2012 ANNUAL REPORT WELCOME TO OUR GREAT STEP FORWARD

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1 2012 ANNUAL REPORT WELCOME TO OUR GREAT STEP FORWARD

2 UNACEM ATOCONGO PLANT LIMA

3 UNACEM CONDORCOCHA PLANT TARMA (3,900 m.a.s.l.) PAGE UNACEM ANNUAL REPORT

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5 CONTENT RESULTS DIRECTORS & MANAGEMENT NATIONAL AND INTERNATIONAL ENVIRONMENT INVESTMENT, OPERATIONS AND ADMINISTRATION PROJECTS SUBSIDIARIES AND AFFILIATES ECONOMIC AND FINANCIAL ASPECTS FINANCIAL STATEMENTS PAGE UNACEM ANNUAL REPORT This document is printed on recycled paper, thus helping to preserve the environment. We have the following environmental certifications. A P P R O V E D

6 RESULTS SALES (in millions of soles) EBITDA (in millions of soles) 2,000 1,800 1,600 1,400 1,324 1,510 1,514 1, ,200 1, CAPEX (in millions of soles) Times Debt / EBITDA

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8 DIRECTORS & MANAGEMENT FOUNDING PRESIDENT PRESIDENT VICEPRESIDENT DIRECTORS BOARD OF DIRECTORS Mr. Jaime Rizo Patrón Remy Mr. Ricardo Rizo Patrón de la Piedra Mr. Alfredo Gastañeta Alayza Mr. Marcelo Rizo Patrón de la Piedra Mr. Jaime Sotomayor Bernós Mr. Carlos Ugás Delgado Mr. Roque Benavides Ganoza Mr. Diego de la Piedra Minetti Mr. Drago Kisic Wagner Mr. Martín Naranjo Landerer (appointed March 2012) Mr. Leslie Pierce Diez Canseco (appointed March 2012) Mr. Oswaldo Avilez D Acunha (appointed December 2012) Mr. Hernán Torres Marchal (appointed December 2012) Mr. Oscar de Osma Berckemeyer (until March 2012) Mr. Alfredo Torres Guzmán (until March 2012) MANAGEMENT Sindicato de Inversiones y Administración S.A. (SIA) GENERAL MANAGER Mr. Carlos Ugás Delgado Representative of SIA in the General Management LEGAL MANAGER Mr. Julio Ramírez Bardález FINANCIAL AND CORPORATE DEVELOPMENT MANAGER Mr. Álvaro Morales Puppo CENTRAL MANAGER Mr. Víctor Cisneros Mori ADMINISTRATION MANAGER Mr. Jorge Trelles Sánchez COMMERCIAL MANAGER Mr. Kurt Uzátegui Dellepiane PROJECT MANAGER Mr. Jeffery Lewis Arriarán ATOCONGO OPERATIONS MANAGER Mr. Juan Asmat Siquero CONDORCOCHA OPERATIONS MANAGER Mr. Ricardo Ramírez Zurita HUMAN RESOURCES MANAGER Mr. Pablo Castro Horna TECHNICAL ADVISORS ARPL Tecnología Industrial S.A. ADMINISTRATION AND FINANCE ADVISORS Inversiones Andino S.A.

10 ANNUAL REPORT OF THE BOARD OF DIRECTORS OF UNIÓN ANDINA DE CEMENTOS S.A.A. For fiscal year 2012 In accordance with the law and the bylaws of our Company, the statement of financial position, statement of income, changes in net equity and cash flow for the fiscal year ending on the 31st of December 2012 were submitted to a General Meeting of Shareholders together with this Annual Report summarizing the most important events affecting the Company during 2012 and up to the 25th of March 2013, the date on which they were approved by the Company s Board of Directors. Furthermore, we submit the Company s Sustainability Report, which describes the Company s corporate social responsibility work during 2012 using the methodology approved by the Global Reporting Initiative.

12 1. NATIONAL AND INTERNATIONAL ENVIRONMENT Because we know that we are part of something bigger. We are the second fastest growing economy in Latin America and UNACEM is committed to continue building a fairer, more prosperous and sustainable society.

14 NATIONAL AND INTERNATIONAL ENVIRONMENT The world economy s performance during 2012 was not very encouraging, with the European crisis deepening, the United States economy slow to improve and China and certain emerging economies slowing down. Nevertheless, thanks to action by the European Central Bank to allay fears of a more serious crisis and the adoption of monetary stimuli by the Federal Reserve, the world economy had grown 2.6% by the close of the year. Furthermore, Latin American economies were affected by uncertainty in the developed nations, principally through their trade (exports), and showed varied levels of growth, with a regional increase of 3.0% compared with This figure was based on good performances by countries such as Panama, Peru and Chile, which achieved GDP growth of 10.0%, 6.3% and 5.0% respectively at year s end, thus counteracting poor results from the region s larger economies: Brazil, which saw a recovery in 3Q 2012 (1.6%), and Argentina (2.1%). As far as Peru was concerned, its economy continued to grow: ending the year with an increase in GDP of 6.3%, making 14 consecutive years of growth for the country. This growth, which was formerly dependent on exports and private investment, has been closely linked to domestic demand and the sectors that drive it: construction, trade and services, basically because of the continuation of economic policies creating stability for investments. The construction sector expanded 15.7% compared with The expansion of the country s economic activity was based on this growth, principally as a result of investment in real estate, shopping centers and infrastructure. In Lima alone 21,990 new houses were sold in 2012, the highest figure for 17 years.

15 Inflation at the end of 2012 was 2.6%, within the Central Bank (BCR) target range after spending most of the year above the target. Some important achievements of the Peruvian Economy: The country has had a trade surplus for 11 consecutive years, which in 2012 amounted to 4,527 million dollars. However this surplus was 51.3% lower than the 9,302 million dollars achieved in Exports fell by 2.3% compared with 2011, to an estimated total of 45,283 million dollars, mostly because of lower traditional exports (5.4% lower than in 2011). Net international reserves amounted to 63,991 million dollars, a figure 15,175 million higher than in Private consumption, according to recent estimates, may have risen 5.8%, driven by highly positive financing conditions that stimulated demand. For the second year running there was a fiscal surplus estimated to be 2.0% of GDP, the result of higher tax revenue from more dynamic domestic demand and lower public spending (during 2012). PAGE UNACEM ANNUAL REPORT During the year the Nuevo Sol continued to strengthen against the US dollar, reaching its highest level for 20 years in real terms, at S/ to the dollar, 5.4% lower than the 2011 exchange rate of S/ to the dollar. To avoid an abrupt appreciation of the Nuevo Sol, the BCR intervened to purchase a record value of approximately US$ 13 billion. The stability of the Peruvian economy in the middle of an international crisis was such as to be worthy of an upgrade in its credit ratings from the ratings agencies. In August 2012, Moody s raised Peru s rating from Baa3 to Baa2, bringing it in line with those of Standard and Poor s and Fitch Ratings.

16 2. INVESTMENT, OPERATIONS AND ADMINISTRATION Every new step takes us higher. We contribute to the country s development, making products of the highest quality, a solid company using technological innovation and respectful of the environment.

18 INVESTMENT, OPERATIONS AND ADMINISTRATION The Board of Directors and General Management exercised by Sindicato de Inversiones y Administración S.A. (SIA) supervised the company s investment, investment performance, operations and administration throughout the year. Merger The most important event in fiscal year 2012 was the takeover of Cemento Andino S.A., after which Cementos Lima S.A.A. changed its trading name to UNACEM S.A.A. In this merger UNACEM S.A.A., as the absorbing company, took over all of the equity of Cemento Andino S.A., and the merger took effect on the 1st of October The formal merger process commenced when it was approved by the boards of directors of UNACEM S.A.A. and Cemento Andino S.A. at meetings held on the 27th of June On the 24th of June 2012, general meetings of the shareholders of both companies approved the merger, by which UNACEM S.A.A. would take over Cemento Andino S.A., the merger project and exchange ratio, involving the issue by UNACEM S.A.A. of three hundred and eighty four (384) shares having a nominal value of S/. 1.0 each, for each share issued by Cemento Andino S.A., having a nominal value of S/ each, which would cease to exist after the merger. The date on which the merger would take effect was set as the 1st of October As a result of the merger, UNACEM S.A.A. increased its capital by S/ ,000.0; in other words, from S/. 1, ,408.0 to S/. 1, ,408.0 and ,000 new ordinary shares were issued having the same nominal value as the existing shares (S/. 1.0 each), to be distributed among the former shareholders of Cemento Andino S.A., using the exchange ratio mentioned earlier. For accounting purposes, of the increase in capital of S/ ,000.0, the sum of S/ ,000.0

19 originated in the capital account of Cemento Andino S.A. and S/ ,000.0 was to be taken from accumulated results. The new shares were issued when the capital increase resulting from the merger was registered with Lima Companies Registry. The merger creates important synergies and operational improvements with the integration of operation, maintenance, purchasing, financing and systems programs, the product portfolio and sales, giving significant savings in production costs, freight and management costs. The merger enables us to improve market supply, with a wider range of cements and other products at competitive prices, due to savings in production and transport costs. Furthermore, it optimizes leverage in order to address future investment projects and to seek adequate levels of liquidity that will enable us to continue our quarterly dividend policy. Moreover, shares in the absorbing company will have greater liquidity in the stock market, leading to improved market valuation. Appointments and dividends After the merger took effect, a General Meeting of Shareholders held on the 13th of December 2012, elected the 12 members of the Board of Directors of UNACEM S.A.A. to serve until In homage to Mr. Jaime Rizo Patrón Remy, founder of Cemento Andino S.A. (in 1952) and Cementos Lima S.A.A. (in 1967), a pioneer of the Peruvian cement industry and leading figure for more than sixty years, which saw the growth and development of the merged companies, the Board of Directors agreed to appoint him Founding President so that he can continue to contribute his experience and valuable advice to the management of the Company. The Board elected as its new president Mr. Ricardo Rizo Patrón de la Piedra. PAGE UNACEM ANNUAL REPORT During the year the Company continued with its policy of paying quarterly dividends in the months of February, May, August and November.

20 Furthermore the shareholders continued to receive the board s Annual Report and quarterly reports on the interim financial statements, as well as a summary of the quarter s activities, which were also available on the Company s web site. Production and Dispatch in the Domestic Market During 2012 the Company s entire cement production totaled 5,355,447 t, a figure 13.2% higher than the 4,730,938 t registered in Production included both plants, with 1,704,111 t of cement produced by Condorcocha plant and 3,651,336 t by Atocongo plant in It is worth highlighting that the Company s production was more than enough to cover domestic demand for cement. Cement production by UNACEM S.A.A. broken down by plant is shown in the following figure: Figure N 1 CEMENT PRODUCTION BROKEN DOWN BY PLANT (in thousands of metric tons)

21 The Company s cement dispatches in 2012 were the best ever achieved by both plants; total volume dispatched was of 5,310,830 t, 12.9% higher than the figure for 2011, which was 4,702,007 t. This increase was a consequence of continual growth in the construction sector, one of the most closely linked to the growth in domestic demand. Cement dispatches from Atocongo and Condorcocha plants are shown in the following figure: Figure N 2 DOMESTIC CEMENT DISPATCHES (in thousands of metric tons) 4,209 4,126 4,702 4,709 5,311 PAGE UNACEM ANNUAL REPORT 3,452 3,056 2,683 2,481 2, ,000 1,500 2,000 2,500 3,000 3,500 4,000 4,500 5,000 5,500

22 Marketing and Sales Sales The Company sells its cement through two business units: bagged cement and bulk cement, which represent 74.6% and 25.4% of total sales respectively. The brands handled by the Bagged Cement unit are: Type I Portland cement under the brands Cemento Andino and Cemento Sol, type IP Portland cement under the brands Cemento Atlas and Cemento Andino and type IPM and type V Portland cement under the brand Cemento Andino. The product portfolio is sold principally through two distribution channels: traditional hardware stores (including the ProgreSol network and independent hardware stores) and modern (or selfservice hardware) stores. As far as results are concerned, by December 2012 sales of type I Cemento Andino in bags had risen 13.2%, while those of Cemento Sol (type I) had risen 7.0% compared with the same period of the previous year. Equally, sales of Cemento Andino type IP increased by 4.7%; on the other hand, sales of Cement Atlas (type IP) fell by 6.0% during the same period. Sales of Cemento Andino type IPM grew 13.6% compared with It should be mentioned that sales of type V cement from Atocongo plant reached 38,502 mt while sales of the same product from the Condorcocha plant amounted to 23,831 mt at the close of The bulk cement business unit sells Portland types I, IP, II and type V, principally to readymixed concrete suppliers, mining, oil and construction companies, and makers of cementbased products. The results of the bulk cement business unit in 2012 were as follows: deliveries of type I Cemento Sol increased by 24.9%, while those of Cemento Andino type I grew 3.1% compared with the same period of the

23 previous year. Furthermore, dispatches of Cemento Atlas (type IP) and Cemento Andino type IP increased by 91.5% and 169.1% respectively compared to the same period of the previous year. Dispatches of type V cement in bulk from Atocongo increased by 12.9% compared with the previous year and deliveries of Cemento Andino type V were satisfactory at 48,662 mt at the close of As can be seen, the bulk cement business unit performed better than the bagged cement unit, principally because of cement sales to premixed concrete suppliers, arising from increased house building and infrastructure works throughout the country. Relationship with clients and the ProgreSol hardware store network The sales strategy stresses continual improvement and a balance between the aims of the Company and those of its clients, purchasers and users to create efficient and longlasting relationships throughout the value chain, from the factory to the points of sale. PAGE UNACEM ANNUAL REPORT For this reason, successful independent hardware stores with high turnover have been incorporated into the ProgreSol network since In 2012 the network consisted of more than 270 points of sale, making it Peru s largest hardware store network. As a result of the recent merger, more than 40 points of sale operated by the Condorcocha plant s distributors were added to the ProgreSol network, increasing the number of outlets and our presence throughout Peru.

24 Conchan Pier Port operations, in metric tons, increased by 78.0% compared with During the year 25 vessels used the facility and a total volume of 784,109 mt was handled; this increase is the result of increased shipments of clinker and coal. Carbon Credits Under the Clean Development Mechanism of the United Nations Framework Convention on Climate Change (UNFCCC) The third periodic verification of emission reduction from the fuel switching project begun in December 2011, through the Designated Operational Entity (DOE) Tüv Süd. The revised period of verification covered reductions generated from September 2010 to August 2011, which amounted to 137,754 t. The verification process is now in its final stage and it is estimated that the corresponding CER will be issued in the second quarter of It should be mentioned that the Company continually monitors the emission reductions arising generated by the fuel switching project and a fourth periodic verification is programed for Principles of Good Corporate Governance The Company adheres to the Principles of Good Corporate Governance in its management and organizational culture; through these principles it seeks to promote good business practices enabling the integration of its agents: the board of directors, management, shareholders and other stakeholders, with a view to increasing value. The adoption of the Principles of Good Corporate Governance provides better security to all stakeholders and guarantees information transparency, equal treatment for all shareholders and responsible management in each of the company s activities.

26 The Obligatory Annual General meeting held on the 20th of March 2012 approved the financial statements for fiscal year 2011, as well as the unreserved opinion of the external auditors. The Annual General Meeting elected the directors and delegated to the board the choice of external auditors for fiscal year At a meeting on the 7th of September 2012, the board unanimously chose the new members of the audit committee, to consist of three directors, two of whom are independent. After the merger took effect, a general meeting of shareholders on the 13th of December 2012 chose the twelve directors who will serve until the end of the period in March Integrated Management System (IMS) At the time of the merger between Cemento Andino S.A. and UNACEM S.A.A., both plants had management systems based on the following international standards: ISO 9001, ISO and OHSAS for quality assurance, the environment, safety and occupational health respectively: Condorcocha already had the three certificates corresponding to these international standards. Atocongo had ISO 9001, BASC (Business Alliance for Secure Commerce) and ISPS (International Ship and Port Security Code) certification and was well advanced with its preparation for ISO and OHSAS certification.

27 At first the two systems will be maintained in parallel and, in a second stage, they will be integrated with planned and systematic changes that will lead to better performance by the plants. Integrated Management System (IMS) Atocongo Plant and Conchan Pier Client satisfaction In February a customer loyalty and satisfaction survey was carried out of Peruvian cement clients, which was used to develop a series of actions aimed at improving the most relevant factors revealed by the survey, particularly in the sale and distribution of the products. Internal audits In 2012 nine internal audits were carried out, which together covered all the Company s processes relevant to quality, safety, occupational health and the environment. These audits verified that each process complied with its objectives and with the applicable requirements of ISO 9001, ISO 14001, OHSAS 18001, BASC and ISPS, as well as other requirements of the integrated management system. An evaluation of compliance with the legal requirements applicable to each one of these aspects was also carried out. PAGE UNACEM ANNUAL REPORT Management review of the IMS As planned, the Management carried out a formal review of the integrated management system to ensure that it remains effective, adequate and appropriate to the Company s interests. As a result of the review, the Management decided upon the integrated management system s actions, goals and targets.

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29 Certification ISO 9001:2008 In September, SGS carried out the annual followup audit of the IMS, concentrating on quality management and as a result recommended that our ISO 9001:2008 certification should be renewed. BASC (Business Alliance for Secure Commerce) In June, BASC PERU renewed the BASC certification for Atocongo plant and Conchan pier. This certification confirms the Company s ability to prevent and avoid the potential use of its operations or facilities for illegal purposes. ISPS (International Ship and Port Security) In September, the National Port Authority carried out a followup audit of our ISPS certification, which was then validated. Integrated Management System (IMS) Condorcocha Plant External followup audits SGS del Peru carried out external audits of ISO 9001:2008, ISO 14001:2004 and OHSAS 18001:2007 standards, for Condorcocha plant (including contractors) and the Lima offices; the first took place from the 31st of January to the 4th of February and the second from the 17th to the 20th of September. PAGE UNACEM ANNUAL REPORT Integrated internal audit of contractors Integrated internal audits were carried out in January, May and November of the Company s contractors, in accordance with ISO and OHSAS standards, in order to determine compliance with the legal requirements applicable to their activities.

