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A n n u a lR e p o r t 2 0 1 6

Introduction 6 Introduction 6 Agenda 7 Chairman’s Speech

Annual Report 10 2016 Annual Report 16 Report on the Application of Corporate Governance Principles

Consolidated Financial Statements 2016 26 Independent Auditors’ Report for Financial Statements 28 Consolidated Financial Statements 30 Income Statement 32 Statement of Changes in Equity 34 Statement of Cash Flows

Notes to the Financial Statements 38 Notes to the Financial Statements 96 Proposal for Profit Distribution 98 Çimentaş Group

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Introduction 6 Introduction 6 Agenda 7 Chairman’s Speech

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Chairman’s Speech

Dear Stakeholders,

Çimentaş achieved to complete the year 2016 with a good performance inspite of geopolitical and economicinstability. We continued our improvement investments in spite of negative developments at surroundingenvironment with trust and dedication. Our faith in Turkey’s economy has been the driving force behind ouractivities in times of economic and other challenges. 2016 has been a year of uncertainty both in our country and in international arena. Our operationalimprovements and intense commercial activity resulted in an increase in revenue from sales but in a reductionof Ebitda profitability mainly driven by a sharp reduction on sales prices. Recent economic growth had positive impact on domestic construction and demand for projects, Turkishconstruction sector performed below 2016 forecasts due to the political uncertainty. Economic headwindsare likely to continue in 2017. Turkey expects to continue to grow moderately, albeit not at a desired leveldue to the ongoing uncertainty. The depreciation of the Turkish Lira may offer some relief by supportingexport growth. Ready-mixed concrete sector is also hopeful about 2017. It expected to usher in more moderate developmentsdespite the turbulence faced in the global economy last year.Turkey’s goal of a sustainable development, increasing awareness and importance to environmental issueshave resulted in giving more importance to waste management, yet law enforcement is still needs to bestrengthen and empowered.Today, in Turkey, still about the half of the total population does not have access to any waste disposal / recoveryand waste treatment services. Moreover, 44% of the municipal solid waste is still dumped into open dumpingsites of municipalities. Due to Turkey’s expected economic and population growth, the absolute amount ofmunicipal and industrial solid waste is even expected to further increase substantially in the future. In all our activities, we are dedicated to satisfy our stakeholders and provide quality products to our customers.Wherever we operate, we strive to ensure that we take a balanced approach to all stakeholders, adding valuethrough managerial capabilities and local knowledge, as well as taking significant care to consider thecommunity, people and the surrounding environment through corporate and socially responsible initiatives. We maintain our aim to play a leading role in sector while focusing on having a strong balance sheet,remunerating our shareholders appropriately, and constantly seeking growth opportunities.Our economic, social and environmental success, as a pre-requisite for the profitability, growth, solvency and,in the final instance, all positive achievements of our Company in the long term is possible with strongdedication of our staff. We thank our teams of talented people who are turning our visions into reality. Wecount on our teams to strengthen, once again in 2017, our competitively in the variety of high quality products. The year 2017 and subsequent years will undoubtedly bring their own challenges and business opportunitiesand we are ready to face this challenge.

Walter MontevecchiChairman

Introductıon

This report is for presentation to 66th Annual GeneralAssembly Meeting of Shareholders in the CompanyÇimentaş İzmir Çimento Fabrikası Türk A.Ş. that is to beconvened at the Company’s headquarters at the addressof Egemenlik Mahallesi Eski Kemalpaşa Caddesi No.4BIşıkkent Bornova-İZMİR on 18 April 2017 at 11.30 toexamine and approve the Company’s operating resultsfor the period 1 January 2016 to 31 December 2016.

Agenda

1. Opening and roll-call,2. Formation of the presiding committee and

authorization of the committee to sign the minutes andother meeting-related documents pursuant to article16 of the company’s articles of association,

3. Reading and approval of the annual report of theBoard of Directors and the independent auditing firm,

4. Discussion and approval of the 2016 balancesheet, income statement and other statements,

5. Individual acquittal of each of the members of theBoard of Directors of their fiduciaryresponsibilities for the accounts and transactionsof the company in 2016,

6. Discussion and approval of the 2016 profit/loss,7. Discussion and approval of the Independent

Auditors assigned by the Board for the year 2017and acceptance of the independent auditors’agreement,

8. Determination of the number and the term of theBoD members. Election of BoD members andindependent Board members,

9. Discussion and approval on the remuneration ofthe directors,

10. Information and approval on authorising theChairman and Board members in accordance witharticles 395 and 396 of the Turkish CommercialCode,

11. Information and approval on the donations andcharities made within the year 2016,

12. Information and approval on the donations andcharities to be made in the year 2017,

13. Information about guarantees given on behalf of3rd parties,

14. Closing remarks.

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1IntroductionA n n u a lR e p o r t 2 0 1 6

Annual Report 10 2016 Annual Report 16 Report on the Application of Corporate Governance Principles

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ÇİMENTAŞ İZMİR ÇİMENTO FABRİKASI TÜRK A.Ş2016 ANNUAL REPORT

A-General Information

1. Accounting Period01.01.2016-31.12.2016

2. Corporate Information:Company Name: Izmir Çimento Fabrikası Türk A.Ş – ÇİMENTAŞRegistration Number: Commercial Register of Izmir – 20907 / K-47Contact Details www.cimentas.com.trHead Office: Egemenlik Mah. Eski Kemalpaşa Cad. No: 4B Işıkkent Bornova İzmir Tel: 0 232 472 1050 Fax: 0 232 472 1055Branch: Sinanköy Mevkii Lalapaşa Edirne Tel: 0 284 1104 Fax: 0 284 323 1240

3. Shareholding Structure and Capital:

4. Members of the Board of Directors Involved During the Period

AUTHORIZATION LIMITSInvested with the powers specified in the Capital Market Law, Turkish Commercial Code, Articles of Associationof the Company and other legislation.

5. The Executives in Charge during the Period

6. Corporate Governance Committee

7. Audit Committee

8. Risk Committee

Name-Surname Title

Walter Montevecchi Chairman

Paolo Zugaro CEO

Yalçın Alpbaz* Managing Director

İsmail Ali Özinönü** Industrial Relations and Exporting President

Ali İhsan Özgürman CFO

Nezir Yalçınkaya Human Resources Director

Francesco Malara Waste & Renewable Energy Director

Barış Karahüseyin Commercial Director

Kayhan Karabayır Legal Affairs and Investment Relations Director

Uğur Aydın Technical Operations Director

Selçuk Kuntalp Procurement Director

* Mr. Yalçın Alpbaz was appointed as Managing Director on 07.10.2016.** Mr. İsmail Ali Özinönü resigned from the Industrial Relations and Exporting President function.

İlhan F. Gürel President

Taha Aksoy Member

Shareholder Shares (TL) %

Aalborg Portland Espana SL 85.198.814,11 97,80

Other 1.913.649,09 2,20

TOTAL 87.112.463,20 100

Name-Surname Title Term

Walter Montevecchi Chairman 15.04.2016-15.04.2017

Francesco Caltagirone Vice Chairman 15.04.2016-15.04.2017

Francesco Gaetano Caltagirone Member 15.04.2016-15.04.2017

Alessandro Caltagirone Member 15.04.2016-15.04.2017

Paolo Zugaro CEO 15.04.2016-15.04.2017

Marco Maria Bianconi Member 15.04.2016-15.04.2017

Massimo Angelo Sala Member 15.04.2016-15.04.2017

Massimiliano Capece Minutolo Member 15.04.2016-15.04.2017

Ilhan F.Gürel Independent Board Member 15.04.2016-15.04.2017

Taha Aksoy Independent Board Member 15.04.2016-15.04.2017

Taha Aksoy President

Marco Maria Bianconi Member

Vedat Özer Member

İlhan F. Gürel President


Gökçe Oyal Püskülcü Member

9. Personnel 803 employees, including executives, were working inÇimentas Group Companies as of 31.12.2016. NealsWaste Management Holdings Ltd. located in the UKwhich was acquired by our subsidiary, Recydia A.Ş,employees 116 resources which make our total staffnumber 919.

A Collective Labour Agreement for the years 2016 and2017 has been signed by and between Çimentoİşverenleri Sendikası and ÇİMSE-İŞ Sendikasıresulting in an increase in salary and social benefitsfor blue-collar personnel. Salary and social benefitsof other personnel has been determined based onmerit and work performance by taking intoconsideration the financial status of the company.

2. InvestmentsIn 2016, our factories maintained the currentefficiency levels and with them, maintenance,development and replacement investments weremade for the purpose of upgrading of automationcontrol levels in factories, the existing plants can beserviced with high reliability in a sustainable mannerand at a cost savings. In this context, mill automation systems have beentotally renewed at the Kars and Trakya plants, theclinker cooling system has been improved at theİzmir plant, raw-mix mill equipment renovationwork has continued at the Elazığ plant, the Trakyaplant clinker stockyard has been strengthened andin order to regain waste heat in İzmir plant, heatrecuperator investment has been started.Comprehensive upgrading of packaging andloading systems has been implemented at theİzmir plant. Comprehensive fire prevention andhydrant systems have been installed at the Elazığand Trakya plants. The investments to be made in 2017 will be carriedout within the same understanding and mostly in thefield of occupational health and safety and theenvironment.

3. Internal Control and Independent AuditThe Internal Audit Function at Cementir Holdingconducts internal control and audit processes of thecompany.There is a Budget Planning & Controlling departmentin the company where the activities and transactionsof the company are audited to verify whether they arein compliance with the law and procedures along withactivity results which are also controlled to verifywhether they are in compliance with the budgetand/or plans. Both functions have been operating efficiently andactively. They duly inform the related departments ontime. By doing so, they actively perform by taking

precaution measures, implementing and enhancingadditional operations. Our company was audited by the independentauditing company KPMG during the fiscal year andreceived a positive report. No lawsuits were filed against the company, whichwould adversely affect the financial situation andoperations of the company.No administration or judicial sanctions were appliedagainst the company and the members of the boardof directors due to practices against legislativeprovisions.Objectives set by the company were achieved withinthe 2016 period and the resolutions of generalassembly were fulfilled.

4. Donations and Remittance The consolidated amount of donations made onbehalf of Cimentas Group was 502.964,75-TL.The total amount of donations made on behalf of theCompany in 2016 was 273.158,54-TL, consisting of269.834,04-TL in cash and 3.324,50- TL ascommodities.

5. Information on Production and Sales As seen from the growth numbers of the first ninemonths of 2016, Turkey has expanded 2,2% overall. Thegrowth expectations for 2017 are around 3,0%. Thegrowth of the first nine months in the constructionsector was 7,4%. Although there are regionaldifferences, the cement sector increased by 9,3%,domestic sales grew by 8,7% and global sales grew by5,7% for the first ten months. Our company, within thescope of regions where it is active as well asdifferences in relation to market conditions, domesticsales increased by 2,2% and export sales decreased by23,3%.Within this scope, the total group sale amountdecreased by 0,9% compared to the same period of theprevious year.

10. Amendments to the Articles of Association during the PeriodThere were no amendments to the Article of Association during the period.

11. Issuance of Securities during the Period and the Related ObligationsSince there were no securities issued during the period, there are no potential financial obligations for theCompany.

12. Subsidiaries and Shareholding Percentages in Subsidiaries

B-BENEFITS PROVIDED TO THE TOPEXECUTIVES

A decision was made during the ordinary generalassembly meeting of the company for the year 2015 thateach member of the board of directors of the companywas to be paid a 2.000-TL gross fee for each boardmeeting to attend and no other fee other than such feehas been paid to the members of the board of directors. The total amount of benefits provided to the seniormanagement of the Cimentas group is 11.003.579-TL.Private health insurance has been provided to topexecutives of the company along with their salaries.Other than this, there is no fixed dividend, premium,bonus or any other payment that has been paid to them. On behalf of the Company the total amount of allbenefits provided to the top executives during the year2016 was 9.725.231-TL.9.390.541-TL of such amount consists of salaries andother payments while 334.690-TL consists of individualretirement and health insurance expenses and SocialSecurity Institution premiums.

C-R&D ACTIVITIES

Concrete laboratories were established in the ElazığCement Factory, Kars Cement Factory and TrakyaCement Factory within the scope of customer-focused

quality improvement studies during the 2016 period.With the x-ray analyser in our factory in Kars, the qualitylaboratory achieved the most advanced quality controland development possibilities. As a result of suchstudies and improvements, there has been significantimprovement, particularly in the quality of clinker andproduct quality stabilization.

D-INFORMATION REGARDINGCOMPANY ACTIVITIES

1. Production Activity of the CompanyAs Çimentaş Group, the cement production isconducted through four clinkers/cement productionPlants located in İzmir, Edirne, Kars and Elazığ. Amongthe Plants which are active in different regions ofTurkey, Kars and Elazığ Plants have legal entitieswhereas the Plant in Edirne is structured as a branch. The Company performs production activities in İzmirPlant through 2 rotary kilns, one of them is with pre-heater and the other is with calciner with a total capacityof 5500 ton/day, the clinker production in Edirne Plantis conducted through 1 kiln with calciner. Calcinerproduction is done through 1 kiln with pre-heater inKars Plant and 1 kiln with calciner in Elazığ Plant.The cement grinding capacity of the Plants is higherthan the production capacity of clinker. Productioncapacity of clinker is as follows:

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Plant Name Annual Production Capacity of Clinker (Tons)

Çimentaş İzmir 1.801.848

Çimentaş Trakya 990.000

Elazığ Çimento A.Ş 1.000.000

Kars Çimento A.Ş 435.000

Subsidiary Shares (TL) %

Çimbeton A.Ş. 890.042 50,28

Kars Çimento A.Ş. 1.751.429 58,38

Recydia A.Ş. 137.536.620 24,94

Destek A.Ş. 49.993 99,99

Yapıtek A.Ş. 36.345 2,00

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E-FINANCIAL POSITION

1. Basic Ratios There is no value not reported in the financial statements as per the Capital Market Legislation and AccountingStandard. Our company has not experienced technical bankruptcy or over-indebtedness. The ratios comparedwith the previous year are as below:

2. Profit and Investment Policies Applied by theCompany in Order to Strengthen thePerformance of the CompanyThe basic point for strengthening the company’sperformance is in a financial policy mainly basedon equity capital. Our main shareholder CementirHolding S.p.A recognizes this policy and supportsthe company’s application of it aimed at using theequity capital for cost decreasing investments.This point of view is effective for achieving thesustainability of the profit margin. Our company, bydistributing profit over the market conditions viaready money or free stock certificates, creates ahigher premium performance for its partners withthe increase in the share value.

3. The Financial Resources and RiskManagement Policies The financing of the investments and the company’sneeds are mainly met with equity capital togetherwith medium and long term Turkish Lira or foreign-currency loans. The risks that can be faced by the Company areaudited by specialized groups in accordance with themain shareholder’s policies.

F-EVALUATION OF RISKS

Risk Management, which is also a managementfunction, has become legally necessary following

the enactment of new Capital Market Law andTurkish Commercial Code. Article 378 of TurkishCommercial Code sets forth that the “Board ofDirectors in publicly held companies areresponsible for: pre-determination of the reasonswhich could endanger the continuance anddevelopment of the company, implementation ofnecessary solutions in order to prevent the risks,formation of a committee and making such systemwork and improve. In order to develop the current risk managementcompetencies and align with article 378 of TurkishCommercial Code: a “Risk Committee” was formed within Çimentaş inNovember 2012. The committee members are Mr.Marco Maria Bianconi, Mr. Taha Aksoy and Mr. VedatÖzer for 2016. Risk Committee meetings are heldperiodically and it submits a report to the Board ofDirectors. In this regard, a “Risk Management Project” wasimplemented in 2013. Within the scope of this project,risk inventories have been prepared; risks have beenprioritised and evaluated by means of using theappropriate risk methodology in compliance with theinternationally recognised “COSO CorporateGovernance”. As a result of such evaluations, riskmaps have been formed; roles and responsibilitiesincluding the steps of monitoring and reporting havebeen defined and documented. The Risk Committeeworks based on this methodology.

6. Main Factors Affecting the Performance ofthe Sector and the BusinessMore than 50% of costs of all enterprises in thesector and our company are composed of energywhich includes fuel and electricity. It is known thatthe increase in coal and petroleum coke pricesalong with a 20% increase in electricity prices whichcame into effect at the end of 2011 have negativelyaffected the capacity usage and competitivestrength in the sector. Such negative effects will beobserved more due to the new increases inelectricity prices which came into effect in October,2012 and possible increases to be made in energyprices in 2013.It is necessary to use the current resources moreefficiently by taking into consideration the demand forelectricity which will increase in the in the future dueto a rapidly increasing population. In the meantime,incentives for waste management shall be improvedin order to increase the alternative fuel usage in thesector. One of the matters which enterprises in the sectorare having difficulty with is the insufficiency of ports.The steps to be taken in this area will play animportant role in increasing the export figures ofTurkish cement companies in the future.

Urban transformation projects which will beimplemented within the framework of the “Lawregarding the Transformation of Places Located inDisaster Areas” are considered to be a significantpotential for the sector. In this context, foreign investors will invest in Turkeymore due to the existing 8 million residentialbuildings which are required to be renovated and alsowith the new 2B law allowing landlords to invest andthe new regulation that will be made regardingreciprocity. On the other hand, an increase on VATrates for real estate sales will have a negative effectfor the sector. The incentives in the energy prices that will beprovided to the companies will result in an increasein the cement production and export revenues via anincrease in the capacity usage ratio.

7. Result Section of the Commitment ReportIT, management consultancy, administrative supportand trademark usage services which are listed in thereport provided by the parent company are incompliance with market practices. In this regard, nodamage has been sustained by the company and noharmful act has been done/committed with themanagement of the parent company.

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Rate 2016 2015

Current Rate 1,84 1,71

Liquidity Rate 1,37 1,23

Liabilities/Assets 0,22 0,22

Liabilities/Equity 0,28 0,28

Equity/Assets 0,78 0,78

Profitability by sales 0,20 0,22

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provisions of the Turkish Commercial Code and CapitalMarkets Law and also published on the company’swebsite three weeks prior to the meeting. Registrationproceedings for shareholders to participate in theGeneral Assembly are conducted under the provisionsof the TCC and Capital Markets Law.Information related to the Ordinary andExtraordinary General Assembly meetings is madeavailable for shareholders to review at theheadquarters of the company pursuant to theTurkish Commercial Code.In order to facilitate participation of shareholders in theGeneral Assembly, in addition to announcements andpublications, due diligence is used for access toinformation on the issues constituting the agenda of theGeneral Assembly and requirements of legalregulations are complied with. Media members are also invited to the GeneralAssembly meeting and they attend.Minutes and documents related to the GeneralAssembly meetings are permanently made available forshareholders to review at the headquarters of theCompany.

2.4 Voting Rights and Minority Rights Shares of the Company do not provide privilege in votingand each share gives only 1 voting right to its holder. For the issue of voting by companies having a mutualparticipation relation, the rules of “disfranchisement”stated in the Turkish Commercial Code are applied. Since the number of minority shares in the Company islow (around 2%), they are not represented in themanagement. The Articles of Association of the Company do notcontain a provision for the method of cumulativevoting in the election of the Board of Directors andStatutory Auditors.

2.5 Profit Distribution Policy and ProfitDistribution Timing A written profit distribution policy of the Company hasbeen established which has been approved by theBoard of Directors and the issue has been regulatedexplicitly in detail in the Articles of Association. Withregard to the share of the Company’s profit, foundercertificate holders have privileged rights, therefore,after deduction of taxes and legal liabilities as well as

losses of former years from net profit and afterallocation of 5% legal reserve as per article 519 of theTurkish Commercial Code and 50% for the firstdividend under Articles of Association, 10% of theremaining dividend amount is distributed to theFounder Certificate holders. Although the communiqué published by the CapitalMarkets Board states 20% for first dividend, suchrate has been determined as 50% in the Articles ofAssociation of the Company as specified above. Thiscircumstance is the result of the policy to maximizethe profit share rights of the shareholders. Thispolicy is applied considering the economicalconditions of the country and present situation ofCompany. Legal periods in profit distribution arestrictly followed.The proposal of the Board of Directors related to theprofit distribution are submitted for the shareholders’information via special event disclosures prior to theGeneral Assembly meeting and are also stated in theactivity report. In case of non-distribution, theinformation on the reason and the usage of the non-distributed profit is given in the General Assembly.

2.6 Assignment of SharesSince all of the shares of the Company were convertedinto bearer shares upon modification of the Articles ofAssociation as resolved in the Ordinary GeneralAssembly meeting for the year 2005, a particularprovision restricting assignment of shares does not exist.

SECTION III - PUBLIC DISCLOSUREAND TRANSPARENCY

3.1 Website of the CompanyA website named www.cimentas.com, established inthe name of our Company, was activated during theyear 2009. The content of the website has reached the levelwhich has been determined with the CorporateGovernance Principles thanks to improvements madesince early 2012. Information on the web-site isupdated continuously. The Company’s pressdocuments are stated at the web-site address.Information on the website is also stated in Englishas necessary taking into consideration the needs ofinternational investors.

REPORT ON THE APPLICATIONS OFCORPORATE GOVERNANCE PRINCIPLES

SECTION I - DECLARATION OFCOMPLIANCE WITH CORPORATEGOVERNANCE PRINCIPLES

Our Company, implements all the necessarycorporate governance principles contained in theannex of communiqué provisions related to thedetermination and the implementation of CorporateGovernance Principles II-17.1 of Capital MarketsBoard, during the year 2016. There are non-compulsory principles, some of these are containedin the Turkish Commercial Code and some are waivedbased on the sector structure and the managementstructure of the company. Remarks on the subject areprovided below.

SECTION II - SHAREHOLDERS

2.1 Investor Relations DepartmentThe “Legal Affairs and Investor RelationsDepartment” conducts relations with shareholders incoordination with the “Finance Directorate”.The primary activities of this department have beenfocusing on conducting relations with eithershareholders or the Capital Markets Board (“CMB”)and Istanbul Stock Exchange (“ISE”). Accordingly,monitoring the company’s stock certificates,transactions related to shareholders’ rights,disclosure of special events to the public andarrangement of General Assembly meetings of theCompany are handled by this department. The authorized person is Gökçe Oyal Püskülcü whohas a Capital Market Activities Level 3 Licensenumbered 203403 and Corporate Governance RatingLicense numbered 700351. The director of theInvestor Relations Department is Kayhan Karabayır.This department can be reached [email protected] via e-mail or at 0.232.472 1050/extension 1402 extension. Twelve applications have been received frominvestor individuals and institutions as well asintermediary entities and relied to, andrequirements of the relevant parties have beenmet within the period.

2.2 Shareholders’ rights on Acquisition ofInformation Requests for information received by the company fromshareholders as well as investors and intermediaryentities have been especially intense in terms ofrequests for the report on operations as well as 2016General Assembly Meeting and the performance of thecompany with the profit distribution issues. Theserequests have been met by means of providing thenecessary explanations and documents.Studies related to publishing the developmentsconcerning the utilization of rights by shareholdersthrough electronic media are still in progress.Updates, related to the subject are made on theCompany’s website. Such developments areannounced within the framework of legal regulationswhich are presently in force.Assignment of a private auditor was not regulated asan individual right within the scope of the Articles ofAssociation, and no request for assignment of a privateauditor was received within the period. Çimentaş isaudited by an Independent External Audit firmperiodically within the context of Capital Market Law.On the other hand, systematic auditing is conducted bythe Internal Audit Function on the group periodicallywithin the framework of a specific programme. Also, aregulation on the subject is available in the new TurkishCommercial Code article 438.

2.3 General Assembly MeetingsDuring the period, the Ordinary General Assemblymeeting for the year 2015 was held on 14 April 2016and 98% participation was achieved in the OrdinaryGeneral Assembly for the year 2012. Before theGeneral Assembly meeting, the agenda, informationabout activities of the company and the financialstatements were announced to the shareholders onthe company’s website. Shareholders used theirquestioning rights during the meeting. Informationabout the donations, made during the period, wasgiven to the shareholders with a separate agendaitem. The Articles of Association do not contain aparticular provision related to the quorum, thereforethe relevant provisions of Turkish Commercial Code(TCC) are considered as a basis.Invitations to the General Assembly Meeting areannounced through necessary publications under the

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Job descriptions of the white collar employees in theÇimentaş Group companies were established in 2009 andhave been communicated to all our employees. Revision isimplemented depending on the needs in case oforganizational modifications. Blue collar employees work withthe described job classifications and descriptions of the union. The systematic job classifications and the marketconditions are taken into consideration in determining theremuneration and other benefits of the white collaremployees. Job evaluation, job groups and job titlesdetermined by the Cement Industry Employer’s Union areapplied for the blue collar employees and the provisionsof the Collective Labour Agreement is complied with.Decisions taken within the Company and developments inthe Company are transmitted to our employees throughthe union representative, notice boards, internal and groupwebsites (Cementir Holding Cnergy, Çimentaş GroupIntracim), internal and group media organs (CementirHolding Voice, Çimentaş Group Habercim). Informationsharing between the management positions is performedduring the Management Communication meetings whichÇimentaş Group Managers attend and which areconducted quarterly. Demands and reformations receivedfrom the Occupational Health Safety sub-committees arecommunicated during the Occupational Health Safety

committee meetings conducted regularly each month. Theworkplace representative transfers the decisions of theOccupational Health Safety committee to the employeesand submits the requests and proposals received from theemployees to the committee. No race, religion, languageand sex discrimination is permitted in the Çimentaş Groupcompanies. No complaint has been received related to discriminationor physical or psychological harassment in ourCompanies.

