annual report - unacem

ANNUALRE

PORT

2013 UNACEM 32013

ANNUALRE

PORT

2013 UNACEM ANNUAL REPORT 5

CONDORCOCHA PLANT, TARMA (3,950 MASL)

2013 UNACEM 11

CONTENTSRESULTS 12

LETTER FROM THE CHAIRMAN OF THE BOARD 14

BOARD OF DIRECTORS AND MANAGEMENT 16

CHAPTER 1. MACROECONOMIC ENVIRONMENT 18

CHAPTER 2. THE COMPANY 26

CHAPTER 3. OPERATIONS 36

CHAPTER 4. SUSTAINABLE MANAGEMENT 50

CHAPTER 5. FUTURE PROJECTS 68

CHAPTER 6. SUBSIDIARIES AND AFFILIATES 78

CHAPTER 7. ECONOMIC-FINANCIAL RESULTS 90

ADMINISTRATION, MANAGEMENT, AND TECHNICAL ASSISTANCE 192

ACKNOWLEDGMENTS 192

RESULTS(in millions of Nuevos Soles) (in millions of Nuevos Soles)

EBITDASALES

2,000

1,800

1,600

1,400

1,200

1,000

800

600

400

200

0

1,3241,510 1,514

2009 2010 2011 2012 2013

1,726 1,785

600

400

200

002009 2010 2011 2012 2013

(en millones de soles)

0

100

200

300

400

500

600

700

800

495

587 573 621

2009 2010 2011 2012

701

20130

100

200

02009 2010 2011 2012 2013

2013 UNACEM 13ANNUAL REPORT UNACEM 2013

(in millions of Nuevos Soles)

times

CAPEX DEBT/EBITDA

200

300

400

500

600

700

560610

345 333 356

0

100

200

02009 2010 2011 2012 2013

1 00

1.50

2.00

2.50

3.00

3.50

2.08

2.662.97 3.01 3.03

0 00

0.50

1.00

0.002009 2010 2011 2012 2013

LETTER FROM Last October 1 marked one year since our merger with Cemento Andino S.A. After this lapse of time, it is with great

satisfaction that I am able to say we are achieving the objectives, synergies, and competitive advantages we have set

for ourselves. The merger enabled us to integrate processes and save on the cost of production, procurements, and

maintenance, as well as streamlining our product portfolio. The successful implementation of the SAP system as a

management instrument and the outstanding commitment of all our employees have been essential to the merger,

inspiring us to take on new challenges for growth and innovation.

In 2013, we completed the expansion of our Condorcocha (Junín) and Atocongo (Lima) plants with excellent results. The

expansion of Condorcocha was finished in June 2012, and this year, the plant produced 1.9 million tons of cement. The expansion

of the Atocongo plant was recently finished in December 2013, with production totaling 3.73 million tons of cement. Thanks

to these expansions, savings of 4% were achieved in the consumption of fuels and electrical energy per ton produced at both

plants, compared to the average for the previous three years. As a result of the expansions, the annual production capacity of

UNACEM rose to 6.7 million tons of clinker and 7.6 million tons of cement, consolidating the company as the leading producer

in Peru and one of the largest in the region.

In 2014, we will be able to operate at 100% of the expanded capacity of both plants, which will allow us to decrease our fuel and

electrical energy costs even more, giving us a very advantageous position in terms of meeting the growing national demand and

recommencing our exports. As of the close of February 2014, we have already accumulated a clinker stock of over 750,000 tons.

This year, we have also managed to strengthen our distribution network, thanks to our close relationship with our clients

and the work we have been carrying out for the last five years with independent home improvement entrepreneurs who

belong to the Progre-Sol Network, in addition to the 40 direct distributors in the cities of the central highlands and the

northeast jungle of the country. Together with our wide-reaching distribution network, we achieved a new historical record

of annual cement dispatches, totaling 5.6 million tons.

Our production and sales increased by 5.1% and 5.6%, respectively, over 2012, resulting in operating profits of S/. 520 million,

7.3% higher than last year. It is worth noting that these higher profits were achieved despite maintaining our cement sale

prices and absorbing the higher cost of sales experienced during 2013 due to the import of 983,000 tons of clinker due to the

stoppage of Kiln 1 in Atocongo from January to August for its expansion and upgrading.

In contrast to our positive operating performance, we had higher financial expenses in 2013, totaling S/. 88 million, along

with foreign exchange losses of S/. 139 million, impacts which we are dealing with so as to avoid them or at least diminish

them in 2014 and subsequent fiscal years. As of the close of 2012, short-term financial debt accounted for 45% of our

total financial debt, while debt in dollars accounted for 70% of our total financial debt. As of the close of 2013, we achieved

our objective of reducing short-term debt to 30% and debt in dollars to 49%, respectively, of the total financial debt, thus

strengthening our current ratio and decreasing the future foreign exchange impact. The higher financial expenses were

due to the substitution of short-term debt in dollars for medium-term debt in soles, inevitably at higher rates, as well as

the increase of our debt to S/. 378 million to cover the cost of the final stage of the expansion of the Atocongo plant and the

higher imports of clinker, factors that will not be repeated in 2014, during which time we will firmly continue with our policy

of reducing exposure to foreign exchange risk and to the rise in interest rates.

TO THE SHAREHOLDERS OF UNACEM:

2013 UNACEM 15

THE CHAIRMAN OF THE BOARD

The growth and strengthening of UNACEM would not be possible if we were not so dedicated to forging and consolidating

a business operation committed to its sustainable development, where our employees, the local communities, the

environment, suppliers, and clients are our priority. Through the Asociación UNACEM, which has spent more than ten

years joining forces with us in an effort to add value for all our stakeholders, we have sought to promote and facilitate the

development and performance of our corporate sustainability strategy. I am convinced that our investment in a sustainable,

ethical, and responsible management has enabled us to consolidate our leadership in the sector and strengthen the trust

of our stakeholders.

This year was also an important one for our subsidiaries. Through these companies, we are diversifying our investments in

a direct line with our business: UNICON and Firth continue to be leaders in the premixed concrete market; PREANSA has

opened doors to new markets such as Chile and Colombia; CELEPSA continues to achieve strong operating results and grows

in its search for electricity projects using renewable sources. We have been especially focused on our subsidiaries in Arizona,

U.S.A.—which are still in the beginning stages, with production and sales at only half of their installed capacity—to make sure

they are in optimum operating order when that market recovers, after showing shaky growth in 2013. As of the close of 2013,

the operations of Drake Cement were starting to overcome the initial difficulties and the premixed concrete and aggregates

business of Drake Materials registered positive operating results, for which reason we feel optimistic about the favorable

evolution of these investments.

I would be remiss not to thank Sindicato de Inversiones y Administración S.A., which continued under the responsibility of

the General Management of UNACEM, as well as Inversiones Andino S.A. and ARPL Tecnología Industrial S.A., companies

that provide us administrative, financial, and technical advisory services; and especially each one of our employees, whose

hard work and commitment have enabled us to achieve the goals we set for ourselves.

We move ahead into 2014 with the unwavering commitment to continue betting on the country’s development. We will

continue to prioritize our offer of a wide range of high-quality products at competitive prices, delivered on a timely basis, to

the satisfaction of our clients and consumers. Likewise, together with our subsidiaries, we will continue to promote growth

in Peru and the region, always prioritizing sustainable development, ready to take on new challenges and seek out new

opportunities.

I invite you to take a look at the most important results of UNACEM’s performance during 2013.

Sincerely,

Ricardo Rizo Patrón de la PiedraChairman of the Board

BOARD OF DIRECTORS

CHAIRMANMr. Ricardo Rizo Patrón de la Piedra

VICE CHAIRMANMr. Alfredo Gastañeta Alayza

DIRECTORSMr. Marcelo Rizo Patrón de la PiedraMr. Jaime Sotomayor BernósMr. Carlos Ugás DelgadoMr. Roque Benavides Ganoza Mr. Diego de la Piedra Minetti Mr. Oswaldo Avilez D’AcunhaMr. Hernán Torres Marchal Mr. Martín Naranjo Landerer Mr. Drago Kisic Wagner Mr. Leslie Pierce Diez Canseco

TECHNICAL ADVISORSARPL Tecnología Industrial S.A.

ADMINISTRATION AND FINANCE ADVISORS Inversiones Andino S.A.

BOARD OF AND MANA

MANAGEMENTSINDICATO DE INVERSIONES Y ADMINISTRACIÓN S.A. (SIA)

GENERAL MANAGER Mr. Carlos Ugás DelgadoRepresentative of SIA in the General Management LEGAL MANAGERMr. Julio Ramírez BardálezFINANCE AND CORPORATE DEVELOPMENT MANAGER Mr. Álvaro Morales Puppo CENTRAL MANAGERMr. Víctor Cisneros Mori ADMINISTRATIVE MANAGERMr. Jorge Trelles Sánchez COMMERCIAL MANAGER Mr. Kurt Uzátegui Dellepiane PROJECT PERFORMANCE MANAGER Mr. Jeffery Lewis Arriarán ATOCONGO OPERATIONS MANAGERMr. Juan Asmat Siquero CONDORCOCHA OPERATIONS MANAGERMr. Ricardo Ramírez Zurita HUMAN RESOURCES MANAGERMr. Pablo Castro Horna

ASOCIACIÓN UNACEM

GENERAL MANAGER Mr. Armando Casis Zarzar

DIRECTORSAGEMENT


1

MACROEENVIR

2013 UNACEM 19

ECONOMIC RONMENT

During 2013, the international economy showed slight signs of recovery. It is estimated that global

growth will total 2.9%, a figure achieved in an adverse and, above all, volatile environment, where

emerging countries were the major contributors to growth.

Starting in the second quarter of the year, Europe came out of its recession, and it is estimated

that its GDP will fall by only 0.4%. China, on the other hand, will grow by 7.7% thanks to greater

external demand and the specific measures of its tax and public spending policy. In the United

States, growth (1.9%) is still weak, considering that neither investment nor employment in said

country have returned to pre-crisis levels. After several years of solid economic performance,

the emerging economies experienced a significant deceleration, which the majority of them

were able to handle thanks to the adoption of adequate policies and the fact that they had

sufficient reserves and more flexible foreign exchange rates.

After a decade of bonanza, the Latin American economy exhibited moderate and heterogeneous

growth (2.6%), partially explained by the drop in the performance of its largest economies, Brazil

(2.3%) and Mexico (1.2%), which account for half of the region’s aggregated GDP. This reduction

was counteracted by higher growth in countries such as Paraguay (12.3%), Panama (8.8%), and

Peru (5.0%). Generally speaking, the region demonstrated that it is prepared to face the impact

of external turbulence. However, its heterogeneous structures and development gaps continue

to be a major challenge.

During 2013, the Peruvian economy kept up its growth streak, standing out for its macroeconomic

strength despite persisting global uncertainty, and registering growth of 5.0% over 2012. This lower

rate may be explained by lesser growth in private investment and private consumption, in addition

to reduced exports.

The construction sector grew by 8.6% over 2012, continuing to be the driving force of the GDP

among non-primary economic sectors. While there was a drop in the rhythm of execution

of roadway infrastructure and mining projects during the year, this was offset by the strong

demand for housing and mall construction. It is important to note that during 2013, the sector

exhibited unequal growth among regions: the south and east were the most dynamic zones,

achieving growth of approximately 14.0% and 16.0%, respectively, while central Peru grew by

around 7.4%.

Annual inflation closed out the year at 2.9%, with the target range of the Central Reserve

Bank (BCR), despite the fact that it fluctuated near the upper limit of this range for the first

eight months of the year (as a result of the increase in hydrocarbon and grain prices). The

decelerations of September and November helped keep the annual inflation rate within the

established target range for monetary policy.

2013 UNACEM 21

The following are some of the most important figures on the performance of the Peruvian

economy according to the information published by the BCR:

Deficit of US$ 365 million in the trade balance (after eleven consecutive years of surpluses),

due mainly to lower sales of traditional and non-traditional products. Exports totaled

US$ 41.826 billion (9.5% less than in 2012), while imports totaled US$ 42.191 billion (2.6%

higher than in 2012), primarily due to the effect of the international crisis on exports and

increased capital investments which affected imports.

Net international reserves as of December 31, 2013 totaled US$ 65.663 billion, or US$ 1.672

billion (2.6%) higher than in 2012, when reserves totaled US$ 63.991 billion.

For the third consecutive year, a fiscal surplus was registered, totaling S/. 3.666 billion,

equivalent to 0.7% of the GDP and 1.4% higher than that registered in 2012. It should be

noted that Peru was the only emerging country that registered this positive indicator.

Based on recent estimates, private investment grew by 3.6%. On the external side, this

decreased expansion is the result of lower global liquidity levels; while on the internal side,

it was caused by the increase in risk perception and the reduced return on investments, two

factors that had partially dissipated by the end of the year.

Public investment continued to grow after last year, reaching a new record level of S/. 31.310

billion, as a result of the greater investments by local governments (S/. 11.918 billion),

regional governments (S/. 7.016 billion), and the federal government (S/. 9.860 billion).

The year 2013 was characterized by a highly volatile foreign exchange rate, influenced by the

drop in metal prices and the announced deceleration in the printing of money in the U.S.A.

Consequently, the Nuevo Sol depreciated against the U.S. dollar by 9.6%, with an exchange rate

of S/. 2.796 per dollar as of the close of the period (S/. 2.551 per dollar at the close of 2012).

In a highly volatile environment, Peru demonstrated that it has reduced its vulnerability to

external shocks, leading Standard and Poor’s to improve its risk rating from BBB to BBB+ in

August. This rating was backed by Fitch Ratings in October.

I LIKED MY JOB A LOT RIGHT FROM THE START. WHEN I FINISH MY TIME HERE, I’LL BE ABLE TO RETIRE IN PEACE BECAUSE I’LL HAVE DONE MY DUTY FOR MY COMPANY AND MY FAMILY, I GAVE MY KIDS A GOOD EDUCATION.”

CIPRIANO ARELLANO ZURITA ELECTRICITY AND GENERATION

MAINTENANCE DIVISION 2013 EMPLOYEE OF THE YEAR

CONDORCOCHA


EXTRACTION OF RAW MATERIALS

THECOMPANY

MERGEROctober 1, 2013 marked one year since our merger with Cemento Andino. To date, we have

obtained competitive advantages as a result of the synergies in commercialization, production,

costs, and improvements in operations, procurements, and maintenance. Special note should

be made of the full use of staff capacities, energy savings due to the operation of the new kilns

in both plants, and the increased value of our company, as synergies that have been achieved

as of this date.

One of our most important landmarks during the year was the rollout in real time of the

world-class SAP computer program on June 3, 2013. The decision to implement an ERP

(Enterprise Resource Planning) System will enable us to streamline the management of

the different areas of the merged company, integrating and standardizing the processes and

operations performed by both companies before the merger, as well as allowing us to:

Obtain reliable and secure information in real time, made available to all employees from

anywhere in our network.

Improve the control of operations, avoiding overlap in tasks and reducing manual activities

with low added value.

Implement the technological infrastructure necessary to ensure the correct support of

SAP® ERP transactions.

Integrate and align all business operations with UNACEM’s Strategic Plan.

Improve the percent of efficiency over time for each month- and year-end closing.

Provide a broader vision of the real expenses and costs compared to those planned, thus

achieving better preventive control.

As of this date, the system has been completely implemented and we are streamlining the

business and control processes in order to ensure greater efficiency in these processes

and the increased reliability of information management. It should be emphasized that this

achievement is owed to the professionalism, dedication, integrity, passion, and creativity of a

team of 55 people from different areas, all of whom played a key role in tackling this challenge.

We are currently developing new projects such as the improvement of our Business Intelligence

platform, our processes and reports, as well as supporting the implementation of the SAP in our

subsidiary Drake Cement.

EXPANDED CAPACITY IN OUR PLANTS

In Condorcocha, after the commissioning of the plant expansion in 2012, we successfully

achieved the operation of the new Kiln 4 in 2013, managing to produce 629,899 tons of clinker,

equivalent to 90% of capacity, with average heat consumption of 835 kcal/kg, at an altitude of

3,950 meters above level, and electricity consumption of 61 kW-h per ton of clinker, generating

significant savings in production costs.

This investment has enabled us to increase the clinker production capacity at the Condorcocha

Plant from 1.18 million to 1.88 million tons annually, and the cement milling capacity to 2.1

million tons annually. In all, fuel consumption during the year at the Condorcocha Plant totaled

902 kcal/kg of clinker, lower than the average of 939 kcal/kg of clinker registered in the three

years prior to the expansion (2009 to 2011). Likewise, we improved our consumption of electrical

energy, registering a consumption of 64 kW-h/t of clinker for the four kilns, lower than the

consumption of 65.7 kW-h/t of clinker registered in the three years prior to the expansion

(2009 to 2011).

At Atocongo, we continued during 2013 with the works related to the project for the upgrading

and expansion of the production capacity of Kiln 1, which involved the construction of a

new six-stage heat exchanger and the construction of a new cross-bar clinker cooler and

electrofilter. The commissioning of the calcination line was commenced in June, with the

trial period. With the entry into operation of this kiln, the consumption of heat and electrical

energy has been substantially reduced, achieving a production as of the close of the year of

1,073,011 tons of clinker with an average heat consumption on the order of 731 kcal/kg in this

production line, and an average electricity consumption of 28.6 kW-h/t of clinker produced, in

addition to a reduction in the monthly water consumption by approximately 12,000 m3. These

conditions should continue to improve as the production of this equipment stabilizes. As with

the Condorcocha Plant, we reduced the consumption of fuels at the Atocongo Plant in 2013,

dropping from 801 kcal/kg of clinker (from 2009 to 2011) to 771 kcal/kg. Similar savings were

registered in the consumption of electrical energy, where we dropped from 38.8 kW-h/t of

clinker (from 2009 to 2011) to 30.7 kW-h/t clinker produced in 2013.

For the modification of the calcination line, it was necessary to halt the operation of Kiln 1 at

Atocongo starting on July 1, 2012, in order to perform a series of modifications that included

metal-mechanical machining, new mechanical and electrical equipment, the implementation

of modern particulate capture systems, as well as new civil works that improved the efficiency

of the process and the kiln’s environmental performance. In February of 2013, the new roller

presses entered into operation for the milling of raw meal and cement.

2013 UNACEM 29

This investment has enabled us to increase the clinker production capacity at the Atocongo

Plant to 4.8 million tons annually, and the cement milling capacity to 5.5 million tons annually.

With the constant operation of Kiln 4 at the Condorcocha Plant and the entry into operation

of the upgraded Kiln 1 at the Atocongo Plant, UNACEM ceased to import clinker. In 2014, we

will decrease our cement manufacturing cost and we expect the heat and electrical energy

consumption to be even lower than that registered this year.

This excellent operating performance was achieved despite the breakdown of Kiln 2 at the

Atocongo Plant, which decreased production to 5,300 t/day, offset with increased imports of

clinker, resulting in the clinker stocks at the close of 2012 (279,160 t) to jump to 520,010 t as of

the close of 2013, reaching over 750,000 t as of the close of February 2014, giving us complete

confidence in our ability to supply cement to our market.

From September 2 to 5, the 30th FICEM – APCAC Technical Congress was held for the first time

in Peru, aimed at bringing together, training, and promoting the exchange of knowledge among

the cement companies that are members of the federation, suppliers, and consultants from the

industry throughout Latin America, the Caribbean, Spain, and Portugal.

Through the Cement Producers’ Association (ASOCEM), and together with the other

representatives of the Peruvian cement industry, UNACEM played an active role in carrying

out congress activities. This year marked a record attendance, with the presence of 358

participants, including 109 industry representatives, 197 suppliers, 7 conference speakers, and

29 representatives with commercial stands.

During the congress, we offered four talks: “The Atocongo – Conchán Underground Ecological

Conveyor Belt”; “Application of Blast Vibration Management Tools at Atocongo”; “Responsible

Water Management”; and “Contribution of the Cement Industry to Access to Water and Sewerage

Services in Communities of Southern Lima.” This latter talk, presented by Asociación UNACEM,

received an award from the evaluation committee, recognizing UNACEM for its good sustainability

practices and innovation with regard to its social responsibility model.

30TH TECHNICAL CONGRESS OF THE INTER-AMERICAN CEMENT FEDERATION (FICEM – APCAC)

2013 UNACEM 31

We carry out our management actions within the framework of the Principles of Good Corporate

Governance, through good business practices that enable us to guarantee the positive performance

of UNACEM, ensuring transparency while striving to benefit all our stakeholders. As such, we seek

to obtain the satisfaction of our shareholders, our management, our employees, and all our interest

groups along the entire value chain.

The Board of Directors met monthly, according to an established schedule, and has directed the

Company in an effort to equally safeguard the interests of all shareholders, taking care that the

interests of UNACEM are given priority at all times.

The Audit Committee, made up of three directors (two of whom are independent directors of the

controlling shareholder), continued to hold periodic meetings throughout the year in order to review

the information provided by the Company and revised by the independent auditors.

The Mandatory Annual Shareholders’ Meeting, held on March 26, 2013, approved the financial

statements for fiscal year 2012, as well as the unqualified opinion of the independent auditors.

During 2013, we maintained our policy for the quarterly payment of dividends in January, April,

July, and October. We have also continued to send shareholders the Annual Report and quarterly

reports with the partial financial statements and a summary of the most significant activities for

each quarter. Said information is also available on our website.