30 Human Resources Personnel The following table shows changes in employee numbers during 2011 and 2012 (as at the 31st of December each year). It should be pointed out that the data for 2012 show the total number of collaborators after the 1st of October, the date on which the merger between Cementos Lima S.A.A and Cemento Andino S.A. took effect, to create the new company UNACEM S.A.A. that includes all personnel working in Atocongo and Concorcocha plants, Conchan pier and the Villaran offices. In order to compare figures, the personnel of both companies as at December 2011 have been added. The Company believes that the merger of human capital from both cultures will be positive and create the largest cement manufacturer in Peru. Table N 1 PAYROLL CHANGES CLASIFICATION Administrative Employees Labourers TOTAL The 2011 figures are the sum of personnel working for Cemento Andino S.A. and Cementos Lima S.A.A.

32 Labour unions Harmonious industrial relations enabled us to achieve a high degree of performance and productivity in the plants during Before the merger, in March 2012 a collective bargaining agreement was entered into with the Labour Union of Cía. Cemento Andino S.A. for a one year period ending on the 31st December In July 2012 a collective bargaining agreement was signed with the Labour Union of Cementos Lima S.A.A. Atocongo Quarries, which is valid for three years. The agreements show our collaborators confidence and commitment to the Company s goals, leading to greater synergies, communication and collaboration in solving problems and maintaining an excellent climate in the workplace. Training and personal development Complying with our commitment to continual improvement, we improve the skills of our collaborators by the use of regular training programs. At present we use a competency management model, which includes job profile analysis, recruitment and selection, performance evaluation, personal development and training. In order to guarantee the competences of our personnel, the Company s policy towards its human capital is to promote and facilitate the professional and technical development of its collaborators through continual training, both in Peru and abroad.

33 Within this framework, during 2012 we provided a total of 20,730 manhours of training, equivalent to an average of 33.4 hours per employee. The following table shows this in detail: Table N 2 CLASSIFICATION OF MANHOURS DEVOTED TO TRAINING INHOUSE OUTSIDE THE COMPANY TOTAL PERÚ ABROAD 8,296 hours 12,282 hours 152 hours 20,730 hours The XX Training Program for Professionals, involving 33 young professionals in different specialties ended in September. At the same time we opened the XXI Program in which 24 recently qualified professionals are taking part. PAGE UNACEM ANNUAL REPORT Furthermore, and as part of our commitment to support youth training in Peru, we hosted visits by 1,038 students from various universities.

34 3. PROJECTS Because these are the goals that encourage us to become bigger every day. Our principal commitment is to meet the growing demand of the Peruvian market. For that reason the increase in the installed capacity of our Atocongo and Condorcocha plants will enable us to produce 7.6 million tons of cement each year.

36 PROJECTS The following is a description of the most relevant information on projects implemented in 2012 at both Atocongo and Condorcocha plants: Increase in the Production Capacity of Atocongo Plant During 2012 work continued on the project to increase the production capacity of Atocongo plant to approximately 4.8 million tons of clinker a year and to increase its cement milling capacity to 5.5 million tons a year. This work required Kiln I to be shut down from the 1st of July 2012 in order to carry out a series of modifications, including steelwork, new mechanical and electrical equipment and new civil engineering work; this kiln is expected to be back in production at its new capacity of 7,500 tons of clinker a day in April By the close of 2012 the steelwork was 99.0% complete and installation 82.0% complete. During the year the civil engineering work on new clinker silos N 13 and N 14 was completed, together with the new process ventilation building and clinker cooling building. The new Kiln I cooler electro filter is complete and ready to be connected to the new cooler on this production line. Electromechanical erection work on the clinker crusher was completed in December 2012, before offload tests were carried out and the unit commissioned. Furthermore, testing and commissioning of the raw mill were carried out in February 2013.

37 Installation of the refractory linings for the new heat exchanger and calcinator was approximately 70.0% completed at the close of The process of alignment and welding of the new sectors of Kiln I is well advanced; the new operating mechanism, tire and other equipment are already installed and will be aligned during February Increase in the Production Capacity of Condorcocha Plant Installation of the clinker cooler crossbar system, is now completed and by the end of the year its refractory lining was also 75.0% finished. Installation of the hydraulic system began in December 2012 and will be completed by the end of February During 2012 we satisfactorily concluded the project to increase the production of Condorcocha plant by 700,000 mt, by installing a complete new production line known as Kiln 4. This kiln has a production capacity of 2,100 tons of clinker a day, which, together with the three existing kilns, increases daily production to a total of 5,900 tons. This project was conceived as part of a commitment by UNACEM S.A.A. to meet growing market demand and to increase the annual production of Condorcocha from 1 260,000 tons to 1 960,000 tons or approximately 55.0%. PAGE UNACEM ANNUAL REPORT The project was implemented in three simultaneous stages. Stage 1 was operational by the beginning of 2012 and consists basically of secondary crushing and transport of raw materials. Work on stage 2 continued with the raw mill and clinker production process, leading to the final stage 3 consisting of the cement mill and dispatch system.

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39 Offload testing of the raw mill and mixing system started at the beginning of 2012 before the installation of refractory linings in the preheater, kiln and cooler; the final drying of the refractory material was completed in March. The final part of the project, carried out at the same time as the offload tests, consisted of installing the integral air, cooling water, diesel oil feed system and CO 2 system in the coal bunkers. Kiln heating started in April. The stage 3 installation work was completed at simultaneously and preparations were made for the start of commissioning testing in this stage. Finally, onload tests of the equipment were carried out, during which the raw mill exceeded the production capacity guaranteed by the supplier. Capacity tests were also carried out on the kiln and cooler, and during the third quarter construction and commissioning of the cement mill and dispatch system were completed. PAGE UNACEM ANNUAL REPORT

40 4. SUBSIDIARIES AND AFFILIATES Those who share our vision and values for development. Almost 100 years of experience has enabled us to develop subsidiary companies that help to expand the construction and energy sectors, creating economic value and responsability to help Peru to develop.

42 SUBSIDIARIES AND AFFILIATES INVECO S.A. / UNICON S.A. Holding: 93.4% of INVECO / 100.0% of UNICON Ready mixed concrete dispatches rose in 2012, amounting to 2 043,476 m 3 for the whole country, a figure 16.0% higher than the volume dispatched in This was due principally to growth in the demand for new housing, shopping malls and infrastructure. In the Lima market 1 568,635 m 3 of concrete were dispatched (an increase of 15.7% compared with 2011), whilst outside the capital 474,841 m 3 were dispatched (an increase of 17.0% compared with 2011). Commercial agreements in 2012 were responsible for 2 225,388 m 3 of concrete. In December of that year the company had entered into agreements for the future supply of 1 246,638 m 3 of concrete. During the year new plants were installed and new vehicles added to the fleet, giving UNICON a production capacity in Lima of 1,160 m 3 /hour at the close of 2012; the company has 7 fixed plants, 359 mixer trucks and 95 concrete pumps. UNICON s financial statements as at the 31st of December 2012 were audited by Medina, Zaldivar, Paredes & Asociados, a member company of Ernst & Young, and approved by the board of directors on the 30th of January 2013, with the following results: Net sales of S/ million (S/ million in 2011). Net results of S/ million (S/ million in 2011). Net equity of S/ million (S/ million in 2011).

43 BASF Construction Chemicals Perú S.A. UNICON holds 30.0% of the stock of BASF Construction Chemicals Peru S.A., a supplier of concrete additives, masonry adhesives and grouts for the erection of industrial equipment, as well as products to repair concrete structures, among others. The financial statements as at the 31st of December 2012, audited by DongoSoria, Gaveglio y Asociados Sociedad Civil de Responsabilidad Limitada, a member firm of Pricewaterhouse Coopers International Limited (PwC), were approved by the AGM on the 28th of February 2013 with the following results: Net sales of S/ million (S/ million in 2011). Net results of S/. 9.6 million (S/. 4.8 million in 2011). Net equity of S/ million (S/ million in 2011). Entrepisos Lima S.A.C. UNICON holds 50.0% of the shares in Entrepisos Lima S.A.C., a company making investments in construction and concrete prefabrication, as well as machinery and equipment rental to the construction and allied trades. PAGE UNACEM ANNUAL REPORT At the close of fiscal year 2012 the company s results were as follows: Net sales of S/ million (S/. 7.0 million in 2011). Net profit of S/. 1.6 million (S/. 0.9 million in 2011). Net equity of S/. 3.4 million (S/. 2.3 million in 2011).

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45 Firth Industries Peru S.A. On the 25th of July 2011, a contract was signed for the sale of 100.0% of the shares in Firth and this operation was completed on the 10th of October The financial statements as at the 31st of December 2012, duly audited by Medina, Zaldívar, Paredes & Asociados, a member firm of Ernst & Young, showed the following results: Compañía Eléctrica El Platanal S.A. (CELEPSA) (90.0% holding) Net turnover of S/ million (S/ million in 2011). Net profit of S/ million (S/. 7.1 million in 2011). Net equity of S/ million (S/ million in 2011). As a result of the merger described above, UNACEM S.A.A. acquired 90.0% of the shares in CELEPSA. The principal activities of CELEPSA during 2012 are summarized below. PAGE UNACEM ANNUAL REPORT Operational aspects During 2012 total energy production by the power station was 1 122,768.5 MWH (1,223 GWh), nearly identical to the figure for 2011, which was 1 224,114 MWH (1,224 GWh).

46 Commercial aspects CELEPSA sold 1,157 GWh of energy during 2012 to fulfil contractual commitments, an increase of 4.8% compared to the previous year. Of the total energy sold, 517 GWh went to the regulated market and 640 GWh to the free market. During 2012 monthly sales of power to the company s free and regulated clients varied between a maximum of 217 MW and a minimum of 47 MW. Net income of CELEPSA from power and energy sales in fiscal year 2012 amounted to US$ 63.2 million, 13.2% higher than in the previous year. CELEPSA was the eighth largest producer in the national grid system (SEIN), providing 3.28% of national production in CELEPSA generated 1,223 GWh of the total 37,314 GWh produced by the SEIN in Carbon credits There were two CER issues in 2012 as part of the United Nations Clean Development Mechanism (CDM): the first occurred in January and amounted to 349,196 CERs while the second was in October and amounted to 384,026 CERs. A total of 733,222 CER were issued during the year. Furthermore, between the 1st of January and the 31st of December 2012, the company provided the system with 1,181 GWh, equivalent to a reduction of 721,200 tons of CO 2 (of which 333,687 CERs had already been issued with the balance pending).

48 The CERs issued for the power generated since the power station began operating amount to a total of 1 522,605, representing an annual average of 630,000 CERs. This means that to date, the station is the principal CDM emissions reduction project in Peru and one of the largest in the world. Financial aspects Financing During 2012 the company made repayments on its bank borrowings for the construction of the power station, amounting to US$ 22.9 million, thus reducing the original debt of US$ million to US$ million at the close of Financial statements The financial statements as at the 31st of December 2012, duly audited by Medina, Zaldívar, Paredes & Asociados, a member firm of Ernst & Young, showed the following results: Net sales of S/ million (S/ million in 2011). These figures only cover income from sales of power and energy; they do not include the collection of regulated charges. Net profit of S/ million (S/ million in 2011). Net equity of S/ million (S/ million in 2011). Skanon Investments, Inc. / Drake Cement, LLC (Holding: 84.6% of Skanon Investments / 93.6% of Drake Cement) The Company has made capital contributions to Skanon Investments amounting to US$ 294 million, as a result of which it is the owner of 84.6% of the shares in this subsidiary. In addition, its nonarmslength companies hold 13.3% of the shares. In turn, Skanon Investments increased its shareholding to 93.6% of Drake Cement as its main partner Yavapai Investment Company decided not to contribute any further capital during 2012.

50 After successfully passing emissions and air quality tests, in 2011, sales during 2012 amounted to 272,000 short tons of cement, representing an increase of 59.0% compared with sales in Net sales income reached US$ 20.8 million and operating losses excluding depreciation amounted to US$ 3.6 million. The Arizona cement market expanded 13.5% during 2012, thus exceeding forecasts by the Portland Cement Association (PCA). The PCA s latest forecasts for the Arizona cement market show annual growth of 13.0% for the next five years. Drake Materials Drake Materials concentrated on the Arizona market in In November the company signed an aggregates supply contract as part of its vertical integration strategy. This contract ensures the availability of important reserves of aggregates over the long term, in the Phoenix metropolitan area. During 2012 Drake Materials sold 433,000 m³ of concrete and 34,578 short tons of aggregates, an increase of 27.0%. Net sales income reached US$ 41.4 million and operating losses amounted to US$ 879,000. Although sales volumes increased compared with 2011, margins remained low because of increases in the prices of the principal raw materials and inputs. The company continued to implement its austerity and operating cost reduction plan, the fruits if which are expected to place it in an advantageous position from which it can reverse its losses and start to make a profit on the back of the recovery that is expected from 2013 onwards.

51 Prefabricados Andinos Perú S.A.C. (PREANSA) (Holding: 50.0%) During 2012 contracting work obtained by PREANSA amounted to S/ million, 41.0% higher than the figure for As a result of this production exceeded 7,000 m 3 of structures a year, making 7,410 m 3 /year, resulting in turnover in excess of S/ million. PREANSA began to projects outside Lima in 2012, in Arequipa, Cañete and Chiclayo; these contracts were valued at S/. 5.0 million. Furthermore, sales by the company s crane hire business were almost 95.0% higher than in The financial statements of PREANSA as at the 31st of December 2012 were audited by Medina, Zaldívar, Paredes & Asociados (a member firm of Ernst & Young), who gave an unqualified opinion; they recorded the following: Net turnover of S/ million (S/ million in 2011). Net profit of S/. 3.8 million (S/. 1.1 million in 2011). Net equity of S/ million (S/ million in 2011). PAGE UNACEM ANNUAL REPORT

52 5. ECONOMIC AND FINANCIAL ASPECTS We seek equilibrium between economic, social and environmental values. This new stage, in which we join forces for maximum operational and administrative efficiency, will create synergies that will further our investment plans and drive sustainable growth.

54 ECONOMIC AND FINANCIAL ASPECTS The Individual Financial Statements as at the 31st of December 2012, with an unqualified opinion from the external auditors, show: Net turnover of S/. 1,725.9 million (S/. 1,513.5 million in 2011). Net profit of S/ million (S/ million in 2011). Net equity of S/. 3,302.6 million (S/. 3,023.5 million in 2011). Cement dispatches increased by 12.9% as a result of increased construction activity, which was itself driven by higher private and public investment compared with the previous year. Furthermore, local sales costs increased by 16.0% because of the higher volume of cement dispatched and the higher cost of imported clinker used by the company. Nevertheless, higher income and strict control of costs and expenditure resulted in an operating profit of S/ million, 8.5% higher than in Financial expenditure was offset by exchange rate differences and this, added to the operating margin, produced a net profit of S/ million, a figure 16.7% higher than in The consolidated financial statements as at the 31st of December 2012 show: Net turnover of S/. 2,674.7 million (S/. 2,082.7 million in 2011). Net profit of S/ million (S/ million in 2011). Net equity of S/. 3,456.8 million (S/. 3,184.1 million in 2011). The individual and consolidated financial statements for fiscal year 2011 were the first statements prepared by the company according to International Financial Reporting Standards (IFRS). Until then, they were prepared in accordance with accounting principles generally accepted in Peru (GAAP Peru).

