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ANNUAL REPORT

2017

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TABLE OF CONTENTS

LETTER FROM THE CHAIRMAN OF THE BOARD 1. THE COMPANY AND ITS SUBSIDIARIES 1.1 Macroeconomic Environment 1.2 Operations 1.3 Subsidiaries and Affiliates 2. ONGOING PROJECTS 2.1 Clinker Yard at Condorcocha 2.2 Migration of the Kiln 2 Control System at Condorcocha 2.3 Bag Filter for the Cooler of Kiln 2 at Condorcocha 2.4 Works for Taxes 3. STAKEHOLDERS 3.1 Our Employees 3.2 Occupational Health and Safety 3.3 Environmental Management 3.4 Development of Our Communities 4. ECONOMIC/FINANCIAL RESULTS 5. ADMINISTRATION 5.1 Board of Directors 5.2 Management 5.3 Good Corporate Governance Administration, Management and Technical Assistance Acknowledgments

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ANNUAL REPORT OF THE BOARD OF DIRECTORS OF UNIÓN ANDINA DE CEMENTOS S.A.A.

FISCAL YEAR 2017

(Approved in the Board of Directors’ Meeting held on February 23, 2018)

Letter from the Chairman of the Board

During 2017, Peru experienced a great deal of political instability, which ended up restricting our growth as a country to just 2.5%. Nevertheless Peru led growth in the region. Unfortunately, the past year saw many Peruvians’ worst fears come true: on the one hand, there were the corruption scandals linked to dealings with Brazilian construction companies, along with the crisis among government branches that we were forced to deal with over the course of the entire year; and on the other, we had the Coastal El Niño phenomenon, which brought significant losses: not only in economic terms, but most tragically, the loss of human lives.

The challenging political environment led to lower private investment, delays in the implementation of major infrastructure projects, and a lower internal demand. As a result of this scenario, our cement dispatches fell by 2.3% compared to 2016. Nevertheless, thanks to a higher average price over the course of the year and increased export volumes, we were able to close out 2017 with a 2.5% increase in revenues. Furthermore, despite the effects of lower sales volumes on the fixed cost, we were able to maintain our EBITDA margin, not including the dividends received from subsidiaries, at 38%, which not only allowed us to meet our financial commitments, but our commitments to all of our stakeholders through our value chain.

As a company, we have been doing business in the Peruvian market for over one hundred years now. Over that time, we have faced many different crises, whether political, economic, or even international situations. In the face of those hard times, we have remained committed to creating value through high-quality processes, striving for operational and economic efficiency, and actively promoting the development of our sector in each of the countries where we are present.

When faced with problems such as corruption, our role within society is clear: we must be part of the solution, and not the problem. At UNACEM, everything comes down to our employees. In 2016, as part of our strategic planning process, we redefined our corporate values, based on excellence, responsibility, ethics, lawfulness, commitment, and innovation. While these values have always been part of our culture, they are now the foundation based on which we seek to achieve our goals. Accordingly, this past October, we approved our new Code of Conduct and Ethics, in an effort to strengthen the values of all of our stakeholders. We will continue to work hard in this area in the coming years, as a crosscutting objective that underlies all aspects of our strategy.

On October 1, 2017, we celebrated five years as UNACEM. I am proud to say that this process has strengthened us and allowed us to forge greater competitive advantages. Our portfolio of products has achieved an excellent balance between consolidation and innovation: Cemento Sol and Cemento Andino have remained

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the leaders in the Peruvian market; this year we began dispatching Cemento Apu from our Condorcocha plant to supply the central highlands market; and Cemento Andino Ultra HS is now the leader in the anti-saltpeter cements category. All of these achievements are guided by the desire to better meet the needs of our clients, always adapting our operations to their expectations and necessities. At the same time, we have continued to strengthen our business relations in the home improvement store channel, achieving wider coverage through the Progresol network. As for our plants, both Atocongo and Condorcocha maintained satisfactory operating levels. We continued to work on operating synergies between the plants during 2017, and redoubled our efforts with regard to occupational health and safety, with continuous training and preventive actions aimed at creating a “zero accident” culture. We are well aware that this goal can only be achieved with time, and requires a commitment from every single one of us.

This year was also a challenging one for our subsidiaries. UNICON and CONCREMAX continue to lead the ready mixed market. Despite the drastic slowdown in the sector, especially with regard to infrastructure, they achieved a combined dispatch of 2.6 million m3 of ready mixed, supplying major infrastructure projects such as Line 2 of the Lima Metro, the National Archaeology Museum, and the construction of the Pan-American Villa, with the products and services required by projects of this size.

In June, CELEPSA began operating the Marañón hydroelectric plant, a renewable energy project that will help it to become an increasingly important operator in the Peruvian electricity market. Over the course of 2017, CELEPSA played an active role in the sector, which has suffered from a surplus of generation in recent years, leading to distorted energy prices that require a revision and adjustment of the regulatory framework. We will continue to seek our solutions focused on the efficiency and sustainability of the electricity sector in the long term.

In the United States, Skanon reported record production and sales, producing 536,407 short tons of clinker and selling 683,582 short tons of cement, making for a positive EBITDA of US$ 4.1 million for 2017.

UNACEM Ecuador succeeded in increasing its sales by 1.7%, and supplied the iconic Quito Metro project with its new Cemento Magno product. In July 2017, through UNICON, we added the ready mixed company Hormigonera Quito to the family. This will allow us to enter this market, where we were not yet active, and to forge synergies with UNACEM Ecuador in order to increase our market share and improve our competitiveness in the sector.

Through Asociación UNACEM, we have continued to work on our sustainability strategy, seeking to promote the development of our stakeholders, and above all, to help build their capacities, encourage community participation, and create a relationship based on trust, as one of the key factors in our long-term strategy.

On behalf of the entire Board of Directors, I would like to once again thank Sindicato de Inversiones y Administración S.A., who continued to act as the General Management of UNACEM; and Inversiones Andino S.A. and ARPL Tecnología Industrial, who provide us with administrative, financial, and technical advisory

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services. A special thanks goes to each and every one of our employees, whose commitment and professionalism enable us to tackle the challenges we have set for ourselves.

We remain firmly committed to the growth of our activities, promoting the development of our country and our region, improving infrastructure, and creating value for all of our stakeholders.

I invite you to take a look at the results of UNACEM’s performance during 2017.

Sincerely,

Ricardo Rizo Patrón de la Piedra

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ANNUAL REPORT OF THE BOARD OF DIRECTORS OF

UNIÓN ANDINA DE CEMENTOS S.A.A. FISCAL YEAR 2017

1. THE COMPANY AND ITS SUBSIDIARIES

1.1. Macroeconomic Environment

In 2017, worldwide economic activity showed general signs of strengthening and recovery, and was defined by the International Monetary Fund as “the broadest synchronized global growth upsurge since 2010.” The growth of the global economy has been estimated at 3.7%, due primarily to a better-than-expected performance by the advanced economies and the most important emerging markets.

As a result of the monetary and fiscal policies implemented over the last few years in the Eurozone and Japan, together with the rise in commodities prices, the advanced economies reported significant improvements in their international trade indicators, higher manufacturing production levels, and growth in internal demand, achieving 2.4% growth in the Eurozone and 1.8% growth in Japan. In the United States, the recent approval of tax reforms and improved numbers in the job market led to a sustained growth of 2.3%.

For their part, the emerging economies benefited from higher commodities prices and the relative stability of the financial markets, which encouraged an influx of capital into their markets, with a slight jump in inflation levels.

The Peruvian economy led the growth numbers in Latin America (1.4%), growing 2.5% over the previous year. The country was able to do so despite widespread political instability and the severe damages caused by natural disasters early in the year. In Peruvian politics, there were two major events. The first was tied to the “Operation Car Wash” corruption scandals involving Brazilian construction companies active in the country, which have spread to Peruvian companies that formed consortiums with the Brazilians, and may potentially have compromised government officials. The second was the petition in Congress to vacate the President of Peru from his office, followed by the pardon of ex-president Alberto Fujimori. These events were aggravated by the loss of human lives and severe damages do infrastructure throughout the country caused by the Coastal El Niño phenomenon. The reconstruction process is still in the early stages, and now stands as one of the greatest challenges faced by the current administration.