4.4 Codes of Conduct and Social ResponsibilityThere is a Codes of Conduct regulation which has beenaccepted and approved by the Board of Directors andimplemented by our main shareholder CementirHolding. This regulation has been published on theCompany’s website. The Company within the framework of socialresponsibility culture and understanding has sustainedits support especially in the fields of training, health andsports over the years through ÇESVAK Foundation.Moreover, no sanctions related to environmental issueswere reported within the period. All permits and licensesnecessary to carry out the Company’s activities exist andare renewed as needed.

3.2 Annual ReportInformation on the corporate governance principlesare featured in the annual report.

SECTION IV - STAKEHOLDERS

4.1 Information on the Company PolicyRelevant to the Stakeholders Relations between stakeholders and the Company areentirely based on written agreements, relations andoperations between the parties are governed within theframework defined by the agreements. In case of non-existence of agreements, the parties’ interests arepreserved within the framework of legislation andgoodwill rules and the Company’s possibilities. Stakeholders are informed about subjects related themby the company, with meetings organized by thecompany and e-mails.

4.2 Support for Stakeholder Participation inManagementInformation on the Company and its activities is given duringthe meetings held both with personnel and otherstakeholders on a time-to-time basis. In addition, althoughno model regarding participation of the personnel inmanagement and disclosures has been established,expectations, complaints and suggestions of the personneland the customers are collected through surveys andenquiries conducted with the personnel and the customers,corrective and regulative actions are taken with the findingswhich are evaluated and prioritized by top management.

4.3 Human Resources PolicyÇimentaş Group aims for a competent managementand an employee community in order to create aunique difference and competitive advantage throughthe improvement of organizational efficiency andindividual skills in the workplace environment. The basic guidelines of HR policy of the Company maybe summarized under the headings below.(i) Recruiting and employment; Raising the quality inby employing new staff and continuously increasingthe current labour quality. (ii) Training; Focusing on training studies for thepurpose of developing the current human resources. (iii) Remuneration; Developing a remuneration systemthat also takes market conditions into account.

(iv) Activities increasing motivation andcommunication; Making organizations andprogrammes to raise loyalty and working motivationof employees.

The process of recruitment and replacement isperformed at the same standards within all ÇimentaşGroup companies and equal opportunities are providedto the candidates who wish to apply for a job. Jobapplications are collected through online sites and ourwebsite which can be reached easily. Pre-selectioncriteria determined specially per job and stated in thejob description are implemented similarly to allapplications and predefined standard tests are appliedto all candidates who meet the initial qualifications andthose results are taken into consideration. Training aimed at increasing the knowledge, skillsand experience of the employees is planned at thebeginning of each year and applied fairly and equallyin accordance with the approved budget. The trainingneeds are planned and applied individually in line withthe performance evaluation results for managementpositions. Furthermore, group training is planned inaccordance with the needs of the function and team. The Cement Industry Employer’s Union CollectiveLabour Agreement is applied in Çimentaş. ACompany Union Representative is selected lawfullyfrom the employees working in the place of businessincluded in the scope of Cement Industry Employer’sUnion Collective Labour Agreement. The Union Representative’s duties are as follows:i. Providing solutions to the conflicts and complaints

arising from the implementation of the collectivelabour agreement by negotiating with theemployee and the employer which are referredeither from the employer or the employee.

ii. Protecting the employees’ rights and laws, compliancewith the employer’s entitled rights in accordance withthis agreement and legislation provisions.

iii. Assisting the employer to study the training whichwill be conducted in the workplace or outside by theemployer in order to increase the employees’knowledge and proficiency and ensure theparticipation of the employees.

iv. Providing continuation of the labour peace bycooperation between the employer and theemployee and work harmony in the workplace.

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Members of Board of Directors

Walter Montevecchi Chairman

Francesco Caltagirone Vice Chairman

Francesco Gaetano Caltagirone Member

Alessandro Caltagirone Member

Paolo Zugaro CEO


Massimo Sala Member

Massimiliano Capece Minutolo Member

İlhan F. Güler Independent Member

Taha Aksoy Independent Member

2Annual Report

SECTION V - BOARD OF DIRECTORS

5.1 Structure of the Board of Directors

All members of the Board of Directors meet the qualifications determined by the CMB Corporate GovernancePrinciples. There is no special provision regarding the qualifications of the members of the Board of Directorsin the Articles of Association. Most of the members of the Board of Directors are non-executive members.Independent members will take part in the 2013 Ordinary General Assembly Meeting as per the CapitalMarkets Board Regulations and Corporate Governance Principles.

Relations divisions. From 2007 to 2009 he wasGroup CFO of the Gianni Versace Group, while in2010 to 2012 he was CFO of EPCG (ElektroprivredaCrna Gora). In April 2012 he worked as ChiefFinancial Officer and Executive in charge atCementir Holding SpA and in 2013 he also becamethe Investor Relations Manager.Massimo Angelo Sala graduated in 1994 at theBocconi University in Milan in BusinessEconomics. He is married and has two daughters.Massimiliano Capece Minutolo, was born in 1968 inRome and started his career as an engineer in 1992.He has worked as manager at Vianini Lavori S.p.A.which is listed on the Milan Stock Exchange and asGeneral Manager at Porto Torre S.p.A and WXIII/IECommercial 4 S.r.l. He is currently the Chairman OfThe Board Of Directors at Unione GeneraleImmobiliare S.p.A. and Member of Board of Directorsat Caltagirone S.p.A, Cementir Holding S.p.A,Romana Partecipazioni 2005 S.r.L.Ilhan F.Gürel, is currently Deputy Chairman of TheBoard Of Directors at Sünel TTAŞ, Chairman of Boardof Directors at Kütaş Food Group and GürelGayrimenkul A.Ş. and member of the Board ofDirectors at Ege Endüstri Ve Ticaret A.Ş. and CJSCSünel Tobacco. İlhan f. Gürel graduated from Newcastle University asa Mechanical Engineer and earned a master’s degreeat Durham University. Taha Aksoy, started his career as an assistant atMETU and immediately after he continued atMunich Technical University. He worked as ‘GeneralManager’ at Betonsan A.Ş., Çimentaş Gazbetonİşletmeleri and Beşer Balatacılık. He worked as amember of the Turkish National AssemblyParliament in 2007-2011 and recently he worked asGeneral Coordinator at the 17th MediterraneanGames and Mersin 2013.Taha Aksoy graduated from METU as a ConstructionEngineer and has a master’s degree from the sameuniversity. Since Candidate Presentation Committee has notbeen formed, Mr. F. Ilhan Gürel and Mr. Taha Aksoy,who have been determined by CorporateGovernance Committee and approved in terms ofindependency, have been presented as independentmember candidates to the Board of Directors with

a report dated 01.03.2017 and approved at theBoard of Directors Meeting on 02.03.2017.Independent members presented theirindependency statements in accordance withrelevant legislation, and they have preserved theirindependence criteria. To get duties outside the company status of Board ofDirectors members and company managers areregulated in ethics charter of the company. Since Members of Board of Directors has no dutyoutside the group organization, there is no need todetermine a rule for such duties.

5.2 Activity Principles of the Board of DirectorsAs the majority of the members of Board of Directorsare located abroad, meetings of Board of Directors areusually performed without being convened, but invideo-conference form by utilizing technologicalfacilities.There were 11 meetings of the Board of Directors inthe period.There were no questions and opposite opinions frommembers of board of directors. Since there was nounfavourable vote, there was no dissenting opinion inthe minutes of the meeting. The date of the Board of Directors meeting, agendaand annotations related to the agenda together withinformative documents were delivered to the membersof the Board of Directors prior to the meeting as perthe “Corporate Actions Management” procedure.Each member has only 1 voting right. There is nocumulative vote or negative veto right in the Board ofDirectors.During the meetings of the Board of Directors, allsubjects are resolved by discussing in detail andclearly. The provisions of TCC are applied regarding thequorum. Prohibition of engaging in activities and competitionwith the company is not applied to the members ofBoard of Directors based on the permission of theGeneral Assembly within the period. Moreover, thesepersons have neither been dealing with any treatmentof the company or performing any activity requiringcompetition with the Company. There are related party transactions submitted forapproval to the independent board members but thereare not significant transactions.

Brief Curriculum Vitaes Of The Bod MembersWalter Montevecchi, started his career at VianiniLavori S.P.A. in 1972. He is currently a member ofBoard of Directors at Cementir Holding, AalborgPortland, Unicon and Cementir Italy and Chairman OfThe Board Of Directors of the Çimentaş GroupCompanies.Walter Montevecchi, was born in Faenza Italy in 1945and he graduated from Bologna University as aMining Engineer.Francesco Caltagirone JR, started his career atVianini Industria S.P.A. He is currently a ManagingDirector and Chairman of Board of Directors atCementir Holding S.p.A, Deputy Chairman of theBoard of Directors at Banca Antonveneta S.p.A andmember of the Board of Directors at CaltagironeS.p.A, Caltagirone Editore S.p.A. and Banca FinnatEuromerica. Francesco Gaetano Caltagirone, He is currentlyChairman of The Board of Directors at CaltagironeS.p.A, Caltagirone Editore S.p.A., II Messaggero, IIGazzettino, Eurostazioni S.p.A and Associazione AmiciDella Luiss.Francesco Gaetano Caltagirone was born in 1943and he graduated from Rome University as anEngineer. Alessandro Caltagirone, started his career atVianini Thai Construction as a Financial Controller.He is currently Chairman of The Board of Directorsat Finanziara İtalia 2005 S.p.A., RomanaPartecipazioni 2005 S.r.L and ICAL S.p.A. and amember of Board of Directors at Cementir HoldingS.p.A, Caltagirone S.p.A, Caltagirone Editore S.p.A.and Çimentaş A.Ş.Alessandro Caltagirone graduated from La SapienzaUniversity as an Economist. Paolo Zugaro, Zugaro started his career working atVitro Ciset S.p.A. as ‘’IT manager’’ in 1991. In 1997he started working in Cementir Italia S.p.A. as‘’CIO’’. From 1999 to 2005 Paolo Zugaro was incharge of starting up the new media activities forCaltagirone Editore Group. He founded the internetcompany Caltanet and the Customer Care Servicescompany B2win. He was "Managing Director ofCaltanet S.p.A." and "Executive Chairman ofB2win". He became "Vice President of Ecare S.p.A."in 2004 after B2win merged with Ecare, the second

biggest operator in Italy for Customer Services. In2005 he was appointed as "Group CIO of CementirHolding S.p.A". Later he worked as ‘’Vice Presidentof Aalborg Portland’’ in the Cementir HoldingGroup in 2008 and was appointed as ‘’CEO ofAalborg Portland’’ and "Head of the Nordic BalticRegion" in 2010. He has been working as "CEO ofÇimentaş Group" in Turkey and "Head of EastMediterranean Region of Cementir Holding S.p.A."since the beginning of 2016.Paolo Zugaro earned a Master’s Degree from TorVergata University of Rome in ElectronicEngineering in 1989 and completed his compulsorymilitary service in the Italian Army as ‘Lieutenant’’in 1991.Marco Maria Bianconi, started his career at IRIRome in 1989 and in later worked as ‘’PortfolioDirector’ at Fidelity Investments, as ‘Capital MarketAnalyst’ at Pan European Equities, ‘FinanceDirector’ at Caltagirone S.p.A, and ‘Budget andControlling Director’ and ‘M&A and IR Director’ atCementir S.p.A. He’s currently working as a‘Business Development Director’ at CementirHolding S.p.A. Marco Maria Bianconi graduated from LuissUniversity as an Economist and has master’sdegree in Business Administration from New YorkUniversity School of Business.Marco Maria Bianconi can speak Italian, Spanishand English and has ‘Chartered Accountant’ and‘IMC’ certificates.Massimo Angelo Sala, started his career in 1986at Honeywell Information Systems Italia Spa asPB&C, then became Controller in the IntegratedSystems dept. in 1989. He then worked asController at SNIA BPD Spa in the Bio-Engineeringand Chemical division. In 1992 he moved to theEdison Group, first as Controller at Edison Spa,then in 1993 as Controller in the Hydrocarbondivision, from 1996 to 2000 he was GroupController and Investor Relations Manager, thenfrom June 2000 he was the Accounts, Financialand Controlling Director of Edisontel SpA (a start-up telecommunications company) and in 2002 hebecame Chief Financial Officer of Edipower Spa. InJanuary 2005 he became CFO of Aeroporti di RomaSpa, also working in its M&A and Investor

2120

A n n u a lR e p o r t 2 0 1 6 2Annual Report

5.3 Committees Established within theCompany The “Audit Committee”, “Corporate GovernanceCommittee” and “Risk Committee” were establishedfrom the members of Board of Directors.The Audit Committee is composed of two membersand independent board members F. İlhan Gürel andTaha Aksoy were elected by the BoD as members.Independent board member F. İlhan Gürel was electedas the president of Corporate Governance Committeeand board member Marco Maria Bianconi and LegalAffairs and Investments Relations personnel GökçeOyal Püskülcü were elected as the members.Independent board member Taha Aksoy was elected asthe president of the Risk Committee and board memberMarco Maria Bianconi and financial affairs deputydirector Vedat Özer were elected as the members.As can be seen, Marco Maria Bianconi has a role in twocommittees, because Mr. Marco Maria Bianconi cangreatly contribute to the activities of the committees.The working principles of the Committees establishedfrom the members Board of Directors, are determinedand disclosed to the public by the BoD.

5.4 Risk Management and Internal ControlMechanismThe “Risk Committee” was established by the Boardof Directors and has started to work. There is an internal audit function within the groupand there are mechanisms related to internal controland audit.

5.5 Strategic Purposes of the CompanyThe mission, vision and purposes of the company areestablished by the BoD. These Purposes areestablished within 5 years plans and reviewed eachyear.

5.6 Financial Rights Provided to Board ofDirectors and Top ManagementIn addition to the attendance fee for the Board ofDirectors (BoD) members and the salary paid to theChairman and Managing Directors, there is no otherfee paid to the BoD members, or a reward systembased upon the performance. The Board of Directorsdetermines the amount of salary paid to the Chairmanand Managing Director.Remuneration principles are disclosed to the publicthrough the company website, annual report andPublic Disclosure Platform. These disclosures aremade based on information from the BoD.As a principle the Company does not provide credit tomembers of the Board of Directors and managerialpersonnel. However Managing Director may utilize thepower of providing limited credit to managers inextraordinary cases..

2322


Consolidated Financial Statements 2016 26 Independent Auditors’ Report for Financial Statements 28 Consolidated Financial Statements 30 Income Statement 32 Equity Capital Changing Table 34 Cash Flow Table

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2928


ASSETS Note 31 December 2016 31 December 2015

Current Assets 427.474 421.818Cash and Cash Equivalents 5 73.682 81.373

Trade Receivables 209.734 194.266

- Due from Related Parties 4.1 91 16

- Due from Third Parties 7.1 209.643 194.250

Other Receivables 30.064 18.925

- Due from Related Parties 4.2 24.744 13.164


Inventories 9 108.300 120.055

Prepaid Expenses 10.1 4.202 6.299

Current Income Tax Assets 27 98 98

Other Current Assets 18.1 1.394 802

Non-Current Assets 1.072.543 1.117.809Other Receivables 11.669 2.380

- Due from Related Parties 4.3 10.059 --


Investment Properties 11 258.384 276.419

Tangible Assets 12 554.811 590.403

Intangible Assets 195.995 199.008

- Goodwill 14 185.489 185.440

- Other Intangible Assets 13 10.506 13.568

Prepaid Expenses 10.2 848 1.614

Deferred Tax Assets 27 26.687 25.179

Other Non-Current Assets 18.2 24.149 22.806

TOTAL ASSETS 1.500.017 1.539.627

LIABILITIES Note 31 December 2016 31 December 2015

Short-Term Liabilities 232.518 246.179Short-Term Borrowings 6 19.221 22.418

Trade Payables 164.806 165.704

- Due to Related Parties 4.4 30.818 31.709

- Due to Third Parties 7.2 133.988 133.995

Other Payables 14.643 24.458

- Due to Related Parties 4.5 8.759 23.968

- Due to Third Parties 8.3 5.884 490

Payables for Employee Benefits 17.1 5.497 4.857

Current Income Tax Liability 27 2.897 5.548

Deferred Income 10.3 7.249 4.119

Short-Term Provisions 14.932 11.143

- Short-Term Provisions related to Employee Benefits 17.2 1.769 1.473

- Other Short-Term Provisions 15.3 13.163 9.670

Other Short-Term Liabilities 18.3 3.273 7.932

Long-Term Liabilities 92.090 94.286Long-Term Borrowings 6 208 312

Long-term Provisions 43.940 43.099

- Long-Term Provisions Related to Employee Benefits 17.3 20.503 20.607

- Other Long-Term Provisions 15.3 23.437 22.492

Deferred Income 10.4 195 728

Deferred Tax Liability 27 41.395 44.261

Other Long-Term Liabilities 18.4 6.352 5.886

TOTAL LIABILITIES 324.608 340.465

EQUITY 1.175.409 1.199.162Equity of Parent Company 996.639 992.593Paid-in Capital 19 87.112 87.112

Capital Adjustment Differences 19 20.069 20.069

Cross Shareholding Capital Adjustment 19 (3.381) (3.381)

Share Premiums/Discounts 19 161.554 161.554

Other Accumulated Comprehensive Income / Expenses that will not be Reclassified through Profit or Loss 19 92.374 96.892

- Revaluation and Remeasurement Gains 19 92.374 96.892

- Tangible Fixed Assets Revaluation Fund Increases 19 106.483 110.111

- Remeasurement Losses on Defined Benefit Plans 19 (13.532) (12.642)

- Other Revaluation and Remeasurement Losses 19 (577) (577)

Other Accumulated Comprehensive Income / Expenses that will be Reclassified through Profit or Loss 5.356 4.791

- Foreign Currency Translation Differences 5.356 4.791

Legal Reserves 41.566 70.372

Retained Earnings 587.322 481.952

Net Profit for the Period 4.667 73.232

Non-Controlling Interests 178.770 206.569TOTAL LIABILITIES 1.500.017 1.539.627

ÇİMENTAŞ İZMİR ÇİMENTO FABRİKASI TÜRK A.Ş. and ITS SUBSIDIARIESAUDITED CONSOLIDATED STATEMENT OF FINANCIAL POSITION AS OF 31 DECEMBER 2016Amounts expressed in thousand Turkish Lira (“thousand TL”) unless otherwise stated

3Consolidated Financial Statements 2016

3130


PROFIT OR LOSS Note 31 December 2016 31 December 2015

Revenue 20 777.463 747.987

Cost of Sales (-) 20 (621.794) (586.694)

GROSS PROFIT 20 155.669 161.293General Administrative Expenses (-) 21.1 (103.752) (88.887)

Marketing Expenses (-) 21.2 (18.665) (18.011)

Other Income from Operating Activities 23.1 11.163 15.200

Other Expenses from Operating Activities (-) 23.2 (25.410) (16.423)

OPERATING PROFIT 19.005 53.172

Income from Investing Activities 24.1 3.308 47.629

Expenses from Investing Activities (-) 24.2 (24.814) (30.518)

Loss of Investments Accounted With Equity Method 18.4 (417) (786)

OPERATING PROFIT BEFORE FINANCIAL EXPENSE (2.918) 69.497Financial Income 25.1 6.818 16.374

Financial Expenses (-) 25.2 (9.326) (18.349)

(LOSS)/PROFIT BEFORE TAX (5.426) 67.522

Tax expense (17.793) (9.234)Income Tax Expense 27 (21.878) (20.792)

Deferred Tax Income 27 4.085 11.558

NET (LOSS)/PROFIT (23.219) 58.288

Distribution of Net (Loss)/ProfitNon-Controlling Interests (27.886) (14.944)

Equity of Main Shareholders 4.667 73.232

Net (loss)/profit for the period (23.219) 58.288

Basic and Diluted Earnings per Share (TL) 28 0,0539 0,8463

OTHER COMPREHENSIVE INCOME:Income that will be Reclassified through Profit or LossForeign Currency Translation Differences 26 852 1.194

Income that will not be Reclassified through Profit or LossRemeasurement of Defined Benefit Plans Losses 26 (1.090) (1.402)

OTHER COMPREHENSIVE INCOME (238) (208)

TOTAL COMPREHENSIVE INCOME (23.457) 58.080

Distribution of Total Comprehensive IncomeNon-Controlling Interests (27.799) (15.084)

Equity of Main Shareholders 4.342 73.164

Total Comprehensive Income (23.457) 58.080

ÇİMENTAŞ İZMİR ÇİMENTO FABRİKASI TÜRK A.Ş. and ITS SUBSIDIARIESAUDITED CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVEINCOME FOR THE YEAR ENDED 31 DECEMBER 2016Amounts expressed in thousand Turkish Lira (“thousand TL”) unless otherwise stated

3332

A n n u a lR e p o r t 2 0 1 6 3Consolidated Financial Statements 2016

Paid-in Capital Cross Share Tangible Fixed Remeasurement Other Foreign Legal Retained Net Equity of Non- Equity Capital Adjustment Shareholding Premiums Assets Losses on Revaluation Currency Reserves Earnings Profit for Parent Controlling

Differences Capital Revaluation Defined Benefit and Translation the Period Company Interests PRIOR PERIOD Adjustment Fund Increases Plans Remeasurement Differences

Losses

Balances as of 1 January 2015 87.112 20.069 (3.381) 161.554 110.111 (11.503) (577) 3.720 24.838 416.911 110.866 919.710 221.713 1.141.423Net profit/(loss) for the period -- -- -- -- -- -- -- -- -- -- 73.232 73.232 (14.944) 58.288

Foreign currency translation differences -- -- -- -- -- -- -- 1.071 -- -- -- 1.071 123 1.194

Remeasurement losses on defined benefit plans -- -- -- -- -- (1.139) -- -- -- -- -- (1.139) (263) (1.402)

Total other comprehensive income -- -- -- -- -- (1.139) -- 1.071 -- -- -- (68) (140) (208)Total comprehensive income -- -- -- -- -- (1.139) -- 1.071 -- -- 73.232 73.164 (15.084) 58.080Dividend payment -- -- -- -- -- -- -- -- -- (302) -- (302) -- (302)

Transfers -- -- -- -- -- -- -- -- 45.544 65.322 (110.866) -- -- --

Changes in non-controlling interest without loss of control -- -- -- -- -- -- -- 21 -- 21 (60) (39)

Balances as of 31 December 2015 87.112 20.069 (3.381) 161.554 110.111 (12.642) (577) 4.791 70.372 481.952 73.232 992.593 206.569 1.199.162

Balances as of 1 January 2016 87.112 20.069 (3.381) 161.554 110.111 (12.642) (577) 4.791 70.372 481.952 73.232 992.593 206.569 1.199.162Net profit/(loss) for the period -- -- -- -- -- -- -- -- -- -- 4.667 4.667 (27.886) (23.219)

Foreign currency translation differences -- -- -- -- -- -- -- 565 -- -- -- 565 287 852

Remeasurement losses on defined benefit plans -- -- -- -- -- (890) -- -- -- -- -- (890) (200) (1.090)

Sales of tangible assets classified as investment property -- -- -- -- (3.628) -- -- 3.628 -- -- -- --

Total other comprehensive income -- -- -- -- (3.628) (890) -- 565 -- 3.628 -- (325) 87 (238)Total comprehensive income -- -- -- -- (3.628) (890) -- 565 -- 3.628 4.667 4.342 (27.799) (23.457)Dividend payment -- -- -- -- -- -- -- -- -- (296) -- (296) -- (296)

Transfers -- -- -- -- -- -- -- -- (28.806) 102.038 (73.232) -- -- --

Balances as of 31 December 2016 87.112 20.069 (3.381) 161.554 106.554 (13.532) (577) 5.356 41.566 587.322 4.667 996.639 178.770 1.175.409

