Cimentas 2014 ING.qxp Layout 1 · _Cimentas_CopING_BIL2014.qxp_Layout 1 27/04/15 11:29 Pagina 1. ANNUAL REPORT 2014. 2 3 28 Independent Auditor's Report 30 Consolidated Financial

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UAL

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2014

_Cimentas_CopING_BIL2014.qxp_Layout 1 27/04/15 11:29 Pagina 1

ANNUAL REPORT2014

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28 Independent Auditor's Report 30 Consolidated Financial Statements 32 Income Statement 34 Equity Capital Changing Table 36 Cash Flow Table

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40 Notes to the Financial Statements4

12 2014 Annual Report 18 Report on the applications of Corporate Governance Principles

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6 Introduction 6 Agenda 7 Chairman’s Speech

1 Introduction

Annual Report

Consolidated Financial Statements 2014

Notes to the Financial Statements

104 Profit distribution proposal 106 Çimentaş Group

Introduction 6 Introduction 6 Agenda 7 Chairman’s Speech

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Introduction

This report is for presentation to 64rd Annual General Assembly Meeting of Shareholders in the Company ofÇimentaş İzmir Çimento Fabrikası Türk A.Ş. that is to be convened at the Company’s headquarters at theaddress of Egemenlik Mahallesi Eski Kemalpaşa Caddesi No.4B Işıkkent Bornova-İZMİR on 15th of April 2015at 11.30 to examine and come to a decision on the Company’s operational results for the period January 1st

2014 to December 31st 2014.

Agenda

1. Opening and roll-call,2. Formation of the presiding committee and authorization of the committee to sign the minutes and other

meeting-related documents pursuant to article 16 of the company’s articles of association,3. Reading and deliberation of the annual report of the Board of Directors and the independent auditing firm,4. Reading, deliberation, and decision concerning approval of the 2014 balance sheet, income statement

and other financial tables, 5. Individual acquittal of each of the members of the Board of Directors of their fiduciary responsibilities for

the accounts and transactions of the company in 2014,6. Deliberation and decision about the 2014 profit/loss,7. Deliberation and resolution about approval of the Independent External Audit Firm assigned by the Board

for the year 2015 and the acceptance of the independent external audit agreement,8. Determination of the number and the period of the BoD members. Election of BoD members and

independent Board members.9. Deliberation and decision concerning the remuneration of the directors,10. Information and deliberation concerning to permission to the Chairman and Board members in

accordance with articles 395 and 396 of the Turkish Commercial Code, 11. nformation and deliberation concerning the donations and charities made within the year 2014,12. Information and deliberation concerning the donations and charities will make in the year 2015,13. Information about guarantees given on behalf of 3rd parties,14. Information about the resolution of CMB dated 02.09.2014, related to disguised profit transfer15. Wishes, Closing.

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Chairman’s speech

Dear Shareholder,In 2014, we saw signs of economic recovery from the global crisis that first began in 2008. However growth inthe Eurozone continued to remain below long-term growth rates. Growth in the global economy was alsobelow target and the Turkish economy like many other emerging economies also grew slightly less thanexpected.The Eurozone achieved limited growth in 2014 highlighting that it continues to feel the effects of the globaleconomic crisis that first began in 2008 to a lesser extent. Amongst the most significant developmentsimpacting the global economy in 2014 were the problems in the Middle East and the tension between Russiaand Ukraine. In particular, the developments in Iraq and Syria had negative effects on Turkey’s significant tradevolume with these countries. Other factors impacting Turkey’s economy specifically were the global decreasesin oil and energy prices, the FED’s decision to end asset purchase policy and speculated plans for interestrate hikes in the near future. While economic growth was indicated in the US, one of the world’s driving powers,growth in China was less than expected. Consequently, developing economies, including Turkey which enjoyclose economic relations with the US and China were also impacted. As a result, Turkey’s growth in 2014 wasless than in 2013.

After experiencing a slowdown in growth, most noticeably since 2011, Turkey’s growth for 2014 is expected toclose the year at 3%. This is deemed moderate considering the dynamics of the country. In 2015, Turkey willhold general elections and the local economy will likely be impacted. Other factors that are expected toinfluence the economy in Turkey significantly in 2015 include the extent of economic recovery in the Eurozone,FED policies and political and economic developments in neighboring regions. Also Lira weaken against theDollar will have consequences for the Turkish economy. Factors such oil price fall and Eurozone quantitiveeasing should somehow favor Turkey’s economy.

Çimentaş performed well in this year which was particularly challenging in the second half of the year. Duringthe last 10 years, domestic demand is more than doubled from 31 mln TL to 66 with an average yearly increaseof 7.9%. The reason of concern on sustainability is driving from the fact that Turkey has more than 400 bln ofexternal long term loans private & public and that mostly used by construction and service sectors more thanproducing sectors. Now a construction oriented group experienced in Turkey has created employment but inthe years ahead, it may become a problem because it doesn’t generate foreign currency. In spite of theseconcerns, cement industry in Turkey is reasonably optimistic for neat future. Urban transformation andinfrastructure project seems likely to continue to play a major role in the industry growth. Our efforts allowedour company to boost its consolidated revenues by 15% to 781 mln TL and increase its ebitda by 41% to 200mln TL.In this weak economy and uncertain political climate, Turkish cement industry growth slightly decreasedversus 2013. Reason of concern is deriving from the fact that in the 1st half the growth was positive (approx.5%) while in the second half 8% downtrend is observed. In 2014, Cimentas domestic clinker and cement sales were slightly above 4.0 mln T in line with previous yearwhich in export with 0.73 mlnT sales reported an increase of 22% in RMC with 1.4 mln M3 slightly belowprevious year Cimbeton our RMC Company maintain its market share.

Çimentaş through Recydia continues its strategic activity in the diversified business of waste management. Inmunicipal solid waste processing, 2014 was an important year because two new important waste processingplants started their operations by Hereko in Istanbul and in Blackburn UK by Neales Plant performanceoptimization has been ongoing during the last part of 2014 and will continue its improvement. In 2015, the

1Annual Report 2014

Introduction and Agenda

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industrial waste company Sureko has obtained a satisfactory performance based on the processing and landfillactivities in Kula plant east of Izmir.

The waste management in Turkey is in an evolution stage but still well below the industrialized countries level.Economic and technological issues are the constraints impacting on this development. Our company hasinvested in this new sector. Now government and municipalities should encourage and support theseinvestments with improved legislations on waste management particularly to strengthen its enforcement. Lastbut not least proper economic incentives should be established in order to encourage reduction of waste tobe sent to landfill.

I would like to extend my sincere gratitude to our employees for their dedication and hardworking whichdelivered invaluable contribution to company’s performance and to our customers and shareholders.

I express my sincere appreciation to our Board of Directors and business partners for their support, inputsand trust.

Although 2015 is expected to be a difficult year with respect to the global economy and political uncertainties,we are confident that it holds lots of opportunities for our company to demonstrate its unique potential. Weare excited about the future challenges and whatever lies ahead.

Best regards,Walter MontevecchiChairman of the Board of Directors

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12 2014 Annual Report 18 Report on the applications of Corporate Governance Principles

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İzmir Çimento Fabrikası Türk A.Ş

A - General Information

1. Period of Report01.01.2014-31.12.2014

2. Corporate InformationCompany Name: Izmir Çimento Fabrikası Türk A.Ş – ÇİMENTAŞRegistration Number: Commercial Register of Izmir – 20907 / K-47Contact Details: www.cimentas.com.tr Head 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 LimitsFurnished with 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

9. Personnel945 personnel, including executives, have been working in Çimentas Group Companies as of 31.12.2014. NealsWaste Management Holdings Ltd. located in the UK which was acquired by our subsidiary, Recydia A.Ş, hasemployed 137 personnel which make our total personnel number 1.082. Collective Labour Agreement for the years 2013 and 2015 has been executed by and between Çimentoİşverenleri Sendikası and ÇİMSE-İŞ Sendikası whereby there has been an increase on salary social benefitsof blue-collar personnel. Salary and social benefits of other personnel has been determined based on meritand work performance by taking into consideration the financial status of the company.

Shareholder Shares (TL) %

Cementir Holding SPA 11.153.220,39 12,80

Aalborg Portland Espana SL 74.045.593,72 85,00

Kars Çimento A.Ş. 418.118,41 0,48

Çimbeton A.Ş. 102.137,28 0,12

BİST 1.393.393,40 1,60

TOTAL 87.112.463,20 100

*The title of Spring Rain Investment SL changed as Aalborg Portland Espana SL on 02.07.2014*Simest SPA sold and transferred all his Çimentaş shares which has a nominal value of 1.198.841,56-TL. to Cementir Holding SpA on07.07.2014

*Cementir Holding SpA sold and transferred 1.219.574.485 Çimentaş Shares which has a nominal value of 12.195.744,85-TL. to AalborgPortland Espana SL on 12.09.2014.

Name-Surname Tıtle Term

Walter Montevecchi Chairman 15.04.2014-15.04.2015

Francesco Caltagirone Vice Chairman 15.04.2014-15.04.2015

Francesco Gaetano Caltagirone Member 15.04.2014-15.04.2015

Alessandro Caltagirone Member 15.04.2014-15.04.2015

Marco Maria Bianconi Member 15.04.2014-15.04.2015

V. Taner Aykaç* CEO 15.04.2014-15.04.2015

Riccardo Nicolini Member 15.04.2014-15.04.2015

Massimiliano Capece Minutolo Member 15.04.2014-15.04.2015

Ilhan F.Gürel Independent Board Member 15.04.2014-15.04.2015

Taha Aksoy Independent Board Member 15.04.2014-15.04.2015

*V. Taner Aykaç has been elected as Board Member on the General Assembly dated 15.04.2014, and Mario Ciliberto has not been assigned.

Name-Surname Title

Walter Montevecchi Chairman

V. Taner Aykaç CEO

İsmail Ali Özinönü Industrial Relations and Exporting President

Ali İhsan Özgürman CFO

Nezir Yalçınkaya Human Resources Director

Francesco Malara Waste & Renewable Energy Director

Selahattin Mersin Co-Processing Coordinator

Cenker Mirzaoğlu Marketing and Sales Director

Kayhan Karabayır Legal Affairs and Investment Relations Director

Uğur Aydın Technical Operations Director

Selçuk Kuntalp Procurement Director

*Mustafa Güçlü resigned from General Relations Coordinator function.*Ergün Olgun resigned from Group Technical Affairs Coordinator function.*Ali Özinönü has been appointed as Industrial Relations and Exporting President*Erciyes Edipoğlu resigned from Human Resources Director function*Cenker Mirzaoğlu has been appointed as Marketing and Sales Director*Nezir Yalçınkaya has been appointed as Human Recourses Director

İlhan F.Gürel President

Marco Maria Bianconi Member

Kayhan Karabayır Member

İlhan F.Gürel President

Taha Aksoy Member

Taha Aksoy President


Vedat Özer Member

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Annual Report

The cement grinding capacity of the Plants is over the production capacity of clinker. Production capacity ofclinker is as follows:

2. InvestmentsIn 2014, renovation investments are made in order to ensure the continuation of the current yield levels of ourfactory. Also, bag filters comply with EU norms were applied in the Kars and Elazığ plants, and it has beenprovided lowest dust emissions. No. 1 oven lantern gear and drive unit system of İzmir plant has been renewed andhas been modernized. No.6 drive gear box of cement mill has been renwed with Siemens/Flender reducer and has been modernized. Inthis way, our factory has been ensured related to the process and the product stability in long term. Inaccordance with the Industrial Air Pollution Control Regulation, projectshas been made in İzmir, Kars andElazığ plants for closed clinker stock hall. Also for each factory in İzmir, Trakya, Kars and Elazığ surface water collection projects have been completedand positive developments have been achieved. It has been planned that the investments in 2015 will be made within the same understanding and mostly inthe field of occupational health and safety and environment.

3. Internal Control and AuditThere are both Internal Audit and Budget Planning & Controlling departments in the company wherebyactivities and transactions of the company is audited whether they are in conformity with the legislation andprocedures along with activity results which are also controlled whether they are in conformity with budgetand/or plans. Both functions have been operating efficiently and actively. They duly inform the related departments in time.By doing so, they actively perform on taking precautions, implementing and enhancing addition operations.

4. Donations and RemittanceConsolidated amount of donations made on behalf of Cimentas Group is 624.059,58-TL.Total amount of donations made on behalf of the Company in 2014 is 446.677,21-TL. consisting of 440.879,82-TL in cash and 5.797,39- TL as commodity.

5. Information as to Production and SalesAs is seen from the growth numbers of first nine months of 2014, Turkey has expanded 2,8% in total.The growth expectations for 2014 were around 3,3%. The growth of first nine months in the constructionsector was realized as 2,9%. Although there are regional differences, the cement sector has reduced by1,7%, domestic sales has grown by 3,36% and global sales has reduced by 25,79% for the first tenmonths. Our company, within the scope of regions where it is active as well as differences in relation tomarket conditions, domestic sale amount has been decreased to 1,6% , export sale amout has beenincreased to 13,9% and total cement sales decreased 0,5%, in 2014 comparing to the same period ofthe previous year. Within this scope, total group sale amount expanded 0,5% comparing to the same period of the previous year.

10. Amendments on the articles of association during the periodThere were no amendments in 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 is not any potential financial obligation on the Company.

B-Benefits provided to the top executives

It has been decided during the ordinary general assembly meeting of the company for the year 2013 that eachmember of the board of directors of the company has been awarded to be paid 2.000-TL gross fee for each boardmeeting to be attended and no other fee other than such fee has been paid to the member of the board of directors. Consolidated amount of benefits provided to senior management of Cimentas group is 9.002.330-TL.Private health insurance has been provided to top executives of the company along with their salaries. Otherthan this, there is no fixed dividend, premium, bonus or any other payment has been paid to them. On behalf of the Company total amount of all benefits provided to the top executives during the year 2014 is7.643.803,90-TL.6.877.300,21-TL of such amount consists of salaries and other payments while 766.503,69-TL consists of travel,accommodation, representation, health insurance expenses and Social Security Institution premiums.

C- R&D Activities

Cement and ready-mixed concrete R&D laboratory has been active in 2014 within the scope of processimprovements. As a result of such improvements, there has been significant improvement, particularly inquality of clinker and product quality stabilization.

D- Information as to company activities

1. Production Activity of the CompanyAs Çimentaş Group, the cement production is conducted through four clinkers/cement production Plantslocated in İzmir, Edirne, Kars and Elazığ. Among the Plants which are active in different regions of Turkey,Kars and Elazığ Plants have legal entities whereas the Plant in Edirne is structured as a branch. Whereas the Company has been performing production activities in İzmir Plant through 2 rotary kilns, one ofthem is with pre-heater and the other is with calciner with a total capacity of 5500 ton/day, the clinkerproduction in in Edirne Plant is conducted through 1 kiln with calciner. Calciner production is done through 1kiln with pre-heater in Kars Plant and 1 kiln with calciner in Elazığ Plant.

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12. Subsidiaries and Shareholding Rates in Subsidiaries

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

(*) Elazığ Altınova Çimento San. ve Tic. A.Ş., Bakırçay Çimento San. ve Tic. A.Ş., Hereko İstanbul 1 Atık Yönetimi Nakliye Lojistik ElektrikÜretim San. ve Tic. A.Ş. merged under Recydia Atık Yönetimi Yenilenebilir Enerji Üretimi Nakliye ve Lojistik Hizmetleri San. ve Tic. A.Ş. thesubsidiary of Çimentaş İzmir Çimento Fabrikası Türk A.Ş. in accordance with the article 136 and cont’d of Turkish Commercial Code.

Plant Name Annual Production Capacity of Clinker (Ton)

Çimentaş İzmir 1.767.125

Çimentaş Trakya 971.500

Elazığ Çimento A.Ş 1.000.000

Kars Çimento A.Ş 363.150

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Annual Report

E- Financial Status

1. Basic RatiosThere is no value not taken into the financial tables under the Capital Market Legislation and AccountingStandard. Our company has not experienced technical bankruptcy or deep into debt. The ratios compared withthe precious year are as below:

2. Profit and Investment Policies Applied by the Company in Order to Strengthen the Performanceof the CompanyThe basic point of strengthening the company’s performance is received from a financial policy mainly based onequity capital. Our main shareholder Cementir Holding S.A recognizes this policy and supports the applications ofthe company directing the equity capital to cost decreasing investments. This point of view is effective on providingthe sustainability of the profit margin. Our company, distributing profit over the market conditions via ready moneyor free stock certificate, creates a higher premium performance to its partners with the increase in the share value.

3. The Financial Resources and Risk Management PoliciesThe financing of the investments and the company’s needs are mainly met equity capital together with mediumand long term Turkish Lira or foreign-currency loans. The risks that can be faced by the Company are audited by the specialized groups in accordance with the mainshareholder’s policies.

F- Evaulation on Risks

Risk Management, which is also a management function, has become legally necessary following the enactmentof new Capital Market Law and Turkish Commercial Code. Article 378 of Turkish Commercial Code sets forththat “Board of Directors in publicly held companies are responsible for; pre-determination of the reasons whichcould endanger the continuance and development of the company, implementation of necessary solutions inorder to prevent the risks, formation of a committee and making such system work and improve. In order to develop the current risk management competencies and make them in parallel with article 378 ofTurkish Commercial Code; “Risk Committee” has been formed within Çimentaş in November 2012. Committee members are Mr. MarcoMaria Bianconi, Mr.Taha Akyol and Mr.Vedat Özer. Risk Committee meetings held periodically and submit itsreport to the Board of Directors. In this regard, “Risk Management Project” has been implemented in 2013. Within the scope of this project,risk inventories have been prepared; risks have been prioritised and evaluated by means of using theappropriate risk methodology in conformity with internationally recognised “COSO Corporate Governance”.As a result of such evaluation, risk maps have been formed; roles and responsibilities including the steps ofmonitoring and reporting have been defined and documented.

6. Main Factors Affecting the Performance of the Sector and the BusinessMore than 50% of cost of all enterprises in the sector and our company is composed of energy which includesfuel and electricity. It is known that the increase in coal and petroleum coke prices along with 20% increasein electricity prices which came into effect at the end of 2011 by electricity tariffs has affected negatively thecapacity usage and competitive strength in the sector. Such negative effect will be observed more due to thenew increases in electricity prices which came into effect in October, 2012 and possible increases to be madein energy prices in 2013.There is necessity to use the current resources more efficiently by taking into consideration the electricity demandwhich to be increased in the following term due to rapidly increasing population. In the meantime, incentives forwaste management shall be improved in order to increase the alternative fuel usage in the sector. One of the matters which enterprises in the sector having difficulty with is the insufficiency of ports. The stepsto be taken in this matter will take an important part for increasing the export figures of Turkish cementcompanies in the following terms.The urban transformation projects which will be implemented within the scope of the “Law regarding theTransformation of the Places Located on Disaster Areas” have been considered to be a significant potentialfor the sector. In this context, foreign investors will invest in Turkey more due to the existing 8 million residential buildingswhich are required to be renewed and also with the new 2B law in which the Landlords may invest and thenew regulation that will be made in the matter of reciprocity. On the other hand, increase on VAT ratios forreal estate sales will have a negative effect for the sector. The incentives in the energy prices that will be provided to the companies will create a result of an increasein the cement production and export revenues via an increase in the capacity usage ratio.

7. Result Section of the Commitment ReportIT, management consultancy, administrative support and trademark usage services which are listed in thereport provided by the parent company are in compliance with the market practice. In this regard, no damagesustained by the company and no harmful act has been done/committed with the direction of the parentcompany.

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Rate 2013 2014

Current Rate 1,26 1,70

Liquidity Rate 0,92 1,21

Liabilities/Assets 0,27 0,23

Liabilities /Equity 0,37 0,30

Equity/Assets 0,73 0,77

Profitability by sales 0,21 0,25

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Assembly meeting, agenda, info about activities of the company and the financial statements wereannounced to the shareholders on the company’s website. Shareholders used their questioning rightsduring the meeting. Information about the donations, which made during the period, was given to theshareholders with a separate agenda item. Articles of Association do not contain a particular provisionrelated to the quorum, therefore the relevant provisions of Turkish Commercial Code (TCC) are consideredas basis.Invitations to the General Assembly Meeting are announced through necessary publications under theprovisions of Turkish Commercial Code and Capital Markets Law and also published on the company’s web-site three weeks prior to the meeting. Registration proceedings for shareholders to participate in the GeneralAssembly are conducted under the provisions of TCC and Capital Markets Law. Information related to Ordinary and Extra Ordinary General Assembly meetings is made available forshareholders to review at the headquarters of the company pursuant to Turkish Commercial Code.In order to facilitate participation of shareholders in the General Assembly, besides announcement andpublications, due diligence is used for access to information on the issues constituting the agenda of GeneralAssembly and requirements of legal regulations are abided. Media members are also invited to the General Assembly meeting and they attend.Minutes and documents related to the General Assembly meetings are permanently made available forshareholders to review at the headquarters of the Company.

2.4 Voting Rights and Minority Rights Shares of the Company do not provide privilege in voting and each share gives only 1 voting right to its holder. For the matter of voting by companies having mutual participation relation, the rules of “disfranchisement”stated in the Turkish Commercial Code is applied. Since minority shares are low (around 2%) within the Company, they are not represented in the management. Articles of Association of the Company do not contain a provision for the method of cumulative voting in electionof Board of Directors and Statutory Auditors.

2.5 Profit Distribution Policy and Profit Distribution Timing A written profit distribution policy of the Company has been constituted which has been approved by theBoard of Directors and the issue has been arranged explicitly in detail in the Articles of Association. Withregard to the share of the Company’s profit, incorporators’ certificate holders are furnished with privilege,therefore, after deduction of taxes and legal liabilities as well as loss of former years from net profit andafter separation of 5% legal reserve under article 519 of Turkish Commercial Code and 50% I. Dividendunder Articles of Association, 10% of the remaining dividend amount is distributed to Incorporators’Certificate holders. Although the communiqué published by Capital Markets Board states 20% for 1st dividend, such rate has beendetermined as 50% in the Articles of Association of the Company as specified above. This circumstance is theyield of the policy regarding to maximizing the profit share rights of the shareholders. This policy is tried to becomplied upon considering economical conditions of the country and present situation of Company. Legalperiods in profit distribution are strictly followed.The proposal of the Board of Directors related to the profit distribution are submitted for the shareholders’information via special event disclosures prior to the General Assembly meeting and are also stated in theactivity report. In case of non-distribution, information on the reason and the usage of the non-distributedprofit is given in the General Assembly.