The sectors that drove the growth of the Peruvian economy in 2017 were fisheries (4.7%), mining (3.2%), and services (3.8%), which balanced out sectors such as electricity (1.1%), trade (1.1%), and manufacturing (-0.3%).

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The main economic indicators for 2017 included the following:

o Exhibiting a volatile and uneven behavior over the course of the year, the Peruvian sol appreciated against the dollar by 3.4% as of the close of 2017, as a result of the sustained recovery of commodities prices and the fiscal measures taken in advanced economies, primarily by the Fed. These impacts were mitigated by the intervention of the Peruvian Central Reserve Bank (BCRP). The closing exchange rate for the year was S/ 3.245 per U.S. dollar (S/ 3.360 at the close of 2016).

o Inflation of 1.4%. While this rate closed out 2017 within the target range set by the BCRP, it was the lowest in the last seven years due to the normalization of prices for certain foods over the course of the year, along with the appreciation of the sol, as discussed in the previous paragraph.

o Trade balance surplus of US$ 6,266 million, with exports totaling US$ 44,918 million as of the close of 2017, primarily due to increased exports of traditional goods (26.7%) as a consequence of higher mineral prices, and—to a lesser extent—higher non-traditional exports (8.2%).

o Net international reserves of US$ 63,621 million, a 3.1% increase over the US$ 61,686 million as of the close of 2016.

The construction sector finished the year with a growth of 2.2% over 2016, due to the greater physical progress in public investment projects for infrastructure and an increase in the construction of private buildings starting in the third quarter, which helped to offset the sector’s weak performance at the start of the year: as of the second quarter of 2017, it had contracted by 3.0%.

1.2. Operations

Production and Dispatch in the Local Market

During 2017, our operations at the Atocongo and Condorcocha plants registered satisfactory operating results, and operated at a combined utilization rate of 68.8% in clinker production (71.0% in 2016) and 60.4% (61.9%) in cement production. During 2017, Kiln 2 at the Atocongo plant was out of service from April to August, in order to reduce the sustained high level of clinker stocks.

Total clinker production came to 4,609,852 t, 3.0% lower than that achieved in 2016 (4,750,298 t). This decrease was primarily due to the shutdown of Kiln 2 at the Atocongo plant, along with the stoppages (also scheduled) of Kilns 2 and 3 at Condorcocha to perform major maintenance.

As for cement, our production totaled 5,009,610 t, registering a decrease of 2.5% compared to the production of 5,137,688 t the previous year. The

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drop in production was due to the contraction of demand in the local market, which registered a notable decrease during the first half of the year as a result of the flooding caused by the Coastal El Niño phenomenon, affecting dispatches from the Condorcocha plant. This scenario was further complicated by the corruption scandals that rocked the whole country, and especially the construction sector.

As of the close of 2017, the Atocongo plant (Lima) reported a production of 3,354,166 t, while the Condorcocha plant (Junín) produced 1,655,244 t, thus allowing us to fully meet the local demand for cement.

Our cement production by plant is shown in Figure 1:

Also in 2017, we commenced the implementation of our Strategic Plan. This task involved a review and restatement of our mission, vision, and values as a company, which will guide the development of 23 initiatives, based on our six core concepts:

- Quality goods and services - Increased per capita cement consumption - Cost efficiency - Prioritization of profitable investments - High-performance organization - Sustainability

The implementation process now underway will allow us to maintain our position as leaders in the sector through an ever-more-efficient operation.

During 2017, the total volume of cement dispatched came to 4,993,346 t, 2.3% lower than the dispatch reported in 2016, which totaled 5,109,203 t. This decrease was registered as a result of the sector’s contraction, mainly

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during the first half of the year, although results significantly improved during the second half of the year.

Figure 2 shows the historical data on our cement dispatches:

On the other hand, the nationwide demand for cement, according to the Cement Producers’ Association (ASOCEM), was 9,556,663 t, 0.9% less than that reported in 2016, which totaled 9,643,095 t. This demand includes dispatches by local producers.

Sales

We sell our products through two business units: bagged cement and bulk cement, which accounted for 74.2% and 25.8% of the total dispatched in 2017, respectively.

The bulk cement business unit exhibited a strong performance, growing by 4.4% over the previous year thanks to the recovery of the construction market starting in the second half of the year, as well as the performance of infrastructure works such as the new National Archaeology Museum (“MUNA,” for its acronym in Spanish) in Pachacamac and the dispatches to Line 2 of the Lima Metro, a work we have been supplying since 2015.

The portfolio of products sold by the bagged cement business unit includes: Cemento Andino, Cemento Sol, Cemento Andino IP, Cemento Andino IPM, Cemento Andino Type V, Cemento Andino Ultra HS, and Cemento Apu.

Our bagged products are mainly sold through two distribution channels: the traditional home improvement store network (consisting of the Progresol Home Improvement Store Network and by other home improvement stores that are not members of this network) and the

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modern home improvement store channel (consisting of big box and self-service home improvement stores).

During 2017, we focused on developing more innovative bagged products that offer a greater value to our consumers. Our new product, Cemento Andino Ultra HS, became the leader in the anti-saltpeter cements category, with a market share of over 68% in said segment. In October, we performed the first dispatch of Cemento Apu from our Condorcocha plant, which will enable us to more efficiently serve the central highlands and jungle markets.

Over the course of this year, we continued to focus on our objective of creating more and more value through our portfolio of brands, successfully maintaining our position as market leaders and remaining the most preferred cement manufacturer among consumers on the coast, in the central highlands, and the jungle.

For its part, the bulk cement business unit sells Type I, IP, IPM, GU, V, and HS Portland cements, mainly supplying companies engaged in the sale of ready mixed, hydroelectric plants, mining and oil companies, construction companies, and companies that manufacture cement byproducts.

Our sales strategy remains focused on innovation, not only in our goods and services, but also with new business models that will allow us to keep strengthening sustainable business relations throughout the value chain (from our plants to the points of sale stores). With this in mind, we have continued to forge bonds and earn the loyalty of home improvement store owners through our outstanding business management and increased coverage, thanks to the Progresol Home Improvement Store Network, which included over 500 points of sale as of the close of 2017.

We also have direct points of sale through distributors located in the largest cities in the central highlands and the northeast region of Peru.

Exports and Port Operations

During 2017, the clinker exports performed using our pier in Conchán rose by 160.8% over the previous period, hitting a total volume of 548,932 t (210,504 t in 2016). This was due to the increase in supply agreements over the course of the year. Our main export destination was Chile, which accounted for over 65% of the year’s exports.

As a result of the foregoing, the total volume of bulk solids handled by the Conchán pier rose by 94.6% compared to 2016. During 2017, in addition to export clinker, the main products unloaded at the pier included gypsum, coal, slag, and grains for third parties, for a total of 393,856 t.

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Integrated Management System (IMS)

Our Integrated Management System enables us to run and control our extractive, production, logistics, commercial, and legal management processes throughout our entire operation, with the goal of improving our competitiveness in the sector. This already consolidated system allows us to set objectives and goals with regard to quality, occupational health and safety, the environment, and security, among other aspects.

We currently hold ISO 9001, ISO 14001, and OHSAS 18001 certifications for the Atocongo and Condorcocha plants, and Business Alliance for Secure Commerce (BASC) and Ship and Port Facility Security (SPFS) certifications for the Conchán pier.

During 2017, as part of the Company’s initiative to strengthen its organizational values and culture, we began implementing an anti-bribery management system, which will be incorporated into the IMS, based on ISO 37001 standards. The purpose is to prevent the Company from becoming involved in any kind of bribery case, in addition to help promote an ethical business culture.