GOOD CORPORATE GOVERNANCE

ATOCONGO PLANT, LIMA

UNACEM IS A COMPANY THAT MOTIVATES ME TO ALWAYS DO BETTER. IT’S A PLEASURE FOR ME TO PERFORM MY DAILY DUTIES, TO PUT IN MY EFFORT AND DEDICATION.”

LEANDRO MANTILLA MEDINA QUALITY CONTROL DIVISION

2013 WORKER OF THE YEARATOCONGO

PRIMARY AND SECONDARY CRUSHING

3

OPERA

RATIONS

PRODUCTION AND DISPATCHES IN THE LOCAL MARKET

In 2013, our total cement production came to 5,631,076 t, 5.1% higher than that registered in

2012 (5,355,447 t). Of the total cement production, 3,731,102 t correspond to production of the

Atocongo Plant (Lima); and 1,899,974 t to the Condorcocha Plant (Junín), fully meeting the

local cement demand. Due to the shutdown of Kiln 1 for upgrading, we had to import nearly

one million tons of clinker to meet demand and carry out plant expansion. As previously

mentioned, the upgrading of Kiln 1 commenced the trial period in June, and we closed out the

year with a production of 1,073,011 t of clinker in this line.

GRAPHIC N.º 1

(in thousands of metric tons)

CEMENT PRODUCTION BY PLANT 2009 - 2013

Condorcocha Atocongo UNACEM

0

1,000

2,000

3,000

4,000

5,000

6,000

2009 2010 2011 2012 2013

4,248

4,774 4,731

5,3555,631

000

1,000

0

2009

Co

2010

Atocong

2011

ondorcocha ACEM

2012

go UNA

2013

2013 UNACEM 39

Our cement dispatches in 2013 reached a new historical record for both plants. The total volume

dispatched was 5,610,572 t, 5.6% higher than that registered in 2012 (5,310,830 t). The construction

sector remained dynamic, growing more than the economy as a whole, due to increased

construction of housing, malls, and public works.

Nationwide cement demand, according to recent estimates, totaled 11,093,004 t, making for

a 9.1% increase over demand in 2012, which was estimated at 10,167,907 t. This demand

was calculated including the dispatches of domestic producers and an estimate of imported

cement entering the country.

DOMESTIC CEMENT DISPATCHES 2004 - 2013

Domestic dispatches

4,500

4,000

3,500

3,000

2,500

2,000

1,500

1,000

500

0

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

5,000

6,000

5,500

0

0

Domestic dispatches

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

5,311

5,611

4,7024,709

4,2094,126

3,452

2,6832,481

3,056

(in thousands of metric tons)

GRAPHIC N.º 2

EACH DAY, THE COMPANY PLACES ITS TRUST IN US, ALLOWING US TO FEEL COMFORTABLE AND PROGRESS IN THE BEST POSSIBLE WAY AS WORKERS AND AS PEOPLE, WITH THE CONSTANT GOAL OF BETTERING OURSELVES.”

DAVID REYES NATEROSMECHANICAL MAINTENANCE DIVISION

2013 WORKER OF THE YEAR CONDORCOCHA


We sell our products through two business units: bagged cement and bulk cement, which

account for 73.0% and 27.0% of all sales, respectively.

The products sold by the bagged cement business unit are as follows: Type I Portland cement,

under the brand names “Cemento Andino” and “Cemento Sol”; Type IP Portland cement, under

the brand names “Cemento Atlas” and “Cemento Andino”; and Type IPM and Type V, under the

brand name “Cemento Andino.” Additionally, in the second quarter of 2013, we incorporated

“Cemento Apu” into our portfolio. This is a general-use blended cement used as a more

economical alternative to cement, with excellent performance results.

Our portfolio of products is sold mainly through two distribution channels: the traditional home

improvement channel (made up of the Progre-Sol Hardware Store network and independent

home improvement stores); and the modern home improvement channel (made up of the large

self-service home improvement stores).

In 2013, we decided to streamline our product portfolio by regions and cities, in an effort to serve

our consumers more efficiently while also increasing our market coverage levels. Thus, in cities

such as Iquitos, Pucallpa, and Ayacucho, priority was given to products from the Condorcocha

Plant (where such products used to compete with products from the Atocongo Plant), thus

achieving savings efficiency for over S/. 3 million, added to coverage levels surpassing 94% in

points of sale in Iquitos achieved in less than one year.

The bulk cement business unit sells Types I, IP, IPM, and Type V Portland cement, mainly

supplying premixed concrete vendors, mining, oil, and construction companies, as well as

companies that manufacture cement byproducts. During 2013, dispatch by this business

unit rose by 11.8% over 2012, explained primarily by the sale of cement to premixed concrete

vendors as a result of the growth experienced in the construction sector related to housing

works and infrastructure works nationwide.

Our sales strategy is focused on strengthening a sustainable commercial relationship

throughout the entire value chain, from the plant to the points of sale, as well as investing

in improving the service provided to our clients and the end users of our products. For this

reason, we have maintained strong bonds since 2008 with independent home improvement

store owners, with outstanding performance in distribution in coverage, through the Progre-Sol

Home Improvement Store Network. During 2013, the Network continued to grow, surpassing

270 points of sale.

In addition to the points of sale of the Progre-Sol Network, we have over 40 direct points of sale

in the form of distributors in cities of the central highlands and the northeast jungle of Peru,

which enables us to achieve higher levels of coverage nationwide.

SALES

2013 UNACEM 43

We are dedicated to innovating with regard to both our products and our business model.

For this reason, in 2013 we continued to design different operating, manufacturing, and final

consumer studies in order to evaluate possible new packaging as well as new formulas that

better meet the demands of cement buyers and users.

CONCHÁNPIER

INTEGRATED MANAGEMENT SYSTEM

Our port operations, expressed in metric tons, totaled 1,487,373 t, representing an increase

of 89.7% over 2012. During the year, the Conchán Pier serviced 46 ships. This considerable

increase in tonnage handled in 2013 was the result of the higher imports of clinker due to

the stoppage of Kiln 1 as part of the project for the expansion of capacity. Note should be

made of the strategic importance of our port facilities at the Conchán Pier, connected by an

underground conveyor belt to the Atocongo Plant.

After the merger, we decided to unify certain processes, such as human resources, commercial,

logistics, and legal management, among others. This gave rise to changes which we have

incorporated into both integrated management systems. For this purpose, we have two

systems: one at the Condorcocha facilities and another at the Atocongo facilities. The latter

includes the Conchán Pier and mining concessions.

During the first half of the year, we conducted a cement client satisfaction and loyalty study,

which helped us to determine opportunities for improvement in our commercial processes,

such as the variable “Credits and Collections” (valorizing the allocated amount, followed by

a complete report on credit options). Additionally, thanks to the six internal audits performed

during the year, we have verified our compliance with the requirements established by ISO

9001, ISO 14001, OHSAS 18001, BASC, and PBIP standards, as well as the legal requirements

for safety, occupational health, and environmental aspects at UNACEM. With the formal review

of the Integrated Management System Area, we have made sure that this system will remain

effective, adequate, and advisable.

In September, SGS performed a follow-up audit on ISO 9001 certification, with positive results,

enabling us to continue with our ISO 9001:2008 certification obtained in 2012 for the Atocongo

Plant and Conchán Pier.

In November 2013, after the second-phase audit performed by SGS, we obtained ISO

14001:2004 and OHSAS 18001:2007 certifications for the “Manufacture and Sale of Clinker

and Cement at the Atocongo Plant; Loading and Unloading of Vessels at the Conchán Pier.”

Beyond compliance with the requirements for standards, these certifications confirm our

commitment to orient our efforts at the prevention of pollution, maintain adequate control of

our environmental matters, and prevent occupational accidents and diseases, thanks to the

planning and controls we use to manage the health and safety risks posed to our employees.

Additionally, we have renewed our BASC (Business Alliance for Secure Commerce) certification

for the Atocongo Plant and Conchán Pier; and PBIP (Ship and Port Facility Protection)

certification for our port operations.

In September 2013, SGS performed the independent follow-up audit for ISO 14001:2004

standards and ISO 9001:2008 and OHSAS 18001:2007 recertification for the processes of the

Condorcocha Plant. The auditing team concluded that UNACEM has established and maintains

quality and occupational health and safety management systems at the Condorcocha Plant

in accordance with the requirements of ISO 9001:2008 and OHSAS 18001:2007 standards,

respectively, recommending recertification and the follow-up of ISO 14001:2004, under the

scope of the “Manufacture and Sale of Cement at an Industrial Plant.”

Over the course of the year, we performed three internal audits focused on the occupational

health, safety and environmental management of our contractors, which is an important tool to

improve contractor performance in environmental and occupational health and safety matters.

Furthermore, in August we performed an integrated internal audit of the processes of UNACEM

Condorcocha, which made it possible for us to identify the areas in which we may strengthen

out Integrated Management System.

ATOCONGO PLANT AND CONCHÁN PIER INTEGRATED MANAGEMENT SYSTEM (IMS)

CONDORCOCHA PLANT INTEGRATED MANAGEMENT SYSTEM (IMS)

PRODUCTION LINE 4, CONDORCOCHA PLANT, TARMA


THE COMPANY HAS GIVEN ME EVERYTHING AND I’VE GIVEN MY ALL TO THE COMPANY. IT’S MY SECOND FAMILY.”YOLANDA CASTILLO CALDERÓN

HUMAN RESOURCES AND ADMINISTRATIVE SERVICES MANAGEMENT

ATOCONGO


PREHOMOGENIZATION AND MILLING OF RAW MEAL

4

SUSTAMANAG

2013 UNACEM 51

AINABLEAGEMENT

At UNACEM, the development of our business is associated with a sustainability strategy

that starts with our employees, as ambassadors of the Company’s responsible management,

aligning, articulating, and integrating our corporate values.

Along these same lines, suppliers, contractors, and clients are given our undivided attention

in order to establish responsible practices in their processes and each one of their companies’

areas.

Another of our essential commitments to sustainable development involves our local

communities, with whom we work on capacity-building and institutional strengthening for

self-sustainability. We are also committed to mitigating the effects of climate change and

promoting good environmental practices.

We have joined forces in an effort to generate value for our stakeholders. With the goal of

strengthening our sustainable vision, we created Asociación UNACEM (previously Asociación

Atocongo), which promotes and fosters the development and execution of UNACEM’s corporate

sustainability strategy, as well as boosting social investment initiatives aligned with our

business objectives.

This sustainability model has three pillars of action: economic management, environmental

management, and social management. All of these are grounded in the basic challenges faced

by the industry, and carried out based on our Corporate Social Responsibility policy.

Likewise, each one of the Group’s companies manages its own sustainability model. Thus, for

example, UNICON focuses on the responsible use of natural resources such as water, through

the implementation of projects for green concrete and the promotion of new initiatives that

involve reductions in the use of energy and other materials for its production processes.

On the other hand, CELEPSA—a hydropower generator—contributes clean energy, for which

reason its strategy is based around the promotion of the adequate use of water in its area of

activity and the social development of the community.

This business vision has enabled us to consolidate our leadership in the sector and build trust

among our stakeholders, promoting a sustainable, ethical, and responsible management.

2013 UNACEM 53

UNACEM has eight stakeholder groups, with whom it seeks to build a rapport and generate

trust so that we may grow together in the development of our activities.

With this purpose in mind, we have implemented dialogue spaces in an effort to learn about

the expectations, concerns, and needs of our stakeholders, so that we may prioritize them

and incorporate them into our management. We have also developed tools that enable us to

maintain direct and transparent communication, providing stakeholders with information on

the Company’s performance.

STAKEHOLDERS

UNACEM’S STAKEHOLDERSGRAPHIC N.º 3

SUPPLIERSSUSUPPPPPLLILIERERSSS

COMMUNITY

STAFF

FUTUREGENERATIONS

ENVIRONMENT GOVERNMENT

SHAREHOLDERS

CUSTOMERS

AS SOON AS I STARTED WORKING FOR THE COMPANY, I LEARNED THE IMPORTANCE OF TEAMWORK, THE POSITIVE ATTITUDE OF THE EMPLOYEES IN THE FACE OF NEW CHALLENGES. THAT’S WHAT SETS US APART.”EDGARDO MONTOYA MORALES

WAREHOUSES DEPARTMENT 2013 EMPLOYEE OF THE YEAR

ATOCONGO


Our employees’ commitment is one of the main pillars necessary to take on the challenges of

the industry. The harmony of our relations with our employees has made it possible to achieve

high levels of performance and productivity in all of our operations during 2013.

Graphic 4 shows the variation in the numbers of employees during 2012 and 2013 (as of

December 31 of each year). It should be noted that the data shown for 2012 is for the total

number of employees starting on October 1, the date on which the merger entered into effect,

and includes the entire staff of UNACEM.

In April 2013, we entered into a Collective Agreement with the Sindicato Único de Trabajadores

de Unión Andina de Cementos S.A.A. workers’ union, which will expire in December 2015. This

agreement joins that signed in July of 2012 with the Sindicato de Trabajadores de Cementos

Lima S.A. – Canteras de Atocongo union, which was established for a term of three years,

ending in 2015.

The signing of agreements with both unions, for a term of three years apiece, confirms the

trust and commitment of our employees with regard to UNACEM’s goals. It will also help us

to standardize human resources management procedures during this term so that we can

merge both units and improve the work environment.

OUR EMPLOYEES

VARIATION IN EMPLOYEES ON PAYROLLGRAPHIC N.º 4

Administrative Staff

Employees

Workers

0

100

200

300

261

152

207

283

137

234

Total 2013: 654

Total 2012: 620

20132012

2013 UNACEM 57

CLASSIFICATION OF TRAINING MAN-HOURS

TRAINING AND DEVELOPMENT OF OUR EMPLOYEES In keeping with our commitment to continuous improvement, we aim to strengthen the skills of our employees through the regular implementation of training programs.

Currently, we have a skill-based management model that involves processes for the analysis of job profiles, recruiting and selection, performance evaluation, development, and training of the members of our team.

To guarantee the skills of our employees, we seek to promote and facilitate their professional and technical development through constant training in Peru and abroad. As such, during 2013 courses were organized for a total of 23,637 man-hours, equivalent to an average of 30.22 hours per employee.

GRAPHIC N.º 5

14,489 horasINSIDE THE COMPANY

8,636 horasPERÚ

OUTSIDE THE COMPANY

23,637 hoursTOTAL

512 horasABROAD

The 21st Professional Training Program finished in September, having brought together young

professionals from different specialties. At the same time, we initiated the 22nd Program, with the

participation of 31 recently-graduate professionals.

On the other hand, as part of our commitment to contribute to the education of young people in

our country, we received technical visits by over 1,730 students from different universities, thus

contributing to the training of the country’s future professionals.

OCCUPATIONAL HEALTH AND SAFETY We have an occupational health and safety management system that enables us to identify the

main risks and incidents in each area and promptly follow up on them in order to prevent and

reduce them.

Thanks to our good practices, we obtained very good results in 2013 in the health and safety

indices. For example, the accident rate dropped by an average of 90.0% at Atocongo and

Condorcocha. Likewise, a 52.8% reduction was achieved in the days lost rate at the Condorcocha

Plant.

TABLE N.º 1

OCCUPATIONAL HEALTH AND SAFETY INDICATORS 2013 VS. 2012

ATOCONGO CONDORCOCHA

2012 2013 2012 2013

Absentee Rate 5.85 6.65 4.98 2.35

Accident Rate 19.00 1.80 19.05 2.14

N.° of fatalities 0 0

Severity index 925.30 115.10 2,206.30 203.35

* In 2012 we reported one fatality at the Atocongo plant, whose case is still being investigated by the Ministry of Labor

2013 UNACEM 59

We have an environmental management system aimed at promptly identifying the impacts

caused by our operations, as well as establishing prevention and mitigation plans for these

impacts. The system has four areas of action, based on the impacts identified: environmental

quality; natural and cultural resources management; capacity building; and environmental

certifications.

ENERGY, EMISSIONS, AND CLIMATE CHANGE One of the primary impacts of the cement sector is the emission of greenhouse gases (GHG).

Our management is focused on reducing the emission of greenhouse gases in the production

process via the implementation of cleaner and more efficient technologies.

In our operations, we seek to use clean energy via our hydroelectric plants Carpapata I and

II, CELEPSA, and our Atocongo thermal power plant. The latter uses 94.0% natural gas and

6.0% diesel fuel in its operations.

As part of the Clean Development Mechanism of the United Nations Framework Convention

on Climate Change (UNFCCC), we have registered our fuel switching project. On September 9,

2013, the Secretariat of the UNFCCC issued the 137,754 Certified Emission Reductions (CERs)

corresponding to the third periodic verification. On December 4, we initiated the transfer of

134,998 CERs, in accordance with the established procedure, which were sold to EDF Trading

Ltd., in compliance with the agreement in force with said company since March 2010. We

constantly monitor the emission reductions generated by our fuel switching project.

Additionally, we are working to raise awareness among our employees, organizing seven

talks during Environment Week, as well as providing inductions for all contractors who enter

our facilities.

ENVIRONMENT

RESPONSIBLE USE OF WATEROur initiatives with regard to water management allowed us to accomplish the following in

2013:

Implement a new “Biocleaner” technology in the Condorcocha water treatment plant, in

which microbes are responsible for cleaning the water. This ecological process requires less

space, maintenance, and operating costs. At Atocongo, the water treatment plan operates

using a system of sub-surface cushion bogs, in which different plants are responsible for

cleaning the water. The treated water in both plants is reused in the watering of green

areas, roadways, as well as the firefighting system and the industrial process.

Measure the Water Footprint at the Atocongo Plant, in order to establish the baseline for our

consumption based on the lifecycle analysis. This made us one of the first five companies

in Peru to conduct this study, positioning as leaders in the promotion of these initiatives in

the country. The work was performed together with the Swiss Agency for Development and

Cooperation (COSUDE), which provided the technical support for the study through the NGO

Agualimpia. The Project is known as “Suizagua,” and will continue during 2014.

Create a responsible culture for the optimization of water use among our employees and

contractors, through the “Make the Difference” program.

OUR COMMUNITIES

We implemented a grassroots development methodology, which promotes a proactive attitude

among stakeholders with regard to their own development, through their positive performance

in the social fabric. For such purpose, we built capacities among community members that will

help them to engage with different social actors in their surroundings, both public and private.

Our community strategy is based on three areas of action: social infrastructure, relations, and

human and social development. Additionally, we form cross-cutting strategic alliances with

different local stakeholders, in order to promote group initiatives, cooperating with the actors

to promote development in our area of influence.

We also created different spaces for dialogue with the community members in our area

of influence, with whom we have established continuous and transparent communication,

enabling us to forge lasting relationships based on trust. We have thus consolidated ourselves

as a key actor in the promotion of the economic, social, and cultural development of our

surroundings.

2013 UNACEM 61

COMMUNITY STRATEGYTABLE N.º 2

Our areas of direct influence include five districts in Lima and four in Tarma, where

we carry out our principal social development actions.

AREAS OF INFLUENCE OF UNACEMGRAPHIC N.º 6

COMMUNITY RELATIONS

Strengthening of

company-community

relations

Promotion of dialogue

spaces

Environmental projects

Contribution of cement

and other construction

materials

Technical advisory

HUMAN AND SOCIAL DEVELOPMENT

Production, social,

and entrepreneurial

development projects

SOCIALINFRASTRUCTURE

VILLA MARÍA DEL TRIUNFO

PACHACÁMAC VILLA EL SALVADOR

SAN JUAN DE MIRAFLORES LURÍN

LIMA TARMA

CONDORCOCHA

HUANCOY CHANCHA

PALCA

In 2013, we made a total investment in development programs of S/. 9,686,055, 20.0% more

than in 2012. We thus benefitted approximately 148,000 community members. Below is a

summary of some of the most notable results of the work we performed with the community:

Construction and remodeling of 14 social infrastructure works in Lima and Tarma: over

51,300 bags of cement donated, benefitting 118 works, as well as 226 lots benefitted through

the Techo Propio program, representing an investment of over S/. 1.4 million.

The “Math for Everyone” program benefitted a total of 35 public schools in the province of

Tarma, in the districts of La Unión Leticia, and Palca, and the Populated Area of Condorcocha.

A total of 35 principals, 104 teachers, and 1,482 primary school students were benefitted.

Additionally, an improvement of 11.0% was achieved in the results of the final evaluation for

2013. The program is currently still underway.

The “Promoting Successful Youth” (PSY) program is carried out in alliance with the World

University Service of Canada (WUSC), with the additional support of Canadian Technical

Cooperation, helping to benefit 554 youths with student scholarships. Of all graduates,

66.0% are currently employed, 65.0% of whom are women. A total of 62 undertakings

received seed capital.

To learn more about our sustainable management, we invite you to read the 2013 Sustainability

Report that accompanies this Report, prepared using the Global Reporting Initiative (GRI)

methodology.

EQUIPMENT COOLING SYSTEM, CONDORCOCHA PLANT, TARMA


WHEN I WAS LITTLE, I WANTED TO BE A NURSE, BUT I NEVER GOT THE CHANCE… ASOCIACIÓN UNACEM HAS GIVEN ME THAT CHANCE NOW, TRAINING IN MEDICAL MATTERS SO THAT I CAN HELP MY COMMUNITY.”