Report on the applications of Corporate Governance Principles

Section I Declaration of compliance To Corporate Governance PrinciplesOur Company, implements all the necessary corporate governance principles which in the annex ofcommuniqué provisions related to the determination and the implementation of Corporate GovernancePrinciples II-17.1 of Capital Markets Board, during the year 2014. In the case of implementation of the non-compulsory principles, principles are waived for reasons of some of the principles are already in the newTurkish Commercial Code, in the face of the sectoral structure of the company and the management structureof the company. Pronouncements on the subject are listed below.

Section II - Shareholders

2.1 Investor Relations Department“Legal Affairs and Investor Relations Department” is conducting relations with shareholders in coordinationwith “Finance Directorate”.Primary activities of this department have been focusing on the point of conducting relations with eithershareholders or Capital Market Board (“CMB”) and Istanbul Stock Exchange (“ISE”). Accordingly, followingthe company’s stock certificates, transactions related to shareholders’ rights, disclosure of special events topublic and arrangement of General Assembly meetings of the Company are handled by this department. The authorized person is Gökçe Oyal Püskülcü who has Capital Market Activities Level 3 License numbered203403 and Corporate Governance Rating License numbered 700351. Director of the Investor RelationsDepartment is Kayhan Karabayır. This department can be reached at [email protected] via e-mail or at0.232.472 10 50/1402 extension number. Having been received from investor individuals and institutions as well as intermediary entities, 40 applicationshave been replied and requirements of the relevant parties have been met within the period.

2.2 Shareholders’ rights on Acquisition of InformationInformation demands received by the company from shareholders as well as investors and intermediaryentities have been especially intensified on demands for activity report as well as 2014 General AssemblyMeeting and the performance of the company with the profit distribution issues. Such demands as mentionedabove have been met by means of providing necessary explanations and documents.Studies related to publishing the developments concerning the utilization of rights by shareholders throughelectronic media are still in progress. Updates, related to the subject are made on Company’s website. Suchdevelopments are announced within the frame of legal regulations which are in force presently.Assignment of private auditor was not regulated as an individual right in scope of the Articles of Association,any demand for assignment of private auditor was not received within the period. Çimentaş is audited not onlyby the auditors within the context of Turkish Commercial Code and also by an Independent External Audit firmperiodically. On the other hand, systematic auditing is conducted by the Internal Audit Department periodicallywithin the frame of a specific programme. Also, a regulation on the subject is available in the new TurkishCommercial Code article 438.

2.3 General Assembly MeetingsDuring the period, Ordinary General Assembly meeting for the year 2013 was held on 15 April 2014 and98% participation was achieved in the Ordinary General Assembly for the year 2012. Before the General

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through online sites and our web-site which can be reached easily. Pre-selection criteria determined specially per joband stated in the job description are implemented similarly to all applications and previously described standard testsare applied to all candidates who meet the initial qualifications and those results are taken into consideration. Trainings aiming to increase the knowledge, skills and experience of the employees are planned each yearbeginning and applied fair and equal in accordance with the approved budget. The training needs are plannedand applied individually in line with the performance evaluation results for the management positions.Furthermore, group trainings are planned in accordance with the needs of function and team. Cement Industry Employer’s Union Collective Labor Agreement is applied in Çimentaş. A Company UnionRepresentative is selected lawfully from the employees working in the place of business included in the scopeof Cement Industry Employer’s Union Collective Labor Agreement. Union Representative’s duties are as follows;i. Providing solutions to the conflicts and complaints arising from the implementation of collective labor

agreement through negotiating with the employee and the employer which are reverted either from theemployer or the employee

ii. Protecting to the employees’ rights and laws, compliance of the employer’s entitled rights in accordancewith this agreement and legislation provisions.

iii. Assisting the employer in the studies of the trainings which will be conducted in the workplace or outsideby the employer in order to increase the employees’ knowledge and proficiency and ensuring theparticipation of the employees.

iv. Providing continuance of the labor peace by cooperation between the employer and the employee and thework harmony in the workplace.

Job descriptions of the white collar employees in the Çimentaş Group companies have been constituted as of2009 and have been announced to all our employees. Revision is implemented depending on the needs in caseof organizational modifications. Blue collar employees work with the described job classifications anddescriptions by the union. The systematic of the job classifications and the market conditions are taken into consideration in determiningthe remuneration and other benefits of the white collar employees. Job evaluation, job groups and job titlesdetermined by the Cement Industry Employer’s Union are applied for the blue collar employees and theprovisions of the Collective Labor Agreement is complied with.Decisions taken within the Company and developments in the Company are transmitted to our employees throughthe union representative, notice boards, internal and group’s web-sites (Cementir Holding Cnergy, Çimentaş GroupIntracim), internal and the group’s media organs(Cementir Holding Voice, Çimentaş Group Habercim). Informationsharing between the management positions is made during the Management Communication meetings in whichÇimentaş Group Managers attend and which is conducted quarterly. Demands and reformations received from theOccupational Health Safety sub-committees are conferred during the Occupational Health Safety committeemeetings conducted regularly each month. Workplace representative transfers the decisions of the OccupationalHealth Safety committee to the employees and submits the requests and proposals received from the employeesto the committee. No race, religion, language and sex discrimination is done in the Çimentaş Group companies. No complaint has been received related to the discrimination or physical or psychological ill treatment in our Companies.

4.4 Codes of Conduct and Social ResponsibilityThere exists a Codes of Conduct regulation which has been accepted and approved by the Board of Directorsand implemented by our main shareholder Cementir Holding. This regulation has been published on theCompany’s web-site. The Company in the frame of social responsibility consciousness and understanding has been sustaining itssupport especially in the fields of training, health and sports over years through ÇESVAK Foundation andÇimentaş Amateur Athletics Specialized Sports Club.

2.6 Assignment of SharesAs the whole shares of the Company have been converted into bearer shares upon modification of the Articlesof Association as resolved in the Ordinary General Assembly meeting for the year 2005, a particular provisionrestricting assignment of shares does not exist.

Section III- public disclosure and transparency

3.1 Web-Site of the CompanyWeb-site named www.cimentas.com which has been established in the name of our Company has beenactivated during the year 2009. The content of the web-site has reached the level which has been determined with the Corporate GovernancePrinciples by enrichment since early 2012. Information on the web-site is updated continuously. The Company’spressed documents are stated at the web-site address. Information on the web-site is also stated in Englishas necessarily taking into consideration the international investors’ needs.

3.2 Annual ReportInformation in the corporate governance principles are featured in the annual report.

Section IV- Stakeholders

4.1 Information on the Company Policy Relevant to the StakeholdersRelations between stakeholders and the Company are entirely based on written agreements, relations and operationsbetween the parties are governed within the framework defined by the agreements. In case of non-existence of agreements,parties’ interests are preserved within the frame of legislation and goodwill rules and the Company’s potentials. Stakeholders are informed about subjects related themselves by company, with meetings organized bycompany and e-mails.

4.2 Support on the Stakeholders Participation in ManagementInformation on the Company and its activities is given during the meetings having been held both withpersonnel and other stakeholders time to time. Apart from that, although any model regarding participationof the personnel in management and informing has not been constituted, expectations, complaints andsuggestions of the personnel and the customers are collected through surveys and enquiries conducted beforethe personnel and the customers, reformative and regulative actions are taken with the findings which areevaluated and prioritized by the top management.

4.3 Human Resources PolicyÇimentaş Group targets a competent management and an employees’ community in order to create a uniquedifference and competitive advantage through the improvement of organizational efficiency and individual skills in theworkplace environment. Basic guidelines of HR policy of the Company may be summarized under the headings below;(i) Recruiting and employment; Raising the quality in employing new staff and continuously increasing thepresent labor quality. (ii) Training; Focusing on training studies for the purpose of developing the present human resource. (iii) Remuneration; Developing a remuneration system that also takes market conditions in account. (iv) Activities increasing motivation and Communication; Making organizations and arrangements to raiseloyalty and working motivation of employees.The process of recruitment and replacement is performed at the same standards within all Çimentaş Group companiesand equal opportunities are provided to the candidates who wish to apply for a job. Job applications are collected

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VEYSİ TANER AYKAÇ, started his business life in Pioneer Overseas Corporation and in worked as ResearchSpecialist, Production Specialist, Production Manager. Afterwards in rotation worked as marketing director inCiba-Geigy, Novartis Crop Protection, as General Manager in Zeneca Agrochemical, as President of the EuropeRegion in Syngenta Crop Protection, as President of EAME Region in Syngenta Seeds and He’s currentlyworking as General Manager and CEO at Cimentas Group. Veysi Taner Aykaç completed his master degree of business from Solvay Business School.MARCO MARİA BİANCONİ, started his business life in IRI Rome in 1989 and in rotation worked as ‘’PortfolioDirector’ at Fidelity Investments, as ‘Capital Market Analist’ at Pan European Equities, ‘Finance Director’ atCaltagirone S.p.A, as ‘Budget and Controlling Director’ and ‘M&A and IR Director’ at Cementir S.p.A. He’scurrently working as a ‘Business Development Director’ at Cementir Holding S.p.A. Marco Maria Bianconi has graduated from Luiss University as an Economist and has master degree onBusiness Administration at New York University School of Business.Marco Maria Bianconi can speak Italian, Spanish and English languages and has ‘Chartered Accountant’ and‘IMC’ certificates.RİCCARDO NİCOLİNİ, started his business life in Promos Sim S.p.A. as ‘Ofice Manager’ in 1994 and in rotationworked as ‘’Finance and Treasury Manager’, Commercial Director’ , ‘’Managing Director’, ‘Chairman Of TheBoard Of Directors’ and ‘General Manager’ at Cementir Italia S.p.A.and ‘Chairman of Group Operation’ atCementir Holding S.p.A. He’s currently working as ‘ Managing Director and Chairman Of The Board OfDirectors’ at Energia S.p.A.Riccardo Niccolini has graduated from La Sapienza University as an Economist in 1994.MASSIMILIANO CAPECE MINUTOLO was born in 1968 in Rome ans started his business life as an engineerin 1992. In rotation he has worked as manager at VianiniLavori S.p.A. which is quoted at Milan Stock- Exchangeand as General Manager at Porto Torre S.p.A and WXIII/IE Commercial 4 S.r.l. He is currently the ChairmanOf The Board Of Directors at Unione Generale Immobiliare S.p.A. and Member of Board of Directors atCaltagirone S.p.A, Cementir Holding S.p.A , Romana Partecipazioni 2005 S.r.L.İLHAN F.GÜREL, is currently Deputy Chairman Of The Board Of Directors at Sünel TTAŞ, Chairman of Boardof Directors at Kütaş Food Group and Gürel Gayrimenkul A.Ş. and member of the Board Of Directors at EgeEndüstri ve Ticaret A.Ş. and CJSC Sünel Tobacco. İlhan f. Gürel has graduated from New Castle University as an Mechanical Engineer and had master degreeat Durham University. TAHA AKSOY, started his business life as an assistant at METU and immediately after he continued his duty atMunich Technical University. In rotation worked as ‘General Manager’ at Betonsan A.Ş., Çimentaş Gazbetonİşletmeleri and Beşer Balatacılık. He worked as the member of Turkish National Assembly Parliament in period2007-2011 and recently he worked as General Coordinator at 17’th Mediterranean Games and Mersin 2013.Taha Aksoy has graduated from METU as an Construction Engineer and had master degree at the sameuniversity. Since Candidate Presentation Committee has not been formed as of 2013, Mr. F. Ilhan Gürel and Mr. TahaAksoy, who have been determined by Corporate Governance Committee and approved in terms ofindependency, have been presented as independent member candidates to the Board of Directors with a reportdated 053.03.2015 and approved at the Board of Directors Meeting on 06.03.2015. Independent members presentedtheir independency statements in accordance with relevant legislation, and they have preserved theirindependence criteria. To get duties outside the company status of Board of Directors members and company managers are regulatedin ethics charter of the company. Since Members of Board of Directors has no duty outside the group organization, there is no need to determinea rule for such duties.

Besides, any sanction related to the environmental issues was not encountered within the period. All permitsand licenses necessary to realize the Company’s activities exist and are renewed in case of a need.

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 not any special provision regarding the qualifications of the members of the Board ofDirectors in the Articles of Association. Most of the members of the Board of Directors consist of non-executive members. Independent memberswill take place in the 2013 Ordinary General Assembly Meeting as per the Capital Markets Board Regulationsand Corporate Governance Principles.

Brief curriculum vitaes of the Bod Members WALTER MONTEVECCHİ, started his business life in Vianini Lavori S.P.A. in 1972. He’s currently a member ofBoard of Directors at Cementir Holding, Aalborg Portland, Unicon and Cementir Italy and Chairman Of TheBoard Of Directors of the Çimentaş Group Companies. Walter Montevecchi, was born in Faenza İtaly in 1945and he has graduated from Bolonga University as a Mining Engineer.FRANCESCO CALTAGİRONE JR, started his business life in Vianini Industria S.P.A.. He’s currently a ManagingDirector and Chairman of Board of Directors at Cementir Holding S.p.A, Deputy Chairman Of The Board OfDirectors at Banca Antonveneta S.p.A and member of the Board Of Directors at Caltagirone S.p.A, CaltagironeEditore S.p.A. and Banca Finnat Euromerica.FRANCESCO GAETANO CALTAGİRONE, He’s currently Chairman Of The Board Of Directors at CaltagironeS.p.A, Caltagirone Editore S.p.A., II Messaggero, II Gazzettino, Eurostazioni S.p.A and Associazione Amici DellaLuiss. Francesco Gaetano Caltagirone was born in 1943 and he has graduated from Rome University as anEngineer.ALESSANDRO CALTAGİRONE, started his business life in Vianini Thai Construction as a Financial Controller.He’s currently Chairman Of The Board Of DirectorsFinanziara İtalia 2005 S.p.A., Romana Partecipazioni 2005S.r.L and ICAL S.p.A. and a member of Board of Directors at Cementir Holding S.p.A, Caltagirone S.p.A,Caltagirone Editore S.p.A. and Çimentaş A.Ş.Alessandro Caltagirone has graduated from La Sapienza University as an Economist.

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Members of Board of Directors

Walter Montevecchi Chairman

Francesco Caltagirone Vice Chairman

Francesco Gaetano Caltagirone Member

Alessandro Caltagirone Member


Veysi Taner Aykaç* CEO

Riccardo Nicolini Member

Massimiliano Capece Minutolo Member

İlhan F. Gürel Independent Member

Taha Aksoy Independent Member

*V. Taner Aykaç has been elected as Board Member on the General Assembly dated 15.04.2014 and has been appointed as CEO by Board ofDirectors on 07.05.2014.

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5.6 Financial Rights Provided to Board of Directors and Top ManagementApart from the attendance fee for the Board of Directors’ (BoD) members and the salary paid to Chairmanand Managing Directors, there is not any other fee paid to the BoD members, or a rewarding system basedupon the performance. Board of Directors determines the amount of salary paid to Chairman and ManagingDirector.Remuneration principles disclosed to the public through company website, annual report and PublicDisclosure Platform. These disclosures are made in BoD terms.Company as a principle is not providing credit to members of Board of Directors and managerial personnel.However Managing Director may utilize the power of providing limited credit to managers in extra ordinarycases.

5.2 Activity principles of the Board of Directors As the majority of the members of Board of Directors are located in abroad, meetings of Board of Directorsare usually realized without convening, however in video-conference form by utilizing technological facilities.There were 8 meetings done by Board of Directors in the period.There were no questions and opposite opinions from members of board of directors. In default of dissentialvote, there was no dissenting opinion on the minutes of the meeting. The date of the Board of Directors meeting, agenda and annotations related to the agenda together with thedocuments are informed and delivered to the members of the Board of Directors prior to the meeting withinthe context of “Corporate Actions Management” procedure.Each member has only 1 voting right. There is no cumulative vote or negative veto right in the Board ofDirectors.During the meetings of Board of Directors, all subjects are resolved by discussing in detail and clearly. Theprovisions of TCC are applied in the quorum. Prohibition of engaging in activities and competition with company is not applied to the members of Board ofDirectors upon the permission of the General Assembly within the period, since the members of Board ofDirectors are the representatives of legal person shareholder and competent authorities of parent company.Moreover, these persons have neither been dealing any treatment with the company nor performing any activityrequiring competition with the Company. There are related party transactions submitted for approval to the independent board members but there areno significant transactions.

5.3 Committees Constituted within the Company“Audit Committee”, “Corporate Governance Committee” and “Risk Committee” were constituted among themembers of Board of Directors.Audit Committee was composed of two members and independet board members F. İlhan Gürel and TahaAksoy were elected by BoD as members.Independet board member F. İlhan Gürel was elected as the president of Corporate Governance Committeeand board member Marco Maria Bianconi and Legal Affairs and Investments Relations Director KayhanKarabayır were elected as the members.Independet board member Taha Aksoy was elected as the president of Risk Committee and board memberMarco Maria Bianconi and accounting manager Vedat Özer were elected as the members.As can be seen, Marco Maria Bianconi is taking role in two committees, because Mr. Marco Maria Bianconiwould be much contributory to the activities of the committees. .The working principles of Committees constituted among the members Board of Directors, are determinedand disclosed to the public by BoD.

5.4 Risk Management and Internal Control Mechanism“Risk Committee” was constituted by Board of Directors and has started to work. There is an internal audit department in the company and there are mechanisms relating to internal controland audit. Internal audit department is reporting to the BoD directly.

5.5 Strategic Purposes of the CompanyMission, vision and purposes of the company are established by BoD. These Purposes established with 5 years’period plans and reviewed each year.

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ConsolidatedFinancial

Statements2014

28 Independent Auditor's Report 30 Consolidated Financial Statements 32 Income Statement 34 Equity Capital Changing Table 36 Cash Flow Table

3

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Convenience Translation of the Independent Auditors’ Report Originally Prepared and Issued in Turkish to English

To the Board of Directors of Çimentaş İzmir Çimento Fabrikası Türk Anonim Şirketi,

Report on the Consolidated Financial Statements We have audited the accompanying consolidated financial statements of Çimentaş İzmir Çimento FabrikasıTürk Anonim Şirketi (“the Company”) and its subsidiaries (collectively referred to as “the Group”) whichcomprise the consolidated statement of financial position as at 31 December 2014, the consolidatedstatements of profit or loss and other comprehensive income, statement of changes in equity and statementof cash flows for the year then ended, and notes, comprising a summary of significant accounting policies andother explanatory information.

Management’s Responsibility for the Consolidated Financial StatementsManagement is responsible for the preparation and fair presentation of these consolidated financialstatements in accordance with Turkish Accounting Standards, and for such internal control as managementdetermines is necessary to enable the preparation of consolidated financial statements that are free frommaterial misstatement, whether due to fraud or error.

Auditors’ Responsibility Our responsibility is to express an opinion on these consolidated financial statements based on our audit. Weconducted our audit in accordance with standards on auditing issued by the Capital Markets Board of Turkey(“CMB”) and Standards on Auditing which is a component of the Turkish Auditing Standards published by thePublic Oversight Accounting and Auditing Standards Authority (“POA”). Those standards require that we complywith ethical requirements and plan and perform the audit to obtain reasonable assurance about whether theconsolidated financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in theconsolidated financial statements. The procedures selected depend on our judgment, including theassessment of the risks of material misstatement of the consolidated financial statements, whether due tofraud or error. In making those risk assessments, we consider internal control relevant to the entity’spreparation and fair presentation of the consolidated financial statements in order to design audit proceduresthat are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectivenessof the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policiesused and the reasonableness of accounting estimates made by management, as well as evaluating the overallpresentation of the consolidated financial statements. We believe that the audit evidence we have obtained during our audit is sufficient and appropriate to providea basis for our audit opinion.

Opinion In our opinion, the consolidated financial statements present fairly, in all material respects, the consolidatedfinancial position of the Group as at 31 December 2014, and its consolidated financial performance and itsconsolidated cash flows for the year then ended in accordance with Turkish Accounting Standards

Report on Other Legal and Regulatory Requirements 1) Pursuant to the fourth paragraph of Article 398 of Turkish Commercial Code (“TCC”) no. 6102; Auditors’

Report on System and Committee of Early Identification of Risks is presented to the Board of Directors ofthe Company on 4 February 2015.

2) Pursuant to the fourth paragraph of Article 402 of the TCC; no significant matter has come to our attentionthat causes us to believe that for the period 1 January - 31 December 2014, the Company’s bookkeepingactivities and consolidated financial statements are not in compliance with TCC and provisions of theCompany’s articles of association in relation to financial reporting.

3) Pursuant to the fourth paragraph of Article 402 of the TCC; the Board of Directors provided us the necessaryexplanations and required documents in connection with the audit.

Akis Bağımsız Denetim ve Serbest Muhasebeci Mali Müşavirlik A.Ş.A member of KPMG International Cooperative

İsmail Önder Ünal, SMMMPartner 6 March 2015İzmir, TÜRKİYE

Additional paragraph for convenience translation to EnglishAs explained in note 2.1, the accompanying consolidated financial statements differ from InternationalFinancial Reporting Standards (“IFRS”) issued by the International Accounting Standards Board with respectto the application of inflation accounting and also for certain reclassification requirement of the POA/CMB.Accordingly, the accompanying financial statements are not intended to present the financial position andresults of operations in accordance with IFRS.

Çimentaş İzmir Çimento Fabrikası Türk Anonim Şirketi and Its SubsidiariesConsolidated Statement of Financial Position As of 31 December 2014Amounts expressed in thousand Turkish Lira (“thousand TL”) unless otherwise stated.