In 2017, Atocongo obtained satisfactory results in terms of its quality objectives and goals: customer satisfaction objectives were once again achieved, along with sales objectives, such as market coverage and the presence of our main products; service objectives, such as reduction in service time and keeping up the compliance level in ship loading and unloading speeds; and internal process objectives, such as maintaining quality control testing cycle times, reducing procurement cycle times, maintaining the accuracy of inventory records and the number of shutdowns due to equipment malfunction, etc.

Our environmental objectives included the optimization of waste management, the reduction of specific fuel and electricity consumption, the reduction of well water consumption, and keeping specific carbon dioxide emissions in the manufacture of clinker below our corresponding goal, etc.

As for health and safety, our objectives included optimizing lockout procedures for different power types to avoid accidents, improving noise management, promoting staff health, and lowering accident rates. Additionally, we have worked to minimize the number of accidents, ensure the operational upkeep of electronic controls, and raise our personnel’s awareness with regard to the main risks they face.

At Condorcocha, on the other hand, we performed comprehensive internal audits, as well as comprehensive audits on our contractors, in order to verify their compliance in matters of environmental management and occupational health and safety. In November, SGS audited the processes at the Condorcocha plant and their compliance with ISO 9001:2015, ISO 14001:2015, and OHSAS 18000:2017 standards, recommending our certification under all of these international standards.

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1.3. Subsidiaries and Affiliates

INVECO S.A. / UNICON S.A. (Ownership: 93.4% of INVECO / 100.0% of UNICON)

During 2017, UNICON remained the market leader in the production, distribution, and sale of ready mixed, services, and related goods.

As of the close of 2017, dispatches of ready mixed nationwide totaled 1,972,832 m³, 1.9% lower than the dispatch reported in 2016. This is mainly due to the slowdown of the construction sector and the delays experienced in major infrastructure projects during the first half of the year, a situation that began to turn around during the second half of the period in review.

Despite these setbacks, UNICON continued to work with major infrastructure projects, such as Line 2 of the Lima Metro; the National Archaeology Museum (MUNA), which will be the country’s largest museum, requiring a total supply of 98,000 m3 of ready mixed; and the supply of the Pan-American Villa, which will house the athletes who come to Lima in 2019 to participate in the Pan-American Games.

During the first quarter, UNICON supplemented its product portfolio with the launch of the Unicosta product line, designed specifically to provide concrete structures with greater protection against aggressive environments such as fog, ocean breezes, and high levels of salt, sulfates, or water.

For the second time in a row, the San Juan, Materiales, and Jicamarca plants were recertified under the OHSAS 18001 standard, for a period of three years. In 2017, UNICON received the ABE Award for Labor Responsibility from the Good Employers’ Association (ABE, for its acronym in Spanish) and the American Chamber of Commerce in Peru (AMCHAM), under the category of Benefits, as well as mentions in the categories of Best Recognition Program and Best Supplier Development Program.

UNICON was one of the 25 committed companies who received public recognition as “S.O.S. Companies” from the National Program for the Promotion of Corporate Social Responsibility – Perú Responsable, run by the Ministry of Labor and Employment Promotion, in acknowledgment of the immediate actions taken in response to the damages caused by mudslides in the Jicamarca area during the emergency resulting from the Coastal El Niño phenomenon.

The audited financial statements of UNICON, as of December 31, 2017, showed the following results:

o Net sales of S/ 660.6 million (S/ 629.6 million in 2016) o Net profit of S/ 35.2 million (S/ 25.2 million in 2016) o Net shareholders’ equity of S/ 347.8 million (S/ 360.6 million in 2016)

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CONCREMAX S.A.

CONCREMAX S.A. is a wholly owned subsidiary of UNICON, which currently has three business units:

- Ready mixed. - TECHOMAX, which has two product lines: a voided slab system and a

hollow-core slab system. - TROMIX, which is a line of bagged dry mixes that has been present in

the market for over fifteen years now.

During 2017, CONCREMAX’s ready mixed dispatches nationwide totaled 618,038 m³, 4.39% higher than its dispatches reported in 2016.

The audited financial statements of CONCREMAX, as of December 31, 2017, showed the following results:

o Net sales of S/ 218.9 million (S/ 214.8 million in 2016) o Net profit of S/ 3.3 million (S/ 2.1 million in 2016) o Net shareholders’ equity of S/ 78.0 million (S/ 88.8 million in 2016)

HORMIGONERA QUITO S.A.

In July 2017, UNICON expanded its presence to the international stage with the acquisition of Hormigonera Quito, also known as HORQUITO. The transaction was conducted through direct negotiations between the two companies’ representatives, and involved the payment of US$ 13 million for 100% of the shares, paid for with UNICON’s own resources.

HORQUITO is one of the leaders in the ready mixed market in Ecuador, where it is widely known and respected, especially in Quito. It has over 30 years of experience in the sector.

The company has two industrial plants to the north and south of Ecuador’s capital to supply large-scale works:

North Plant: area of 16,000 m2. This plant has cutting-edge equipment for the manufacture of ready mixed, such as computerized ready mixed plants for aggregate dosing, mixing trucks, mechanical grinding, a concrete laboratory, pumping equipment, and precast equipment.

South Plant: area of 22,000 m2. Serves the southern part of Quito and neighboring valleys.

The unaudited financial statements as of December 31, 2017, showed the following results:

o Net sales of S/ 21.3 million o Net loss of S/ -2.0 million o Net shareholders’ equity of S/ 36.5 million

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BASF Construction Chemicals Perú S.A.

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

BASF is a multinational German company, present in over 170 countries around the world, which manufactures and supplies additives for concrete, as well as adhesives and grouts for masonry, grouts for industrial equipment mounting, and products for the repair of concrete structures, among other products.

The audited financial statements, as of December 31, 2017, showed the following results:

o Net sales of S/ 60.9 million (S/ 58.7 million in 2016) o Net profit of S/ 6.5 million (S/ 7.1 million in 2016) o Net shareholders’ equity of S/ 20.1 million (S/ 20.7 million in 2016)

Entrepisos Lima S.A.C.

UNICON holds a 50% share in the company Entrepisos Lima S.A.C.

This company offers prefabricated concrete products as a construction solution for different structural elements in building and infrastructure works. It is a specialist in lightweight prefabricated products, with unit weights of up to 10 tons.

The audited financial statements, as of December 31, 2017, showed the following results:

o Net sales of S/ 20.9 million (S/ 26.0 million in 2016) o Net profit of S/ 1.9 million (S/ 2.3 million in 2016) o Net shareholders’ equity of S/ 10.8 million (S/ 8.9 million in 2016)

COMPAÑÍA ELÉCTRICA EL PLATANAL S.A. – CELEPSA (Ownership: 90.0%)

In 2017, CELEPSA’s net revenues for power and energy totaled US$ 50.4 million.

The output of the El Platanal hydroelectric plant totaled 1,184 GWh as a result of a favorable hydrological year in the Cañete River basin.

Owing to its contractual commitments, CELEPSA sold 1,382 GWh of energy, of which 606.7 GWh were sales in the regulated market, while 775.3 GWh went to its customers in the free market. In total, the power supplied to its free and regulated customers fluctuated between a high of 169.6 MW and a low of 146.3 MW.

Out of the total annual energy produced in the national market, which came to 49,108 GWh, CELEPSA ranked twelfth in national production for

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the National Grid System (SEIN), with a share of 2.41%. Among hydroelectric plants, its share was 4.4%, situating it in ninth place.

CELEPSA is a water resources manager. In 2017, as part of its environmental policy, it focused on impact prevention and mitigation activities in an effort to meet the commitments established in the Environmental Management Plan (PMA) for the Paucarcocha dam and the Environmental Impact Assessment (EIA) of the El Platanal hydroelectric plant.

In the social area, it continued to work on creating and strengthening alliances with local stakeholders; promoting the participation of local stakeholders and agents in their own development and responsible environmental management; and communicating effectively, accurately, and promptly with regard to any of the company’s activities that may affect their surroundings.

CELEPSA incorporates the concept of sustainability into its own strategies. In 2017, in recognition of the vulnerability of water resources, it continued to support the implementation of green infrastructure conservation projects in the Nor Yauyos Cochas Scenic Reserve (RPNYC).