MARÍA FELÍCITA YUPANQUI LUNA COMMUNITY AGENT OF THE JOSÉ GÁLVEZ

MOTHER AND CHILD HEALTH CENTER

2013 UNACEM 65202020202013313313111313 UNUNUNUNUUNUNUNUNNAAAAAAAAAAAACCCCCCCCCCCCCCCAAAAAAAAAA EEEEEEEEEEEEEMMMMMMMM 6556656

MAKING CLINKER

5

FUTURPR

2013 UNACEM 69

EOJECTS

KILN 5 AND CEMENT MILL 9

At the Condorcocha Plant, taking into account the growing demand projected for the coming

years, we have initiated the feasibility studies and detailed engineering for the performance of

the “New Kiln 5 Production Line” project, which is scheduled to enter into operation by the end

of 2017. This new line will contribute an installed capacity of 1 million tons of clinker.

This new production line includes the installation of Cement Mill 9, which would contribute an

installed capacity of 1.2 million tons of cement. Like Mill 8, it will be able to manufacture Types

I and IP cement.

With the performance of these two projects at the Condorcocha Plant, we will increase our

capacity for the production of clinker from 1.88 million to 2.82 million starting at the end

of 2017. Likewise, the milling capacity will rise from 2.1 million tons of cement annually to

2.9 million tons annually in 2015, which will later be increased to nearly 4.0 million tons by the

end of 2017.

Our joint capacity will grow from 6.7 million tons of clinker in 2013 to 7.6 million tons by the end

of 2017. The cement milling capacity will increase from 7.6 million to 9.5 million tons annually

during the same period.

UPGRADING AND PRODUCTION CAPACITY INCREASE OF THE ATOCONGO PLANT

As described in Chapter 2, the startup and commissioning of the upgraded Kiln 1 was a

resounding success, and is currently operating at full capacity.

As of the close of 2013, the civil works for the modification of the four raw meal storage

silos had been concluded, for their conversion into mixing silos. During the first half of

2014, the electromechanical assembly and commissioning of the last of these four silos will

be performed.

2013 UNACEM 71

In August 2013, we began construction on the building for the new Cementer Bagger 6, which

was concluded in later December. This new bagger is fully automatic and has a bagging capacity

of 3,000 bags of cement per hour.

During 2014, we will continue with metal-mechanical works and electromechanical assemblies

so that the system may enter into operation by September 2014.

NEW CEMENT BAGGER 6 AT THE ATOCONGO PLANT

FIREFIGHTING SYSTEM OF THE ATOCONGO – CONCHÁN CONVEYOR BELT

Over the course of this year, we carried out the project for the installation of the firefighting

system of the conveyor belt and tunnel that run from the Atocongo Plant to the Conchán Pier.

This system has a reservoir with a capacity of 750 m3 of water coming from our Wastewater

Treatment Plant.

During 2013, we initiated the construction of a new concrete block plant located in Cajamarquilla.

The principal products that will be manufactured are floor cobblestones, joist filler block (roofing

bricks), and King Kong bricks. The plant’s annual capacity varies from 20 million to 60 million units

annually, approximately, depending on the product to be manufactured.

CAJAMARQUILLA CONCRETE BLOCK PLANT

NEW CEMENT MILL 8 AND BAGGER 5 AT THE CONDORCOCHA PLANT

Over the course of the year, we continued to develop the engineering and procure the equipment

for these systems. In January 2014, pilot works were begun for the foundations of the new

mill building.

The new cement mill will have a capacity of 125 t/hour, i.e., a nominal capacity of 825,000 t

annually, via a combined milling system comprising a roller press and ball mill.

Likewise, the new bagger will have a bagging capacity of 3,000 bags per hour, with two cement

storage silos with a capacity of 7,500 tons each.

The electromechanical works are scheduled to begin in July 2014, and the commissioning

of the system is set for April 2015, concluding in July of that year.

2013 UNACEM 73

CARPAPATA III HYDROPOWER PLANT

In 2013, we performed the final and definitive studies for the performance of the project for the

new Carpapata III hydropower plant, which will have a generation capacity of 12.8 MW, via a net

water height of 125 meters and two Francis turbines.

We also continued with the procurement process for the equipment, which will be supplied by

the Austrian company Gugler Water Turbines GmbH. In April 2014, the tender process for the

construction works for the tunnels and engine room will begin, with construction scheduled to

commence in July. The plant should enter into operation during the second half of 2016.

CARPAPATA I HYDROELECTRIC PLANT, TARMA

THE COMPANY HAS HELPED ME DEVELOP AS A PERSON, TO PUT MY IDEAS INTO PRACTICE, TO GROW IN THE SECTOR. SOMETIMES, YOU’VE LEARNED THE THEORY BEHIND THINGS, BUT YOU NEED THE CHANCE TO FULFILL THE OBJECTIVES… WITH THE MERGER, THAT IS EXACTLY WHAT HAS BEEN ACHIEVED.”

CARLOS ATENCIO HERRERA REPRESENTACIONES SAN JORGE E.I.R.L.

DISTRIBUTOR IN LIMA


COOLING AND MILLING OF CEMENT

6

SUBSIDIAAF

2013 UNACEM 79

RIES ANDFILIATES

Through our subsidiaries, we have diversified our investments in premixed concrete,

industrialized prefabricated concrete, as well as cement byproducts and the energy sector.

In 2013, UNICON and Firth maintained their position as leaders in the premixed concrete industry.

CELEPSA reinforces our commitment to seek out renewable energy matrices with excellent

results; and via PREANSA, a large-scale prefabricated structures plant, we have expanded

our vision in South America to Chile. In the near future, we will also be initiating operations in

Colombia.

During 2013, premixed concrete dispatches nationwide totaled 2,353,679 m³, making for an increase

of 15.2% over the shipments of 2,043,476 m³ registered in 2012, explained mainly by the higher

demand from infrastructure and housing works.

In Lima, dispatches totaled 1,823,528 m³, 16.3% higher than the previous period (1,568,635 m³).

Likewise, shipments in the provinces rose by 11.7%, to 530,151 m³.

Commercial agreements during 2013 totaled 2,442,325 m³ of concrete, surpassing the 2,225,388

m³ registered in 2012. During the year, the capacity to meet demand was expanded with the

installation of the Villa, Oquendo 2, Collique, and Muelle Norte Plants. Likewise, as of the close of

2013, the fleet of mixers and pumps had been increased, with a total capacity of 1,540 m³/h in 16

fixed plants, 332 mixer trucks, and 90 concrete pumps.

The audited financial statements of UNICON as of December 31, 2013 showed the following results:

Net sales of S/. 764.7 million (S/. 637.6 million in 2012).

Net results of S/. 39.2 million (S/. 48.1 million in 2012).

Net shareholders’ equity of S/. 259.0 million (S/. 219.0 million in 2012).

FIRTH INDUSTRIES PERÚ S.A.UNICON holds 100.0% of the shares in Firth Industries Perú S.A. In 2013, the company’s premixed

concrete dispatches nationwide totaled 594,207 m³, a volume that was 3.7% less than the 617,148 m³

registered in 2012. This is due to the fact that the company centered its operations point in Lima. Over

the course of the year, dispatches in Lima rose by 26.2%, in contrast to the 66.9% drop in the provinces,

thus generating this slight decrease in Firth’s overall results.

The audited financial statements as of December 31, 2013 showed the following results:




INVECO S.A. / UNICON S.A.(OWNERSHIP SHARE: 93.4% OF INVECO / 100.0% OF UNICON)

2013 UNACEM 81

BASF CONSTRUCTION CHEMICALS PERÚ S.A.UNICON holds a 30.0% share in the capital stock of BASF Construction Chemicals Perú S.A., a

supplier of additives for concrete, adhesives, and grouts for masonry, grouts for the assembly of

industrial equipment, and products for the repair of concrete structure, among others.

The audited financial statements as of December 31, 2013 showed the following results:




ENTREPISOS LIMA S.A.C.UNICON holds a 50.0% share of the stock in the company Entrepisos Lima S.A.C., engaged

in investments in the activities of construction, concrete prefabrication, and the rental of

equipment and machinery for construction and related activities.

As of the close of fiscal year 2013, the company had showed the following results:




COMPAÑÍA ELÉCTRICA EL PLATANAL S.A. – CELEPSA

(OWNERSHIP SHARE: 90.0%)

During 2013, as a result of the hydrological conditions, the total energy production of the Power

Plant came to 1,149,137 MW-h (1,149 GW-h), slightly higher than the production for 2012, which

totaled 1,122,768 MW-h (1,123 GW-h).

The company’s commercial management enabled it to identify business opportunities that

resulted in an increase in energy sales by 32.7% over the previous year.

The energy sold by CELEPSA during 2013 as a result of contractual commitments totaled 1,535

GW-h, of which 840 GW-h were used to meet the needs of the regulated market, while 695

GW-h were used to meet the needs of the company’s clients in the free market.

Additionally, the monthly power billed to the company’s free and regulated clients fluctuated

between a high of 221 MW and a low of 85 MW.

The net revenues of CELEPSA for power and energy in fiscal year 2013 totaled US$ 67.8 million,

exceeding revenues for 2012 by 7.3%. CELEPSA occupies eighth place in the production

ranking for the National Grid System (SEIN), with a 2.9% share of national production in

2013. During said year, CELEPSA generated 1,149 GW-h of the total 39,669 GW-h of the SEIN.

CARBON CREDITSDuring 2013, a total of 286,312 CERs were issued (January 1 to April 30), which will be sold in

the future when adequate conditions are determined.

Likewise, during the period between January 1 and December 31, 2013, the Company injected

a total of 1,149 GW-h into the system, equivalent to 577,947,000 tons of CO2 reduced.

The CERs issued for the Plant’s generation from the start of operations to date total 2,141,261,

representing an annual average of 658,850 CERs. This means that El Platanal continues to be

the leading CDM emissions reduction project in Peru.

FINANCIAL ASPECTSCELEPSA has been meeting the profitability indicators promised to its investors and complying

on a timely basis with its financial obligations, in addition to making the mandatory prepayment

of the final installments required by its financing (60.0% of the cash flow surplus from the

previous year).

During 2013, CELEPSA signed a leaseback for the electromechanical equipment at a term

of seven years, replacing the debt of the original financing, specifically the final installments

(“balloon” installments). Considering the foregoing, CELEPSA’s total debt shrank from

US$ 134.7 million at the close of 2012 to US$ 108.8 million at the close of 2013.

This decrease in the debt caused interest expenses to drop from S/. 26 million in 2012 to

S/. 23 million in 2013. However, because the debt is held in dollars, a net foreign exchange loss

of S/. 32 million was registered (compared to a net foreign exchange gain of S/. 22.4 million in

2012), causing the net profit to drop from S/. 36 million in 2012 to S/. 1.8 million in 2013.

The audited financial statements of CELEPSA as of December 31, 2013 showed the following

results:


Net profit of S/. 1.8 million (S/. 36.0 million in 2012).


CELEPSA RENOVABLES S.A.C.This company is the vehicle established by CELEPSA for the development of hydroelectric

projects with a power of up to 20 MW, as well as other activities related to the generation,

production, commercialization, distribution, transmission, and supply of electrical energy with

renewable energy resources.

2013 UNACEM 83

The Company has made capital contributions to Skanon Investments, Inc. for US$ 332 million

(US$ 31.3 million in 2013), making it the direct owner of 87.4% of the shares in this subsidiary.

Additionally, its related companies hold 10.7% of the rest of the stock.

Skanon Investments, Inc. is in turn the owner of 93.9% of Drake Cement and 100% of Drake

Materials.

In 2013, the total cement sales of Drake Cement came to 329,800 short tons, 20.9% higher than

sales during the previous year, which totaled 272,689 short tons. In 2014, Drake Cement’s sales

are expected to exceed 400,000 short tons of cement.

Over the course of the year, Drake Materials registered premixed concrete sales of 500,000 m³,

an increase of 15.0% over the previous year. Additionally, in 2013 it completed the procurement

of a CEMCO mobile concrete batching plant, capable of producing 150 m³ per hour, which may be

set up and start producing concrete in one day. This plant is currently at the Sky Harbor Airport

in Phoenix, at a job awarded to Drake for 42,000 m³.

The cement market in Arizona grew by 11.3% during 2013. According to the Portland Cement

Association (PCA), projections for the next five years show an average annual growth of 11.0%.

The consolidated financial statements for Skanon Investments, Inc. showed the following results:

Net sales of US$ 68.8 million (US$ 50.6 million in 2012).

Net loss of US$ 19.5 million (US$ 22.2 million in 2012).

Net shareholders’ equity of US$ 318.3 million (US$ 307.0 million in 2012).

SKANON INVESTMENTS, INC. / DRAKE CEMENT, LLC

(OWNERSHIP SHARE: 87.4% OF SKANON INVESTMENTS / 93.9% OF DRAKE CEMENT)

AMBIENTAL ANDINA S.A.Company in which CELEPSA holds a 50.0% share. It was established for the purpose of

positioning itself as the leading private company in meteorology, hydrology, and hydropower

project origination in Peru, providing solutions that help companies detect investment

opportunities, as well as minimizing risks and reducing the impact of weather on business

operations.

During 2013, operations moved forward as scheduled in the annual plan. Contracting levels

totaled S/. 26.5 million, meaning a 11.0% increase over the previous period. Sales for erection

were also achieved for S/. 28.1 million, 25.0% higher than the amount registered in the previous

period, thus meeting one of the established objectives.

As a consequence of the foregoing, production levels exceeded 7,453 m³, achieving a figure

very similar to that of 2012 (7,422 m³). Erection totaled 8,210 m³, 19.1% higher than in 2012

(6,888 m³).

The crane rental service, following the same pattern as the rest of the activities, achieved an

increase of 47.0% in billing over 2012, with a total of S/. 2.2 million.

It is important to note that during the second half of the year, the company supplied concrete

structures for public works, including those carried out at the Alipio Ponce and San Pedro

bridges on the Panamericana Sur highway.

The audited financial statements of PREANSA PERÚ showed the following results:




PREFABRICADOS ANDINOS PERÚ S.A.C. (PREANSA PERÚ)


2013 UNACEM 85

PREFABRICADOS ANDINOS S.A. (PREANSA CHILE)


The Board of Directors’ Meeting held on January 17, 2014 approved the purchase of 51.0%

of the capital stock in the company Prefabricados Andinos S.A., equivalent to the sum of

US$ 7.14 million. The other 49.0% of the stock in this company is owned by the Spanish

company Prefabricados Agrícolas e Industriales S.A.

PREANSA CHILE is a company engaged in the manufacture and sale of industrialized concrete

structures, with over 17 years of experience in the Chilean market.

SALOG WAREHOUSE ERECTION-WORK PERFORMED BY PREANSA, PERU

I HAVE GREAT MEMORIES OF THE COMPANY, WHERE I WORKED FOR THIRTY-FIVE YEARS OF MY LIFE. TODAY, AT THE AGE OF 93, IT CONTINUES TO BE PART OF MY LIFE. THANKS TO THE COMPANY’S SUPPORT, I’VE BEEN ABLE TO TRAVEL ABROAD TO COMPETE AND WIN SEVERAL MEDALS.”

EUGENIO MEJÍA JULCARETIREE

SOUTH AMERICAN CHAMPION MASTER CATEGORY

ATOCONGO

BULK PACKAGING AND DISPATCH

7

ECONOMIFINAN

RESU

2013 UNACEM 91

IC-CIAL ULTS

The audited itemized financial statements of UNACEM as of December 31, 2013 showed the

following results:

Net sales of S/. 1.7852 billion (S/. 1.7259 billion in 2012).


Net shareholders’ equity of S/. 3.4181 billion (S/. 3.2899 billion in 2012).

Net sales grew by 3.4% over sales for 2012. This increase is based on the higher physical

volume dispatched, totaling 4.7%, as a result of increased construction activity driven by higher

private and public investment, net of the lower average price of the product mix.

On the other hand, the cost of local sales increased by 2.8%, due to the higher volume of cement

dispatches and the higher cost of the imported clinker purchase. However, as a consequence

of higher revenues, and the control of costs and expenses, the gross profit was maintained

following the previous period, with operating profits totaling S/. 520.0 million, 7.3% higher

than in 2012. Despite maintaining the same sale prices for cement and the large volume of

clinker imported in 2013 (983,130 t in 2013 vs. 333,513 t in 2012), which cost twice that of

manufacturing it ourselves, we achieved an operating profit in 2013 equal to that of 2012. The

EBITDA for 2013 was 9.5% higher than in 2012, thanks to the operating efficiency and synergies

achieved through the merger.

Financial expenses were 35.3% higher than in the previous fiscal year, as a result of the

increase in the debt on the order of 19.5% and higher rates due to the partial substitution

of the short-term debt in dollars for a medium-term debt in Nuevos Soles at higher rates.

At the start of the fiscal year, 70.3% of the debt was expressed in U.S. dollars, resulting in

significant foreign exchange losses. In order to avoid exposure to greater fluctuations in the

exchange rate and increases in interest rates, the Management reduced the exposure of the

debt in U.S. dollars to 49.0% of the total debt. As of the close of 2013, the long-term debt

represented 70.0% of the total financial debt, compared to 55.0% as of the close of 2012.

During the fiscal year in course, we will continue with the policy of reducing exposure to

foreign exchange risk and increases in interest rates.

FINANCIAL DEBT 2013 VS. 2012

5781,3651,1861,135

2012

Short-Term: 45% Long-Term: 55% Short-Term: 30% Long-Term: 70%

2013

In Nuevos Soles

In U.S. dollars

(in millions of Nuevos Soles)

GRAPHIC N.º 7

2013 UNACEM 93

Finally, the positive performance in operating terms was negatively impacted by the foreign

exchange losses, as a result of which the net profit totaled S/. 204.7 million, 42.9% lower than

that booked in 2012.

The consolidated financial statements as of December 31, 2013 showed the following results:

Net sales of S/. 2.8947 billion (S/. 2.6747 billion in 2012).


Net shareholders’ equity of S/. 3.6362 billion (S/. 3.4441 billion in 2012).

The itemized and consolidated financial statements for fiscal year 2013 were prepared in

accordance with the International Financial Reporting Standards (IFRSs).

By delegation of the Shareholders’ Meeting, the Board of Directors adopted the decisions

summarized herein below over the course of fiscal year 2013, with their respective effects on

the Company’s net shareholders’ equity:

January 18: Payment to the shareholders of UNACEM S.A.A. of dividends totaling S/. 0.017 per

ordinary share, charged to the retained profits corresponding to fiscal year 2012.

April 19: Payment to the shareholders of UNACEM S.A.A. of dividends totaling S/. 0.013 per

ordinary share, charged to the partial profits corresponding to fiscal year 2013.

July 19: Payment to the shareholders of UNACEM S.A.A. of dividends totaling S/. 0.008 per


October 18: Payment to the shareholders of UNACEM S.A.A. of dividends totaling S/. 0.013 per


The Shareholders’ Meeting held on April 7, 2010 approved the Second Debt Security Issue

Program—for up to a maximum amount in circulation of US$ 150,000,000 or its equivalent

in Nuevos Soles—approved via Issue Director’s Resolution 095-2010-EF/94.06.3. In

accordance with the provisions established and the approval given by the Board of Directors,

the following corporate bond issues were performed under the Second Program:

March 7: Placement of the First Issue, for S/. 60.0 million at a term of 7 years, with an

annual rate of 4.9375%, for a bullet payment at the end of the seventh year.

March 7: Placement of the Second Issue, for S/. 60.0 million at a term of 10 years, with an

annual rate of 5.15625%, for a bullet payment at the end of the tenth year.

December 12: Placement of the Third Issue, for S/. 60.0 million at a term of 3 years, with an

annual rate of 5.5625%, for a bullet payment at the end of the third year.

The fully subscribed and paid-in capital stock is S/. 1,646,503,408 (One Billion, Six Hundred

Forty-Six Million, Five Hundred and Three Thousand, Four Hundred and Eight with 00/100

Nuevos Soles), represented by 1,646,503,408 (One Billion, Six Hundred Forty-Six Million, Five

Hundred and Three Thousand, Four Hundred and Eight) ordinary shares with a par value of

S/. 1.00 each.

In light of the foregoing, and in accordance with the International Financial Reporting Standards

(IFRSs), the figures in Nuevos Soles as of December 31, 2013 and 2012, respectively, are as follows:

Different tax, legal, and labor proceedings are currently pending with regard to the Company’s

operations. In the opinion of the Management and the legal counsels, the final results of these

proceedings will not involve significant expenses for the Company, for which reason, as of

December 31, 2013, we have not registered any allowance whatsoever with regard thereto.

The independent auditing duties during fiscal year 2013 were under the responsibility of Medina,

Zaldívar, Paredes & Asociados (member firm of Ernst & Young). The opinion with regard to the

Statement of Financial Position, the Results Statement, the Comprehensive Results Statement,

and the itemized Statement of Changes in Net Shareholders’ Equity and Cash Flow Statement

as of December 31, 2013, which form part of this Report, are free of objections.

SHAREHOLDERS’ EQUITY ACCOUNT AS OF DEC. 31, 2013 AS OF DEC. 31, 2012

Capital Stock 1,646,503,408 1,646,503,408

Legal Reserve 270,202,711 249,728,493

Unrealized Results -1,677,519 -5,010,952

Cumulative Results 1,503,095,246 1,398,671,356

TOTAL SHAREHOLDERS’ EQUITY 3,418,123,851 3,289,892,305

SHAREHOLDERS’ EQUITY ACCOUNT AS OF DECEMBER 31, 2013

AS OF DECEMBER 31,2012

Capital Stock 1,646,503,408 1,646,503,408

Legal Reserve 270,202,711 249,728,493

Unrealized Results -1,677,519 -5,010,952

Cumulative Results 1,503,095,246 1,398,671,356

TOTAL SHAREHOLDERS’ EQUITY 3,418,123,851 3,289,892,305

BAG OF TYPE I ANDINO CEMENT


PACKAGING AND DISPATCH OF BAGGED CEMENT

INDEPENDENT AUDITOR’S REPORT

TO THE SHAREHOLDERS OF UNIÓN ANDINA DE CEMENTOS S.A.A. We have audited the accompanying separate financial statements of Unión Andina de Cementos

S.A.A. (a Peruvian entity), which comprise the statements of financial position as of December

31, 2013 and 2012, 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 notes.