ÇİMENTAŞ İZMİR ÇİMENTO FABRİKASI TÜRK A.Ş. and ITS SUBSIDIARIESAUDITED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 31DECEMBER 2016 Amounts expressed in thousand Turkish Lira (“thousand TL”) unless otherwise stated

Other AccumulatedComprehensive

Income/Expensesthat will beReclassified

through Profit or Loss

Other AccumulatedComprehensive

Income/Expensesthat will not be

Reclassified through Profit

or Loss

Accumulated ProfitsRevaluation and

Remeasurement Gains

3534

A n n u a lR e p o r t 2 0 1 6 3Consolidated Financial Statements 2016

31 December 2016 31 December 2015

A. CASH FLOWS FROM OPERATING ACTIVITIES 56.779 91.727(Loss)/Profit for the Period (23.219) 58.288(Loss)/Profit for the Period from Ongoing Operations (23.219) 58.288

Adjustments for Net (Loss)/Profit for the Period Reconciliation 117.493 71.717Adjustments for Depreciation and Amortization Expense 12, 13, 22 62.639 63.631

Adjustments for Impairment 24.781 33.076

Adjustments for Impairment Value in Receivables 7.1, 23.2 461 2.570

Impairment for Inventory Value 9 (494) --

Adjustments for Impairment in Tangible Fixed Assets 24.2 24.814 11.461

Adjustments for Impairment in Other Non-Tangible Fixed Assets 24.2 -- 19.045

Adjustments relating to Provisions 14.762 8.914

Adjustments for Provisions for Employee Benefits 2.374 (586)

Adjustments for Other Provisions 12.388 9.500

Adjustments for Interest Income and Expenses 642 705

Adjustments for Unrealized Foreign Currency Conversion Differences 3.344 6.314

Adjustments to Earnings on Fair Value 24.1 -- (46.512)

Adjustments for Undistributed Profits of Investments accounted for using the Equity Method 417 786

Adjustments for Tax Expense 27 17.793 9.234

Adjustments for Gains Arising from Disposal of Fixed Assets 24.1, 24.2 (3.308) (1.105)

Other Adjustments to Reconcile Net Profit/(Loss) for the Period 23.1 (3.577) (3.326)

Changes in Working Capital (8.496) (12.769)Adjustments for Increase in Trade Receivables (14.405) (30.778)

(Increase)/Decrease in Amounts Due from Related Parties (75) 1.135

Increase in Amounts Due from Third Parties (14.330) (31.913)

Adjustments for Decrease in Other Receivables 1.211 4.076

Decrease in Amounts Due from Third Parties 1.211 4.076

Adjustments for Decrease/(Increase) in Inventories 16.640 (727)

Adjustments for Decrease in Trade Payables (337) 22.479

(Increase)/Decrease in Amounts Due toRelated Parties (3.844) 17.448

Decrease in Amounts Due to Third Parties 3.507 5.031

Adjustments for Increase in Other Payables 211 --

Increase in Amounts Due to Third Parties 211 --

Adjustments for Other Decreases in Operating Capital (11.816) (7.819)

Decrease/(Increase) in Other Operational Assets 946 (1.010)

Decrease in Other Operational Liabilities (12.762) (6.809)

Net Cash Provided by Operating Activities 85.778 117.236Payments Made Within Adjustments for Provisions for Employee Benefits (4.470) (4.266)

Tax Payments 27 (24.529) (21.243)

B. CASH FLOWS USED IN INVESTING ACTIVITIES (45.332) (39.234)Cash Inflows from Proceeds from Sale of Tangible and Intangible Assets 202 2.764


Cash Outflows from Acquisition of Tangible and Intangible Assets 12, 13 (46.827) (58.038)

Proceeds from Sale of Investment Properties 40 --

Cash Advances and Loans to Other Parties (342) 14.454

Cash Advances and Loans to Related Parties (342) 14.454

Interest Received 1.595 1.586

C. CASH FLOWS FROM FINANCING ACTIVITIES (19.994) (32.038)Cash Inflows from Loans and Borrowing 19.876 72.454

Cash Outflows from Repayment of Loans and Borrowings (22.973) (98.791)

Increase in Other Loans Received from Related Parties 8.638 --

Reduction in Other Loans Received from Related Parties (23.884) (4.268)

Dividend Payment (296) (302)

Interest Paid (1.355) (1.131)

NET DECREASE IN CASH AND CASH EQUIVALENTS BEFORE EFFECT OF FOREIGN CURRENCY TRANSLATION DIFFERENCES (A+B+C) (8.547) 20.455D. EFFECT OF FOREIGN CURRENCY TRANSLATION DIFFERENCES ON CASH AND CASH EQUIVALENTS 856 (7.861)NET (DECREASE) / INCREASE IN CASH AND CASH EQUIVALENTS (A+B+C+D) (7.691) 12.594E. CASH AND CASH EQUIVALENTS AT THE BEGINNING OF THE PERIOD 5 81.373 68.779CASH AND CASH EQUIVALENTS AT THE END OF THE PERIOD (A+B+C+D+E) 5 73.682 81.373

ÇİMENTAŞ İZMİR ÇİMENTO FABRİKASI TÜRK A.Ş. and ITS SUBSIDIARIESAUDITED CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 31 DECEMBER 2016Amounts expressed in thousand Turkish Lira (“thousand TL”) unless otherwise stated

Notes to the Financial Statements 38 Notes to the Financial Statements4

Çimentaş and its subsidiary Çimbeton are publiclytraded companies, and shares equivalent to 2,20% ofthe capital of Çimentaş (2015: 2,20%) and 49,65% ofÇimbeton (2015: 49,65%) are traded at Borsa İstanbulA.Ş. [Stock Market Istanbul S.A.) (“BIST”) under thenames CMENT and CMBTN respectively.The company’s registered address is Egemenlik MahEskiKemalpaşa Cad. No: 4B Işıkkent Bornova - İzmir/Turkey.For the Company and its subsidiaries, the term “TheGroup” will be used throughout the report.

2. BASIS OF PRESENTATION OFCONSOLIDATED FINANCIAL STATEMENTS

2.1 Basis of Preparation2.1.1 Declaration of Conformity with the TurkishAccounting Standards (TAS)The accounting records and legal financialstatements of the company and its subsidiariesoperating in Turkey are prepared in Turkish Lira (“TL”)in accordance with the Turkish Commercial Code(“TCC”), the Tax Procedure Law, and the GeneralCommuniqué on the Implementation of Accounting

Systems issued by the Finance Ministry, and theUniform Accounting Plan annexed thereto. The accompanying consolidated financial statements havebeen prepared in accordance with the Turkish AccountingStandards (TAS) issued by Public Oversight Accounting andAuditing Standards Authority of Turkey (“POA”), according tothe applicable Communiqué (“Communiqué”) Serial: II, No:14.1 on “Principles of Financial Reporting in the CapitalMarkets” issued by the Capital Markets Board (“CMB”),which was published on 13 June 2013 in the Official Gazettenumber 28676. TAS; The Turkish Accounting Standards(“TAS”) comprise the Turkish Financial Reporting Standards(“TFRS”), annexes thereto and interpretations thereof.

2.1.2 Basis of presentation of financial statementsAdditionally, the consolidated financial statements and notesare presented in accordance with the formats stipulated withthe statement published by CMB on 7 June 2013.The financial statements of the Group as of 31December 2016 were approved by the Board ofDirectors on 2 March 2017. The General Assemblyhas the right to amend the financial statements afterpublication of the financial statements.

ÇİMENTAŞ İZMİR ÇİMENTO FABRİKASITÜRK A.Ş. and ITS SUBSIDIARIESNOTES TO THE AUDITED CONSOLIDATEDFINANCIAL STATEMENTS AS OF AND FOR THEYEAR ENDED 31 DECEMBER 2016

1. ORGANIZATION OF THE COMPANYAND NATURE OF BUSINESS

Çimentaş İzmir Çimento Fabrikası Türk A.Ş. (“Çimentaş”or “the Company”), the main shareholder, was foundedon 7 August 1950. The Company operates in theproduction, trade, sale and transportation of bulk andbagged cement. The major shareholder of the Companyis Aalborg Portland Espana SL (“Aalborg PortlandEspana”) which is resident in Denmark.Aalborg Portland A/S (“Aalborg”), the main shareholderin Çimentaş and Çimentaş’s former main shareholderCementir Holding SPA (“Cementir Holding”)transferred 25% of the company capital, 2.177.811.580shares each with a nominal value of TL 0,01, and a[total] nominal value of TL 21.778 thousand, for TL228.645 thousand, a unit/lot price of TL 10,50, on 12August 2013 to Aalborg Portland Espana. Also, Cementir Holding transferred 46% of thecompany capital, 4.007.173.307 shares each with anominal value of TL 0,01, and a [total] nominal valueof TL 40.072 thousand , for TL 442.559 thousand, aunit/lot price of TL 11,04 on 10 September 2013 toAalborg Portland Espana SL, wholly owned byAalborg. After these operations, Aalborg PortlandEspana’s direct shareholding reached 71%.On July 8, 2014, Simest S.p.A, owner of 1,38% of

Çimentaş shares, transferred all of its shares inCementir Holding. By this transaction, CementirHolding purchased 1.198.841,56 shares in Çimentaşowned by Simest S.p.A. at a unit/lot price of TL 11,04,and the direct shareholding in Çimentaş rose from25,42% to 26,80%. Cementir Holding, Çimentaş’s former mainshareholder, transferred 14% of the companycapital, 1.219.574.542 shares each with a nominalvalue of TL 0,01, and a [total] nominal value of TL12.196 thousand, for TL 140.975 thousand, aunit/lot price of TL 11,56 on 12 September 2014 toAalborg Portland Espana. After these transactions,Aalborg Portland Espana’s direct shareholding inÇimentaş reached 85%, and Cementir Holding’ssubsidiary shareholding in Çimentaş decreased to12,80%. Cementir Holding, sold all of its shares in Çimentaş,representing 12,80% of the company capital, with atotal nominal value of TL 11.153 thousand, for TL134.989 thousand, a unit/lot price of TL 12,1031 on 9July 2015, to Aalborg Portland Espana. After thesesales transactions, Cementir Holding had no directshareholding in Çimentaş. The direct shareholding ofAalborg Portland Espana in Çimentaş reached97,80%. These share transfer transactions werecarried out between the companies of CementirHolding Group, and this common control transactiondid not result in any changes in shareholders andtheir voting rights.The major areas of activities by Çimentaş’ssubsidiaries (“Subsidiaries”) and jointly controlledentities are as follows:

Operating Nature of BusinessSubsidiaries Country

• Çimbeton Hazır Beton ve Prefabrik Yapı Ready mixed concrete Elemanları San. ve Tic. A.Ş. (“Çimbeton”) Turkey and cement production

• Kars Çimento Sanayi ve Tic. A.Ş. (“Kars Çimento”) Turkey Cement production

• Destek Organizasyon Temizlik, Akaryakıt,Tabldot Servis San. ve Tic. A.Ş. (“Destek”) Turkey Service

• İlion Çimento İnşaat San. ve Tic. Ltd. Şti. (“İlion Çimento”) Turkey Fly ash production

• Recydia Atık Yönetimi Yenilenebilir Enerji Üretimi ve Cement production and Lojistik Hizmetleri San. ve Tic. A.Ş. (“Recydia”) Turkey waste management

• Süreko Atık Yönetimi Nakliye Lojistik Sanayi ve Ticaret A.Ş. (“Süreko”) Turkey Waste management

• Neales Waste Management HoldingsLimited (“NWM Holding”) England Waste management

• Neales Waste Management Limited (“NWM”) England Waste management

• Quercia Limited (“Quercia”) England Waste management

• Clayton Hall Sand Company Limited (“CHS”) England Waste management

Operating Nature of BusinessJointly controlled entities Country

Environmental Power International (“UK JV R&D”) Limited England Research and Development

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A n n u a lR e p o r t 2 0 1 6 4Notes to the Financial Statements

iii. Jointly controlled entitiesJointly controlled entities are the enterprises establishedby agreements that entail making financial and strategicdecisions. The profit or loss is reported in theaccompanying consolidated financial statements basedon the recognized acquisition cost of the joint ventures aspresented by the Group at the beginning, in accordancewith equity method, according to the participation portionfrom the net assets of the related company.If the participant’s whole share in the joint venture decreasesto zero as a result of losses, the participant reports theliabilities undertaken or payments made on behalf of thejoint venture in its financial statements as liability or loss.

iv. Loss of ControlThe Group derecognizes the assets and liabilities of thesubsidiary, any non-controlling interests and the othercomponents of equity related to the subsidiary, if it loses controlover the subsidiary. Any surplus or deficit arising on the loss ofcontrol is recognized in profit or loss. If the Group retains anyinterest in the previous subsidiary, then such interest ismeasured at fair value on the date that control is lost.

v. Transactions eliminated on consolidationIntragroup balances and transactions, and anyunrealized income and expenses arising fromintragroup transactions are eliminated when preparingthe condensed consolidated financial statements.Profits and losses arising from the transactionsbetween associates and parent company and betweenthe consolidated subsidiaries of the parent companyand the jointly controlled subsidiaries are offset by theshare ratio of the parent company. Unrealized lossesare eliminated in the same way as unrealized gains,unless there is evidence of impairment.

2.1.6 Comparative informationIn order to ensure determination of financial andperformance trends, the Group has prepared theconsolidated statement of financial position as of 31December 2016 comparatively with the consolidatedstatement of financial position as of 31 December 2015,and the consolidated statement of profit or loss andother comprehensive income, consolidated statementof changes in equity and consolidated statement ofcash flows for the year ended 31 December 2016comparative to the year ended 31 December 2015.

2.1.7 Foreign currency transactionsTransactions carried out in foreign currency unitshave been converted into the valid currency units forGroup companies on the day upon which thetransaction occurred. Financial assets and liabilities in foreign currencies havebeen converted to the valid currency unit on the basis ofthe exchange rate at the end of the reporting period.Foreign currency non-monetary assets and liabilitiesmeasured by fair value are converted into the validcurrency unit using the exchange rate on the date that thefair value was assessed. Foreign currency differencesarising from reconversion are generally recognized asprofit or loss. Non-monetary items measured by historicalcost in foreign currencies have not been converted. Foreign currency differences arising fromreconversion for the following items are recognizedas other comprehensive income. • share-based marketable securities recognized under

equity (other than in circumstances of impairment. Insuch circumstances foreign currency differencesrecognized in other comprehensive income isreclassified as profit or loss);

• to the extent that protection from risk of financialliabilities undertaken in order to hedge against riskassociated with net investments in foreigntransactions is effective; and

• specialized cash flow risk hedge instruments, to theextent of the effectiveness of the protection from risk.

2.2 Changes in Accounting PoliciesThe applied valuation principles and accounting policieshave been set out consistently in all the information ofthe presented periods. The Group recognizes,measures and presents transactions, other events andsituations of similar nature on a consistent basis in thefinancial statements. Material changes in accountingpolicies or material accounting errors detected areapplied retrospectively by restating the consolidatedfinancial statements of the prior period. As of 31December 2016, the Group has no changes inaccounting policies.

2.3 Changes in Accounting Estimates andErrorsThe changes in accounting estimates affecting onlyone period are applied in the current period where

2.1.3 Functional and presentation currencyThe consolidated financial statements are presentedin Turkish Lira, the valid currency unit for companiesbased in Turkey, and expressed in “thousands ofTurkish Lira.” The functional currency of NWMHolding, NWM, Quercia and CHS, which aresubsidiaries in England and of UK JV R&D, which isthe jointly controlled company, is Great Britain Pound(“GBP”). All financial information is presented in TLunless otherwise stated.

2.1.4 Basis of MeasurementConsolidated financial statements have beenprepared on a historical cost basis except forinvestment properties.

2.1.5 Basis of ConsolidationThe consolidated financial statements include thefinancial statements of the parent company and itscontrolled subsidiaries. Control is ensured by havingcontrol over the financial and operational policies of abusiness in order to obtain benefits from its activities.

i. Non-Controlling InterestsNon-controlling interests in the net assets ofsubsidiaries included in the consolidation arereported as a separate item in the Group’s equity.Non-controlling interests are composed of the

amounts of existing minority shares at the initialacquisition date and the consolidated equity ofinvestments in the changes in equity of the subsidiarysince acquisition date. Losses applicable to non-controlling interests in asubsidiary are allocated to the non-controllinginterests even if doing so causes the non-controllinginterests to have a deficit balance.

ii. SubsidiariesSubsidiaries are the companies that are controlled bythe Group. The Group controls an enterprise when ithas variable profits or when it has a right over theseprofits due to its relation with the enterprise, and alsoif it has the power to affect these profits by its powerover the enterprise. The financial statements of thesubsidiaries are included in the consolidated financialstatements from the date that control commencesuntil the date that control ceases.The accounting policies of the subsidiaries are changedwhen necessary due to adjustments to the politicsaccepted by the Group. Even if this results in non-controlling shares, total comprehensive income istransferred to parent shareholders and non-controllingshares.The table below shows the Group’s subsidiaries andits shareholding therein as of 31 December 2016 and31 December 2015:

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Direct and indirect controlling shares of Çimentaş and its subsidiaries (%)

2016 2015

Destek 99,99 99,99

Recydia 61,61 61,61

NWM Holding 61,61 61,61

NWM 61,61 61,61

Quercia 61,61 61,61

CHS 61,61 61,61

Süreko 61,61 61,61

Kars Çimento 58,38 58,38

Çimbeton 50,32 50,32

Ilion Çimento 50,28 50,28

referred to as IFRSs or IASs. The Group shall makethe necessary changes to its consolidated financialstatements and notes after said standards andinterpretations are issued and become effectiveunder TFRS.IFRS 9 Financial Instruments – Hedge Accountingand Amendments to IFRS 9, IFRS 7 and IAS 39 –UFRS 9 (2013)In November 2013, the IASB issued a new version ofIFRS 9 containing new hedge accounting requirementsand related amendments to IAS 39 and IFRS 7. Inconnection with this new version, entities may make anaccounting policy choice to continue to apply the hedgeaccounting requirements of IAS 39 for all of theirhedging transactions. In addition to this, the mandatoryeffective date of 1 January 2015 contained in olderversions of Standard IFRS 9 has been deferred. Bymeans of IFRS 9 (2014) that supersedes IFRS 9 (2013),the mandatory effective date has been set for 1 January2018. The Group is in the process of assessing theimpact of the standard on the consolidated financialposition or performance of the Group.IFRS 9 Financial Instruments (2014)The IFRS 9 Standard, published in July 2014 amendsthe existing guidance in the IAS 39 standard FinancialInstruments Recognition and Measurement. This versionincludes revised guidance on the classification andmeasurement of financial instruments including a newexpected credit loss model for calculating impairmenton financial assets, and the new general hedgeaccounting requirements. IFRS 9, at the same time,introduces new practices for the recognition of financialinstruments and their exclusion from the balance sheetcontained in IAS 39 into the IRFS 9 standard. IFRS 9standard is effective for the annual reporting periodsbeginning on or after 1 January 2018. The Group is inthe process of assessing the impact of the standard onthe consolidated financial position or performance ofthe Group.IFRS 16 LeasesThe new IFRS 16 Leasing Standard was issued by theIASB on 13 January 2016. This standard replaces theexisting standards and interpretations governingleasing arrangements IFRS 17 Leasing, IFRS

Interpretation 4 Determining whether anArrangement contains a Lease and IAS Interpretation15 Operating Leases – Incentives and also gives riseto amendments to the IAS 40 Investment Propertystandard. IFRS 16 eliminates the dual accountingmodel in current application for lessees in the formof on-balance sheet finance leases and off-balancesheet operating leases. Instead, there is a single on-balance sheet accounting model that is similar tocurrent finance lease accounting. For lessors,accounting remains similar to current practice. Thisamendment will be effective for annual accountingperiods beginning on or after 1 January 2019, andearly adoption is permitted for entities implementingthe TFRS 15 standard Revenue from CustomerContract.. The Group is in the process of assessingthe impact of the standard on the consolidatedfinancial position or performance of the Group.IFRIC 22 – Foreign Currency Transactions andAdvance Consideration IFRS Interpretations Committee 22 was published byIASB in order to resolve doubts experience on thematter of which exchange rate date should be appliedfor advances given or received in a foreign currency.This Interpretation is applicable for assets orliabilities in foreign currencies, being non-monetaryitems recognized for income received by entities asadvance or pre-paid expenses. The transaction datewill, in terms of identifying the exchange rate date, bethe initial recognition date of a liability relating todeferred income or an asset related to a pre-payment. If there is more than one advance amountreceived or given in advance, a separate transactiondate must be determined for each advance amount.The IFRS IC effective date is for reporting periodscommencing after 1 January 2018, but earlyimplementation is permitted. The Group is in theprocess of assessing the impact of the amendmenton the consolidated financial position or performanceof the Group. Amendments to the IAS 7 Statement of Cash Flows –Disclosure InitiativeAs part of the IASB’s wide-ranging disclosureinitiative, amendments have been made to the IAS 7

the changes have been made, and the changes inaccounting estimates affecting the periods in thefuture are applied in the current period and futureperiods prospectively. As of 31 December 2016, theGroup has neither changes nor errors inaccounting estimates.

2.4 OffsettingAll items with significant amounts and nature, evenwith similar characteristics, are presentedseparately in the financial statements. Insignificantamounts are grouped and presented by means ofitems having similar basics and function. When thenature of transactions and events necessitateoffsetting, presentation of these transactions andevents based on their net amounts or recognition ofthe assets after deducting the related impairmentare not considered as a violation of the rule of non-offsetting.

2.5 31 Standards issued as of 31 December2016, but which had not yet entered into force,and were not adopted early

2.5.1 Standards issued but not yet effective and notearly adoptedStandards, interpretations and amendments toexisting standards that are issued as of theapproval date of the consolidated financialstatements but were not effective for the currentreporting period and not adopted early by theGroup are as follows. The Group will make thenecessary changes unless otherwise stated, forthose that will affect the consolidated financialstatements and notes, after the new standards andinterpretations become effective.TFRS 9 Financial Instruments – Classification andMeasurementAs amended in December 2012, the new standardwill be effective for annual accounting periodsbeginning on or after 1 January 2018. The firstphase of TFRS 9 Financial Instruments standardintroduces new provisions for classifying andmeasuring financial assets and liabilities. The

amendments made to TFRS 9 will mainly affect theclassification and measurement of financial assetsand measurement of the financial liabilities whichare classified with the fair value option (FVO)through profit and loss and require that thechanges in fair value of a FVO financial liabilityattributable to credit risk be presented under othercomprehensive income. Early adoption of thestandard is permitted. The Group is in the processof assessing the impact of the standard on theconsolidated financial position or performance ofthe Group.TFRS 15 Revenue from Contracts with CustomersThe new standard issued in September 2016introduces a new control-based model forcontracts made with customers amending theguidance contained in existing TFRSs. This newstandard envisages the introduction of newguidance in recognizing revenue as todistinguishing among the goods and servicescontained in the contract and recognition overtime, and the measurement of the amount ofrevenue as the amount of consideration to whichthe company expects to be entitled rather than fairvalue. This amendment is effective for the annualaccounting periods beginning on or after 1 January2018, and early adoption is permitted. The Groupis in the process of assessing the impact of thestandard on the consolidated financial position orperformance of the Group.New and amended standards and interpretationsthat have been made by the International AccountingStandards Board (IASB) but have not been issued byPOA The new standards, interpretations andamendments to existing International FinancialReporting Standards (“IFRS”) listed below havebeen issued by IASB but were not yet effective inthe current reporting period; however, these newstandards, interpretations and amendments havenot yet been adopted into TFRS by the POA andthus do not constitute part of TFRS. Hence,standards that have been issued by the IASB buthave not currently been issued by POA will be

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under the 2012-2014 cycle improvements concerningcomments on financial instruments, employeebenefits and consolidation of investees for thoseadopting IFRS for the first time.IFRS 12 “Disclosure of Interests in Other Entities”With a view to clarifying the scope of IFRS 12, theaddition that, in the event that an entity classifiesinvestments in subsidiaries, joint ventures orassociates as being for the purpose of sale(inclusion within assets held for sale), that there isno need for disclosure of the summary financialinformation that requires to be made pursuant toIFRS 12.IAS 28 “Investments in Associates and JointVentures”In the event that investments in associates and jointventures are owned by directly or indirectly by entitiessuch as venture capital entities, investment funds orsecurities or investment-purpose insurance funds,they are afforded the opportunity to measureinvestments in associates and joint ventures at fairvalue pursuant to IFRS 9.

2.6 Summary of Significant Accounting PoliciesSignificant valuation principles applied in thepreparation of the financial statements and theaccounting policies are summarized below.