The unaudited financial statements of CELEPSA, as of December 31, 2017, showed the following results:

o Net sales of S/ 298.5 million (S/ 351.9 million in 2016) o Net profit of S/ 32.9 million (S/ 2.6 million in 2016) o Net shareholders’ equity of S/ 686.03 million (S/ 701.8 million in 2016)

Hidro Marañón S.R.L.

The Marañón hydroelectric plant started operating on June 23, 2017, when the Operations Committee of the National Grid System (COES) formally declared the beginning of its commercial operation.

The plant uses water from the Marañón River, at 2,900 meters above sea level, near the town of Nuevas Flores, in the province of Huamalíes, region of Huánuco, to produce 18.4 MW of power. It meets renewable energy standards, with a sustainable design that allows it to generate energy every day of the year with a high capacity factor, thus contributing to the security of supply of the National Gride System.

From the start of operations in June through the end of 2017, the production of the Marañón hydroelectric plant totaled 70.7 GWh, with net revenues for power and energy of US$ 2.3 million.

On November 21, CELEPSA Renovables S.A.C. merged into Hidro Marañón S.R.L. Under this name, the two companies will continue to evaluate and implement new hydroelectric plants based on renewable energy resources (RERs).

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Ambiental Andina S.A. – AMBIAND

Engaged in the provision of meteorology and hydrology services, as well as the evaluation and development of hydroelectric projects, AMBIAND was incorporated in April 2013. CELEPSA holds a 50.0% stake in AMBIAND’s capital stock, which totaled S/ 802,000 as of December 31, 2017.

Over the course of the year, AMBIAND registered net sales of S/ 2.3 million.

The company mainly serves customers in the energy, agriculture, and consumer sectors, as well as services and infrastructure, which seek to minimize risks and reduce the impacts of climate on their operations. In 2017, the company identified a particularly notable hydroelectric generation project in the jungle, with four hydraulic jumps.

SKANON INVESTMENTS, INC. / DRAKE CEMENT, LLC (Ownership: 85.0% of SKANON INVESTMENTS / 94.1% of DRAKE CEMENT)

UNACEM is the direct owner of 85.0% of the shares in its subsidiary Skanon Investments, Inc. Additionally, our related companies hold 13.1% of said shares. Skanon Investments is, in turn, the owner of 94.1% of Drake Cement and 100.0% of the companies grouped together under the Drake Materials brand.

According to estimates by the Portland Cement Association (PCA), the cement market in Arizona grew by 9.5% in 2017, compared to the previous year.

The clinker production volume of Drake Cement totaled 536,407 short tons, 6.6% higher than the 503,226 short tons produced in 2016, while the total sale volume of cement was 683,582 short tons, which represented an increase of 26.1% over the 542,700 short tons sold in 2016. Based on these numbers, Drake Cement’s market share in Arizona is estimated at 30.8% for 2017.

This growth in sales volume was mainly due to the agreement reached in 2015 with California Portland Cement (CPC), a subsidiary of the Taiheyo Corporation of Japan, by virtue of which CPC undertakes to purchase a significant quantity of Drake Cement’s cement production through the end of 2018, in addition to purchasing aggregates from Drake Materials.

Since April of 2017, a new management team has been in place, led by the engineer Enrique Rozas as CEO. The new team prepared a short-term plan focused mainly on the Operations, Finance, Human Resources, and Sales areas. The rapid implementation of this plan showed positive results for Skanon, as of the close of 2017. In addition to setting clinker production and cement sales records, the company also reported a positive EBITDA for the first time, totaling US$ 4.1 million.

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The Portland Cement Association remains optimistic with regard to the growth of the cement market in Arizona, estimating that it may grow by up to 3.8% in 2018. Nevertheless, the market in this state has yet to recover in terms of the consumption levels and cement prices registered prior to the real estate crisis of 2007.

The unaudited, consolidated financial statements of Skanon Investments, Inc. as of December 31, 2017 showed the following results:

o Net sales of US$ 98.9 million (US$ 84.6 million in 2016) o Net loss before taxes of US$ 29.9 million (US$ 37.8 million in 2016) o Net shareholders’ equity of US$ 194.6 million (US$ 252.1 million in

2016). The decrease of US$ 57.5 million can be broken down as follows: (i) loss for 2017, US$ 29.9 million; (ii) change in the income tax rate, US$ 23.2 million; and (iii) loss due to the sale of assets between related companies, US$ 4.4 million.

PREFABRICADOS ANDINOS PERÚ S.A.C. – PREANSA PERÚ (Ownership: 50.0%)

Fiscal year 2017 was an atypical one for PREANSA Perú, due to external political, economic, and weather factors, as well as the corruption scandals that have rocked the industrial, road, and wholesale sectors, which also happen to be the areas where the company is mainly active. As a result, there were delays in many of the projects that were ready to commence, including those for which contracts had already been signed. This created a pending portfolio that will help boost the company’s numbers in 2018, regaining the production levels registered in previous years.

PREANSA Perú continues to position itself in the Peruvian market as a safe, flexible alternative that offers its customers long-term savings in time and money. It is increasingly present at the country’s most important works, offering solutions for large-scale infrastructure projects through industrialized concrete structures.

Over the course of the year, PREANSA Perú played an important part in the implementation of major projects: works are almost complete (95%) at the Santa Anita maintenance workshop for Line 2 of the Lima Metro, and the assembly of the Rímac viaduct was also finished as part of the Yellow Line project, among other private contracting projects.

The works performed during 2017 were billed for a total of S/ 17 million. This figure is lower than the S/ 30.9 million registered in 2016, due to a considerable drop in the sales volume, which fell from 8,900 m3 in 2016 to 4,670 m3 in 2017.

The unaudited financial statements of PREANSA Perú, as of December 31, 2017, showed the following results:

o Net sales of S/ 17.0 million (S/ 31.5 million in 2016) o Net profit of S/ 0.09 million (S/ 2.1 million in 2016)

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o Net shareholders’ equity of S/ 41.0 million (S/ 41.0 million in 2016)

PREFABRICADOS ANDINOS S.A.S. – PREANSA COLOMBIA (Ownership: 100.0% by PREANSA PERÚ)

In 2017, PREANSA Colombia continued with its program aimed at spreading the word about its products and their benefits among customers around the country. The decision was also made to expand the product portfolio, in order to create greater market share opportunities in infrastructure and buildings, adding products such as box culverts, abutment walls, exterior siding, etc.

From January to March 2017, 1,800 m2 of siding were manufactured, transported, and erected with the company JMV Construktora. In October, the contract was awarded for the manufacture of 96 pre-stressed beams measuring 40 meters long and weighing 65 tons each, for a project implemented by Obrascón Huarte Lain (OHL). The contract value is equivalent to US$ 850,000, and manufacturing is scheduled to begin the last week of February.

PREFABRICADOS ANDINOS S.A. – PREANSA CHILE (Ownership: 51.0%)

During 2017, PREANSA Chile took part in the performance of infrastructure works in private concessions and public, commercial, and industrial building works.

PREANSA Chile concluded a major project for the concession of the Los Libertadores Border Compound, under the responsibility of Dragados Concesiones de Infraestructura S.A. This project is the main mountain border pass between Argentina and Chile, located in the middle of the Andean Cordillera at an elevation of 3,000 meters above sea level. The work involved the engineering for three buildings and the manufacture of the control building, with an area of 30,000 m2, as well as the implementation of an erection in record time during the harsh winter months in the Chilean Andes, which ultimately helped save a significant amount of time in the overall implementation of the project.

In the private sector, projects were performed for the company Maigas, that manufactures refrigerators ; a tire distribution center; buildings for warehouse leases; a factory for wooden construction panels; the new casino in the city of Chillán, belonging to the Marina del Sol chain; and a supermarket for the U.S. chain Walmart.

In Santiago, PREANSA took part in the works tied to the Line 6 metro stations and was awarded the contract for the following stage, which includes six stations for Line 3.