MANAGEMENT RESPONSIBILITY FOR THE SEPARATE FINANCIAL STATEMENTSManagement 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 RESPONSIBILITYOur 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.

2013 UNACEM 99

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a

basis for our audit opinion.

OPINIONIn our opinion, the accompanying separated financial statements, present fairly, in all material

aspects, the financial position of Unión Andina de Cementos S.A.A. as of December 31, 2013

and 2012, and its financial performance and cash flows for the years then ended, in accordance

with International Financial Reporting Standards.

EMPHASIS OVER THE SEPARATE INFORMATIONThe separate financial statements of Unión Andina de Cementos 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. and Subsidiaries, which are separately

presented.

Lima, Peru

February 13, 2014

Countersigned by:

__________________________

Marco Antonio Zaldívar

C.P.C.C. Register No. 12477

STATEMENTS OF FINANCIAL POSITIONAs of December 31, 2013 and 2012

ASSET NOTE 2013 2012(NOTE 3.3)

AT JANUARY 1, 2012

(NOTE 3.3)

S/. (000) S/. (000) S/. (000)

CURRENT ASSETS

Cash and cash equivalents 7 196,750 74,189 63,473

Investments - 33 170

Trade and other receivables, net 8 259,003 160,012 141,606

Inventories 9 497,835 419,775 353,114

Prepaid taxes and expenses 11,204 9,277 11,803

TOTAL CURRENT ASSETS 964,792 663,286 570,166

NON CURRENT ASSETS

Trade and other receivables, net 8 5,024 7,474 11,700

Investments in subsidiaries and other 10 1,645,786 1,558,675 1,503,326

Property, plant and equipment, net 11(a) 3,706,550 3,605,739 3,346,367

Deferred stripping cost 11(b) 142,815 132,386 115,806

Intangible assets, net 12 77,817 76,992 72,909

TOTAL NON CURRENT ASSETS 5,577,992 5,381,266 5,050,108

TOTAL ASSET 6,542,784 6,044,552 5,620,274

2013 UNACEM 101

CURRENT LIABILITIES

Bank overdrafts and loans 13 266,766 532,476 396,016

Trade and other payables 14 209,148 234,606 211,230

Financial obligations 15 426,640 341,009 141,054

Deferred income 16 9,932 7,262 72,173

Income tax payable - - 14,499

Provisions 17 15,814 25,604 37,321

TOTAL CURRENT LIABILITIES 928,300 1,140,957 872,293

NON CURRENT LIABILITIES

Bank loans 13 450,154 - -

Trade and other payables 14 11,883 12,755 -

Financial obligations 15 1,177,800 1,069,495 1,228,313

Derivative financial instruments 31(i) 5,557 7,159 9,328

Deferred income tax liability, net 18 537,303 513,232 487,418

Provisions 17 13,663 11,062 10,590

TOTAL NON CURRENT LIABILITIES 2,196,360 1,613,703 1,735,649

EQUITY 19

Capital stock 1,646,503 1,646,503 1,499,023

Legal reserve 270,203 249,728 213,749

Unrealized net loss on hedging derivative financial instruments (1,678) (5,011) (6,529)

Retained earnings 1,503,096 1,398,672 1,306,089

TOTAL EQUITY 3,418,124 3,289,892 3,012,332

LIABILITY AND EQUITY NOTE 2013 2012(NOTE 3.3)

AT JANUARY 1, 2012

(NOTE 3.3)

S/. (000) S/. (000) S/. (000)

TOTAL LIABILITIES AND EQUITY 6,542,784 6,044,552 5,620,274

TOTAL LIABILITIES 3,124,660 2,754,660 2,607,942

STATEMENTS OF INCOMEFor the years ended December 31, 2013 and 2012

NOTE 2013 2012

S/. (000) S/. (000)

Net sales 20 1,785,163 1,725,896

Cost of sales 21 (1,021,726) (994,207)

OPERATING INCOME (EXPENSES)

Administrative expenses 22 (152,425) (171,125)

Selling expenses 23 (89,889) (82,517)

Other operating (expenses) income, net 25 (1,077) 6,630

TOTAL OPERATING EXPENSES, NET (243,391) (247,012)

OTHER INCOME (EXPENSES)

Finance income 26 10,488 16,956

Finance costs 27 (90,835) (67,125)

Exchange difference, net 31(ii) (138,260) 75,973

TOTAL OTHER INCOME (EXPENSES), NET (218,607) 25,804

INCOME BEFORE TAX 301,439 510,481

Income tax expense 18(b) (96,697) (152,141)

NET INCOME 204,742 358,340

Basic and diluted earnings per share (stated in thousands of Nuevos Soles)

29 0.124 0.218

( ) ( )

( ) ( )

OPERATING PROFIT 520,046 484,677

GROSS PROFIT 763,437 731,689

2013 UNACEM 103

STATEMENTS OF COMPREHENSIVE INCOMEFor the years ended December 31, 2013 and 2012

2013 2012

S/. (000) S/. (000)

NET INCOME 204,742 358,340

OTHER COMPREHENSIVE INCOME

Changes in the fair value of hedging derivative financial instruments

4,762 2,169

Income tax effect (1,429) (651)

Other comprehensive income, net of income tax 3,333 1,518

TOTAL COMPREHENSIVE INCOME, NET OF INCOME TAX 208,075 359,858

STATEMENTS OF CHANGES IN EQUITYFor the years ended December 31, 2013 and 2012

CAPITAL STOCK

LEGALRESERV

S/. (000) S/. (000

Balance as of January 1, 2012 1,499,023

Change in accounting policy, note 3.3 -

BALANCE AS OF JANUARY 1, 2012, RESTATED, SEE NOTE 3.3 1,499,023

Net income -

Changes in the fair value of hedging derivative financial instruments, net -

TOTAL COMPREHENSIVE NET INCOME -

Capitalization of earnings, note 19(a) 147,480

Transfer to legal reserve, note 19(b) -

Dividend distributions, note 19(d) -

Others -

BALANCE AS OF DECEMBER 31, 2012, RESTATED, SEE NOTE 3.3 1,646,503

Net income -

Changes in the fair value of hedging derivative financial instruments, net -

TOTAL COMPREHENSIVE INCOME

Transfer to legal reserve, note 19(b) -

Dividend distributions, note 19(d) -

Others -

BALANCE AS OF DECEMBER 31, 2013 1,646,503

2013 UNACEM 105

L VE

UNREALIZED RESULTS

RETAINED EARNINGS

TOTAL

0) S/. (000) S/. (000) S/. (000)

213,749 (6,529) 1,317,306 3,023,549

- - (11,217) (11,217)

213,749 (6,529) 1,306,089 3,012,332

- - 358,340 358,340

- 1,518 - 1,518

- 1,518 358,340 359,858

- - (147,480) -

35,979 - (35,979) -

- - (84,472) (84,472)

- - 2,174 2,174

249,728 (5,011) 1,398,672 3,289,892

- - 204,742 204,742

- 3,333 - 3,333

3,333 204,742 208,075

20,475 - (20,475) -

- - (83,971) (83,971)

- - 4,128 4,128

270,203 (1,678) 1,503,096 3,418,124

STATEMENTS OF CASH FLOWSFor the years ended December 31, 2013 and 2012

2013 2012

S/. (000) S/. (000)

OPERATING ACTIVITIES

Collections from customers 2,114,729 2,031,861

Payments to suppliers (1,472,938) (1,396,475)

Payments to employees (141,329) (159,032)

Taxes paid (92,401) (153,950)

Interest paid (85,047) (70,195)

Other payments (collections), net (17,815) 16,950

NET CASH PROVIDED FROM OPERATING ACTIVITIES 305,199 269,159

INVESTING ACTIVITIES

Sale of property, plant and equipment - 6,091

Dividends income 2,850 1,371

Additions of stripping assets (227,641) (240,344)

Purchase of financial investments (89,527) (48,944)

Purchase of property, plant and equipment (32,158) (32,199)

Purchase of intangible assets (6,817) (17,320)

NET CASH USED IN INVESTING ACTIVITIES (353,293) (331,345)

FINANCING ACTIVITIES

Proceeds from bank loans 771,651 416,329

Proceeds from financial obligations 626,308 145,514

Payment of bank overdrafts and loans (753,457) (255,189)

Payment of financial obligations (389,876) (147,980)

Dividends paid (83,971) (85,772)

NET CASH PROVIDED FROM FINANCING ACTIVITIES 170,655 72,902

2013 UNACEM 107

2013 2012

S/. (000) S/. (000)

Net decrease in cash and cash equivalents 122,561 10,716

Cash and cash equivalents at the beginning of the year 74,189 63,473

CASH AND CASH EQUIVALENTS AT THE END OF THE YEAR 196,750 74,189

SIGNIFICANT NON-CASH ACTIVITIES

Acquisition of property, plant and equipment under financial leases 7,171 104,620

Capitalization of retained earnings - 147,480

Capitalized interest 25,381 38,752

Provision for impairment of investments 2,415 917

NOTES TO THE SEPARATE FINANCIAL STATEMENTS

1. IDENTIFICATION AND ECONOMIC ACTIVITYUnión Andina de Cementos S.A.A. (hereinafter the “Company”) was incorporated in 1967. The

Company is a subsidiary of Sindicato de Inversiones y Administración S.A. (hereinafter “the

Principal”), which holds 43.4 percent of the Company’s capital stock, which is also a subsidiary

of Nuevas Inversiones S.A., ultimate parent of the consolidable economic group. As approved

by 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 6.68 million tons of clinker and 7.60 million tons of cement.

The separate financial statements as of December 31, 2012 were approved by General

Shareholders Meeting held on March 26, 2013. The separate financial statements as of

December 31, 2013 were approved by Management on January 17, 2014 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 WITH 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, 2012. The approved merger was made among entities under common

control and has not implied an effective change in the control of subsidiaries within the Group.

The accounting treatment of this merger is explained in note 3.2(a) Business combinations

among entities under common control.

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.

AS OF DECEMBER 31, 2013 AND 2012

2013 UNACEM 109

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES3.1 BASIS OF PREPARATIONThe separate financial statements have been prepared in accordance to International Financial

Reporting Standards (hereinafter “IFRS”) prevailing as of December 31, 2013. In accordance

with IFRS prevailing as of December 31, 2013, 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 Securities 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.

The separate financial statements provide comparative information in respect of the previous

period. In addition, the Company presents an additional statement of financial position at

the beginning of the earliest period presented when there is: a retrospective application of

an accounting policy; a retrospective restatement; or a reclassification of items in financial

statements that has a material impact on the Company. An additional statement of financial

position as of January 1, 2012 is presented in these separate financial statements due to

retrospective application of IFRIC 20 Stripping costs in the production phase of a surface mine,

refer to note 3.3.

The accounting policies adopted are consistent with those applied in previous years, except

that the Company has adopted the new IFRS and revised IAS that are mandatory for periods

beginning on or after January 1, 2013, as described below; however, due to the structure of the

Company and nature of its operations, except as mentioned in note 3.3, the adoption of these

standards did not have a significant effect on its financial position and results, therefore, it has

not been necessary to modify the comparative financial statements of the Company.

IAS 1 "PRESENTATION OF ITEMS OF OTHER COMPREHENSIVE INCOME - CHANGES

TO THE IAS 1"

The grouping of items presented in Other Comprehensive Income changes (OCI, for its

acronym in English). Items that may be reclassified ("recycled") to results in a time future will

be presented separately from the elements that will never be reclassified. This change affects

only the presentation of Financial Statements and has no effect on the financial position or

results of operations.

NIC IAS 19 "EMPLOYEE BENEFITS (AMENDED)"

The amendment eliminates the option to defer the recognition of

gains and losses actuarial, that is to say, the mechanism of the corridor. All changes in the

value of the plans defined benefits are recorded in the statement of comprehensive income.

IAS 28 "INVESTMENTS IN ASSOCIATES AND JOINT VENTURES (REVISED)"

As a result of the new IFRS 11 "Joint Arrangements" and IFRS 12 "Disclosure

of Interests in Other Entities”, IAS 28 was renamed "Investments in Associates and Joint

Ventures", and describes the application of the equity method for joint investments and

investments in associates.

IFRS 7 "FINANCIAL INSTRUMENTS: DISCLOSURES - OFFSETTING FINANCIAL AS-

SETS AND LIABILITIES FINANCIAL (AMENDMENT)"

The amendment requires entities to disclose information about rights to set-off and related the

gross amounts of dutiable compensation arrangements. The disclosure would provide users

with information that is useful in evaluating the effect of netting arrangements on an entity’s

financial position.

IFRS 10 "CONSOLIDATED FINANCIAL STATEMENTS"

IFRS 10 replaces the portion of IAS 27 "Consolidated and Separate

Financial Statements" which describe the consolidation of financial statements. It also

includes considerations included in SIC-12 "Consolidation - Special Purpose Entities". IFRS 10

establishes a single control model that applies to all entities, including special purpose entities.

The changes introduced by the IFRS 10 require management to exercise significant judgment

to determine which entities are controlled, and, therefore, are required to be consolidated by

the parent, compared with the requirements that were in IAS 27

IFRS 11 "JOINT ARRANGEMENTS"

IFRS 11 supersedes IAS 31 "Interests in Joint Ventures and SIC 13 "Entities

jointly-controlled non-monetary contributions by participants." IFRS 11 removes the option to

register to jointly controlled entities (ECC) using proportionate consolidation. Instead, the ECC

that meet the definition of a joint venture must be recorded by the equity method.

IFRS 12 "DISCLOSURE OF INTERESTS IN OTHER ENTITIES"

IFRS 12 includes all disclosures that were previously in IAS 27, IAS 28

and IAS 31 in relation to the consolidated financial statements, an entity having interests in

subsidiaries, joint arrangements, associates and structured entities.

IFRS 13 "FAIR VALUE MEASUREMENT"

IFRS 13 establishes a single guide for all fair value measurements in

accordance with IFRS, giving guidelines on how to perform these measurements, but does not

change when an entity is required to use fair value. IFRS 13 defines fair value as an exit price.

As part of the implementation process of IFRS 13, the Company has reassessed its policies for

measuring the fair values of assets and liabilities, as a result of the application of IFRS 13, the

Company has not significantly affected the fair value measurement of its assets and liabilities.

Also, additional disclosures are made in the individual notes of assets and liabilities for which

fair values were determined. The fair value hierarchy is presented in note 27.

Disclosures over the recoverable value of non-financial assets - Amendments to IAS 36

"Impairment of Assets".

These amendments clarify certain matters not provided for by IFRS 13 with respect to the

disclosures required by IAS 36, likewise, require disclosure of the recoverable amounts of the

assets or cash-generating units for which it has been recognized or reversed a loss impairment

during the period. These amendments are effective for periods beginning on or after January

1, 2014, and can be taken in advance as long as the entity has also adopted the NIIF 13.

ANNUAL IMPROVEMENTS TO IFRSS (ISSUED IN MAY 2012)The IASB published a preview of the changes and improvements to IFRSs in May 2012. The

amendments made to IAS 1, IAS 16, IAS 32, IAS 34 and IFRS 1, included in this improvement

cycle, have no significant effect on the accompanying financial statements.

2013 UNACEM 111

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.

Consequently, the assets and liabilities to be incorporated are recognized to the book values

kept in the financial statements of the merged entities as of the date of the legal merger. These

book values include any goodwill, intangible assets, 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 January 1,

2012 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 short-term 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.

(C) FINANCIAL INSTRUMENTS-INITIAL RECOGNITION AND SUBSEQUENT MEASUREMENT

(i) Financial AssetsInitial recognition and measurement Financial assets are classified, at the moment of initial recognition, as financial assets at fair

value through profit or loss, loans and receivables, held-to-maturity investments, available-

for-sale financial investments, or as derivatives designated as hedging instruments in an

effective hedge, as appropriate.

All financial assets are recognized initially at fair value plus, in the case of assets not at fair value

with changes through profit or loss, the transaction costsare attributable to the acquisition of

the financial asset.

Purchases or sales of financial assets that require delivery of assets within a time frame

established by regulation or convention in the marketplace are recognized on 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 For purposes of subsequent measurement financial assets are classified in four categories:

Financial assets at fair value through profit or loss;

Loans and receivables;

Held-to-maturity investments;

Available-for-sale financial investments.

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. As of

December 31, 2013 and 2012, the Company has designated one financial asset as at fair value

through profit or loss, the trading “Cross Currency Interest Rate Swap” maintained as of such

date, note 8.

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.

Loans and receivablesLoans and receivables are non-derivative 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 income statement. The losses arising from impairment are

recognized in the statements of income in finance costs.

Held-to-maturity investments Non-derivative financial assets with fixed or determinable payments and fixed maturities are

classified as held-to-maturity investments when the Company has the positive intention and

ability to hold them to maturity.

The Company did not have any held-to-maturity investments as of December 31, 2013 and

2012.

Available-for-sale financial investments Available-for-sale financial investments include equity and debt securities. Equity investments

classified as available-for-sale are those, which are neither classified as held for trading nor

designated at fair value through profit or loss.

After initial measurement, available-for-sale financial investments are subsequently measured

at fair value, and the unrealized gains or losses are recognized directly in the statement of

changes in equity as unrealized results of available-for-sale investments, until the investments

2013 UNACEM 113

are disposed. When the financial investment is sold, the cumulative gain or loss previously

recognized in statement of changes in equity is recognized in the income statement in “finance

costs or income”, and the effect on equity is eliminated.

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 an available for-sale-financial instrument

as of December 31, 2013 and 2012.

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 pass-through 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 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 asset,

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.

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 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 write-off 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, 2013 and 2012, the Company’s financial liabilities include bank overdrafts

and loans, trade and other payables, long-term 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.

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.

2013 UNACEM 115

Loans and borrowings After their initial recognition, interest-bearing 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.

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.

(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 Company measures financial instruments, such as derivatives at fair value at each balance

sheet date. In addition, the value has financial instruments measured at amortized cost, which

are disclosed in note (c)(ii).

Fair value is the price that would be received to sell an asset or paid to transfer a liability in

an orderly transaction between market participants at the measurement date. The fair value

measurement is based on the presumption that the transaction to sell the asset or transfer

the liability takes place either:

In the principal market for the asset or liability, or

In the absence of a principal market, in the most advantageous market for the asset or

liability.

The principal or the most advantageous market must be accessible by the Company.

The fair value of an asset or a liability is measured using the assumptions that market

participants would use when pricing the asset or liability, assuming that market participants

act in their economic best interest.

A fair value measurement of a non-financial asset takes into account a market participant's

ability to generate economic benefits by using the asset in its highest and best use, or by

selling it to another market participant that would use the asset in its highest and best use.

The Company uses valuation techniques that are appropriate in the circumstances and for

which sufficient data are available to measure fair value, maximizing the use of relevant

observable inputs and minimizing the use of unobservable inputs.

All assets and liabilities for which fair value is measured or disclosed in the financial statements

are categorized within the fair value hierarchy, described as follows, based on the lowest level

input that is significant to the fair value measurement as a whole:

LEVEL 1 Quoted (unadjusted) market prices in active markets for identical assets

or liabilities.

LEVEL 2 Valuation techniques for which the lowest level input that is significant

to the fair value measurement is directly or indirectly observable.

LEVEL 3 Valuation techniques for which the lowest level input that is significant

to the fair value measurement is unobservable.

For assets and liabilities that are recognized in the financial statements on a recurring basis,

the Company determines whether transfers have occurred between levels in the hierarchy by

re-assessing categorization (based on the lowest level input that is significant to the fair value

measurement as a whole) at the end of each reporting period.

The Company’s Management determines the policies and procedures for both recurring fair

value measurement. At each reporting date, the valuation committee analyses the movements

in the values of assets and liabilities which are required to be re-measured or re-assessed as

per the Company’s accounting policies.

For the purpose of fair value disclosures, the Company has determined classes of assets and

liabilities on the basis of the nature, characteristics and risks of the asset or liability and the

level of the fair value hierarchy as explained above.

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 Initial recognition and subsequent measurementThe Company uses derivative financial instruments, such as forward currency contracts and

interest rate swaps contracts, to hedge its foreign currency risks and interest rate risks,

respectively. Such derivative financial instruments are initially recognized at fair value on the

date on which a derivative contract is entered into and are subsequently re-measured at fair

value. Derivatives are carried as financial assets when the fair value is positive and as financial

liabilities when the fair value is negative.

The purchase contracts that meet the definition of a derivative under IAS 39 are recognized

in the statement of profit or loss as finance costs. Commodity contracts that are entered

into and continue to be held for the purpose of the receipt or delivery of a non-financial

item in accordance with the Company’s expected purchase, sale or usage requirements are

held at cost.

2013 UNACEM 117

Any gains or losses arising from changes in the fair value of derivatives are taken directly to

profit or loss, except for the effective portion of cash flow hedges, which is recognized in OCI

and later reclassified to profit or loss when the hedge item affects profit or loss.