2.6.1 Financial instrumentsThe Group classifies its non-derivative financialassets into the stated categories: Financial assetsreported at fair value in profit or loss, held-to-maturity investments, loans and receivables andavailable-for-sale financial assets.i. Non-derivative financial assets and financialliabilities - recognition and de-recognitionThe Group recognizes loans and receivables and debtinstruments that have been issued on the date thatthey originate. The entity purely and simplyrecognizes all other financial assets and liabilities onthe transaction date on which it becomes a party tothe contractual provisions of the financial instrumentin question.The Group derecognizes a financial asset when thecontractual rights to the cash flows from the asset

expire, or when it transfers the rights to receive thecontractual cash flows on the financial asset in a saletransaction in which all the risks and rewards ofownership of the financial asset are transferred. Anyinterest in transferred financial assets that is createdor retained by the Group is recognized as a separateasset or liability.When contractual obligations are fulfilled, cancelledor annulled, the Group derecognizes the financialliability in question.The Group offsets its financial assets and liabilitiesand reports the net amount in the financialstatements purely and simply when it has a legal rightto offset the amounts and intends either to conductthe transaction on a net basis or to realize the assetand settle the liability simultaneously.The Group classifies non-derivative financial liabilitiesinto the category of other financial liabilities.The Group can report the non-derivative financialassets as loans and receivables.

Loans and receivablesLoans and receivables are financial assets with fixedor determinable payments that are not quoted in anactive market. Such assets are recognized initially atfair value plus any directly attributable transactioncosts. Subsequent to initial recognition, loans andreceivables are measured by reducing the impairmentfrom amortized cost using the effective interest ratesof capital and interest cash flows in future.Loans and receivables generally comprise trade andother receivables, receivables from related parties andcash and cash equivalents. Cash and cash equivalentsCash and cash equivalents comprise cash balancesand call deposits with maturities of three months orless from the acquisition date that are subject to aninsignificant risk of changes in their fair value, andare used by the Group in the management of itsshort-term commitments. Cash and cash equivalentscomprise cash, cash at banks and other cash andcash equivalents.As of 31 December 2016, the Group does not have anynon-derivative financial instruments (31 December2015: None).

Statement of Cash Flows to improve presentation andexplanation in consolidated financial statements. Thisamendment will enable users of financial statementsto peruse cash based and non-cash based changesin liabilities arising from financing activities. Thisamendment is effective for the annual accountingperiods beginning on or after 1 January 2017, andearly adoption is permitted. The Group is in theprocess of assessing the impact of the amendmenton the consolidated financial position or performanceof the Group. Amendments to IAS 12 Income Taxes – Recording ofDeferred Tax Assets for Unrealised Losses The amendments clarify that whether or not thereexists a deductible temporary difference isdependent purely on a comparison of the asset’s netcarrying amount and its tax base at the end of thereporting period, and is not affected by potentialchanges that may occur to the net carrying amountof the asset in question or the expected manner ofits recovery. This amendment is effective for theannual accounting periods beginning on or after 1January 2017, and early adoption is permitted. TheGroup is in the process of assessing the impact ofthe amendment on the consolidated financialposition or performance of the Group. Amendments to the IFRS 2 Share Based Paymentstandard – Classification and Measurement of ShareBased Payment TransactionsAmendments have been made by the IASB to theIFRS 2 Share Based Payment standard to increaseconsistency and eliminate various uncertainties.Through this amendment; clarification has beenprovided over the measurement of cash-settledshare-based payments, classification of share-basedpayments settled net of tax withholdings andrecognition of share-based payments modified fromcash-settled to equity-settled. Thus, the sameapproach has been adopted in measuring cash-settled share-based payments as is used inmeasuring equity-settled share-based payments.Share-based payments settled net of tax withholdingswill be recognized as equity-settled share-basedpayments provided certain conditions are met. Thisamendment is effective for the annual accounting

periods beginning on or after 1 January 2018, andearly adoption is permitted. The Group is in theprocess of assessing the impact of the amendmenton the consolidated financial position or performanceof the Group. IAS 40 Transfers of Investment Property Amendments have been made to the IAS 40 Transfersof Investment Property standard by the IASB toeliminate uncertainties over events that furnish proofof transfers from investment properties to other assetgroups or from other asset groups to investmentproperties. Under this amendment, clarification hasbeen given that an intended change in the use ofinvestment properties does not on its own serve asproof that the intended use of the asset had changed.Consequently, if an entity decides to dispose of aninvestment immovable property without developing it,it will continue to be treated as an investment property,to the extent of the immovable property being excludedfrom financial statements (removing it from financialstatements), and it will not be reclassified as inventory.Similarly, if an entity begins to restructure an existinginvestment immovable property so as to continue to useit in the same manner in the future, it will continue toclassify this immovable property as an investmentimmovable property and it will not be classified over thecourse of restructuring as an immovable property inuse by its owner. This amendment is effective for theannual accounting periods beginning on or after 1January 2018, and early adoption is permitted. TheGroup is in the process of assessing the impact of theamendment on the consolidated financial position orperformance of the Group. IFRS ImprovementsThe “IFRS Annual Improvements / 2014-2016Cycle” issued for standards under implementationhave been shown below. The amendments areeffective as of 1 January 2018. The amendmentsare not expected to have a significant impact onthe consolidated financial position or performanceof the Group. Annual Improvements - Cycle - 2014–2016 IFRS 1 “First-time Adoption of International FinancialReporting Standards”Deletion of the short-term exemptions provided

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2.6.2 Share capitalOrdinary sharesIncremental costs directly attributable to the issue ofordinary shares, net of any tax effects, if any, arerecognised as a deduction from equity.

2.6.3 Tangible AssetsThe costs of non-current assets purchased before 1January 2005 are restated by deducting theaccumulated depreciation and permanent impairmentlosses from the adjusted cost values for the effects ofinflation on 31 December 2004, the costs of non-currentassets purchased after 1 January 2005 are reflected bydeducting the accumulated depreciation and permanentimpairment losses from the cost values. Cost includes the expenditures that are directlyundertaken during acquisition of the asset andattributable to the acquisition. Gains or losses ondisposals of tangible assets are included in the relevantincome and expense accounts and the cost andaccumulated depreciation of tangible assets is writtenoff from the relevant accounts as appropriate. Whenparts of tangible assets have different useful lives, theyare accounted for as separate items of the tangibleassets.

Subsequent costsExpenses from the cost of replacing a part oftangible assets and which include the repair andmaintenance costs can be capitalized if they are ableto increase the future economic benefits of saidtangible asset. The carrying amounts of non-currentitems are derecognised. All other expense items arerecognized in the consolidated statement of profit orloss.

DepreciationDepreciation on tangible assets is performed on astraight line basis according to their useful lives fromthe date of recognition or assembly of the relatedassets. Leasehold improvements are subject todepreciation on a straight line basis according to theshortest between their lease period and their usefullives.The estimated useful lives of tangible long-termassets in the current and comparative period are asfollows:

Buildings and land improvements 5-50 yearsMachinery, installations, and devices 4-25 yearsMotor vehicles 2-10 yearsFurniture and fixtures 4-20 yearsOther intangible assets 2-10 yearsLeasehold improvements 5-20 yearsThe depreciation method, useful lives and depreciatedcosts of the tangible assets are reviewed everyreporting period.Leased assets are depreciated over the shorter of thelease period and their expected useful lives, in asimilar way with the tangible assets owned by theGroup.

2.6.4 Intangible assetsThe costs of intangible assets capitalized before 1January 2005 are restated by deducting theaccumulated amortization and permanentimpairment from the adjusted cost values for theeffects of inflation on 31 December 2004, the costs ofintangible assets capitalized after 1 January 2005 arerestated by deducting the accumulated amortizationand permanent impairment from the cost values. Ifthere is impairment, the carrying amounts of theintangible assets are decreased to their recoverablevalues.

AmortizationAmortization is calculated on a straight-line basisover the estimated useful lives of the items and isgenerally recognized in profit or loss after deductingthe residual value of intangible asset items from theircosts. Goodwill is not subject to amortisation. The expected useful lives of the intangible assetsin the current and comparative periods are asfollows:Rights 4-20 yearsCustomer relations 5-10 yearsBrand equity 5 yearsOther intangible assets 3-20 yearsThe amortization method, useful lives anddepreciated costs of intangible fixed assets arereviewed on every reporting date.

2.6.5 Investment propertiesInvestment properties is real estate held to earnrental income and/or for capital appreciation.

Investment properties were revalued on 31 December2016. Investment properties are presented in thefinancial statements at their fair value determined inthe revaluation process. The valuation work wascarried out by an independent appraisal companyaccredited by the Capital Markets Board. Appreciationdetermined as a result of the mentioned valuation isassociated with the consolidated profit or lossstatement.If an owner-occupied property becomes aninvestment property that will be carried at fair value,the entity shall apply TAS 16 up to the date of changein use. The entity shall treat any difference at thatdate between the carrying amount of the property inaccordance with TAS 16 and its fair value, in the sameway as a revaluation performed in accordance withTAS 16.Investment properties are derecognized when eitherthey have been disposed of or when the investmentproperty is permanently withdrawn from use and nofuture economic benefit is expected from its disposal.Profits/losses arising from investment propertiesreaching the end of their useful life or from their sale,are included in the consolidated profit or loss or othercomprehensive income during the period they occur.tablosuna dahil edilir.

2.6.6 LeasesLeased assets where the Group assumessubstantially all the risks and rewards of ownershipare classified as finance leases. In the balance sheetof the Group, the leased non-current assets arerecognized on the asset side of the balance sheet atthe fair value of the asset or at the present value ofthe minimum lease payments, whichever is smaller,and also as a liability on the liability side of thebalance sheet at the present value of the minimumfinance lease payments. Subsequent to initialrecognition, the leased asset is recognized inaccordance with the accounting policy applicable tothat asset.Leased assets where the lessor assumes asignificant portion of all the risks and rewards ofownership are classified as operating leases. Thepayments made as operating leases are recognizedas expense in the statement of profit or loss and othercomprehensive income during the leasing period.

2.6.7 InventoriesThe values of the inventories are based on the cost ornet realizable value, whichever is lower. Theinventories are reported based on the weightedaverage cost. The cost of the inventories includesexpenditures incurred in acquiring the inventories,conversion costs and other costs incurred in bringingthem to their existing location and condition. Cost forfinished goods includes overhead costs to areasonable extent in accordance with normalproduction capacity. Net realizable value is theamount acquired by deducting the sum of theestimated completion cost and the estimated salescost, necessary to realise the sales from theestimated sales price in the course of business.

2.6.8 Impairment of assetsFinancial assetsEach financial asset not carried at fair value throughprofit or loss is assessed at each reporting date todetermine whether there is any objective evidencethat it is impaired. A financial asset is considered asimpaired if one or more pieces of objective evidenceindicate that the estimated future cash flows of theasset have been negatively impacted.Objective evidence showing that financial assets areimpaired can include default or delinquency andbankruptcy of the other party and restructuring ofthe payment because the Group has no otheroption. The Group considers evidence of impairment forreceivables on both an asset basis and on a collectivelevel. Impairment of significant assets is assessedand tested separately. The remaining financial assetsare assessed collectively in groups that share similarcredit risk characteristics.Impairment for a financial asset measured atamortized cost is the difference between its carryingamount and the present value of the estimated futurecash flows discounted at the original effective interestrate. If financial assets are subject to significantimpairment amounts when considered separately,then they are considered for impairment collectively. All impairment is recognized in the statement of profitor loss and comprehensive income.An impairment loss is reversed if it can be relatedobjectively to an event occurring after the loss was

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The Group does not have any other liability as long asit makes these premium payments. These premiumpayments are reported in the personnel expenses inthe period when they are accrued.

2.6.10 Provisions, contingent liabilities andcontingent assetsThe Group recognizes a provision equivalent to theliability in the accompanying financial statementswhere the Group has a legal and constructiveobligation resulting from previous events, an outflowof the resources including economic benefits fromthe entity is probable, and the liability can beestimated reliably. Contingent liabilities are continuously reviewed todetermine whether there is a possibility that theoutflow of the resources including economic benefitsfrom the entity will be required to settle theobligation. Such contingent liabilities are disclosed inthe notes to the financial statements, except for thesituations where the possibility for outflow of theresources including economic benefits from the entityis remote.If an economic benefit to the entity is possible,explanations are included in the notes to thefinancial statements about the contingent asset. Ifan economic benefit is certain, the asset and itsrelated income changes are included in thefinancial statements at the date when they haveoccurred.

2.6.11 RevenueSales are recognized based on the accrual principle,at the fair value of the amount received or to bereceived when the sales, product delivery and transferof the product risks and benefits have occurred andwhen the income can be reliably determined and theeconomic benefits associated with the transactioncan be transferred to the Group. Net selling is theinvoiced price of the delivered products from whichthe sales returns and discounts are deducted. TheGroup systematically issues an invoice according tothe delivery note issued during the goods shipment,and the related sales amount is systematicallytransferred to the consolidated statement ofcomprehensive income.If there is a significant financing cost in the sales

transaction, the reasonable value is determinedby discounting future collections with the implicitinterest rate in the financing cost. The differencebetween nominal values and carrying amounts isrecognized as interest income on an accrualbasis.

2.6.12 Financial income and expensesFinancial income is comprised of interest income ontime deposits and foreign exchange income. Financialexpenses comprise foreign exchange, currencydifference and bank commission expenses.

2.6.13 Taxes estimated on company profitIncome tax expenses consist of the total of thecurrent period tax and deferred tax. Income taxes arerecognized directly in the statement of profit or loss,except for those that relate to mergers or directly toequity or other comprehensive income.

i) Current period tax Current period tax is the expected tax liability orreceivable on the taxable profit or loss in the currentyear and includes adjusted records for tax liabilitiesin past years. It is determined with reference to tax rates that are inforce or are almost certain to come into force at theend of the reporting period. The period tax liabilityalso includes tax liabilities arising from announceddividend distributions.Offsetting of current tax assets and liabilities may onlybe done if specific conditions are met.

ii) Deferred Tax Deferred tax is determined based on the temporarydifferences between carrying values in financialstatements and tax base values. Deferred tax is notrecognised for the temporary differences occurring inthe following conditions:• Temporary differences on the initial recognition of

assets or liabilities in a transaction that is not abusiness combination and that affects neitheraccounting nor taxable profit or loss;

• Temporary differences related to the investments insubsidiaries, associates and jointly controlledentities to the extent that the Group is able tocontrol the timing of the reversal of the temporary

recognized making the impairment invalid. Thereversal of the financial assets recognized in respectof the discounted amounts is reported in profit orloss.

Non-financial assetsCarrying amounts of the Group’s non-financialassets, other than inventories, deferred tax assetsand investment properties are reviewed at eachreporting date to determine whether there are anyindications of impairment. If any such indicationexists, then the recoverable amount of the asset isestimated. For goodwill, impairment tests areperformed every year to estimate the recoverableamount. The recoverable amount of an asset or cashgenerating unit is either its value in use or the valueacquired by deducting the sales costs from the fairvalue, whichever is greater. In assessing value in use,the estimated future cash flows of the asset arediscounted by a pre-tax internal rate of return whichcan reflect the time value of money and the risksspecific to that asset under current marketconditions.An impairment is recognized if the carrying amountof an asset or its cash generating units exceeds itsestimated recoverable amount. Impairment isrecognized in profit or loss. The smallest separablegroup of assets that generates cash inflowsindependently of other assets or groups of assets aredescribed as cash-generating units. Impairment isrecognized in the statement of profit or loss and othercomprehensive income. The impairment recognizedfor the cash generating units is allocated to reducethe carrying amounts of other assets in the group(group of units) on a pro rata basis.For other assets, impairment recognized in priorperiods is assessed again at each reporting date forany indications that the loss has decreased or nolonger exists. Impairment is reversed if there hasbeen a change in the estimations used to determinethe recoverable amount. The increase in the carryingamount of an asset due to the reversal of theimpairment loss is recognized in a way that it will notexceed the carrying amount (the remaining net valueafter being subject to amortization) determined oncondition that no impairment was recognized in thefinancial statements in previous years.

2.6.9 Employee benefits(i) Short-term benefits for employeesShort-term benefits for employees are recognized asexpenses as long as the relevant service is rendered.A liability is recognized for the amounts that arisefrom the Company’s legal and constructive obligationat the end of previous services of its employees andwhich it is obliged to pay and which are anticipated tobe paid in cases where this liability can reliably beestimated.

(ii) Other long-term benefits for employeesAs per the existing Labour Law in Turkey, the Groupis obliged to pay certain sums to employees whowork more than one year and leave work for suchreasons as retirement, military service or death.The provision for severance payments representsthe net present value of estimated futureobligations in the event that Group employees retireon a thirty-day basis. The provision of severancepayments is calculated on the assumption that suchpayment will be incurred for all employees and isreported on an accrual basis in (consolidated)financial statements. The provision for severancepayment has been calculated according to ceilingseverance payment announced by the Government.As of 31 December 2016, the ceiling severancepayment is TL 4.297 (31 December 2015: TL 3.828).The Company management has used someestimations to calculate the provision for severancepayment as explained in Note 17.All actuarial gains and losses are recognized as othercomprehensive income. According to currentlegislation, the Group is liable to pay specified lumpsum payments to its employees in the event ofretirement or termination of employees’ employmentcontract, other than in the case of resignation orbehaviour specified in labour laws. Such paymentsare computed according to the severance paymentceiling valid at the reporting date. The severancepayment amount is recognized in the enclosedfinancial statements by means of estimation of theliability amounts to be imposed according to currentnet value in future due to the retirement of all theemployees. The Group, as the Employer, makes the insurancepremium payments to the Social Security Institution.

4948


activities. Cash flows resulting from operatingactivities represent the cash flows resulting from theGroup’s operations. The Group presents operatingcash flows according to the indirect method byadjusting net income with non-cash expenses,income expense accruals or deferrals related toprevious or future transactions and income andexpense items related to cash flows regardinginvesting or financing activities.Cash flows from investing activities represent thecash flows used in / provided from investing activitiesby the Group (tangible and intangible assetinvestments) and the cash flows acquired from theseactivities.Cash flows from financing activities represent thefunds used in financing activities by the Group andrepayment of these funds.

2.6.19 Goodwill Business combinations entail the combination oftwo different entities or two different operatingactivities to form a different reporting type.Mergers between entities which are not undercommon control are accounted using the purchasemethod within the scope of IFRS 3 “BusinessCombinations”.The excess of the consideration transferred on thepurchasing cost undertaken, the fair value of theidentifiable assets, liabilities and contingent liabilitiesacquired by the acquirers at the time of the purchaseis reported as goodwill.In business combinations, tangible assets, intangibleassets and / or contingent liabilities which are notincluded in the financial statements of the purchasedcompany but which qualify for separate recognitionfrom goodwill are recognized in the financialstatements at fair value as long as their fair value canbe measured reliably. Goodwill amounts which arerecognized in the financial statements of thepurchased company cannot be measured as anidentifiable asset. Goodwill is allocated to thesmallest cash generating units, which can befollowed for management’s internal reportingpurposes for impairment testing. Goodwill impairment test are performed every yearon the same date and if any indication related toimpairment of goodwill is detected, then impairment

tests are repeated more frequently. An impairmentloss for goodwill is not reversed.If a negative result is obtained after the assessment,the negotiated purchase is recognised in profit or lossdirectly. The purchase cost does not include theamounts related to establishing relationships. Thesecosts are recognized in profit or loss. Securities basedon debt or shares which the Group incurred inconnection with business combinations are expensedwhen transaction costs are accrued except forexpenses associated with the issue.

2.6.20 Borrowing costs and loans receivedBank borrowings are initially recognized with theiramount at the date received, less any transactioncost. Subsequently, bank borrowings are reflected attheir discounted cost using the effective interestmethod. The difference, between the amount fromwhich the transaction costs are deducted and thediscounted cost amount, is recognized as financialexpense in the consolidated statement ofcomprehensive income during the loan period. Thefinancial expense that occurs resulting from thereceived loans is reported in the consolidatedstatement of profit or loss and other comprehensiveincome. If the maturity of the loans is less than 12months as of balance sheet date, it is shown in theshort term liabilities; if the maturity of the loans ismore than 12 months as of balance sheet date, it isshown in the long term liabilities.

2.6.21 Related parties a) A person or a close member of that person’s familyis related to a reporting entity if: That person i) has control or joint control over the reporting

entity, ii) has significant influence over the reporting entity; iii) is a member of the key management personnel of

the reporting entity or of a parent of the reportingentity.

b) An entity is related to a reporting entity if any of thefollowing conditions applies: i) The entity and the reporting entity are members

of the same group, ii) One entity is an associate or joint venture of the

other entity (or an associate or joint venture of a

differences and it is probable that they will notreverse in the foreseeable future; and

• Taxable temporary differences arising on the initialrecognition of goodwill.

Non-utilized previous years’ financial losses, taxadvantages and deductible temporary differences arerecognized as deferred tax assets where theprobability exists of obtaining sufficient taxable profitagainst which they may be offset in the future period.Taxable profit is determined in accordance with thebusiness plan of each subsidiary in the Group.Deferred tax assets are revised on each reportingdate and, where the probability exists of obtainingtaxable profit in the future period, previouslyunrecognized deferred tax assets are recognizedlimited to such amount.The Group will measure deferred tax liabilities anddeferred tax assets in a manner that is consistentwith the tax consequences of the expectations at theend of the reporting period as to the manner in whichit will recover the carrying value of its assets or willpay its debts.To this end, the Group’s valid assumption is that,unless proved otherwise, for investment propertymeasured by fair value, the carrying value for thesaid investment property will be recovered uponsale. A deferred tax asset may only be set off against adeferred tax liability provided that certain conditionsare met.

iii) Tax Exposures In determining the amount of current and deferredtax, the Group takes into account the impact ofuncertain tax positions and whether additional taxesand interest may be due. The Group believes that itsaccruals for tax liabilities are adequate for all opentax years based on its assessment of many factors,including interpretations of tax law and priorexperience. This assessment relies on estimates andassumptions and may involve a series of judgementsabout future events. New information may becomeavailable that causes the Group to change itsjudgement regarding the adequacy of existing taxliabilities; such changes to tax liabilities will impacttax expense in the period that such a determinationis made.

2.6.14 Earnings per shareEarnings per share disclosed in the consolidatedstatement of profit or loss and other comprehensiveincome are determined by dividing net period profitby the weighted average number of shares that havebeen outstanding during the related periodconcerned.In Turkey, companies can increase their share capitalby making a pro-rata distribution of shares (“bonusshares”) to their current shareholders from retainedprofits. Distribution of such kind of bonus shares aretaken into consideration in the computation ofearnings per share as issued share certificates.Accordingly, the weighted average number of sharesused in these computations is determinedconsidering the retrospective effects of the sharecertificate issues.

2.6.15 Subsequent eventsSubsequent events represent the events that occuragainst or on behalf of the Group between thereporting date when the financial statements areprepared and the date when the consolidatedstatement of financial position was authorized for theissue. In cases where there is new evidence indicatingthe presence of the said events as of the end of theperiod in which the financial statements are preparedor that the said events have occurred after this dateand these events make it necessary for the financialstatements to be adjusted, the Group will adjust thefinancial statements to bring them into line with thenew situation. If such events do not require restatingthe financial statements, the Group shall disclosesuch events in the related notes.

2.6.16 ExpensesExpenses are recognized on an accrual basis.Operating expenses are recognised as they incur.

2.6.17 DividendsDividends distributed on the ordinary shares areoffset and recognised with retained earnings in theperiod in which they are declared.

2.6.18 Statement of cash flowsIn the cash flow statement, cash flows are classifiedand reported as operating, investing and financing

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3. SEGMENT REPORTING

The Group has three reportable operating segments thatare used for resource allocation and performanceevaluation. These strategic reportable segments arereviewed periodically by the Group’s decision-makingauthority in accordance with their performances andresource allocations since they are affected by differenteconomic conditions and different geographical positions.The Group’s main segments are cement, ready-mixedconcrete and waste management. Waste management

has significantly grown with the effect of newacquisitions in 2011 and 2012 meeting criteria forsegment reporting and the operations of this segmentare being followed by management. Fuel sales serviceis also provided under the group but it does not meetthe criteria for separate segment reporting. Gross profit is used in assessing the performance ofthe segments periodically. The Group managementconsiders gross profit as the best indicator in assessingthe performance of the segments since it iscomparable with other companies in the same sector.

member of a group of which the other entity is amember).

iii) Both entities are joint ventures of the same thirdparty,

iv) One of the entities is a joint venture of a thirdentity and the other entity is an associate of thethird entity,

v) The entity has a post-employment defined benefitplan for the benefit of employees of either thereporting entity or an entity related to the reportingentity (if the reporting entity itself has such a plan,the sponsoring employers are also related to thereporting entity),

vi) If an entity is controlled by a person defined inarticle (a) or jointly controlled thereby,

vii) if the person defined in section (i) of article (a) hassignificant influence over the said entity or if thatperson is a member of key management personnelof the said entity (or the parent of the entity).