55 Throughout the year, the General Meeting of Shareholders and the Board of Directors delegated by it, took the decisions summarized below, with their respective effects on the company s equity. 20th of January: payment to shareholders of Cementos Lima S.A.A of a dividend of S/ per ordinary share, charged to retained profits from fiscal year th of April: payment to the shareholders of Cementos Lima S.A.A. of a dividend of S/ per ordinary share, charged to interim profit for fiscal year th of June: payment to the shareholders of Cemento Andino S.A. of a dividends of S/ per ordinary share, charged to interim profit made by Ex Cemento Andino S.A. for fiscal year th of July: payment to the shareholders of Cementos Lima S.A.A. of a dividend of S/ per ordinary share, charged to interim profit for fiscal year th of September: payment to the shareholders of UNACEM S.A.A. on this date (prior to the merger) of a dividend of S/ per ordinary share, charged to interim profit for fiscal year The Company s fully subscribed and paid up capital before the merger was S/. 1, ,408.0 (one thousand one hundred and eighty five million seven hundred and three thousand four hundred and eight nuevos soles only), represented by 1, ,408 (one thousand one hundred and eighty five million seven hundred and three thousand four hundred and eight) ordinary shares having a nominal value of S/. 1.0 each. PAGE UNACEM ANNUAL REPORT As a consequence of the merger by which UNACEM S.A.A. absorbed Cemento Andino S.A., the capital of UNACEM S.A.A. rose by S/ , That is, from S/. 1, ,408.0 it increased to S/. 1, ,408.0 through the issue of ,000 new ordinary shares having the same nominal value as existing shares (S/. 1.0 each), which were distributed among former holders of shares in Cemento Andino S.A. on the cutoff date, using the

56 exchange rate of three hundred and eighty four (384) new UNACEM S.A.A. shares having a nominal value of S/. 1.0 each for each Cemento Andino S.A. share having a nominal value of S/ each. For accounting purposes, of the capital increase of S/ ,000.0, the sum of S/ ,000.0 came from the Capital Account of Cemento Andino S.A. and S/ ,000.0 from accumulated results. The new shares were issued on the 30th of November 2012, once the merger had been registered in the Public Records Office entry for UNACEM S.A.A. With the above and in accordance with International Financial Reporting Standards (IFRS), the figures in nuevos soles as at the 31st of December 2012 and 2011, respectively are as follows: EQUITY ACCOUNT AS AT 31/12/11 AS AT 31/12/12 Capital 1,499,023,408 1,646,503,408 Statutory reserve 213,749, ,728,493 Unrealized profits 6,529,416 5,010,952 Accumulated results 1,317,306,007 1,411,342,089 Total equity 3,023,549,085 3,302,563,038

57 At present we have a number of tax, legal and labor proceedings in progress relating to the Company s operations. In the opinion of the management and legal advisors, the final results of these proceedings will not represent a significant cost to the Company, therefore no provision was made for them as at the 31st of December The firm of Medina, Zaldívar, Paredes & Asociados Sociedad Civil (a member of Ernst & Young) was responsible for the external audit during The opinion on the statement of financial position, income statement, integral results, changes in net equity and individual cash flow accounts as at the 31st of December 2012, which form part of this Annual Report, was issued without qualifications. PAGE UNACEM ANNUAL REPORT

58 ADMINISTRATION, MANAGEMENT AND TECHNICAL ASSISTANCE In accordance with the provisions of public deed of incorporation of the Company, dated the 28th of December 1967 and as ordered by a general meeting of shareholders held on the 28th of December 1981, the general management of Union Andina de Cementos S.A.A. continues in the hands of Sindicato de Inversiones y Administración S.A., by means of a contract renewed on the 12th of April Administrative and financial advice continues to be provided by Inversiones Andino S.A., in accordance with an agreement renewed automatically in January 2012, which remains in force to date. Technical advice remains in the hands of ARPL Tecnología Industrial S.A., in accordance with a contract renewed during 2012 and in force until the 31st of December The board of directors acknowledges the important contributions made by these companies throughout ACKNOWLEDGEMENT The Board of Directors wishes to thank every one of the Company s employees and collaborators, whose efforts and commitment have enabled it to achieve its goals and consolidate its leading position in the market. Board of Directors Lima, 25th February 2013 Mr. Ricardo Rizo Patrón de la Piedra Chairman of the Board Mr. Carlos Ugás Delgado DirectorGeneral Manager

60 6. FINANCIAL STATEMENTS With the commitment that is our hallmark. Financial statements as at the 31st of December 2012 and 2011, together with the independent auditors opinion.

62 FINANCIAL STATEMENTS REPORT OF THE INDEPENDENT PUBLIC ACCOUNTANTS To the Shareholders of Unión Andina de Cementos S.A.A. (formerly Cementos Lima S.A.A.) We have audited the accompanying separate financial statements of Unión Andina de Cementos S.A.A. (formerly Cementos Lima S.A.A., a Peruvian entity), which comprise the statements of financial position as of December 31, 2012 and 2011, and the related statements of income, statements of comprehensive income, statements of changes in equity and statements of cash flows for the years then ended, and a summary of significant accounting policies and other explanatory notes. Management responsibility for the Separate Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with International Financial Reporting Standards and for the internal control that Management determines is appropriate to the preparation of financial statements that are free from material misstatement, whether due fraud or error. Auditor s Responsibility Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with generally accepted auditing standards in force in Peru. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the separate financial statements. The procedures selected depend on the auditor s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by Management, as well as evaluating the overall presentation of the separate financial statements.

63 We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Opinion In our opinion, the accompanying separated financial statements, prepared for the purpose explained in the next paragraph, present fairly, in all material aspects, the financial position of Unión Andina de Cementos S.A.A. (formerly Cementos Lima S.A.A.) as of December 31, 2012 and 2011, and its financial performance and cash flows for the years then ended, in accordance with International Financial Reporting Standards. Emphasis over the separate information The separate financial statements of Unión Andina de Cementos S.A.A. (formerly Cementos Lima S.A.A.) have been prepared in compliance with the legal requirements in force in Peru for the filing of financial information. These financial statements reflect the value of the investments in subsidiaries at cost and not on a consolidated basis; as a result, they should be read together with the consolidated financial statements of Unión Andina de Cementos S.A.A. (formerly Cementos Lima S.A.A.), which are separately presented and our report dated January 28, 2013 expresed an unqualified opinion. PAGE UNACEM ANNUAL REPORT Lima, Peru January 28, 2013 Countersigned: Marco Antonio Zaldívar C.P.C.C. Register No

64 Separate statements of financial position As of December 31, 2012 and 2011 ASSET Current assets (Note 7) (Note 8) (Note 9) (Note 3.2 (l), 21 (b) ) Cash and cash equivalents Investments Trade and other accounts receivable, net Inventories Deferred stripping cost Prepaid taxes and expenses 74, , ,775 27,892 9,277 63, , ,114 23,775 11, , ,941 Non current assets (Note 8) (Note 10) (Note 11) (Note 12) (Note 3.2 (l), 21 (b) ) Trade and other accounts receivable, net Investments in subsidiaries and others Property, plant and equipment, net Intangible assets, net Deferred stripping cost 7,474 1,558,675 3,605,739 76, ,567 11,700 1,503,326 3,346,367 72, ,476 5,371,447 5,038,778 Total asset 6,062,625 5,632,719

65 LIABILITY AND EQUITY (Note 13) (Note 14) (Note 15) (Note 16) (Note 17) (Note 14) (Note 15) (Note 31) (Note 18) (Note 17) Current liabilities Bank overdrafts and loans Trade and other accounts payable Current portion of longterm debt Deferred income Income tax payable Provisions Non current liabilities Trade and other accounts payable Longterm debt Derivative financial instruments Deferred income tax liability, net Other noncurrent provisions 532, , ,009 7,262 25,604 1,140,957 12,755 1,069,495 7, ,634 11, , , ,054 72,173 14,499 37, ,293 1,228,313 9, ,646 10,590 PAGE UNACEM ANNUAL REPORT 1,619,105 1,736,877 Total liabilities 2,760,062 2,609,170 (Note 19) Equity Capital stock Legal reserve Unrealized loss on derivative financial instruments Retained earnings 1,646, ,728 1,411,343 1,499, ,749 (5,011) (6,529) 1,317,306 Total equity 3,302,563 3,023,549 Total liabilities and equity 6,062,625 5,632,719

66 Separate statements of income For the years ended December 31, 2012 and (Note 20) Net sales 1,725,896 1,513,521 (Note 21) Cost of sales (988,604) (851,849) Gross profit 737, ,672 Operating Income (expenses) (Note 22) Administrative expenses (171,125) (160,334) (Note 23) Selling expenses (82,517) (79,950) (Note 25) Other operating income, net 6,630 35,355 Total operating expenses, net (247,012) (204,929) Operating profit 490, ,743 Other income (expenses) (Note 26) Financial income 16,956 10,212 (Note 27) Financial costs (67,125) (64,838) Exchange difference, net 75,973 34,770 Total other income (expenses), net 25,804 (19,856) Income before tax 516, ,887 (Note 18(b)) Income tax expense (156,290) (128,506) Net income 359, ,381 (Note 29) Basic and diliuted earnings per share (stated in thousands of nuevos soles)

67 Separate statements comprehensive of income For the years ended December 31, 2012 and Net income 359, ,381 Other comprehensive income Changes in the fair value of hedging derivative financial instruments Income tax effect Other comprehensive income, net of income tax Total comprehensive income, net of income tax 2,169 (651) 1, ,312 (992) 298 (694) 307,687 PAGE UNACEM ANNUAL REPORT

68 Separate statements of changes in equity For the years ended December 31, 2012 and 2011 Capital stock Investment shares Balance as of January 1, 2011 Net income Other comprehensive income 1,070,316 97,787 Total comprehensive income Capitalization of retained earnings, note 19(a) Exchange of investment shares, note 19(a) Purchase of treasury shares Transfer to legal reserve, note 19(b) Dividend distributions, note 19(d) Other 293, ,632 (97,773) (14) Balance as of December 31, ,499,023 Net income Other comprehensive income, net of income tax Total comprehensive income Capitalization of retained earnings, note 19(a) Transfer to legal reserve, note 19(b) Dividend distributions, note 19(d) Other 147,480 Balance as of December 31, ,646,503

69 PAGE UNACEM ANNUAL REPORT Legal reserve Unrealized loss Retained earnings Total 192,350 21, ,749 35, ,728 (5,835) (694) (694) (6,529) 1,518 1,518 (5,011) 1,442, , ,381 (293,075) (37,859) (21,349) (82,348) 1,034 1,317, , ,794 (147,480) (35,979) (84,472) 2,174 1,411,343 2,797, ,381 (694) 307,687 (14) (82,348) 1,084 3,023, ,794 1, ,312 (84,472) 2,174 3,302,563

70 Separate statements of cash flows For the years ended December 31, 2012 and Operating activities Collections from customers Other collections Payments to suppliers Payments to employees Taxes paid Interest paid Other payments 2,031,861 18,551 (1,396,475) (159,032) (153,950) (66,479) (53,304) 1,820,184 51,056 (1,018,297) (145,544) (149,624) (73,810) (34,462) Net cash provided from operating activities 221, ,503 Investing activities Sale of property, machinery and equipment Dividends income Additions of stripping assets Purchase of investments Purchase of property, machinery and equipment Purchase of intangible assets Other payments 6,091 1,371 (240,344) (48,944) (32,199) (17,320) (24,270) 2,159 6,989 (236,450) (79,188) (19,872) (11,456) (79,018) Net cash used in investing activities (355,615) (416,836)

71 Financing activities Proceeds from bank overdrafts and loans 416, ,430 Proceeds from longterm debt 145,514 51,373 Payment of bank overdrafts and loans Payment of longterm debt Dividends paid Other payments Net cash provided from (used in) financing activities Net decrease in cash and cash equivalents Exchange difference, net Cash and cash equivalents at the beginning of the year (255,189) (147,980) (85,772) (3,716) 69,186 (65,257) 75,973 63,473 (341,016) (61,423) (82,348) (7,851) (272,835) (240,168) 34, ,871 PAGE UNACEM ANNUAL REPORT Cash and cash equivalents at the end of the year 74,189 63,473 Significant noncash activities Financial leases 104, ,189 Capitalization of retained earnings 147, ,075 Capitalized interest 38,752 29,479 Provision for impairment of investments 917 4,452

72 Notes to the separate financial statements As of December 31, 2012 and Corporate information Unión Andina de Cementos S.A.A. (formerly Cementos Lima S.A.A., hereinafter the Company ) was incorporated in The Company is a subsidiary of Sindicato de Inversiones y Administración S.A. (hereinafter the Principal ), which holds percent of the Company s capital stock, and is also a subsidiary of Nuevas Inversiones S.A., ultimate parent of the consolidable economic group. As approved General Shareholders Meeting dated July 24, 2012; the Company s name changed from Cementos Lima S.A.A. to Unión Andina de Cementos S.A.A. The registered office of the Company is located at Atocongo Avenue 2440, Villa María del Triunfo, Lima, Peru. The Company s main activity is the production and sale, for local and foreign sales of cement and clinker. For this purpose, the Company owns two plants located at Lima and Junín, whose capacity is 4.78 million tons of clinker and 6 million tons of cement. The separate financial separate statements as of December 31, 2011 were approved by General Shareholders Meeting held on March 30, The separate financial separate statements as of December 31, 2012 were approved by Management on January 18, 2013 and will be presented for the approval of the Board of Directors and the Shareholders within the terms established by law. In Management s opinion, the accompanying financial separate statements will be approved without changes. 2. Merger of Cemento Andino S.A. On July 24, 2012, the General Shareholders Meeting approved the merger of the Company with Cemento Andino S.A. (an entity under common control). The merged company transferred its total equity and was extinguished and not dissolved neither liquidated. The effective date of the merger was October 1, The approved merger was made among entities under common control and has not implied an effective change in the control of subsidiaries inside the Group. The accounting treatment of this merger is explained in note 3.2 (a) Business combinations among entities under common control.

73 The main activity of Cemento Andino S.A. was the production and sale of every type of cement, concentrating its trading operations mainly in the coast, central east and central west of Peru. For this purpose, the Company owned a plant located at Junín, whose capacity is 1.18 million tons of clinker and 1.5 million tons of cement. The assets and liabilities as of September 30, 2012 and December 31, 2011, and the income and expenses of the merged company for the ninemonth period and twelvemonth period ended such dates, respectively, were as follow: Statement of financial position Assets Current assets Noncurrent assets September 30, ,270 1,721,391 December 30, ,342 1,615,567 1,985,661 1,812,909 PAGE UNACEM ANNUAL REPORT Liabilities Current liabilities Noncurrent liabilities 199, , , , , ,110 Equity, net 1,112,833 1,058,799 Statement of income Net sales Gross profit Operating expenses Operating profit Net income 364, ,624 (26,330) 100,294 78, , ,080 (17,520) 129,560 87,116

74 Notes to the separate financial statements As of December 31, 2012 and Summary of significant accounting policies 3.1 Basis of preparation According to International Financial Reporting Standards prevailing as of December 31, 2012, it is not necessary to prepare separate financial statements; but in Peru, companies are required to prepare them in compliance with the prevailing Law. For that purpose, the Company has prepared separate financial statements according to IAS 27, Consolidated and Separate Financial Statements. The financial statements are made public within the term established by the Superintendence of Security Market (SMV for its acronym in Spanish). The financial separate statements have been prepared on a historical cost basis, except for derivative financial instruments that have been measured at fair value. The separate financial statements are presented in Nuevos Soles and all values are rounded to the nearest thousand (S/. 000), except when otherwise indicated. 3.2 Summary of significant accounting policies The following are the significant accounting policies applied by the Company s Management in preparing its financial separate statements: (a) Merger of entities under common control Merger IFRS do not establish specific accounting treatment for the legal merger of a parent company with an entity under common control; hence the Company based upon the criteria allowed by IAS 8 and the IFRS Conceptual Framework has adopted the following accounting policy. A legal merger where the Company merges a company under common control is in substance an exchange of shares, and assets and liabilities of such entity.

75 Consequently, the assets and liabilities to be incorporated are recognized to the book values kept in the financial statements of the merged as of the date of the legal merger. These book values include any goodwill, intangible asets, net of any allowance for amortization, depreciation or impairment, if applicable. Costs of this operation are recognized in the results of the period. In the accompanying financial statements and for comparative purposes, the assets, liabilities, income and expenses of the merged entities are presented, as if they have always been an only one entity, in that sense, the financial statements as of December 31, 2012 and 2011 were added to comprise the accompanying financial statements, eliminating the effect of transaction among the merged companies. (b) Cash and cash equivalents Cash and cash equivalents in the statement of financial position comprise cash at banks and on hand and shortterm deposits with a maturity of three month or less. For the purpose of the statement of cash flows, cash and cash equivalents consist of cash and short term deposits as defined above, net of outstanding bank overdrafts. PAGE UNACEM ANNUAL REPORT (c) Financial instrumentsinitial recognition and subsequent measurement (i) Financial Assets Initial recognition and measurement Financial assets within the scope of IAS 39 Financial Instruments: Recognition and Measurement are classified as financial assets at fair value through profit or loss, loans and receivables, heldtomaturity investments, availableforsale financial investments, or as derivatives designated as hedging instruments in an effective hedge, as appropriate. The Company determines the classification of its financial assets at initial recognition. All financial assets are recognized initially at fair value plus, in the case of assets not at fair value through profit or loss, directly attributable transaction costs.

76 Notes to the separate financial statements As of December 31, 2012 and 2011 Purchases or sales of financial assets that require delivery of assets within a time frame established by regulation or convention in the marketplace (regular way trades) are recognized on the date trade, i.e., the date that the Company commits to purchase or sell the asset. The Company financial assets include cash and cash equivalents, trade and other receivables. Subsequent measurement The subsequent measurement of financial assets depends on their classification as follows: Financial assets at fair value through profit or loss Financial assets at fair value through profit or loss includes financial assets held for trading and financial assets designated upon initial recognition as at fair value through profit or loss. Financial assets are classified as held for trading if they are acquired for the purpose of selling or repurchasing in the near term. This category includes derivate financial instruments entered into by the Company that are not designated as hedging instruments in hedge relationships as defined by IAS 39. Financial assets at fair value through profit and loss are carried in the statement of financial position at fair value with changes in fair value recognized in finance income or finance costs in the statement of income. As of December 31, 2012 and 2011, the Company has designated one financial asset as at fait value through profit or loss, the trading Cross Currency Interest Rate Swap mantained as of such dates, note 8.

77 Loans and receivables Loans and receivables are nonderivative financial assets with fixed or determinable payments that are not quoted in an active market. After initial measurement, such financial assets are subsequently measured at amortized cost using the effective interest rate method (EIR), less impairment. Amortized cost is calculated by taking into account any discount or premium on acquisition and fees or costs that are an integral part of the EIR. The EIR amortization is included in finance income in the consolidated income statement. The losses arising from impairment are recognized in the statements of income in finance costs. Availableforsale financial investments Availableforsale financial investments include equity and debt securities. Equity investments classified as availableforsale are those, which are neither classified as held for trading nor designated at fair value through profit or loss. After initial measurement, availableforsale financial investments are measured at fair value. Unrealized gains or losses recognized as other comprehensive income in the availableforsale reserve until investment is derecognized, at which time the cumulative gain or loss is recognized in other operating income, or determined to be impaired, at which time the cumulative loss is reclassified to the statement of income in finance costs and removed from the availableforsale reserve. PAGE UNACEM ANNUAL REPORT Dividends earned during the period the company had the investment are credited to results when the right to collect is established. The Company has not designed any financial asset as a available forsalefinancial instruments as of December 31, 2012 and 2011.