For the purpose of hedge accounting, hedges are classified as:

Fair value hedges when hedging the exposure to changes in the fair value of a recognized

asset or liability or an unrecognized firm commitment;

Cash flow hedges when hedging the exposure to variability in cash flows that is either

attributable to a particular risk associated with a recognized asset or liability, or a

highly probable forecast transaction or the foreign currency risk in an unrecognized firm

commitment; or

Hedges of a net investment in a foreign operation.

At the inception of a hedge relationship, the Company formally designates and documents

the hedge relationship to which the Company wishes to apply hedge accounting, the risk

management objective and strategy for undertaking the hedge. The documentation includes

identification of the hedging instrument, the hedged item or transaction, the nature of the risk

being hedged and how the Company will assess the effectiveness of changes in the hedging

instrument’s fair value in offsetting the exposure to changes in the hedged item’s fair value or

cash flows attributable to the hedged risk.

The Company expects that such hedges are to be highly effective in achieving offsetting

changes in fair value or cash flows, and are assessed on an ongoing basis to determine that

they actually have been highly effective throughout the financial reporting periods for which

they were designated.

Hedges that meet the strict criteria for hedge accounting are accounted for, as described below:

Fair value hedges The change in the fair value of a hedging derivative is recognized in the statement of profit or

loss as finance costs. The change in the fair value of the hedged item attributable to the risk

hedged is recorded as part of the carrying value of the hedged item, and is also recognized in

the statement of profit or loss as finance costs.

For fair value hedges relating to items carried at amortized cost, any adjustment to carrying

value is amortized through profit or loss over the remaining term of the hedge using the EIR

method. EIR amortization may begin as soon as an adjustment exists, and no later than when

the hedged item ceases to be adjusted for changes in its fair value attributable to the risk being

hedged.

If the hedged item is derecognized, the unamortized fair value is recognized immediately in

profit or loss.

When an unrecognized firm commitment is designated as a hedged item, the subsequent

cumulative change in the fair value of the firm commitment attributable to the hedged risk

is recognized as an asset or liability with a corresponding gain or loss recognized in profit

and loss.

Cash flow hedges The effective portion of the gain or loss on the hedging instrument is recognized in OCI in

the cash flow hedge reserve, while any ineffective portion is recognized immediately in the

statement of profit or loss as finance costs.

The Company uses swaps contracts as hedges of its exposure to interest rate risks in

transactions. The ineffective portion relating to swaps contracts is recognized in finance costs,

see details in note 27.

Amounts recognized as OCI are transferred to profit or loss when the hedged transaction affects

profit or loss, such as when the hedged financial income or financial expense is recognized, or

when a forecast sale occurs. When the hedged item is the cost of a non-financial asset or non-

financial liability, the amounts recognized as OCI are transferred to the initial carrying amount

of the non-financial asset or liability.

If the hedging instrument expires or is sold, terminated or exercised without replacement or

rollover (as part of the hedging strategy), or if its designation as a hedge is revoked, or when

the hedge no longer meets the criteria for hedge accounting, any cumulative gain or loss

previously recognized in OCI remains separately in equity until the forecast transaction occurs,

or the foreign currency firm commitment is met.

Hedges of a net investment in a foreign operation Hedges of a net investment in a foreign operation, including a hedge of a monetary item that

is accounted for as part of the net investment, are accounted for in a way similar to cash flow

hedges.

As of December 31, 2013 and 2012, the Company has no hedging instruments of a net investment

in a foreign operation.

(D) CURRENT VERSUS NON-CURRENT CLASSIFICATION

The Company presents assets and liabilities in statement of financial position based on current/

non-current classification. An asset is current when:

it is expected to be realized or intended to sold or consumed in normal operating cycle;

it is held primarily for the purpose of trading;

expected to be realized within twelve months after the reporting period;

it is cash or cash equivalent unless restricted from being exchanged or used to settle a

liability for at least twelve months after the reporting period.

All other assets are classified as non-current. A liability is current when:

it is expected to be settled in normal operating cycle;

it is held primarily for the purpose of trading.

2013 UNACEM 119

(E) FOREIGN CURRENCY TRANSLATION

The Company’s financial statements are presented in Nuevos Soles. The Company has

determined the Nuevo Sol as the functional and presentation currency, because it reflects the

nature of economic events and circumstances relevant to the Company.

Transactions and balances in foreign currencyAre 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 statement of financial position date. The differences between the closing rate at the

date of each financial statement presented and the exchange rate initially used to record the

transactions are recognized in the statement of income in the period in which they occur in the

“Exchange difference, net” caption. Non-monetary assets and liabilities acquired in foreign

currencies are translated at the exchange rate at the date of the initial transaction.

(F) 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 suppliesPurchase cost, using the weighted average method.

Finished goods and work in progressAt 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

Net realizable value is the sales price obtained in the ordinary course of business, less

the estimated costs of placing the inventories into a ready-for-sale condition and the

commercialization and distribution expenses.

Management periodically evaluates the impairment and obsolescence of these assets. The

estimation, if any, is recognized with charge to the profit and loss.

(G) INVESTMENTS IN SUBSIDIARIES

These investments in subsidiaries are recorded at acquisition cost less the estimation for

impairment. 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 are credited in the statement of income when declared.

(H) 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.

(I) 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 straight-line basis over the lease term.

(J) PROPERTY, PLANT AND EQUIPMENT Property, plant and equipment are stated at cost, net of accumulated depreciation and/or

accumulated impairment losses, if any. The initial cost of an asset comprises its purchase price

or construction cost, any costs directly attributable to bringing the asset into operation. Such

cost includes the cost of replacing component parts of the property, plant and equipment and

borrowing costs for long-term construction projects, if the recognition criteria are met. The

present value of the estimate cost of dismantling the asset and rehabilitation the site where

it is located, is included in the cost of the respective assets, see note 3.2(o). 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 replacement, if the recognition criteria are

2013 UNACEM 121

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 straight-line-basis method over the estimated useful lives

of such assets as follows:

ESTIMATED USEFUL LIVES OF ASSETSTABLE N.º 3

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.

(K) 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 units-of-production method, based on proved reserves to which they

relate. In the event the Company abandons the concession, the costs associated are written-

off in the statement of income.

(L) INTANGIBLE ASSETS

GoodwillGoodwill is initially measured at cost, being the excess of the aggregate of the consideration

transferred and the amount recognized for non-controlling interest over the net identifiable

assets acquired and liabilities assumed. Goodwill is presented within the intangible assets, net

caption in the statement of financial position.

YEARS

Buildings and other constructions 10 to 50

Installations and other 3 to 10

Machinery and equipment 7 to 25

Transportation units 5 to 10

Furniture and fixtures 6 to 10

Other equipment 4 and 10

y q p

g

p

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 cash-generating units that are expected to

benefit from the combination.

LicensesThe licenses of software are stated at cost and include expenditures directly related to the

acquisition or entry into use of specific software. These costs are amortized over their estimated

useful life of three years.

(M) DEFERRED STRIPPING COSTS

The Company incurs waste removal costs (stripping costs) during the development and

production phases of its surface operations. During the production phase, stripping costs

(production stripping costs) can be incurred, both in relation to the production of inventory

in that period and the creation of improved access and flexibility operational in relation to

be mined in the future. The former are included as part of the costs of inventory, while the

latter are capitalized as a stripping activity asset, where certain criteria are met. Significant

judgement is required to distinguish between development stripping and production stripping,

and to distinguish between the production stripping that relates to the extraction of inventory

and what relates to the creation of a stripping activity asset.

Once the Company has identified its production stripping for each surface mining operation,

it identifies the separate components of the ore bodies for each of its mining operations. An

identifiable component is a specific volume of the ore body that is made more accessible by the

stripping activity. Significant judgement is required to identify and define these components,

and also to determine the expected volumes (e.g., in tones) of waste to be stripped and ore to

be mined in each of these components. These assessments are undertaken for each individual

mining operation, based on the information available in the mine plan. The mine plans and,

therefore, the identification of components, will vary between mines for a number of reasons.

These include, but are not limited to, the type of commodity, the geological characteristics of

the ore body, the geographical location and/or financial considerations.

According to note 3.3, the depreciation of the assets of the stripping activity in the production

phase is calculated using the units of production method.

(N) ESTIMATES OF RESOURCES AND RESERVES

The mineral reserves are estimates of the amount of ore that can be economically and legally

extracted from the Company’s mining properties and concessions. The Company estimates its

ore reserves and mineral resources, based on information compiled by appropriately qualified

persons relating to the geological data on the size, depth and shape of the ore body, and requires

complex geological judgments to interpret the data. The estimation of recoverable reserves is

based upon factors such as estimates of foreign exchange rates, commodity prices, future

capital requirements, and production costs, along with geological assumptions and judgments

made in estimating the size and grade of the ore body.

2013 UNACEM 123

Changes in the reserve or resource estimates may impact upon the carrying value of exploration

and evaluation assets, provision for rehabilitation and depreciation and amortization charges.

(O) IMPAIRMENT OF NON-FINANCIAL 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 cash-generating unit’s (CGU) fair value less the sales costs and its value

in use, said value 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 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 pre-tax 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.

For assets excluding goodwill, 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 cash-

generating 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.

(P) PROVISIONS

GeneralProvisions 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 pre-tax 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 provisionThe 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 pre-tax 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.

(Q) CONTINGENCIES

Contingent liabilities are disclosed when the existence of the liability is?is 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.

(R) EMPLOYEES’ BENEFITS

The Company has short-term obligations for employees’ benefits that include salaries, social

contributions, gratifications, bonuses for performance, and workers’ sharing profits. These

liabilities are recorded monthly with charge to profit and loss, as they are accrued.

(S) 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 goodsRevenue 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.

2013 UNACEM 125

Interest incomeThe 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 incomeDividends from investments are credited in the statement of income when declared.

(T) TAXES

Current income taxCurrent 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

of tax are those that are enacted or substantively enacted, at the close of the reporting period

under review

Current income tax relating to items recognized directly in equity is recognized in equity and not

in the consolidated 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.

Deferred income taxDeferred 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; or

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:

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.

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.

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.

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.

Mining royalties and special tax on mining in PeruMining royalties and special mining tax are accounted for in accordance with IAS 12 because

they have the characteristics of an income tax.

Value added taxRevenues, 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;

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.

(U) EARNINGS PER SHARE

Basic and diluted earnings per share have been calculated based on weighted average of

common shares at the date of the statement of financial position. As of December 31, 2013

and 2012, the Company has no dilutive financial instruments; therefore the basic and diluted

earnings per share are the same.

(V) 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.

2013 UNACEM 127

3.3 CHANGES IN ACCOUNTING POLICIES AND DISCLOSURES

IFRIC 20 “STRIPPING COSTS IN THE PRODUCTION PHASE OF A SURFACE MINE”

The Interpretations Committee issued IFRIC 20, effective January 1, 2013.

Prior to the issuance of IFRIC 20, the accounting for production stripping costs had been based

on general IFRS principles and the Framework, as International Financial Reporting Standards

had no specific guidance.

Previously, the Company deferred the stripping costs incurred in the development of a mine

before production commences, This is the case of the exploited areas of Atocongo Norte

and Pucará. The amount of stripping costs deferred was 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 were deferred or amortized when the actual strip

ratio compared to the estimated one is higher or less, respectively.

IFRIC 20 now provides specific guidance on how to account for production stripping costs.

It requires such costs to be capitalized where certain recognition criteria are met. IFRIC 20

differs from the life of mine average strip ratio approach in a number of ways, including:

The level at which production stripping costs are to be assessed, i.e., at a component level

rather than a life-of-mine level;

The way in which any stripping activity assets are to be depreciated.

In addition, specific transitional rules are provided to deal with any opening deferred stripping

balances an entity may have recognized under its previous accounting policy.

IDENTIFICATION OF STRIPPING ACTIVITY ASSETS

Is the requirement to identify the components of each ore body. This will determine whether

any stripping activity assets should be recognized and, if so, the level at which such assets are

initially recognized, refer to note 3.2(m).

DEPRECIATION OF THE STRIPPING ACTIVITY ASSET

The Company will identify the way in which the stripping activity assets are depreciated. IFRIC

20 requires that any stripping activity asset is to be depreciated over the expected useful life of

the identified component of the ore body that has been made more accessible by the activity.

The method used should be the one that best reflects the consumption of economic benefits.

IFRIC 20 requires the use of the units of production method unless another method is more

appropriate, refer to note 3.2(m).

TRANSITION

IFRIC 20 is applied prospectively to production stripping costs incurred on, or after the

beginning of the earliest period presented, which is January 1, 2012 for the Company. Any

previously recognized asset balance that resulted from stripping activity undertaken during

the production phase (predecessor stripping asset) was required to be reclassified as a part

of an existing asset to which the stripping activity related, to the extent that there remains an

identifiable component of the ore body with which the predecessor stripping asset could be

associated. Such balances are then depreciated over the remaining expected useful life of

the identified component of the ore body to which each predecessor stripping asset balance

related.

If there was no identifiable component of the ore body to which the predecessor asset related,

it was written off via opening retained earnings at January 1, 2012.

IMPACT AS AT TRANSITION DATE (1 JANUARY 2012) AND ON THE COMPARATIVE FINANCIAL INFORMATION FOR THE YEAR ENDED 31 DECEMBER 2012

In accordance with the transitional provisions of IFRIC 20, this new policy has been applied

prospectively from the start of the comparative period, being January 1, 2012. As a result of

the adoption of the interpretation, the adjustments outlined below were made to the financial

statements.

The Company has two surface mining operations, which are in the production phase.

Previously, the Company had used an average extraction ratio to determine shipping production

costs, as explained above. As of January 1, 2012, the balances of the "Asset deferred stripping"

in the statement of financial position for Atocongo and Pucará sites were approximately

S/.99,396,000 and S/.28,855,000, respectively. In applying the requirements of IFRIC 20, the

Company has determined that Atocongo has two components (Atocongo and Atocongo Norte,

known as different phases in the plan of limestone vining of the Company), and Pucará has a

single component and phase.

Given the age and nature of the operations and the way in which the Company plans to mine

the remaining components of the ore body, it has been calculated the entire deferred stripping

balance related to components of the ore body that had already been extracted. Therefore, the

entire opening deferred stripping balance to S/.84,194,000, S/.15,202,000 and S/.28,855,000 for

components of Atocongo, Atocongo Norte y Pucará, respectively, has been written off through

retained earnings by approximately S/.12,445,000.

Given the nature of the operations of the limestone quarries and how ore will be extracted, the

Company was able to determine that 13,747,756 tons of limestone and 23,067,617 tons of waste

relative to components orev obtained that had been removed and the remaining 36,147,033

tons of limestone and 36,147,033 tons of waste related to ore that will be extracted in the

future. These amounts have been allocated to the respective phases and depreciated over the

useful life thereof by units of production method.

2013 UNACEM 129

The adoption of IFRIC 20 had the following impact at the transition date of January 1, 2012 and

for the year ended as of December 31, 2012:

(1) Adjustment to accumulated balance at January 1, 2012 by recording depreciation, according to the method of units of

production "Deferred stripping asset" balance and its effect on the income tax. Also, it was determined the effect of the

depreciation of the asset for the year 2012.

(2) Adjustment to accumulated balance at January 1, 2012, which is the correct presentation of "Deferred income tax

liability", as a result of the effect on the "Deferred stripping asset" for the change in accounting policy, in accordance with

the IFRIC 20.

(3) During the year 2012, the Company recorded additions of "Deferred stripping asset"; however, for comparative purposes

a stripping adjustment was recognized in profit or loss as a result of the change in ratio.

AS PREVIOUSLY REPORTED

S/. (000)

IFRS 20 ADJUSTMENTS

S/. (000)

ADJUSTED BALANCE

S/. (000)

RETAINED EARNING -

January 1, 2012 - opening balance 1,317,306 - 1,317,306

Opening deferred stripping balance (1) - (12,445) (12,445)

Income tax (1) - 3,734 3,734

Deferred income tax recorded in profit or loss (2) - (2,506) (2,506)

ADJUSTED OPENING RETAINED EARNINGSJANUARY 1, 2012 1,317,306 (11,217) 1,306,089

STRIPPING ACTIVITY ASSET -

January 1, 2012 - opening balance 128,251 - 128,251

Depreciation (1) - (12,445) (12,445)

Subtotal 128,251 (12,445) 115,806

Additions under IFRS 20 (3) 22,208 (1,162) 21,046

Depreciation (1) - (4,466) (4,466)

DECEMBER 31, 2012 CLOSING BALANCE 150,459 (18,073) 132,386

(1) Adjustment to accumulated balance as of December 31, 2012, which is the correct presentation of "Deferred income tax

liability", as a result of the effect on the "Deferred stripping asset" for the change in accounting policy, in accordance with

the IFRIC 20.

(2) During the year 2012, the Company recorded additions of "Deferred stripping asset"; however, for comparative purposes

a stripping adjustment was recognized in profit or loss as a result of the change in ratio.

(3) Adjustment to accumulated balance as of December 31, 2012, by recording depreciation according to the method of

units produced "Deferred stripping asset" balance and its effect on the income tax.

IMPACT ON EARNINGS PER SHARE

The effect on earnings per share related to the 2012 restatement was a reduction of S/. 0.219

to S/. 0.218 per share.

IMPACT ON THE STATEMENT OF CASH FLOWS

The effect on the statement of cash flows was a decrease to cash flows from operating activities

of S/. 1,137,000, as a higher amount of stripping costs was allocated directly to asset during

the year, and a decrease to cash flows used in investing activities of S/. 1,137,000, as a lower

amount was capitalized to the stripping activity asset during the year 2012.

AS PREVIOUSLY REPORTED

S/. (000)

IFRS 20 ADJUSTMENTS

S/. (000)

ADJUSTED BALANCE

S/. (000)

PROFIT OR LOSS -

Profit after tax 359,794 - 359,794

Deferred income tax recognized in profit or loss (1) - 2,468 2,468

Deferred stripping recognized in profit or loss and change average strip ratio (2) - (1,137) (1,137)

Depreciation (3) - (4,466) (4,466)

Income tax (3) - 1,681 1,681

PROFIT AFTER TAX 359,794 (1,454) 358,340

2013 UNACEM 131

4. SIGNIFICANT ACCOUNTING JUDGMENTS, ESTIMATES AND ASSUMPTIONSThe financial statements preparation requires Management to make judgments, estimates

and assumptions to determine the reportable figures of assets and liabilities, the disclosure of

contingent assets and liabilities as of the financial statements date, and also the income and

expenses balances for the years ended as of December 31, 2013 and 2012.

The most significant estimates considered by Management related to the financial statements

are:

Fair value of derivatives financial instruments - note 3.2(c)(v)

Deferred stripping assets - note 3.2(m)

Estimates of resources and reserves – note 3.2(n)

Costs and depreciation of stripping assets - note 3.3

Estimation for impairment of non-financial assets - note 3.2(o)

Provisions - note 3.2(p)

Income tax - note 3.2(t)

Management considers that estimates are based on its best knowledge of the relevant facts

and circumstances, having regard to prior experience. Actual results may differ from the

amounts included in the financial statements.

5. NEW ACCOUNTING STANDARDS The Company has decided not to early adopt the following standards and interpretations were

issued by the IASB, but are not effective as of December 31, 2013:

IAS 32 "FINANCIAL INSTRUMENTS: PRESENTATION - OFFSETTING FINANCIAL

ASSETS AND FINANCIAL LIABILITIES (AMENDMENT)"

Effective for periods beginning on, or after, January 1, 2014. Defines the meaning of "currently

has a legal right to compensation" criteria and mechanisms for non-simultaneous solution

clearinghouses for entitlement to compensation modification. Additionally, this amendment

clarifies that to make two or more instruments financial institutions should have a right to

compensation that can not be conditioned on a fact future, and should be mandatory the

following circumstances: (i) the normal course of business, (ii) an event of default, and (iii) in

the event of insolvency or bankruptcy of the entity or any of the counterparties.

IAS 39 NOVATION OF DERIVATIVES AND CONTINUITY OF HEDGE ACCOUNTING

(AMENDMENTS)

Effective for periods beginning on, or after, January 1, 2014. These changes provide an

exception to discontinue hedge accounting when the novation occurs to a hedging instrument

designated that meets certain criteria.

IFRS 9 "FINANCIAL INSTRUMENTS: CLASSIFICATION AND MEASUREMENT"

This rule has an effective date of enactment. IFRS 9 reflects the first phase of

the IASB's work for the replacement of IAS 39, and refers to the classification and measurement

of financial assets as defined in IAS 39. The approval of the first phase of IFRS 9 will have an

effect on the classification and measurement of financial assets of the Company, but potentially

will have no impact on the classification and measurement of financial liabilities. IFRS 9 also

introduces new requirements for the use of hedge accounting, in order that it is aligned with

the risk management of a company.

"INVESTMENT ENTITIES"(AMENDMENTS TO IFRS 10, IFRS 12 AND IAS 27)Effective for periods beginning on, or after, January 1, 2014. These changes provide an exception

to the requirement to consolidate entities that qualify as an entity investment under the criteria

of IFRS 10. The exception to consolidation requires that investment entities are recorded as

subsidiaries at is fair value with changes in profit and loss.

IFRIC 21 "LEVIES"

Effective for periods beginning on, or after, January 1, 2014. IFRIC

21 clarifies that an entity recognizes a liability for a tax when the activity giving rise to the

payment, as identified in the relevant legislation, is performed. To a lien that is activated when

a minimum threshold, the interpretation clarifies that no person should be anticipated before

reaching the minimum threshold specified.