The operations with the related parties are describedat Note 4.

2.7 Use of Accounting EstimationsThe preparation of the financial statements requiresthe Group administration to make judgements,estimates and assumptions that affect the applicationof accounting policies and the reported amounts ofassets, liabilities, income and expenses. Actualresults may differ from these estimates.Estimates and underlying assumptions are reviewedon a constant basis. Revisions to accountingestimates are recognized in the period in which theestimates are revised and in any future periodsaffected by these revisions.The significant estimates and assumptions used inpreparation of the financial statements by the Groupare given in the following notes:Note 7 Impairment of trade receivablesNote 11 Fair value of investment propertiesNote 12 and 13 Useful lives of tangible and intangibleassetsNote 13 Intangible asset impairment test: keyassumptions underlying recoverable amountsNotes 14 Goodwill impairment test: key assumptionsunderlying recoverable amountsNote 15 Recognition and measurement ofprovisions and contingent assets and liabilities:

key assumptions about the likelihood andmagnitude of resource outflowsNote 17 Remeasurement of the liabilities related to thedefined employee benefit plans: key actuarialassumptionsNote 27 Recognition of deferred tax assets: availabilityof future taxable profits which can be used againstprospective tax losses.

52

31 December 2016 Cement Ready-mixed Waste Other Adjustment TotalConcrete management between sections

RevenueExternal Revenue 461.632 207.460 81.152 27.219 -- 777.463

Intersegment revenue 90.215 -- 3.615 17.612 (111.442) --

Net sales 551.847 207.460 84.767 44.831 (111.442) 777.463 Cost of sales (393.980) (194.985) (93.618) (43.329) 104.118 (621.794)Gross Profit/(Loss) 157.867 12.475 (8.851) 1.502 (7.324) 155.669 Interest income 25.474 169 150 -- (24.105) 1.688

Interest expense (1.490) (112) (26.265) (29) 24.105 (3.791)

Depreciation and amortization expenses 44.783 2.061 14.962 275 558 62.639

Impairment -- -- (24.814) -- -- (24.814)

Investment property value appreciation -- -- -- -- -- --

Segments assets 1.949.032 96.452 596.044 7.348 (1.148.859) 1.500.017

Acquisitions of tangible and intangible assets 34.895 7.191 4.591 150 -- 46.827

Segment liabilities 371.597 58.843 447.651 5.128 (558.611) 324.608

31 December 2015 Cement Ready-mixed Waste Other Adjustment TotalConcrete management between sections

RevenueExternal Revenue 490.403 156.537 77.911 23.136 -- 747.987

Intersegment revenue 81.418 1.313 5.079 13.216 (101.026) --

Net sales 571.821 157.850 82.990 36.352 (101.026) 747.987 Cost of sales (387.451) (145.587) (97.642) (35.951) 79.937 (586.694)Gross Profit/(Loss) 184.370 12.263 (14.652) 401 (21.089) 161.293 Interest income 30.573 167 13.137 -- (41.523) 2.354

Interest expense (14.932) (73) (30.531) (23) 41.523 (4.036)

Depreciation and amortization expenses 42.519 2.176 17.209 58 1.669 63.631

Impairment -- -- (30.506) -- -- (30.506)

Investment property value appreciation 46.237 275 -- -- -- 46.512

Segments assets 2.005.392 92.416 603.339 6.637 (1.168.157) 1.539.627

Acquisitions of tangible and intangible assets 47.031 2.531 8.457 19 -- 58.038

Segment liabilities 489.504 50.729 372.286 5.449 (577.503) 340.465

53


4.5 Other Short-Term trade payables due to related parties:As of 31 December 2016 and 2015, other short-term payables to the related parties are as follows:

4.6 Goods and Service Sales to Related Parties:As of 31 December 2016 and 2015, goods and service sales to related parties are as follows:

4.7 Goods and Service Purchases from Related Parties:As of 31 December 2016 and 31 December 2015, goods and service purchases from the related parties are asfollows:

Service purchases are composed of brand name usage fee charged for 2016 in accordance with brand nameusage agreement signed on 13 June 2008, consultancy expenses charged in accordance with the serviceagreement signed on 1 January 2013 and consultancy services obtained from Aalborg in 2016. The consultancyservices consist of technical assistance consultancy, investor relations, organization, management and internalaudit services in 2016.

4.8 Senior management benefits: Senior management benefits provided during the year are as follows:

55

4. RELATED PARTY DISCLOSURES

4.1 Due from Related PartiesThe short term trade receivables due from the related parties as of 31 December 2016 and 2015 are as follows:

4.2 Other Short-Term Receivables from Related Parties:The short term other receivables due from the related parties as of 31 December 2016 and 2015 are as follows:

4.3 Other long-term receivables due from related parties:The long term trade receivables due from the related parties as of 31 December 2016 and 2015 are as follows:

4.4 Short-Term trade payables due to related parties:The short term trade payables due to the related parties as of 31 December 2016 and 31 December 2015 are as follows:

As of 31 December 2016, the Group’s TL 29.680 thousand debt to Cementir Holding arises from franchising andconsultancy service charges amounting to EUR 8.000 thousand received under a branding contract signed on 13June 2008 with Cementir Holding (31 December 2015: EUR 9.818 thousand equivalent to TL 31.198 thousand).

54



Yapıtek Yapı Teknolojisi Sanayi ve Ticaret A.Ş.(“Yapıtek”) 84 6

Çimentaş Education and Health Foundation (“Çimentaş Foundation”) 7 10

91 16


UK JV R&D CO. (*) 13.579 13.114

Yapıtek(**) 11.085 --

Other 80 50

24.744 13.164

(*) The receivables are due from UK JV R & D Co. founded by joint venture partnership of Environmental Power International and the Companyin 2011. The receivable is due for research and development activities.

(**) Consists of short term receivables related to the Group’s sale of land to Yapıtek in 2016.


Yapıtek (*) 10.059 --

10.059 --

(*) Consists of long term receivables related to the Group’s sale of land to Yapıtek in 2016.


Short-term benefits for employees 11.004 8.911

11.004 8.911


Cementir Holding 29.680 31.198

Aalborg 886 305

Çimentaş Foundation 252 206

30.818 31.709


Aalborg (*) 8.652 --

Aalborg Portland Holding (**) 27 23.891

Other 80 77

8.759 23.968

(*) As of 31 December 2016, the Group’s debt to Aalborg consists of a loan with a due date of 31 December 2017 at a variable interest rate ofLibor+5% at GBP 2.000 thousand granted to the Group by the said company.

(**) As of 31 December 2015, the Group’s debt to Aalborg Portland Holding consists of a loan with a due date of 31 December 2016 at avariable interest rate of Libor+5% at GBP 5.000 thousand granted to the Group by the said company.


Yapıtek (*) 22.230 207


22.251 264

(*) TL 21.144 thousand of the sales of goods and services to Yapıtek consisted of a land sale, and the balance of TL 1.086 thousand consistedof sales of ready mixed concrete.


Cementir Holding 21.008 17.794

Aalborg 1.549 868


23.064 18.843

6. FINANCIAL BORROWINGS

As of 31 December 2016 and 2015, financial borrowings are detailed as follows

As of 31 December 2016, the Group has foreign currency loans of GBP 4.426 thousand, equivalent to TL 19.116 thousand.The Group has taken loans from Bank Intesa totalling GBP 4.426 thousand at an interest rate of 3,15% consisting ofGBP 1.926 thousand with a due date of 31 January 2017, GBP 2.500 thousand, with a due date of 30 September 2017. See Note 29 for further information about the interest risk, exchange rate risk and liquidity risk to which theGroup was exposed, as of 31 December 2016.

7. TRADE RECEIVABLES AND PAYABLES

7.1 Short-Term Trade Receivables As of 31 December 2016 and 2015, short-term trade receivables are as follows:

The average collection period for trade receivables is subject to the characteristics of the product and to theagreements made with customers, and is at an average of 79 days (31 December 2015: 64 days).Considering past experience and the current economic situation, the Group management assesses and wherenecessary allocates an appropriate proportion of the provision for doubtful receivables. The current yearchanges in the provision for doubtful receivables are as follows:

5. NAKİT VE NAKİT BENZERLERİ

As of 31 December 2016 and 2015, cash and cash equivalents are detailed as follows:

The maturity dates of the time deposits was within one month (31 December 2015: one month). As of 31December 2016, foreign currency deposits were EUR 4.190 thousand, USD 646 thousand and GBP 448thousand (31 December 2015: EUR 4.524 thousand, USD 4.605 thousand and GBP 435 thousand). As of 31December 2016 and 2015, the weighted average yearly effective interest rates of the time deposits of the relatedcurrencies are as follows:

As of 31 December 2016, the Group has no blockage on deposits (31 December 2015: None). The fair values of cash and cash equivalents approximate the carrying amounts including the accrued incomeat the respective reporting date.The Group's exposure to interest rate risk and currency risk as well as a sensitivity analysis are disclosed inNote 29.

5756



Cash on hand 71 36

Cash at banks 71.361 79.468

Demand deposits 33.253 17.174

Turkish Lira 13.505 9.933

Foreign currency 19.748 7.241

Time deposits 38.108 62.294

Turkish Lira 38.101 39.901

Foreign currency 7 22.393

Other liquid assets (*) 2.250 1.869

Cash and cash equivalents 73.682 81.373

(*) As of 31 December 2016 and 2015, the other available assets consist of credit card receivables with anoriginal due date shorter than three months.

31 December 2016 31 December 2015TL time deposits 9,25% 11,00%

USD time deposits 0,50% 0,45%

EUR time deposits 0,50% 0,05%

31 December 2016 31 December 2015Weighted average Weighted average effective interest effective interest

rates ratesShort term bank borrowing Thousand TL % Thousand TL %

GBP bank loans 19.116 3,15% 5.831 3,15%

EUR bank loans -- -- 15.888 0,50%

Short term portion of the long term financial borrowingsShort term portion of finance lease liabilities 105 699

Total short term financial borrowings 19.221 22.418 Long term financial borrowings:Finance lease liabilities 208 312

Total long term financial borrowings 208 312


Accounts receivable 167.275 153.144

Notes and cheques receivables 52.504 50.984

219.779 204.128Less: Provision for doubtful trade receivables (10.136) (9.878)

209.643 194.250


Beginning of the period 9.878 7.576Doubtful receivables for the period (Notes 23.2) 461 2.570

Doubtful receivables received for the period -- (104)

Doubtful receivables written-off for the period (203) (164)

End of the period 10.136 9.878

9. INVENTORIES

As of 31 December 2016 and 2015, details of inventories are as follows:

As of 31 December 2016, total of raw material, semi-finished products and finished goods, which are recognisedas an expense during the period and included in cost of sales is TL 257.258 thousand (31 December 2015: TL 250.937thousand) (Note 22).As of 31 December 2016, the inventory value in the sum of TL 813 thousand has been subtracted from records entered asexpenditure in the cost of sales account in order to arrive at a net realizable value. (31 December 2015:TL 1.307 thousand).As of 31 December 2016, the insurance on inventory is EUR 26.582 thousand (31 December 2015: USD 29.200 thousand).As of 31 December 2016, there is no mortgage/pledge on the inventories (31 December 2015: None).

10. PREPAID EXPENSES AND DEFERRED INCOME

10.1 Short-Term Prepaid ExpensesAs of 31 December 2016 and 2015, short-term prepaid expenses are as follows:

Prepaid expenses comprised prepaid insurance and rent expenses.

10.2 Long-Term Prepaid ExpensesAs of 31 December 2016 and 2015, long-term prepaid expenses are TL 848 thousand (31 December 2015: TL1.614 thousand) and of this, TL 802 thousand (31 December 2015: TL 1.568 thousand) is made up of supplieradvances given as part of purchase of non-current assets.

Details on credit risk, market risk, currency risk and impairments related to short-term trade receivables ofthe Group are disclosed in Note 29.

7.2 Short-Term Trade Payables As of 31 December 2016, short-term trade payables to third parties is TL 133.988 thousand (31 December2015: TL 133.995 thousand) consisting of debts to various suppliers.The average payment period of short term trade payables is 81 days (31 December 2015: 107 days).Explanations on the currency risk and liquidity risk to which The Group is exposed are disclosed in Note 29.

8. OTHER RECEIVABLES AND PAYABLES

8.1 Other Short-Term Receivables from Third PartiesAs of 31 December 2016 and 2015, other short-term receivables from third parties are as follows:

8.2 Other Long-Term Receivables from Third Parties As of 31 December 2016 and 2015, other-long term receivables from third parties are as follows:

8.3 Other Short-Term Payables to Third Parties As of 31 December 2016 and 2015, other short-term payables to third parties are as follows:

5958



Receivables from public institutions 3.723 1.079

Deposits and guarantees given 117 78

Receivables relating to late payment suppliers -- 2.724

Other 1.480 1.880

5.320 5.761


Deposits and guarantees given 1.610 2.380

1.610 2.380


Debt arising from contractual liability (*) 5.183 --

Deposits and guarantees received (**) 625 490

Other 76 --

5.884 490

(*) Consists of a GBP 1.2 million liability which it will pay under a contract entered into with the Group companyMathlyn Investment Ltd of Recydia. (**) All of the deposits and guarantees received comprise guarantees received in cash from the Group’scustomers.


Raw materials 76.235 77.397

- Spare parts and operating supplies 43.979 41.495

- Fuel 16.400 22.095

- Iron ore 3.307 2.680

- Gypsum 2.792 1.176

- Clay 2.135 2.235

- Packaging materials 1.907 1.246

- Other 5.715 6.470

Work in process 24.518 35.337

Finished goods 5.999 6.332

Other 1.548 989

108.300 120.055


Prepaid expenses 2.654 3.840

Job advances given 1.216 2.054

Other 332 405

4.202 6.299

12. TANGIBLE ASSETS

The Group’s tangible assets comprise mine assets and other non-current assets and their carrying amountsare as follows:

12.1 Quarry assetsQuarry assets are composed of the discounted costs of rehabilitation and closure of the mine sites. Changesof mine sites for the years ending on 31 December 2016 and 2015 are as follows:

10.3 Short-Term deferred incomeAs of 31 December 2016 and 2015, short-term deferred income is as follows:

10.4 Long-Term deferred incomeAs of 31 December 2016 and 2015, long-term deferred income is TL 195 thousand (31 December 2015: TL 728thousand) made up of rental income.

11. INVESTMENT PROPERTIES

(a) Fair value reconciliationFor the years ending on 31 December, the change in investment properties is as follows:

Investment properties are the properties which the Group holds in hand and are intended to be appreciated inthe future and not to be utilized in the production or supply of goods and services or administrative course ofthe business, in order to obtain value appreciation.As of 31 December 2016 and 2015, fair values of the investment properties are as follows:

As of 31 December 2016, there are no mortgages on the investment properties (31 December 2015: None).

(b) Fair value measurement Fair value hierarchyThe Group has assigned an independent property valuation body for determination of the market values of theinvestment properties, and based on the valuation reports, presented its investment properties at their fairvalues. The fair value of the investment property amounting to TL 258.384 thousand has been categorized as a Level2 fair value based on the inputs to the valuation technique used.

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Advance payments for orders received 6.663 3.573

Other 586 546

7.249 4.119

2016 2015

1 January 276.419 229.907Real estate sold (18.035) --

Changes in fair value (Note 24.1) -- 46.512

December 31 258.384 276.419

31 December 2016 31 December 2015Appraisal Fair value Appraisal Fair value

reporting date reporting date

Land 31 December 2016 243.849 31 December 2015 261.859

Buildings 31 December 2016 14.535 31 December 2015 14.560

258.384 276.419


Quarry assets 29.423 23.460

Other non-current assets 525.388 566.943

554.811 590.403

1 January Additions Transfer Foreign 31 December2016 Currency 2016

Translation Differences

Cost of rehabilitation of mining areas 50.497 6.377 97 178 57.149

Accumulated depreciation (27.037) (616) -- (73) (27.726)

23.460 5.761 97 105 29.423

1 January Additions/ Transfer Foreign 31 December2015 (Disposals) Currency 2015

Translation Differences

Cost of rehabilitation of mining areas 46.995 (1.589) 41 5.050 50.497

Accumulated depreciation (22.326) (1.411) -- (3.300) (27.037)

24.669 (3.000) 41 1.750 23.460

12.2 Other non-current assetsFor the year ended on 31 December 2016, movements of tangible assets are as follows:

(*) The relevant amount, as of 31 December 2016, subsequent to impairment tests, comprises impairmentallocated for costs to machinery, installations, and devices (Note 24.2).The current year depreciation and amortization expenses are recognized as TL 57.126 thousand and TL 2.077thousand (31 December 2015: TL 58.051 thousand and TL 1.960 thousand) on the “cost of sales” accountrespectively, TL 1.952 thousand and TL 1.269 thousand (31 December 2015: TL 1.930 thousand and TL 1.351thousand) on the “general administrative expenses” account; TL 214 thousand and TL thousand portion (31December 2015: TL 212 thousand and TL 127 thousand) on the “sales and marketing expenses” account andTL 4.310 thousand and TL 81 thousand (31 December 2015: TL 4.876 thousand and TL 179 thousand) to the“inventory” account. As of 31 December 2016 and 2015, there are no restrictions such as mortgages and pledges on tangible assets.As of 31 December 2016, there is insurance in the amount of EUR 432.087 thousand on non-current assets(2015:USD 461.568 thousand).As of 31 December 2016, there are no capitalized borrowing costs on the tangible assets (31 December 2015:None). For the year ended on 31 December 2015, movements of tangible assets are as follows:

6362


1 January 2016 Additions Disposals Impairment Transfers Foreign currency 31 December 2016translation differences

Cost:Land 83.816 2.481 -- -- -- -- 86.297

Land improvements 80.325 182 -- -- 1.471 -- 81.978

Buildings 165.882 976 -- -- 1.326 54 168.238

Machinery, installations, and devices 1.038.167 9.202 (928) -- 23.237 285 1.069.963

Motor vehicles 20.913 16 (347) -- 392 17 20.991

Furniture and fixtures 33.572 1.045 -- -- 1.083 17 35.717

Other intangible assets 3.445 -- -- -- (52) -- 3.393

Leasehold improvements 26.346 -- -- -- 800 -- 27.146

Investments in progress 2.258 32.848 -- -- (28.719) (13) 6.374

Total cost 1.454.724 46.750 (1.275) -- (462) 360 1.500.097Accumulated depreciation and impairments:Land improvements (57.158) (1.640) -- -- -- -- (58.798)

Buildings (80.975) (3.554) -- -- -- (38) (84.567)

Machinery, installations, and devices (699.575) (53.436) 899 (24.814)* -- (268) (777.194)

Motor vehicles (17.376) (1.472) 333 -- -- (42) (18.557)

Furniture and fixtures (25.429) (1.286) -- -- (6) (12) (26.733)

Other intangible assets (3.411) -- -- -- 18 -- (3.393)

Leasehold improvements (3.857) (1.598) -- -- (12) -- (5.467)

Total accumulated depreciation depreciation and impairments: (887.781) (62.986) 1.232 (24.814) -- (360) (974.709)Net book value 566.943 525.388

1 January 2015 Additions Disposals Impairment Transfers Foreign currency 31 December 2015translation differences

Cost:Land 82.388 1.411 -- -- 17 -- 83.816

Land improvements 77.692 204 -- -- 2.429 -- 80.325

Buildings 147.982 334 -- -- 16.245 1.321 165.882

Machinery, installations, and devices 991.991 12.008 (2.180) -- 28.352 7.996 1.038.167

Motor vehicles 21.805 41 (3.054) -- 1.015 1.106 20.913

Furniture and fixtures 30.445 1.387 -- -- 1.336 404 33.572

Other intangible assets 20.773 25 -- -- (17.355) 2 3.445

Leasehold improvements -- 10 -- -- 26.336 -- 26.346

Investments in progress 19.512 42.602 (685) -- (59.213) 42 2.258

Total cost 1.392.588 58.022 (5.919) -- (838) 10.871 1.454.724Accumulated depreciation and impairments: Land improvements (55.563) (1.595) -- -- -- -- (57.158)

Buildings (75.984) (3.890) -- -- -- (1.101) (80.975)

Machinery, installations, and devices (633.941) (52.055) 1.451 (11.461)* -- (3.569) (699.575)

Motor vehicles (17.578) (1.858) 2.809 -- -- (749) (17.376)

Furniture and fixtures (23.892) (1.328) -- -- -- (209) (25.429)

Other intangible assets (4.336) (99) -- -- 1.024 -- (3.411)

Leasehold improvements -- (2.833) -- -- (1.024) -- (3.857)

Total accumulated depreciation and impairments: (811.294) (63.658) 4.260 (11.461) -- (5.628) (887.781)Net book value 581.294 566.943

(*) The relevant amount, as of 31 December 2015, subsequent to impairment tests, comprises impairment allocated for costs tomachinery, installations, and devices (Note 24.2).

i) Kömürcüoda AgreementOn March 11, 2011, the Group acquired all theequipment of Ekosistem Atık Ambalajları KaynağındaKazanım Ayrıştırma ve Geri Kazanım Ltd.(“Ekosistem”) (machines, equipment, buildings andfixtures in working and good condition); and theinstallation and operation agreement of Recyclingand Composting Facilities in the KömürcüodaRegular Storage Area, made by Ekosistem and İstaç,for a total consideration of TL 12.100 thousand(“Kömürcüoda agreement”). As it is possible to operate and manage the all of theassets taken over as an entity and the Group had theintention to operate this asset as an entity, it resultedthat the asset taken over from Ekosistem was anenterprise and this purchase was considered withinthe scope of "Business Combinations". TheKömürcüoda agreement was reported as anintangible asset for an amount of TL 28.061 thousandin accordance with TFRS 3 purchase accounting.As a result of some deferrals in operations, this assetis subject to impairment testing every year. Theimpairment test was made on the basis of the cashgenerating unit (“CGU”) within the framework of TAS36. The CGU is the Group’s subsidiary Hereko. TheCGU’s recoverable amount was calculated on thebasis of value in use on the assumption that theimprovement investments would be completed in2018. The recoverable amount of the CGU is TL111.600 thousand as of 31 December 2016.In the valuation technique applied, the impairmenttest is based on the following assumptions:i) Values used in the assumptions are based on thefuture trend assessment of management in therelated industry and historical data which is obtainedfrom both internal and external sources. Thesignificant assumptions discount rate used in thecalculation of recoverable amounts (13,70%) (2015:13,40%), growth rate (5,50%) (2015: 5,50%) andPBIT/Net sales ratio (30,00%-36,97%) (2015: (22,25%- 36,97 %) is consistent with the management’sbudgets for 2017 and after.

ii) The cash flow projections included specificestimates for five years and a growth rate until2035, the end of the Kömürcüoda contract term.Final growth rate depends on a long termcompound annual EBITDA growth rateestimation by management, which is consistentwith the assumptions to be used by the marketparticipant.

iii) Budgeted EBITDA is based on the recycling pricesof the last 5 years and current market trends andon the SRF prices in the contracts signed with thecustomers. Optimizations that are expected tohappen in the coming years increased the EBITDArate.

iv) Revenue to be obtained from the Municipality,which is subject to cash flow projections, is basedon global benchmarks in the industry.

As of 31 December 2016, subsequent to impairmenttesting, it was identified that the carrying value set forthe cash generating unit was higher that therecoverable amount and the impairment loss of TL24.814 thousand (31 December 2015: TL 30.506thousand) was recognized under the account“investment activity expenses” account. Subsequent to the impairment recognized formachinery, installations, and devices, the carryingvalue of the CGU is equal to its recoverable value.Therefore, any adverse change in a key assumptionwould lead to further impairment.It was identified that if a 1% increase in the discountrate is applied with assumptions holding othervariables were held fixed, the recoverable amount ofthe CGU will be TL 7.685 thousand lower than itscarrying value under present conditions (Total TL32.498 thousand), that if the PBIT/net sales ratio isreduced by 1%, the recoverable amount of the CGUwill be TL 2.927 thousand lower than its carryingvalue, under present conditions (Total TL 27.741thousand), and when the growth rate is reduced by1%, the recoverable amount for the CGU will be TL5.671 thousand lower than its carrying value, underpresent conditions (Total TL 30.485 thousand).