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Audited

ASSETS Notes 31 December 2014 31 December 2013

Current Assets 398.833 357.864Cash and Cash Equivalents 5 69.189 86.882

Trade Receivables 165.463 155.037

- Due From Related Parties 4.1 1.151 479

- Other Trade Receivables 7.1 164.312 154.558

Other Receivables 35.207 16.216

- Due From Related Parties 4.2 24.828 13.345

- Other Receivables 8.1 10.379 2.871

Inventories 9 114.273 95.217

Prepared Expenses 10.1 3.631 2.469

Current Income Tax Assets 27 301 657

Other Current Assets 19.1 10.769 1.386

Non-Current Assets 1.083.835 1.044.754Other Receivables 1.838 1.301

- Other Receivables 8.2 1.838 1.301

Investment Property 11 229.907 206.723

Property, Plant and Equipment 12 605.963 591.266

Intangible Assets 218.118 222.843

- Goodwill 14 183.543 183.313

- Other Intangible Assets 13 34.575 39.530

Prepared Expenses 10.2 3.623 4.287

Deferred Tax Asset 27 11.882 2.404

Other Non-Current Assets 19.2 12.504 15.930

TOTAL ASSETS 1.482.668 1.402.618

Audited

LIABILITIES Notes 31 December 2014 31 December 2013

Short-Term Liabilities 234.908 284.505Loans and Borrowings 6 43.505 89.028

Trade Payables 140.972 128.271

- Due to Related Parties 4.3 12.314 6.685

- Other Trade Payables 7.2 128.658 121.586

Other Payables 12.600 28.912

- Due to Related Parties 4.4 8.665 12.525

- Other Payables 8.3 3.935 16.387

Employee Benefit Liability 17.1 4.409 2.600

Tax Liabilities 27 6.202 2.345

Deferred Income 10.3 7.568 14.272

Short-term Provisions 8.932 7.952

- Employee Benefits Short-term Provisions 17.2 6.225 4.808

- Other Short-term Provisions 15.3 2.707 3.144

Other Short - Term Liabilities 19.3 10.720 11.125

Long-Term Liabilities 106.337 89.435Loans and Borrowings 6 845 53

Other Payables 17.981 2.813

- Other Payables for related parties 4.5 17.981 --

- Other Payables for nonrelated parties 8.4 -- 2.813

Long Term Provisions 40.334 41.140

- Employee Benefits Long-term Provisions 17.3 18.230 16.202

- Other Long-term Provisions 15.3 22.104 24.938

Deferred Income 10.4 -- 101

Deferred Tax Liability 27 42.937 41.901

Other Long-Term Liabilities 19.4 4.240 3.427

TOTAL LIABILITIES 341.245 373.940

EQUITY 1.141.423 1.028.678Equity attributable to equity holders of the Company 919.710 810.581Paid-in Capital 20 87.112 87.112

Inflation Adjustment on Capital 20 20.069 20.069

Cross Shareholding Adjustment on Capital 20 (3.381) (3.381)

Share Premiums and Discounts 20 161.554 161.554

Accumulated Other Comprehensive Income/Expensethat will not be Reclassified through Profit or Loss 98.031 104.525

- Revaluation and remeasurement gains 98.031 104.525

Accumulated Other Comprehensive Income/Expensethat will be Reclassified through Profit or Loss 3.720 3.435

- Foreign Currency Translation Differences 3.720 3.435

Legal Reserves 20 24.828 22.016

Retained Earnings 416.911 380.950

Profit for the Period 110.866 34.301

Non-Controlling Interest 221.713 218.097TOTAL EQUITY 1.482.668 1.402.618

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Audited

PROFIT OR LOSS Notes 31 December 2014 31 December 2013

Revenues 21 780.621 676.503

Cost of Sales (-) 21 (587.446) (533.215)

GROSS PROFIT 21 193.175 143.288Administrative expenses (-) 22.1 (88.650) (74.761)

Marketing expenses (-) 22.2 (21.609) (17.325)

Other income from operating activities 23.1 18.524 14.214

Other expense from operating activities (-) 23.2 (5.167) (14.023)

OPERATING PROFIT 96.273 51.393

Income from investing activities 24.1 40.282 33.009

Expense from investing activities (-) 24.2 (3.769) (213)

Loss of investments accounted with equity method (731) (1.051)

PROFIT BEFORE FINANCE EXPENSE 132.055 83.138Finance income 25.1 25.290 6.954

Finance costs (-) 25.2 (24.867) (37.148)

PROFIT BEFORE INCOME TAX 132.478 52.944

Tax Expense (16.118) (16.674)Income Tax Expense 27 (23.875) (9.140)

Deferred Tax Benefit 27 7.757 (7.534)

NET PROFIT 116.360 36.270

Distribution of Total Comprehensive IncomeNon-Controlling Interest 5.494 1.969

Owners of the Company 110.866 34.301

Total Comprehensive Income 116.360 36.270

Basic and Diluted Earnings per Share (TL) 28 1,2812 0,3964

OTHER COMPHERENSİVE INCOME:Accumulated Other Comprehensive Income/Expensethat will be Reclassified through Profit or LossTranslation differences 462 2.253

Accumulated Other Comprehensive Income/Expensethat will not be Reclassified through Profit or LossDefined Benefit Plans Re-measurement losses (3.018) (2.969)

Other comprehensive income (2.556) (716)

TOTAL COMPRHERENSIVE INCOME 113.804 35.554

Distribution of total comprehensive incomeNon-controlling interest 5.417 1.969

Equity holders of the Company 108.387 33.585

Total comprehensive income 113.804 35.554

Çimentaş İzmir Çimento Fabrikası Türk Anonim Şirketi and Its SubsidiariesConsolidated Statement of Profit or Loss and Other Comprehensive Income For the Year Ended31 December 2014(Amounts expressed in thousand Turkish Lira (“thousand TL”) unless otherwise stated)

3534

Accumulated Accumulated Other Other

Comprehensive ComprehensiveIncome/Expense Income/Expense

that will not be that will not Reclassified be Reclassified through Profit through Profit Loss or Loss Accumulated Profits

Share Inflation Cross Share Revaluation Translation Legal Retained Profit for Equity Non- TotalCapital Adjustment Shareholding Premium and Reserve Reserves Earnings the holders of Controlling Equity

on Share Capital Adjustment and remeasurement period the Interest PRIOR PERIOD on Capital Discounts Reserve Company

Balance At 1 January 2013 87.112 20.069 (3.381) 161.554 115.633 456 22.016 355.499 9.798 768.756 155.999 924.755Impact of changes in accounting policies -- -- -- -- (5.770) -- -- 1.835 2.946 (989) 989 --

Balance At 1 January 2013 (restated) 87.112 20.069 (3.381) 161.554 109.863 456 22.016 357.334 12.744 767.767 156.988 924.755Profit for the period -- -- -- -- -- -- -- -- 34.301 34.301 1.969 36.270

Translation Reserve -- -- -- -- -- 2.253 -- -- -- 2.253 -- 2.253

Revaluation of property, plant and equipment reclassified as investment property -- -- -- -- (2.369) -- -- 2.369 -- -- -- --

Defined Benefit Plans Re-measurement losses -- -- -- -- (2.969) -- -- -- -- (2.969) -- (2.969)

Total Other Comprehensive Income -- -- -- -- (5.338) 2.253 -- 2.369 -- (716) -- (716)Total Comprehensive Income -- -- -- -- (5.338) 2.253 -- 2.369 34.301 33.585 1.969 35.554Dividend payment -- -- -- -- -- -- -- (581) -- (581) -- (581)

Transfers -- -- -- -- -- -- -- 12.744 (12.744) -- -- --

Changes in non-controlling interest without loss of control -- -- -- -- -- 726 -- 9.084 -- 9.810 59.140 68.950

Balance at 31 December 2013 87.112 20.069 (3.381) 161.554 104.525 3.435 22.016 380.950 34.301 810.581 218.097 1.028.678

Balance at January 2014 87.112 20.069 (3.381) 161.554 104.525 3.435 22.016 380.950 34.301 810.581 218.097 1.028.678Profit for the period -- -- -- -- -- -- -- -- 110.866 110.866 5.494 116.360

Translation Reserve -- -- -- -- -- 285 -- -- -- 285 177 462

Sales of tangible fixed asset classified as inventment property -- -- -- -- (3.730) -- -- 3.730 -- -- -- --

Defined Benefit Plans Re-measurement losses -- -- -- -- (2.764) -- -- -- -- (2.764) (254) (3.018)

Total Other Comprehensive Income -- -- -- -- (6.494) 285 -- 3.730 -- (2.479) (77) (2.556)Total Comprehensive Income -- -- -- -- (6.494) 285 -- 3.730 110.866 108.387 5.417 113.804Dividend payment -- -- -- -- -- -- -- (404) -- (404) -- (404)

Transfers -- -- -- -- -- -- 2.812 31.489 (34.301) -- -- --

Changes in non-controlling interest without loss of control -- -- -- -- -- -- -- 1.146 -- 1.146 (1.801) (655)

Balance at 31 December 2014 87.112 20.069 (3.381) 161.554 98.031 3.720 24.828 416.911 110.866 919.710 221.713 1.141.423

Çimentaş İzmir Çimento Fabrikası Türk Anonim Şirketi and Its SubsidiariesConsolidated Statement of Changes in Equity For the Year Ended 31 December 2014(Amounts expressed in thousand Turkish Lira (“thousand TL”) unless otherwise stated)

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Audited

Notes 31 December2014 31 December 2013

A. CASH FLOWS FROM OPERATING ACTIVITIES 90.452 110.639Profit for the period 116.360 36.270

Adjustments to current year profit reconciliation 47.149 64.981Adjustments in depreciation and amortization 12, 13, 18 61.664 55.693

Adjustments for provision for employee severance indemnity 17.3, 18 1.783 1.635

Doubtful receivables provisions 7.1, 23.2 756 184

Adjustment for other provisions 9.905 6.239

Adjustment for interest income and expense 1.231 4.053

Adjustment for other income 23.1 (7.669) --

Adjustment for unrealized foreign currency translation difference (857) 13.533

Adjustment for fair value 24.1 (35.008) (32.701)

Adjustments for impairments of Intangible Assets 24.2 3.769 --

Adjustment for tax expense 27 16.118 16.674

Share of loss of equity accounted investees 731 1.051

Adjustment in gain on sale of property, plant and equipment (5.274) (1.380)

Changes in working capital (47.626) 20.753Adjustments for increase in inventories (14.914) (4.817)

Adjustments for increase in trade receivable (10.520) (6.130)

Adjustments for increase/decrease in other receivables from operating activities (5.321) (342)

Adjustments for increase/decrease in trade payables 13.844 28.573

Adjustments for decrease /increase in other payables from operating activities (11.654) 3.149

Adjustments for decrease/(increase) in working capital (19.061) 320

Cash flow from operating activities 115.883 122.004Tax payment 27 (19.237) (7.703)

Employee termination benefits paid (6.194) (3.662)

Audited

Notes 31 December2014 31 December 2013

B. CASH FLOW USED IN INVESTİNG ACTIVITIES (74.120) (20.025)Cash inflow by proceeds from sales of tangible and intangibles assets 3.456 3.675

Cash outflow by proceeds from buys of tangible and intangible assets 12, 13 (83.707) (93.001)

Adjustments for increase in other receivables from related parties 3.609 (5.974)

Interest received 2.522 2.242

Sales of investment property -- 3.750

Cash payment during acquisition of a subsidiary -- 68.950

Derivatives to cash outflow -- (10.363)

Derivatives to cash inflow -- 10.696

C. CASH FLOW USED IN FINANCING ACTIVITIES (33.865) (53.284)Adjustment for increase/decrease in other payables to related parties 13.032 9.302

Cash inflow from debts 57.349 102.101

Cash outflow from debt payments (100.383) (159.085)

Dividend payment (404) (581)

Interest payment (3.459) (5.021)

DECREASE/INCREASE IN CASH AND CASH EQUIVALENT BEFORE TRANSLATION DIFFERENCES (A+B+C) (17.533) 37.330

D. EFFECT OF FOREIGN CURRENCY TRANSLATION DIFFERENCES ON CASH AND CASH EQUIVALENTS (462) (4.440)NET DECREASE IN CASH AND CASH EQUİVALENTS (A+B+C+D) (17.995) 32.890

E. BEGİNNİNG OF CASH AND CASH EQUİVALENT BALANCES 5 86.774 53.884ENDİNG OF CASH AND CASH EQUİVALENT BALANCES (A+B+C+D+E) 5 68.779 86.774

Çimentaş İzmir Çimento Fabrikası Türk Anonim Şirketi and Its SubsidiariesConsolidated Statement of Cash Flows For the Year Ended 31 December 2014(Amounts expressed in thousand Turkish Lira (“thousand TL”) unless otherwise stated)

3Annual Report 2014


Notes to theFinancial Statements

40 Notes to the Financial Statements

4

Çimentaş and Çimbeton are registered to Capital Markets Board (“CMB”) and their shares are traded on BIST.As of 31 December 2014, 2,20% (2013:2,20%) of Çimentaş’s shares and 49,65% (2013: 49,65%) of Çimbetonshares are listed on ISE under the names, “CMENT” and “CMBTN”, respectively.The registered address of the Company is Kemalpaşa Caddesi No:4, 35070 Işıkkent/ İzmir /Turkey.The Company and its subsidiaries are named as “The Group” throughout the report.

2. Basis of Presentation of Financial Statements

2.1 Basis of Preparation2.1.1 Statements of ComplianceThe Group maintains its book of accounts and prepares its statutory financial statements in TL in accordancewith the Turkish Uniform Chart of Accounts, Turkish Commercial Code and Turkish Tax Code. The accompanying consolidated financial statements have been prepared in accordance with TurkishAccounting Standards (“TAS”) issued by Public Oversight Accounting and Auditing Standards Authority ofTurkey(“POA”), according to communiqué (“Communiqué”) Serial: II, No: 14.1 “Basis for Financial Reportingin the Capital Markets” issued by CMB which is published on 13 June 2013 in the Official Gazette numbered28676. TAS is composed of Turkish Accounting Standards, Turkish Financial Reporting Standards, appendixesand interpretations.In accordance with article 5 of the Communiqué, the Companies which are reporting under CMB legislationare required to apply Turkish Accounting Standards / Turkish Financial Reporting Standards (“TAS”/”TFRS”)which are published by Public Oversight of Accounting and Auditing Standards Board (“POA”).

Çimentaş İzmir Çimento Fabrikası Türk Anonim Şirketi and Its SubsidiariesNotes to the Consolidated Financial Statements as of and for the year ended 31 December 2014

1. Organization and Nature of Business

Çimentaş İzmir Çimento Fabrikası Türk A.Ş. (“Çimentaş” or “the Company”), parent company, was establishedon 7 August 1950. The Company operates in production, sale and transportation of bulk and bagged cement.The major shareholder of the Company is Cementir Holding Group which is resident in Italy.Cementir Holding SPA subsidiaries and shareholder Aalborg Portland transferred Çimentaş İzmir ÇimentoFabrikası Türk A.Ş.’s 25% shares which are TL 21.778 thousand nominal value and each of that TL 0,01,2.177.811.580 items share has sold unit price of share is TL 10,50 equals to 228.645 TL to Spring RainInvestment SL.Besides, the main shareholder of Çimentaş İzmir Çimento Fabrikası Türk A.Ş. is Cementir Holding SPAtransferred their shares of Çimentaş on 10 September 2013 which equals 46% of shares with TL 42.072thousand nominal value and each of that TL 0,01, 4.007.173.307 items share all related Aalborg Portland hastransferred unit price of share is TL 11,04 equals to 442.559 TL to Spring Rain Investment SL. After theseoperations, Spring Rain Investment SL’s share of direct subsidiary has reached to 71%.On July 8, 2014, Simest S.p.A , owned 1,38 % of Çimentaş shares, transferred all its shares on Çimentaş tothe Cement Holding SpA. Cementır Holding S.p.A. purchased all shares of Simest S.p.A on Çimentaşamounting to 119,884,156 shares with the price of 11,04 TL per each share and Cementır Holding S.p.A.increased direct shareholding of 25,42 % to 26,80 % on Çimentaş.On September 12, 2014, Cementir Holding, former parent company of Çimentaş İzmir Çimento Fabrikası TürkA.Ş., transferred 14% of the Company’s shares which are TL 12,196 thousand nominal value with a price of TL0.01 per share. 1.219.574.485 shares of the Company was purchased with a price of TL 11,56 per share equalsto TL 140,975 thousand by Aalborg Portland Espana SL. After these transactions, Aalborg Portland EspanaSL’s share of direct subsidiary has reached to 85%, Cementir Holding’s share of direct subsidiary has decreasedto 12.80%. Çimentaş management has not been changed due to the fact that Aalborg Portland Espana SL. isan indirect subsidiary of Cementir Holding SPA.Çimentaş’s subsidiaries (“Subsidiaries”) and their major line of operations are as follows:

Faaliyet Başlıca faaliyet konusuBağlı Ortaklıklar gösterdiği ülke

• Çimbeton Hazır Beton ve Prefabrik Yapı Ready mixed concreteElemanları 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 Production of flying ash

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

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

• Neales Waste Management Holdings Limited (“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 R&D”) Limited İngiltere Research and development

(*) Recydia Atık Yönetimi, Yenilenebilir Enerji Üretimi, Nakliye ve Lojistik Hizmetleri Sanayi ve Ticaret A.Ş., Hereko İstanbul 1 Atık Yönetimi Nakliye Lojistik Elektrik ÜretimSanayi ve Ticaret A.Ş., Elazığ Altınova Çimento Sanayi Ticaret A.Ş. and Bakırçay Çimento Sanayi ve Ticaret A.Ş. companies, are merged due to Article 136 of the TurkishCommercial Code and more articles within the framework of the provisions of the merger by takeover under Recydia Atık Yönetimi, Yenilenebilir Enerji Üretimi, Nakliyeve Lojistik Hizmetleri Sanayi ve Ticaret A.Ş.. The registration accrued as of 31 December 2014.

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(*) Spring Rain Investment SL’s legal name was changed to Aalborg Portland Espana SL as of 2 July 2014.

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iii. Jointly controlled entitiesThe companies that are in joint control of the Group, and on which the Group has significant effect on theirfinancial and operating policies are defined as joint ventures. The profit or loss is reflected in the accompanyingconsolidated financial statements on the recognized acquiring cost of the joint ventures at the beginning, inaccordance with equity method, according to the participation rate from the net assets to the related company.In the case of participant’s whole share in joint venture decreases to zero as a result of losses, the participantfollows to the extent that the liabilities undertaken or payments made on behalf of the joint venture in itsfinancial statements as liability or loss.

iv. Loss of ControlThe Group derecognizes the assets and liabilities of the subsidiary, any non-controlling interests and the othercomponents of equity related to the subsidiary. Any surplus or deficit arising on the loss of control is recognizedin profit or loss. If the Group retains any interest in the previous subsidiary, then such interest is measured atfair value at the date that control is lost.

v. Transactions eliminated on consolidationIntra-group balances and transactions, and any unrealized income and expenses arising from intra-grouptransactions, are eliminated in preparing the consolidated financial statements. Unrealized gains arising fromtransactions with equity-accounted investees are eliminated against the investment to the extent of the Group’sinterest in the investees. Unrealized losses are eliminated in the same way as unrealized gains, but only tothe extent that there is no evidence of impairment

2.1.2 Basis of presentation of financial statementsAs at 31 December 2014, the accompanying consolidated financial statements and notes are prepared inaccordance with CMB’s Communiqué “Principles of Financial Reporting in Capital Markets” which waspublished in the Official Gazette dated 13 June 2013 and numbered 28676 Series:II, No.14.1Additionally, the accompanying consolidated financial statements and notes are presented in accordance withillustrative financial statements published by CMB on 7 June 2013.

Approval of consolidated financial statementsThe Group’s consolidated financial statements as of 31 December 2014 were approved by the board of directorsof the Company at 6 March 2015. The General Assembly has the right to emendate the financial statementsafter the publication of the financial statements.

2.1.3 Functional and presentation currencyThe accompanying consolidated financial statements are presented in Turkish Lira (“TL”) which is the Group’sfunctional currency. The functional currency of NWM Holding, NWM, Quercia, CHS, subsidiaries in Englandand UK R&D, jointly controlled company is Great Britain Pound (“GBP”). All financial information presentedin thousand TL unless otherwise stated.

2.1.4 Basis of MeasurementThe consolidated financial statements have been prepared on the historical cost basis except fair valuechanges of financial assets are accounted through profit or loss and investment properties

2.1.5 Basis of ConsolidationThe accompanying consolidated financial statements include the financial statements of the parent companyand its controlled subsidiary. Control is ensured by having control over the financial and operational policiesof a business in order to obtain benefits from its activities.

i. Non-controlling InterestsNon-controlling interest are measured at their proportionate share of the acquiree’s identifiable net assets atthe date of acquisition. Changes in the Group’s interest in a subsidiary that do not result in a loss of controlare accounted for as equity transactions.Losses applicable to non-controlling interests in a subsidiary are allocated to the non-controlling interestseven if doing so causes the non-controlling interests to have a deficit balance.

ii. Subsidiaries Subsidiaries are the companies that the Company has direct or indirect control over their operations. TheGroup takes interests from the results of the operations of the subsidiaries according to its control over itssubsidiaries’ financial and operational policies. The financial statements of subsidiaries are included in theconsolidated financial statements from the date that control commences until the date that control ceases.The accounting policies are changed when necessary due to adjusting to the politics accepted by the Group.In the case of participant’s whole share in joint venture decreases to zero as a result of losses, the participantfollows to the extent that the liabilities undertaken or payments made on behalf of the joint venture in itsfinancial statements as liability or loss.As of 31 December 2014 and 2013, the Group’s subsidiaries and its shares are as follows:

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Çimentaş and its subsidiaries’ direct or Indirect shares (%)

2014 2013

Destek 99,99 99,99

Recydia (*) 61,61 63,01

NWM Holding 61,61 63,01

NWM 61,61 63,01

Quercia 61,61 63,01

CHS 61,61 63,01

Süreko 61,44 59,38

Kars Çimento 58,38 58,38

Çimbeton 50,32 50,32

Ilion Çimento 50,28 50,28

Hereko (*) -- 63,01

Elazığ Çimento (*) -- 60,94

Bakırçay (*) -- 58,38

(*) Recydia Atık Yönetimi, Yenilenebilir Enerji Üretimi, Nakliye ve Lojistik Hizmetleri Sanayi ve Ticaret A.Ş., Hereko İstanbul 1 Atık YönetimiNakliye Lojistik Elektrik Üretim Sanayi ve Ticaret A.Ş., Elazığ Altınova Çimento Sanayii Ticaret A.Ş. ile Bakırçay Çimento Sanayi ve TicaretA.Ş. şirketleri, Türk Ticaret Kanunu'nun 136. ve devamı maddelerinde düzenlenen devralma suretiyle birleşme hükümleri çerçevesinde,Recydia Atık Yönetimi, Yenilenebilir Enerji Üretimi, Nakliye ve Lojistik Hizmetleri Sanayi ve Ticaret A.Ş. bünyesinde birleşmiş olup,birleşmeye dair tescil işlemi 31 Aralık 2014 tarihi itibarıyla gerçekleştirilmiştir.