The Company is in the process of evaluating the impact of the application of these standards,

if any, on its financial statements and disclosures in the notes to the separate financial

statements.

2013 UNACEM 133

6. FOREIGN CURRENCY TRANSACTIONSForeign currency transactions are made at free market exchange rates. As of December 31,

2013, the weighted average market exchange rate for transactions in U.S. Dollars published

by the Superintendence of Banks, Insurance and Private Funds Managers (Superintendence

of Banking, Insurance and Private Pension Funds or "SBS" for its acronym in Spanish) was

S/. 2.794 for buying and S/.2.796 for selling (S/. 2.549 for buying and S/. 2.551 for selling as of

December 31, 2012), respectively.

As of December 31, 2013 and 2012, the Company had the following assets and liabilities in U.S.

Dollars:

2013 2012

US$ (000)

EQUIVALENT IN

S/. (000) US$ (000)

EQUIVALENT IN

S/. (000)

ASSETS

Cash and cash equivalents 45,968 128,435 6,723 17,137

Trade and other receivables, net 7,024 19,625 18,291 46,624

52,992 148,060 25,014 63,761

LIABILITIES

Bank overdrafts and loans 247,955 693,282 199,259 508,310

Trade and other payables 16,846 47,101 66,174 168,810

Financial obligations 582,244 1,627,954 335,748 856,493

Derivative financial instruments 1,514 4,233 2,806 7,158

848,559 2,372,570 603,987 1,540,771

Derivative financial instruments 473 1,323 - -

NET LIABILITY POSITION (796,040) (2,225,833) (578,973) (1,477,010)

7. CASH AND CASH EQUIVALENTS(a) This item is made up as follows:

(b) Demand deposits are maintained in local and foreign currency, kept in domestic and foreign

banks and are freely available. These deposits earn interest at market rates.

(c) 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.

2013 2012

S/. (000) S/. (000)

Petty cash 673 655

Demand deposits (b) 28,470 50,287

Time deposits (c) 167,607 23,247

196,750 74,189

2013 UNACEM 135

8. TRADE AND OTHER ACCOUNTS RECEIVABLE, NET(a) This item is made up as follows:

(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) As of December 31, 2013 and 2012, this balance corresponds to prepaid income tax, paid on

those dates, in addition to payments of temporary tax to net assets.

In Management’s opinion, such prepayments will be applied to future taxes generated in the

current period.

(d) In February 2013, the kiln 2 of the Atocongo plant, suffered a breakdown and production of

clinker (main raw material for cement production) decreased. The net cost of the assets that

were affected totals S/. 9,029,000.

CURRENT NON CURRENT

2013 2012 2013 2012

S/. (000) S/. (000) S/. (000) S/. (000)

Trade accounts receivable (b) 63,850 73,388 344 454

Accounts receivable from related parties, note 28(c) 51,535 42,982 - -

Prepaid income tax (c) 51,399 579 - -

Claims to third parties (d) 45,026 1,614 - -

Claims to tax authority (e) 24,146 17,597 - -

Advances to suppliers (f) 13,765 14,480 4,680 7,020

Loans to employees 6,355 1,633 - -

Derivative financial instruments, note 32(a) 772 3,399 - -

Other accounts receivable 3,839 4,443 - -

260,687 160,115 5,024 7,474

LESS – ESTIMATION FOR DOUBTFUL ACCOUNTS (G) (1,684) (103) - -

259,003 160,012 5,024 7,474

To date, the Company has made efforts to negotiate with the insurers and reinsurers for the

collection of compensation of approximately US$ 15,000,000 (equivalent to S/. 41,940,000),

according to the conditions of insurance contracts that found effect on the date of the accident

and reports issued by the independent expert appointed by the reinsurers. As of December 31,

2013, the Company reported revenues of approximately S/. 41,940,000, which is included in

other manufacturing costs under "Cost of sales" in the income statement, see note 21. In the

month of January 2014, the kiln 2 has recovered its production capacity after technical repairs

required.

In Management and its advisors’ opinion, that amount will be returned during the first quarter

of 2014.

(e) As of December 31, 2013 and 2012, this balance corresponds to claims to tax authorities for

the refund of the overpayment of income tax in prior years, note 30.

In management’s opinion, expectations are to recover these balances in the short-term.

(f) Mainly corresponds to advances granted to San Martín Contratistas Generales S.A., on

January 7, 2011, for stripping and exploitation services in the Cristina mining concession,

which is to be collected in five years.

(g) The movement of the allowance for doubtful trade and other accounts receivable for the

years ended December 31, 2013 and 2012, was as follows:

In Management’s opinion, the estimation for doubtful accounts adequately covers the credit

risk for the years ended December 31, 2013 and 2012.

2013 2012

S/. (000) S/. (000)

OPENING BALANCE 103 50

Provision of the year, note 22 1,553 53

Exchange differences 28 -

ENDING BALANCE 1,684 103

2013 UNACEM 137

9. INVENTORIES (a) This item is made up as follows:

(b) Work in progress includes coal, puzulana, gypsum, clay, clinker production and limestone

extracted from the Company’s mines, which according to the Company estimates will be used

in the short-term production.

(c) The raw and auxiliary materials include imported and national coal. As of December 31,

2013, the Company keeps in coal stock for approximately S/. 92,800,000 (S/. 92,100,000 as of

December 31, 2012).

(d) As of December 31, 2013, this item mainly corresponds to the imports of coal for approximately

S/. 28,674,000 (approximately S/. 84,085,000 for clinker and coal as of December 31, 2012).

(e) In management’s opinion, according to the assessment made by the operative areas, it is

not necessary to create an estimation for impairment of inventories as of December 31, 2013

and 2012.

2013 2012

S/. (000) S/. (000)

Finished goods 10,486 5,705

Work in progress (b) 139,277 88,617

Raw and auxiliary materials (c) 127,844 104,987

Packages and packing 44,510 23,087

Sundry supplies 141,381 96,407

Inventory in transit (d) 34,337 100,972

497,835 419,775

10. INVESTMENTS IN SUBSIDIARIES AND OTHER(a) This item is made up as follows:

A brief summary of the activities of the most significant subsidiaries of the Company is

presented below:

SKANON INVESTMENTS INC. – SKANON

It is a non-resident company incorporated in February 2007 under the laws of the State of

Arizona in the United States of America. Skanon owns 93.56 percent of Drake Cement LLC,

a company domiciled in the U.S., which core business is a cement plant in Yavapai County, in

northern Arizona.

During the year 2013, the Company made a capital contribution of approximately US$ 32,920,000

(equivalent to S/. 89,121,000), receiving 34,914,774 shares of the capital stock of the subsidiary

(approximately US$ 11,000,000 and equivalent to S/. 28,901,000); receiving 11,666,577 shares

of the capital stock of the subsidiary.

DIRECT PARTICIPATION

CARRYING VALUE

2013 2012 2013 2012

% % S/. (000) S/. (000)

Skanon Investments Inc. 86.03 84.58 952,514 863,393

Compañía Eléctrica El Platanal S.A. 90.00 90.00 567,829 567,829

Inversiones en Concreto y Afines S.A. 93.38 93.38 67,036 67,036

Transportes Lurín S.A. 99.99 99.99 63,937 63,688

Prefabricados Andinos Perú S.A.C. 50.00 50.00 17,527 17,527

Ferrocarril Central Andino S.A. 14.69 14.69 5,617 5,617

Minera Adelaida S.A. 100.00 100.00 2,053 1,902

Generación Eléctrica de Atocongo S.A. 99.85 99.85 125 125

Depósito Aduanero Conchán S.A. 99.98 99.98 63 63

Other 225 220

1,676,926 1,587,400

Estimation for impairment of investments (b)

(31,140) (28,725)

1,645,786 1,558,675

2013 UNACEM 139

COMPAÑÍA ELÉCTRICA EL PLATANAL S.A. - CELEPSA

It is a company incorporated in Lima in December 2005, 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 1996, dedicated to investing in companies

principally engaged in supplying concrete ready-mix, building materials and related activities,

through its subsidiary Unión Concreteras S.A.,on which holds a participation of 99.9 percent,

which is also the owner in 99.99 percent of Firth Industries Perú S.A., dedicated to the same

activity.

TRANSPORTES LURÍN S.A. - LURÍN

It is a company incorporated in Lima in July 1990. 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 the United States of America, whose activity

is the construction and operation of a port to discharge, storage and shipping of cement and

aggregates, with a participation of 3.03 percent in Skanon Investments Inc. as of December 31,

2013 and 2012.

During the year 2013, the Company paid capital contributions to LURÍN for approximately

S/. 249,000 (S/. 19,794,000 during 2012). During the year 2012, LURÍN acquired 20 percent of

additional participation in Staten Island Terminal LLC.

As of December 31, 2013 and 2012, the Company recorded an estimation for impairment on its

investment on this subsidiary, amounting to approximately S/. 31,140,000 and S/. 28,725,000,

respectively, as result of the impairment of the investment that LURÍN recorded on its

investment in Staten Island Terminal LLC. Nowadays, the Company has decided to stop the

operations in the port and expects to restart them in mid-term.

PREFABRICADOS ANDINOS PERÚ S.A.C. - PREANSA

It is a company founded in Lima in October 2007. PREANSA manufactures prestressed concrete

structures and precast concrete, and sells these products in Peru and abroad.

(b) The movement of the estimation for impairment of investments for the years ended

December 31, 2013 and 2012 is as follows:

2013 2012

S/. (000) S/. (000)

OPENING BALANCE 28,725 27,808

Additions, note 25 2,415 917

ENDING BALANCE 31,140 28,725

11. PROPERTY, PLANT AND EQUIPMENT(a) The table below presents the components of this caption:

MINING CONCESSIONS (C)

LAND MINE CLOSURE

BUILDINGS AND CONSTRUCTIONS

OTHER INSTALLATIONS

MACHINAND

EQUIPM

S/. (000) S/. (000) S/. (000) S/. (000) S/. (000) S/. (00

COST -

As of January 1, 2013 34,856 551,481 6,516 417,664 50,206 1,498

Additions 666 6,599 - 315 1,441 12

Transfers (f) - 5,543 - 310,927 5,087 1,084

Retirements (g) (947) - (529) (22) (792) (31

Adjustments (h) - - - (11,202) - (59

BALANCE AS OF DECEMBER 31, 2013 34,575 563,623 5,987 717,682 55,942 2,504

ACCUMULATED DEPRECIATION -

As of January 1, 2013 10,207 - 2,226 67,730 40,047 224

Depreciation of the year 466 - 420 24,214 1,834 109

Transfers (f) - - - (210) 210 (1

Retirements (g) (947) - (2) 90 (10) (11

Adjustments (h) - - - (11,202) - (59

BALANCE AS OF DECEMBER 31, 2013 9,726 - 2,644 80,622 42,081 261

NET BOOK VALUE -

As of December 31, 2013 24,849 563,623 3,343 637,060 13,861 2,242

As of December 31, 2012 24,649 551,481 4,290 349,934 10,159 1,273

2013 UNACEM 141

ERY ENT

TRANSPORTATION UNITS

FURNITURE AND FIXTURES

OTHER EQUIPMENT

UNITS IN TRANSIT

WORK IN PROGRESS (F)

TOTAL

00) S/. (000) S/. (000) S/. (000) S/. (000) S/. (000) S/. (000)

8,464 23,974 17,068 43,607 69,428 1,296,761 4,010,025

2,997 847 202 1,604 7,487 234,812 266,970

4,521 4,393 126 11,129 (69,681) (1,352,045) -

,902) (6,283) - (18) - (858) (41,351)

9,884) (58) (586) (975) - - (72,705)

,196 22,873 16,810 55,347 7,234 178,670 4,162,939

4,973 14,395 13,637 31,071 - - 404,286

9,578 3,252 637 3,510 - - 143,911

,128) - - 1,128 - - -

,949) (6,285) - - - - (19,103)

9,884) (58) (586) (975) - - (72,705)

,590 11,304 13,688 34,734 - - 456,389

2,606 11,569 3,122 20,613 7,234 178,670 3,706,550

3,491 9,579 3,431 12,536 69,428 1,296,761 3,605,739

(b) The following is the movement of deferred stripping assets:

(c) As of December 31, 2013 and 2012, corresponds mainly to the concessions of the quarries

of Atocongo, Atocongo Norte, Pucará and Oyón.

(d) As of December 31, 2013, the carrying value of assets acquired through finance leases

amounted to approximately S/. 599,491,000 (S/. 592,320,000 as of December 31, 2012). Additions

in 2013 include S/. 7,171,000 (S/. 104,620,000 in 2012). The leased assets guaranteed financial

lease liabilities, see note 15.

(e) The amount of borrowing costs capitalized during the year ended December 31, 2013 was

S/. 25,381,000 (S/. 38,752,000 as of December 31, 2012). Interest rates used to determine the

amount of borrowing costs eligible for capitalization were between Libor 0.308 and 0.581, plus

a spread between 2.35 and 5.52 percent as of December 31, 2013 and 2012.

S/. (000)

COST -

As of January 1, 2012 128,251

Change in accounting policy, note 3.3 -

As of January 1, 2012 128,251

Additions 21,046

Balance as of December 31, 2012 149,297

Additions 15,205

BALANCE AS OF DECEMBER 31, 2013 164,502

ACCUMULATED DEPRECIATION -

As of January 1, 2012 -

Change in accounting policy, note 3.3 (12,445)

As of January 1, 2012 (12,445)

Additions, note 21 (4,466)

Balance as of December 31, 2012 (16,911)

Additions, note 21 (4,776)

BALANCE AS OF DECEMBER 31, 2013 (21,687)

NET BOOK VALUE -

AS OF DECEMBER 31, 2013 142,815

AS OF DECEMBER 31, 2012 132,386

AS OF DECEMBER 31, 2011 115,806

( )

2013 UNACEM 143

(f) As of December 31, 2012, corresponded mainly to the work in progress to the Project of

enlargement of the production capacity of Kiln 1 and the construction of Kiln 4. During 2013 the

transfers include mainly the transfer of the work in progress of Kiln 1 and 4 and Condorcocha

and Atocongo, respectively, which began operations in November and March 2013, respectively.

(g) During the year 2013, the Company made a technical analysis and derecognized certain

components of the account Machinery and Equipment, because they would not continue to

be used and others were reclassified from significant parts to supplies for approximately

S/. 4.627,000 (S/. 7,286,000 and S/. 11,913,000 cost and accumulated depreciation, respectively)

( all these included in the caption "Retained earnings" and S/. 22,777,000 in the caption

"Inventories" in the statement of financial position.

(h) During the year 2011, cost and depreciation were recorded to present the net assets

attributable cost of Condorcocha plant located in the city of Junín, whose net balance was zero.

Such cost and depreciation were reversed in the year 2013, and had no effect on profit and loss

of the Company.

(i) The depreciation for the years 2013 and 2012 was distributed as follows:

(j) As of December 31, 2013 and 2012, 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.

(k) As of December 31, 2013 and 2012, the Company has granted two mortgages on its

mining concession Atocongo and one mortgage on its mining concession Cristina for up to

S/. 149,4000 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 Pachacámac and Lurín districts for up to US$ 50,000,000 to secure the loan obtained

from the Bank of Nova Scotia, see note 15.

(l) In Management’s opinion, the Company has insurance policies to adequately cover all of its

fixed assets.

2013 2012

S/. (000) S/. (000)

Cost of sales, note 21 129,228 85,972

Administrative expenses, note 22 9,217 9,441

Inventories 5,466 3,590

143,911 99,003

12. INTANGIBLE ASSETS, NET(a) The table below presents the components of this caption:

CONCESSION FOR ELECTRICITY GENERATION (B)

GOODWILL (C) SOFTWAREP

S/. (000) S/. (000) S/. (000)

COST -

As of January 1, 2013 61,330 9,745 18,772

Additions - - 2,948

Retirements - - (11,008)

AS OF DECEMBER 31, 2013 61,330 9,745 10,712

ACCUMULATED AMORTIZATION -

As of January 1, 2013 4,137 - 11,007

Amortization of the year, notes 22 and 25 1,484 - 1,075

Retirements - - (11,008)

AS OF DECEMBER 31, 2013 5,621 - 1,074

NET BOOK VALUE -

AS OF DECEMBER 31, 2013 55,709 9,745 9,638

AS OF DECEMBER 31, 2012 57,193 9,745 7,765

2013 UNACEM 145

ENVIRONMENTAL PROTECTION PROGRAM

EXPLORATION EXPENSES

OTHERS TOTAL

S/. (000) S/. (000) S/. (000) S/. (000)

18,269 10,434 22,895 141,445

230 - 3,639 6,817

(1,428) (10,434) (23,858) (46,728)

17,071 - 2,676 101,534

18,065 10,433 20,811 64,453

37 1 3,160 5,757

(1,428) (10,434) (23,623) (46,493)

16,674 - 348 23,717

397 - 2,328 77,817

204 1 2,084 76,992

(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

130-2001-EM, dated July 25, 2001. On September 12, 2006, the transfer of the concession

and the assignment of use of the "El Platanal" project to Compañía Eléctrica El Platanal

S.A. (CELEPSA) was approved by Supreme Resolution 053-2006-EM 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, 2013 and 2012, 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.

The recoverable amount of coal grinding plant (generating unit) is established on the basis

of calculation of value in use, which uses projections of cash flows on preliminary financial

budgets prepared by Management covering a 5-year period, calculated on the resource base.

As a result of this analysis, no impairment loss on this unit was found. The coal grinding

plant has a production horizon of 11 years as of December 31, 2013. Management believes

that there will not be significant changes in estimated production volumes, which would

produce that the book value of these assets exceeds its recoverable value . The Company

has projected its operating costs in relation to their current cost of coal grinding. In relation

to the assessment of value in use of the cash-generating unit, Management believes that no

reasonable change in assumptions would cause the carrying amount of the unit exceeds its

recoverable amount significantly.

(d) As of 31 December 2013 and 2012, the Company's Management conducted an assessment

on its intangibles assets, finding no indicators of impairment in those assets. Accordingly,

the carrying value of intangibles assets is recoverable with future profits to be generated by

the Company.

2013 UNACEM 147

13. BANK OVERDRAFTS AND LOANS(a) The table below presents the components of this caption:

(b) As of 31 December 2013 and 2012, the balance is made up as follows:

2013 2012

S/. (000) S/. (000)

Bank overdrafts - 163

Bank loans (b) 716,920 532,313

716,920 532,476

2013 2012

S/. (000) S/. (000)

CREDITOR -

Citibank N.A. New York 258,466 121,764

BBVA Banco Continental 170,970 31,888

Santander Overseas Bank Inc. 111,840 63,776

ITAU Private Bank 83,376 -

Banco de Crédito de Miami 50,328 136,315

Bank of Nova Scotia New York 41,940 38,265

Banco Internacional del Perú S.A.A. - INTERBANK - 140,305

716,920 532,313

TERM -

Current portion 266,766 532,313

Non current portion 450,154 -

716,920 532,313

(c) Bank loans correspond mainly to loans for working capital at fixed annual rates that range

from 2.0 to 5.3 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, 2013 and 2012, the interest payable amounts to approximately

S/. 2,244,000 and S/. 2,965,000, respectively, and are recorded in the caption "Trade and other

accounts payable" of the separate statement of financial position. As of December 31, 2013

and 2012, the interest expenses amounted to approximately S/. 16,338,000 and S/. 17,666,000,

respectively, and are included in the caption "Financial costs" of the separate statement of

income, see note 27.

2013 UNACEM 149

14. TRADE AND OTHER PAYABLES(a) This caption is made up as follows:

(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.

CURRENT NON CURRENT

2013 2012 2013 2012

S/. (000) S/. (000) S/. (000) S/. (000)

Trade payables (b) 122,716 164,776 - -

Accounts payable to related entities, note 28(c) 43,380 33,053 11,883 12,755

Interest payable notes 13(d) and 15(k) 16,391 13,327 - -

Remunerations and vacations payable 13,914 7,846 - -

Director’s remunerations payable 1,919 2,934 - -

Dividends payable 28 - - -

Value added tax payable - 5,071 - -

Other accounts payable 10,800 7,599 - -

209,148 234,606 11,883 12,755

15. LONG-TERM DEBT (a) This caption is made up as follows:

ANNUAL RATE MATURITY

%

BONOS CORPORATIVOS -

First to eighth issuance programs (b) Between 5.91 and 6.81 Between April 2014 and March 2015

First and third issuance of the second program (c) Between 4.93 and 5.56 December 2016, March 2020 and 202

First and third issuance of the first program (d) Between 3.75 and 6.25 Between January 2014 and January 20

BANK LOANS -

Bank of Nova Scotia (f) Libor to 3 months + 2.35 August 2018

BBVA Banco Continental (g) Libor to 3 months + 2.90 September 2016

BBVA Banco Continental (g) 6.00 January 2015

Bank of Nova Scotia (f) Libor to 3 months + 1.95 September 2015

BBVA Banco Continental (g) 4.35 June 2017

Banco de Crédito del Perú (e) 5.80 October 2016

Banco de Crédito del Perú (e) 5.57 July 2016

Bank of Nova Scotia (f) Libor to 3 months + 2.40 September 2018

Banco International del Perú (h) 5.25 March 2019

Amortized cost

FINANCIAL LEASE -

Banco de Crédito del Perú (i) Libor + 2.35 February 2018

Banco Internacional del Perú (j) 5.80 October 2018

(-) Fondo de Garantía BCP Panamá (i)

TOTAL BANK LOANS

LESS – CURRENT PORTION

NON-CURRENT PORTION

2013 UNACEM 151

GUARANTEE 2013 2012

S/. (000) S/. (000)

None 270,000 385,000

23 None 180,000 -

018 None 70,459 89,285

520,459 474,285

Guarantee on property, see note 11 (k) 110,675 122,235





None 25,164 22,959

None 17,695 20,963

None 133,858 -

None 168,421 -

669,419 516,475

(5,248) (4,182)

664,171 512,293

Assets under leasing 326,420 476,120

Assets under leasing 93,390 80,355

- (132,549)

419,810 423,926

1,604,440 1,410,504

426,640 341,009

1,177,800 1,069,495

(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 Program of Issuance of Corporate Bonds and and Short-Term Instruments of

Unión Andina de Cementos S.A.A."

