenwu, 43 years old, 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.
Annex II
Proposal in Respect of Changing Some Members of Special Committees to the Sixth Board of Directors
As some Directors of the Company have been changed, correspondingly, members of Special Committees to the Sixth Board of Directors, namely Strategic Committee, Auditing Committee, Nominating Committee and Remuneration & Assessment Committee, are appointed as follows:
1. Strategic Committee: Mr. Chen Musen, Mr. Ian Thackwray, Mr. Li Yeqing, Mr. Roland Kohler, Mr. Paul Thaler, Mr. Ji Changhua, Mr. Lu Mai, Mr. Xu Yongmo, Mr. Huang Jinhui
Convener: Mr. Ian Thackwray, Mr. Li Yeqing
2. Auditing Committee: Mr. Huang Jinhui, Mr. Lu Mai, Mr. Xu Yongmo, Mr. Ian Thackwray, Mr. Ji Changhua
Convener: Mr. Huang Jinhui
3. Nominating Committee: Mr. Lu Mai, Mr. Xu Yongmo, Mr. Huang Jinhui, Mr. Ian Thackwray, Mr. Li Yeqing
Convener: Mr. Lu Mai
4. Remuneration and Assessment Committee: Mr. Xu Yongmo, Mr. Lu Mai, Mr. Huang Jinhui, Mr. Roland Kohler, Mr. Chen Musen
Convener: Mr. Xu Yongmo
Annex III
Working Plan on Internal Control Implementation
1. Executive summary
In recent years the Chinese government has put increased emphasis on the importance of internal control in big listed companies. A series of regulations on internal control was announced by various government authorities. As a major listed company, Huaxin is already chosen as a pilot to implement Chinese internal control system (C-SOX) in 2011.
One of the approaches to meet the requirements of C-SOX we assessed was to leverage the experience of its biggest shareholder (Holcim), as Holcim has already implemented an internal control system (Holcim ICS) based on Swiss regulatory requirements in all its major subsidiaries. However, the result of a gap analysis between C-SOX and the Holcim ICS showed that this is not possible. The main reason for this is the significantly wider scope of C-SOX. Just extending Holcim ICS is also not an option due to time and resource constraints. Holcim ICS even in its unextended form would take considerably longer to implement and it would not be possible to cover 50% of the Huaxin business as required by CRSC.
It is therefore recommended to treat the C-SOX and Holcim ICS implementations as separate projects. It is also suggested that external consultants should be used in developing a local methodology to meet local legal requirements. Management will then work with external consultants to prepare a detailed implementation schedule with related cost estimation for the Audit Committee approval in April. With the tentative kick-off of the C-SOX project in May, we are confident that the company will meet Chinese regulatory requirements within this year.
2. Background
2.1 Requirements from Chinese regulatory authorities
The Chinese government has been stepping up its effort to strengthen internal control in big enterprises in recent years. On May 22, 2008, the Ministry of Finance, in conjunction with the China Securities Regulatory Commission (CSRC), General Audit Administration, China Banking Regulatory Commission and China Insurance Regulatory Commission, issued the “Basic standard of Enterprise Internal Control”, requiring listed companies to implement this standard as of July 1, 2009, including the completion of self-assessment of the effectiveness of internal control and the publication of such report on an annual basis.
Subsequent to this legislature, on April 15, 2010, the same five ministries issued a set of three detail guidelines on internal control, including: 1) “The Application Guidelines for Enterprise Internal Control” (a total of 18 parts, covering all aspects of company operation from organization to strategy, from procurement to sales); 2) “Enterprise Internal Control Assessment Guideline”; and 3) “Enterprise Internal Control Audit Guideline”. For easy reference we will use the term C-SOX to describe this set of legislations in this paper.
C-SOX requires listed companies on the main board of Shanghai Stock Exchange to implement internal control based on these guidelines as of Jan. 1, 2012, including completion of a self-assessment report of the effectiveness of internal control and publication of this report on an annual basis. Under these guidelines, companies must engage external auditors (with securities business qualification) to perform independent audit on the effectiveness of internal control for financial reporting purpose.
Huaxin, being an A and B share listed company in the Shanghai Stock Exchange, will need to comply with C-SOX in 2012. However, as a leading company in Hubei province, Huaxin was already chosen as a pilot company in January 2011 to implement C-SOX within this year. In total, 216 listed companies (including 3 in Hubei Province) have been selected as pilot sites for internal control implementation in 2011.
On Feb. 14, 2011, CSRC issued the “Circular on the Proper Implementation of Internal Control in Pilot Companies”, requiring pilot companies to implement an internal control system, conduct self-assessments on internal control and engage external auditors to verify this self-assessment on over 50% of their subsidiaries based on three main indicators (total assets, net sales and net profit). That is, the total assets, net sales and net profit of the chosen subsidiaries of the pilot company must exceed 50% of the entity in each category per consolidated financial statements at 2010 year-end. To Huaxin, this means a total of close to 20 cement plants will be included in the scope for the C-SOX implementation in 2011.