78 Notes to the separate financial statements As of December 31, 2012 and 2011 Derecognition A financial asset (or, where applicable a part of a financial asset or part of a group of similar financial assets) is derecognized when: The rights to receive cash flow from such asset have expired; or The Company has transferred its rights to receive cash flows from the asset or has assumed an obligation to pay the received cash flows in full without material delay to a third party under a pass through agreement; and either (a) the Company has transferred substantially all the risks and rewards of the asset, or (b) the Company has neither transferred nor retained substantially all of the risks and rewards of the asset, but has transferred control of the asset. When the Company has transferred its rights to receive cash flows from an asset or has entered into a passthrough arrangement, and has neither transferred nor retained substantially all of the risks and rewards of the asset nor transferred control of it, the asset is recognized to the extent of the Company s continuing involvement in it. In that case, the Company also recognizes an associated liability. The transferred asset and the associated liability are measured on a basis that reflects the rights and obligations that the Company has retained. (ii) Impairment of financial assets The Company assess at each reporting date whether there is any objective evidence that a financial asset or a group of financial assets is impaired. A financial asset or a group of financial assets is deemed to be impaired if, and only if, there is objective evidence of impairment as a result of one or more events that has occurred after the initial recognition of the asset (an incurred loss event ) and that loss event has an impact on the estimated future cash flows of the financial asset or the group of financial assets that can be reliably estimated. Evidence of impairment may include indications that the debtors or a group of debtors is experiencing significant financial difficulty, default or delinquency in interest or principal payments, the probability that they will enter

79 bankruptcy or other financial reorganization and where observable data indicate that there is a measurable decrease in the estimated future cash flows, such as changes in arrears or economic conditions that correlate with defaults. Financial assets carried at amortized cost For financial assets carried at amortized cost, the Company first assesses whether objective evidence of impairment exists individually for financial assets that are individually significant, or collectively for financial assets that are not individually significant. If the Company determines that no objective evidence of impairment exists for an individually assessed financial assets, whether significant or not, it includes the asset in a group of financial assets with similar credit risk characteristics and collectively assesses them for impairment. Assets that are individually assessed for impairment and for which an impairment loss is, or continues to be, recognized are not included in a collective assessment of impairment. If there is objective evidence that an impairment loss has been incurred, the amount of the loss is measured as the difference between the assets carrying amount and the present value of estimated future cash flows (excluding future expected credit losses that have not yet been incurred). The present value of the estimated future cash flows is discounted at the financial asset s original effective interest rate. If a loan has a variable interest rate, the discount rate for measuring any impairment loss is the current effective interest rate. PAGE UNACEM ANNUAL REPORT The carrying amount of the asset is reduced through the use of an allowance account and the amount of the loss is recognized in the income statement. Interest income continues to be accrued on the reduced carrying amount and is accrued using the rate of interest used to discount the future cash flows for the purpose of measuring the impairment loss. The interest income is recorded as part of finance income in the statement of income. Loans together with the associated allowance are written off when there is no realistic prospect of future recovery and all collateral has been realized or has been transferred to the Company. If, in a subsequent year, the amount of the estimated impairment loss increases or decreases because of an event occurring after

80 Notes to the separate financial statements As of December 31, 2012 and 2011 the impairment was recognized, the previously recognized impairment loss is increased or reduced by adjusting the allowance account. If the estimated loss decreases, the reversal shall not result in a carrying amount of the financial asset that exceeds what the amortized cost would have been had the impairment not been recognized at the date the impairment is reversed. If a future writeoff is later recovered, the recovery is credited to finance costs in the statement of income. (iii) Financial liabilities Initial recognition and measurement Financial liabilities within the scope of IAS 39 are classified as financial liabilities at fair value through profit or loss, loans and borrowings, or as derivatives designated as hedging instruments in an effective hedge, as appropriate. The Company determines the classification of its financial liabilities at initial recognition. All financial liabilities are recognized initially at fair value and, in the case of loans and borrowings, carried at amortized cost. This includes directly attributable transaction costs. As of December 31, 2012 and 2011, the Company s financial liabilities include bank overdrafts and loans, trade and other payables, longterm debt and derivative financial instruments. Subsequent measurement The subsequent measurement of financial liabilities depends on their classification as follows: Financial liabilities at fair value through profit or loss Financial liabilities at fair value through profit or loss include financial liabilities held for trading and financial liabilities designated upon initial recognition as at fair value through profit or loss.

81 Financial liabilities are classified as held for trading if they are acquired for the purpose of selling in the near term. This category includes financial derivative instruments which are not designated as hedge instruments as required by IAS 39. The embedded derivatives are also classified as negotiable, unless they are designated as effective hedge instruments. Gains or losses on liabilities held for trading are recognized in the statement of income. As of December 31,2012 and 2011, the Company has designed a Cross currency Interest Rate Swap as a financial liability at fair value through profit and loss. Loans and borrowings After their initial recognition, interestbearing loans and borrowings are subsequently measured at amortized cost using the effective interest rate method. Gains and loss are recognized in the statement of income when the liabilities are derecognized as well as through the effective interest rate method (EIR) amortization process. Amortized cost is calculated by taking into account any discount or premium on acquisition and fees or costs that are an integral part of the EIR. The EIR amortization is included in finance costs in the statement of income. PAGE UNACEM ANNUAL REPORT Derecognition A financial liability is derecognized when the obligation under the liability is discharged or cancelled or expired. When an existing financial liability is replaced by another one from the same lender on substantially different terms, or the terms are substantially modified, such replacement or amendment is treated as a derecognition of the original liability and the recognition of a new liability, and the difference in the respective carrying amount is recognized in the statement of income.

82 Notes to the separate financial statements As of December 31, 2012 and 2011 (iv) Offsetting of financial instruments Financial assets and financial liabilities are offset and the net amount reported in the statement of financial position if, and only if, there is a currently enforceable legal right to offset the recognized amounts and there is an intention to settle on a net basis, or to realize the assets and settle the liabilities simultaneously. (v) Fair value of financial instruments The fair value of financial instruments that are traded in active markets at each reporting date is determined by reference to quoted market prices or dealer price quotations (bid price for long positions and ask price for short positions), without any deduction for transaction costs. For financial instruments not traded in an active market, the fair value is determined using appropriate valuation techniques. Such techniques may include using recent arm s length market transactions, reference to the current fair value of another instrument that is substantially the same, a discounted cash flow analysis or other valuation models. An analysis of fair values of financial instruments and further details as to how they are measured are provided in note 32. Derivative financial instruments Derivative financial instruments, according to IAS 39, are classified as negotiable or hedging instruments. The most relevant aspects of each category are: Negotiables Derivative contracts are initially recognized as assets and liabilities at fair value in the statement of

83 financial position. Changes in the fair value of negotiable derivative contracts are recorded in the statement of income. The cross currency interest rate swap does not qualify as hedge according to IAS 39 and therefore, it is accounted for as a negotiable financial instrument. Derivatives designated as hedging instruments The Company uses derivative instruments to manage its exposure to changes in interest rates and foreign currency. In order to manage special risks, the Company applies hedge accounting for those transactions that meet the specific criteria applicable. The Company uses derivative financial instruments (swaps of interest rates) to manage its exposure to interest rate risk. These instruments are initially recorded at fair value at the date of contract and subsequently remeasured at their fair value. Derivative instruments are accounted for as financial assets when the fair value is positive and as financial liabilities when the fair value is negative. PAGE UNACEM ANNUAL REPORT Any gain or loss is recorded in the statement of income, except for the ineffective portion of the cash flow hedge which is recognized as a comprehensive income item. At the inception date of the hedge relation, the Company formally documents the relationship between the item hedged and the hedging instrument, including the nature of the risk, the objective and the strategy to be taken to carry out the hedging, and the method to be used to estimate the effectiveness of the hedge relation. A formal assessment is made upon beginning the hedge relation, to assure that the hedging instrument is highly effective in offsetting the risk designated in the item hedged.

84 Notes to the separate financial statements As of December 31, 2012 and 2011 Hedges are formally assessed every quarter. A hedge is considered as highly effective if it is expected that the changes in cash flow attributed to the risk hedged during the period for which the hedge is designated are offset within a range from 80 to 125 percent. For those cash flow hedges that qualify as such, any gain or loss from the effective portion of the hedging instrument is initially recognized in the statement of changes in equity as unrealized results. Any gain or loss from the ineffective portion of the hedging instrument is initially recognized in the statement of income as financial costs. (d) Foreign currency translation The Company s financial statements are presented in Nuevos Soles, which is also the functional and presentation currency, because it reflects the nature of economic events and circumstances relevant to the Company. Transactions and balances in foreign currency Are considered foreign currency transactions those made in a currency other than the functional currency. Transactions in foreign currencies are initially recorded at the functional currency rates prevailing at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are converted to the functional currency using the Exchange rate ruling at the consolidated statement of financial position date. The differences between the closing rate at the date of each consolidated financial statement presented and the exchange rate initially used to record the transactions are recognized in the consolidated statement of income in the period in which they occur in the Exchange difference, net caption. Nonmonetary assets and liabilities acquired in foreign currencies are translated at the exchange rate at the dates of the initial transactions.

85 (e) Inventories Inventories are valued at the lower of cost and net realizable value. Costs incurred in bringing each product to its present location and conditions are accounted for as follows: Raw materials and supplies Purchase cost. The cost is determined using the weighted average method. Finished goods and work in progress At cost of direct materials and supplies, services provided by third parties, raw material, direct labor cost, other direct cost, general manufacturing expenses and an overhead based on fixed and variable cost based on normal operating capacity, but excluding borrowing costs and exchange currency differences. Inventory in transit Purchase cost. PAGE UNACEM ANNUAL REPORT Net realizable value is the estimated selling price in the ordinary course of business, less estimated cost of completion and the estimated costs necessary to make the sale. Management periodically evaluates the impairment and obsolescence of these assets. The estimation is recognized with charge to the results of the year when determined.

86 Notes to the separate financial statements As of December 31, 2012 and 2011 (f) Investments in subsidiaries These investments in subsidiaries are recorded at acquisition cost less any impairment loss. The Company evaluates the impairment of the investments for events or changes in the circumstances, which may indicate that the book value is not recoverable. In case of an impairment indicator, the Company makes an estimation of the recoverable amount. If the carrying value is higher than the recoverable amount, the investment is considered impaired and is reduced to its recoverable amount. If in a subsequent period the amount of the impairment loss is reduced, such loss is reversed. Any subsequent reversal is recognized in the statement of income to the extent the book value of the asset is not higher than the amortized cost at the date of reversal. Dividends from investments in subsidiaries are recognized in the statement of income when declared. (g) Borrowing costs Borrowing costs directly attributable to the acquisition, construction or production of an asset that necessarily takes a substantial period of time to get ready for its intended use or sale are capitalized as part of the cost of the respective assets. All other borrowing costs are expensed in the period they occur. Borrowing costs consist of interest and other costs that an entity incurs in connection with the borrowing of funds. Where funds are borrowed specifically to finance a project, the amount capitalized represents the actual borrowing costs incurred. Where surplus funds are available for a short term out of money borrowed specifically to finance a project, the income generated from the temporary investment of such amounts is also capitalized and deducted from the total capitalized borrowing cost. Where the funds used to finance a project form part of general borrowings, the amount capitalized is calculated using a weighted average of rates applicable to relevant general borrowings of the Company during the period. All other borrowing costs are recognized in the statement of income in the period in which they are incurred.

87 (h) Leases The determination of whether an agreement is, or contains, a lease is based on the substance of the arrangement at the inception date, whether fulfillment of the arrangement is dependent on the use of a specific asset or the arrangement conveys a right to use the asset, even it that right is not explicitly specified in an arrangement. Finance leases which transfer to the Company substantially all the risks and benefits incidental to ownership of the leased asset, are capitalized at the commencement of the lease at the fair value of the leased property or, if lower, at the present value of the minimum lease payments. Lease payments are apportioned between financial charges and reduction of the lease liability so as to achieve a constant rate of interest on the remaining balance of the liability. Finance charges are recognized in finance costs in the statement of income. A leased asset is depreciated over the useful life of the asset. However, if there is no reasonable certainty that the Company will obtain ownership by the end of the lease term, the asset is depreciated over the shorter of the estimated useful life of the asset and the lease term. Operating lease payments are recognized as an operating expense in the statement of income on a straightline basis over the lease term. PAGE UNACEM ANNUAL REPORT (i) Property, plant and equipment Property, plant and equipment are stated at cost, net of accumulated depreciation and/or accumulated impairment losses, if any. Such cost includes the cost of replacing component parts of the property, plant and equipment and borrowing costs for longterm construction projects if the recognition criteria are met. The capitalized value of a finance lease is also included within property, plant and equipment. When significant parts of property, plant and equipment are required to be replaced at intervals, the Company derecognizes the replaced part, and recognizes the new part with its own associated useful life and depreciation. Likewise, when major inspection is performed, its cost is recognized in the carrying amount of the plant and equipment as a

88 Notes to the separate financial statements As of December 31, 2012 and 2011 replacement if the recognition criteria are satisfied. All other maintenance and repair costs are recognized in the statement of income in the period on which they are incurred. Depreciation is calculated using a straightlinebasis method over the estimated useful lives of such assets as follows: Years Buildings and other constructions Installations and other Machinery and equipment Transportation units Furniture and fixtures Other equipments 10 to 50 3 to 10 7 to 25 5 to 10 6 to 10 4 and 10 An item of property, plant and equipment and any significant part initially recognized is derecognized upon disposal or when no future economic benefits are expected from its use or disposal. Any gain or loss arising on derecognition of the asset (calculated as the difference between the net disposal proceeds and the carrying amount of the asset) is included in the statement of income when the asset is derecognized. The asset s residual value, useful lives and methods of depreciation/amortization are reviewed at each reporting period, and adjusted prospectively if appropriate. (j) Mining concessions Mining concessions correspond to the exploration rights in areas of interest acquired in previous years. Mining concessions are stated at cost, net of accumulated amortization and/or accumulated impairment losses, if any, and are presented within the property, plant and equipment caption. Those mining concessions are amortized starting from the production phase following the unitsofproduction method based on proved reserves to which they relate. In the event the Company abandons the concession, the costs associated are writtenoff in the statement of income.

89 (k) Goodwill Goodwill is initially measured at cost, being the excess of the aggregate of the consideration transferred and the amount recognized for noncontrolling interest over the net identifiable assets acquired and liabilities assumed. Goodwill is presented within the intangibles caption in the statement of financial position. After initial recognition, goodwill is measured at cost less any accumulated impairment losses. For the purpose of impairment testing, goodwill acquired in a business combination is, from the acquisition date, allocated to each of the Company s cashgenerating units that are expected to benefit from the combination, irrespective of whether other assets or liabilities of the acquire are assigned to those units. (l) Deferred stripping costs Stripping costs incurred in the development of a mine before production commences are capitalized as part of the cost of constructing the mine and subsequently amortized over the life of the mine on a unitsofproduction basis. This is the case of the exploited areas of Atocongo Norte and Pucará. The amount of stripping costs deferred is based on the strip ratio obtained by dividing the tonnage of waste mined by the quantity of ore to be mined during the life of the mine. Stripping costs incurred in the period are deferred or amortized when the actual strip ratio compared to the estimated one is higher or less, respectively. As of December 31, 2012 and 2011, the deferred stripping cost amounted to approximately S/. 150,459,000 and S/. 128,251,000, respectively, see note 21(b). As of the date of this report, the Company is assessing the effects of applying IFRIC 20, effective starting January 1, 2013, see note 5. PAGE UNACEM ANNUAL REPORT (m) Impairment of nonfinancial assets The Company assesses at each reporting date whether there is an indication that an asset may be impaired. If any indication exists, or when annual impairment testing for an asset is required, the Company estimates the asset s recoverable amount. An asset s recoverable amount is the higher of an asset s or cashgenerating units (CGU) fair value less costs to sell and its value in use and is determined for an individual asset, unless the asset does not generate cash inflows that are largely independent of those from other assets or groups

90 Notes to the separate financial statements As of December 31, 2012 and 2011 of assets. Where the carrying amount of an asset of CGU exceeds its recoverable amount, the asset is considered impaired and is written down to its recoverable amount. In assessing value in use, the estimated future cash flows are discounted to their present value using a pretax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. In determining fair value less costs to sell, recent market transactions are taken into account, if available. If no such transactions can be identified, an appropriate valuation model is used. Impairment losses of continuing operations, including impairment on inventories, are recognized in the statement of income in those expense categories consistent with the function of the impaired asset. An assessment is made at each reporting date as to whether there is any indication that previously recognized impairment losses may no longer exist or may have decreased. If such indication exists, the Company estimates the asset s or cashgenerating unit s recoverable amount. A previously recognized impairment loss is reversed only if there has been a change in the assumptions used to determine the asset s recoverable amount since the last impairment loss was recognized. The reversal is limited so that the carrying amount of the asset does not exceed its recoverable amount, nor exceed the carrying amount that would have been determined, net of depreciation, had no impairment loss been recognized for the asset in prior years. Such reversal is recognized in the statement of income. The following criteria are also applied in assessing impairment of goodwill: Goodwill is tested for impairment annually (as of December 31) and when circumstances indicate that the carrying value may be impaired. Impairment is determined by assessing the recoverable amount of each cash generating unit which the goodwill relates. When this amount is less than its carrying amount, an impairment loss is recognized. Impairment losses relating to goodwill cannot be reversed in future periods.