13. INTANGIBLE ASSETS

For the year ending on 31 December 2015, changes of the intangible assets are as follows:

For the year ending on 31 December 2015, changes of the intangible assets are as follows:

6564


1 January 2016 Additions Impairment Transfers Foreign currency 31 December translation 2016differences

Cost:Rights 7.421 31 -- -- -- 7.452

Kömürcüoda agreement 28.061 -- -- -- -- 28.061

Customer relations 8.622 -- -- -- 36 8.658

Brand equity 964 -- -- -- 4 968

Other intangible assets 10.712 46 -- 365 -- 11.123

Total Cost 55.780 77 -- 365 40 56.262Accumulated depreciation and impairments:Rights (1.947) (285) -- -- -- (2.232)

Kömürcüoda agreement (28.061) -- -- -- -- (28.061)

Customer relations (5.073) (1.374) -- -- (103) (6.550)

Brand equity (674) (183) -- -- (13) (870)

Other intangible assets (6.457) (1.586) -- -- -- (8.043)

Total accumulated depreciation and impairments (42.212) (3.428) -- -- (116) (45.756)Net book value 13.568 10.506

1 January 2015 Additions Impairment Transfers Foreign currency 31 December translation 2015differences

Cost:Rights 15.933 11 -- (8.523) -- 7.421

Kömürcüoda agreement 28.061 -- -- -- -- 28.061

Customer relations 7.209 -- -- -- 1.413 8.622

Brand equity 806 -- -- -- 158 964

Other intangible assets 1.387 5 -- 9.320 -- 10.712

Total Cost 53.396 16 -- 797 1.571 55.780Accumulated depreciation and impairments:Rights (1.600) (347) -- -- -- (1.947)

Kömürcüoda agreement (8.072) (944) (19.045) -- -- (28.061)

Customer relations (3.030) (1.400) -- -- (643) (5.073)

Brand equity (403) (185) -- -- (86) (674)

Other intangible assets (5.716) (741) -- -- -- (6.457)

Total accumulated depreciation and impairments (18.821) (3.617) (19.045)* -- (729) (42.212)Net book value 34.575 13.568

(*) Total amount of TL 19.045 thousand consists of the impairment amount allocated for the Kömürcüoda agreement cost value, asa result of the impairment test as of 31 December 2015 (Note 24.2).

b) The EBITDA/Net Sales ratio, accepted as being inthe range (16)% - 22% (2015: 7% - 23%) isconsistent with the Company’s budgets preparedfor 2017 and thereafter, but the Weighted AverageCost of Capital ratio is dependent upon a numberof macroeconomic variables and variables specificto the cement sector.

As of 31 December 2016, the estimated recoverableamount of the CGU exceeded its carrying amount byapproximately TL 21.540 thousand. Management hasidentified that a possible change in two keyassumptions could cause the carrying amount toexceed the recoverable amount. When a 1,1%increase is applied in the discount rate, one of thevalues used in assumptions while holding othervariables fixed, the recoverable amount of the CGU isequal to its carrying value. Likewise, the CGU’srecoverable amount is equal to the carrying amountwhen the EBITDA / net sales ratio is reduced by 1,7%from the values used in assumptions by keeping othervariables constant.

(iii) Acquisition of SürekoOn 1 September 2009, the Group acquired 69,9% ofnet assets of Süreko for a purchase consideration ofUSD 10.759 thousand, equivalent to TL 22.853thousand. Acquisition is valued according to theprinciples of TFRS 3 “Business Combinations”.Calculated after the acquisition, the goodwillamounting to TL 21.691 thousand is recognised in theconsolidated financial statements. In accordance with the principles of TAS 36, goodwillfrom the acquisition of Sureko is subject to animpairment test by the Group management, using themethod of discounted cash flow. As of 31 December2016, no impairment was identified subsequent to thetest using generally recognized valuation techniqueson the basis of current conditions.In the valuation technique applied, the impairmenttest of the goodwill is based on the followingassumptions:a) The said generally recognized valuation techniques

are extremely sensitive to changes in theEBITDA/Net Sales ratio accepted as in the range tothe 31% - 39% (2015: 21% - 35%) and the WeightedAverage Cost of Capital, accepted to be13,70%(2015: 13,40%).

b) The EBITDA/Net Sales ratio, accepted as being inthe range 31% - 39% (2015: 21% - 35%) isconsistent with the Company’s budgets preparedfor 2017 and thereafter, but the Weighted AverageCost of Capital ratio is dependent upon a numberof macroeconomic variables and variables specificto the waste sector.

As of 31 December 2016, the estimated recoverableamount of the CGU exceeded its carrying amount byapproximately TL 34.246 thousand. Management hasidentified that a possible change in two keyassumptions could cause the carrying amount toexceed the recoverable amount. When a 5,1%increase is applied in the discount rate, one of thevalues used in assumptions while holding othervariables fixed, the recoverable amount of the CGU isequal to its carrying value. Likewise, the CGU’srecoverable amount is equal to the carrying amountwhen the EBITDA / net sales ratio is reduced by 13,3%from the values used in assumptions by keeping othervariables constant.

iv) Acquisition of NWM HoldingRecydia, a subsidiary of the Group acquired 100% ofthe net assets of NWM Holding amounting to GBP8.600 thousand which is equivalent to TL 24.170thousand, on 4 July 2012. The acquisition wasreported in accordance with the provisions of TFRS 3“Business Combinations” and there are otheridentifiable intangible assets whose fair values canbe reliably measured in accordance with TAS 38.Calculated after the acquisitions, the goodwillamounting to TL 9.681 thousand was recognised inthe consolidated financial statements. In accordance with the principles of TAS 36, goodwillfrom the acquisition of NWM Holding is subject to animpairment test by Group management, using themethod of discounted cash flow. As of 31 December2016, no impairment was identified subsequent to thetest using generally recognized valuation techniqueson the basis of current conditions. In the valuationtechnique applied, the impairment test of thegoodwill is based on the following assumptions:a) The said generally recognized valuation techniques

are extremely sensitive to changes in theEBITDA/Net Sales ratio accepted as in the range tothe 5% - 11% (2015: 6% - 11%) and the Weighted

14. GOODWILL

As of 31 December 2016 and 2015, goodwill comprises the follows:

(i) Acquisition of LalapaşaThe Group participated in the auction for Lalapaşaarranged by the Saving Deposits Insurance Fund(“SDIF”) on 10 October 2005 and acquired Lalapaşafor a purchase consideration of TL 223.510 thousand(USD 166.500.000). Following the approval ofCompetition Board and Fund Board, control ofLalapaşa was transferred to the Group on 28December 2005 and the acquisition is recognized inaccordance with TFRS 3.Within the framework of the provisions of TAS 36, thegoodwill arising from the purchase of Lalapaşa wassubjected to impairment testing by the Groupmanagement using the discounted cash flow method.As of 31 December 2016, no impairment was identifiedsubsequent to the test using generally recognizedvaluation techniques on the basis of current conditions.In the valuation technique applied, the impairmenttest of the goodwill is based on the followingassumptions:a) The said generally recognized valuation techniques

are extremely sensitive to changes in theEBITDA/Net Sales ratio accepted as in the range tothe 39% - 43% (2015: 35% - 43%) and to theWeighted Average Cost of Capital accepted as13,60% (2015: 13,10%).

b) The EBITDA/Net Sales ratio, accepted as being inthe range 39% - 43% (2015: 35% - 43%), isconsistent with the Company’s budgets preparedfor 2017 and thereafter, but the Weighted AverageCost of Capital ratio is dependent upon a numberof macroeconomic variables and variables specificto the cement sector.

As of 31 December 2016, the estimated recoverableamount of the CGU exceeded its carrying amount by

approximately TL 239.091 thousand. When a 7,3%increase is applied in the discount rate, one of the valuesused in assumptions while holding other variables fixed,the recoverable amount of the CGU is equal to itscarrying value. Likewise, the CGU’s recoverable amountis equal to the carrying amount when the EBITDA / netsales ratio is reduced by 14,8% from the values used inassumptions by keeping other variables constant.

(ii) Acquisition of Elazığ Çimento On 21 September 2006, the Group acquired 99,99% of netassets of Elazığ Çimento for a purchase consideration ofUSD 110.000.000, equivalent to TL 161.116 thousand. Theacquisition was reported in accordance with theprovisions of TFRS 3, “Business Combinations” and noother identifiable intangible assets have been detectedwhose fair value can be measured reliably, and therelated goodwill reflected on the consolidated financialstatements amounts to TL 13.506. Within the framework of the provisions of TAS 36, thegoodwill arising from the purchase of Elazığ Çimentowas subjected to impairment testing by the Groupmanagement using the discounted cash flow method.As of 31 December 2016, no impairment wasidentified subsequent to the test using generallyrecognized valuation techniques on the basis ofcurrent conditions.In the valuation technique applied, the impairmenttest of the goodwill is based on the followingassumptions:a) The said generally recognized valuation techniques

are extremely sensitive to changes in the value ofthe EBITDA/ Net Sales ratio in the range (16)% -22% (2015: 7% - 23%) and to the Weighted AverageCost of Capital accepted as 13,60% (2015: 13,10%).

6766



Goodwill from acquisition of Lalapaşa 138.665 138.665

Goodwill from acquisition of Sureko 21.691 21.691

Goodwill from acquisition of Elazığ Çimento 13.506 13.506

Goodwill from acquisition of NWM Holding 11.627 11.578

185.489 185.440

The Group's position related to letters of guarantee given, pledges and mortgages ("GPM") as of 31 December2016 and 2015, are as follows:

The ratio of the other GPMs given to the total equity of the Group as of 31 December 2016 is 0,0% (31 December2015: 0,0%).

b) Sureties ReceivedAs of 31 December 2016 and 2015, the details of the sureties received are as follows:

c) Sureties GivenAs of 31 December 2016 and 2015, details of the sureties given are as follows:

d) Guarantees ReceivedAs of 31 December 2016 and 2015, details of guarantees received are as follows:

Average Cost of Capital, accepted to be 6,50%(2015: 6,10%).

b) The EBITDA/Net Sales ratio, accepted as being inthe range 5% - 11% (2015: 6% - 11%) is consistentwith the Company’s budgets prepared for 2017 andthereafter, but the Weighted Average Cost ofCapital ratio is dependent upon a number ofmacroeconomic variables and variables specific tothe waste sector.

As of 31 December 2016, the estimated recoverableamount of the CGU exceeded its carrying amount byapproximately GBP 11.158 thousand. Management

15. PROVISIONS, CONTINGENT ASSETS AND LIABILITIES

15.1 Commitments and Contingent Liabilities In accordance with the decision taken by CMB on 9th September 2009 at meeting number 28/780 at whichGuarantees, Pledges and Mortgages (GPM) that publicly traded companies issue to secure 3rd party debtswere assessed:For companies other than publicly traded investment partnerships and financial institutions;

i) For their own corporate identities, ii) In favour of fully consolidated partnerships during the preparation of their financial statements,

iii) In favour of 3rd parties to continue their ordinary commercial operations, their Guarantee, Pledge andMortgages shall not be limited,

After the decision is published at the Public Disclosure Platform, publicly owned companies shall not givecommitments to real people or corporations other than those mentioned in the points (i) and (ii) above or tothird parties other than those mentioned in the point (iii). If any commitments have already been given theyshall be reduced to nil by 31 December 2014.

a) Guarantees GivenAs of 31 December 2016 and 2015, details of the guarantees given are as follows:

has identified that a possible change in two keyassumptions could cause the carrying amount toexceed the recoverable amount. When a 11,9%increase is applied as discount rate on the valuesused in assumptions by keeping the other variablesconstant for the estimated recoverable amount to beequal to the carrying amount, the CGU’s recoverableamount is equal to its carrying amount. Likewise, theCGU’s recoverable amount is equal to the carryingamount when the EBITDA / net sales ratio is reducedby 2,9% from the values used in assumptions bykeeping other variables constant.

68



Letters of guarantee 62.928 40.216

62.928 40.216


TL TL USD GBP TL TL USD GBPEquivalent Equivalent

A Total amount of GPMs issued on its own corporate behalf 56.732 50.055 200 1.383 30.629 24.006 233 1.382

B Total amount of GPMs issued in favour of fully consolidated partners 6.196 6.196 -- -- 9.587 2.668 -- 1.609

C Total amount of GPMs issued to secure other third party debts for the furtheranceof ordinary commercial activities -- -- -- -- -- -- -- --

D Total amount of Other GPM given -- -- -- -- -- -- -- --

- Total amount of GPM given in favour of the parent company -- -- -- -- -- -- -- --

- Total amount of GPMs issued in favour of other group companies that do not fall under items B and C -- -- -- -- -- -- -- --

- Total amount of GPMs issued in favourof 3rd parties that do not fall under item C -- -- -- -- -- -- -- --

Total 62.928 56.251 200 1.383 40.216 26.674 233 2.991


Sureties Received 2.635 2.335

2.635 2.335


Sureties Given -- 6.919

-- 6.919


Letters of guarantee 231.302 224.130

Mortgages 20.454 20.454

Guarantee notes 8.402 17.318

Sureties Received 2.635 2.335

Cheques 10.177 6.177

272.970 270.414

69

Article 41 of the Law in order to establish whether there hadbeen a violation of article 4 of the Competition Protection Law,Statute 4054, by a total of ten enterprises, including ElazığÇimento and Kars Çimento. At the end of the investigation,the Competition Authority identified that the companies inquestion had violated article 4 of the Competition ProtectionLaw and an administrative fine was imposed on thecompanies concerned under the same law. According to this,the Turkish Competition Board issued an administrative fineof TL 1.121 and 2.903 thousand, respectively against KarsÇimento and Elazığ Çimento for a total amount of TL 4.024thousand. These fines were paid TL 3.018 thousand with a25% discount within the given time period determined byLaw of Misdemeanour in 19 November 2012. After thepayment, both companies appealed to administrative courtfor the cancellation of the administrative fines mentionedabove. As of 31 December 2016, the judicial process wascontinuing. The cancellation lawsuit issued for theadministrative fines for Kars Çimento was rejected by theadministrative court and the decision was appealed to ahigher court.

- The investigation and lawsuits of the Competition Board(Continued)The Investigation of the Competition Board regarding Elazığand Kars Çimento (Continued)The lawsuit issued for Elazığ Çimento was accepted by theadministrative court which cancelled the decision of theCompetition Board based on the grounds that the penaltyrate should be 2% of the revenue instead of 3%. After thecancellation, the amount of TL 2.177 thousand previouslypaid was refunded in 2014. The Competition Board has bothappealed the decision of the Administrative Court andestablished a new decision complying with 2%, and theamount TL 1.451 thousand was paid by the Elazığ Çimentofor this decision in 2014. Legal proceedings have been filedagainst the new decisions. Ankara Administrative Courtrejected the petition of Elazığ Çimento. The decision wasappealed by Elazığ Çimento. The period for the appeal hasnot been established yet.

The investigation and lawsuits of the Competition Board aboutÇimentaşThe Competition Authority ruled, in [ruling] number 14-21/416-M dated 12 June 2014 pursuant to Article 41 of theCompetition Protection Law, Statute 4054, that aninvestigation be opened concerning Çimentaş in order to

establish whether there had been a violation of article 4 ofStatute 4054.Together with the extension received, theCompetition Board has taken nine months additional timeto prepare the investigation report. Pleadings against theInvestigation Committee’s investigation report and itsamendments have been delivered to the Competition Board.With regard to the investigation, an administrative penaltyamounting to TL 12.810 thousand was charged against theCompany within the framework of the Competition Board’sdecision due to violation of article 4 of Protection ofCompetition Law No. 4045, on 15 January 2016. A paymentof an administrative fine of TL 9.608 thousand less 25% waspaid within the period specified under the Law onMisdemeanours. Çimentaş brought proceedings forcancellation of the Competition Authority’s ruling.

The investigation of the Competition Board about ÇimbetonIt was learnt from the Competition Authority’scorrespondence number 5135 of 5 May 2016 that a decisionhad been taken by the Competition Authority throughresolution number 16-14/223-M of 20 April 2016 to launchan investigation into Çimbeton Hazırbeton ve Prefabrik YapıElemanları Sanayi ve Ticaret A.Ş. pursuant to Article 41 ofthe Law on the Protection of Competition number 4054 asto whether there had been a breach of Article 4 of Lawnumber 4054 The Investigation Report compiled by theinvestigating committee was served on 25 January 2017. TheCompetition Authority’s investigation has been continuingas of the date of the report, and on the precautionaryprinciple, a provision of TL 3.118 thousand has been set asidein the financial statements by the Company management(Note 15.3.i and 23.2).

- Tax Case regarding ÇimentaşAtax investigation carried out by Income Examiners on theaccounting records of Çimentaş related to years 2005, 2006,2007, 2008 and 2009 was finished on 17 August 2010. TheTax Authorities criticized a purchase and sale transaction ofshares of a Group subsidiary named Alfacem S.R.L. whichwas purchased in 2005 and sold in 2009, and foreignexchange differences and interest expenses incurred andpaid related to the borrowings utilized from abroad for thefinancing the purchase of the shares of the related subsidiarywere both rejected. As a result, Hasan Tahsin Tax Officecharged a penalty amounting to TL 67.897 thousand, TL21.359 thousand of which is the original tax amount and TL46.538 thousand is the penalty for tax loss, to the Company

15.2 Important LawsuitsLawsuits Against the Group: - Lawsuits against the Group for the lands in minesites:Continuing lawsuits against the Group for the lands in minesites as of 31 December 2016 include the compensation fordamages resulting from the activities in the lands ofcomplainants. Lawsuits for damages against Çimentaşamount to TL 5.461 thousand as of 31 December 2016 (31December 2015: TL 5.461 thousand). Most of the lawsuitshave been settled against the Group and the Group madepayments amounting to TL 10.081 thousand for thoselawsuits as at 31 December 2016 (31 December 2015: TL10.060 thousand). The Group made set aside a provision forpossible liabilities arising from lawsuits that may be settledagainst it and allocated a total amount of TL 181 thousandto include legal interest costs and expenses of lawsuits andreported them in the consolidated financial statements of31 December 2016 (31 December 2015: TL 193 thousand).The Group management assessed the likelihood ofadditional lawsuits which are possible to be filed against theCompany in the future under the above context; themaximum amount for such exposure is expected to be TL3.658 thousand, however, no provision has been reported forthis amount in the consolidated financial statements sincethere is no lawsuit filed or sign of lawsuit to be filed in theforeseeable future as at 31 December 2016.

- Compensation for damages lawsuit against the Group forthe mining activitiesBatı Madencilik which has a mining license within theboundaries of Edirne/Keşan started proceedings against theGroup amounting to TL 1.045 thousand stating that they hadincurred losses because the Group extracts pozzolan fromthe ground, for compensation of said loss. An expert reportprepared during the trial includes statements against theGroup. Therefore, the Group prepared a detailed petitionagainst the decision of the court expert, and additionally ascientific view supported by Dokuz Eylül University, Facultyof Law was submitted to the court regarding this lawsuit.The court sentenced the Group to pay for TL 800 thousand.The Group management filed an appeal against the decision.The Supreme Court accepted the appeal of the Group andthen the plaintiff company demanded a review of thedecision The demand of the plaintiff company was rejectedand the case was sent back to local court. The objection tothe expert investigation made by the Company was accepted

and judgement was given by the court to establish a newexpert panel. The same company filed an additional lawsuit for damagesagainst the Group for the same reasons amounting to TL3.141 thousand in December 2009. Both actions fordamages were consolidated. At the end of the trial, the courtruled to the detriment of the Group. The ReasonedJudgement was served and this judgement was appealedwith a request for Suspension of Execution. In addition, Batı Madencilik filed a lawsuit against the Groupfor decertification of mining. The demand for decertificationwas rejected as a result of the trial by Edirne AdministrativeCourt and the lawsuit resulted in favour of the Group. TheClaimant appealed the decision and in December 2011,following appeal to the Eighth Chamber of the Council ofState [Administrative Appeal Court], it quashed the decisionof Edirne Administrative Court. The Council of State’s reasonfor reversing the judgement of the local court was due toprocedural errors rather than the gist of the action or thedecision. The trial on the reverse decision resulted in favourof the Group. The plaintiff appealed the decision to the Councilof State, and the Council of State gave a decision in favour ofthe Group. The appeal judgement made by the Council ofState went back before the Council of State at the request ofthe claimant which demanded revision of judgement, but thisprocess also concluded in the Group’s favour, and the courtjudgement in favour of the Group became absolute. The proceedings for compensation which resulted in adecision against the Group were placed before the Councilof State and, since this had a connection with the confirmedpositive outcome in the proceedings for decertification, it isbelieved that the outcome of the proceedings will be in theGroup’s favour. In connection with this, since the GroupManagement believed there was a strong possibility that theaforementioned proceedings would conclude in the Group’sfavour, no provision was made in the consolidated financialstatements dated 31 December 2016.

- The investigation and lawsuits of the Competition Board:The Investigation of the Competition Board regarding Elazığand Kars ÇimentoThe Competition Board commenced a pre-investigation ofbusiness dealings of all cement companies operating in theEast and South-East Anatolian Region on 27 October 2010.The Preliminary Investigation Report was discussed atmeeting 10-78 of the Competition Authority dated 16December 2010 and an investigation was opened under

7170


15.3 Other provisions i) Other Short-Term Provisions Other short-term provisions as of 31 December 2016 and 2015 are as follows:

As of 31 December 2016 and 2015, changes of the provision for lawsuits and fines are as follows:

(*) A TL 3.118 thousand portion of the amount concerned consisted of provision allocated subsequent to theÇimbeton Competition Authority investigation which is still ongoing (Note 15.2 and 23.2).

ii) Other Long-Term ProvisionsAs of 31 December 2016 and 2015, long-term provisions are as follows:

Changes of the provision for environmental rehabilitation, improvement and closure of mines are as follows:

16. COMMITMENTS

a) Purchase commitmentsAs of 31 December 2016, the Group has a purchasing commitment for 142 thousand tonnes of coal which itwill carry out in 2017 (31 December 2015: 263 thousand tonnes).

b) Sales commitmentsNone (31 December 2015: None).

on 23 November 2010. The Company had decided to benefitfrom the “Tax Amnesty Law No: 6111”, which came into forceon 25 February 2011, and had waived the related lawsuit andapplied the amnesty on 29 April 2011. In the framework ofthe opportunities provided by the law, the Group hadcompromised with the tax office and paid a tax penaltyamounting to TL 12.970 thousand which was reduced fromoriginal tax amount and tax penalties amounting to TL67.897 thousand and the payment for the related tax fine wasmade on 1 July 2011.Again in the same investigation report with the same reasonsthe Tax Authorities reported a decrease in tax lossesamounting to TL 60.059 thousand by making correction in thetax losses of 2008 and 2009. Group management filed alawsuit against the Hasan Tahsin Tax Office in İzmir Tax Courtfor the cancellation of the decision related to the decrease oftax losses in 2008 and 2009 amounting to TL 60.059 thousandon 22 December 2010. The proceedings brought were rejectedby the Tax Court without examination on 12 September 2011on the grounds that the reduction of losses deferred futureperiods was not a litigable transaction because it was not, initself, a final and executive transaction. The said judgementwas appealed by the Group, and the Third Chamber of theCouncil of State, on 22 November 2011, ruled that the requestfor a stay order would be examined after the defence of therespondent and the administration was received. Later on theTax Court’s decision dated 13 February 2012 and numberedK:2012/414, the Group’s demand for an appeal was acceptedand the decision of the Tax Court was reversed. The defendant administration applied for the correction ofthe mentioned decision and the Council of State rejected thedemand for correction. The file sent back to the Izmir TaxCourt was examined on the facts, and Izmir Tax Court No 1ruled in favour of the company in judgements numbers2014/331 and 332. The administration appealed thedecisions taken. The appeal process was continuing as of 31December 2016.

- Case related to Capital Markets BoardFollowing examination by the Capital Market Board(CMB), by judgement number 44649743-663.09-286-8709 dated 2 September 2014 served on the Group on 5September 2014, and published in the CMB’s weeklybulletin on 29 August 2014, a ruling was given that whenthe company Alfacem S.r.L. bought for EUR 85.000.000in 2005 from a subsidiary of Cementir Holding, the parentcompany with which Çimentaş is related in terms ofmanagement, supervision and capital, was sold on to theparent company at the same price by resolution of theboard of directors on 20 March 2009, the sale price of theshares in Alfacem S.r.L. was determined in a mannerwhich was not arm’s length and that Çimentaş be givenwarning notice that , it was decided to alert that thenecessary steps be taken for the return of the financeexpenses, as of the sale date of 20 March 2009, of TL101.811.908 by Çimentaş to the Group within a maximumof 3 months.After the notification, the Group applied to Capital MarketsBoard for the cancellation of the decision within the scopeof Administrative Jurisdiction Procedures Law Article 11, asthey acted in accordance with all the laws and otherregulations regarding the transaction mentioned in thedecision. As said application was not responded to in thelegal period of 60 days, it was considered rejected and therejection response of CMB was notified to the Group afterthe completion of 60-day period.In connection with this, on 30 December 2014 proceedingswere opened at Ankara Administrative Court No 7 under filenumber E 2014/2266 against the CMB for cancellation of thesaid ruling and the court gave judgement to suspendexecution. At the objection of the CMB, the Ankara RegionalAdministrative Court gave judgement to reverse thesuspension of execution judgement and the file was passedto an expert panel. The appeal process was continuing as of31 December 2016.