The first and second emissions by S/. 50,000,000 each 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 2009. 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, 2013 in relation to these safeguards:

The compliance of the financial covenants is overseen by the Management and the Representative

of the Bondholders. In case of breach of the above safeguards and early termination will

proceed. In Management’s opinion, the Company was in compliance with these obligations as

of December 31, 2013 and 2012.

(c) On April 7, 2010, the General Meeting approved the "Second Program of Issuance of

Corporate Bonds and Short-Term Debt Instruments of Unión Andina de Cementos S.A.A.”, up

to a maximum outstanding amount of US$ 150,000,000 or its equivalent in Nuevos Soles".

On September 15, 2010, the Company signed with Scotiabank Perú S.A.A. as Representative

of the Noteholders, under contract bond, and in October the prospectus was signed under the

"Second Issuance Program Corporate Bonds and Short-Term Instruments of Unión Andina de

Cementos S.A.A."

LIMITS ESTABLISHED

PERIODICITY RESULTS OBTAINED IN

2013

Non-taxed assets on total amount of financial debt ratio

Higher than 1.20 Quarterly 3.08

Debt ratio Less than 1.50 Quarterly 0.74

Receivable accounts from related on total assets ratio

Less than 0.08 Quarterly 0.01

2013 UNACEM 153

In March 2013, the Company placed the First and Second Issuance of the Corporate Bondstotaling

S/. 60,000,000 each, and in December 2013, placed the Third Issuance of the same program for

S/. 60,000,000.

The financial covenants for this program are similar to those of the First Program for the

Issuance of Debt Instruments, see paragraph (b) above. In the opinion of Management, the

Company has complied with these obligations as of December 31, 2013.

(d) 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) up to an amount of issuance of

US$ 40,000,000 or its equivalent 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 issuances for US$ 7,000,000 and US$ 28,000,000, respectively, were sold under

the Dutch auction modality on January 21, 2010.

Financial covenants are monitored on a quarterly basis, 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, 2013 in relation to these

safeguards:

The compliance of the financial covenants is overseen by the Management and the Representative

of the Bondholders. In case of breach of the above safeguards, early termination will be

incurred. In Management’s opinion, the Company was in compliance with these obligations as

of December 31, 2013 and 2012.

(e) As of December 31, 2013 and 2012, bank loans in local and foreign currency obtained from

local and foreign financial institutions were used primarily for working capital, see paragraph

(f), (g) and (h) below.

LIMITS ESTABLISHED


2013

Interest coverage ratio Higher than 4.00 Quarterly 9.79

Debt service coverage ratio Higher than 1.25 Quarterly 2.27

Cash ratio Higher than 1.00 Quarterly 1.04

Leverage ratio Less than 1.50 Quarterly 0.76

(f) The Company must comply with some financial covenants on a quarterly basis as part of

the contractual obligation with Bank of Nova Scotia. Below are the results obtained by the

Company as of December 31, 2013:

(g) The Company must comply with some financial covenants on a quarterly basis as part of

the contractual obligation with BBVA Banco Continental. Below are the results obtained by the

Company as of December 31, 2013:

LIMITS ESTABLISHED


2013


Debt service coverage ratio Higher than 1.30 Quarterly 1.53

Debt ratio/EBITDA Less than 3.50 Quarterly 3.13

LIMITS ESTABLISHED


2013

Total liabilities/equity ratio Less than 1.50 Quarterly 0.76

Debt coverage ratio Less than 3.00 Quarterly 2.92

Interests coverage ratio Higher than 4.00 Quarterly 8.00

2013 UNACEM 155

(h) The Company is required to meet certain financial covenants which are quarterly monitored

as part of contractual commitments with Banco Internacional del Perú (Interbank). The results

obtained by the Company as of December 31, 2013 relating to these safeguards are:

(i) 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 up to US$ 25,000,000 for the

extension of the production capacity through the installment of a new line of production in

the plant of Junín (Kiln 4), whose estimated cost is US$ 162,000,000; the interest rate is Libor

+ 2.35 percent, with an availability term of three years and a financing term, including the

availability term, of six years for machinery and equipment and eight years for construction.

Then, on December 17, 2008, the Company signed a summary of terms and conditions of

financial leasing with BCP, in order to establish some basic understanding points on which the

financing can be structured.

LIMITS ESTABLISHED


2013


Coverage of debt service ratio Higher than 1.30 Quarterly 1.53

Interest coverage ratio Higher than 4.00 Quarterly 8.00

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 up to 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 + 2.35 percent, ii) Part 2, nominal

annual Libor + 4.95 percent and iii) Part 3, nominal annual Libor + 4.20 percent.

Availability term of financing is three years and quarterly payments on five years.

All payments related to the leasing will be made on a quarterly basis, since the date all the

agreement’s conditions are met.

Financing has as guarantee: i)surface right 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 pre-payment. Likewise,

the credit part, Corporación Andina de Fomento (CAF), has guaranteed the Company with

Banco de Crédito del Perú for an amount of US$ 50,000,000.

As of December 31, 2012, the Company had a guarantee fund in Banco de Crédito del Perú in

Panama for an amount of US$ 50,000,000 (equivalent to S/. 132,549,000), which was applied

as initial payment of the leasing in March 2013. As of December 31, 2013, the net book value

of the assets is approximately S/. 602,225,000 (S/. 620,953,000 as of December 31, 2012).

2013 UNACEM 157

(j) In General Shareholders Meeting dated May 19, 2010, the lease agreement to increase the

production capacity with Banco Internacional del Perú (Interbank) was approved, said project

increase the production capacity of Kiln 1 from 3,200 to 7,500 tones clinker/day. As of December

31, 2013, the net book value of the assets is approximately S/. 645,090.000 (S/. 503,700,000 at

as of December 31, 2012).

The financial covenants for this lease are similar to bank loans, see paragraph (h) above. In

the opinion of Management, the Company has complied with these obligations as of December

31, 2013.

(k) As of December 31, 2013 and 2012, interest payable amounted to approximately S/.

14,147,000 and S/.10,362,000, respectively, and are recorded in the caption "Trade and other

accounts payable", note 14.

(l) Interests generated by financial liabilities held as of December 31, 2013 and 2012, amounted

to approximately S/. 78,959,000 and S/. 74,962,000, respectively. From the total interests

generated, interests have been capitalized for approximately S/. 25,381,000 and S/. 38,752,000,

respectively, and are included in the caption "Property, plant and equipment, net" of the

separate statement of financial position, see note 11(d). The balance ascending approximately

to S/. 53,578,000 and S/. 36,210,000, respectively, is included in the caption "Financial costs" in

the separate statement of income, note 27.

16. DEFERRED INCOME As of December 31, 2013, it mainly relates to cement sales invoiced and not shipped by

S/. 9,932,000, which will be performed in the first quarter of 2014 (S/. 7,262,000 as of December

31, 2012 delivered during January 2013).

17. PROVISIONS (a) This item is made up as follows:

WORKERS’ PROFIT

SHARING (B)

PROVISION FOR MINE

CLOSURE (C)

SEVERANCE INDEMNITIES

TOTAL

As of January 1, 2013 23,549 11,976 1,141 36,666

Additions 26,109 - 5,676 31,785

Accretion expense - 2,610 - 2,610

Payments (35,274) (586) (5,724) (41,584)

AS OF DECEMBER 31, 2013 14,384 14,000 1,093 29,477

CLASSIFICATION:

Current 14,384 337 1,093 15,814

Non current - 13,663 - 13,663

14,384 14,000 1,093 29,477

As of January 1, 2012 32,540 14,540 831 47,911

Additions 47,173 - 6,758 53,931

Accretion expense - 1,168 - 1,168

Payments (56,164) (3,732) (6,448) (66,344)

AS OF DECEMBER 31, 2012 23,549 11,976 1,141 36,666

CLASSIFICATION:

Current 23,549 914 1,141 25,604

Non current - 11,062 - 11,062

23,549 11,976 1,141 36,666

2013 UNACEM 159

(b) Workers’ profit sharing -

In accordance with Peruvian legislation, the Company maintains an employee profit sharing

plan of 10 percent of annual taxable income. Distributions to employees under the plan are

based 50 percent on the number of days that each employee worked during the preceding year

and 50 percent on proportionate annual salary levels.

(c) Provision for mine closure -

As of December 31, 2013 and 2012, 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

2.87 per cent in 2013 (3.00 per cent in 2012). 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.

18. DEFERRED INCOME TAX LIABILITY, NET(a) The following table presents the composition of the deferred income tax asset and liability:

AS OF JANUARY 1, 2012

STATEMENT OF INCOME

CHARGE TO EQUITY

AS OF

S/. (000) S/. (000) S/. (000)

DEFERRED LIABILITY

Differences on fixed assets bases 452,153 (7,499) -

Stripping cost 34,742 4,974 -

Capitalized interests 7,077 20,008 -

Exchange difference on leasings - 7,839 -

Deferred commissions of financial obligations 10,694 (9,347) -

Amortization of "El Platanal" studies 644 668 -

Amortization of software - - -

505,310 16,643 -

DEFERRED ASSETS

Derivative financial instruments (2,147) 463 651

Provision for mine closure (2,528) (328) -

Provision for vacation (1,654) (533) -

Deferred income (net) (9,503) 8,355 -

Workers’ profit sharing charged to inventories (178) - -

Sundry provisions (1,882) 563 -

(17,892) 8,520 651

DEFERRED LIABILITY, NET 487,418 25,163 651

2013 UNACEM 161

DECEMBER 31, 2012

STATEMENT OF INCOME

CHARGE TO EQUITY

OTHER AS OF DECEMBER 31, 2013

S/. (000) S/. (000) S/. (000) S/. (000) S/. (000)

444,654 17,744 - - 462,398

39,716 3,128 - - 42,844

27,085 6,606 - - 33,691

7,839 (1,568) - - 6,271

1,347 362 - (216) 1,493

1,312 668 - - 1,980

- 2,784 - - 2,784

521,953 29,724 - (216) 551,461

(1,033) (1,737) 1,429 (95) (1,436)

(2,856) (603) - - (3,459)

(2,187) (1,329) - 273 (3,243)

(1,148) 214 - (76) (1,010)

(178) (93) - - (271)

(1,319) (2,126) - (1,294) (4,739)

(8,721) (5,674) 1,429 (1,192) (14,158)

513,232 24,050 1,429 (1,408) 537,303

(b) The current and deferred portions of the provision for income tax for the years ended 2013

and 2012 are comprised as follows:

As of December 31, 2013 and 2012, 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 and the legal tax rate for

the years ended December 31, 2013 and 2012:

2013 2012

S/. (000) % S/. (000) %

Profit before income tax 301,439 100.0 510,481 100.0

Theoretical expense 90,432 30.0 153,144 30.0

Tax effect on permanent items 6,265 2.1 (1,003) (0.2)

EXPENSE FOR INCOME TAX 96,697 32.1 152,141 29.8

2013 2012

S/. (000) S/. (000)

Current (72,647) (126,978)

Deferred (24,050) (25,163)

(96,697) (152,141)

2013 UNACEM 163

19. EQUITY(a) Capital stock -

As of December 31, 2013 and 2012, the capital stock is represented by 1,646,503,408 common

shares, totally subscribed and paid at a nominal value of S/. 1 per share. 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.

As of December 31, 2013, the share price of each share has been S/. 3.77 (S/. 3.24 as of

December 31, 2012).

(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 18, April 19, July 19 and October 18, 2013,

agreed to distribute dividends with charge to retained earnings for approximately S/. 83,971,000

(S/. 1 per share), such payments were made on February 21, May 23, August 22 and November

21, 2013 respectively.

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.

21. COST OF SALESThis item is made up as follows:

20. NET SALESThis item is made up as follows:

2013 2012

2013 2012

S/. (000) S/. (000)

Beginning balance of finished goods and work in process 94,322 120,086

Cost of production:

Consumption of raw material, add clinker importation 220,049 132,906

Fuel 196,237 231,131

Depreciation, note 11(i) 129,228 85,972

Power 95,500 90,907

Personnel expenses, note 24 (b) 86,291 93,074

Packaging 59,279 59,027

Stripping costs 22,731 22,416

Depreciation for stripping cost, note 11(b) 4,776 4,466

Other manufacturing expenses (includes personnel expenses

for S/.4,629,000 of year 2012, note 24(b)) 263,076 248,544

Ending balance of finished goods and work in process (149,763) (94,322)

1,021,726 994,207

2013 2012

S/. (000) S/. (000)

Cement 1,751,402 1,705,294

Concrete blocks, bricks and pavers 33,758 20,595

Clinker 3 7

1,785,163 1,725,896

2013 UNACEM 165

22. ADMINISTRATIVE EXPENSESThis item is made up as follows:

23. SELLING EXPENSESThis item is made up as follows:

2013 2012

S/. (000) S/. (000)

Personnel expense, note 24(b) 46,395 50,850

Management services 36,578 56,210

Services rendered by third parties 20,885 13,754

Taxes 16,220 12,998

Donations 13,374 13,284

Depreciation, note 11(i) 9,217 9,441

Amortization, note 12(a) 4,273 7,271

Estimation for doubtful accounts, note 8(g) 1,553 53

Other 3,930 7,264

152,425 171,125

2013 2012

S/. (000) S/. (000)

Sales commissions 42,958 34,306

Advertising and marketing 37,767 37,338

Personnel expenses, note 24(b) 3,978 4,827

Warehouse managing services 2,653 3,832

Other 2,533 2,214

89,889 82,517

(b) Employee benefits expenses are allocated as follows:

(c) The average number of employees during 2013 was 755 (729 in the year 2012).

24. PERSONNEL EXPENSES(a) This item is made up as follows:

2013 2012

S/. (000) S/. (000)

Cost of sales, note 21 86,291 93,074

Administrative expenses, note 22 46,395 50,850

Selling expenses, note 23 3,978 4,827

Cost of sales (other production costs), note 21 - 4,629

Other operating income, net, note 25 3,112 4,011

139,776 157,391

2013 2012

S/. (000) S/. (000)

Remunerations 69,893 64,014

Employee profit sharing 26,109 47,173

Bonuses 10,500 10,083

Social contributions 7,143 5,553

Vacations 6,652 6,406

Severance compensation 5,676 5,693

Medical aid 4,237 4,631

Fees and remunerations to Directors 3,833 7,623

Voluntary sharing profit - 4,420

Other 5,733 1,795

139,776 157,391

2013 UNACEM 167

26. FINANCIAL INCOMEThis item is made up as follows:

25. OTHER OPERATING INCOME (EXPENSES), NETThis item is made up as follows:

2013 2012

S/. (000) S/. (000)

OTHER INCOMEIncome from services 12,351 16,633

Income from royalties, note 28(b) 6,110 5,659

Sale of goods and supplies 3,182 6,586

Rental income 2,609 5,552

Indemnity insurance 35 96

Revenue from carbon credits - 391

Other 5,729 6,881

30,016 41,798

OTHER EXPENSESExpenses of pier 7,272 5,242

Cost from services 7,009 12,637

Staff costs, note 24(b) 3,112 4,011

Provision for impairment of investments, note 10(b) 2,415 917

Amortization of power concession, note 12(a) 1,484 1,484

Cost of goods and supplies 1,248 6,305

Other 8,553 4,572

31,093 35,168

(1,077) 6,630

2013 2012

S/. (000) S/. (000)

Interest on deposits 6,643 12,446

Income from dividends 2,850 1,423

Change in fair value derivative financial instruments - 2,848

Other 995 239

10,488 16,956

27. FINANCIAL EXPENSESThis item is made up as follows:

2013 2012

S/. (000) S/. (000)

Interest on financial obligations, note 15(l) 53,578 36,210

Interest on borrowings, note 13(d) 16,338 17,666

Financial expenses on derivatives, note 31 6,293 4,853

Change in fair value of trading derivatives 5,788 -

Loss on remeasurement to fair value of liabilities 1,476 3,793

Other 5,345 2,949

88,818 65,471

Commissions for structuring financial obligations 2,017 1,654

90,835 67,125

2013 UNACEM 169

28. TRANSACTIONS WITH RELATED PARTIES(a) Nature of the relationship -

During the years 2013 and 2012, 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, 2013 and

2012, Sindicato de Inversiones y Administración S.A. owned 43.4 and 68.03 percent of the

share capital of the Company, respectively

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.

Compañía Eléctrica El Platanal S.A. - CELEPSA, see note 10 and 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 the promotion of services, transportation, storage, management

and delivery of cement manufactured by the Company, which also rents DAC the warehouse

facilities for the development of its activities.

Generación Eléctrica de Atocongo S.A. - GEA

GEA’s main activity is the generation and sale of electricity to the Company, which 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.

(b) The main transactions with related companies during the years 2013 and 2012 were as

follows:

2013 2012

S/. (000) S/. (000)

CEMENT SALES -

Unión de Concreteras S.A. 190,060 147,017

Firth Industries Perú S.A. 56,214 52,945

Prefabricados Andinos Perú S.A.C. 1,664 973

Depósito Aduanero Conchán S.A. - 5

BLOCKS, BRICKS AND PAVERS SALES -


Firth Industries Perú S.A. 1,400 45

LEASES OF PLANT, EQUIPMENT AND FACILITY -

Generación Eléctrica Atocongo S.A. 798 3,553

Unión de Concreteras S.A. 624 538

Depósito Aduanero Conchán S.A. 354 638

Prefabricados Andinos Perú S.A.C. 197 160

INCOME FROM ROYALTIES -

Compañía Eléctrica el Platanal S.A., nota 25 6,110 5,659

DIVIDENDS INCOME -

Generación Eléctrica Atocongo S.A. 2,496 -

Ferrocarril Central Andino S.A. 308 289

Prefabricados Andinos Perú S.A.C. - 1,371

ADMINISTRATIVE, TECHNOLOGY AND MANAGEMENT SUPPORT -

Drake Cement LLC 377 222



Generación Eléctrica Atocongo S.A. 88 85

Vigilancia Andina S.A. 66 60

Compañía Eléctrica el Platanal S.A. 37 41

OTHER INCOME -

Compañía Eléctrica el Platanal S.A. 593 91


Unión de Concreteras S.A. 281 512

Generación Eléctrica Atocongo S.A. 250 1,099

Sindicato de Inversiones y Administración S.A. 108 91


2013 UNACEM 171

2013 2012

S/. (000) S/. (000)

PURCHASES OF ELECTRIC ENERGY -

Compañía Eléctrica el Platanal S.A. 80,112 75,165

Generación Eléctrica Atocongo S.A. 3,536 17,868

MANAGEMENT SERVICES -

Sindicato de Inversiones y Administración S.A. 25,370 21,905

Inversiones Andino S.A. 4,437 19,710

MANAGEMENT PROJECT SERVICES -

ARPL Tecnología Industrial S.A. 23,836 5,601

TECHNICAL ASSISTANCE AND ENGINEERING SERVICES -


MAQUILA SERVICE -


WAREHOUSE MANAGEMENT SERVICES -

Depósito Aduanero Conchán S.A. 4,348 8,147

PURCHASES OF ADDITIONAL MATERIAL -


Generación Eléctrica Atocongo S.A. 1,202 -

PRECAST STRUCTURES -

Prefabricados Andinos Perú S.A.C. 814 1,304

EXPENSE REIMBURSEMENTS -


Depósito Aduanero Conchán S.A. 435 -

ARPL Tecnología Industrial S.A. 333 -

OTHERS -

Vigilancia Andina S.A. 19,293 4,581

Unión de Concreteras S.A. 6,794 997

Generación Eléctrica Atocongo S.A. 4,453 25


Inversiones Andino S.A. 876 516

ARPL Tecnología Industrial S.A. 835 395


Drake Cement L.L.C. 31 -

Compañía Eléctrica el Platanal S.A. 4 -

Depósito Aduanero Conchán S.A. - 307

(c) As a result of these transactions, the Company had the following rights and obligations with

its related entities as of December 31, 2013 and 2012:

2013 2012

S/. (000) S/. (000)

ACCOUNTS RECEIVABLE -


Firth Industries Perú S.A. 14,085 6,056

Compañía Eléctrica El Platanal S.A. 6,255 5,543



Generación Eléctrica de Atocongo S.A. 250 403

Others 1,534 303

51,535 42,982

ACCOUNTS PAYABLE -


Inversiones Andino S.A.A. 12,297 5,110


Compañía Eléctrica El Platanal S.A. 6,752 6,416


Vigilancia Andina S.A.A. 1,381 544


Generación Eléctrica de Atocongo S.A. 898 1,346



Drake Cement LLC. 31 -

55,263 45,808

TERM -

Current portion, note 14(a) 43,380 33,053

Non current portion, note 14(a) 11,883 12,755

55,263 45,808

2013 UNACEM 173

The Company conducts its operations with related entities 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.