91 (n) Provisions General Provisions are recognized when the Company has a present obligation (legal or constructive) as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. Where the Company expects some or all of a provision to be reimbursed, for example under an insurance contract, the reimbursement is recognized as a separate asset but only when the reimbursement is virtually certain. The expense relating to any provision is presented in profit or loss net of any reimbursement. If the effect of the time value of money is material, provisions are discounted using a current pretax rate that reflects where appropriate, the risks specific to the liability. Where discounting is used, the increase in the provision due to the passage of time is recognized as finance cost. Mine closure provision The Company records the present value of estimated costs of legal and constructive obligations required to restore operating locations in the period in which the obligation is incurred. Mine closure costs are provided at the present value of expected costs to settle the obligation using estimated cash flows and are recognized as part of the cost of that particular asset. The cash flows are discounted at a current pretax rate that reflects the risk specific to the rehabilitation provision. The unwinding of the discount is expensed as incurred and recognized in the statement of income as a finance cost. The estimated future costs of rehabilitation are reviewed annually and adjusted as appropriate. Changes in the estimated future costs or in the discount rate applied are added to or deducted from the cost of the asset. PAGE UNACEM ANNUAL REPORT (o) Contingencies Contingent liabilities are disclosed when the existence of the liability will only confirmed by future events or when the amount of the liability can not be measured reasonably. Contingent assets are not recognized in the financial statements, but they are disclosed when it is probable that economic benefits flow to the Company.

92 Notes to the separate financial statements As of December 31, 2012 and 2011 (p) Employees benefits The Company has shortterm obligations for employees benefits that include salaries, social contributions, gratifications, bonuses for performance, and workers sharing profit. These liabilities are recorded monthly with charge to results, as they are accrued. According to IAS 19 Employees benefit, the Company recognizes this longterm liability to its present value as of the date of separate financial statements, using the projected credit unit method. In order to calculate the present value of such longterm liabilities, the Company uses a discount rate of the actual market as of the date of the financial statements. This liability is revised annually as of the date of the separate financial statements and the updates due to the accrual and changes in the discount rate are recognized in the separate statement of income, until its liquidation. (q) Revenue recognition Revenues of ordinary activities are recognized to the extent it is probable that the economic benefits will flow to the Company and the revenue can be reliably measured, regardless of when the payment is being made. Revenue is measured at the fair value of the consideration received or receivable, taking into account contractually defined terms of payment and excluding taxes or duty. The following specific recognition criteria must be also met before revenue is recognized: Sales of goods Revenue from sales of goods is recognized when the significant risks and rewards of ownership have been transferred to the buyer, on delivery of the goods.

93 Interest income The revenue is recognized when the interest accrues using the effective interest rate. Interest income is included in finance income in the statement of income. Dividends income Dividends income is recognized when the payment right has been established. (r) Taxes Current income tax Current income tax assets and liabilities are measured at the amount expected to be recovered from or paid to the taxation authorities. The tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted, at the reporting date in Peru, where the Company operates and generates taxable income. Current income tax relating to items recognized directly in equity is recognized in equity and not in the statement of income. Management periodically evaluates positions taken in the tax returns with respect to situations in which applicable tax regulations are subject to interpretation and establishes provisions where appropriate. PAGE UNACEM ANNUAL REPORT Deferred income tax Deferred tax is provided using the liability method on temporary differences at the reporting date between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes. Deferred tax liabilities are recognized for all taxable temporary differences, except: Where the deferred income tax arises from the initial recognition of goodwill, or from an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss.

94 Notes to the separate financial statements As of December 31, 2012 and 2011 Where the timing of the reversal of the temporary differences can be controlled and it is probable that the temporary differences will not reverse in the foreseeable future. Deferred tax assets are recognized for all deductible temporary differences, carry forward of unused tax credits and unused tax losses, to the extent that it is probable that taxable profit will be available against which the deductible temporary differences, and the carry forward of unused tax credits and unused tax losses can be utilized, except: In respect of deductible temporary differences associated with investments in subsidiaries and associates, where deferred assets are recognized only to the extent that it is probable that the temporary differences will reverse in the foreseeable future and taxable profit will be available against which the temporary differences can be utilized. When the deferred tax asset relating to deductible temporary difference arises from the initial recognition of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss. The carrying amount of deferred tax assets is reviewed at each reporting date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred tax asset to be utilized. Unrecognized deferred tax assets are reassessed at each reporting date and are recognized to the extent that it has become probable that future taxable profits will allow the deferred tax asset to be recovered.

95 Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the year when the asset is realized or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted at the reporting date. Deferred tax assets and deferred tax liabilities are offset if a legally enforceable right exists to set off current tax assets against current income tax liabilities and the deferred taxes relate to the same taxable entity and the same taxation authority. Value added tax Revenues, expenses and assets are recognized net of the amount of sales tax, except: Where the sales tax incurred on a purchase of assets or services is not recoverable from the taxation authority, in which case the sales tax is recognized as part of the cost of acquisition of the asset or as part of the expense item as applicable. PAGE UNACEM ANNUAL REPORT Receivables and payables are stated with the amount of sales tax included. The net amount of sales tax recoverable from, or payable to, the taxation authority is included as part of receivables or payables in the statement of financial position. (s) Earnings per share Basic and diluted earnings per share have been calculated based on weighted average of common and investment shares at the date of the statement of financial position. As of December 31, 2012 and 2011, the Company has no dilutive financial instruments; therefore the basic and diluted earnings per share are the same.

96 Notes to the separate financial statements As of December 31, 2012 and 2011 (t) Reclassifications Besides the indicated in note 3.2(a) when necessary, the comparative amounts have been reclassified to make them comparable to the current year s presentation. Some transactions were reclassified in the presentation of the current year and, in Management s opinion, they are not significant to the separate financial statements as of December 31, 2012 and Significant accounting judgments, estimates and assumptions Many of the amounts included in the financial statements involve the use of judgment and/or estimation. These judgments and estimates are based on management s best knowledge of the relevant facts and circumstances, having regard to prior experience, but actual results may differ from the amounts included in the financial statements. Information about such judgments and estimates are contained in the accounting policies and/or the notes to the financial statements. The key areas are summarized below: Valuation of derivatives financial instruments note 3.2 (c) Deferred stripping assets note 3.2(l) Review of asset carrying values and impairment charges note 3.2(l) Contingency provision note 3.2(n) Income tax note 3.2(r)

97 5. International Reporting Financial Information standards issued but not yet effective Standards issued but not yet effective up to the date of issuance of the Corporation s consolidated financial statements are listed below. This listing of standards and interpretations issued are those that the Corporation reasonably expects to be applied at a future date. The Corporation intends to adopt these standards when they become effective. IFRS 9 Financial Instruments: Classification and Measurement As part of the IASB s Project to replace IAS 39 Financial instruments: classification and measurement in November 2009, IAS issued the first phase of IFRS 9 Financial instruments, which is related to the classification and measurement of financial assets. In October 2010, IASB updated IFRS 9 through the incorporation of requirements to record financial liabilities. This standard is effective for annual periods beginning on or after January 1, The Company will quantify the effect in conjunction with the other phases, when the final standard including all phases is issued. IAS 12 Income tax According to such amendment, the measurement of deferred taxed depends on the fact if an entity expects to recover an asset through its use or sale. This amendment introduces an assumption that the recoverability of the book value will be normally through the sale and is effective for the annual periods beginning on or after January 1, The Company does not expect that this amendments will have an impact on the separate financial statements. PAGE UNACEM ANNUAL REPORT IFRS 10 Consolidated financial statements It establishes the principles for the preparation and presentation of consolidated financial statements when the entity controls one or more entities. IFRS 10 replaces the requirements of consolidation established in SIC 12 Consolidation Special Purpose Entities and IAS 27 Consolidated and Separate Financial Statements and will be effective for the annual period beginning on or after January 1, The Company is assessing the impact, if any, for the adoption of such standard.

98 Notes to the separate financial statements As of December 31, 2012 and 2011 IFRS 12 Disclosures of interests in other entities IFRS 12 is a new standard related to the disclosure requirements for all types of interest in other entities, including subsidiaries, joint ventures, associates and structure entities not consolidated. IFRS 12 is effective for annual period beginning on or after January 1, The Company is assessing the impact, if any, for the adoption of such standard. IFRS 13 Fair value measurement IFRS 13 establishes new requirements on how to measure fair value and the disclosures related to IFRS and the generally accepted accounting standards in United States of America (U.S. GAAP). Guide included in IFRS 13 Fair value measurement, as an update of Accounting Standards Codification (ASC) 820 Fair value measurement of Financial Accounting Standards Board (known formerly as SFAS 157), completes an important project of a joint work to improve IFRS and U.S. GAAP and get their convergence. IFRS 13 is effective for annual period beginning on or after January 1, The Company is assessing the impact, if any, for the adoption of such standard. IFRIC 20 Stripping costs in the Production Phase of a Surface Mine In the operations of surface mining, entities may extract rubbish materials from mine ( overload ) to get into the mineral s deposit. This activity of extraction of rubbish is called desmonte. There may be two benefits being accumulated in the entity proceeding from the desmonte activity during the phase of production: the useful mineral can be used to produce inventories and the improvement of accesses to additional amounts of material to be exploded in the future. IFRIC 20 considers how and when to record separately these two benefits generated by the activities of extraction of desmonte, as well as to measure such benefits at the beginning of the extraction as its subsequent measurement. This interpretation is effective for annual period beginning on or after January 1, The Company is calculating the impact to adopt such standard since 2013.

99 Annual improvements to IFRS (issued in May 2012) IAS 1 Presentation of Financial Statements, clarifies the difference between voluntary annual comparative information and the minimum requirement of comparative information. Generally the minimum requirements relating to prior periods. IAS 16 Property, Plant and Equipment, clarifies that significant parts of services and facilities that meet the definition of property, plant and equipment are no inventories. IAS 32 Financial Instruments: Presentation, clarifies that tax effect of a distribution to holders of equity instruments should be accounted for in accordance with IAS 12. These amendments become effective for annual periods on or after January 1, Except for IFRIC 20, the adoption of these standards and interpretations are not expected to have a material impact in the financial statements and disclosures of the Company. Management is evaluating the impact that IFRIC 20 will have in the financial statements and disclosures of the Company and the implementation of this standard is expected to result in a change in the accounting of costs of desmonte as described in note 3.2(l). PAGE UNACEM ANNUAL REPORT

100 Notes to the separate financial statements As of December 31, 2012 and Foreign currency transactions Foreign currency transactions are made at free market exchange rates. As of December 31, 2012, the weighted average market exchange rate for transactions in U.S. Dollars published by the Superintendence of Banks, Insurance and Private Funds Managers (Superintendence de Bank, Insurance and AFP or SBS for its acronym in Spanish) was S/ per US$ 1 for buying and S/ per US$ 1 for selling (S/ per US$ 1 for buying and S/ per US$ 1 for selling as of December 31, 2011). As of December 31, 2012 and 2011, the Group had the following assets and liabilities in U.S. Dollars: Equivalent in Equivalent in US$ (000) S/. (000) US$ (000) S/. (000) Assets Cash and cash equivalents Trade and other accounts receivable, net 6,723 18,291 17,137 46,630 2,321 8,716 6,255 23,490 25,014 63,767 11,037 29,745 Liabilities Bank overdrafts and loans Trade and other accounts payable Financial obligations Derivative financial instruments 199,259 66, ,748 2, , , ,493 7, ,773 40, ,668 3, , , ,417 9, ,987 1,540, ,480 1,244,611 Net liability position (578,973) (1,477,008) (450,443) (1,214,866)

101 7. Cash and cash equivalents (a) This item is made up as follows: Petty cash Demand deposits (b) Time deposits (c) ,287 23,247 74, ,268 57,340 4,865 63,473 (b) Demand deposits are maintained in local and foreign currency, kept in domestic and foreign banks, in local currency and in U.S. Dollars. These deposits are freely available and earn interest at market rates. PAGE UNACEM ANNUAL REPORT (c) As of December 31, 2012, corresponds to time deposits in domestic banks, denominated in local and foreign currency, earn interest at market rates and have original maturities shorter than 3 months.

102 Notes to the separate financial statements As of December 31, 2012 and Trade and other accounts receivable, net (a) This item is made up as follows: Current Non current Trade accounts receivable, (b) Accounts receivable from related parties, note 28(c) Advances to suppliers (c) Claims to tax authority (d) Derivative financial instruments, note 3.2(c) Claims to third parties Loans to employees Prepaid income tax Other accounts receivable 73,388 42,982 14,480 17,597 3,399 1,614 1, ,443 67,661 26,464 13,847 14, ,178 3,882 10, ,020 11, , ,656 7,474 11,700 Less Estimation for doubtful accounts (e) (103) (50) 160, ,606 7,474 11,700

103 (b) Trade account receivables are mainly denominated in Nuevos Soles, have current maturities (between 7 and 30 days), do not earn interest, have no specific guarantees and do not present significant overdue balances. (c) Mainly corresponds to advances granted to San Martín Contratistas Generales S.A., on January 7, 2011, for stripping and exploitation services in the Cristiana mining concession, which is to be collected in five years. (d) As of December 31, 2012 and 2011, this balance corresponds to claims to tax authorities (Superintendence National Tributaria) for the refund of the overpayment of income tax in prior years, Note 30. (e) In management s opinion, the estimation for doubtful accounts adequately covers the credit risk for the years ended December 31, 2012 and 2011, respectively. PAGE UNACEM ANNUAL REPORT

104 Notes to the separate financial statements As of December 31, 2012 and Inventories (a) This item is made up as follows: Finished goods Work in progress (b) Raw materials Packages and packing Sundry supplies Inventory in transit (c) 5,705 88, ,987 23,087 96, ,972 5, ,420 73,150 38,660 90,350 30, , ,114 (b) Work in progress includes clinker production and limestone extracted from the Company s mines, which according to the Company estimates will be used in the shortterm production. (c) As of December 31, 2012, mainly corresponds to the importation of clinker and choal in transit for approximately S/. 84,085,000 (approximately S/. 21,280,000 as of December 31, 2011). (d) In Management s opinion, according to the assessment made by the operative areas, it is not necessary to create a provision for impairment of inventories as of December 31, 2012 and 2011.

105 10. Investments in subsidiaries and other (a) This item is made up as follows: Direct participation Carrying value Skanon Investments Inc. Compañía Eléctrica El Platanal S.A. Inversiones en Concreto y Afines S.A. Transportes Lurín S.A. Prefabricados Andinos Perú S.A.C. Ferrocarril Central Andino S.A. Minera Adelaida S.A. Generación Eléctrica de Atocongo S.A. Depósito Aduanero Conchán S.A. Other 2012 % % , ,829 67,036 63,688 17,527 5,617 1, ,587, , ,829 59,714 43,895 17,527 5,617 1, ,531,134 PAGE UNACEM ANNUAL REPORT Impairment (b) (28,725) (27,808) 1,558,675 1,503,326 A brief summary of the activities of the subsidiaries of the Company is presented below: Skanon Investments Inc. SKANON It is a nonresident company incorporated in February 2007 under the laws of the State of Arizona in the United States. Skannon involved in percent of Drake Cement LLC, a company domiciled in the U.S., whose core business is building a cement plant in Yavapai County, in northern Arizona.

106 Notes to the separate financial statements As of December 31, 2012 and 2011 During 2012, the Company made a capital contribution of US$ 11,000,000 (equivalent to S/. 28,901,000), receiving 11,666,577 shares of the capital stock of the subsidiary. Compañía Eléctrica El Platanal S.A. CELEPSA It is a company incorporated in Lima in December It is dedicated to the generation and sale of electricity, using water resources, geothermal and thermal as well as to the operation of its property and facilities in general. Inversiones en Concreto y Afines S.A. INVECO It is a company incorporated in Lima in April It is dedicated to investing in companies principally engaged in supplying concrete readymix, building materials and related activities, through its subsidiary Unión de Concreteras S.A., on which holds a participation of 99.9 percent, which is also the owner in percent of Firth Industries Perú S.A., dedicated to the same activity. Transportes Lurín S.A. LURIN It is a company incorporated in Lima in July As of December 31, 2012, Transportes Lurín S.A. has a participation of 100 percent in Staten Island Terminal LLC (80 percent as of December 31, 2011) a company incorporated in United States of America whose activity is the construction and operation of a port to discharge, storage and shipping of cement and aggregates and participation of 3.03 percent, as of December 31, 2012 and 2011, in Skanon Investments Inc.