7372



Provisions for litigation, claims and penalties 9.687 6.598

State limestone usage fee 2.026 2.102

Other 1.450 970

13.163 9.670


1 January 6.598 219Amount of provision set aside in the current period (*) 9.516 6.428

Payment for litigation, claims and penalties (6.427) (49)

Reversal of provision -- --

31 December 9.687 6.598


Provision for environmental rehabilitationimprovement and closure of the mine sites 23.437 22.492

23.437 22.492


Beginning of the period 22.492 22.104Paid during period (342) (61)

Effect of translation differences 24 1.520

Unwinding of discount effect of discount recognized as expense (Note 25.2) 1.474 633

Decrease during period (211) (1.704)


The changes of employee severance as of 31 December 2016 and 2015 are as follows:

The interest cost, service cost and actuarial difference amount to TL 4.366 thousand (2015: TL 4.458 thousand)and TL 925 thousand in interest costs is included in the financial expenses (31 December 2015: TL 725thousand), and TL 2.079 thousand in service costs is included in the general administrative expenses (31December 2015: TL 1.980 thousand). As of 31 December 2016, the TL 1.362 thousand actuarial difference isshown in other comprehensive income ( 31 December 2015: TL 1.753 thousand).

18. OTHER ASSETS AND LIABILITIES

18.1 Other Current AssetsAs of 31 December 2016 and 2015, other current assets are as follows:

18.2 Other Non-Current AssetsAs of 31 December 2016 and 2015, other non-current assets are as follows:

17. EMPLOYEE BENEFITS

17.1 Short-Term Payables within the scope of Employee Benefits Short-term payables within the scope of employee benefits as of 31 December 2016 and 2015 are as follows:

17.2 Short-Term Provisions related to Employee BenefitsShort-term provisions related to employee benefits as of 31 December 2016 and 2015 are as follows:

17.3 Long-Term Provisions Related to Employee Benefits Long-term provisions related to employee benefits as of 31 December 2016 and 2015, are as follows:

Provision for severance payment has been set as follows:Under the Turkish Labour Law, the Group is required to make severance payment to each employee who hascompleted one year of service and whose employment is terminated or who is called up for military service, passesaway or retires after completing 25 years of service (20 years for women) and reaches the age for retirement (58 forwomen and 60 for men). Since the legislative amendment on 23 May 2002, certain transitional provisions with respectto the length of service prior to retirement have been put into force.The compensation is calculated as one month gross salary for every employment year and as of 31 December 2016this amount has been limited to TL 4.297,21 (31 December 2015: TL 3.828,37). The liability of severance payment is not subject to any funding in legal terms and there is no clause for funding. Theseverance pay provision is calculated by estimating the present value of the future probable obligation arising fromthe retirement of the employees.The basic assumption is that the ceiling provision settled for each year of service increases in proportion to inflation.In this way, the implemented discount rate reflects the real rate without the expected impacts of the inflation rate.The accounting policies of the group require the Company to use various actuarial methods to predict the Group’sseverance payment liability. The severance payment provision has been calculated in accordance with the presentvalue of future probable obligations arising from the retirement of all the employees and reported in the financialstatements. Accordingly, the following statistical assumptions are used in the calculation of the total liability:

74



Employee unused holiday provision 1.726 1.473

Personnel premium provisions 43 --

1.769 1.473


Provision for severance payment 20.503 20.607

20.503 20.607


Discount rate 4,88% 4,49%

Probability of turnover without receiving severance 3,00% 2,20%


Value Added Tax (“VAT”) receivables 1.376 790

Other 18 12

1.394 802


VAT receivables 23.942 22.599

Other 207 207

24.149 22.806


Beginning of the period 20.607 18.230Interest cost (Note 25.2) 925 725

Service cost (Note 21.1 and 22) 2.079 1.980

Payments made during the period (4.470) (2.081)

Actuarial difference 1.362 1.753



Payables for social security and tax withholdings 4.076 3.612

Salary payables 1.360 1.175

Other 61 70

5.497 4.857

75

Cross shareholding capital adjustmentThe mutual participation capital correction in the sumof TL 3.381 thousand ( 31 December 2015: TL 3.381thousand) comprises Çimentaş share certificatesreceived from third parties, the cost value recognizedin the consolidated financial statements. As of 31December 2016, the total amount of treasury stock is520.256 ( 31 December 2015: 520.256).

Share Premiums/DiscountsShare premium amounting to TL 161.554 thousand(31 December 2015: TL 161.554 thousand) representsthe difference between the nominal amount and salesprice of the shares.

Gain / Loss on revaluation and measurementAs of 31 December 2016, fixed assets which arerecognized as other comprehensive income withoutbeing related to profit or loss or to gain / losses onrevaluation and measurement consisted of revaluationincreases, remeasurement of defined benefit planslosses and other revaluation and remeasurement lossesrelating to the subsidiary share sale. As of 31 December2016, the Group has fixed asset value gain reserve of TL106.483 thousand (31 December 2015: TL 110.111thousand), an actuarial loss of TL 13.532 thousand (31December 2015: TL 12.642 thousand) and otherrevaluation and remeasurement losses of TL 577thousand (31 December 2015: TL 577 thousand).

Foreign currency translation differences Foreign currency translation differences comprise allforeign currency differences arising from the translationof the financial statements of foreign operations.

Reserves on Retained Profits

Legal reservesAccording to the Turkish Commercial Code, legalreserves are divided into two as primary andsecondary legal reserves. According to TurkishCommercial Code, the primary legal reserves areallocated as 5% of the tax base found after deductingstatutory retained losses in the statutory net periodprofit, until it reaches 20% of the Company’s paid-in/issued capital. Secondary legal reserves are 1/10 ofdividend distributions which excess 5% of the paid-in

capital. On the other hand, if a decision is made todistribute the net distributable period profit in itsentirety by way of dividend in this instance alone, 1/11of the portion of distributable profit in excess of 5% ofthe paid-in/issued capital is set aside as a secondarystatutory reserve. Under the Turkish CommercialCode, the legal reserves can be used only to offsetlosses and are not available for any other usageunless they exceed 50% of paid-in capital.Within the framework of the Corporate Tax Lawnumbered 5520, 75% of the gains from the sale of theparticipation shares, immovables, pre-emptive rights,founder shares and dividend shares reported in theassets of corporations full-time for at least two yearsare exempt from corporate tax as of 21 June 2006. Inorder to benefit from the exemption, the gain must bekept in a liabilities provision and not withdrawn fromthe corporation for 5 years. To this end, the Groupreclassified as reserve on retained profits: TL 1.314thousand in 2011, being 75% of the profit derived fromsales of subsidiary shares in 2010, TL 14.310thousand in 2012, being 75% of the profit derived fromsales of subsidiary shares in 2011, TL 2.812 thousandin 2014, being 75% of the profit derived from sales ofland in 2013, TL 11.175 thousand in 2015, being 75%of the profit derived from sales of land in 2014.“Extra Reserves” whose inherently unrestrictednominal amount was TL 103.714 thousand (31December 2015: TL 43.547 thousand) are classified in“Retained Profits.” DividendsPublicly traded companies shall perform dividenddistribution in accordance with the Communiqué onDividends no. II-19.1 of the Capital Markets Boardeffective as of 1 February 2014. Companies shall distribute their profits within theframework of the profit distribution policies to bedetermined by their general assemblies and inaccordance with the provisions of the relatedregulation. Within the scope of this communiqué, nominimum distribution rate has been determined.Companies shall pay dividends as set out in theirarticles of association or in their profit distributionpolicies. Additionally, dividends can be paid via equalor different amounts of instalments and companiesshall be able to distribute dividend advances based onprofits at interim financial statements.

18.3 Other Short-Term LiabilitiesOther short-term liabilities as of 31 December 2016 and 2015 are as follows:

18.4 Other Long-Term LiabilitiesAs of 31 December 2016 and 2015, long-term liabilities are as follows:

UK JV R&D CO is the only joint venture of the Group. The Group founded UK JV R & D Co. with the joint ventureof Environmental Power International to perform research and development activities in 2011.UK JV R&D CO.’s summary financial statements and reconciliation of the Group’s shares in UK JV R&D are asfollows:

19 . CAPITAL, RESERVES AND OTHER EQUITY ITEMS

Paid-up capital and differences of capital adjustmentAs of 31 December 2016, the issued capital of the Company is TL 87.112 thousand comprising 87.112.463shares with a lot value of TL 1 (31 December 2015: issued capital was TL 87.112 thousand comprising87.112.463 shares with a lot value of TL 1). The shareholding structure of the Group is as follows:

77



Taxes and funds payable 3.267 7.926

Other 6 6

3.273 7.932


The percentage of shareholding 50% 50%

Loss for the period (834) (1.572)

Other comprehensive income -- --

Total comprehensive income (834) (1.572)


Liability from equity accounted investees 6.352 5.886

6.352 5.886


Rate of Share (%) Amount Of Share Rate of Share (%) Amount Of ShareRate (%) Thousand TL Rate (%) Thousand TL

Aalborg Portland Espana 97,80 85.198 97,80 85.198

Publicly traded share 2,20 1.914 2,20 1.914

100 87.112 100 87.112

Cross shareholding capital adjustment (3.381) (3.381)

83.731 83.731Capital adjustment differences (*) 20.069 20.069

(*) Capital adjustment differences represent the indexation effect of the cash or equivalent capital increases with the purchasing power on31 December 2004.

76

21.2 Marketing ExpensesMarketing expenses for the years ending on 31 December 2016 and 2015 are as follows:

22. EXPENSES BY NATURE

For the years ending on 31 December 2016 and 2015, distribution of expenses by nature is as follows:

(*) Personnel expenses as of 31 December 2016 and 2015 are as follows:

Although in accordance with Capital Markets Board's 23 January 2014 dated II-19.1 number Dividend Notification,the company has distributable profit in the statutory records, by considering net loss of the Çimentaş Group forthe year ended 31 December 2016 and the company's medium- and short-term strategies, anticipated capitalexpenditures and financial plans, market conditions and economic conditions, the Board of Directors dated 2March 2017 has decided to make a suggestion for the decision not to distribute profits to the General Assembly.

Non-controlling interestsEquity in a subsidiary that is not attributable, directly or indirectly, to a parent is classified under the “Non-controlling interests” in the consolidated financial statements.

20. REVENUE AND COST OF SALES

Revenue and cost of sales for the years ending on 31 December 2016 and 2015 are as follows:

21. GENERAL ADMINISTRATIVE EXPENSES AND MARKETING EXPENSES

21.1 General Administrative ExpensesGeneral administrative expenses for the years ending on 31 December 2016 and 2015 are as follows:

7978



Domestic sales 741.938 710.307

Export sales 49.733 69.899

Gross sales 791.671 780.206Less: discounts (14.208) (32.219)

Net sales 777.463 747.987Cost of sales (621.794) (586.694)

Gross margin 155.669 161.293


Loading and freight expenses 11.701 10.635

Personnel expenses 4.213 5.187

Marketing service expenses 1.642 934

Depreciation and amortization (Note 12.2) 215 339

Other 894 916

Brüt kar 18.665 18.011


Salaries and wages 76.529 71.365

Social security premium payments 10.088 8.201

Other 9.863 7.948

96.480 87.514


Personnel expenses 37.736 31.985

Consultancy expenses 27.317 24.649

Outsourced benefits and services 10.837 9.040

Taxes, levies and charges 5.569 5.170

Depreciation and amortization (Note 12.2) 3.221 3.281

Rental expenses 2.188 1.375

Severance payment expenses (Note 17.3 and 22) 2.079 1.980

Travel Expenses 1.876 1.691

Lightening and water expenses 1.822 2.899

Insurance expenses 1.524 1.282

Post, courier service and telephone costs 787 443

Representative accommodation expenses 562 609

Donations and aid 509 600

Other 7.725 3.883

103.752 88.887


Raw material, work in process and finished goods costs (Note 9) 257.258 250.937

Electricity and water expenses 109.233 99.279

Personnel expenses (*) 96.480 87.514

Outsourced benefits and services 87.417 63.141

Depreciation and amortization (Notes 12 and 13) 62.639 63.631

Loading and freight expenses 35.351 39.409

Maintenance and repair costs 27.544 25.878

Consultancy expenses 27.317 24.726

Taxes, levies and charges 10.033 5.182

Rental expenses 6.570 3.492

Severance payment expenses (Note 17.3 and 21.1) 2.079 1.980

Other 22.290 28.423

744.211 693.592

24. INCOME AND EXPENSES FROM INVESTING ACTIVITIES

24.1 Income from investing activitiesIncome from investing activities for the years ending on 31 December is as follows:

24.2 Expenses from investing activitiesExpenses from investing activities for the years ending on 31 December are as follows:

25. FINANCIAL INCOME AND EXPENSES

25.1 Financial incomeFinancial income for the years ending on December 31 is as follows:

25.2 Financial expensesFinancial expenses for the years ending on December 31 are as follows:

23. OTHER INCOME AND EXPENSES FROM OPERATING ACTIVITIES

23.1 Other income from operating activitiesOther income from operating activities for the years ending on 31 December 2016 and 2015 is as follows:

(*) TL 2.920 thousand of the amount in question arises from a debt cancellation pursuant to a contract with asupplier, and TL 657 thousand arises from a debt cancelled following an agreement with suppliers.(*) As of 31 December 2015, the amount concerned arises from the cancellation of a liability condition for GBP801 thousand recorded in the financial statements as recognition of purchase in accordance with TFRS 3 onthe occasion of the purchase of NWM Holding, one of the Group’s subsidiaries.

23.2 Other expenses from operating activitiesOther expenses from operating activities for the years ending on 31 December 2016 and 2015 are as follows:

(*) A TL 3.118 thousand portion of the relevant amount, as of the reporting date, consisted of provision allocatedsubsequent to the Çimbeton Competition Authority investigation which is still ongoing (Note 15.2 and 15.3.i).

8180



Expenses from supplier debt cancellation (*) 3.577 --

Foreign exchange gain from operating activities 2.356 4.968

Late payment interest 1.826 1.790

Rental income 1.079 1.326

Gain on sale of scrap materials 820 2.577

Insurance income 264 83

Rediscount income 188 382

Income arising from the cancellation of debt arising from purchase of a subsidiary (**) -- 3.326

Other 1.053 748

11.163 15.200


Expenses for penalties, compensation and legal proceedings (*) (13.002) (6.428)

Foreign exchange losses from operating activities (9.602) (5.005)

Late payment expense (553) (813)

Excavation expense (478) (884)

Provision for doubtful receivable expenses (Note 7.1) (461) (2.570)

Other expenses (1.314) (723)

(25.410) (16.423)


Gain on sale of non-current assets 3.308 1.117

Investment properties value increase gain (Note 11) -- 46.512

3.308 47.629


Impairment loss on tangible and intangible assets (Note 12.2 and 13) (24.814) (30.506)

Loss on sale of non-current assets -- 12

(24.814) (30.518)


Foreign exchange gains 5.130 14.020

Interest income 1.688 2.354

6.818 16.374


Foreign exchange expense (4.388) (12.852)

Effect of discount from reclamation of mine sites and provision for closure of mine sites (Note 15.3) (1.474) (633)

Bank loans interest expenses (1.392) (2.678)

Actuarial interest expense (Note 17.3) (925) (725)

Bank commission expenses (830) (652)

Other (317) (809)

(9.326) (18.349)

The reconciliation of tax expense is as follows:

As of 31 December 2016 and 2015, the breakdown of tax asset and liability calculations using current tax ratesare as shown below:

26. ANALYSIS OF OTHER COMPREHENSIVE INCOME ITEMS

In the accounting period ending 31 December 2016, the Group has other comprehensive income that will be reclassifiedthrough profit or loss in the sum of TL 852 thousand (31 December 2015: TL 1.194 thousand) arising from foreign currencyexchange differences and other comprehensive expenses that will not be reclassified through profit or loss in the sumof TL 1.090 thousand (31 December 2015: TL 1.402 thousand) arising from defined benefit plan remeasurement losses.

27. INCOME TAXES (INCLUDING DEFERRED TAX ASSETS AND LIABILITIES)

Prepaid corporate tax and corporation tax provision as of 31 December 2016 and 2015 are as follows:

Turkish tax legislation does not permit a parent company and its subsidiary to file a consolidated tax returnfor their financial statements. Therefore, provisions for taxes, as reported in the consolidated financialstatements at the end of the year, have been calculated on a separate-entity basis for the companies whichare fully consolidated. According to this:

Tax expenses reported in the income statement for the years ending on 31 December 2016 and 2015 are asfollows:

8382



Current period corporation tax provision 21.878 20.792

Deduction: Prepaid corporation tax (19.079) (15.342)

Tax provision for the current period - net 2.799 5.450


Period income tax liability 2.897 5.548

Prepaid income tax (98) (98)

2.799 5.450


Current period corporation tax (21.878) (20.792)

Deferred tax income 4.085 11.558

Total tax expense (17.793) (9.234)

(%) 2016 (%) 2015

Net (loss)/ profit for the period (23.219) 58.288Total tax expense (17.793) (9.234)

(Loss)/ profit before tax (5.426) 67.522Tax calculated at the parent company tax rate on pre-tax (loss) / profit 20,00 1.085 20,00 (13.504)

Non-deductible expenses (38,83) (2.107) 3,13 (2.116)

Fiscal losses not recognized as deferred tax (299,58) (16.255) 1,07 (725)

Tax exempt income 10,12 549 (0,21) 141

Tax effect of fair value gain -- -- (10,33) 6.977

Recognition of the fiscal losses not subject to deferred tax in previous years -- -- (0,44) 299

Other (19,63) (1.065) 0,45 (306)

Total tax expense (327,92) (17.793) 13,68 (9.234)

Deferred Deferred Tax Tax

Assets Liabilities

2016 2015 2016 2015

Tangible and intangible assets -- -- (3.584) (10.780)

Goodwill amortization in statutory books -- -- (27.488) (27.488)

Deductible financial losses 17.735 23.509 -- --

Provision for severance payment 4.101 4.121

Provision for rehabilitation and closure of the mine sites 2.847 2.609 -- --

Debt provisions 2.043 1.015 -- --

Provision for doubtful receivables-payables 234 484 -- --

Investment properties -- -- (11.639) (12.494)

Other assets and liabilities 1.043 -- -- (58)

Total deferred tax assets (liabilities) 28.003 31.738 (42.711) (50.820)

Offset amount (1.316) (6.559) 1.316 6.559

Total deferred tax assets/(liabilities) 26.687 25.179 (41.395) (44.261)

As of 31 December 2016, it was calculated that the Group has a deferred tax asset in the sum of TL 17.735 thousand (31December 2015: TL 23.509 thousand) on financial losses in previous years in the sum of TL 92.259 thousand (31 December2015: TL 119.569 thousand) which is very likely to be set off against profits in future years. The distribution of the taxlosses carried forward on which deferred tax assets are calculated by their year of expiration is as shown below:

* Since use of accumulated losses is not limited to any period by legislation in the UK, financial lossesamounting to TL 24.015 thousand and TL 1.134 thousand which can be deducted in the calculation of deferredtax as of 31 December 2016 of the Group’s subsidiaries operating in the UK, NWM and Quercia, is not shownin the table above.

As of 31 December 2016, total tax losses not subject to deferred tax calculation are TL 75.420 thousand (31December 2015: TL 5.100 thousand).

28. EARNINGS PER SHARE

Earnings per share for the accounting periods ending on 31 December 2016 and 31 December 2015 are asfollows:

Changes in the deferred tax income/(expense) by year as of 31 December 2016 are as follows:

Changes in the deferred tax income/(expense) by year as of 31 December 2015 are as follows:

8584


1 January 2016 Current period Portion recognized 31 December deferred in other 2016

tax comprehensive expense income

Tangible and intangible assets (10.780) 7.179 17 (3.584)

Goodwill amortization at statutory books (27.488) -- -- (27.488)

Deductible financial losses 23.509 (5.774) -- 17.735

Provision for severance payment 4.121 (292) 272 4.101

Provision for rehabilitation and closure of the mine sites 2.609 238 -- 2.847

Debt provisions 1.015 1.028 -- 2.043

Provision for doubtful receivables-payables 484 (250) -- 234

Investment properties (12.494) 855 -- (11.639)

Other assets and liabilities (58) 1.101 -- 1.043

Deferred tax assets/(liabilities) (19.082) 4.085 289 (14.708)

1 January 2015 Current period Portion recognized 31 December deferred in other 2015

tax comprehensive expense income

Tangible and intangible assets (18.848) 8.004 64 (10.780)

Goodwill amortization at statutory books (27.488) -- -- (27.488)

Deductible financial losses 16.840 6.669 -- 23.509

Provision for severance payment 3.646 124 351 4.121

Provision for rehabilitation and closure of the mine sites 2.870 (261) -- 2.609

Debt provisions 733 282 -- 1.015

Provision for doubtful receivables-payables 422 62 -- 484

Investment properties (10.168) (2.326) -- (12.494)

Other assets and liabilities 938 (996) -- (58)

Deferred tax assets/(liabilities) (31.055) 11.558 415 (19.082)

2016 2015

Expiration year2017 1.485 --

2018 1.414 10.115

2019 12.654 21.873

2020 21.776 29.315

2021 29.781 36.431

67.110 97.734

2016 2015

Net period income of parent company 4.667 73.232Weighted average number of issued ordinaryshares (lot value is TL 1*) 87.112.463 87.112.463

Weighted average number of issued treasury shares (577.674) (577.674)

86.534.789 86.534.789Earnings per share calculated on the distributable profit of parent company (TL) 0,0539 0,8463

(*) 1 lot is composed of 100 shares.

29.1.1 Credit riskHaving financial assets also brings the risks that the counterparty may not obey the rules of the agreements.The Group administration manages these risks by limiting the average risk related to the other party (exceptfor related parties) in the agreement getting guarantees when necessary. The Group manages these riskswhich can arise from customers, by updating the determined credit limits within specific periods. The Groupuses credit limits and the credit quality of customers is evaluated considering to the customer’s financialposition, past experiences, market recognition and other factors.

87

29. NATURE AND LEVEL OF RISK ARISINGFROM FINANCIAL INSTRUMENTS

29.1 Financial risk managementThe Group is exposed to market risk, capital risk, creditrisk and liquidity risk which are composed of foreigncurrency, cash flow and interest rate risks because ofits operations. The Group’s risk management policy isfocused on unexpected changes in the financialmarkets. The financial risk management policy is carried out bythe top management and finance department ofÇimentaş in accordance with the policies and strategiesapproved by the Board of Directors. The Board ofDirectors prepares policies and principles of a generalnature to manage credit, liquidity, interest and capitalrisks in particular and monitors the financial andoperational risks in detail.The aims that are determined by the Group to managefinancial risks can be summarized as follows:• Maintaining the sustainability of the cash flows

provided from the Group’s operations and mainassets effectively by considering the currency andinterest rate risks,

• Keeping sufficient sources of borrowings ready tobe used effectively and efficiently when necessaryin appropriate conditions of type and maturity,

• Keeping the risks from others at the minimum leveland monitoring them effectively.

Risk management frameworkThe Board of Directors of the Company is responsiblein general terms for determining and monitoring therisk management framework of the Group. The Boardof Directors established a Committee of Early RiskDetection responsible for improving and monitoringthe risk management policies of the Group. Thecommittee reports its activities to the Boardperiodically.The risk management policies of the Group aredetermined with the purpose of detecting andanalysing possible risks, determining appropriate risklimits and establishing their controls, and monitoringrisks and making sure they remain within the limits.Risk management policies and systems are regularlyreviewed so as to reflect the changes in the Group’soperations and market conditions. The Group aims todevelop a disciplined and constructive controlenvironment where all employees understand theirroles and responsibilities through training andmanagement standards and procedures.The Group Auditing Committee, monitorsmanagement in terms of compliance with the riskmanagement policy and procedures of the Group andprovides support to fulfil the risk managementframework. The internal audit department reviewsrisk management policies and procedures regularlyand separately and reports the results to the AuditingCommittee.