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The turnover for 2017 was US$ 14.8 million, with new work contracts for US$ 17.5 million (106.0% higher than in 2016). Annual production totaled 11,219 m3.

The unaudited financial statements of PREANSA Chile, as of December 31, 2017, showed the following results:

o Net sales of S/ 45.4 million (S/ 36.9 million in 2016) o Net loss of S/ 2.3 million (S/ 6.4 million net loss in 2016) o Net shareholders’ equity of S/ 8.3 million (S/ 11.2 million in 2016)

INVERSIONES IMBABURA S.A. – UNACEM ECUADOR S.A. (Ownership: 100.0% of IMBABURA / 98.6% of UNACEM Ecuador)

In 2017, the Ecuadorian economy began to show signs of reactivation. Nevertheless, the construction sector, and specifically the cement market, continued to shrink—for the fourth year in a row, in the case of cement. The Goodwill Act, passed in late 2016, and a first half of the year marked by the presidential elections and limitations on the development of new infrastructure works, influenced a drop in GDP for construction activity in excess of US$ 1,000 million. In the face of these circumstances, UNACEM Ecuador focused its business management on providing personalized customer service and promoting its new product, Magno HE, which is being used in the construction of the emblematic Quito Metro. The vertical integration with Hormigonera Quito, the company acquired in July 2017 by UNACEM’s subsidiary UNICON, enabled UNACEM Ecuador to develop other synergies in the supply of concrete in the local market. This management allowed UNACEM Ecuador to increase its market share and close out 2017 with 1.2 million tons of cement sold, 2.1% higher than the numbers reported in 2016. Convinced that innovation is essential to sustainable industrial development, UNACEM Ecuador—with the technical collaboration of ARPL Tecnología Industrial—installed a new bag filter in Kiln 1, which uses a cleaner, more efficient technology in place of electrofilters in particulate matter emissions control. This new filter required an investment of US$ 8.9 million and 63 days of work, without major safety incidents, and will allow UNACEM Ecuador to increase its production capacity and its ability to co-process fuel, thanks to a lower particulate matter emissions baseline. In November 2017, the Global Compact recognized two of UNACEM Ecuador’s projects for their use of best sustainable development practices, aligned with the United Nations’ Sustainable Development Goals (SDGs): the project for the co-processing of waste from other industries, which has succeeded in replacing 30% of the fossil fuels used for the industrial plant; and the “Volante Seguro” (“Safe Driver”) program, which promotes a culture

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of road safety among the 300+ drivers/contractors employed by UNACEM Ecuador. In the communities in its surroundings, UNACEM Ecuador continued to work hand-in-hand with town halls (municipalities) on six lines of action: human talent and social development; social, health, and environmental investment; socioeconomic development; employment and transportation; communication and dialogue; and strategic alliances. In keeping with its interest in the development of its strategic partners throughout its value chain, UNACEM Ecuador’s “Maestro Seguro” (“Safe Foreman”) program helped train 768 laborers on safety standards at construction works and the proper use of cement, making for a total of 6,206 construction workers trained since the program’s launch in 2012. The unaudited financial statements of UNACEM Ecuador S.A., as of December 31, 2017, showed the following results: o Net sales of US$ 154.9 million (US$ 152.3 million in 2016) o Net profit of US$ 32.6 million (US$ 35.8 million in 2016) o Net shareholders’ equity of US$ 96.3 million (US$ 115.9 million in

2016)

CANTERAS Y VOLADURAS S.A. – CANTYVOL

CANTYVOL S.A. is a subsidiary of UNACEM Ecuador S.A. engaged in the extraction and sale of raw materials for the manufacture of cement. During 2017, CANTYVOL S.A. produced 259,000 tons of pozzolan and 230,000 tons of clay. Thanks to a substantial improvement in the reliability of the limestone production station (which increased from 93.0% in 2016 to 96.2% in 2017), a total of 965,000 tons of this raw material was extracted, similar to the total for last year. At the Selva Alegre mining concession—where the emblematic Quinde Project was performed, consisting of the construction of a tunnel and a shaft inside the mountain for the safe and environmentally friendly extraction of limestone—the stripping process, or removal of the barren layer, began in 2017 to guarantee that the project will enter into operation within the next five years. This operation also closed out the year with 2,081 consecutive days without an accident. The operations of CANTYVOL S.A. have received ISO 14001 certification, validating the careful implementation of administrative and operating procedures, protocols, and controls in order to maintain the highest environmental management standards in all of the activities performed in its mining concessions. The unaudited financial statements of CANTYVOL, as of December 31, 2017, showed the following results:

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o Net sales of US$ 7.4 million (US$ 6.7 million in 2016) o Net profit of US$ 0.8 million (US$ 0.05 million in 2016) o Net shareholders’ equity of US$ 4 million (US$ 2.9 million in 2016)

2. ONGOING PROJECTS

In 2017, our investments were lower, limited to improving our facilities in the highest-priority areas, in order to achieve operating efficiencies and improve our competitiveness.

We also took part in public infrastructure projects under the Works for Taxes Act. We firmly believe that our active participation in the development of our country’s infrastructure through this important legal mechanism contributes to the development of all of our stakeholders.

2.1. Clinker Yard at Condorcocha

During the last quarter of 2017, we began construction in the first stage of the clinker yard project at our Condorcocha plant, which will have a total storage capacity of 130,000 t of clinker.

2.2. Migration of the Kiln 2 Control System at Condorcocha

This project involves an overhaul of the current control system for the Kiln 2 production line at the Condorcocha plant, updating the software to the latest version and upgrading hardware such as PLC boards, fiber optics, and other equipment to guarantee the system’s reliability and optimize operations.

During 2017, work was done on the development of engineering, selection of suppliers, and the execution of contracts for the performance of this project during 2018.

2.3. Bag Filter for the Cooler of Kiln 2 at Condorcocha

In 2017, the engineering for this project was developed, which is scheduled to be performed in late 2018. The project includes the installation of a heat exchanger and bag filter, to replace the current multicyclone system used by the cooler in Kiln 2.

This new system is highly efficient, and will make a significant contribution to caring for the environment, in line with the Company’s continuous improvement policy.

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2.4. Works for Taxes

We implemented the following projects under this mechanism:

a. Sanitation System of the Town of Condorcocha

This project consists of the installation of a water treatment system, sewerage and wastewater treatment system for the population of Condorcocha, located next to our plant, thus benefiting a total of 1,200 inhabitants. The investment will total approximately S/ 5 million.

b. Papa Francisco Hospital in Manchay

This project consists of the construction of a hospital in the area of Manchay, in the district of Pachacamac. It will serve a direct population of 140,000 people, in addition to a large number of residents from nearby areas.

In order to finance and build this work, UNACEM will form part of the ALOXI consortium, together with other companies that promote the development of works for taxes, under an agreement with the Ministry of Health. The estimated total investment for the project is S/ 80 million.

c. Paving of Jr. Junín in the District of La Unión Leticia

This project consists of the pavement and sidewalk construction on Jr. Junín, in the district of Unión Leticia, which will be made of concrete and measure approximately 900 m long. The estimated investment is S/ 1.5 million.

3. STAKEHOLDERS

Throughout 2017, we have continued to work on sustainable management by identifying and managing the economic, social, and environmental impacts tied to our operations. Additionally, through the Asociación UNACEM, we channel and bolster our efforts to foster the development of our neighboring communities and all of our stakeholders.

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Figure 3 Main Stakeholders

3.1. Our Employees

Our employees are the foundation that has made us the leader in our sector and helped us tackle the new challenges that have arisen in the industry. For this reason, it is essential to promote their development via a professional and personal training strategy inside the organization, providing them with a safe and healthy work environment that meets their individual needs.

In 2017, we worked with a total of 767 employees, including the Company’s entire payroll.

Table 1

Classification of Employees, 2017

Our personnel selection process is based on established standards, in order to ensure that all new employees have the necessary skills to fill the job position for which they are hired. We also use a competency-based management model, which includes processes for job profile analysis, recruitment and selection, performance evaluation, and the training and development of our team.