(d) The total remuneration paid to directors and key members as of December 31, 2013 totaled

approximately S/. 21,800,000 (approximately S/. 28,300,000 in 2012), which includes short-

term benefits and compensation for time served.

(e) Guarantees given -

The Company maintains a "Comfort Letter" with Scotiabank Perú S.A.A. in favor of Unión de

Concreteras S.A., dated July 31, 2009, guaranteeing a line of credit amounting to US$ 8,500,000

(equivalent to S/. 21,684,000), under which UNICON will perform various credit transactions.

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 shares outstanding during the year.

Calculation of the weighted average number of shares and the basic and diluted earnings per

share is presented below:

2013 2012

S/. (000) S/. (000)

NUMERATOR Net income attributable to common shares 204,742 358,340

DENOMINATOR Weighted average number of common shares 1,646,503 1,646,503

Basic and diluted earnings for common shares 0.124 0.218

30. COMMITMENTS AND CONTINGENCIESCOMMITMENTS As of December 31, 2013, 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/. 39,144,000 (S/. 35,714,000 as of December 31, 2012).

FINANCIAL LEASES The future minimum payments for leases are as follows:

TAX SITUATIONThe Company is subject to the Peruvian tax system. As of December 31, 2013 and 2012, the

income tax rate is 30 percent on the taxable income.

Companies not domiciled in Peru and individuals must pay an additional tax of 4.1 percent over

received dividends.

The Tax authority have the power to review and, if necessary, adjust the income tax calculated by

the Company during the four years following the year of the filing of the affidavit. The affidavits

of income tax for the years 2009 to 2013 and the affidavits of General Sales Tax from monthly

periods of exercise 2009 to 2013 are open to inspection by the tax authorities. The returns of

income tax from the years 2009 to 2013 and the affidavits of General Sales Tax comprised of

monthly periods between December 2009 and September 2012 for Cemento Andino S.A. are

open to inspection as well.

2013 2012

MINIMUM PAYMENTS

PRESENT VALUE OF

MINIMUM LEASE PAYMENTS

MINIMUM PAYMENTS

PRESENT VALUE OF

MINIMUM LEASE PAYMENTS

S/. (000) S/. (000) S/. (000) S/. (000)

Between one to five years 419,810 380,865 423,926 399,660

Total payments 419,810 380,865 423,926 399,660

Less - financial costs (499) - (499) -

PRESENT VALUE OF MINIMUM LEASE PAYMENTS

419,311 380,865 423,427 399,660

2013 UNACEM 175

At the date of this report, the Company is in the process of audit of Income Tax by the SUNAT

with respect to 2007 and 2008 fiscal years, also a revision motivated by refund requested to the

same tax with respect to 2004 to 2006 fiscal years

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, whether the reviews to be conducted will result

or not in liabilities for the Company, therefore, any increased tax or surcharge that could arise

from possible tax reviews will be applied to the results of the year in which it is determined. In

the Management’s and its legal advisors’ opinion, any additional tax settlement would not be

significant for the financial statements as of December 31, 2013 and 2012.

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(q).

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 it has proceeded to pay the assessments received.

As of December 31, 2013 and 2012, the Company has recorded the necessary provisions, leaving

as a possible contingency an amount of S/. 5,981,000, plus interest and costs.

Likewise, as of December 31, 2013, the Company holds three claims to SUNAT, corresponding

to the request of refund of income tax paid in excess for the years 2004, 2005 and 2006,

amounting to approximately S/. 17,900,000 (approximately S/. 17,013,000 as of December 31,

2012). 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), said amount and interest was recovered in July 2013.

Management and its legal advisors 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 ROYALTIESOn September 28, 2011, Congress passed Law 29788, amending Law 28258 - Mining Royalty

Act. This law is to establish the mining royalty payable by holders of mining concessions against

the economic benefit of the the exploitation of metallic and nonmetallic mining. The mining

royalty is determined quarterly and the amount payable will be the highest when comparing

the 1% of net sales in the quarter and quarterly operating income by a rate that varies between

1 and 12. Mining royalty payments will be deductible for income tax purposes in the fiscal year

in which such payments are made.

On December 2, 2011, the Company filed a constitutional action before the Constitutional Court,

requesting to put things back to the state before they were previous to the effective date of the

Supreme Decrease 180-2011/EEFF and 209-2011 EF on the definition of nonmetallic mineral

resources and specifically on the determination of the base of calculation of the royalties.

As result of the review of the year 2008, the Company has been notified by the Tax Authority

(SUNAT) with several resolutions of assumed omissions to payment of Mining Royalties and its

corresponding fines, amounting approximately to S/. 11,587,000.

On November 20, 2013, Peru’s Constitutional Court, in a final and unappealable decision, stated

the new regulation of the Royalty Mining Law violates the constitutional right of property, as well

as the principles of legal reservation and proportionality: consequently, the new regulation is

rendered inapplicable to the Company. Accordingly, the Company will continue using as a basis

for the calculation of the mining royalty the value of the concentrate or mining component and

not the value of the product obtained by the industrial and manufacturing process.

Mining royalty expenses paid to the Peruvian Government for the years 2013 and 2012 amounted

to S/. 2,853,000 and S/. 1,641,000, respectively, and were recorded in the statement of profit or

loss.

ENVIRONMENTAL COMMITMENTS The Company’s activities are subject to environmental protection standards and have to meet

the following regulations:

(A) INDUSTRIAL ACTIVITIES

In compliance with Supreme Decree 019-97-ITINCI "Regulation of Environmental

Protection for the Development of Manufacturing Activities", enacted on September 26,

1997, the Company filed on January 29, 2001 its Program for Environmental Management

(PAMA) before the Ministry of Production (PRODUCE), which was approved on February 1,

2002 and whose implementation program ended in May 2008, following the environmental

monitoring programs. As of December 31, 2013, the Company has incurred in expenditures

of approximately US$ 16,918,000 (US$ 16,600,000 as of December 31, 2012), related to

environmental remediation and management for the modernization of its industrial plant.

Additionally, the Company has currently an Environmental Impact Study (EIA by its acronym in

Spanish), 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 investment of

US$ 53,725,000 as of December 2013 (US$ 21,300,000 as of December 2013) for improvements

to systems capturing particles in the cement manufacturing process.

(B) MINING AND PORT ACTIVITIES

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

in compliance with the terms and amounts determined in such studies. The cumulative

investment as of December 31, 2013 amounts to approximately US$ 15,344,000 (approximately

US$ 15,300,000 as of December 31, 2012).

2013 UNACEM 177

On October 14, 2003, the Congress of Peru issued Law 28090, regulating the mine closures. This

law regulates the obligations and procedures for the elaboration, 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 established by 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, 2013, the provision for mine closure amounts to approximately

S/. 14,000,000 (approximately S/. 11,976,000 as of December 31, 2012) and is included in the

"Provisions" caption in the statement of financial position, see note 17(a).

(C) USE OF HYDROCARBONS

Supreme Decree 046-93-EM "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 with this regulation, the Company has a Program

for Environmental Management (PAMA by its acronym in Spanish), that was approved by the

Ministry of Energy and Mines in 1996. As of December 31, 2013, the Company has made an

accumulated investment of approximately US$ 98,000 (US$ 95,000 as of December 31, 2012)

in said PAMA.

(D) SPECIAL PROJECTS

As of December 31, 2013, the projects that the Company is executing are:

(i) New silo for 20,000 tons of cement – Atocongo plant

This project consists in the construction of a new silo with a capacity of 20,000 tons of cement. It

has two systems that permit to feed the plant bulk systems and tubular belt. This silo is currently

operating. As of December 31, 2013, the Company has paid approximately S/. 79,600,000.

(ii) Kiln 1 – Electrostatic cooler

This project for the control of emissions will generate efficiencies in the particle caption (no se

entiende) (higher than 99.9 percent), in compliance with the PAMA. As of December 31, 2013,

the Company has paid approximately S/. 24,800,000.

During the year 2013, the Company completed the following projects:

(i) Expansion of productive capacity of the Atocongo plant This project consist in increasing the production capacity of Kiln 1, from 3,200 tons of clinker

per day to 7,500 tones, and increasing the production capacity of raw meal and cement by

installing new roller presses of 310 tons/hour to 120 tons/hour, respectively. The project has

been operating since November 2013, and only complementary worksneeds to be finished.

This project required approximately S/. 543,400,000 and commitments for approximately

S/. 4,700,000.

(ii) Expansion of productive capacity – Kiln 4 This project consists in increasing the production capacity of the plant. This new line will rise

the production capacity of the Company in 700,000 tones clinker/day and has been operational

since the end of March 2013, and only the complementary works are pending. This project

required approximately S/.123,600,000 and to commitments for approximately S/. 6,000,000.

(E) CARBON CREDITS

As of December 31, 2013 and 2012, the Company has the 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, 2008. To date the Company has made 3 CERs emissions

Under this project in March 2011, DOE Tuv Sud submitted to UNFCCC the issuance request

of 112,346 CERs. On April 19, 2011, and after concluding the process called "Completeness

check”, the Secretary of UNFCCC confirmed the reception of the issuance request and made

it 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 (equivalent 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, 2011. The total of reductions obtained in this period was 137,754 tons of CO2, the

verification process is undergoing its final phase and the issuance and subsequent sale of the

CERs is estimated to take place by the end of January 2014.

2013 UNACEM 179

31. FINANCIAL RISK MANAGEMENT, OBJECTIVES AND POLICIESThe 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 short-term 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.

The Company’s Senior Management oversees the management of these risks. The Company’s

Senior Management is supported by the 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 risk-taking activities are governed by appropriate policies and procedures and that

financial risks are identified, measured and managed in accordance with the 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, 2013 and 2012.

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, 2013 and 2012.

(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 long-term debt with variable interest rates.

The Company has four contracts interest rate swap designated as cash flow hedges and are

recorded at their fair value. The detail of these operations is as follows:

(*) Corresponds to the same swap agreement with Bank of Nova Scotia.

COUNTERPARTY REFERENCE VALUE AS OF DECEMBER 31,

2013

MATURITY RECEIVVARIABLE R

US$ (000)

ASSETS -

Bank of Nova Scotia (*) 50,000 August 2018 LIBOR to 3 mon

Bank of Nova Scotia 50,000 September 2018 LIBOR to 3 mon

LIABILITIES -

Bank of Nova Scotia (*) 50,000 August 2018 LIBOR to 3 mon

Bank of Nova Scotia 60,000 September 2015 LIBOR to 3 mon

BBVA Banco Continental S.A. 40,000 September 2016 LIBOR to 3 mon

2013 UNACEM 181

VESRATE AT:

PAYS FIX RATE AT: FAIR VALUE

2013 2012

S/. (000) S/. (000)

ths + 2.35% 0.850% 307 -

ths + 2.40% 1.020% 465 -

772 -

ths + 2.35% 0.850% - 746

ths + 1.95% 3.680% 1,980 4,195

ths + 2.90% 4.455% 1,188 2,218

3,168 7,159

Financial instruments are intended to reduce exposure to the 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 3-month Libor.

The Company pays or receives on 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.

In 2013, the Company recognized an expense on these derivative financial instruments

amounting to approximately S/. 6,293,000 (S/ .4,853,000 during the year 2012), whose amounts

were actually paid during the year and are presented as "Borrowing Costs" in the statement of

income, see note 27.

The effective portion of changes in the fair value of financial instruments that qualify as hedges

is recognized as assets or liabilities and affects equity. As of December 31, 2013 and 2012, the

Company has recognized under "unrealized results" in the statement of changes in equity, a

negative change in fair value of approximately S/. 1,678,000 and S/ .5,011,000, respectively,

which is presented net of the income tax effect.

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:

The movement course in the basics related to the analysis of sensitivity to interest rate is

based on the current market environment.

INCREASE / DECREASE IN BASIS POINTS

IMPACT ON INCOME BEFORE INCOME TAXES

2013 2012

% S/. (000) S/. (000)

+10 (174) (212)

-10 174 212

2013 UNACEM 183

(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).

Management monitors this risk through analysis of the country’s macroeconomic variables.

As of December 31, 2013 and 2012, the Company has two cross currency interest rate swap

amounting to S/. 2,389,000 to the bank (and a cross currency interest rate swap amounting

to S/. 3,399,000 on behalf of the Company as of December 31, 2012). These instruments were

designated as held for trading.

The result of holding balances in foreign currency for the Company in the years 2013 and 2012

was a loss and gain in exchange difference amounting to approximately S/. 138,260,000 and

S/.75,973,000, respectively, which are presented in the caption "Exchange difference, net" in

the 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 profits 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).

CHANGE INUS DOLLARS RATE

EFFECT ON PROFIT BEFORE TAX

2013 2012

% S/. (000) S/. (000)

+ 5 (111,226) (73,851)

+10 (222,451) (147,693)

- 5 111,226 73,851

-10 222,451 147,693

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, 2013

and 2012, 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 customers as of

December 31, 2013 (30 as of December 31, 2012). As of December 31, 2013, the Company had

4 significant customers that accounted for approximately 73.9 percent of sales (approximately

79.4 as of December 31, 2012).

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, 2013 and 2012, other

accounts receivable correspond mainly to: advances to suppliers, claims to SUNAT and claims

to third parties. Company’s Management makes a continuous monitoring of the credit risk to

such items and it periodically assesses the balances that evidence an impairment to determine

the required allowance for irrecoverability.

2013 UNACEM 185

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:

AS OF DECEMBER 31, 2013

FROM 3 TO 12 MONTHS

FROM 1 TO 10 YEARS

TOTAL

S/. (000) S/. (000) S/. (000)

Bank overdrafts and loans 266,766 450,154 716,920

Trade and other accounts payable 209,148 11,883 221,031

Financial obligations

Amortization of capital 426,640 1,177,800 1,604,440

Flow of interest payments 91,218 153,947 245,165

TOTAL LIABILITIES 993,772 1,793,784 2,787,556

AS OF DECEMBER 31, 2013

FROM 3 TO 12 MONTHS

FROM 1 TO 10 YEARS

TOTAL

S/. (000) S/. (000) S/. (000)

Bank overdrafts and loans 532,476 - 532,476

Trade and other accounts payable 234,606 12,755 247,361

Financial obligations

Amortization of capital 341,009 1,069,495 1,410,504

Flow of interest payments 16,375 104,221 120,596

TOTAL LIABILITIES 1,124,466 1,186,471 2,310,937

Capital management The Company’s objective in managing capital is to safeguard its ability to continue al company in

order to generate returns for shareholders, benefits for other groups of interest, and maintain

optimal capital structure to reduce the cost of capital.

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, the Company 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 non-current 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, 2013 and December 31, 2012.

32. FAIR VALUES (A) INSTRUMENTS RECORDED AT FAIR VALUE, ACCORDING TO HIERARCHY

The following table presents an analysis of the financial instruments recorded at fair value,

according to their hierarchy level:

2013 2012

S/. (000) S/. (000)

Asset for derivatives financial instruments:

Level 2 772 3,399

TOTAL 772 3,399

Liability for derivatives financial instruments:

Level 2 5,557 7,159

TOTAL 5,557 7,159

2013 UNACEM 187

LEVEL 1 The financial assets included in the Level 1 category are measured based

on quotations obtained from an active market. A financial instrument is

regarded as quoted in an active market if prices are readily and regularly available from a

centralized trading mechanism, agent, broker, industry group, pricing providers or regulatory

agencies; and those prices are from regular transactions in the market.

LEVEL 2 Financial instruments included in the Level 2 category are measured ba-

sed on market factors. This category includes instruments valued using

market prices of similar instruments, whether or not active markets, and other valuation tech-

niques (models) in which all significant inputs are directly or indirectly observable in the mar-

ketplace. A description of how the fair value of the Company’s principal financial instruments

is determined in this category is presented as follows:

Derivative financial instrumentsThe valuation technique most commonly used includes valuation of forwards and swaps,

calculating the present value. The models incorporate various data, including the credit quality

of counterparties, spot exchange rates and forward rates and interest rate curves. Options are

valued using recognized and generally accepted models.

LEVEL 3 As of December 31, 2013 and 2012, the Company does not maintain finan-

cial instruments in this category.

(b) In addition to the instruments carried at fair value, in Management’s opinion, the fair value

of the Company’s financial instruments is not materially different from its carrying values

and, therefore, disclosure of this information has no effect for the financial statements as of

December 31, 2013 and 2012.

2013 LEVEL 1 LEVEL 2 LEVEL 3 FAIR VALUE

CARRYING VALUE

S/. (000) S/. (000) S/. (000) S/. (000) S/. (000) S/. (000)

FINANCIAL ASSETS

Cash and cash equivalents 196,750 - - - 196,750 196,750

Trade and other accounts receivable, net 262,865 - 772 - 263,637 264,027

FINANCIAL LIABILITIES

Bank overdrafts and loans 716,920 - - - 716,920 716,920

Trade and others accounts payable 219,271 - - - 219,271 221,031

Financial obligations 1,287,365 - - - 1,287,365 1,604,440

Trade and others accounts payable - - 5,557 - 5,557 5,557

2013 LEVEL 1 LEVEL 2 LEVEL 3 FAIR VALUE

CARRYING VALUE

S/. (000) S/. (000) S/. (000) S/. (000) S/. (000) S/. (000)

FINANCIAL ASSETS

Cash and cash equivalents 74,189 - - - 74,189 74,189

Trade and other accounts receivable, net 163,631 - 3,399 - 167,030 167,486

FINANCIAL LIABILITIES

Bank overdrafts and loans 532,476 - - - 532,476 532,476

Trade and others accounts payable 247,361 - - - 247,361 246,613

Financial obligations 1,410,504 - - - 1,410,504 1,343,602

Trade and others accounts payable - - 7,159 - 7,159 7,159

2013 UNACEM 189

The methodologies and assumptions used by the Company to determine the estimated fair

values depend on the terms and risk characteristics of various financial instruments that are

carried at amortized cost and include the following:

(i) Assets whose fair value is similar to their book value For financial assets and liabilities that are liquid or have short-term maturity (less than three

months), it is considered that the carrying value is similar to the fair value. This assumption is

also applicable for time deposits, savings accounts without specific maturity and variable rate

financial instruments.

(ii) Financial instruments at fixed ratesThe fair value of financial assets and liabilities at fixed rate and amortized cost is estimated

by comparing market interest rates at the time of initial recognition with current market rates

for similar financial instruments. The estimated fair value of interest-bearing deposits is

determined by discounted cash flows using market interest rates for financial instruments

with maturities and similar credit risk. For debt issued, the fair value is determined based on

quoted market prices. When there is no market price, the model of discounted cash flow based

on the yield curve of interest rate for the term to overcome is used.

2013 UNACEM 191

IT’S A PRIVILEGE TO WORK AT SUCH A SOLID COMPANY, WHICH NOT ONLY GIVES OPPORTUNITIES TO ITS EMPLOYEES, BUT ALSO CARES FOR THE ENVIRONMENT AND PRACTICES SOCIAL RESPONSIBILITY.”

IMI MAVILA MARQUINA SECURITIES DEPARTMENT


ADMINISTRATION, MANAGEMENT, AND TECHNICAL ASSISTANCE

ACKNOWLEDGMENTS

In accordance with the provisions established in the articles of incorporation of our Company, dated

December 28, 1967, and in accordance with the mandate of the Shareholders’ Meeting held on December 28,

1981, the General Management of Unión Andina de Cementos S.A.A. continued to be exercised by Sindicato

de Inversiones y Administración S.A., via the agreement renewed on April 12, 2012, in force as of this date.

Inversiones Andino S.A. provided administrative and financial advisory services, in accordance with the

agreement automatically renewed in January 2012 and in force as of this date.

ARPL Tecnología Industrial S.A. was responsible for the technical advisory service, in accordance with the

agreement renewed during 2013.

The Board of Directors acknowledges and values the important contributions of these three companies

throughout 2013.

The Board of Directors would like to express its sincere thanks to each one of the Company’s employees, whose

commitment throughout the year enabled us to achieve the objectives we set for ourselves and continue our

process of consolidation as a leader in the domestic and international market.

2013 UNACEM 193

CONCHÁN PIER, LIMA


ATOCONGO PLANT, LIMA

2013 UNACEM 1952013 UNACEM ANNUAL REPORT 195

2013 ANNUAL REPORT

Unión Andina de Cementos S.A.A.

Avenida Atocongo 2440. Lima 35, Perú

©Editorial Rayo Verde S.A.C.

Calle Lola Pardo Vargas 060. Lima 34, Perú

Editors in Chief · Marcela Delgado y Cecilia Durand

Text Editor · Marjorie Effio

Proofreader · Jorge Cornejo

English Translation · Servidioma

Graphic Design · Claudia Burga-Cisneros

Packaging Design · Eduardo Aritomi

Layout · Luis Felipe Chanamé, Veruska Noriega, Antonio Echarri

Photography and Photography Editing · Marcela Delgado y Cecilia Durand

Photography Touchups · Julio Basilio

Development and Programming of Web Software · Khameleon World S.A.C.

All Rights ReservedThis book is published exclusively for Unión Andina de Cementos S.A.A.

It may not be reproduced, recorded, or transmitted by any type of data

recovery system via any means, whether mechanical, photochemical,

electronic, magnetic, electro-optical, photocopies, or others, without the

prior written permission of Unión Andina de Cementos S.A.A.

annual report - unacem

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