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TAS 32 Financial Instruments: Presentation - Offsetting Financial Assets and Financial liabilities (Amended):The amendments clarify the meaning of ―currently has a legally enforceable right to set-off and also clarifythe application of the IAS 32 offsetting criteria to settlement systems which apply gross settlementmechanisms that are not simultaneous. The amendments had no significant impact on the consolidatedfinancial position or performance of the Group.TAS 36 Impairment of Assets – Recoverable Amount Disclosures for Non-Financial Assets (Amendments): Asa consequential amendment to TFRS 13 Fair Value Measurement, some of the disclosure requirements in IAS36 Impairment of Assets regarding measurement of the recoverable amount of impaired assets are modified.The amendments required additional disclosures about the measurement of impaired assets (or a group ofassets) with a recoverable amount based on fair value less costs of disposal. The amendment has affecteddisclosure principles of the recoverable amounts for non-financial assets. The amendments had no significantimpact on the financial position or performance of the Group.TAS 39 Financial Instruments: Recognition and Measurement - Novation of Derivatives and Continuation ofHedge Accounting (Amendments): Amendments to TAS 39 Financial Instruments: Recognition andMeasurement provides a narrow exception to the requirement for the discontinuation of hedge accounting incircumstances when a hedging instrument is required to be novated to a central counterparty as a result oflaws or regulations. The amendments had no significant impact on the financial position or performance ofthe Group.TFRIC Interpretation 21 Levies: The interpretation clarifies that an entity recognizes a liability for a levy whenthe activity that triggers payment, as identified by the relevant legislation, occurs. It also clarifies that a levyliability is accrued progressively only if the activity that triggers payment occurs over a period of time, inaccordance with the relevant legislation. For a levy that is triggered upon reaching a minimum threshold, theinterpretation clarifies that no liability should be recognized before the specified minimum threshold isreached. The Interpretation had no significant impact on the financial position or performance of the Group.

2.5.2 Standards issued but not yet effective and not early adopted Standards, interpretations and amendments to existing standards that are issued but not yet effective up tothe date of issuance of the consolidated financial statements are as follows. The Group will make the necessarychanges if not indicated otherwise, which will be affecting the consolidated financial statements anddisclosures, after the new standards and interpretations become in effect.TFRS TFRS 9 Financial Instruments – Classification and measurement : As amended in December 2012, thenew standard is effective for annual periods beginning on or after 1 January 2015. Phase 1 of this new TFRS9 introduces new requirements for classifying and measuring financial assets and liabilities. The amendmentsmade to TFRS 9 will mainly affect the classification and measurement of financial assets and measurementof fair value option (FVO) liabilities and requires that the change in fair value of a FVO financial liabilityattributable to credit risk is presented under other comprehensive income. Early adoption is permitted. TheGroup is in the process of assessing the impact of the standard on financial position or performance of theGroup.

2.1.6 Comparative InformationsThe Group has prepared the consolidated statement of financial position as at 31 December 2014 comparativelywith the consolidated statement of financial position as at 31 December 2013, and the consolidated statementof profit or loss and other comprehensive income, consolidated statement of changes in equity andconsolidated statement of cash flows for the year ended 31 December 2014 comparative to the year ended 31December 2013.

2.2 Changes in Accounting PoliciesGroup has consistently applied the accounting policies set out to all periods presented in these consolidatedfinancial statements. The Group recognize, measure and present similar transactions, events and situationson a consistent basis. Material changes in accounting policies or material errors are corrected retrospectivelyby restating the prior period consolidated financial statements. As of 31 December 2014, the Group has nochanges in accounting policies.

2.3 Changes in Accounting Estimates and ErrorsMaterial errors are corrected retrospectively by restating the prior period consolidated financial statements.The effect of changes in accounting estimates affecting the current period is recognized in the current period;the effect of changes in accounting estimates affecting current and future periods is recognized in the currentand future periods. As of 31 December 2014, the Group has no changes in accounting estimation or error.

2.4 OffsettingAll items with significant amounts and nature, even with similar characteristics, are presented separately inthe financial statements. Insignificant amounts are grouped and presented by means of items having similarsubstance and function. When the nature of transactions and events necessitate offsetting, presentation ofthese transactions and events over their net amounts or recognition of the assets after deducting the relatedimpairment are not considered as a violation of the rule of non-offsetting.

2.5 Standards and interpretations issued but not yet effective The accounting policies adopted in preparation of the consolidated financial statements as at 31 December2014 are consistent with those of the previous financial year, except for the adoption of new and amendedTFRS and TFRIC interpretations effective as of 1 January 2014. The effects of these standards andinterpretations on the Group’s financial position and performance have been disclosed in the relatedparagraphs.

2.5.1 The new standards, amendments and interpretations which are effective as at 1 January 2014 are asfollowsInvestment Entities (Amendments to TFRS 10, TFRS 12 and TAS 27): TFRS 10 is amended for entities thatmeet the definition of an investment entity to qualify for the consolidation exception. According to theamendment, financial assets of an investment entity should be measured at fair value under TFRS 9 FinancialInstruments, or to the extent possible under TMS 39 Financial Instruments: Recognition and Measurement.The amendments had no significant impact on the consolidated financial position or performance of the Group.

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TFRS 11 – Accounting for acquisition of interests in joint operations: The amendments clarify whether TFRS3 Business Combinations applies when an entity acquires an interest in a joint operation that meets thatstandard’s definition of a business. The amendments require business combination accounting to be appliedto acquisitions of interests in a joint operation that constitutes a business. The amendments apply prospectivelyfor annual periods beginning on or after 1 January 2016. Early adoption is permitted. The Group does notexpect that these amendments will have significant impact on the financial position or performance of theGroup.The IASB issued Annual Improvements to IFRSs - 2010–2012 and 2011-2013 Cycle. The amendments areeffective as of 1 July 2014.

2.6 Resolutions Promulgated by Public Oversight AuthorityThe POA has issued the Authority’s Principle Decisions on the following topics for companies preparingfinancial statements in accordance with TAS until further amendments are made to TAS on the relevantmatters. These principle decisions are issued with the aim of promoting reliability, relevance, comparability,understandability and uniformity and easing audit ability of the financial information presented to users.Details of these resolutions and impact on the Group stated as below: Financial Statement Examples and User Guide (2013-1): Financial statement examples and user guide areprepared topics for companies preparing financial statements in accordance with the TAS with the aim ofpromoting reliability, relevance, comparability, understandability and uniformity and easing audit ability of thefinancial information presented to users. This resolution is effective from the first reporting period after thatresolution publication date 20 May 2013. The Group made reclassifications explained in Note 2.2 in order tofulfill the requirements of this resolution and comply with illustrative financial statements published by CMBon 7 June 2013Other resolutions mentioned below became effective for the reporting periods subsequent to 21 July 2013 andapplicable from annual reporting periods beginning after 31 December 2012. It is not expected that the belowmentioned resolutions would have impact on the consolidated financial statements of the Group.Accounting of Combinations under Common Control (2013-2): Combination of entities under commoncontrol should be recognized using the pooling of interest method. Thus, goodwill should not be includedin the financial statements. The effect of combination of entities under common control should berecognized on “The effect of Combination of Entities or Business Under Common Control” under equityas equalizing balance. The financial statements should be prepared as if the combination has takenplace as of the beginning of the reporting period in which the common control occurs and should bepresented comparatively from the beginning of the reporting period in which the common controloccurred. Accounting of Redeemed Share Certificates (2013-3): Clarification has been provided on the conditions andcircumstances where the redeemed share certificates shall be recognized as a financial liability or equitybased financial instruments.Accounting of Cross Shareholding Investments (2013-4): Accounting of cross investment in associatesis assessed based on the type of the investment, the subsidiary holding the equity based financialinstruments of the parent, the associates or joint ventures holding the equity based financial instrumentsof the parent, the parent’s equity based financial instruments are held by an entity, which is accounted asan investment within the scope of TAS 39 and TFRS 9 by the parent. With this resolution, this topic hasbeen assessed under three main headings above and the recognition principles for each one of them hasbeen determined.

2.5.3 The new standards, amendments and interpretations that are issued by the International AccountingStandards Board (IASB) but not issued by POAThe following standards, interpretations and amendments to existing IFRS standards are issued by the IASBbut not yet effective up to the date of issuance of the financial statements. However, these standards,interpretations and amendments to existing IFRS standards are not yet adapted/issued to TFRS by the POA,thus they do not constitute part of TFRS. Such standards, interpretations and amendments that are issued bythe IASB but not yet issued by the POA are referred to as IFRS or IAS. The Group will make the necessarychanges to its consolidated financial statements after the new standards and interpretations are issued andbecome effective under TFRS. IFRS 9 Financial Instruments – Hedge Accounting and amendments to TFRS 9, TFRS 7 and TAS 39 - (2013):In November 2013, the IASB issued a new version of IFRS 9, which includes the new hedge accountingrequirements and some related amendments to IAS 39 and IFRS 7. Entities may make an accounting policychoice to continue to apply the hedge accounting requirements of IAS 39 for all of their hedging transactions.Further, the new standard removes the 1 January 2015 effective date of IFRS 9. The new version of IFRS 9issued after IFRS 9 (2013) introduces the mandatory effective date of 1 January 2018 for IFRS 9, with earlyadoption permitted. The Group is in the process of assessing the impact of the standard on financial positionor performance of the Group. Defined Benefit Plans: Employee Contributions (Amendments to TAS 19): The amendments introduce a reliefthat will reduce the complexity and burden of accounting for certain contributions from employees or thirdparties. When contributions are eligible for the practical expedient, a company is permitted (but not required)to recognize them as a reduction of the service cost in the period in which the related service is rendered.IFRS 14 Regulatory Deferral: IASB has started a comprehensive project for Rate Regulated Activities in2012. As part of the project, IASB published an interim standard to ease the transition to IFRS for rateregulated entities. The standard permits first time adopters of IFRS to continue using previous GAAP toaccount for regulatory deferral account balances. The interim standard is effective for financial reportingperiods beginning on or after 1 January 2016, although early adoption is permitted. The Group does notexpect that these amendments will have significant impact on the financial position or performance of theGroup.IFRS 15 Revenue from Contracts with customers: The standard replaces existing IFRS and United StatesGenerally Accepted Accounting Principles (“US GAAP”) guidance and introduces a new control-based revenuerecognition model for contracts with customers. In the new standard, total consideration measured will bethe amount to which the Company expects to be entitled, rather than fair value and new guidance have beenintroduced on separating goods and services in a contract and recognizing revenue over time.The standard is effective for annual periods beginning on or after 1 January 2017, with early adoption permittedunder IFRS. The Group is in the process of assessing the impact of the amendment on financial position orperformance of the Group Amendments to TAS 16 and TAS 38 – Clarification of acceptable methods of depreciation and amortization:The amendments to TAS 16 Property, Plant and Equipment explicitly state that revenue-based methods ofdepreciation cannot be used for property, plant and equipment. The amendments to TAS 38 Intangible Assets introduce a rebuttable presumption that the use of revenue-based amortization methods for intangible assets is inappropriateThe amendments are effective for annual periods beginning on after 1 January 2016, and are to be appliedprospectively. Early adoption is permitted. The Group does not expect that these amendments will havesignificant impact on the financial position or performance of the Group.

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ii. Non-derivative financial liabilitiesNon-derivative financial liabilities comprise borrowings, trade and other payables, due to related parties andshort term liabilities. Non-derivative financial liabilities are recognized as follows:Financial liabilities are recognized initially at fair value less any directly attributable transaction costs.Subsequent to initial recognition, these financial liabilities are reflected in financial statements with theircurrent values of reimbursement using effective interest rate, and the differences with the initial cost arereflected in the comprehensive income statement during the maturity of the liabilities.Other non-derivative financial liabilities are measured at amortized cost using the effective interest method,less any impairment. Short term other receivables and payables are disclosed at their cost values.The Group derecognizes a financial liability when its contractual obligations are discharged or cancelled orexpired.As of 31 December 2014, the Group does not have any non-derivative financial instruments (31 December2013: None).

2.7.3 Tangible AssetsThe costs of tangible assets purchased before 1 January 2005 are restated for the effects of inflation in TLunits current at 31 December 2004 less accumulated depreciation and impairment losses. The costs oftangible assets purchased after 1 January 2005 are carried at cost less accumulated depreciation andimpairment losses.Cost includes expenditure that is directly attributable to the acquisition of the asset. Gains or losses ondisposals of property plant and equipment are included in the relevant income and expense accounts and thecost and accumulated depreciation of property, plant and equipment has been written off from the relevantaccounts as appropriate. When parts of property, plant and equipment have different useful lives, they areaccounted for as separate items of property, plant and equipment.

Subsequent costsThe cost of replacing part of an item of property plant and equipment together with the repair and maintenancecosts can be capitalized. Subsequent cost can be capitalized if it is probable that the future economic benefitswill flow to the Company. All other expense items are recognized in the consolidated statement of profit orloss and other comprehensive income on an accrual basis.

DepreciationDepreciation on the property and equipment is provided on straight line method according to their useful livesfrom the date of recognition or assembly of the related assets. Depreciation on the leaseholds is provided onstraight line method according to shortest of their rent period or useful lives.

2.7 Summary of Significant Accounting PoliciesSignificant valuation principles applied in the preparation of the financial statements and the accountingpolicies are summarized below.

2.7.1 Foreign Currency TransactionsTransactions in foreign currencies are translated to TL at exchange rates ruling at the date of the transactions.Monetary assets and liabilities denominated in foreign currencies at the reporting date are translated to TLat the exchange rate at that date. Foreign currency differences arising on translation of foreign currencytransactions are recognized in the income statement. Monetary items foreign currency translation gain orloss represents the difference between the effective interest rate amortized amount of currency in thebeginning period by correcting the impact of payment denominated in foreign currency and amount translatedat the period end.Non-monetary assets and liabilities denominated in foreign currencies that are measured at fair value areretranslated to the functional currency at the exchange rate at the date that the fair value was determined.Non-monetary items in a foreign currency that are measured based on historical cost are translated usingthe exchange rate at the date of the transaction.

2.7.2 Financial Instrumentsi. Non-derivative financial assetsThe Group initially recognizes loans and receivables and deposits on the date that they are originated. Allother financial assets (including assets designated at fair value through profit or loss) are recognizedinitially on the trade date at which the Group becomes a party to the contractual provisions of theinstrument. The Group derecognizes a financial asset when the contractual rights to the cash flows from the asset expire,or it transfers the rights to receive the contractual cash flows on the financial asset in a transaction in whichsubstantially all the risks and rewards of ownership of the financial asset are transferred. Any interest intransferred financial assets that is created or retained by the Group is recognized as a separate asset orliability. Financial assets and liabilities are offset and the net amount presented in the statement of financial positiononly when, the Group has a legal right to offset the amounts and intends either to settle on a net basis or torealize the asset and settle the liability simultaneously. Non-derivative financial assets, trade and other receivables, cash and cash equivalents consist of receivablesfrom related parties. Non-derivative financial assets are recorded at cost. Non-derivative financial assets arerecognized in the following way after they are recorded.

Loans and receivablesLoans and receivables are financial assets with fixed or determinable payments that are not quoted in anactive market. Such assets are recognized initially at fair value plus any directly attributable transaction costs.Subsequent to initial recognition loans and receivables are measured at amortized cost using the effectiveinterest method, less any impairment losses. Loans and receivables comprise cash and cash equivalents and trade and other receivables.

Cash and cash equivalentsCash and cash equivalents comprise cash balances and time deposits with original maturities of three monthsor less. Cash and cash equivalents are highly liquid investments with maturity periods of less than three-months and having no conversion risk exposure other than the impact of foreign currency changes.

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2.7.5 Investment propertiesInvestment properties are the real estates which are held to earn rental income and/or for capital appreciation.Investment properties were revalued on 31 December 2014. Investment properties are presented in thefinancial statements at their fair value determined in the revaluation work which is carried out by anindependent appraisal company accredited by the Capital Market Board. Appreciation or devaluation in thementioned properties is accounted in the consolidated profit or loss table. If an owner-occupied property becomes an investment property that will be carried at fair value, an entity shallapply TAS 16 up to the date of change in use. The entity shall treat any difference at that date between thecarrying amount of the property in accordance with TAS 16 and its fair value in the same way as a revaluationin accordance with TAS 16.Investment properties are derecognized when either they have been disposed of or when the investmentproperty is permanently withdrawn from use and no future economic benefit is expected from its disposal.Any gains or losses on the retirement or disposal of an investment property are recognized in the consolidatedstatement of income in the year of retirement or disposal. A gain or loss arising from a change in the fair valueof investment property shall be recognized in profit or loss for the period in which it arises.

2.7.6 LeasesLeases in terms of which the Group assumes substantially all the risks and rewards of ownership are classifiedas finance leases. Upon initial recognition the leased asset is recognized at an amount equal to the lower ofits fair value and the present value of the minimum lease payments on the asset side of the statement offinancial position and also as a liability on the liability side. Subsequent to initial recognition, the asset isaccounted for in accordance with the accounting policy applicable to that asset.Leases where a significant portion of the risks and rewards of ownership are retained by the lessor areclassified as operating leases. Payments made under operating leases (net off any incentives received fromthe leaser) are charged to the profit or loss statement on a straight-line basis over the period of the lease.

2.7.7 InventoriesInventories are valued at the lower of cost or net realizable value. The cost of the inventories includesexpenditure incurred in acquiring the inventories, production or conversion costs and other costs incurred inbringing them to their existing location and condition. Cost for finished goods includes overhead costs inaccordance with normal production capacity. Net realizable value is the estimated selling price in the ordinarycourse of business, less the costs of completion and selling expenses .The cost of inventories is based on theweighted average cost basis.

The useful lives of the related property, plant and equipments are as follows:Buildings and land improvements 5-50 yearsMachinery and equipment 4-25 yearsLeaseholds 5-20 yearsFurniture and fixture 4-20 yearsLands are not subject to depreciation since their useful lives are accepted as unlimited.The depreciation methods, useful lives and depreciated costs of the property, plant and equipment are reviewedevery reporting period.Leased assets are depreciated over the shorter of the lease term and their useful lives, unless it is reasonablycertain that the Group will obtain ownership by the end of the lease term.

Reclassification to investment propertyIf the usage of property has changed from own use to investment property, then it is reclassified to investmentproperty and measured with its fair value in the consolidated statement of financial position. Gains when itarises during the revaluation of fair value, the amount up to previously recorded in the profit or loss for thereason of impairment losses are recorded under the profit or loss; the remaining amount is recorded in thestatement of other comprehensive income and it is presented as revaluation gain under the equity. Lossesthat arise from revaluation of fair value are recognized in profit or loss.If the usage of the property has changed and reclassified as property, plant and equipment, the fair value ofthe property at the reclassification date will be considered as its cost. Any gain or loss on disposal of aninvestment property (calculated as the difference between the net proceeds from disposal and the carryingamount of the item) is recognised in profit or loss and other comprehensive income.

2.7.4 Intangible assetsIntangible assets are comprised of computer rights. The costs of intangible assets purchased before 1 January2005 are restated for the effects of inflation in TL units current at 31 December 2004 less accumulatedamortization and impairment losses. The costs of intangible assets purchased after 1 January 2005 are carriedat cost less accumulated amortization and impairment losses. If there is an impairment, the recorded valueof the intangible assets is decreased to their recoverable values.

AmortizationIntangible assets are amortized on a straight-line basis in consolidated statement of comprehensive incomeover their estimated useful lives.The useful lives of the related intangible assets are as follows:Rights 4-20 yearsKömürcüoda agreement 21 yearsThe depreciation method, useful lives and depreciated costs of the intangible assets are reviewed everyreporting period.

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2.7.9 Employee BenefitsAccording to the enacted laws the Group is liable to pay lump sum payments to its employees in case ofretirement or the termination of the employment contract of the employees except for the rules stated in thelabor laws. Such payments are computed according to the severance indemnity ceiling valid at the statementof financial position date. Employee severance indemnity recognized as the present value of the estimatedtotal reserve of the future probable obligation of the Group The Group makes compulsory premium payments to the Social Security Institution and does not have anyother liabilities. These premium payments are accrued at the financials as they incur.

2.7.10 Provisions, contingent liabilities and contingent assetsA provision is recognized in the accompanying consolidated financial statements if as a result of a past event,the Group has a present legal or constructive obligation that can be estimated reliably and it is probable thatan outflow of economic benefits will be required to settle the obligation. Contingent liabilities are reviewed to determine if there is a possibility that the outflow of economic benefitswill be required to settle the obligation. Except for the economic benefit outflow possibility is remote, suchcontingent liabilities is disclosed in the notes to the financial statements.If the entry of the economic benefit to the Group is possible, explanations are included in the disclosures ofthe financial statements about the contingent asset. If the entry of economic benefit is certain, the asset andits related income changes are included in the financial statements at the date that they occurred.

2.7.11 RevenueRevenue from sale of goods in the course of ordinary activities is measured at the fair value of the considerationreceived or receivable, net of returns, trade discounts and volume rebates. Revenue is recognized whenpersuasive evidence exists that the significant risk and rewards of ownership have been transferred to thebuyer, recovery of the consideration is probable, the associated costs and possible return of goods can beestimated reliably. Group systematically issues invoice after the issuance goods dispatched noted and therelated sales amount is transferred to consolidated statement of profit or loss and other comprehensiveincome.If there is a significant financing cost in the sales transaction, the fair value is determined by discountingfuture collections with the imputed interest rate. The difference between nominal values and carrying amountsis recognized as interest income on accrual basis.

2.7.8 Impairment of assetsFinancial AssetsA financial asset not carried at fair value through profit or loss is assessed at each reporting date to determinewhether there is any objective evidence that it is impaired. A financial asset is impaired if objective evidenceindicates that a loss event has occurred after the initial recognition of the asset and that the loss event had anegative effect on the estimated future cash flows of the asset that can be estimated reliably.Objective evidence that financial assets are impaired can include default or delinquency by a debtor,restructuring of an amount due to the Group on items that the Group would not consider otherwise, indicationsthat a debtor or issuer will enter bankruptcy. The Group considers evidences of impairment for receivables at both a specific asset or on collective level. Allindividually significant receivables are assessed for specific impairment. The remaining financial assets areassessed collectively in groups that share similar credit risk characteristics.An impairment loss in respect of a financial asset measured at amortized cost is calculated as the differencebetween its carrying amount and the present value of the estimated future cash flows discounted at the originaleffective interest rate. If financial assets are subject to significant impairment amounts when consideredseparately, then they are considered for impairment collectivelyAll impairment losses are recognized in the profit or loss.An impairment loss is reversed if the reversal can be related objectively to an event occurring after theimpairment loss was recognized. The reversal of the impairment in respect of the discounted financial assetsis recognized in profit or loss.