As part of our training process, we implement an Annual Training Plan (PACE), aimed at improving our employees’ personal and professional

Employees

Environment

Community

Future

Generations

Shareholders

Suppliers

Government

Customers

Men Women Men Women

Administrative 161 49 64 2 276

Employees 86 28 40 3 157

Laborers 142 0 191 1 334

Total 389 77 295 6 767

ClassificationAtocongo Plant Condorcocha Plant

Total

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competencies in order to enhance their performance and growth within the organization.

During 2017, the training plan was focused on occupational health and safety, a point that has been prioritized throughout the entire Company, with the long-term objective of achieving a “zero accident” culture.

In 2017, we provided a total of 21,973 hours of training to our employees, equivalent to an average of 28.6 man-hours per employee.

Table 2

Classification of Training Man-Hours

Employee

Classification Gender No. of Hours Avg. Hours

Administrative

Female 1,153.5 22.6

Male 9,114.5 40.5

Total 10,268.0 37.2

Employees

Female 493.5 15.9

Male 3,850.0 30.6

Total 4,343.5 27.7

Operators

Female 16.0 16.0

Male 7,345.5 22.1

Total 7,361.5 22.0

Total 21,973.0 28.6

New projects include the development of soft skills with the new CrossKnowledge e-learning platform, which was acquired to broaden our employees’ personal and leadership skills. During 2017, we maintained a positive relationship with our two unions, both of which have collective bargaining agreements currently in force. In the case of the Sindicato Único de Trabajadores de Unión Andina de Cementos S.A.A., at the Condorcocha plant, the agreement is valid through December 2018; while the agreement with Sindicato de Trabajadores de Unión Andina de Cementos S.A.A. – Quarries of Atocongo expires in June 2018, thus guaranteeing the mutual commitment between employees and the Company to achieve the objectives we have set.

3.2. Occupational Health and Safety

We strive to develop a culture of risk prevention, promoting responsible safety behavior among our employees and contractors. For this reason, we

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have an occupational health and safety management system, certified under the OHSAS 18001 standard, which allows us to identify the main hazards in each area, assess risks, and manage them in a timely manner in order to prevent or mitigate them.

The Central Occupational Health and Safety Committee is made up of members elected in August 2017 for a two-year period, in a joint voting process that included the Company’s management and workers from both plants in order to guarantee that all parties are well-represented.

Our Occupational Health and Safety Training Plan includes the following proactive indicators:

Planned work observation (PWO). Five-minute safety talks. Safety inspections by a senior management representative. Inspections by the Central Occupational Health and Safety Committee. During 2017, we implemented Visible Leadership Interventions (VLIs)

to motivate our personnel to adopt safe behavior by setting an example.

Table 3 Accident Frequency and Severity Rates

Our rates include both our own personnel and those of our contractors. The deaths at the Condorcocha plant were contractors’ employees: one at the Carpapata 2 hydroelectric plant, and the other at the Patón electrical substation. In both cases, we carried out a process for the registration, investigation, and analysis of the accidents in accordance with our internal

Rates 2016 2017

Atocongo

Frequency 6.6  6.9

Severity*  36.4 56.9

Accident Rate*  0.2 0.4

No. of Fatal Victims  0 -

Condorcocha

Frequency 3.61 7.8

Severity* 60.28 5,178.5

Accident Rate* 0.20 40.5

No. of Fatal Victims 0 2.0

UNACEM

Frequency 5.5 7.2

Severity*  44.7 1,740.4

Accident Rate* 0.2  12.4

No. of Fatal Victims  0 2.0

*In 2017, both rates increased considerably as a result of the fatal accidents

reported at the Condorcocha plant.

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procedures, and we took comprehensive actions to improve our safety management in order to prevent accidents such as these from happening again in the future.

3.3. Environmental Management

Our environmental management system—certified under the ISO 14001 standard—is focused on efficiency and the reduction of environmental impacts tied to all of our operations. As such, we take care to minimize particulate matter emissions, ensuring that they are below the Maximum Permissible Limits (MPLs), along with greenhouse gases such as carbon dioxide (CO2), nitrogen oxide (NOx), and sulfur oxide (SOx). We also reduce our energy and water consumption, among other aspects that are aimed at helping us improve our environmental performance.

Our management strategy is based on four lines of action:

Environmental Quality: Management of major environmental aspects, emissions, maximum permissible limits, and the responsible management of water and solid waste.

Natural and Cultural Resources: Management of biodiversity and archaeological resources, and optimization of the use of raw materials through geological, archaeological, and environmental studies.

Environmental Certifications: Drafting and approval of instruments such as Environmental Impact Assessments (EIAs), Environmental Impact Declarations (EIDs), and Supporting Technical Reports (STRs) on our activities, and verification of compliance with the ISO 14001 standard.

Capacity Building: We use knowledge and training to generate commitment and help align behaviors that foster the preservation of and care for the environment and natural resources.

Emissions and Climate Change Management

At UNACEM, we are always working to reduce the concentration levels of greenhouse gas emissions for each ton of cement produced. With this goal in mind, we have taken the following actions:

We have modern dust collection systems, using electrofilters and a bag filter, with 99.9% efficiency in dust collection.

We control the gas and particulate emissions of our operations, as well as the environmental quality of the air in the towns neighboring our activities. We then compare these results to the Maximum Permissible Limits and Environmental Quality Standards for Air, and submit the reports to the competent environmental authority.

The carbon footprint study has helped us determine the emissions generated by our organization in our cement manufacturing

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activities. This includes indirect emissions due to personnel transportation services, electricity consumption, etc.

We comply with the commitments assumed in our environmental instruments, undertaking actions for the reduction, mitigation, prevention, and control of our industrial, generation, mining, and port activities.

Our monitoring results are supervised by the Environmental Evaluation and Auditing Board (OEFA).

Table 4

Emissions and Main Indicators

(Average by Plant)

Atocongo Condorcocha

Greenhouse Gas Emissions

kg of CO2eq / t cement 710 764

Clinker/Cement Ratio 0.87 0.89 Specific Heat Consumption

(kcal/kg clinker) 759 834

Resource Consumption and Management

Our process requires large quantities of thermal and electric energy. For this reason, we seek out technologies that help us improve our processes and reduce our consumption.

Our main energy consumption results for 2017 were as follows:

At Atocongo, an average consumption of 90.8 kW-h per ton of cement equivalent. This value is below the established maximum target of 94 kW-h per ton of cement produced.

At Condorcocha, which operates at 3,950 meters above sea level, an average consumption of 160.4 kW-h per ton of cement equivalent, which falls below the established maximum target of 165 kW-h.

We are working to align our performance indicators with the principles laid down by the Cement Sustainability Initiative (CSI). Starting in 2018, we will also use the CSI’s Getting the Numbers Right (GNR) reporting standards, which provide a standardized methodology for the industry on how to estimate CO2 emissions and energy consumption.

Of the total energy consumed at both plants, 95.0% came from renewable sources, whether from our Carpapata I, II, and III plants, or from the El Platanal hydroelectric plant, operated by our subsidiary Celepsa.

Our products can be manufactured with relatively little water, given that they involve dry processes. Regardless of this fact, we are conscious of the

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fact that water is a scarce resource. For that reason, we have a Responsible Water Management Program in place in all of our industrial, mining, port, and power facilities located in arid zones, especially in the district of Villa María del Triunfo in Lima, and in other special temperate climates with dry winters, as in La Unión Leticia in Tarma.