86


Receivables

Trade Receivables Other Receivables

Current Period Related Other Related Other Deposits Derivative Other*31 December 2016 Party Party Party Party at Banks Instruments

Maximum credit risk to be exposed to as of the reporting date (A+B+C+D) 91 209.643 34.803 6.930 71.361 -- 63.365- Part of the maximum credit risk, secured by guarantee, etc. -- 138.189 -- -- -- -- --

A. Net carrying amount of financial assets that are neither overdue nor impaired 91 173.659 21.224 6.930 71.361 -- 437

B. Net carrying amount of financial assets that are overdue but not impaired -- 35.984 13.579 -- -- -- --

C. Net carrying amount of the impaired assets -- -- -- -- -- -- --

- Overdue (gross carrying amount) -- 10.136 -- -- -- -- --

- Impairment (-) -- (10.136) -- -- -- -- --

- Part of the net value, secured by guarantee, etc. -- -- -- -- -- -- --

- Not overdue (gross carrying amount) -- -- -- -- -- -- --

- Impairment (-) -- -- -- -- -- -- --


D. Off-balance sheet items with credit risk -- -- -- -- -- -- 62.928

* The section “other” includes the guarantees given, receivables from personnel and income accruals. Non-financial items such as deferred VAT, prepaid expenses and prepaid taxes are not included in the Otherclassification.

89

Receivables

Trade Receivables Other Receivables

Prior Period Related Other Related Other Deposits Derivative Other (*)31 December 2015 Party Party Party Party at Banks Instruments

Maximum credit risk to be exposed to as of the reporting date (A+B+C+D) 16 194.250 13.164 5.761 79.468 -- 40.595- Part of the maximum credit risk, secured by guarantee, etc. -- 130.690 -- -- -- -- --

A. Net carrying amount of financial assets that are neither overdue nor impaired 16 154.461 13.164 5.761 79.468 -- 379

B. Net carrying amount of financial assets that areoverdue but not impaired -- 39.789 -- -- -- -- --

C. Net carrying amount of the impaired assets -- -- -- -- -- -- --

- Overdue (gross carrying amount) -- 9.878 -- -- -- -- --

- Impairment (-) -- (9.878) -- -- -- -- --


- Not overdue (gross carrying amount) -- -- -- -- -- -- --

- Impairment (-) -- -- -- -- -- -- --


D. Off-balance sheet items with credit risk -- -- -- -- -- -- 40.216

Receivables

Current Period Trade Other Deposit at Derivative Other 31 December 2016 Receivables Receivables Banks Instruments

Past due 1-30 days 19.932 115 -- -- --

Past due 1-3 months 8.280 32 -- -- --

Past due 3-12 months 3.928 262 -- -- --

Past due 1-5 years 3.521 13.170 -- -- --

Past due more than 5 years 323 -- -- -- --

35.984 13.579 -- -- --

Receivables Prior Period Trade Other Deposit at Derivative Other 31 December 2015 Receivables Receivables Banks Instruments

Past due 1-30 days 20.339 -- -- -- --

Past due 1-3 months 8.983 -- -- -- --

Past due 3-12 months 10.141 -- -- -- --

Past due 1-5 years 326 -- -- -- --

Past due more than 5 years -- -- -- -- --

39.789 -- -- -- --

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31 December 2016 Carrying Total Less than 3 Between 3 - 12 Between 1- 5 More than 5 Contractual Amount contractual months (I) months (II) Year (III) Years (IV)maturities cash

outflows (=I+II+III+IV)

Non-derivative Financial Liabilities Bank loans 19.116 19.710 8.467 11.243 -- --

Finance Lease Liabilities 313 337 30 89 218 --

Trade Payables 164.806 165.134 165.049 85 -- --

Other Payables* 14.018 14.493 5.380 9.113 -- --

Total 198.253 199.674 178.926 20.530 218 --

31 December 2015 Carrying Total Less than 3 Between 3 - 12 Between 1- 5 More than 5 Contractual Amount contractual months (I) months (II) Year (III) Years (IV)maturities cash

outflows (=I+II+III+IV)

Non-derivative Financial Liabilities Bank loans 21.719 21.857 15.934 5.923 -- --

Finance Lease Liabilities 1.011 1.065 220 510 335 --

Trade Payables 165.704 166.095 159.731 6.364 -- --

Other Payables* 23.968 25.170 6.431 18.739 -- --

Total 212.402 214.187 182.316 31.536 335 --

* The section “other” includes the guarantees given, receivables from personnel and income accruals. Non-financial items such as deferred VAT, prepaid expenses and prepaid taxes are not included in the Otherclassification.

As a result of the Group administration’s evaluation considering the past experiences and subsequent periodcollections, there is no collection risk for the trade receivables which are overdue but not impaired; whilematurity of the financial instruments which are overdue but not impaired is as follows:

29.1.2 Liquidity riskPrudential liquidity risk management means keeping adequate cash and marketable securities, utilization offund sources by means of adequate borrowing transactions and the power to close out the market positions.The liquidity risk for existing and prospective debt requirements is managed by sustaining adequate amountsof accessibility to the Group’s own lenders and to the funds created from the operations. The Groupadministration closely follows the collection from its customers in order to ensure uninterrupted liquidity,tries to prevent any financial burden on the Group in case of late payments and arranges available cash andnon-cash credit limits through arrangements with banks when the Group is in need. In addition, the Group’sliquidity management policy includes preparation of cash flow projections per cement production plants andmonitoring and evaluation of the liquidity ratios by comparing them with budgeted ratios.

The Group’s financial liabilities and contractual outflows from those liabilities in respect of their maturitiesas of 31 December 2016 and 2015 are as follows:

* Deposits and guarantees received are not included in other payables.

29.1.3 Market risk Exchange rate riskThe Group is exposed to foreign exchange risk arising from exchange rate changes through translating asset andliability amounts in foreign currency to TL. The Group follows a policy for stabilizing its foreign exchange positionin order to reduce exchange rate risk. Existing risks are monitored and the exchange rate position of the Group isfollowed up in the meetings regularly held by the Group’s Auditing Committee and the Board of Directors.

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TL USD EUR GBP TL USD EUR GBPEquivalent Equivalent

1. Trade Receivables 3.544 1.007 -- -- 7.411 2.549 -- --

2a. Monetary Financial Assets(Including Cash and Bank Accounts) 31.396 646 4.190 3.144 40.877 4.605 4.524 3.049

2b. Non-Monetary Financial Assets -- -- -- -- -- -- -- --

3. Other -- -- -- -- -- -- -- --

4. Current Assets (1+2+3) 34.940 1.653 4.190 3.144 48.288 7.154 4.524 3.0495. Trade Receivables -- -- -- -- -- -- -- --

6a. Monetary Financial Assets -- -- -- -- -- -- -- --

6b. Non-Monetary Financial Assets -- -- -- -- -- -- -- --

7. Other -- -- -- -- -- -- -- --

8. . Non-Current Assets (5+6+7) -- -- -- -- -- -- -- --9. Total Assets (4+8) 34.940 1.653 4.190 3.144 48.288 7.154 4.524 3.04910. Trade Payables 61.484 8.034 8.944 7 36.501 10.007 2.321 7

11. Financial Liabilities -- -- -- -- 15.888 -- 5.000 --

12a. Other Monetary Liabilities 82 -- 22 -- -- -- -- --

12b. Other Non-Monetary Liabilities -- -- -- -- -- -- -- --

13. Short Term Liabilities (10+11+12) 61.566 8.034 8.966 7 52.389 10.007 7.321 714. Trade Payables -- -- -- -- -- -- -- --

15. Financial Liabilities -- -- -- -- -- -- -- --

16a. Other Monetary Liabilities -- -- -- -- -- -- -- --

16b. Other Non-Monetary Liabilities -- -- -- -- -- -- -- --

17. Long Term Liabilities (14+15+16) -- -- -- -- -- -- -- --18. Total Liabilities (13+17) 61.566 8.034 8.966 7 52.389 10.007 7.321 719. Net Asset/(Liability) Position of Off-Balance

Sheet Derivative Instruments (19a-19b) -- -- -- -- -- -- -- --19a.Off-Balance Sheet Foreign Currency

Derivative Assets -- -- -- -- -- -- -- --19b.Off-Balance Sheet Foreign Currency

Derivative Liabilities -- -- -- -- -- -- -- --20. Net Foreign Currency Asset/(Liability)

Position (9-18+19) (26.626) (6.381) (4.776) 3.137 (4.101) (2.853) (2.797) 3.04221. Net Foreign Currency Asset / (Liability)

Position of Monetary Items (TFRS 7.B23) (=1+2a+5+6a-10-11-12a-14-15-16a) (26.626) (6.381) (4.776) 3.137 (4.101) (2.853) (2.797) 3.042

22. Fair Value of Financial InstrumentsUsed in Foreign Currency Hedges -- -- -- -- -- -- -- --

23. Hedged Foreign Currency Assets -- -- -- -- -- -- -- -- 24. Hedged Foreign Currency

Liabilities -- -- -- -- -- -- -- --

Foreign Exchange Risk Sensitivity Analysis31 December 2016

Profit or Loss EquityForeign currency Foreign currency Foreign currency Foreign currency

value gain value loss value gain value loss

Assumption of devaluation/appreciation by 10% of USD against TL

1-Net asset / liability of USD (2.246) 2.246 -- --

2-USD risk hedged (-) -- -- -- --

3-USD net effect (1+2) (2.246) 2.246 -- -- Assumption of devaluation/appreciationby 10% of EUR against TL

4-Net asset / liability of EUR (1.772) 1.772 -- --

5-EUR risk hedged (-) -- -- -- --

6-EUR net effect (4+5) (1.772) 1.772 -- -- Assumption of devaluation/appreciation by 10% of GBP against TL

7-Net asset/liability of GBP 1.355 (1.355) -- --

8-GBP risk hedged (-) -- -- -- --

9-GBP net effect (7+8) 1.355 (1.355) -- -- Total (3+6+9) (2.663) (2.663) -- --

Foreign Exchange Risk Sensitivity Analysis31 December 2015

Profit or Loss EquityForeign currency Foreign currency Foreign currency Foreign currency

value gain value loss value gain value loss

Assumption of devaluation/appreciation by 10% of USD against TL

1-Net asset / liability of USD (829) 829 -- --

2-USD risk hedged (-) -- -- -- --

3-USD net effect (1+2) (829) 829 -- -- Assumption of devaluation/appreciationby 10% of EUR against TL

4-Net asset / liability of EUR (889) 889 -- --

5-EUR risk hedged (-) -- -- -- --

6-EUR net effect (4+5) (889) 889 -- -- Assumption of devaluation/appreciationby 10% of GBP against TL

7-Net asset/liability of GBP 1.308 (1.308) -- --

8-GBP risk hedged (-) -- -- -- --

9-GBP net effect (7+8) 1.308 (1.308) -- -- Total (3+6+9) (410) 410 -- --

29.1.5 Fair value of financial instrumentsThe Group determines the fair values of financialinstruments by using its current market dataknowledge and appropriate valuation methods.However, since judgement may be required indetermining fair value, fair values may not reflect theamounts that may appear in the existing market.Considering that the fair values of the financial assetsand liabilities, including receivables from cash andbanks, other financial assets and other short-termfinancial liabilities, which are measured at amortisedcost using the effective interest method interest, areshort-term in nature and the possible losses may beimmaterial, the Group administration has assessedthat they are close to their reported values.

30.FINANCIAL INSTRUMENTS(DISCLOSURES FOR FAIR VALUE AND HEDGE ACCOUNTING)

Classification of Financial InstrumentsThe Group has classified its financial assets andliabilities as loans and receivables. Cash and cashequivalents of the financial assets (Note 5), tradereceivables (Note 4 and 7) and other receivables (Note4 and 8) of the Group are classified as loans andreceivables and measured at amortized cost usingthe effective interest method. The financial liabilitiesof the Group are composed of trade payables (Note 4and 7) and other payables (Note 4 and 8); they areclassified by amortized costs as carried financialliabilities and measured at amortized cost using theeffective interest method.The estimated fair values of financial instrumentshave been determined by the Group using available

market information and appropriate valuationmethodologies. However, judgement is necessarilyrequired to interpret market data for the purpose ofestimating the fair value. Accordingly, the estimatespresented herein may not necessarily be indicative ofthe amounts the Group could realize in a currentmarket exchange.The methods and assumptions below are used forestimating the fair values of financial instrumentswhose fair values can be determined.

Financial assetsIt is accepted that the fair values of foreign currencybalances which are translated from the year endrates are close to the carrying amounts. Cash andcash equivalents are shown with their fair values. Itis also assumed that the current market values oftrade and related party receivables are close to thecarrying amounts of their fair values as they areshort-dated. Financial assets whose fair valuechanges are recognized in the comprehensive incomestatement are shown with their fair values.Nonetheless, the fair values of the financial assetswhich are not listed are determined with generallyaccepted valuation methods and impairment on theseamounts, if there is any, is deducted and the resultingamount is accepted as close to the fair values.

Financial liabilitiesTrade payables, due to related parties and otherfinancial liabilities are estimated to be measured atamounts close to their fair values at amortized cost;and the fair value of foreign currency balancestranslated with year-end exchange rate is acceptedas being close to their reported values.

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Interest rate risk The Group’s financial assets and liabilities designated at fair value through profit and loss and the fair valuehedge accounting model reported in the hedging derivative instruments (interest rate swaps) are not available.Hence, the change in interest rates will not affect profit or loss of the Group in the reporting period.

Price riskThe Group’s operational profitability and cash inflows generated by operations are affected in line with thecompetition in the cement and ready mixed concrete sector and changes in raw material prices, and the Groupadministration follows these price changes and takes remedial measures to reduce the pressure of costs onprices. Related risks are monitored through meetings held by the Early Detection of Risk Committee of the Group.

29.1.4 Capital RiskWhile managing capital, the Group’s aim is to keep sustainability of the Group’s operations with the mostappropriate capital structure to minimize the cost of capital and to provide earnings and benefit to itsshareholders.The Group can change the amount of the dividend to shareholders, return the capital to shareholders, issuenew bonds and sell assets to reduce its debt rate in order to maintain the capital structure or to recapitalize.In parallel with the other companies in the sector, the Group monitors its capital using the debt/equity ratio.This ratio is calculated by dividing the net debt by equity. Net debt is calculated by subtracting cash and cashequivalents (including loans, payables to commercial and related parties, trade payables and other liabilitiesas shown on financial statements) from total debt.

2016 2015

Financial instruments with fixed interest rateFinancial assets 38.108 62.294

Financial liabilities 313 1.011

Financial instruments with floating interest rateFinancial assets -- --

Financial liabilities 19.116 21.719


Due to unrelated parties (Note 7.2) 133.988 133.995

Debt provisions (Note 15.3, 17.2 and 17.3) 58.872 54.242

Trade payables to related parties (Note 4.4) 30.818 31.709

Financial liabilities (Note 6) 19.429 22.730

Other payables to related parties (Note 4.5) 8.759 23.968

Deferred income (Note 10.3 and 10.4) 7.444 4.847

Payables for Employee Benefits (Note 17.1) 5.497 4.857

Other liabilities (Note 18.3 and 18.4) 9.625 13.818

Other payables (Note 8.3) 5.884 490

Less: Cash and Cash Equivalents (Note 5) (73.682) (81.373)

Net debt 206.634 209.283

Total equity 1.175.409 1.199.162

Debt / equity ratio 18% 17%

32. SUBSEQUENT EVENTS

An Investigation Report compiled in connection with a Competition Authority investigation launched into Groupsubsidiary, Çimbeton, as to whether there had been a breach of Article 4 of Law number 4054 was served on25 January 2017. As has been explained in Note 15.2, the Competition Authority’s investigation into the matterhas been ongoing on the reporting date and a provision in the amount of TL 3.118 thousand has been set asidein the financial statements by Company management in line with the precautionary principle.

33. 33 OTHER ISSUES THAT SIGNIFICANTLY AFFECT THE CONSOLIDATEDFINANCIAL STATEMENTS OR THAT NEED TO BE EXPLAINED TO MAKE THEFINANCIAL STATEMENTS CLEAR, INTERPRETABLE AND UNDERSTANDABLE

None (2015: None).

34. DISCLOSURES IN RELATION TO THE STATEMENT OF CASH FLOWS

In the accounting period ending 31 December 2016, the cash flows derived from operational activities are TL56.779 thousand ( 31 December 2015: TL 91.727 thousand), the cash flows derived from investment activitiesare TL 45.332 thousand (31 December 2015: TL 39.234 thousand), and the cash flows derived from financeactivities are TL 19.994 thousand (31 December 2015: TL 32.038 thousand). During the period Destek, one ofthe Group’s subsidiaries, made a dividend payment in the sum of TL 296 thousand (31 December 2015: TL 302thousand), and this amount is shown in cash flows from finance activities.

35. DISCLOSURES IN RELATION TO THE STATEMENT OF CHANGES IN EQUITY

In the accounting period ending 31 December 2016, the Group’s total equity consists of parent company equity of TL 996.639thousand (31 December 2015: TL 992.593 thousand) and non-controlling interests of TL 178.770 thousand (31 December2015: TL 206.569 thousand), totally amounting to TL 1.175.409 thousand (31 December 2015: TL 1.199.162 thousand).

31. NON-CONTROLLING INTERESTS

As of 31 December 2016, information on the non-controlling interests in subsidiaries, including the Group'snon-controlling interests at significant levels, is as follows:

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as Thousand TL Recydia Kars Çimbeton Other individual Çimento immaterial subsidiaries

Percentage of non-controlling interests 38,39% 41,62% 49,68% Non-current assets 429.716 202.356 32.316 63.111

Current assets 87.645 168.515 64.136 36.739

Long-term liabilities (5.859) (5.613) (2.075) (10.790)

Short-term liabilities (152.374) (17.121) (56.768) (49.714)

Net assets 359.128 348.137 37.609 39.346Carrying amount of non-controlling interests 40.734 145.032 14.268 (21.264)Revenue 96.828 65.994 207.461 119.438

Profit / (Loss) (79.479) 17.909 (2.897) (6.537)

Other comprehensive income (336) (80) (75) 824

Total comprehensive income (79.815) 17.829 (2.972) (5.713)Profit allocated to non-controlling interests (30.907) 7.476 (1.585) (2.870)

Other comprehensive income allocated to non-controlling interests (129) (33) (37) 287

as Thousand TL Recydia Kars Çimbeton Other individualÇimento immaterial subsidiaries

Percentage of non-controlling interests 38,39% 41,62% 49,68%Non-current assets 463.878 202.847 27.181 67.693

Current assets 80.253 213.946 63.598 44.586

Long-term liabilities (6.454) (5.399) (2.115) (11.513)

Short-term liabilities (98.735) (81.086) (48.084) (53.739)

Net assets 438.942 330.308 40.580 47.027Carrying amount of non-controlling interests 71.531 137.590 15.749 (18.301)Revenue 119.919 56.534 156.171 107.910

Profit / (Loss) (50.736) 17.688 1.501 (8.243)

Other comprehensive income (208) (290) (118) 1.091

Total comprehensive income (50.944) 17.398 1.383 (7.152)Profit allocated to non-controlling interests (19.546) 7.383 690 (3.471)

Other comprehensive income allocated to non-controlling interests (80) (121) (59) 119

As of 31 December 2015, information on the non-controlling interests in subsidiaries, including the Group’snon-controlling interests at significant levels, is as follows:

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Profit Distribution Proposal

In accordance with Capital Markets Board’s January 23, 2014 dated II-19.1 number Dividend Notification, thecompany has distributable profit in the statutory records, by considering net loss of the Çimentaş Group forthe year ended 31 December 2016 and the company's medium- and short-term strategies, anticipated capitalexpenditures and financial plans, market conditions and economic conditions, it has been resolved to make asuggestion to the General Assembly, not to distribute profits.

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ÇİMENTAŞ GROUP

Çimentaş İzmir Çimento Fabrikası Türk A.Ş.Having been established as the 1st cement factory of the region in 1950, Çimentaş produces clinker in 2 kilnsand cement in 4 mills located in the İzmir plant. With its 65 years of history Çimentaş is one of the fundamentalestablishments of the sector and the region.

Çimentaş İzmir Çimento Fabrikası Türk A.Ş. Trakya BranchEdirne Lalapaşa Cement Plant was acquired from the Savings Deposit Insurance Fund in the final days of2005 through an Asset Sale transaction. It has been structured and organized as the Trakya Branch ofÇimentaş İzmir Çimento Fabrikası Türk A.Ş. Thus, Çimentaş has entered the biggest cement market of thecountry and has created new opportunities in terms of exports to neighbouring countries.

Kars Çimento Sanayi ve Ticaret A.Ş.Kars Çimento joined the group in 1996 by acquisition from the Privatization Administration in accordance withthe concept of “corporate responsibility”. It is a profitable and efficient establishment in the region in termsof its economic and social situation.

Çimbeton Hazırbeton ve Prefabrik Yapı Elemanları San. veTic. A.Ş.

Founded in 1986, Çimbeton A.Ş. is the leading supplier in the region of the ready mixed concrete market. Thecompany, which indicates the place, meaning and characteristics of the RMC in the construction sector,became the most important institution of the regional market. It is one of the profitable and productivecompanies of the sector.

İlion Çimento İnşaat Sanayi ve Ticaret Ltd. Şti.İlion Çimento joined the Group in 2007 and has operations in Soma Seaş Thermal Power Plant to meet the flyash requirements of Çimentaş and Çimbeton.

Recydia Atık Yönetimi Yenilenebilir Enerji Üretimi, Nakliyeve Lojistik Hizmetleri Sanayi ve Ticaret A.Ş.

Recydia A.Ş. founded in 2009, with the aim of gaining various advantages from the supply and usage ofalternative fuel in order to diversify and optimize the energy resources of the Group, has first taken a placein the sector by taking over 70% of the company Süreko A.Ş., which was already operating with its plants inManisa-Kula and Ankara-Kazan. In 2011, Recydia A.Ş. entered into the municipal waste sector by acquiring the operating licence of themunicipal waste processing plant of the Istaç establishment that operates under the Istanbul MetropolitanMunicipality, at Istanbul / Kömürcüoda for a period of 25 years. The Company merged with Hereko Istanbul 1 Atık Yönetimi Nakliye Lojistik Elektrik Üretim Sanayive TicaretA. Ş., Elazığ Altınova Çimento Sanayi Ticaret A. Ş. and Bakırçay Çimento Sanayive Ticaret A. Ş. on 31.12.2014.

Recydia Atık Yönetimi Yenilenebilir Enerji Üretimi, Nakliyeve Lojistik Hizmetleri Sanayi ve Ticaret A.Ş. İstanbul HerekoBranch

Hereko Istanbul 1 AtıkYönetimi, Nakliye, Lojistik, Elektrik Üretim Sanayive Ticaret A.S., founded early in theyear 2011 as a 100% subsidiary of Recydia A.Ş. entered into the disposal sector of the municipal waste byacquiring the operating license of the municipal waste processing plant of Istaç establishment that operatesunder the Istanbul Metropolitan Municipality, at Istanbul / Kömürcüoda for a period of 25 years. The Companymerged with Recydia A.Ş. in 2014 and has continued its activities as Recydia A.Ş. Istanbul Hereko Branch.

Recydia Atık Yönetimi Yenilenebilir Enerji Üretimi, Nakliyeve Lojistik Hizmetleri Sanayi ve Ticaret A.Ş. Elazığ ÇimentoBranch

Elaziğ Çimento was acquired under a OYAK-GAMA Joint Venture in September 2006. It is one the leadingestablishments in terms of economic and social development of its region. The Company merged with RecydiaA.Ş. in 2014 and has continued its activities as Recydia A.Ş. Elazığ Çimento Branch.

Süreko Atık Yönetimi, Nakliye, Lojistik, Elektrik ÜretimSanayi ve Ticaret A.Ş.

The company, of which 70% was taken over by our subsidiary Recydia A.Ş. in 2009, provides waste disposalservices to industrial companies and private sector enterprises in line with the principle ‘’Reliable WasteManagement’’ with its plants in Manisa-Kula and Ankara-Kazan,.The company is in a position to be the candidate for being a leader in the recently developing sector with itsrapidly ongoing investments.

Destek Organizasyon Temizlik Akaryakıt Tabldot Servis San.ve Tic. A.Ş.

Destek A.Ş., which provides logistic support, provides cleaning and other services beside operating a gasservice station, table d’hôte and restaurant, also finances the Çimentaş Education and Health Foundation withits sources and revenue.

Çimentaş Education and health Fund One of the important social institutions in the region with a strong reputation for its support of education andhealth services, Çimentaş Education and Health Fund was founded in 1986 and received tax-exempt status in1992. Çimentaş Education and Health Fund granted various health and education institutions to the public inthe past period.

Çimentaş İzmir Çimento Fabrikası Türk A.Ş.

Kemalpaşa Caddesi No: 4, 35070 Işıkkent, İzmir, TurkeyTel: +90.232.472 10 50 | Fax: +90.232.472 10 [email protected] www.cimentas.com.tr

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