107 During the year 2012, the Company paid capital contributions to LURIN for approximately S/. 19,794,000 (S/. 4,072,000 during 2011). During 2012, Transportes Lurín S.A. acquired 20 percent of additional participation in Staten Island Terminal LLC. As of December 31, 2012 and 2011, the Company recorded an allowance for impairment on its investment on this subsidiary, amounting approximately to S/. 28,725,000 and S/. 27,808,000, respectively, as result of the impairment of the investment that LURIN recorded on its investment in Staten Island Terminal LLC. Nowadays, the Group has decided to stop the operations in the port and expects to restart them in medium term. Prefabricados Andinos Perú S.A.C. PREANSA It is a company founded in Lima in October PREANSA manufactures prestressed concrete structures and precast concrete, as well as sells these products, both in Peru and abroad. PAGE UNACEM ANNUAL REPORT (b) The movement of the provision for impairment of investments for the years ended December 31, 2012 and 2011 is as follows: Beginning balance Additions, note 25 27, ,356 4,452 Ending balance 28,725 27,808

108 Notes to the separate financial statements As of December 31, 2012 and Property, plant and equipment (a) The table below presents the components of this caption: Mining concessions (b) Land Mine closure Buildings and constructions Other installations Cost As of January 1, , ,977 9, ,256 49,391 Additions Transfers 43, Retirements, adjustments and sales (7,740) (3,036) (220,467) Balance as of December 31, , ,481 6, ,664 50,206 Accumulated depreciation As of January 1, ,497 1, ,927 38,968 Depreciation of the year (f) ,242 1,079 Transfers Retirements and sales (220,439) Balance as of December 31, ,207 2,226 67,730 40,047 Net book value As of December 31, , ,481 4, ,934 10,159 As of December 31, , ,977 7, ,329 10,423

109 Machinery and equipment 1,945,345 20,683 99,499 (567,063) 1,498,464 Transportation units 23,883 2,256 3,148 (5,313) 23,974 Furniture and fixtures 16, (12) 17,068 Other equipment 40,958 1,522 3,104 (1,977) 43,607 Units in transit 87,741 12,914 (31,227) 69,428 Work in progress (e) 1,081, ,860 (118,520) 1,296,761 Total 4,442, ,226 (805,608) 4,010,025 PAGE UNACEM ANNUAL REPORT 716,417 72,582 (8) (564,018) 16,543 2,276 (4,424) 12, ,806 2,167 8 (1,910) 1,096,040 99,003 (790,757) 224,973 14,395 13,637 31, ,286 1,273,491 9,579 3,431 12,536 69,428 1,296,761 3,605,739 1,228,928 7,340 3,966 10,152 87,741 1,081,421 3,346,367

110 Notes to the separate financial statements As of December 31, 2012 and 2011 (b) As of December 31, 2012 and 2011, corresponds mainly to the concessions of the quarries of Atocongo, Atocongo Norte, Pucará and Oyón. (c) As of December 31, 2012, the carrying value of assets acquired through finance leases amounted to approximately S/. 592,320,000 (S/. 487,702,000 as of December 31, 2011). Additions in 2012 include S/. 104,620,000 (S/. 175,189,000 in 2011). The leased assets guaranteed financial lease liabilities. (d) The amount of borrowing costs capitalized during the year ended December 31, 2012 was S/. 38,752,000 (S/. 29,479,000 as of December 31, 2011). Interest rates used to determine the amount of borrowing costs eligible for capitalization were between Libor and plus an spread between 2.35 and 5.52 percent as of December 31, 2012 and (e) As of December 31, 2012 and 2011, corresponds mainly to the Project of enlargement of the production capacity of kiln I, which the Company estimates to conclude in the second semester of 2013 and the construction of kiln 4, which will start operations in the first semester of (f) The depreciation for the 2012 and 2011 years was distributed as follows: Cost of sales, note 21 Administrative expenses, note 22 Inventories 85,972 9,441 3,590 75,372 21, ,003 97,054

111 (g) As of December 31, 2012 and 2011, the Company s management conducted an assessment of its property, plant and equipment and found no indicators of impairment on these assets. Therefore, the carrying value of property, plant and equipment is recoverable with future profits to be generated by the Company. (h) As of December 31, 2012 and 2011, the Company has granted two mortgages on its mining concession Atocongo and one mortgage on its mining concession Cristina for up to S/. 149,400,000 and US$ 94,000,000, respectively, to guarantee loans obtained with BBVA Banco Continental. In addition, it has granted a mortgage over its Atocongo mining concession for up to US$ 75,000,000, to secure the loan obtained from the Bank of Nova Scotia and a mortgage on land in Pachacamac and Lurin districts for up to US$ 50,000,000 to secure the loan obtained from the Bank of Nova Scotia, see note 15. PAGE UNACEM ANNUAL REPORT

112 Notes to the separate financial statements As of December 31, 2012 and Intangible assets, net (a) The table below presents the components of this caption: Concession for electricity generation (b) Goodwill (c) Software Cost As of 1 January 2012 Additions 61,330 9,745 14,081 4,691 As of 31 December ,330 9,745 18,772 Amortization As of 1 January ,653 10,266 Amortization 1, Adjustment As of 31 December ,137 11,007 Net book value As of 31 December ,193 9,745 7,765 As of 31 December ,677 9,745 3,815

113 Environmental protection program 16,217 2,052 18,269 16,034 Exploration expenses 10, ,434 10,108 Others 17,361 5,534 22,895 16,872 Total 128,842 12, ,445 55,933 PAGE UNACEM ANNUAL REPORT 2, ,174 8,755 (235) (235) 18,065 10,433 20,811 64, ,084 76, ,909

114 Notes to the separate financial statements As of December 31, 2012 and 2011 (b) This amount corresponds to the expenditures to develop the comprehensive project El Platanal consisting of the construction of two hydroelectric reservoirs and a system for the irrigation of uncultivated land, and to obtain the final concession to develop the activity of electricity generation, which was obtained by the Company, through Supreme Resolution EM, dated July 25, On September 12, 2006, it was approved by Supreme Resolution EM, the transfer of the concession and the assignment of use of the El Platanal project to Compañía Eléctrica El Platanal S.A. (CELEPSA) for a period of 25 years from March 30, 2011, whereby the Company receives royalties in exchange equivalent to 3.55 percent of net monthly income obtained by CELEPSA, on sales of energy and power to third parties. As of December 31, 2012 and 2011, the Company amortizes the cost during the term of the contract (25 years). (c) Effective 2003, the Company acquired 100 percent of the shares representing the capital stock of Lar Carbón S.A. The acquisition was accounted for using the purchase method, by means of which the Company recorded adjustments to its financial separate statements to reflect the assets and liabilities acquired at their fair values at the acquisition date. As a result of this acquisition, the Company recognized a goodwill of S/. 9,745,000. (d) As of 31 December 2012 and 2011, the Company s management conducted an assessment on of its intangibles, finding no indicators of impairment in those assets. Accordingly, the carrying value of intangibles is recoverable with future profits to be generated by the Company.

115 13. Bank overdrafts and loans (a) The table below presents the components of this caption: Bank overdrafts Bank loans (b) , ,476 (b) As of 31 December 2012 and 2011, the balance is made up as follows 2, , ,016 PAGE UNACEM ANNUAL REPORT Creditor Banco Internacional del Perú S.A.A. INTERBANK Banco de Crédito del Perú BCP Citibank del Perú S.A. Banco Santander Perú S.A. Scotiabank Perú S.A.A. BBVA Banco Continental , , ,764 63,776 38,265 31, ,856 78,014 51,243 86,304 35, , ,417

116 Notes to the separate financial statements As of December 31, 2012 and 2011 (c) Bank loans correspond mainly to loans for working capital at fixed annual rates that range from 1 to 7 percent, have maturity lower than 12 months, do not have specific guarantees and are renewed depending on the needs of working capital for the Company. (d) As of December 31, 2012 and 2011, the interests payable amounts aproximately to S/. 2,965,000 and S/. 1,681,000, respectively and are recorded in the caption Trade and other accounts payable of the separate statement of financial position. As of December 31, 2012 and 2011, the interest expenses amounted approximately to S/. 13,886,000 and S/. 8,049,000, respectively and are included in the caption Financial costs of the separate statement of income.

117 14. Trade and other payables (a) This caption is made up as follows: Current Noncurrent Trade payables (b) Accounts payable to related entities, note 28(c) Interest payable notes 13(e) and 15(g) Remunerations and vacations payable Value added tax payable Director s remunerations payable Dividends payable Other accounts payable ,776 33,053 13,327 7,846 5,071 2,934 7, ,195 59,539 13,486 7,228 14,963 4, , , PAGE UNACEM ANNUAL REPORT 234, ,230 12,755 (b) Trade accounts payable are generated, mainly, by services of extraction of minerals and acquisition of supplies and additives for the Company s production, are nominated in local and foreign currencies, have current currency, do not yield interests and do not have guarantees.

118 15. Longterm debt (a) This caption is made up as follows: Corporate bonds First to eighth issuance programs (b) Annual Rate % Between 5.91 and 6.81 Maturity Between May 2013 to March 2015 First and third issuance program (c) Between 3.75 and 6.25 Between January 2013 to January 2018 Bank loans Bank of Nova Scotia (d) BBVA Banco Continental (e) BBVA Banco Continental (e) Bank of Nova Scotia (d) BBVA Banco Continental (e) Banco de Crédito del Perú (f) Banco de Crédito del Perú (f) Libor to 3 months Libor to 3 months Libor to 3 months August 2018 September 2016 January 2015 September 2015 June 2017 October 2016 July 2016 Amortized cost Financial lease Banco de Crédito del Perú (f) Banco Internacional del Perú S.A.A. () Fund in Guarantee BCP Panamá (f) Libor January 2023 May 2017 Total bank loans Less current portion Noncurrent portion

119 Guarantee None 385, ,000 None 89,285 94,395 Guarantee on property, see note 11(h) Guarantee on property, see note 11(h) Guarantee on property, see note 11(h) Guarantee on property, see note 11(h) Guarantee on property, see note 11(h) None None 474, ,235 95,663 93,375 84,183 77,097 22,959 20, ,475 (4,182) 534, , , ,365 84,750 24,273 26, ,963 (3,685) PAGE UNACEM ANNUAL REPORT 512, ,278 Assets under leasing Assets under leasing 476,120 80,355 (132,549) 415,169 67,024 (139,499) 423, ,694 1,410,504 1,369, , ,054 1,069,495 1,228,313

120 Notes to the separate financial statements As of December 31, 2012 and 2011 (b) On May 9, 2006, the General Shareholders meeting approved the proposal for the issuance of the First Program Debt Instruments of US$ 150,000,000 or its equivalent in Nuevos Soles. On August 24, 2006, the Company signed with BBVA Banco Continental, as Representative of the Bondholders, the framework contract bond, and in October signed the prospectus framework for the First Issuance Program Corporate Bonds and ShortTerm Instruments of Unión Andina de Cementos S.A.A. (formerly Cementos Lima S.A.A.). The first and second emission for S/. 50,000,000 each one were awarded in the first quarter of 2007, the third emission by S/. 60,000,000 was awarded in the second quarter of 2007, the fourth emission by S/. 60,000,000 was awarded in the second quarter of 2008, the fifth, sixth and seventh emissions by S/. 55,000,000 each were awarded in the second quarter of 2009 and the eighth emission by S/. 55,000,000 was awarded in the fourth quarter of All awards were under the form of Dutch auction. Financial covenants are monitored quarterly, and must be calculated on the basis of separate financial information and the calculation methods required by the financial entity. Below are the results obtained by the Company as of December 31, 2012 in relation to these safeguards: Limits established Periodicity Results obtained in 2012 Nontaxed assets on total amount of financial debt ratio Higher than 1.20 Quarterly 3.24 Debt ratio Less than 1.50 Quarterly 0.75 Receivable accounts from related on total assets ratio Higher than 0.08 Quarterly 0.007

121 The compliance of the financial covenants is overseen by the Management and the Representative of the Bondholders. (c) On March 26 and June 19, 2009, the Board of Directors and General Shareholders Meeting, respectively, approved the First Program of Corporate Bonds of Cemento Andino S.A. (transferred later than the date of merger to the Company) until an amount of issuance of US$ 40,000,000 or its equivalente in nuevos soles. On June 17, 2009, the Company signed, as Debtors Representative, the agreement and prospect framework with Banco de Crédito del Perú for the First Program of Corporative Bonds. The first and third issuance for US$ 7,000,000 and US$ 28,000,000, respectively were sold under the Dutch auction mode on January 21, The Company must maintain some financial ratios until the last date of maturity and/or redention date in all issuances, which comprise interests coverage ratio (greater than 4.00), debt service coverage ratio (greater than 1.25), liquidity ratio (greater than 1.00) and leverage ratio (lower than 1.50) PAGE UNACEM ANNUAL REPORT (d) The Company must comply with some financial covenants on a quarterly basis as part of the contractual obliation with Bank of Nova Scotia. Below are the results obtained by the Company as of December 31, 2012: Limits established Periodicity Results obtained in 2012 Debt ratio Less than 1.50 Quarterly 0.84 Debt service coverage ratio Less than 1.30 Quarterly 3.15 Debt ratio/ebitda Less than 3.50 Quarterly 3.29

122 Notes to the separate financial statements As of December 31, 2012 and 2011 (e) The Company must comply with some financial covenants on a quarterly basis as part of the contractual obliation with BBVA Banco Continental. Below are the results obtained by UNACEM as of December 31, 2012: Established limits Periodicity Results obtained in 2012 Total liabilities/equity ratio Less than 1.50 Quarterly 0.68 Debt coverage ratio Less than 3.00 Quarterly 2.82 Interests coverage ratio Higher than 4.00 Quarterly 9.86 (f) On February 7, 2008, the Company signed an Understanding Agreement for a Future Financial Leasing with Banco de Crédito del Perú (BCP) for an amount until US$ 25,000,000 for the extension of the production capacity through the installment of a new line of production whose estimated cost is US$ 162,000,000, the interest rate is LIBOR percent, with an availability term of three years and a financing term of, including the availability term, of six years for machinery and equipment and eight years for constructions. Then, on December 17, 2008, the Company signed a Summary of Terms and Conditions of Financial Leasing with BCP, whose objective was establishing some basic understanding points on which the financing can be structured. On December 9, 2011, the Company signed the second amendment to such Agreement with BCP related to the components that allow obtaining the service debt coverage ratio. The summary of other terms of the agreement is as follows: Financing amounts until US$ 162,000,000, to be disbursed in three parts: US$ 25,000,000, US$ 85,000,000 and US$ 52,000,000. Interest rate corresponds to: i) Part 1, nominal annual LIBOR percent, ii) Part 2, nominal annual LIBOR percent and iii) Part 3, nominal annual LIBOR percent.

123 Availability term of financing is three years and the payment term of the quarterly payments is five years. All payments related to the leasing will be made quarterly since the date all the agreement s conditions are met. Financing has as guarantee: i) right to surface on the land when the project is built; ii) assets under financial leasing; iii) funds in guarantee amounting to Part 3 (at least 32 percent of the financing received) and to be applied to the payment of the initial prepayment. Likewise, the credit part, Corporación Andina de Fomento (CAF), has guaranteed the Company in the face of Banco de Crédito del Perú for an amount of US$ 50,000,000. Also, its corresponding fund in guarantee as of December 31, 2012 amounts US$ 51,800,000, whose deposits are held in the Banco de Crédito del Perú in Panama. (g) As of December 31, 2012 and 2011, interests payable amount approximately to S/. 10,362,000 and S/. 11,805,000, respectively and are recorded in the caption Trade and other accounts payable, note 14. (h) Interests generated by financial liabilities held as of December 31, 2012 and 2011, amounted approximately S/. 79,277,000 and S/. 74,602,000, respectively. From the total interests generated, interests have been capitalized for approximately S/. 38,752,000 and S/. 29,479,000, respectively and are included in the caption Property, machinery and equipment, net of the separate statement of financial position, see note 11(d). The balance ascending approximately to S/. 40,525,000 and S/. 45,123,000, respectively, is included in the caption Financial costs in the separate statement of income, note 27. PAGE UNACEM ANNUAL REPORT 16. Deferred income As of December 31, 2012, mainly relates to cement sales invoiced and not shipped by S/. 7,262,000, which will be performed in the first quarter of 2013 (S/. 72,173,000 as of December 31, 2011 delivered during January 2012).

124 17. Provisions (a) This item is made up as follows: Workers profit sharing (b) As of January 1, 2012 Additions Acreetion expense Payments 32,540 47,173 (56,164) As of December 31, ,549 Classification: Current Non current 23,549 23,549 As of January 1, 2011 Additions Acreetion expense Payments 32,384 47,180 (47,024) As of December 31, ,540 Classification: Current Non current 32,540 32,540

125 Provision for mine closure (c) Severance indemnities Total 14, ,911 1,168 (3,732) 11, ,062 11,976 6,758 (6,448) 1,141 1,141 1,141 53,931 1,168 (66,344) 36,666 25,604 11,062 36,666 PAGE UNACEM ANNUAL REPORT 9, ,375 3,950 1,423 5,220 56,350 1,423 (5,213) (52,237) 14, ,911 3, ,321 10,590 10,590 14, ,911

126 Notes to the separate financial statements As of December 31, 2012 and 2011 (b) Workers profit sharing In accordance with Peruvian legislation, the Company maintains an employee profit sharing plan of 10% of annual taxable income. Distributions to employees under the plan are based 50% on the number of days that each employee worked during the preceding year and 50% on proportionate annual salary levels. (c) Provision for mine closure As of December 31, 2012 and 2011, the Company maintains a provision for future closure costs of its mines based on an estimated life between 30 and 46 years. The provision was created on the basis of studies conducted by internal specialists using a discount rate of approximately 3.00 per cent in 2012 (4.73 per cent in 2011). Based on the current economic environment, management adopted certain assumptions which are considered reasonable to make an estimation of future liabilities. This estimate is reviewed annually to take into account any change in the assumptions. However, the actual costs of closing the mines finally depend on future market prices for the necessary works of abandonment that reflect market conditions at the relevant time. In addition, the actual closing time depends on when the mines ceases to produce economically viable products.