Non financial assetsCarrying amounts of the Group’s non-financial assets, other than inventories, deferred tax assets andinvestment properties are reviewed at each reporting date to determine whether there are any indications ofimpairment. If any such indication exists then the asset’s recoverable amount is estimated. For goodwill,impairment tests are performed every year to estimate the recoverable amount of it. The recoverable amountof an asset or cash generating unit is the greater of its value in use and its fair value less costs to sell. Inassessing value in use, the estimated future cash flows are discounted to their present value using a pre-taxdiscount rate that reflects current market assessments of the time value of money and the risks specific tothat asset.An impairment loss is recognized if the carrying amount of an asset or its cash-generating unit exceeds itsestimated recoverable amount. Impairment losses are recognized in profit or loss. Assets are grouped togetherinto the smallest group of assets that generates cash inflows from continuing use that are largely independentof the cash inflows of other assets or groups of assets are described as cash-generating unit. Impairmentlosses are recognized in statement of comprehensive income. Impairment losses recognized in respect of thecash generating units are allocated to reduce the carrying amounts of the other assets in the unit (group ofunits) on a pro rata basis.In respect of other assets, impairment losses recognized in prior periods are assessed at each reporting datefor any indications that the loss has decreased or no longer exists. An impairment loss is reversed if therehas been a change in the estimates used to determine the recoverable amount. An impairment loss is reversedonly to the extent that the asset’s carrying amount does not exceed the carrying amount that would have beendetermined, net of depreciation or amortization, if no impairment loss had been recognized.

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4Annual Report 2014


iii) Tax ExposuresIn determining the amount of current and deferred tax the Group takes into account the impact of uncertaintax positions and whether additional taxes and interest may be due. The Group believes that its accruals fortax liabilities are adequate for all open tax years based on its assessment of many factors, includinginterpretations of tax law and prior experience. This assessment relies on estimates and assumptions andmay involve a series of judgments about future events. New information may become available that causesthe Group to change its judgment regarding the adequacy of existing tax liabilities; such changes to taxliabilities will impact tax expense in the period that such a determination is made.

2.7.14 Earnings per shareEarnings per share disclosed in the consolidated statement of profit or loss and other comprehensive incomeare determined by dividing net income by the weighted average number of shares that have been outstandingduring the related period concernedIn Turkey, companies can increase their share capital by making a pro-rata distribution of shares (“bonusshares”) to existing shareholders from retained. Such kind of bonus shares are taken into consideration in thecomputation of earnings per share as issued share certificates. For the purpose of earnings per sharecomputations, the weighted average number of shares outstanding during the period has been adjusted inrespect of bonus shares issues without a corresponding change in resources, by giving them retroactive effectfor the year in which they were issued.

2.7.15 Subsequent eventsSubsequent events represent the events that occur against or on behalf of the Group between the consolidatedstatement of financial position date and the date when the consolidated statement of financial position wasauthorized for the issue. As at the consolidated statement of financial position date, if the evidence with respectto such events or such events has occurred after the consolidated statement of financial position date andsuch events require restating the financial statements; accordingly the Company restates the financialstatements appropriately. If such events do not require restating the financial statements, such events havebeen disclosed in the related notes.

2.7.16 ExpensesExpenses are recognized on accrual basis. Operating expenses are recognized as they incur.

2.7.17 Paid-in capital and dividendsOrdinary shares are classified as paid-in capital. Dividends distributed on ordinary shares are offset withretained earnings in the period in which they are declared.

55

2.7.12 Financial income and finance expensesFinance income is comprised of interest incomes on time deposits and foreign currency income. Financialexpenses are comprised of interest expenses of borrowings, foreign exchange, factoring and bank commissionexpenses.

2.7.13 Income taxesIncome taxes comprised current and deferred tax expenses. The current period tax and deferred tax arerecognized directly under the equity or other comprehensive income statement.

i) Current tax liability Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted orsubstantively enacted at the reporting date, and any adjustment to tax payable in respect of previous years.Deferred tax assets and liabilities are offset if there is a legally enforceable right to offset current tax liabilitiesand assets, and they relate to taxes levied by the same tax authority on the same taxable entity.The Turkish tax legislation does not permit a parent company and its subsidiaries to file a consolidated taxreturn. Therefore, provisions for taxes, as reflected in the accompanying consolidated financial statements,have been calculated on a separate-entity basis.

ii) Deferred taxDeferred tax is recognized on temporary differences between the carrying amounts of assets and liabilities inthe financial statements and the corresponding tax bases used in the computation of taxable profit, and areaccounted for using the liability method. Deferred tax liabilities are generally recognized for all taxabletemporary differences and deferred tax assets are recognized to the extent that it is probable that taxableprofits will be available against which deductible temporary differences can be utilized.Deferred tax is not recognised for: • Temporary differences on the initial recognition of assets or liabilities in a transaction that is not a business

combination and that affects neither accounting nor taxable profit or loss; • Temporary differences related to investments in subsidiaries, associates and jointly controlled entities to

the extent that the Group is able to control the timing of the reversal of the temporary differences and it isprobable that they will not reverse in the foreseeable future; and

• Taxable temporary differences arising on the initial recognition of goodwill.Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longerprobable that the related tax benefit will be realized.The Company and the other consolidated subsidiaries have reflected their deferred tax asset and liabilities bynetting their individual balances; however, there is no netting on a consolidation basis. Deferred tax iscalculated at the tax rates that are expected to apply in the period when the liability is settled or the assetrealized.Deferred tax assets are recognized for unused tax loses, unused tax credits an deductible temporarydifferences to the extent that it is possible that future taxable profits will be available against which they canbe used. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is nolonger probable that the related tax benefit will be realized.

54

4Annual Report 2014


2.7.21 Related parties a) A person or a close member of that person’s family is related to a reporting entity if that person:

The 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 reporting

entity b) An entity is related to a reporting entity if any of the following 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 member

of a group of which the other entity is a member). iii) Both entities are joint ventures of the same third party,iv) One entity is a joint venture of a third entity and the other entity is an associate of the third entity,v) The entity is a post-employment defined benefit plan for the benefit of employees of either the reporting

entity or an entity related to the reporting entity. If the reporting entity is itself such a plan, the sponsoringemployers are also related to the reporting entity

vi) The entity is controlled or jointly controlled by a person identified in (a).vii) A person identified in (a)(i) has significant influence over the entity or is a member of the key

management personnel of the entity (or of a parent of the entity).Details of related parties are presented in Note 4.

2.8 Use of Estimates and JudgementsThe preparation of consolidated financial statements in conformity with accounting standards requiresmanagement to make judgments, estimates and assumptions that affect the application of accounting policiesand the reported amounts of assets, liabilities, income and expenses. Actual results may differ from theseestimates.Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimatesare recognized in the period in which the estimates are revised and in any future periods affected. In preparation of the consolidated financial statements, the significant estimates and judgments used by theGroup are included in the following notes:Notes 7 Impairment of trade receivablesNotes 11 Investment Property measured at fair valueNotes 12 and 13 Useful lives of property, plant and equipment and intangible assetsNotes 13 Intangible assets impairment test: key assumptions underlying recoverable amountsNotes 14 Goodwill impairment test: key assumptions underlying recoverable amounts.Notes 15 Recognition and measurement of provisions and contingencies: key assumptions about the

likelihood and magnitude of an outflow of resourcesNotes 19 Measurement of defined benefit obligations: key actuarial assumptionsNotes 28 Recognition of deferred tax assets: availability of future taxable profit against which

carryforward tax losses can be used.

57

2.7.18 Statement of cash flowsIn the cash flow statement, cash flows are classified as operating, investing and financing activities. Cashflows from operating activities represent the Group’s cash flows generated from operating activities. Grouppresents operating cash flows in indirect method by adjusting net income with non cash expenses, incomeor expense accruals or deferrals and income and expense items related to investment or financingactivities.Cash flows from investing activities represent the cash flows used in investing activities (Acquisition of property,plant, equipment and intangible assets).Cash flows from financing activities represent the funds used in and repayment of the funds during the period.

2.7.19 Goodwill Business combinations are bringing together two different entities or two different operating activities byforming a different reporting type. Mergers between entities which are not under common control is accountedby purchase method within IFRS 3 “Business Combinations”The excess of the consideration transferred over the fair value of the identifiable assets, liabilities andcontingent liabilities acquired by the acquirers is accounted as goodwill In business combinations, tangible assets, intangible assets and / or contingent liabilities with a separationability from inside of goodwill are recognized in the financial statements at fair value unless fair value can bemeasured reliably. Goodwill which is recognized in the financial statements of the purchased company cannotbe measured as an identifiable asset. Goodwill are allocated to the smallest cash generated units that can befollowed for management’s internal reporting purposes for impairment testing.Goodwill impairment test are performed every year and if any indication related to impairment of goodwillthen impairment test are repeated more frequently. An impairment loss in respect of goodwill is not reversed.If the cost of the acquisition is less than the fair values of identifiable assets and liabilities, then negotiatedpurchase gain arises and recognized in profit or loss in the period in which it occurs. Securities based on debtor shares which Group incurred in connection with business combinations are expensed when transactioncosts accrued except for expenses associated with the issue.

2.7.20 Borrowing costs and loans receivedBank borrowings are initially recognized with their amount at the date received, less any transaction cost.Subsequently, bank borrowings are reflected at their discounted cost using the effective interest method. Thedifference, between the amount from which the transaction costs are deducted and the discounted costamount, is recognized as financial expense in the consolidated statement of comprehensive income duringthe loan period. The finance expense that occurs resulting from the received loans is reflected in theconsolidated statement of comprehensive income. If the maturity of the loans is less than 12 months as ofbalance sheet date, it is showed in the short term liabilities; if the maturity of the loans is more than 12 monthsas of balance sheet date, it is showed in the long term liabilities.

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4Annual Report 2014


4. Related Parties

4.1 Due from Related PartiesAs of 31 December 2014 and 2013, due from related parties comprised the following:

Due from related parties balances are considered with their undiscounted invoice amounts with a maturity ofless than one month period. The unaccrued interest income effect is immaterial (2013: one month).

4.2 Other Receivables from Related PartiesAs of 31 December 2014 and 2013, other receivables from related parties are as follows:

The other receivables from related parties are considered with their undiscounted invoice amounts as thediscount effect is immaterial..

4.3 Due to Related PartiesAs of 31 December 2014 and 31 December 2013, due to related parties is as follows:

As of 31 December 2014, TL 11.986 thousand of payables to Cementir Holding consist of the brand name andEUR 4.215 thousand management fee expenses according to the royalty agreement signed with CementirHolding in 13 June 2008.(2013: EUR 2.225 thousand equivalent to TL 6.533.)

3. Segment Reporting

The Group has three strategic reportable segments that were used in resource allocation and performanceevaluation. These strategic reportable segments are reviewed periodically by the Group management inaccordance with their performances and resource allocations since they are affected by different economicconditions and different geographical positions.The Group’s main segments are cement, ready-mixed concrete and waste management. Waste managementhas significantly grown with the effect of new acquisition in 2011 and 2012 meeting the criteria for segmentreporting and the operations of waste management has been followed by management. The activities of thissegment are followed by management. In other segment, there are catering services which does not meetthe criteria of a single reporting segment.Gross profit is used in assessing the performance of the segments periodically. The Group managementevaluates gross profit as the best indicator in assessing the performance of the segments since it iscomparable with other companies in the same sector.

5958

31 December 2014 Cement Ready- Waste Others Elimination Totalmixed Management

Concrete

RevenueExternal revenue 546.407 151.565 74.312 8.337 -- 780.621

Intersegment revenue 69.262 20 8.282 38.327 (115.891) --

Net sales 615.669 151.585 82.594 46.664 (115.891) 780.621 Cost of Sales (403.651) (141.569) (81.717) (45.600) 85.091 (587.446)Gross Profit 212.018 10.016 877 1.064 (30.800) 193.175 Interest income 31.039 119 7.706 33 (36.413) 2.484

Interest expense (22.548) (223) (15.451) (36) 33.555 (4.703)

Depreciation and amortization expense 39.928 2.182 17.019 89 2.446 61.664

Impairment -- -- (3.769) -- -- (3.769)

Investment property value appreciation 34.793 215 -- -- -- 35.008

Segments assets 1.806.652 77.268 539.930 4.350 (945.532) 1.482.668

Capital expenditures 43.805 2.609 40.132 12 (2.851) 83.707

Segment liabilities 421.059 37.175 254.029 2.694 (373.712) 341.245

31 December 2013 Cement Ready- Waste Others Elimination Totalmixed Management

Concrete

RevenueExternal revenue 469.713 145.849 52.175 8.766 -- 676.503

Intersegment revenue 52.682 73 1.789 42.536 (97.080) --

Net sales 522.395 145.922 53.964 51.302 (97.080) 676.503 Cost of Sales (376.769) (132.014) (50.438) (49.389) 75.395 (533.215)Gross Profit 145.626 13.908 3.526 1.913 (21.685) 143.288 Interest income 24.096 103 5.674 11 (27.642) 2.242

Interest expense (16.709) (346) (10.833) (24) 23.369 (4.543)

Depreciation and amortization expense 37.836 2.453 11.306 94 4.004 55.693

Investment property value appreciation 32.431 270 -- -- -- 32.701

Segments assets 1.666.033 70.129 447.410 7.208 (788.162) 1.402.618

Capital expenditures 36.765 3.861 57.146 83 (4.299) 93.556

Segment liabilities 420.692 31.684 138.846 4.801 (222.083) 373.940

31 December 2014 31 December 2013

UK JV R&D CO. 615 404

Yapıtek Yapı Teknolojisi Sanayi ve Ticaret A.Ş. (“Yapıtek”) 504 --

Çimentaş Eğitim ve Sağlık Vakfı (“Çimentaş Vakfı”) 32 75

1.151 479


Cementir Holding 11.888 6.533

Aalborg 343 --

Çimentaş Eğitim ve Sağlık Vakfı (“Çimentaş Vakfı”) 83 152

12.314 6.685


Yapıtek(*) 15.210 5.189

UK JV R&D CO. (**) 9.560 8.140

Diğer 58 16

24.828 13.345

(*) It consists of the receivable from Yapıtek for the land sold in 2013 and expenditures for Yapıtek to continue its operations.(**) The receivables are due from UK JV R & D Co. founded by joint venture partnership of Environmental Power International and the Company

in 2011. The receivable is given for research and development activities.

4Annual Report 2014


4.7 Goods and Service Purchases from Related PartiesAs of 31 December 2014 and 2013, goods and service purchases from related parties are as follows:

Service purchases are composed of brand name usage fee charged in accordance with brand name usageagreement signed on 13 June 2008, consultancy expenses charged in accordance with the service agreementsigned on 1 January 2013 and consultancy services taken from Aalborg in 2013. The consultancy servicesconsist of technical assistance consultancy, investor relations, organization, management and internal auditservices.

4.8 Key management personnel compensation As of 31 December, key management personnel compensation is as follows:

5. Cash and Cash Equivalents

At 31 December 2014 and 31 December 2013, cash and cash equivalents comprised the following:

4.4 Other Short Term Payables to Related PartiesAs of 31 December 2014 and 31 December 2013, other short-term payables to related parties are as follows:

As of 31 December 2014, GBP 2.000 thousand of payables to Aalborg Portland A.S is due to the floating-rateborrowings with an interest rate of Libor + 2,5 % and a maturity of 31 December 2015.

4.5 Other Long Term Payables to Related PartiesAs of 31 December 2014 and 2013, other long term payables to related parties are as follows:

As of 31 December 2014, GBP 5.000 thousand of payables to Aalborg Portland A.S is due to the floating-rateborrowings with an interest rate of Libor + 5 % and a maturity of 31 December 2016.

4.6 Goods and Service Sales to Related PartiesAs of 31 December 2014 and 2013, goods and service sales to related parties are as follows:

6160


Aalborg 8.282 12.449

Yapıtek 307 --

Other 76 76

8.665 12.525


Cementir Holding 17.225 11.850

Aalborg 707 595

Çimentaş Vakfı 123 236

18.055 12.681


Short term benefits 9.002 7.000

9.002 7.000


Cash on hand 46 58

Cash at banks 67.586 86.022

Demand deposits 11.409 6.684

Turkish Lira 8.244 4.238

Foreign currency 3.165 2.446

Time deposits 56.177 79.338

Foreign currency 40.600 28.910

Turkish Lira 15.577 50.428

Others(*) 1.557 802Cash and cash equivalents 69.189 86.882Spot loans (Note 6) (410) (108)

Cash and cash equivalents in the cash flow statement 68.779 86.774

(*) As of 31 December 2014 and 2013, others consist of credit card receivables.


Aalborg 17.981 --

17.981 --


Yapıtek(*) 1.533 13

Çimentaş Vakfı 1.236 2.024

2.769 2.037

(*) The balance is due to sales of goods and ready mixed concrete to Yapıtek..

4Annual Report 2014


7. Trade Receivables and Payables

7.1 Short Term Trade Receivables At 31 December 2014 and 2013, short term trade receivables comprise the following:

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 72 days (31 December 2013:69 days)Considering the past experiences and the current economic situation, the Group management asses andwhere necessary appropriate proportion of the provision for doubtful receivables are allocated. The currentyear movement of provision for doubtfull receivables as follows:

Short-term credit risk, market risk, currency risk and impairments related to trade receivables of the Groupare disclosed in Note 29.

7.2 Short Term Trade PayablesAs of 31 December 2014, the short term trade payables amounts TL 128.658 thousand (31 December 2013: TL121.586 thousand) and are comprised of payables to suppliers.The average payment period of short term trade payables is 74 days. (31 December 2013: 66 days).The Group’s exposure to currency risk and liquidity risk explanations are disclosed in Note 29.

The maturity of time deposits is one month (31 December 2013: one month). As of 31 December 2014 theforeign currency time and demand deposits comprise USD 7.134 thousand and EUR 2.220 thousand and GBP283 thousand (2013: USD 20.520 thousand , Euro 3.039 thousand and 44 thousand). The weighted averageyearly effective interest rates of the time deposits of the related currencies are as follows:

As of 31 December 2013, the Group has no blocked deposit amount (31 December 2013: USD 75 thousand). Thefair values of cash and cash equivalents, approximates carrying amount including accrued income at thereporting date.The interest rates for financial assets and liabilities of the Group’s interest rate risk and sensitivity analysisare disclosed in Note 29.

6. Borrowings

At 31 December 2014 and 2013, short term bank borrowings comprised the following:

As of 31 December 2014, the Group has borrowings amounting to EUR 15.000 equivalent to TL 42.311 thousand.Çimentaş has two borrowings as a borrowing from Intesa Sanpaolo Bank used at 6 August 2014 with 1-yearterm and Libor + 2,20 % interest rate amounting to EUR 10.000 thousand and a borrowing from Eximbankused at 6 August 2014 with 8-month term and Euribor+1% interest rate amounting to EUR 5.000 thousand.As of 31 December 2014, Cementir Holding guarantees the borrowings that the Group has utilised amountingto EUR 10.000 thousand equivalent to TL 28.207 thousand (2013: USD 30.000 thousand equivalent to TL 88.095)As of 31 December 2014, The Group’s exposure to interest rate risk, currency risk and liquidity risk aredisclosed in Note 29.

6362


Weighted Weightedaverage effective average effective

interest rates interest rates

Thousand % Thousand %Short term bank borrowings TL TL

EUR bank loans 42.414 %1,96 88.357 %3,00

Interest free spot loans (Note 5) 410 -- 108 --

Long term portion of the short term financial borrowingsShort term portion of finance lease liabilities 681 563

Total short term financial borrowings 43.505 89.028Long term financial borrowings:Finance lease liabilities 845 53

Total long term financial borrowings 845 53


Accounts receivable 127.004 125.540

Notes and cheques receivables 34.309 35.981

173.812 162.985Less: Allowance for doubtful receivables (7.576) (6.965)

Less: Discount on receivables (1.924) (1.462)

(9.500) (8.427)164.312 154.558


Beginning of the period 6.965 6.955Doubtful receivables for the period (Notes 23.2) 756 184

Doubtful receivables writen-off for the period (145) (174)

End of the period 7.576 6.965


TL time deposits 8,38% 5,95%

USD time deposits 1,76% 1,99%

EUR time deposits 1,45% 0,74%

4Annual Report 2014


9. Inventories

At 31 December 2014 and 2013, inventories comprised the following:

As of 31 December 2014, inventories of TL 258.699 thousand (31 December 2013: TL 234.638 thousand) wererecognised as an expense during the period and included in cost of sales (Note 18).As of 31 December 2014, there is 29.600 thousand USD amount of insurance on inventories. (31 December2013: 15.661 thousand USD).As of 31 December 2014, there is no mortgate/pledge on inventories. (31 December 2013: None.)

10. Prepaid Expenses and Deferred Income

10.1 Short-term prepaid expensesAs at 31 December 2014 and 2013, short-term prepaid expenses comprised the following:

Short-term prepaid expenses comprised rent expenses and insurance expenses.

10.2 Long-term prepaid expensesAs at 31 December 2014 and 2013, long-term prepaid expenses are TL 3.623 thousand (31 December 2013:TL 4.287 thousand). TL 3.576 thousand comprised of suppliers advances granted under fixed assets.

10.3 Short-term deferred incomeAt 31 December 2014 and 2013, long-term prepaid expenses comprised the following:

8. Other Receivables and Payables

8.1 Other Short-Term Receivables from Third PartiesAt 31 December 2014 and 2013, other short-term receivables from third parties comprised the following:

8.2 Other Long Term Receivables from Third Parties At 31 December 2014 and 2013, other long term receivables from third parties comprised the following:

8.3 Other Short Term Payables to Third Parties At 31 December 2014 and 2013, other short term payables to third parties comprised the following:

8.4 Other Long Term Payables to Third Parties None (31 December 2013: TL 2.813 thousand).

6564


Receivables relating to late payment supplier 2.724 --

Receivables from tax offices 2.256 730

Deposits and guarantees given 82 75

Receivables from sale of fixed assets -- 1.308

Other (*) 5.317 758

10.379 2.871

(*) TL 4.593 thousand is due from trade receivables related to tax payables, as a result of landfill service fromQuercia demolished in England.


Deposits and guarantees given 1.838 1.301

1.838 1.301


Prepaid expenses 2.604 1.590

Job advances given 736 448

Others 291 431

3.631 2.469


Advances received 7.467 14.136

Other 101 136

7.568 14.272


Payable arising from acquisition of subsidiary(*) 3.488 15.941

Deposits and guarantees received(**) 447 446

3.935 16.387

(*) TL 2.880 thousand of payable arising from acquisition of subsidiary consist of contingent considerationdepending on the purchasing contract with Matlyn Investment LTD for purchasing NWM Holding by Groupmanagement and TL 608 thousand consist of remaining balance of the liability from the payments made forpurchasing shares of Süreko by Group management.(**) All of the Deposits and guarantees consist of collateral received in cash from the Group’s customers.