Table 5

Water Consumption and Management

2016 2017

Atocongo Plant (in

m3)

Condorcocha Plant (in m3)

Atocongo Plant (in m3)

Condorcocha Plant (in m3)

Total Water Consumption 518,150.09 187,237.88 441,488.05 235,462.81

Total Groundwater Consumption 518,150.09 - 441,488.05 -

Total Consumption of Spring and Ravine Water

- 187,237.88 - 235,462.81

Total Consumption of Water for Domestic Use1

353,464.00 131,470.08 209,729.00 140,983.13

Total Consumption of Water for Industrial and Mining Use

164,686.09 46,414.00 231,759.05 36,170.00

Firefighting System - 9,353.80 - 14,467.80

Total Consumption of Water to Wet Down Roads (m3)

- - - 43,841.88

Volume of Water Reused 132,551.00 105,176.07 122,720.00 117,985.30

Percentage of Water Reused 26.00 56.17 28.00 50.11

Solid Waste Management

We promote the reduction, reuse, and recycling of solid waste. Our solid waste management results during 2017 were as follows:

Table 6

Waste Management, 2017

1 Includes consumption of water for watering green areas.

Method Condorcocha Atocongo

Weight (in tons) % Weight (in tons) %

Non-Hazardous Waste

Reuse 83,870 6.1 1,637.0 42.6

Recycling 835,057 61.2 1,650.2 42.9

Composting 195,228 14.3 50.6 1.3

Dump 251,037 18.4 508.8 13.2

Hazardous Waste

Recycling 26.6 36.0 23.8 17.05

Stabilization 6.4 8.7 -

Encapsulation 0.1 0.1 -

Dump 40.9 55.3 115.8 82.95

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3.4. Development of Our Communities

Through the Asociación UNACEM, we have formed strategic alliances with different local, national, and international actors to coordinate collective initiatives and promote development in our area of influence. Community participation is critical to bind our communities together and encourage them to identify their problems and the resources available to them. This will help them to better formulate projects in coordination with different stakeholders, both public and private.

Areas of Influence

Our direct area of influence comprises five districts in Lima and three in Tarma, where we carry out our main social investment activities.

Figure 5

The UNACEM Community

Main Projects and Initiatives with Our Communities Through Asociación UNACEM, we promote the development of projects that achieve positive impacts, in an effort to improve the social conditions in the communities located in our surroundings. With this goal in mind, we prioritize projects focused on entrepreneurship, improved infrastructure, quality of life, and the sustainable development of our areas of direct influence.

a) Social Infrastructure

38,000 bags of cement donated to 101 community works, benefiting approximately 38,500 residents.

44 families in high-risk areas benefited from the Techo Propio program organized by the Ministry of Housing, Construction,

•Villa María del Triunfo

•Pachacamac

•Villa El Salvador

•San Juan de Miraflores

•Lurín

Atocongo Plant – Lima

•La Unión Leticia (Village of Condorcocha and Peasant Communities of Chancha and Huancoy)

•Palca

•Acobamba

Condorcocha Plant – Tarma

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and Sanitation. These families received support in the construction of retaining walls and the application of stucco to their dwellings.

4 community premises built and improved, 2 sporting complexes restored, irrigation canals repaired, and 5 schools repaired.

The construction of the perimeter fence for the cemetery of Condorcocha was finished, and cobblestones were laid in the road and the sidewalks in front of the town hall.

b) Health We promote healthy lifestyles and habits among families, and help to strengthen health establishments in alliance with the community and the Ministry of Health (MINSA), through the Healthy Communities program, to the benefit of over 10,500 people. Additionally, over 27,000 persons benefited from preventive health and education activities, among several other projects.

c) Education We promote the development and improvement of athletic and artistic abilities, as well as teaching, vocational, and business skills among the population in our areas of influence. We also foster the development of personal and social skills, and the productive use of free time. Some of our most notable projects and programs include the following: At Atocongo:

411 youths and adults from southern Lima received specialized training in buffet and pastry services, esthetics, handicrafts, screen printing, and electronics. Additionally, 22 entrepreneurs received specialized business advice.

2,500 students attended 105 workshops over the course of the year as part of the Arts, Culture, and Sports program.

At Condorcocha:

214 women from the communities of La Unión Leticia and Tarma strengthened their vocational and production skills in textile manufacturing, while 57 women improved their knowledge of marketing, costs, etc.

228 children and teenagers improved their school performance, as well as their cross-cutting skills and athletic abilities, through 15 workshops.

266 students and 29 teachers from nine primary schools strengthened their abilities and pedagogical skills for teaching reading comprehension through the “Read to Grow” program.

273 students and 25 teachers from nine primary schools in La Unión Leticia strengthened their teaching skills and abilities through the use of information and communications technology (ICT), as well as

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improving their classroom teaching processes through the “Digital Literacy for Teachers” Quality Building Program.

d) Environment

Through the Community Environmental Program, we promote better environmental management in the towns in our area of influence, in alliance with the communities and local and sector authorities. The most notable achievements thanks to these efforts include the following:

At Atocongo:

Trees were planted over 4,000 square meters in 13 different

campaigns in the areas of direct and indirect influence in the

districts of Villa María del Triunfo and Villa El Salvador, benefiting

7,000 people.

10,000 families benefited from the maintenance of 7.5 km of green areas located in the medians of Avenida Lima and Avenida María Reiche, in the districts of Villa María del Triunfo and Villa El Salvador.

40 environmental leaders received training on the internal and institutional strengthening of the Zonal Environmental Committees (CAZs, for their acronym in Spanish), as well as the compliance with the local environmental agenda through Municipal Environmental Commissions (CAMs).

55 teachers received their teaching license in agreement with Local

School District (UGEL) No. 01-SJM.

At Condorcocha:

In the district of La Unión Leticia, we oversaw the implementation of environmental instruments designed to strengthen local environmental skills in the management of solid waste.

We strengthened schools’ skills in environmental matters, and trained four neighborhoods under an agreement entered into with the peasant community of Huancoy Sacsamarca.

55 teachers received their teaching license in agreement with Local School District (UGEL) Tarma.

e) Community Relations To ensure a positive rapport with our communities, we strengthen, manage, and monitor our ties with the residents, organizations, and institutions present near our operations, with the goal of establishing bonds of trust and cooperation that contribute to sustainable development. In 2017, our local initiatives directly benefited over 17,000 people.

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During 2017, we began compliance with some points of the agreement entered into with the peasant community of Huancoy Sacsamarca, including hiring of local labor, scholastic scholarships, electricity supply, leasing of 9 hectares, sale of cement, and titling of land plots for the road.

For more details on our sustainability management, please see the Sustainability Report attached hereto.

4. ECONOMIC AND FINANCIAL RESULTS

The audited separate financial statements of UNACEM, as of December 31, 2017, show the following results:

Net sales of S/ 1,912.3 million (S/ 1,865.1 million in 2016) Net profit of S/ 466.2 million (S/ 312.2 million in 2016) Net shareholders’ equity of S/ 4.276.6 million (S/ 3.896.1 million in

2016)

Net sales rose by 2.5% over the sales reported in 2016, explained by a higher average price during the year, net of a lower sales volume, and higher revenues from exports.

For its part, the cost of sales was 5.3% higher than in 2016, due largely to higher fixed costs, mainly because of the depreciation of assets, net of lower sales volumes.

As a result of the foregoing, the gross profit fell slightly, by 1.3% compared to 2016. The operating profit totaled S/ 709.3 million, 0.7% lower than in 2016, due to the decrease in sales volume as a result of the contraction of the construction sector, mainly during the first half of the year. The EBITDA margin was 51.2% in 2017 (49.4% for 2016). This margin includes the dividends received from subsidiaries, for a total amount of S/ 247.2 million. The EBITDA, not including the dividends received from subsidiaries, was S/ 731.4 million, equivalent to 38.2% of sales.

During 2017, gains from foreign exchange totaled S/ 88.0 million, compared to a foreign exchange loss of S/ 17.6 million in 2016. This entry is primarily tied to the financial debt held in dollars.

We paid off debt amortizations in accordance with the established timelines, reducing our total debt by 12.2% compared to the previous year. In March, the Board of Directors approved the refinancing of S/ 260 million in short-term liabilities at a lower financial cost, at a term that allowed us to improve our debt maturity profile for the coming years.

Despite the Company’s solid fundamentals, as a result of our lower sales volumes during the first half of the year due to political instability and the impact of corruption scandals on the construction sector, Standard & Poor’s lowered our credit rating from BB+ to BB in June, with a negative outlook. In

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December, on the other hand, Moody’s maintained our rating at Ba2 with a stable outlook. We continue to take the necessary measures to improve the performance of our operations and our leverage levels, which will enable us to improve our credit rating in the medium term.