127 18. Deferred income tax liability, net (a) The following table presents the composition of the deferred income tax asset and liability as of December 31, 2012 and 2011: Deferred liability Differences on fixed assets bases Stripping costs Commissions and interest, net on finance leases Capitalized interests Exchange difference on leasings Deferred commissions on long term debt Amortization of "El Platanal" studies Workers profit sharing charged to inventories Provision for mine closure As of December 31, ,006 36,621 9,563 7,077 1, ,953 Statement of income (4,079) 7,671 7,142 4,483 7, (911) 23,017 Charge to equity As of December 31, ,927 44,292 16,705 11,560 7,839 1,372 1, ,970 PAGE UNACEM ANNUAL REPORT Deferred asset Differences on fixed assets bases (5,764) (3,242) (9,006) Derivative financial instruments (2,798) 651 (2,147) Provision for mine closure (2,528) 435 (2,093) Provision for vacation (1,654) (340) (1,994) Deferred income (9,503) 8,355 (1,148) Sundry provisions (2,060) 1,112 (948) (24,307) 6, (17,336) Deferred liability, net 488,646 29, ,634

128 Notes to the separate financial statements As of December 31, 2012 and 2011 (b) The current and deferred portions of the provision for income tax for the years ended 2012 and 2011 are comprised as follows: Current Deferred (126,953) (29,337) (123,908) (4,598) (156,290) (128,506) As of December 31, 2012 and 2011, the Company does not need to recognize a liability for deferred income taxes by the tax that would be payable on the profits of its subsidiaries. The Company has determined that the temporary differences will reverse through dividends to be received in the future, which according to current tax legislation in Peru are not subject to income tax. (c) The table below presents the reconciliation of the effective tax rate to the legal tax rate for the years ended December 31, 2012 and 2011: 2012 % 2011 % Profit before income tax 516, , Theoretical expense 154, , Tax effect on permanent items 1, (2,560) (0.6) Expense for income tax 156, ,

129 19. Equity (a) Capital stock As of December 31, 2011, the capital stock is represented by 1,646,503 common shares totally subscribed and paid at a nominal value of S/. 1 per share (1,499,023 common shares at a nominal value of S/. 1 per share as of December 31, 2011). The common shares representing the Company s capital stock are traded on the Lima Stock Exchange. On September 7, 2012, the Board of Directors, as result of the merger with Cemento Andino S.A. approved by the General Shareholders Meeting held on July 24, 2012, approved to increase the capital stock of the Company for the amount of S/. 460,800,000, from S/. 1,185,703,000 to S/. 1,646,503,000 through the issuance of 460,800,000 new common shares at a same nominal value (S/. 1 per share), considering the capital stock of the merged company and the capitalization of the retained earnings of S/. 313,320,000 and S/. 147,480,000, respectively, which will be distributed among the shareholders of Cemento Andino S.A. PAGE UNACEM ANNUAL REPORT On March 22, 2011, the General Shareholders Meeting approved to capitalize approximately S/. 293,075,000 of retained earnings. On August 19 and September 21, 2011, the Board of Directors, in compliance with faculties given by the General Shareholders Meeting dated May 2, 2011, approved to increase the capital stock for an amount of S/. 135,632,000, as result of the acceptance of the exchange of investment shares and common shares. At the end of year 2012, the share price of each share has been S/ (S/ during the year 2011).

130 Notes to the separate financial statements As of December 31, 2012 and 2011 (b) Legal reserve Under the terms of the General Corporation Law, it is required that at least 10 percent of the distributable profit for each year, less income tax, has to be transferred to a legal reserve until such reserve equals to 20 percent of the share capital. The legal reserve may offset any losses or may be capitalized, existing in both cases the obligation to replenish it. (c) Unrealized hedging derivatives Corresponds to the fair value changes on hedging financial instruments, net of its corresponding tax effect. (d) Dividend distributions The Board of Directors meetings held on January 20, April 20, July 20 and September 7, 2012, agreed to distribute dividends with charge to retained earnings for approximately S/. 84,472,000 (S/. 1 per common share), such payments were made on February 21, May 23, August 23 and November 19, 2012, respectively. The Board of Directors meetings held on January 26, April 20, July 21, August 17 and October 19, 2011, agreed to distribute dividends with charge to retained earnings for approximately S/. 82,348,000 (S/. 1 per share), such payments were made on March 1, May 25, August 25, August 31 and November 22, 2011 respectively.

131 20. Net sales This item is made up as follows: Cement Concrete blocks, bricks and pavers Clinker 21. Cost of sales (a) This item is made up as follows: Beginning balance of finished goods and work in process 1,705,294 20, ,725, ,086 1,492,713 16,223 4,585 1,513, ,604 PAGE UNACEM ANNUAL REPORT Cost of production: Fuel Consumption of raw material Personnel expenses, note 24(b) Power Depreciation, note 11(f) Packaging Stripping costs (b) Other manufacturing expenses (includes personnel expenses for S/. 4,629,000 and S/. 7,127,000, respectively, note 24(b)) 231, ,906 93,074 90,907 85,972 59,027 21, , , ,038 86,154 87,964 75,372 54,334 12, ,984 Ending balance of finished goods and work in process (94,322) (120,086) 988, ,849

132 Notes to the separate financial statements As of December 31, 2012 and 2011 (b) The movement of stripping costs during 2012 an 2011 was as follows: Beginning balance Incurred during the period Used during the period (a) 128,251 43,487 (21,279) 98,867 42,138 (12,754) Ending balance Less Current portion 150,459 (27,892) 128,251 (23,775) Non current portion 122, , Administrative expenses This item is made up as follows: Management services Personnel expense, note 24(b) Donations Taxes Depreciation, note 11(f) Amortization Services rendered by third parties Other 56,210 50,850 13,284 12,998 9,441 7,271 5,627 15,444 49,371 43,943 10,571 11,103 21,291 6,307 4,072 13, , ,334

133 23. Selling expenses This item is made up as follows: Advertising and marketing Sales commissions Personnel expenses, note 24(b) Warehouse managing services Other 24. Personnel expenses (a) This item is made up as follows: 37,338 34,306 4,827 3,832 2,214 82, ,278 30,261 4,251 4,588 1,572 79, PAGE UNACEM ANNUAL REPORT Remunerations Employee profit sharing Bonuses Fees and remunerations to Directors Vacations Severance compensation Social contributions Medical aid Voluntary sharing profit Others 64,014 47,173 10,083 7,623 6,406 5,693 5,553 4,631 4,420 1,795 57,004 47,180 9,249 6,992 5,422 5,068 5,199 4,063 3,127 1, , ,167

134 Notes to the separate financial statements As of December 31, 2012 and 2011 (b) Employee benefits expenses are allocated as follows: (Note 21) (Note 21) (Note 22) (Note 23) (Note 25) Cost of sales Cost of sales (other production costs) Administrative expenses Selling expenses Other operating income, net 93,074 4,629 50,850 4,827 4,011 86,154 7,127 43,943 4,251 3, , ,167 (c) The average number of employees during 2012 was 729 (718 in the year 2011) 25. Other operating income, net This item is made up as follows: (Note 28(b)) Other income Coastal shipping Income Income from royalties Rental income Sale of goods and supplies Income from sale of energy Revenue from carbon credits Indemnity insurance Sale of properties Reimbursements of income tax from prior years Other 6,160 5,659 5,552 4, ,090 4,879 5,302 6,421 2, ,114 16,356 7,868 1,545 5,267 26,269 55,753

135 (Note 24(b)) (Note 10(b)) Other expenses Expenses of pier Staff costs Cost of goods and supplies Coastal shipping expense Amortization of power concession Provision for impairment of investments Other expenses 26. Financial income This item is made up as follows: 5,242 4,011 3,572 2,391 1, ,022 19,639 6,630 5,206 3, ,773 1,501 4,452 2,899 20,398 35,355 PAGE UNACEM ANNUAL REPORT (Note 31) Interest on deposits Income from derivative financial instruments Income from dividends Others 12,446 2,848 1, , , ,956 10,212

136 Notes to the separate financial statements As of December 31, 2012 and Financial expenses This item is made up as follows: (Note 15(h)) (Note 13(d)) (Note 31) Interest on financial obligations Interest on borrowings Financial expenses on derivatives Other 40,525 13,886 4,853 6,207 45,123 8,049 6,335 4,027 65,471 63,534 Structuring commissions on financial obligations 1,654 1,304 67,125 64,838

137 28. Transactions with related parties (a) Nature of the relationship During the years 2012 and 2011, the Company has made transactions with the following related entities: Sindicato de Inversiones y Administración S.A. SIA SIA s main activity is to provide management services to the Company, in exchange for an annual payment up to 10 percent of its profits before taxes. As of December 31, 2012 and 2011, Sindicato de Inversiones y Administración S.A. owns 43.4 and percent of the share capital of the Company. Unión de Concreteras S.A. UNICON UNICON s main activity is the commercialization of cement with the Company, which is an indirect subsidiary of the Company through Inversiones en Concreto y Afines S.A. Likewise, UNICON provides the service of producing concrete blocks, bricks and pavers. Firth Industries Perú S.A. FIRTH FIRTH s main activity is the commercialization of cement with the Company, which is a subsidiary of the Company, through Unión de Concreteras S.A. PAGE UNACEM ANNUAL REPORT Compañía Eléctrica El Platanal S.A. CELEPSA, see note 10 y 12(b). Prefabricados Andinos Perú S.A.C. PREANSA, see note 10. Depósito Aduanero Conchán S.A. DAC DAC s main activity is to provide storage services, authorized warehouse for own and third parties goods, as well as promotion services, transportation, storage, management and delivery of cement manufactured by the Company, who also rents DAC the warehouse facilities for the development of its activities.

138 Notes to the separate financial statements As of December 31, 2012 and 2011 Generación Eléctrica de Atocongo S.A. GEA GEA s main activity is the generation and sale of electricity to the Company, who also leases GEA the equipment for the development of its business. ARPL Tecnología Industrial S.A. ARPL The shareholders of the Company have significant influence in ARPL. The Company receives services related to advisory and technical assistance, development and management of engineering projects.

139 (b) The main transactions with related during the years 2012 and 2011 were as follows: Sales of cement Unión de Concreteras S.A. Firth Industries Perú S.A. Prefabricados Andinos Perú S.A.C. Depósito Aduanero Conchán S.A. Revenues from sales of concrete blocks, bricks and pavers Unión de Concreteras S.A. Firth Industries Perú S.A. Income from rental of plant, equipment and facilities Generación Eléctrica Atocongo S.A. Depósito Aduanero Conchán S.A. Unión de Concreteras S.A. Prefabricados Andinos Perú S.A.C. 147,017 52, , , ,009 50,123 16,218 3,692 1,255 PAGE UNACEM ANNUAL REPORT Royalty income Compañía Eléctrica El Platanal S.A., note 25 5,659 5,302 Dividends income Generación Eléctrica Atocongo S.A. Depósito Aduanero Conchán S.A. Prefabricados Andinos Perú S.A.C. Ferrocarril Central Andino S.A. 1, ,094 2,

140 Income from administrative, information technology and management services Prefabricados Andinos Perú S.A.C. Depósito Aduanero Conchán S.A. Generación Eléctrica Atocongo S.A. Compañía Eléctrica El Platanal S.A. Drake Cement LLC Vigilancia Andina S.A. Other income Generación Eléctrica Atocongo S.A. Unión de Concreteras S.A. Prefabricados Andinos Perú S.A.C. Compañía Eléctrica El Platanal S.A. Depósito Aduanero Conchán S.A. Sindicato de Inversiones y Administración S.A. Purchase of electricity Generación Eléctrica Atocongo S.A. Compañía Eléctrica El Platanal S.A. Management services Sindicato de Inversiones y Administración S.A. Inversiones Andino S.A. Project management services ARPL Tecnología Industrial S.A. Engineering services and technical assistance ARPL Tecnología Industrial S.A. Production service Unión de Concreteras S.A. Warehouse management service Depósito Aduanero Conchán S.A. Purchase of complementary materials Unión de Concreteras S.A. Generación Eléctrica Atocongo S.A. Prefabricated structures Prefabricados Andinos Perú S.A.C , ,868 75,165 21,905 19,710 5,601 16,171 4,806 8,147 4,981 1, , , ,117 73,381 42,994 12,754 10,609 14,538 4,730 6,450 3,432 94

141 Expense reimbursement Unión de Concreteras S.A. Depósito Aduanero Conchán S.A. ARPL Tecnología Industrial S.A , , Other Depósito Aduanero Conchán S.A. ARPL Tecnología Industrial S.A. Unión de Concreteras S.A. Compañía Eléctrica El Platanal S.A. Firth Industries Perú S.A. Prefabricados Andinos Perú S.A.C. Generación Eléctrica Atocongo S.A. Vigilancia Andina S.A. Inversiones Andino S.A. (c) As a result of these transactions, the Company had the following rights and obligations with its related entities as of December 31, 2012 and 2011: Accounts receivable Unión de Concreteras S.A. Firth Industries Perú S.A. Compañía Eléctrica El Platanal S.A. Sindicato de Inversiones y Administración S.A. Generación Eléctrica de Atocongo S.A. Prefabricados Andinos Perú S.A.C. Other , ,203 6,056 5,543 4, , ,273 2,449 5,234 10, ,184 PAGE UNACEM ANNUAL REPORT 42,982 26,464

142 Notes to the separate financial statements As of December 31, 2012 and 2011 Continued from previous page Accounts payable Unión de Concreteras S.A. Sindicato de Inversiones y Administración S.A. Compañía Eléctrica El Platanal S.A. Inversiones Andino S.A.A. ARPL Tecnología Industrial S.A. Generación Eléctrica de Atocongo S.A. Depósito Aduanero Conchán S.A. Vigilancia Andina S.A.A. Prefabricados Andinos Perú S.A.C Firth industries Perú S.A. Other 17,493 11,772 6,416 5,110 1,669 1, ,974 7,159 1,100 1,169 9,777 9,289 25,123 1,085 45,808 59,539 (Note 14(a)) (Note 14(a)) Term Current portion Non current portion 33,053 12,755 59,539 45,808 59,539 The Company conducts its operations with related companies under the same conditions as those made with third parties, therefore there is no difference in pricing policies or the settlement of tax base, in relation to the payment, and they do not differ with the policies issued to third parties.

143 (d) Guarantees given The Company maintains a letter of guarantee with BBVA Banco Continental for US$ 3,000,000 (equivalent to S/. 7,653,000) in favor of Compañía Eléctrica El Platanal S.A., dated February 24, 2010, maturing on February 11, 2012, by means of which guarantees the payment of obligations that Compañía Eléctrica El Platanal S.A. has with Consorcio Transmantaro S.A. On February 9, 2012, this letter of guarantee was renewed maturing on February 11, The Company maintains a Comfort Letter with the Scotiabank Peru S.A.A. in favor of Unión de Concreteras S.A., dated July 31, 2009, by means of which it guarantees a line of credit amounting to US$ 8,500,000 (equivalent to S/. 21,684,000), under which UNICON will be perform various credit transactions. The Company maintains a Comfort Letter with BBVA Continental amounting to US$ 2,500,000 (equivalent to S/. 6,377,500), which guarantees PREANSA s customers advances. 29. Earnings per share Basic earnings per share amounts are calculated by dividing net income for the year by the weighted average number of common and investment shares outstanding during the year. Calculation of the weighted average number of shares and the basic and diluted earnings per share is presented below: PAGE UNACEM ANNUAL REPORT Numerator Net income attributable to common and investment shares , ,381 Denominator Weighted average number of common and investment shares ,646, ,646,503 Basic and diluted earnings for common and investment shares

144 Notes to the separate financial statements As of December 31, 2012 and Commitments and contingencies Commitments As of December 31, 2012, the Company has Comfort Letters with BBVA Banco Continental and Scotiabank Perú S.A.A. in guarantee of obligations acquired by its related entities by S/. 35,714,000 (S/. 31,016,000 as of December 31, 2011). Financial leases The future minimum payments for leases are as follows: Minimum payments Present value of minimum lease payments Minimum payments Present value of minimum lease payments Between one to five years 423, , , ,669 Total payments 423, , , ,669 Less financial costs (499) (421) Present value of minimum lease payments 423, , , ,669

145 Tax situation The Company is subject to taxation in Peru. As of December 31, 2012 and 2011, the income tax rate is 30 percent on the taxable income. Not domiciled legal entities and individuals must pay an additional tax of 4.1 percent on the dividends received. The tax authorities have the power to review and if necessary, adjust the income tax calculated by Union Andina de Cementos S.A.A., in the four years following the filing of the return. The affidavits of income tax for the years 2008 to 2012 and the affidavits of General Sales Tax from monthly periods of exercise 2008 to 2012 are open to inspection by the tax authorities. Likewise, the returns of income tax from years 2009 to 2012 and the returns of value added tax of the monthly periods of the years 2009 to 2012 of Cemento Andino S.A. are open to review by the Tax Authority. Due to the interpretations likely to be given by the Tax Authority on current legal regulations, it is not possible to determine, as of this date, if whether the reviews to be conducted will result or not in liabilities for the Group, therefore, any increased tax or surcharge that could arise from possible tax reviews will be applied to the results of the year in which is determined. In the Company s Management and its legal advisors opinion, any additional tax settlement would not be significant for the consolidated financial statements as of December 31, 2012 and PAGE UNACEM ANNUAL REPORT Contingencies In the normal course of business, the Company has received several complaints of such tax, legal (labor and management) and regulatory, which are recorded and disclosed in accordance with International Financial Reporting Standards as set out in note 3.2 (o).