Raw materials 65.091 60.420

- Spare parts and operating supplies 37.773 36.687

- Fuel 15.842 12.944

- Iron ore 2.584 3.453

- Clay 1.375 756

- Gypsum 1.163 1.059

- Packaging materials 1.109 1.046

- Other 5.245 4.475

Work in process 43.238 28.968

Finished goods 4.816 4.956

Other 1.128 873

114.273 95.217

4Annual Report 2014


Valuation technique and significant unobservable inputsThe valuation technique used in measuring the fair value of investment property is market value approach inwhich representative samples are selected in the neighborhoods of the specified property, which provide recentsales transactions. Then the average price of the samples is compared with the relevant investment property.Finally, the following price adjustment criteria are considered by making comparison in order to appraise thefair value of a property:- It’s location/position in the territory: its visibility, advertisability etc.- It’s “public works permit” /registry: how much square meter is permitted on the specified area. More permit,

higher comparable value.- Goodwill: the neighborhood construction environment, its distance to shopping mall etc.

12. Property, Plant and Equipment

Group’s property, plant and equipment comprise mine assets and other tangible assets and the carryingamounts of them are as follows:

12.1 Quarry AssetsQuarry assets comprised the discounted costs of rehabilitation and closure of the mine sites. The movementof the Quarry assets as of 31 December is as follows:

10.4 Long-term deferred incomeNone (31 December 2013: TL 101 thousand).

11. Investment Property

(a) Fair value reconciliationFor the years ended 31 December, movement in investment property comprised of the following:

Investment properties are intended to be appreciated in the future and not to be utilized in operations orordinary course of the business by Group management. TL 35.008 thousand increase in fair value of investment property recognized through profit or loss.The fair value amount of the investment property as of 31 December 2014 and 2013 are as follows:

As of 31 December 2014, there are no mortgages on investment properties. (31 December 2013: None).

(b) Measurement of fair value (i) Fair value hierarchyFor determination of market value of investment property, the Group has appointed an independent valuationfirm and investment properties were stated at fair value depending on the appraisal report. TL 229.907 thousand of investment property at fair value assessment techniques based on the fair value inputsare categorized as Level 3.

6766

2014 2013

1 January 206.723 177.772Changes in fair value (Note 24.1) 35.008 32.701

Real estate sold (11.824) (3.750)

31 December 229.907 206.723

31 December 2014 31 December 2013Appraisal Fair Appraisal Fair

report date Value report date Value

Lands 31 December 2014 216.330 31 December 2013 194.841

Buildings 31 December 2014 13.577 31 December 2013 11.882

229.907 206.723


Quarry assets 24.669 31.527

Other tangible assets 581.294 559.739

605.963 591.266

1 January Additions/ Foreign 31 December 2014 Disposals currency 2014

translationdifferences

Cost of rehabilitation of mining areas 50.346 (3.978) 627 46.995

Accumulated depreciation (18.819) (3.145) (362) (22.326)

31.527 (7.123) 265 24.669

1 January Additions/ Foreign 31 December 2014 Disposals currency 2013

translationdifferences

Cost of rehabilitation of mining areas 40.430 5.006 4.910 50.346

Accumulated depreciation (11.476) (4.742) (2.601) (18.819)

28.954 264 2.309 31.527

4Annual Report 2014


For the year ended 31 December 2013, movement in the property, plant and equipment comprised thefollowing:

12.2 Other Tangible AssetsFor the year ended 31 December 2014, movement in the property, plant and equipment comprised thefollowing:

TL 59.015 thousand (2013: TL 52.769 thousand) of the current year depreciation and amortization expensesare classified to cost of sales, TL 2.500 thousand (2013: TL 2.793 thousand) of the current year depreciationand amortization expenses are classified to general administrative expenses, TL 149 thousand (2013: TL 131thousand) of the current year depreciation and amortization expenses are classified to selling, marketing anddistribution expenses, TL 4.142 thousand (2013: TL: 2.910 thousand) of the current year depreciation andamortization expenses are classified to inventories. As of 31 December 2014, there are no restrictions such as mortgages and pledges on tangible assets. As of31 December 2014, the insurance on property, plant and equipment is amounting to USD 441.656 thousand(2013: USD 441.656 thousand).

6968

1 January 2014 Additions Disposals Transfers Foreign Currency 31 December 2014TranslationDifference

Cost:Land 80.974 1.414 -- -- -- 82.388

Land improvements 74.643 3.049 -- -- -- 77.692

Buildings 144.540 3.287 -- -- 155 147.982

Machinery and equipment 904.772 14.181 (1.431) 73.723 746 991.991

Motor vehicles 26.277 1.750 (6.349) -- 127 21.805

Furniture and fixtures 28.468 2.127 (178) -- 28 30.445

Other tangible assets 4.048 124 (308) 16.909 -- 20.773

Construction in progress 54.931 57.733 -- (93.152) -- 19.512

1.318.653 83.665 (8.266) (2.520) 1.056 1.392.588Accumulated Depreciation:Land improvements (54.082) (1.481) -- -- -- (55.563)

Buildings (72.402) (3.458) -- -- (124) (75.984)

Machinery and equipment (584.842) (50.165) 1.402 -- (336) (633.941)

Motor vehicles (21.201) (2.342) 6.062 -- (97) (17.578)

Döşeme ve demirbaşlar (22.685) (1.327) 141 -- (21) (23.892)

Furniture and fixtures (3.702) (634) -- -- -- (4.336)

(758.914) (59.407) 7.605 -- (578) (811.294)Net book value 559.739 24.258 (661) (2.520) 478 581.294

1 January 2013 Additions Disposals Transfers Foreign Currency 31 December 2013Translationdifferences

Cost:Land 80.974 -- -- -- -- 80.974

Land improvements 71.827 2.822 (6) -- -- 74.643

Buildings 141.900 1.467 -- -- 1.173 144.540

Machinery and equipment 782.926 20.730 (4.428) 100.253 5.291 904.772

Motor vehicles 25.588 999 (1.274) -- 964 26.277

Furniture and fixtures 25.977 2.283 -- -- 208 28.468

Other tangible assets 3.394 345 -- 309 -- 4.048

Construction in progress 97.206 58.287 -- (100.562) -- 54.931

1.229.792 86.933 (5.708) -- 7.636 1.318.653Accumulated Depreciation:Land improvements (52.737) (1.347) 2 -- -- (54.082)

Buildings (68.288) (3.185) -- -- (929) (72.402)

Machinery and equipment (542.541) (41.938) 2.160 -- (2.523) (584.842)

Motor vehicles (19.715) (1.983) 1.251 -- (754) (21.201)

Furniture and fixtures (21.351) (1.179) -- -- (155) (22.685)

Other tangible assets (3.393) (309) -- -- -- (3.702)

(708.025) (49.941) 3.413 -- (4.361) (758.914)Net book value 521.767 36.992 (2.295) -- 3.275 559.739

4Annual Report 2014


i) Kömürcüoda AgreementOn March 11, 2011, Recydia, which is the fully controlled subsidiary of Çimentaş, acquired the waste gatheringfacility and the waste management contract with the municipality company, Istanbul Çevre Koruma ve AtıkMaddeleri Değerlendirme San. ve Tic. A.Ş. (ISTAÇ) from the Ekosistem AŞ for a total consideration of TL 12.100thousand. Hereko was established in February 2011 to perform the requirements of the waste managementcontract with ISTAÇ. The Company’s core business area is gathering, decomposing the waste by its nature,transporting to the intermediate warehouses, sales of waste and recycling of any kind of domestic, industrial,municipal and organic waste.The transaction is evaluated as business combination and valuation analysis has been performed for thecontract by considering TFRS 3 “Business Combinations” and TAS 38 “Intangible Assets”. Waste managementcontract with İSTAÇ is identified as an intangible asset and fair value of the contract is recommended in thevaluation TL 28.061 thousand at acquisition date.These assets are subject to impairment testing due to some delay in operation as of December 31, 2014. Theimpairment test is made on the basis of cash generated unit (CGU) with in the framework of IAS 36. CGU isGroup’s subsidiary Hereko. CGU’s recoverable amount has been calculated on the basis of value in use on theassumption that the improvement investments completed in April 2015. The recoverable amount of the CGUis TL 157.760 thosand as of December 31, 2014. In the valuation techniques applied, impairment test is based on the following assumptions:

i) Value assumptions are relied on future trend assessment of management in the related industry andhistorical data which obtained from both internal and external sources. Key assumptions which used incalculating the recoverable amount, discount rate (12.67%) (2013: 11.9%), growth rate (5%) (2013: 5%), andEBIDTA / net sales ratio (24%-40.9%) (2013: 30%-42.5%), are consistent with management budget for 2014and after.ii) The cash flow projections included specific estimates for five years and a growth rate until 2035, the endof the Kömürcüoda contract term. A long-term growth rate until 2035 has been determined as the lowerof the nominal GDP rates for Turkey in which the CGU operates and the long-term compound annualEBITDA growth rate estimated by management.iii) Budgeted EBITDA was based on the prices estimated using the last 5 years average recyclable pricesand current market trend and the SRF price related to the contracts signed with the customers. Both therevenue & costs are expected to increase with the same trend.

As of 31 December 2014, the carrying amount of the CGU was determined to be higher than its recoverableamount of TL 3.769 thousand (2013: None ) was recognised due to the impairment test. The impairment losswas fully allocated to expenses from investing activities.Following the impairment loss recognised in the Group’s Kömürcüoda agreement CGU, the recoverableamount was equal to the carrying amount. Therefore, any adverse movement in a key assumption would leadto further impairment.When other variables are constant in the impairment test, if discount rate is increased by 1%, the book valueof CGU’s recoverable amount will be reduced by TL 12,074 thousand, if EBITDA / net sales ratio is decreasedby 1%, the book value of CGU’s recoverable amount will be reduced by TL 4.893 thousand, when growth rateis decreased by 1%, the book value of CGU’s recoverable amount will be reduced by TL 11.998 thousand.

13. Intangible Assets

For the year ended 31 December 2014, movement in the intangible assets comprises the following:

(*) TL 3.769 is due to the impairment amount of the Kömürcüoda agreement after the impairment test performedas of December 31, 2014. (Note 24.2).

For the year ended 31 December 2013, movement in the intangible assets comprises the following:

7170

1 January 2014 Additions Impairment/ Transfer Foreign 31 December 2014Disposalsr currency

translationdifference

Haklar 13.968 42 (597) 2.520 -- 15.933

Kömürcüoda sözleşmesi 28.061 -- -- -- -- 28.061

Müşteri ilişkileri 7.072 -- -- -- 137 7.209

Marka bedeli 790 -- -- -- 16 806

Diğer maddi olmayan duran varlıklar 1.387 -- -- -- -- 1.387

Tenzil: Birikmiş itfa paylarıve değer düşüklükleri (11.748) (3.254) (3.769) -- (50) (18.821)

39.530 (3.212) (4.366) 2.520 103 34.575

1 January 2013 Additions Impairment/ Transfer Foreign 31 December 2013Disposalsr currency

translationdifference

Haklar 11.229 420 -- 2.319 -- 13.968

Kömürcüoda sözleşmesi 28.061 -- -- -- -- 28.061

Müşteri ilişkileri 5.788 -- -- -- 1.284 7.072

Marka bedeli 647 -- -- -- 143 790

Diğer maddi olmayan duran varlıklar 1.387 -- -- -- -- 1.387

Devam etmekte olan yatırımlar 1.687 632 -- (2.319) -- --

Tenzil: Birikmiş itfa payları (7.501) (3.920) -- -- (327) (11.748)

41.298 (2.868) -- -- 1.100 39.530

(*)

4Annual Report 2014


In the valuation techniques applied, the possibility of impairment in goodwill depends on the followingassumptions:

a) The valuation exercises are highly sensitive to the range of EBITDA / Net Sales and the WACC, whichwere taken into account by the Group as range 19% - 30% (2013: 18%-30%) and 12,67% (2013: 12,10%)respectively. b) Range of the EBITDA/ Net Sales ratio between 19%-30% (2013: 18%- 30%) is in line with the Company’sbudget for the year 2015 and onwards; whereas the WACC is based on macroeconomic and sector specificparameters

As of 31 December 2014, the estimated recoverable amount of the CGU exceeded its carrying amount byapproximately TL 2.966 thousand. Management has identified that a reasonably possible change in two keyassumptions could cause the carrying amount to exceed the recoverable amount. When other variables areconstant in the impairment test, CGU’s recoverable amount is equal to book value when 0.4% increase indiscount rate and the other variables keeping constant for the estimated recoverable amount equal to bookvalue. Likewise, CGU’s recoverable amount is equal to book value when 1.3% decrease in EBITDA / net salesratio.

iv) Acquisition of NWM HoldingRecydia, subsidiary of the Group acquired 100% of net assets of NWM Holding amounting to GBP 8.600thousand which is equivalent to TL 24.170 thousand. The acquisition has been accounted in accordance withthe provisions of TFRS 3 “Business Combinations” and there are other identifiable intangible assets whichare reliably measured in accordance with TAS 38. The goodwill amounting to TL 9.681 thousand is recognisedin consolidated financial statements.Accordance with the provisions within the scope of TAS 36, goodwill arising from the acquisition of NWMHolding is subjected to an impairment test by the Group management as of 31 December 2014 by usingdiscounted cash flow. As of 31 December 2014, no impairment is recognized considering the current conditionsby using generally accepted valuation techniques.

a) The valuation exercises are highly sensitive to the range of EBITDA / Net Sales and the WACC, whichwere taken into account by the Group as range 1% - 7% (2013: 7%-15%) and 6,65% (2013: 10,91%)respectively. b) Range of the EBITDA/ Net Sales ratio between 1% and 7% (2013: 7%- 15%) is in line with the Company’sbudget for the year 2015 and onwards; whereas the WACC is based on macroeconomic and sector specificparameters

As of 31 December 2014, The estimated recoverable amount of the CGU exceeded its carrying amount byapproximately TL 4.329 thousand. Management has identified that a reasonably possible change in two keyassumptions could cause the carrying amount to exceed the recoverable amount. When other variables areconstant in the impairment test, CGU’s recoverable amount is equal to book value when 0.5% increase in discountrate and the other variables keeping constant for the estimated recoverable amount equal to book value. Likewise,CGU’s recoverable amount is equal to book value when 0.3% decrease in EBITDA / net sales ratio.

14. Goodwill

As at 31 December 2014 and 2013, goodwill comprises the following:

(i) Acquisition of LalapaşaThe Group participated in the auction for Lalapaşa arranged by Saving Deposits Insurance Fund (“SDIF”) on10 October 2005 and acquired Lalapaşa for a purchase consideration of TL 223.510 thousand (USD166.500.000). Following the approval of Competition Board and Fund Board, control of Lalapaşa has beentransferred to the Group on 28 December 2005 and the acquisition is recognized in accordance with TFRS 3. Accordance with the provisions within the scope of TAS 36, goodwill arising from the acquisition of ElazığÇimento is subjected to an impairment test by the Group management as of 31 December 2014. Therecoverable amount is determined as fair value less cost to sell which is higher of value in use in terms ofdiscounted cash flows and fair value less cost to sell.

(ii) Acquisition of Elazığ Çimento On 21 September 2006, the Group acquired 99,99% of net assets of Elazığ Çimento for a purchase considerationof USD 110.000.000, equivalent to TL 161.116 thousand. The acquisition has been accounted for in accordancewith the TFRS 3, “Business Combinations” and there is no other identifiable intangible asset mentioned inTAS 38. The resulting goodwill amounting to TL 13.506 thousand has been recognized in the consolidatedfinancial statements. Accordance with the provisions within the scope of TAS 36, goodwill arising from the acquisition of Lalapaşais subjected to an impairment test by the Group management as of 31 December 2014. The recoverable amountis determined as fair value less cost to sell which is higher of value in use in terms of discounted cash flowsand fair value less cost to sell.In order to test the impairment of goodwill arising from the acquisitions in accordance with the TAS 36“Impairment of Assets”, the Group considered the outcome of the recent transactions within the cement sectorin Turkey in April and July 2009, by considering risks and other factors like clinker production capacity, asthere is no binding sale agreement to be adjusted for incremental costs directly attributable to the sale in anarm’s length transaction, and there is no active market for such transactions. In accordance with the resultsof the assessment, it has been concluded by the Group management that there was no impairment of thegoodwill related with the acquisition of Elazığ Çimento and Lalapaşa as of 31 December 2014.

(iii) Acquisition of SürekoOn 1 September 2009, the Group purchased the 69,9% of net assets of Sureko with the price of TL 22.853thousand in equivalent to Euro 10.759 thousand. Acquisition is valued according to the principles of TFRS 3“Business Combinations”. Goodwill amounting to TL 21.691 thousand is recognised in consolidated financialstatements. In accordance with the principles of TAS 36, goodwill from the acquisition of Sureko is subject tothe impairment test in terms of discounted cash flows. As of 31 December 2014 no impairment has not beenrecognized considering the current conditions by using generally accepted valuation techniques.

7372


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 9.681 9.451

183.543 183.313

4Annual Report 2014


b) Sureties ReceivedAs of 31 December 2014 and 2013, sureties received were as follows:

c) Sureties GivenAs of 31 December 2014 and 2013, sureties given were as follows.

d) Guarantees ReceivedAs of 31 December 2014 and 2013, guarantees received were as follows.

15.2 Important LawsuitsLawsuits Against the Group:- Lawsuits against the Group for the lands in mine sites:Files opened by the owners of the lands against the damages as a result of the work done on the land by theGroup amounts to TL 5.455 thousand as of 31 December 2014 (31 December 2013: TL 5.415 thousand). Mostof the lawsuits are settled against the Group and the Group made payments amounting to TL 9.989 thousandfor those lawsuits as at 31 December 2014 (31 December 2013: TL 9.887 thousand). The Group made provisionfor the possible legal interest costs and expenses of lawsuits amounting to TL 219 thousand as at 31 December2014 (31 December 2013: TL 312 thousand). The Group management assessed the likelihood of additionallawsuits which are possible to be filed against the Company in the future under the above context. Themaximum amount for such exposure is expected to be TL 3.658 thousand. However, no provision is recordedfor this amount since there is no lawsuit filed or sign of lawsuit to be filed in the foreseeable future as at 31December 2014.

15. Provisions, Contingent Assets and Liabilities

15.1 Commitments and contingent liabilities In accordance with the decision of CMB on 29 September 2009 related to the guarantee, pledge and mortgagesthat publicly owned companies gave to ensure 3rd party’s debts, and in accordance with decision numbered28/780;For companies publicly traded other than publicly traded investment partnership and financial institutions;

i) For their own corporate identities, ii) In favor of fully consolidated associations, iii) In favor of 3rd parties to continue their operations will not be limited,

After the decision is published at the Public Disclosure Platform, publicly owned companies will not givecommitments to real people or corporations other than mentioned at the bullets (i) and (ii) above or to thirdparties other than mentioned at the bullet (iii). If any commitments are already given it will be reduced to niluntil 31 December 2014.

a) Guarantees GivenAs of 31 December 2014 and 2013, letters of guarantees given by the Group were as follows:

As at 31 December 2014 and 2013, the Group’s position related to letters of guarantee given, pledges andmortgages (“GPM”) are as follows:

As of 31 December 2014, the ratio of the other commitments given to the total equity of the Group is 0,0% and0,0%).

7574


Letters of guarantee 36.160 25.221

36.160 25.221


TL Equivalent TL USD GBP TL TL USD GBPEquivalent

A Total amount of GPM given on behalf of own legal personality 29.693 25.734 200 972 21.478 21.052 200 --

B Total amount of GPM given in favor of partnerships which is consolidated 6.467 681 -- 1.609 3.743 3.743 -- --

C Total amount of GPM given for assurance of third parties debts in order to conduct of usual business activities -- -- -- -- -- -- -- --

D Total Amount of other GPM -- -- -- -- -- -- -- --

- Total amount of GPM given in favor of parent company -- -- -- -- -- -- -- --

- The amount of GPM given in favor of other group companies which B and C don’t comprise -- -- -- -- -- -- -- --

- The amount of GPM given in favor of 3rd parties which C doesn’t comprise -- -- -- -- -- -- -- --

Total GPM 36.160 26.415 200 2.581 25.221 24.795 200 --


Sureties received 28.209 92.730

28.209 92.730


Verilen kefaletler 4.618 5.767

4.618 5.767


Letters of guarantee 203.175 190.669

Mortgages 17.748 7.447

Guarantee notes 14.899 9.956

Sureties 2.335 4.635

Cheques 177 113

238.334 212.820

4Annual Report 2014


2015. Accordingly, provision has not been presented in Group’s consolidated financial statement due to thevery early stages of the investigation that is not presented to Group.

-Tax Case about ÇimentaşTax Authorities initiated an investigation on the accounting records of Çimentaş related to years 2005, 2006,2007, 2008 and 2009 and finished its investigation. Tax Authorities criticized purchase and sale transaction ofshares of subsidiary of the Group named Alfacem S.R.L. in 2005 and 2009, and foreign exchange losses andinterest expenses incurred and paid related to the borrowings utilized from abroad for the financing of thepurchase of the shares of the related subsidiary was rejected. As a result, Hasan Tahsin Tax Office charged apenalty amounting to TL 67.897 thousand, of which TL 21.359 thousand is the original tax amount and TL46.538 thousand is the loss of tax revenue, to the Company on 23 November 2010. The Group had decided tobenefit from the “Tax Amnesty Law No: 6111”, which came into force on 25 February 2011, and had waived therelated lawsuit and applied the amnesty on 29 April 2011. In the framework of the opportunities provided bythe law, the Group had compromised with the tax office and paid a tax penalty amounting to TL 12.970 thousandwhich was reduced from original tax amount and tax penalties amounting to TL 67.897 thousand and thepayment about related tax fine was made 1 July 2011.Again in the same investigation report with the same reasons Tax Authorities anticipated a decrease in taxlosses amounting to TL 60.059 thousand by making correction in tax losses of 2008 and 2009. Groupmanagement filed a lawsuit against Hasan Tahsin Tax Office in İzmir Tax Court for the cancellation of thedecision related to the decrease of tax losses in 2008 and 2009 amounting to TL 60.059 thousand on 22December 2010. The Tax Court rejected the Company’s claim due to lack of executive decision of theadministration without further investigation on 12 September 2011. The decision has been appealed by theGroup and the Council of State 3 Chamber’s decision of November 22, 2011 about the request for a stay ofexecution is to examine it after the defense of the defendant and administration. Later on with 13/02/2012 thedate and K: 2012/414 numbered decision, Group’s appeal was accepted and the decision of the Tax Court iscancelled. The defendant administration applied for the correction of mentioned decision and the Council ofState has dismissed the application. The case was sent back to local court and it has not been resulted bylocal court yet.