2.2 Company’s need to strengthen internal control
Huaxin has been expanding very rapidly in recent years. With the growth of business operation, management talent and expertise are to a certain extent diluted. Management has become increasingly aware that the potential risk of ineffective internal control is real. With an improvement of internal control, risks related to all aspects of company operation will be lower, financial information will be more reliable and the company could continue to grow with a firm footing.
2.3 Organizational set-up
Due to both legal and internal needs, Huaxin has mandated one of its Executive Committee (EXCO) members to be in charge of the internal control implementation. This EXCO member will report both to the CEO and the Audit Committee as outlined in the below graph. Under this EXCO member, a new department has been set up in January to lead the implementation of internal control in the company.
Remuneration and Appraisal Committee |
Internal Control Department |
The internal control department will be in charge of all aspects of the implementation of internal control in the company, including setting up project team, getting the right training and doing the necessary change management.
It is the intention of the company that through this new department and the support of all the management staff, the company will meet C-SOX requirements by the end of 2011.
3. Proposed next steps and tentative time-line
In view of the lack of experience internally and the tight implementation deadline, it is proposed that the company could use external consultant to develop a suitable methodology to meet C-SOX requirements. The chosen consultant can work with Huaxin management and Holcim expert to develop a suitable methodology, may be even borrowing some of the good practice of Holcim ICS. Tentative time-line for the rest of the year will be as follow:
|
Timing |
Main Tasks |
|
Mar, 2011 |
Approval of C-SOX implementation proposal |
|
Apr, 2011 |
Selection of external consultant; preparation of detailed schedule and cost estimation |
|
May to Aug, 2011 |
Project kick off; methodology development and testing in pilot site |
|
Sep to Oct, 2011 |
Roll out template to other in-scope plants |
|
Nov to Dec, 2011 |
Control testing and corrective actions |
|
Jan to Mar, 2012 |
Self assessment report and external audit |
The above time-line is similar to a recent implementation project of one the biggest cement companies in China. This company has started the C-SOX project in the middle of last year, and now they are in the roll-out phase. Therefore, we are confident that this could also be achieved in Huaxin.
Please see Appendix 1 for an outline of the basic principles governing the public tender process in the selection of external consultant. The Internal Control Department will follow such principles in the tender process and submit a final proposal to the CEO and Audit Committee for approval. After the selection of an audit firm as external consultant, management will work with them to develop a more detailed implementation schedule with related cost estimation for the Audit Committee approval in April.
In term of the implementation of Holcim ICS, it is recommended that we treat this as a separate project. The company has to decide the implementation of Holcim ICS based on the benefits it will bring. It is also suggested that a detailed cost and benefit analysis of such implementation should be performed with the help of Holcim experts. This analysis could then form the basis of management decision.
4. Conclusion
We are confident that the company will meet Chinese regulatory requirements by leveraging the experience of external consultants and best practice from Holcim. We therefore recommend the Board of Directors of the Company to approve our proposal as described in this paper.
Annex IV
Proposal in Respect of Empowering the Management of the Company to Purchase Financial Products of Banks
Against the background of continuous expansion and enhanced administration, the Company still owns some short-term idle funds besides funds ensured for regular production, operation and development. In order to make full use of these idle funds, improve capital efficiency and capital income, the Management hereby proposes the Board to approve Huaxin Cement Co., Ltd. and its subsidiaries to use their own idle funds to purchase financial products of banks within the limit of 200 million Yuan adhering to the precondition of ensuring capital liquidity and safety of the Company. These financial products should guarantee capital with a term of no more than 7 days.
Annex V
Huaxin Cement Co., Ltd.
Annual Shareholders’ General Meeting 2010
Power of Attorney
Mr. (Ms.) is now authorized by myself (or our Company) to attend the Annual Shareholders’ General Meeting 2010 of Huaxin Cement Co., Ltd., and exercise voting rights to the following proposals on my (or our Company’s) behalf according to the following indications.
|
No. |
Proposal |
Voting |
|
Affirmative |
Negative |
Abstention |
|
1 |
Directors’ Report 2010 of the Company |
|
|
|
|
2 |
Supervisors’ Report 2010 of the Company |
|
|
|
|
3 |
Final Financial Report 2010 and the Financial Budget Report 2011 of the Company |
|
|
|
|
4 |
Profit Distribution and Stock Split Proposal 2010 of the Company |
|
|
|
|
5 |
Proposal in Respect of Appointing the Accounting Firm and External Auditor for Internal Control |
|
|
|
|
6 |
Annual Work Report 2010 of Independent Directors |
|
|
|
|
7 |
Report on Utilization of the Funds Raised from Previous Offering. |
|
|
|
Note: Mark the column by “√”, (if there are proposals not be indicated specifically, the shareholder proxy can exercise voting right with full authority).
Signing of Consigner (common seal):
ID Number or Number of Business License:
Account of Shareholder:
Type and Number of Shares:
Signing of Proxy:
ID Number:
Date of Authorization:
Limit of authorization: from the authorization day to the meeting termination