146 Notes to the separate financial statements As of December 31, 2012 and 2011 As a result of audits for the years 2002 to 2006, the Company has been notified by the Tax Authority (SUNAT) with different resolutions for alleged omissions in income tax. In some cases, the Company has filed appeals for not finding the appropriate resolutions in accordance with the laws in force in Peru and in other cases have proceeded to pay the assessments received. As of December 31, 2012 and 2011, the Company has recorded the necessary provisions, leaving as a possible contingency an amount of S/. 5,981,000 plus interest and costs. The same way, on December 31, 2012, the Company holds three claims to SUNAT, corresponding to request of refund of income tax paid in excess for the years 2004, 2005 and 2006, amounting approximately S/. 17,013,000 (approximately S/. 14,092,000 as of December 31, 2011). In October 2012, Cemento Andino S.A. submitted to SUNAT a request of refund of value added tax paid in excess for the month August 2012, for an amount ascending to approximately S/. 584,000, see note 8(d). Management and its legal counsel estimate that there are legal arguments to obtain a favorable outcome in these processes, in which case they will not have a significant impact on the financial statements of the Company. Mining royalties On September 28, 2011, Congress passed Republic Act amending Law Mining Royalty Act. This law is to establish the mining royalty payable by holders of mining concessions as against economic benefit for the exploitation of metallic and nonmetallic mining. The mining royalty is determined quarterly and the amount payable will be the highest of comparing the 1% of net sales in the quarter and quarterly operating income by a rate that varies between 1 and 12. As of September 31, 2012 and 2011, the Company complied with the payment of mining royalties. On December 2, 2011, the Company filed with the Constitutional Court a constitutional action to request to put things back to the state before they were before the effective date of the Supreme Decrease /EEFF and EF

147 on the definition of nonmetallic mineral resources and specifically on the determination of the base of calculation of the royalties. In Management s opinion, there are high possibilities that the claim of the Company may be estimated by the Constitutional Court. As result of the review of year 2008, the Company has been notified by Tax Authority (SUNAT) with several resolutions of assumed omissions to payment of Mining Royalties and its fines for the amount approximate to S/. 11,587,000. Management and its legal counsels estimate that there are some legal arguments to obtain as favorable result in the mentioned process. In the year 2012, the Superintendence of Tax Authority (SUNAT) has started the review process of the year Environmental commitments The Company s activities are subject to environmental protection standards and has to meet the following regulations: (a) Industrial activities In compliance with Supreme Decree 01997ITINCI Regulation of Environmental Protection for the Development of Manufacturing Activities, enacted on September 26, 1997, the Company filed on January 29, 2001 before the Production Ministry (PRODUCE) its Program for Environmental Management (PAMA), which was approved on February 1, 2002 and whose implementation program was ended in May 2008, following the environmental monitoring programs. The Company has incurred expenditures related to environmental remediation and management for the modernization of its industrial plant as of December 31, 2012 of approximately US$ 16,600,000 (US$ 15,600,000 as of December 31, 2011). PAGE UNACEM ANNUAL REPORT Additionally, the Company currently has an EIA for the modernization of its industrial facility approved by the Ministry of Production in May 2011 and has been executing environmental activities with an accumulated

148 Notes to the separate financial statements As of December 31, 2012 and 2011 investment as of December 2012 of US$ 21,300,000 for improvements to systems capturing particles in the cement manufacturing process. (b) Mining and port activity In relation to its mining and port activities, the Company has filed before PRODUCE the corresponding Environmental Impact Studies (EIA by its acronym in Spanish), which are under compliance at the amounts determined in such studies. The cumulative investment as of December 31, 2012 amounts to approximately US$ 15,300,000 (approximately US$ 13,900,000 as of December 31, 2011). On October 14, 2003, the Congress of Peru issued Law 28090, Law that regulates the mine closures. This law regulates the obligations and procedures for elaborating, filing and implementation of the Mine Closure Plan, as well as the constitution of guarantees that secures the compliance of the investments related to environmental matters. The Company has filed the closure plans for the mining units within the terms of law. The provision for mine closure corresponds to the activities that must be performed for restoring the areas affected by the exploitation activities. The main works are related to earth movements and reforesting. As of December 31, 2012, the provision for mine closure amounts to approximately S/. 11,976,000 (approximately S/. 14,540,000 as of December 31m 2011) and is included in the Provisions caption in the statement of financial position, see note 17(a). (c) Use of hydrocarbons Supreme Decree 04693EM Regulation for the Protection of Hydrocarbon Activities enacted on November 12, 1993 regulates the activities performed by the Company related to the use of hydrocarbons as final user. In compliance of this regulation, the Company has a PAMA approved by the Ministry of Energy and Mines in As of December the Company has made an accumulated investment of approximately US$ 95,000 (US$ 91,600 as of December 31, 2011) in said PAMA.

149 (d) Special projects As of December 31, 2012, the projects that the Company is executing are: (i) Expansion of productive capacity of the Atocongo plant This Project consist in increasing the production capacity of the Kiln I from 3,200 tons of clinker per day to 7,500 tons and increasing the production capacity of crude and cement by installing new roller presses of 310 tons/hour to 120 tons/hour, respectively. As of December 31, 2012, the Company has paid approximately S/. 503,700,000 and has assumed commitments for approximately S/. 76,000,000. (ii) Expansion of productive capacity Kiln 4 This project consists in increasing the production capacity of the plant, this new line will increase the production capacity of the Company in 700,000 tons clinker/ day. As of December 31, 2012, the Company has paid approximately S/. 113,200,000 and has assumed commitments for approximately S/. 507,700,000. (iii) New silo for 20,000 tons of cement This project consists in the construction of a new silo with a capacity of 20,000 tons of cement, containing a system that permits to feed the plant. Currently, this silo is operating. As of December 31, 2012, the Company has paid approximately S/. 75,100,000 and has assumed commitments for approximately US$ 1,000,000. PAGE UNACEM ANNUAL REPORT (iv) Kiln 1 Electrostatic cooler This project for the control of emissions will efficiencies in the particle collection (higher than 99.9 percent) in compliance with the Program for Environmental Management (PAMA by its acronym in Spanish). As of December 31, 2012, the Company has paid approximately S/. 30,400,000 and has assumed commitments for approximately S/. 100,000.

150 Notes to the separate financial statements As of December 31, 2012 and 2011 (e) Carbon credits As of December 31, 2012 and 2011, the Company counts with the project Fuel Switching at Atocongo Cement Plant and Natural Gas Pipeline Extension, Cementos Lima, Peru, registered with the Executive Board of the United Nations Framework Convention on Climate Change (UNFCCC) on November 10, Under this Project in March 2011, DOE Tüv Süd submitted to UNFCCC the issuance request of 112,346 CERs. On April 19, 2011, and after concluding the process so called Review of Compliance, the Secretary of UNFCCC confirmed the reception of the issuance request and made public. The second tranche of CERs was issued by United Nations on May 23, 2011 and was commercialized with EDF Trading ltd. The revenues generated in this second emission were 1,304,000 (equivalents to S/. 5,052,000), which were fully collected, and are presented in others, net in the statement of income. The third verification of the project was on December 12, 13 and 14, 2011 and was under the responsibility of the DOE Tüv Süd, covering the monitoring period of September 1, 2010 to August 31, The total of reductions obtained in this period was 137,754 tons of CO 2 reduced, the verification process is undergoing its final phase and is estimated that the issuance and subsequent sale of the CERs by the end of March Financial risk management, objectives and policies The Company s principal financial liabilities comprise loans and borrowings, trade payables and other payables. The main purpose of these financial liabilities is to finance the Company s operations. The Company has cash and shortterm deposits and trade and other receivables that arise directly from its operations. The Company also holds derivative financial instruments. The Company is exposed to market risk, credit risk and liquidity risk.

151 The Company s senior management oversees the management of these risks. The Company s senior management is supported by financial management that advises on financial risks and the appropriate financial risk governance framework for the Company. The financial management provides assurance to the Company s senior management that the Company s financial risktaking activities are governed by appropriate policies and procedures and that financial risks are identified, measured and managed in accordance with company policies and company risk appetite. The Board of Directors reviews and agrees policies for managing each of these risks which are summarized below. Market risk Market risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in market prices. Market prices comprise four types of risk: interest rate risk, currency risk, commodity price risk and other price risk. Financial instruments affected by market risk include loans and borrowings, deposits and derivative financial instruments. The sensitivity analyses shown in the following sections relate to the position as of December 31, 2012 and PAGE UNACEM ANNUAL REPORT The sensitivity analyses have been prepared on the basis that the amount of net debts, the ratio of fixed to floating interest rate of the debt and the proportion of financial instruments in foreign currencies are all constant as of December 31, 2012 and (i) Interest rate risk Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates. Exposure of the Company to the interest rate risk is related mainly to the longterm debt with variable interest rates.

152 Notes to the separate financial statements As of December 31, 2012 and 2011 The Company has three contracts interest rate swap designated as cash flow hedges and are recorded at their fair value. The detail of these operations is as follows: Counterparty Reference value as of US$ (000) Maturity Bank of Nova Scotia Bank of Nova Scotia BBVA Banco Continental S.A. 60,000 50,000 40,000 September 2015 August 2018 September 2016 Financial instruments are intended to reduce exposure to interest rate risk variable associated with the financial obligations set out in note 15. These financings bear interest at a variable rate equal to the 3month Libor. The Company pays or receives a quarterly basis (on each interest payment date of the loan) the difference between the Libor rate on the loan market in that period and the fixed rate agreed upon in the contract coverage. Flows actually received or paid by the Company are recognized as a correction of the financial cost of the loan period for the hedged loans.

153 Receives variable rate at: Pays fix rate at: Fair value Libor 3 months % Libor 3 months % Libor 3 months % 3.680% 0.850% 4.455% 2012 Liability 4, ,218 7, Liability 7,044 2,284 In 2012, the Company recognized an expense on these derivative financial instruments amounting to approximately S/. 4,853,000 (S/. 6,335,000 during the year 2011), whose amounts were actually paid during the year and are presented as Borrowing Costs in the statement of income, see note 26. 9,328 PAGE UNACEM ANNUAL REPORT The effective portion of changes in the fair value of financial instruments that qualify as hedges is recognized as assets or liabilities and effects equity. As of December 31, 2012 and 2011, the Company has recognized under unrealized results in the statement of changes in equity, a negative change in fair value of approximately S/. 5,011,000 and S/. 6,529,000, respectively, which is presented net of the effect on income tax.

154 Notes to the separate financial statements As of December 31, 2012 and 2011 Sensitivity to interest rate The following table shows the sensitivity to a reasonably possible change in interest rates on the portion of the loans, after the impact of hedge accounting. With all other variables remaining constant, the income before income tax would be affected by the impact on variable rate loans, as follows: Increase / decrease in basis points Impact on income before income taxes % (212) 212 (273) 273 The movement course in the basics related to the analysis of sensitivity to interest rate is based on the current market environment. (ii) Foreign currency risk Foreign currency risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in foreign exchange rates. The Company s exposure to the risk of changes in foreign exchange relates primarily to the Company s operating activities (when revenue or expense is denominated in a different currency from the Company s functional currency).

155 Management monitors this risk through analysis of the country s macroeconomic variables. As of December 31, 2012 and 2011, the Company has a cross currency interest rate swap amounting to S/. 3,399,000 and S/. 550,000 with the purpose of hedging its foreign currency risk. The result of holding balances in foreign currency for the Company in years 2012 and 2011 was a gain in exchange difference amounting approximately S/. 75,973,000 and S/. 34,770,000, respectively, which are presented in the caption Gain in exchange difference, net in the separate statement of income. Foreign currency sensitivity The following table demonstrates the sensitivity to a reasonably possible change in the US dollar exchange rate, with all other variables held constant, of the Company s profit before income tax (due to changes in the fair value of monetary assets and liabilities, including derivative financial instruments in foreign currency not classified as hedge). PAGE UNACEM ANNUAL REPORT Change in US Dollars rate % 2012 Effect on profit before tax (73,851) (147,693) 73, ,693 (60,743) (121,487) 60,743 (121,487)

156 Notes to the separate financial statements As of December 31, 2012 and 2011 (iii) Credit risk Credit risk is the risk that a counterparty will not meet its obligations under a financial instrument or customer contract, leading to a financial loss. The Company is exposed to a credit risk from its operating activities (primarily for trade receivables) and from its financing activities, including deposits with banks and financial institutions, and trade and other receivables. The maximum credit risk of the components of the financial statements as of December 31, 2012 and 2011, is represented by the amount of the captions cash and cash equivalents, trade and other accounts receivable. Financial instruments and cash deposits Credit risk from balances with banks and financial institutions is managed by the Company s CFO in accordance with the Company s policy. Counterparty credit limits are reviewed by Management and Board of Directors to minimize the concentration of risks and therefore mitigate financial loss through potential counterparty s failure. Trade accounts receivable Customer credit risk is managed by management, subject to the Company s established policies, procedures and controls. Outstanding customer receivables are regularly monitored to assure the collection. Sales are made in Peru and there is a client portfolio of 31 as of December 31, 2012 (30 as of December 31, 2011). As of December 31, 2012, the Company had 4 significant customers that accounted for approximately 79.4 percent of sales (approximately 79.3 as of December 31, 2011). Likewise, the Company evaluates the accounts receivable whose collection is estimated as remote to determine the required allowance for no irrecoverability. Other accounts receivable Accounts receivable correspond to balances pending of collection due to concepts not related to the main operation activities of the Company. As of December 31, 2012 and 2011, other accounts receivable correspond mainly to:

157 advances to suppliers, claims to SUNAT and claims to third parties. Company s Management made a continuous monitoring of the credit risk to such items and periodically, it assesses the balances that evidence an impairment to determine the required allowance for irrecoverability. (iv) Liquidity risk The Company monitors its risk of shortage of funds using a recurring liquidity planning tool. The Company s objective is to maintain a balance between continuity of funding and flexibility through the use of bank deposits and loans. The table below summarizes the maturity profile of the Company s financial liabilities based on contractual undiscounted payments: From 3 to 12 months As of December 31, 2012 From 1 to 5 years Total PAGE UNACEM ANNUAL REPORT Bank overdrafts and loans Trade and other accounts payable Financial obligations Amortization of capital Flow of interest payments 532, , ,009 16,375 12,755 1,069, , , ,034 1,410, ,596 Total liabilities 1,111,139 1,186,471 2,297,610

158 Notes to the separate financial statements As of December 31, 2012 and 2011 As of December 31, 2011 From 3 to 12 months From 1 to 5 years Total Bank overdrafts and loans Trade and other accounts payable Financial obligations Amortization of capital Flow of interest payments Bank overdrafts and loans 396, ,744 14, ,054 46,093 1,228,313 71, , ,744 14,499 1,369, ,980 Total liabilities 795,406 1,300,200 2,095,606 Capital management The primary objective of the Company s capital management is to ensure that it maintains a strong credit rating and healthy capital ratios in order to support its business and maximize shareholder value. In order to maintain or adjust the capital structure, the Company can adjust the amount of dividends paid to shareholders, refund capital to shareholders, issue new shares or sell assets to reduce its debt. Consistent to the industry, Management monitors its capital on the basis of leverage ratio. This ratio is calculated dividing the net debt into the capital stock. The net debt corresponds to the total of debt (including current and noncurrent debt) minus the cash and cash equivalents. The total capital stock corresponds to the net equity and is presented in the separate statement of financial position plus the net debt. No changes were made in the objectives, policies or processes for managing capital during the years ended December 31, 2012 and December 31, 2011.

159 32. Fair value of financial instruments Set out below is a comparison by class of the carrying amounts and fair values of the Company s financial instruments that are carried in the financial statements. Carrying value Fair value Financial assets Cash and cash equivalents Trade and other accounts receivable, net Total Financial liabilities , , , , , , , , , , , ,144 PAGE UNACEM ANNUAL REPORT Bank overdrafts and loans Trade and others accounts payable Financial obligations Trade and others accounts payable 532, ,361 1,410,504 7, , ,230 1,369,367 9, , ,613 1,343,602 7, , ,230 1,246,065 9,328 Total 2,197,500 1,985,941 2,129,850 1,862,639 The fair values of the financial assets and liabilities are included at the amount at which the instrument could be exchanged in a current transaction between willing parties, other than in a forced or liquidation sale.

160 Notes to the separate financial statements As of December 31, 2012 and 2011 The following methods and assumptions were used to estimate the fair values: The fair value of cash and cash equivalents, shortterm trade and other accounts receivables and shortterm trade and other accounts payable, approximate their carrying amounts largely due to the shortterm maturities of these instruments. Fair value of longterm accounts receivable and long term debt is estimated by discounting future cash flows based on parameters such as interest rates, the risk factors of each individual country, the creditworthiness of the customer and the risk characteristics of funded project.. Based on this evaluation, the Company makes provisions for expected losses on these receivables and loans. As of December 31, 2012 and 2011, the carrying amounts of these receivables and loans, net of allowances, are not materially different from the fair values calculated. The Company signs contracts of derivative financial instruments with counterparties, mainly financial institutions with solvency qualifications. The derivatives measured using valuation techniques and observable data are mainly swaps of interest rate. The most frequently applied valuation techniques include forward pricing and swap models, using present value calculations. The models incorporate various inputs including the credit quality of counterparties, foreign exchange spot and forward rates and interest rate curves and subjacent basic product s prices curves. Fair value hierarchy The Company uses the following hierarchy for determining and disclosing the fair value of financial instruments by valuation technique: Level 1: quoted (unadjusted) prices in active markets for identical assets or liabilities. Level 2: other techniques for which all inputs which have a significant effect on the recorded fair value are observable, either directly or indirectly. Level 3: valuation techniques (no observable market value).

161 As of 31 December 2012 and 2011, the Company held the following instruments carried at fair value on the statement of financial position: Derivative financial instruments: Level 2 Total 2012 The Company does not maintain assets measured at levels 1, 2 and 3, or liabilities measured at level 1 and 3. 7,159 7, ,328 9,328 PAGE UNACEM ANNUAL REPORT

162

163 Printed in Cyclus Print Matt. Paper made with 100% recycled fiber, free from chlorine and optical brightening agents, certified by NAPM (National Association of Paper Merchants). Furthermore, it has been made using bio energy (clean energy) and is certified by Ecoflower and Blue Engel, who identify products made using environmentally appropiate methods, social responsibility and economically viable resources. PAGE UNACEM ANNUAL REPORT The benefit of using paper made from 100% recycled fiber is a lower impact on the environment, equivalent to: 749 kg of solid waste not generated 187 kg of greenhouse gases avoided 1,868 km of road transport avoided 19,569 l. of water not consumed 1,842 kwh of energy not consumed 1,218 Kg of wood pulp not used OTHER CERTIFICATIONS: License ISO 9001 EMAS, ISO DIN 673 EN 713 Nordic Swan Quality management EU environmental management / certification scheme Archive properties, LDK class 2485 (> 200/g years) Safety of toys, migration of certain elements

164 Concept, design, lay out and editing: Mayo Publicidad Photography: Daniel Giannoni Prepress and offset printing: Khameleon World Lettera Gráfica