-Compensation lawsuit against the Group about the mining activitiesBatı Madencilik which has land near the Group’s land in Edirne/Keşan opened a file amounting to TL 1.045thousand stating that they incurred losses as the Group extracts pozzuolana from the ground. Statement ofcourt expert during the trial was against the Group. The Group prepared a petition against the decision of thecourt expert with a scientific view supported by Dokuz Eylül University, faculty of law. The court decided theGroup to pay for TL 800 thousand. The Group management filed an appeal against the decision and SupremeCourt accepted the appeal of the Group and penalty amounting to TL 800 thousand was cancelled. Then theplaintiff company demanded revision of the decision, but it had been rejected. Thus, the case was sent backto local court and it has not been resulted by local court yet.The same company filed another lawsuit against the Group for the same reasons amounting to TL 3.141thousand and decision of this case will be given according to the result of the first case. The second additionalcases are ongoing in local courts. The outcome of this case will be determined depending on the results ofthe first trial. The Group management did not record any provision for these cases as they and their legaladvisors believe that it is highly probable to win the case.Additionally the same company has filed another lawsuit for the cancellation of mining right of the Groupagainst Ministry of Energy and the Group participated as intervening side. The court expert prepared its reportin favor of the Group. The same company appealed this final decision to Council of State and the Council ofState has reversed the judgment of the local court due to departure of the rule in December 2011. Thus, thecase was sent back to local court and it has not been resulted by local court yet. The Group Management andtheir legal advisors believe that it is highly probable to win the case.

-The investigation and lawsuits of the Competition Board:The Investigation of the Competition Board related with Elazığ and Kars ÇimentoThe Competition Board commenced a pre-investigation of business dealings of all cement companiesoperating in East and South-East Anatolian Region on 27 October 2010. Pre-investigation report is discussedon Competition Board meeting dated 16 December 2010 and numbered 10-78 and it is decided to commencean investigation on 10 cement companies including Kars and Elazığ Çimento about the infringement of 4tharticle of Law on the Protection of Competition based on the 41st article of the same law. As a result ofinvestigation, Turkish Competition Board confirmed that related firms violated 4st article of Law on theProtection of Competition and determined them to pay administrative fine based on same law. According tothis, Turkish Competition Board commanded administrative fine TL 1.121 and 2.903 thousand, respectivelyopposed to Kars Çimento and Elazığ Çimento by totally amounting to TL 4.024 thousand. These fines werepaid TL 3.018 thousand on 25% discount in a while determined by Law of Misdemeanor in 19 November 2012.After the payment, Elazığ and Kars Çimento applied to administrative court for the cancellation of theadministrative fines mentioned above. The court of cancellation of administrative fines for Kars Çimento wasrejected by governance and decision appealed to the higher court. However, the lawsuit of Elazığ Çimento wasaccepted by administrative law court and cancelled the decision of the Competition Board based on the groundthat the penalty rate should be 2% of the revenue instead of 3%. After cancellation, the amount TL 2.177thousand previously paid get refund. Either the Competition Board has appealed the decision of theAdministrative Court or established a new decision complying with 2% and the amount TL 1.451 thousandwere paid by the Elazığ Çimento for this decision. Legal actions have resorted against aforementioned newdecisions.Competition Board Investigation about Çimentaş; Competition Board has decided to open an investigation todetermine whether there has been a violation of article 4 of law numbered 4054, with the date June 12, 2014and number 14-21/416-M, numbered 4054 on the Protection of Competition Law’s in accordance with thearticle 41, about Çimentaş İzmir Çimento Fabrikası Türk A.Ş. The Competition Board has taken additional sixmonths grace to prepare the investigation report. The aforementioned additional time will be expired June

7776

4Annual Report 2014


ii) Other long-term provisionsAs of 31 December 2014 and 2013, movement of the provision for long-term is as follows:

Movement of the provision for environmental rehabilitation and mine are as follows:

16. Commitments

a) Purchase commitments As of 31 December 2014, the Group has commitment of 420 thousand tonnes of coal purchase (31 December2013: 74 thousand tonnes).

b) Sales commitmentsNone (31 December 2013: None).

17. Employee Benefits

17.1 Payables for Employee Benefits As of 31 December 2014 and 2013, employee benefit liabilities were as follows:

Case related to Capital Markets BoardAs a result of investigations carried out by the Capital Markets Board, with the decision dated September2,2014 and numbered 44649743-663.09-286-8709 published in the CMB’s weekly bulletin on August 29,2009and was delivered on September 5, 2014 to the Group, stimulation was decided to take necessary measuresfor the return of the financial expenses TL 101,811,908 that is incurred by Çimentaş in purchased date March20,2009 to the Group at the latest three months due to the transfer implicitly and with lower sales pricescontrary to peers to Cementir Holding SpA dominant partner of Çimentaş as a result of shares of the AlfacemS.r.L, which is purchased from a subsidiary of the parent company Cementir Holding SpA is related in termsof management, control and capital by Çimentaş, in 2005 a cost of 85.000.000 Euro, sold again to the parentcompany in the same price dated March 20,2009 with the decision of the Board of Directors.According to notice, the Group has applied to Capital Markets Board for the abolition of the decision in theframework of Article 11 of the Administrative Procedure Act, because, the group have acted in accordancewith all applicable laws and other regulations. CMB has rejected the petition of the Company 60 days afterthe letter of application. In this case, lawsuit has been filed against CMB in December 30, 2014 at Ankara 7th Administrative Courtwith the file number 2014/2266 E with claims for annulment and execution of the aforementioned decision.

15.3 Short-term provisions Diğer karşılıklar

i) Short-term provisions for employee benefitsAs of 31 December 2014 and 2013, movement of the provision for others is as follows:

As of 31 December 2014 and 2013, movement of the provision for lawsuits and fines are as follows:

7978


State limestone usage fee 1.739 2.232

Provision for rehabilitation and closure of the mine sites 453 --

Provisions for litigation, claims and penalties 219 313

Other 296 599

2.707 3.144

2014 2013

1 January 313 283Provisions for the current year 128 171

Payment for litigation, claims and penalties (70) (141)

Reversal of provision (152) --

31 December 219 313


Social security premiums payables 3.155 1.598

Salary payables 1.224 801

Other 30 201

4.409 2.600


Provision for rehabilitation and closure of the mine sites 22.104 24.938

22.104 24.938


1 January 24.938 23.769Paid during period (286) --

Unwinding of discount 747 190

Effect of translation differences 179 1.424

Decrease during period (3.474) (445)

31 December 22.104 24.938

4Annual Report 2014


At 31 December 2014 and 2013 the movement of employee severance indemnity was as follows:

Interest costs, service costs and actuarial difference amounting to TL 6.211 thousand (2013: TL 5.791 thousand). Interest cost amounting to TL 656 thousand is recorded under financial expenses (2013: TL 445 thousand).Service cost amounting to TL 1.783 thousand was recorded under general administrative expenses (2013: TL1.635 ). Actuarial difference amounting to TL 3.772 thousand (2013: TL 3.711 thousand) respectively ispresented in other comprehensive income.

18. Expenses by Nature

For the years ended 31 December 2014 and 2013, expenses by nature comprised the following:

17.2 Short-Term Provisions Related to Employee BenefitsAs of 31 December 2014 and 2013, provisions related to employee benefits comprised the following:

17.3 Long-Term Provisions Related to Employee BenefitsAs of 31 December 2014 and 2013, provisions related to employee benefits comprised the following:

Provision for employee severance indemnity has been set as follows:Under the Turkish Labor Law, the Group is required to pay termination benefits to each employee who hascompleted one year of service and whose employment is terminated without due cause or who is called upfor military service, dies or retires after completing 25 years of service (20 years for women) and achieves theretirement age (58 for women and 60 for men). Since the legislation was changed on 23 May 2002 there arecertain transitional provisions relating to the length of service prior to retirement.The severance pay is calculated as one month gross salary for every employment year and as of 31 December2014 the ceiling amount has been limited to TL 3.438,22 (31 December 2013: TL 3.254,44). The liability is not funded, as there is no funding requirement. The provision has been calculated by estimatingthe present value of the future probable obligation of the Group arising from the retirement of the employees.The basic assumption is that the provision ceiling settled for working increases with the rise of inflation rate.In this way, the implemented discount rate reflects the real rate without expected impact of inflation rate.The Group’s accounting policies requires the Company to use various statistical methods to determine theemployee severance indemnity. The reserve has been calculated by estimating the present value of futureprobable obligation of the Group arising from the retirement of the employees and reflected in the financialstatements. Accordingly, the following statistical assumptions were used in the calculation of the total liability:

The principal assumption is that the maximum liability for each year of service will increase in line withinflation. Thus the discount rate applied represents the expected real rate after adjusting for the anticipatedeffects of future inflation.

8180

31 December 2014 31 December 2014 2013

Personnel premium provision 4.100 4.078

Employee vacation provision 2.125 730

6.225 4.808


Employee severance indemnity 18.230 16.202

18.230 16.202


Discount rate 3,98% 4,05%

Turnover rate to estimate the probability of retirement 1,00% 1,00%


Salary and wages 70.731 67.065

Social security premium payments 7.735 7.128

Vacation pay provision 1.395 730

Other 10.520 8.545

90.381 83.468


Beginning of the period 16.202 14.073Interest cost (Note 25.2) 656 445

Service cost (Note 18 and 22.1) 1.783 1.635

Payments made during the period (4.183) (3.662)

Actuarial difference 3.772 3.711

End of the period 18.230 16.202


Raw material, work in process and finished goods costs (Note 9) 258.699 234.638

Electricity and water expenses 104.563 103.106

Personnel expenses (*) 90.381 83.468

Depreciation and amortization(Note 12 and 13) 61.664 55.693

Transportation costs 51.783 45.617

Maintenance and repair costs 28.524 27.128

Outsourced benefits and services 24.207 18.188

Consultancy expenses 23.579 15.036

Rent expenses 17.950 15.918

Taxes, duties and charges 4.554 3.556

Severance indemnity expense(Note 17.3 and 22.1) 1.783 1.635

Other 30.018 21.318

697.705 625.301

(*)As of 31 December 2014 and 2013, personnel expenses comprised the following:

4Annual Report 2014


20. Capital, reserves and other equity items

Paid-up capital and inflation adjustment on share capitalAs of 31 December 2014 the issued capital of the Group is TL 87.112 thousand which comprise 87.112.463shares having a value of TL 1 for one lot (31 December 2013: TL 87.112 thousand which comprise 87.112.463shares having a value of TL 1 for one share). The shareholding structure of the Group is as follows:

Capital Adjustments Due to Cross-ownershipReserve for own shares acquired amounting to TL 3.381 thousand (31 December 2013: TL 3.381 thousand)comprises shares of Çimentaş which were purchased from third parties and reflected with their cost valuesinto the consolidated financial statements. As of 31 December 2014 the total number of treasury shares is520.256 (31 December 2013: 520.256)

Share premiumThe share premium amounting to TL 161.554 thousand (31 December 2013: TL 161.554 thousand), representsthe difference between the nominal values and initial sales price.

Revaluation and Measurement Gain/LossAs of 31 December ,2014, revaluation and measurement gain / losses consist of fixed asset revaluation reservewhich is recognized as other comprehensive income associated with non profit or loss and actuarial losses.As of 31 December 2014 revaluation reserve stemmed from valuation of tangible fixed asset is amounting toTL 109.534 thousand (2013: TL 113.264 thousand). Gain and losses arising from changes in actuarialassumptions is TL 11.757 thousand (2013: TL 8.739 thousand).

Translation reserveThe translation reserve comprises all foreign currency differences arising from the translation of the financialstatements of foreign operations.

19. Other Assets and Liabilities

19.1 Other current assetsAs of 31 December 2014 and 2013, other current assets were as follows:

19.2 Other non-current assetsAs of 31 December 2014 and 2013, other non-current assets were as follows:

19.3 Other short-term liabilitiesAs of 31 December 2014 and 2013, other long-term liabilities were as follows:

19.4 Other long-term liabilitiesAs of 31 December 2014 and 2013, other long-term liabilities were 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 for perform research and development activities in 2011.UK JV R&D CO.’s summary financial statements and reconcilation of Group’s shares on UK JV R&D are asfollows:

8382


Katma değer vergisi alacakları 10.637 1.033

Diğer 132 353

10.769 1.386


VAT receivables 12.297 15.811

Others 207 119

12.504 15.930


Taxes and funds payables 10.349 11.125

Others 371 --

10.720 11.125


Liability from equity accounted investees 4.240 3.427

4.240 3.427


The percentage of shareholding %50 %50Loss for the period (1.462) (2.102)

Other comprehensive income -- --

Total comprehensive income (1.462) (2.102)


Rate Amount Rate Amountof Share of Share of Share of Share

% Thousand TL % Thousand TL

Aalborg Portland Espana 85,00 74.045 71,00 61.850

Cementir Holding S.p.A. 12,80 11.153 25,42 22.150

Simest S.p.A 0,00 -- 1,38 1.198

Publicly traded 2,20 1.914 2,20 1.914

100 87.112 100 87.112

Reserve for own shares acquired (3.381) (3.381)

83.731 83.731Inflation adjustment on share capital(*) 20.069 20.069

Total adjusted capital 103.800 103.800

(*) Sermaye düzeltmesi farkları, 31 Aralık 2004 tarihindeki satın alma gücünde, nakit ve muadili sermaye artırımlarının endekslenmesinin etkisini temsil etmektedir.

4Annual Report 2014


21. Sales and cost of sales

For the years ended 31 December2014 and 2013, sales and cost of sales comprised the following:

22. General administrative expenses and marketing expenses

22.1 General Administrative ExpensesFor the years ended 31 December 2014 and 2013, general administrative expenses comprised the following:

22.2 Marketing ExpensesFor the years ended 31 December 2014 and 2013, marketing expenses comprised the following:

Restricted reserves

Legal reservesAccording to the Turkish Commercial Code (“TCC”), legal reserves are comprised of first and legal reserves.The first legal reserves are generated by annual appropriations amounting to 5 percent of income disclosedin the Company’s statutory accounts until it reaches 20 percent of paid-in share capital. Further 1/10 of dividenddistributions, in excess of 5 percent of paid-in capital is to be appropriated to increase second legal reserves.If the dividend distribution is made in accordance with statutory records, a further 1/11 of dividend distributions,in excess of 5 percent of paid-in capitals are to be appropriated to increase second legal reserves. Under theTCC, the legal reserves can be used only to offset losses and are not available for any other usage unless theyexceed 50 percent of paid-in capital.Within the framework of the Corporate Tax Law numbered 5520, 75% of the gains on the sale of theparticipation shares, which were held in the assets for a minimum of 2 whole years and 75% of the gains onthe sale of immovables are exempt from tax provided starting from 21 June 2006 that they are added to thecapital as set forth by the Law or that they are kept in a special fund under liabilities for a period of 5 years. Inthis case, Group has been reclassified 75% profit earned from the sales of buildings in 2012 which equals TL14,310 thousand, was sold in 2011 and 75% profit earned from the sales of buildings in 2014 which equals TL2.812 thousand, was sold in 2013.As of 31 December 2014, nominal amount of the restricted legal reserves of the Group amount to TL 24.828thousand (31 December 2013: TL 22.016 thousand) and they are presented in the inherently unrestricted“Extraordinary Reserves” and “Retained Earnings” with nominal amount TL 9.178 thousand (31 December2014: TL 9.178 thousand).

DividendPublicly traded companies shall perform dividend distribution in accordance with the Communique onDividends II-19.1 of the Capital Market Board effective as of February 1, 2014. Companies shall distribute their profits within the framework of the profit distribution policies to bedetermined by their general assemblies and in accordance with the provisions of the related regulation. Withinthe scope of this communique, no minimum distribution rate has been determined. Companies shall paydividends as set out in their profit distribution policies or their articles of association. Additionally, dividendscan be paid via equal or different installments and companies can distribute dividend advances based onprofits at interim financial statements.Although the Capital Markets Board’s January 23, 2014 dated II-19.1 number Dividend Notification inaccordance with the company consists of distributable profit in the statutory records, the company’s medium-and short-term strategies, anticipated capital expenditures and financial plans, market conditions andeconomic conditions, the consideration of the negative net debt position of Çimentaş Group at the end of 2014,the Board of Directors dated March 6, 2015, has decided to make a suggestion for the decision not to distributeprofits 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.

8584


Domestic sales 729.391 637.198

Foreign sales 75.926 55.048

Gross sales 805.317 692.246Less: Discounts (24.696) (15.743)

Net sales 780.621 676.503Cost of sales (587.446) (533.215)

Gross profit 193.175 143.288


Loading expenses 15.154 10.306

Personnel expenses 4.607 4.756

Outsourced service expenses 1.408 1.098

Depreciation and amortization (Not 12.2) 149 131

Other 291 1.034

21.609 17.325


Personnel expenses 36.373 33.414

Consultancy expenses 23.497 15.036

Outsourced services expenses 7.997 6.605

Taxes and duties 4.554 3.556

Depreciation and amortization (Note 12.2) 2.500 2.793

Employee termination expenses (Note 17.3 and 18) 1.783 1.635

Water and lightening expenses 953 922

Rent expenses 929 232

Donations 702 365

Representation expenses 612 599

Insurance expenses 480 440

Other 8.270 9.664

88.650 74.761

4Annual Report 2014


24.2 Expense from Investing ActivitiesFor the year ended 31 December 2014 and 2013, expense from investing activities comprised the following:

25. Financial Income and Expenses

25.1 Financial IncomeFor the years ended 31 December 2014 and 2013, financial income comprised the following:

25.2 Financial ExpensesFor the years ended 31 December 2014 and 2013, financial expenses comprised the following:

26. Analysis of other compherensive income components

For the year ended 31 December 2014, the Group’s foreign currency translation reserve amounting to TL 462thousand (December 31, 2013: TL 2.253 thousand) is due to profit or loss and other comprehensive ıncomethat will be reclassified through profit or loss. The Group’s defined benefit plans arising from remeasurementloss of TL 3.018 thousand (December 31, 2013: TL 2.969 thousand) is due to profit or loss and othercomprehensive expense that will be reclassified through profit or loss.

23. Other income and expenses from operating activities

23.1 Other Income from Operating ActivitiesFor the years ended 31 December 2014 and 2013, other income from operating activities comprised thefollowing:

(*) The income relating to late payments consist of delay income of fixed asset investment based on thecontract clauses.(**) The income related to the cancellation of the debt arising from acquisition of subsidiary consist of the noncontrolling shareholders in the previous year amounting to waive related to receivables from shares whichsold to Recydia during the acquisition of the shares 5.49% which is owned by non controlling shareholders ofthe Group other subsidiary Sureko.

23.2 Other expenses from operating activitiesFor the years ended 31 December 2014 and 2013, other expenses from operating activities comprised thefollowing:

24. Income/expense from investing activities

24.1 Income from Investing ActivitiesFor the year ended 31 December 2014 and 2013, income from investing activities comprised the following:

87


Income relating to late payments (*) 4.058 --

Foreign exchange gain from other operating activities 3.633 8.950

Income related to the cancellation of the debt arising from acquisition of subsidiary (**) 3.611 --

Late payment interest 1.830 1.323

Gain on sale of scrap materials 1.499 1.455

Rent income 1.111 568

Competition Board penalty refund income(Note15.2) 726 --

Insurance income 241 627

Other 1.815 1.291

18.524 14.214


Foreign currency losses (2.557) (8.175)

Late interest expenses (842) (993)

Provision for doubtful receivable expenses (Note 7.1) (756) (184)

Excavation expense (568) (2.211)

Penalties and administrative fines (407) (1.371)

Other (37) (1.089)

(5.167) (14.023)


Valuation gain on investment property (Note 11) 35.008 32.701

Gain on sale of tangible assets 5.274 138

Gain on sales of securities -- 170

40.282 33.009


Impairment of intangible assets (Note 13) (3.769) --

Loss on sale of tangible assets -- (213)

(3.769) (213)


Foreign exchange gains 22.806 4.712

Interest income 2.484 2.242)

25.290 6.954


Foreign Exchange expense (18.707) (31.357)

Bank loans interest expense (3.300) (4.543)

Effect of discount from asset retirement obligation (Note 15.3) (747) (190)

Actuarial interest expense (Note 17.3) (656) (445)

Other (1.457) (613)

(24.867) (37.148)

4Annual Report 2014


86

The reconciliation of income tax expense as follows:

The detail of cumulative temporary differences and the resulting deferred tax assets and liabilities providedat 31 December 2014 and 31 December 2013, using enacted tax rates at the balance sheet dates, were asfollows:

27. Income taxes (included deferred tax assets and liabilities)

As of 31 December 2014 and 2013, corporate tax provision and prepaid corporation tax is as follows:

Turkish tax legislation does not permit a parent company and its subsidiary to file a consolidated tax return.Therefore, provisions for taxes, as reflected in the consolidated financial statements, have been calculated ona separate-entity basis. According to this:

As of 31 December 2014 and 2013, the interim tax expense in the statement of income for the periods issummarized below:

8988


Corporation tax provision 23.450 8.854

Less: Prepaid corporation tax (17.549) (7.166)

Tax provision for the period - net 5.901 1.688


Current tax expense 6.202 2.345

Prepaid income tax (301) (657)

5.901 1.688


Corporate tax expense (23.875) (9.140)

Deferred tax income/expense 7.757 (7.534)

Total tax expense (16.118) (16.674)

(%) 2014 (%) 2013

Net profit 116.360 36.270Total tax expense (16.118) (16.674)

Tax before profit 132.478 52.944Taxes on reported profit per statutory tax rate of the parent company 20,00 (26.496) 20,00 (10.589)

Non-deductible expenses 0,55 (728) 3,40 (1.798)

Valuation of investment properties (3,96) 5.251 (9,27) 4.909

Recognition of previously unrecognized tax losses (3,95) 5.232 (1,23) 651

Tax exempt income (0,44) 585 (0,04) 22

Current period tax losses over which no deferred taxes recognized -- -- 6,60 (3.492)

Unused and expired tax losses over whichdeferred tax was recognized in prior years -- -- 11,62 (6.149)

Other (0,03) 38 0,43 (228)

Total tax expense 12,17 (16.118) 31,51 (16.674)

Deferred DeferredTax Tax

Assets Liabilities

2014 2013 2014 2013

Tangible and intangible assets -- -- (18.848) (23.641)

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

Tax loss carryforwards 16.840 12.269 -- --

Reserve for employee severance indemnity 3.646 3.163

Provision for rehabilitation and closure of the mine sites 2.870 3.516 -- --

Debt provisions 733 996 -- --

Provision for doubtful receivables 422 396 -- --

Investment properties -- -- (10.168) (9.132)

Other assets and liabilities 938 424 -- --

Total deferred tax assets/liabilities 25.449 20.764 (56.504) (60.261)

Net amount (13.567) (18.360) 13.567 18.360

Net deferred taxAssets / liabilities 11.882 2.404 (42.937) (41.901)

4Annual Report 2014


As of 31 December 2014, the Group has calculated deferred tax asset amounting to TL 84.200 thousand (31December 2013: TL 61.345 thousand) over tax loss carryforwards amounting to TL 16.840 thousand (31December 2013: TL 12.269 thousand) that is highly probable to be deductible from future taxable profits. Thedistribution of the tax loss carryforwards which deferred tax asset is calculated by their year of expiration isas shown below:

* Within the regulatory framework in the UK, the use of accumulated losses is not limited to any period.Financial losses TL 2.314 thousands and TL 8.838 thousands which can be deducted in the calculation ofdeferred tax as of December 31,2014 of the Group’s subsidiaries operating in the UK, NWM and Quercia, isnot shown in the table above.