The net profit for the year came to S/ 466.2 million, 49.3% higher than the previous year, primarily explained by the effect of the foreign exchange rate. This profit was equal to 24.4% of our net sales, higher than the 16.7% obtained in 2016.

The separate financial statements for fiscal year 2017 were prepared in accordance with the International Financial Reporting Standards (IFRSs).

By delegation of the Shareholders’ Meeting, the Board of Directors adopted the following resolutions over the course of fiscal year 2017, with their respective effects on the Company’s equity:

March 1: Payment to the shareholders of UNACEM S.A.A. of dividends equal to S/ 0.013 per common share, charged to the cumulative results for 2009.

June 1: Payment to the shareholders of UNACEM S.A.A. of dividends equal to S/ 0.013 per common share, charged to the cumulative results for fiscal year 2009.

August 24: Payment to the shareholders of UNACEM S.A.A. of dividends equal to S/ 0.013 per common share, charged to the cumulative results for fiscal year 2009.

November 30: Payment to the shareholders of UNACEM S.A.A. of dividends equal to S/ 0.013 per common share, charged to the cumulative results for fiscal year 2011.

The fully subscribed and paid-in capital stock is S/. 1,646,503,408 (One Billion, Six Hundred Forty-Six Million, Five Hundred Three Thousand, Four Hundred and Eight Peruvian Nuevos Soles), represented by 1,646,503,408 (One Billion, Six Hundred Forty-Six Million, Five Hundred Three Thousand, Four Hundred and Eight) common shares with a face value of S/. 1.00 each.

In light of the foregoing, and in accordance with the International Financial Reporting Standards (IFRSs), the figures in Peruvian soles as of December 31, 2017 and 2016, respectively, are as follows:

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Equity Account As of Dec. 31, ‘17 As of Dec. 31, ‘16

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

Legal Reserve 329,300,686 329,300,686

Unrealized Profit (Loss) 197,488 279,287

Cumulative Profit (Loss) 2,300,609,400 1,920,069,913

Total Equity 4,276,610,982 3,896,153,295

Currently, there are several tax, legal, and labor proceedings pending resolution in relation to the Company’s operations. In the opinion of the Management and its legal advisors, the final results of these proceedings will not involve significant expenses. Thus, as of December 31, 2017, we have not booked any provision whatsoever in relation to said proceedings.

The external auditing duties during fiscal year 2017 were entrusted to Messrs. Paredes, Burga & Asociados (a member firm of Ernst & Young). The firm’s opinion on the separate statement of financial position, profit and loss statement, comprehensive profit and loss statement, statement of changes in net shareholders’ equity, and cash flow statement as of December 31, 2017, which form part of this Report, have been issued without objections.

5. ADMINISTRATION

5.1 Board of Directors

Chairman Mr. Ricardo Rizo Patrón de la Piedra Vice Chairman Mr. Alfredo Gastañeta Alayza Directors Mr. Marcelo Rizo Patrón de la Piedra Mr. Jaime Sotomayor Bernós Mr. Carlos Ugás Delgado Mr. Roque Benavides Ganoza Mr. Diego de la Piedra Minetti Mr. Oswaldo Avilez D’Acunha Mr. Hernán Torres Marchal Mr. Martín Naranjo Landerer Mr. Roberto Abusada Salah Mr. Jaime Raygada Sommerkamp

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5.2 Management SINDICATO DE INVERSIONES Y ADMINISTRACIÓN S.A. (SIA) General Manager Mr. Carlos Ugás Delgado Representative of SIA in the General Management Legal Manager Mr. Julio Ramírez Bardález Finance and Corporate Development Manager Mr. Álvaro Morales Puppo Central Manager Mr. Víctor Cisneros Mori Investments Manager Mr. Francisco Barúa Costa Commercial Manager Mr. Kurt Uzátegui Dellepiane Project Execution Manager Mr. Jeffery Lewis Arriarán Atocongo Operations Manager Mr. Juan Asmat Siquero Condorcocha Operations Manager Mr. Ricardo Ramírez Zurita Human Resources Manager Mr. Pablo Castro Horna ADMINISTRATIVE AND FINANCIAL ADVISORS Inversiones Andino S.A. ASOCIACIÓN UNACEM General Manager Mr. Armando Casis Zarzar TECHNICAL ADVISORS ARPL Tecnología Industrial S.A.

5.3 Good Corporate Governance

We carry out our management under the framework of the Principles of Good Corporate Governance, as regulated by our bylaws and normative documents. With our sound business practices and our emphasis on transparency, we seek to earn the trust of all of our stakeholders and guarantee the strong performance of UNACEM at all management levels.

Thanks to this approach, UNACEM creates value for all of its shareholders and stakeholders. Good corporate governance increases our efficiency and performance, while reducing risks and capital costs. By fostering investors’ confidence in the Company, it guarantees UNACEM’s sustainable economic growth.

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On March 23, 2017, the Mandatory Annual Shareholders’ Meeting approved the separate financial statements for fiscal year 2016, as well as the report, issued without objections, by the external auditors. It also delegated the appointment of the external audits for fiscal year 2017 to the Board of Directors.

On November 29, 2017, at the request of the minority shareholders, a Shareholders’ Meeting was held for the sole purpose of reviewing the economic report on the Management Agreement entered into with Sindicato de Inversiones y Administración S.A., disclosed by the Company as a Significant Event. This Shareholder’s Meeting resolved that a committee consisting of representatives from the private pension fund management companies (AFPs) and other institutional investors would hire an internationally recognized independent consultant to prepare a new economic report, with the cost being assumed by the AFPs. Once the report is delivered to the Company, it will be notified as a Significant Event and a Shareholders’ Meeting will be called.

As established, the Board of Directors met each month according to a previously set schedule, striving to safeguard the interests of all the Company’s shareholders on an equal basis, and above all, the interests of UNACEM as a value-creating entity.

UNACEM also has an Auditing Committee, consisting of three directors, two of whom are independent directors representing the controlling shareholder. This Committee met four times throughout the year.

The Committee’s duty is to review the information provided by the Company and inspected by the external auditors, safeguarding the internal control and risk management systems put into place to supervise the performance of duties and review the results of internal and external audits, as well as accounting processes, including the General Informational Technology Controls and others established in the Company’s bylaws. During 2017, at the orders of the Board of Directors, the Committee was placed in charge of developing UNACEM’s Code of Ethics and Conduct, which was approved on October 27. Also during 2017, the Committee requested the development and implementation of an anticorruption system, which the Company is currently working on—in accordance with the ISO 37001 standard—as part of its integrated management system; as well as the implementation of a comprehensive grievance system, handled by a well-respected company.

During 2017, we continued our policy for the quarterly distribution of dividends in March, June, August, and December.

Additionally, as part of our transparency practices, we published the Annual Report, quarterly interim financial statements, and quarterly reports, which include a summary of the Company’s most significant activities during the quarter, all of which are available on our website. Furthermore, through our Investor Relations team, we seek to maintain

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direct ties to our investors by participating in local and international conferences, meetings, visits, phone calls, and quarterly conference calls.

Administration, Management and Technical Assistance

As established in our Company’s Articles of Incorporation, 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 entrusted to Sindicato de Inversiones y Administración S.A., under the agreement in force as of this date.

Inversiones Andino S.A. provided administrative and financial advisory services, under the agreement in force as of this date.

ARPL Tecnología Industrial S.A. was responsible for technical advisory services, under the agreement in force as of this date.

The Board of Directors acknowledges and values the important contributions made by these three companies throughout 2017.

Acknowledgments

The Board of Directors would like to give a special thanks to each one of UNACEM’s employees for the hard work and commitment they have exhibited throughout the year, thanks to which the Company has obtained satisfactory results in the face of political instability and a weakened construction sector. Their unflagging commitment makes us optimistic in the face of the challenges in store in 2018, and gives us faith in our ability to continue to building opportunities.