As of 31 December 2014, total tax losses not subject to deferred tax calculation are TL 737 thousand,. (31December 2013: 27.224 thousand TL).

28. Earnings per share

As of 31 December 2014 and 2013 the earnings per share comprises as follows:

As at 31 December 2014, movement in the deferred tax asset/liabilities comprised the following:

As at 31 December 2013, movement in the deferred tax asset/liabilities comprised the following:

9190

1 January 2014 Current year Recognized 31 December 2014deferred in other

tax comprehensiveexpense income

Tangible and intangible assets (23.641) 4.863 (70) (18.848)

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

Tax loss carryforwards 12.269 4.571 -- 16.840

Provision for rehabilitation and closure of the mine sites 3.516 (646) -- 2.870

Reserve for employee severance indemnity 3.163 (272) 755 3.646

Provision for doubtful receivables 396 26 -- 422

Debt provisions 996 (263) -- 733

Investment properties (9.132) (1.036) -- (10.168)

Other assets and liabilities 424 514 -- 938

Deferred tax asset/(liabilities) (39.497) 7.757 685 (31.055)

1 January 2013 Current year Recognized 31 December 2013deferred in other

tax comprehensiveexpense income

Tangible and intangible assets (25.726) 2.765 (680) (23.641)

Goodwill amortization at statutory books (27.604) 116 -- (27.488)

Tax loss carryforwards 21.838 (9.569) -- 12.269

Provision for rehabilitation and closure of the mine sites 3.478 38 -- 3.516

Reserve for employee severance indemnity 2.735 (313) 741 3.163

Provision for doubtful receivables 405 (9) -- 396

Debt provisions 96 900 -- 996

Investment properties (7.495) (1.637) -- (9.132)

Other assets and liabilities 249 175 -- 424

Deferred tax asset/(liabilities) (32.024) (7.534) 61 (39.497)

2014 2013

Expiration year2014 -- 41.339

2015 5.579 8.444

2016 5.686 7.066

2017 10.326 4.496

2018 21.873 --

2019 29.584 --

73.048 61.345

2014 2013

Net profit for the equity holders of the Company 110.866 34.301Number of weighted averageof ordinary shares (lot value is TL 1*) 87.112.463 87.112.463

Number of weighted averageof ordinary shares (577.674) (577.674)

86.534.789 86.534.789Earnings per share (TL) 1,2812 0,3964

(*) 1 lot is composed of 100 shares.

4Annual Report 2014


29.1.1 Credit RiskHaving financial assets also brings the risks that the opponent party may not obey the rules of theagreements. The Group management minimizes these risks by getting guarantees for every agreementsigned (except for related parties). The Group manages these risks by updating the credit limits for thecustomers within specific periods. The usage of credit limits are followed by Group management and thecredit quality of customers are evaluated according to the customer’s financial position, past experiences,market prestige and other factors.

93

29. Nature and level of risk arising from financial instruments

29.1 Financial Risk ManagementThe Group has exposure to market risk, capital risk, credit risk and liquidity risk which are composed of foreigncurrency, cash flow and interest rate risks because of its operations. The policy of financial risk managementof the Group is focused on the unexpected changes. Financial risk management policy is determined by the top management, Board of Directors and financedepartment together. Board of Directors especially prepare policies and principles about the credit, liquidityand capital risks subjects and follows the operational and financial risks in detail.The aims that are determined by the Group to manage the financial risks can be summarized as follows:• Providing the cash flows from the Group’s operations continuously by considering the currency and interestrate risks,

• Having borrowings with an appropriate type and maturity in order to use effectively for the operations• Following and keeping the risks from others at the minimum level.

Risk Management FrameworkBoard of Directors of the Company is responsible for determining and monitoring risk management frameworkof the Group. Board of Directors established an “Early Detection of Risk Committee” responsible for improvingand monitoring risk management policy of the Group. The committee reports its activities to the Boardperiodically.The Group’s risk management policy was determined to detect and analyze risks would be faced, to designateappropriate risk limits and set controls, to observe risks and dependence of risk limits Policies and sytems ofrisk management is reviewed regularly by means of reflect changes in market conditions and operations ofthe Group. The Group aims to develop a diciplined and constructive control environment where all employeesunderstand their roles and responsibilities through training and management standards and procedures.The Group Auditing Committee, monitors to the management in terms of compliance to risk managementpolicy and procedures of the Group and supports them in carrying out the risk management framework.Internal audit department reviews risk management policy and procedures regularly and reports the resultsto the Group Auditing Committee.

92

Receivables

Trade Receivables Other Receivables

Related Other Related Other Time Derivatives Other*31 December 2014 Party Party Deposits

Exposure to maximum credit risk as of reporting date(A+B+C+D) 1.151 164.312 24.828 10.379 67.586 -- 36.292

- Secured part of the maximum credit risk -- 114.539 -- - -- -- --

A. Net book value of financial assetswhich are neither impaired nor overdue 1.151 152.416 24.828 10.379 67.586 -- 132

B. Net book value of financial assetswhich are overdue but not impaired -- 11.896 -- -- -- -- --

C. Net book value of impaired -- -- -- -- -- -- --

- Overdue (gross value) -- 7.576 -- -- -- -- --

- Impairment (-) -- (7.576) -- -- -- -- --

- Net value of guarantee letter -- -- -- -- -- -- --

- Non-overdue (gross value) -- -- -- -- -- -- --

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


D. Off balance sheet items with credit risks -- -- -- -- -- -- 36.160

* Other comprises guarantees given, receivables from personnel and income accruals, excluding non-financialinstruments such as VAT receivables, prepaid expenses, and prepaid taxes.

4Annual Report 2014


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.Liquidity risk is the ability to fund the existing and prospective debt requirements. It is managed by obtainingadequate funding lines from high quality lenders and to keep sufficient amount of cash and marketablesecurities. Group management follows the collection from its customers closely and tries to minimize thefinancing need in case of late payments and arranges credit limits from banks when required. In addition,Group’s liquidity management includes preparation of cash flow projections as per production units,comparison of liquidity ratios with budgeted ratios.

As of 31 December 2014 and 2013 financial liabilities and contractual outflows of those liabilities in respect oftheir maturities is as follows:

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

29.1.3 Market Risk Foreign Currency RiskThe Group is exposed to currency risk through translating assets and liability amounts in foreign currency toTL. For the exchange rate risk, the management of the Group strictly follows up stabilizing foreign exchangeposition. The Internal Audit Committee and Board of Directors monitor the foreign currency risks throughoutthe committee meetings and monitor the foreign currency position of the Group.

95

* Other comprises guarantees given, receivables from personnel and income accruals, excluding non-financialinstruments such as VAT receivables, prepaid expenses, and prepaid taxes.

According to Group management’s evaluation of the past experiences and collections in the following periods,trade receivables which are past due but not impaired do not have a risk of collection. The maturity of the pastdue but not impaired trade receivables is as follows:

Receivables

Trade Receivables Other Receivables

Related Other Related Other Time Derivatives Other*31 December 2013 Party Party Deposits

Exposure to maximum credit risk as of reporting date(A+B+C+D) 479 154.558 13.445 2.871 86.882 -- 26.816

- Secured part of the maximum credit risk -- 127.290 -- - -- -- --

A. Net book value of financial assetswhich are neither impaired nor overdue 479 103.791 13.445 2.871 86.882 -- 1.595

B. Net book value of financial assetswhich are overdue but not impaired -- 50.767 -- -- -- -- --

C. Net book value of impaired -- -- -- -- -- -- --

- Overdue (gross value) -- 6.965 -- -- -- -- --

- Impairment (-) -- (6.965) -- -- -- -- --


- Non-overdue (gross value) -- -- -- -- -- -- --

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


D. Off balance sheet items with credit risks -- -- -- -- -- -- 25.221

Receivables

Trade Other Time Derivatives Other31 December 2014 Receivables Receivables Deposits

Past due 1 - 30 days 7.302 -- -- -- --

Past due 1 - 3 months 3.511 -- -- -- --

Past due 3 - 12 months 1.083 -- -- -- --

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

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

11.896 -- -- -- --

ReceivablesTrade Other Time Derivatives Other

31 December 2013 Receivables Receivables Deposits

Past due 1 - 30 days 29.311 -- -- -- --

Past due 1 - 3 months 14.432 -- -- -- --

Past due 3 - 12 months 6.926 -- -- -- --

Past due 1 - 5 years 98 -- -- -- --

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

50.767 -- -- -- --

94

31 December 2014 Carrying Total Less than Between Between More thanContractual Amount contractual 3 months (I) 3 – 12 1- 5 Year (III) 5 Yearsmaturities cash months (II) (IV)

outflows(=I+II+III+IV)

Non-derivative Financial LiabilitiesBank Borrowings 42.824 44.458 207 43.406 845 --

Finance lease liabilities 1.526 1.649 169 539 941 --

Trade payables 140.972 141.305 141.154 151 -- --

Other payables * 30.135 32.356 5.267 8.108 18.981 --

Total 215.457 219.768 146.797 52.204 20.767 --

31 December 2013 Carrying Total Less than Between Between More thanContractual Amount contractual 3 months (I) 3 – 12 1- 5 Year (III) 5 Yearsmaturities cash months (II) (IV)

outflows(=I+II+III+IV)

Non-derivative Financial LiabilitiesBank Borrowings 89.081 90.676 783 89.840 53 --

Trade Payables 128.271 128.611 128.394 217 -- --

Other Payables * 29.267 29.267 17.327 -- 11.940 --

Total 246.619 248.554 146.504 90.057 11.993 --

4Annual Report 2014


9796


TL USD TL USDEquivalent Euro GBP* Other Equivalent Euro GBP* Other

1. Trade receivables 5.926 2.289 1 171 -- 13.135 2.146 4 2.433 --

2a. Monetary financial assets(Including cash and cash at banks) 32.648 7.134 2.220 2.737 -- 52.720 20.520 3.039 -- --

2b. Parasal Olmayan Finansal Varlıklar -- -- -- -- -- -- -- -- -- --

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

4. Current Assets (1+2+3) 38.574 9.423 2.221 2.908 -- 65.855 22.666 3.043 2.433 --5. Trade Payables -- -- -- -- -- -- -- -- -- --

6a. Monetary financial assets -- -- -- -- -- -- -- -- -- --

6b. Non-monetary financial assets -- -- -- -- -- -- -- -- -- --

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

8. Non-Current Assets (5+6+7) -- -- -- -- -- -- -- -- -- --9. Total Assets (4+8) 38.574 9.423 2.221 2.908 -- 65.855 22.666 3.043 2.433 --10. Trade payables 51.246 12.238 8.107 -- -- 18.045 262 5.901 45 --

11. Financial liabilities 42.415 -- 15.037 -- -- 88.356 -- 30.089 -- --

12a. Monetary other liabilities -- -- -- -- -- 15.939 -- 5.428 -- --

12b. Non-monetary other liabilities -- -- -- -- -- -- -- -- --

13. Short Term Liabilities (10+11+12) 93.661 12.238 23.144 -- -- 122.340 262 41.418 45 --14. Trade payables -- -- -- -- -- -- -- -- -- --

15. Financial liabilities -- -- -- -- -- -- -- -- -- -

16a. Monetary other liaiblities -- -- -- -- -- -- -- -- -- --

16b.Non-monetary other liabilities -- -- -- -- -- -- -- -- -- --

17. Long Term Liabilities(14+15+16) -- -- -- -- -- -- -- -- -- --18. Total Liabilities (13+17) 93.661 12.238 23.144 -- -- 122.340 262 41.418 45 --19. Net Asset/(liability) position

of Derivative instruments (19a-19b) -- -- -- -- -- -- -- -- -- --19a.Off-balance sheet foreign

currency derivative assets -- -- -- -- -- -- -- -- -- --19b.Off-balance sheet foreign

currency derivative liabilities -- -- -- -- -- -- -- -- -- --20. Position (9-18+19) (55.087) (2.815) (20.923) 2.908 -- (56.485) 22.404 (38.375) 2.388 --21. Net foreign currency asset / (liability)

position of monetary items (TFRS 7.B23) (55.087) (2.815) (20.923) 2.908 -- (56.485) 22.404 (38.375) 2.388 --22. Fair value of financial instruments

used in foreign currency hedges -- -- -- -- -- -- -- -- -- --23. Hedged foreign currency assets -- -- -- -- -- -- -- -- -- --24. Hedged foreign currency assets -- -- -- -- -- -- -- -- -- --

* Only GBP Risk of subsidiaries whose functional currencies are not GBP is presented in this column.

Currency Sensitivity Analysis31 December 2014

Profit/Loss EquityAppreciation of Devaluation of Appreciation Devaluation

foreign currency foreign currency of foreign currency of foreign currency

Assumption of devaluation/appreciationby 10% of USD against TL

1- Net asset/(liability) of USD (653) 653 -- --

2-USD Risk hedged (-) -- -- -- --

3-USD net effect (1+2) (653) 653 -- -- Assumption of devaluation/appreciationby 10% of EURO against TL

4-Net asset/(liability) of EURO (5.902) 5.902 -- --

5-Euro Risk hedged (-) -- -- -- --

6-EURO net effect (4+5) (5.902) 5.902 -- -- Assumption of devaluation/appreciationby 10% of GBP against TL

7-Net asset/(liability) of GBP 1.046 (1.046) -- --

8-GBP Risk hedged(-) -- -- -- --

9-GBP net effect (7+8) 1.046 (1046) -- -- Assumption of devaluation/appreciationby 10% of other currencies against TL

10-Net asset/(liability) of other currencies -- -- -- --

11-Other currencies risk hedged (-) -- -- -- --

12-Net effect of Other Currencies (10+11) -- -- -- -- Total (3+6+9+12) (5.509) 5.509 -- --

4Annual Report 2014


Interest Rate Risk The Group’s fair value profit or loss financial assets and liabilities and the fair value hedge accounting modelrecorded in the hedging derivative instruments (interest rate swaps) are not available. Therefore, as of thereporting period, changes in interest rates will affect profit or loss.

Price RiskGroup’s operational profitability and cash inflows generated by operations change with the changes at rawmaterial prices, competition in cement and ready mixed concrete markets. Group management follows theprice changes and takes precautions to decrease the costs. Related risks are monitored through meetingsheld by Early Detection of Risk Committee and Board of Directors.

29.1.4 Capital riskGroup’s aim is to keep sustainability of the operations with the most sufficient capital structure to minimizethe cost of capital and to provide earnings and benefit to its shareholders.The Group can change the amount of dividend to shareholders, return the capital to shareholders, issue newbonds and sell assets to reduce the debts in order to keep capital structure or to adjust the structure of thecapital.In line with the other companies in the market, the Group follows the capital with the rate of debts/equity. Thisrate is calculated by dividing the net debt to equity. Net debt is calculated by subtracting the cash and cashequivalents from total debt amount.

9998

Currency Sensitivity Analysis31 December 2013

Profit/Loss EquityAppreciation of Devaluation of Appreciation Devaluation

foreign currency foreign currency of foreign currency of foreign currency

Assumption of devaluation/appreciationby 10% of USD against TL

1- Net asset/(liability) of USD 4.782 (4.782) -- --

2- USD Risk hedged (-) -- -- -- --

3- USD net effect (1+2) 4.782 (4.782) -- -- Assumption of devaluation/appreciationby 10% of EURO against TL

4-Net asset/(liability) of EURO (11.269) 11.269 -- --

5-Euro Risk hedged (-) -- -- -- --

6-EURO net effect (4+5) (11.269) 11.269 -- -- Assumption of devaluation/appreciationby 10% of GBP against TL

7-Net asset/(liability) of GBP 839 (839) -- --

8- GBP Risk hedged(-) -- -- -- --

9-GBP net effect (7+8) 839 (839) -- -- Assumption of devaluation/appreciationby 10% of other currencies against TL

10-Net asset/(liability) of other currencies -- -- -- --

11-Other currencies risk hedged (-) -- -- -- --

12-Net effect of Other Currencies (10+11) -- -- -- -- Total (3+6+9+12) (5.648) 5.648 -- --

2014 2013

Fixed interest rate financial instrumentsFinancial asset 56.177 79.338

Financial liabilities 1.526 88.973

Variable interest rate financial instrumentsFinancial asset -- --

Financial liabilities 42.414 --

4Annual Report 2014


that the current market values of trade and related party receivables are close to the book values. Financialassets whose fair value changes are recognized in the comprehensive income statement are shown with theirfair values. Nonetheless, the fair values of the financial assets which are not listed are determined withgenerally accepted valuation methods and if there is impairment over these amounts, they are deducted andresulting amount is close to the fair values.

Financial liabilitiesValues of trade payables, due to related parties and other financial liabilities measured at amortized cost usingthe effective interest method are assessed as fair values. Fair values of foreign currency liabilities translatedinto TL with the year-end exchange rate have been accepted as closing to carrying values.

Classifying the measurement of fair valueIn the following table, the valuation methodologies of financial instruments made valuation with their fairvalues are presented. They are described in terms of their levels as follows:Level 1: Quoted (unadjusted) prices in active markets for identical assets or liabilities;Level 2: Inputs other than quoted prices included within Level 1 that are observable for the asset or liability,either directly (i.e. as prices) or indirectly (i.e. derived from prices);Level 3: Inputs for the asset or liability that is not based on observable market data (unobservable inputs).

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29.1.5 Fair value of financial instrumentsThe Group determines fair values of financial assets by using market data and appropriate valuation methods.But, since judgment may be required in determining fair value, fair values may not reflect the amounts in themarket. Group assesses fair values of financial assets and liabilities measured at amortized cost using theeffective interest method including cash and banks, other financial assets and other short term financialliabilities as they reflect their fair value because of their short-term nature.

30. Financial Instruments (Fair Value And Financial Risk ManagementDisclosures)

The Classification of Financial InstrumentsThe Group has classified its financial assets as loans and receivables. Cash and cash equivalents (Note 5),trade receivables (Note 4 and Note 7) and other receivables (Note 4, Note 8) are classified as loans andreceivables and measured at amortized cost using the effective interest method. The financial liabilities of theGroup are composed of trade payables (Note 4, Note 7) and other payables (Note 4 and Note 8) and measuredat amortized cost using the effective interest method.The estimated fair values of financial instruments have been determined by the Group using available marketinformation and appropriate valuation methodologies. However, judgment is necessarily required to interpretmarket data to estimate the fair value. Accordingly, the estimates presented herein may not necessarily beindicative of the amounts the Group could realize in a current market exchange.The methods and estimations below are used for the financial instruments whose fair values can bedetermined.

Financial assetsIt is accepted that the fair values of foreign currency balances which are translated from the year end ratesare close to the book values. Cash and cash equivalents are shown with their fair values. It is also accepted

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31 December 2014 31 December 2013Other trade payables (Note 7.2) 128.658 121.586

Debt provisions (Note 15.3, 17.2 and 17.3) 49.266 49.092

Financial liabilities (Note 6) 44.350 89.081

Other payables to related parties (Note 4.4 and 4.5) 26.646 12.525

Due to related parties (Note 4.3) 12.314 6.685

Deferred income (Note 10.3 and 10.4) 7.568 14.373

Employee benefits liabilities (Note 17.1) 4.409 2.600

Other liabilities (Note 19.3 and 19.4) 14.960 14.552

Diğer borçlar (Dipnot 8.3 ve 8.4) 3.935 19.200

Less: Cash and cash equivalents (Note 5) (69.189) (86.882)

Net payables 222.917 242.812

Total equity 1.141.423 1.028.678

Debt / equity ratio %20 %24

31 December 2014 Level 1 Level 2 Level 3

Fair value of investment properties -- -- 229.907

-- -- 229.907

31 December 2013 Level 1 Level 2 Level 3

Fair value of investment properties -- -- 206.723

-- -- 206.723

4Annual Report 2014


32. Subsequent Events

None.

33. Other matters that significantly affect the consolidated financial statementsor make the financial statements clear, interpretable and understandable

None (2013: None).

34. Disclosures in relation to statement of cash flows

For the year ended 31 December 2014, the Group’s cash flow from operating activities are TL 90.452 thousand(31 December 2013: TL 110.639 thousand), cash flow used in investing activities are TL 74.120 thousand (31December 2013: 20.025 thousand), cash flow from financing activities are TL 33.865 thousand in cash flowsused (31 December 2013: 53.284 thousand), respectively.Destek, a subsidiary of the Group, made TL 404 thousand dividend payment (31 December 2013: TL 581thousand ) shown in the cash flow from financing activities.The Group sold its land in investment property amounting to TL 14.900 thousand to its related party, Yapıtek.TL 3.076 thousands gain on sale of the investment property is shown as adjustment of gain on disposal offixed assets under cash flows from operations, the sales price of operation is shown as adjustment of increasein other receivables from related parties under cash flow used in investing activities.

35. Disclosures in relation to statement of changes in equity

As of 31 December 2014, total equity of the Company is TL 1.141.423 thousand (31 December 2013: TL1.028.678 thousand). Total equity attributable to equity holders of the Company is TL 919.710 thousand (31December 2013: TL 810.581 thousand) and attributable to the non-controlling interests is TL 221.713 thousand(31 December 2013: TL 218.097 thousand) as of 31 December 2014.

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31. Non-Controlling Interest

As of 31 December 2014, information about the non-controlling interests in subsidiaries, including the Group’snon-controlling interests in significant levels are as follows:

As of 31 December 2013, information about the non-controlling interests in subsidiaries, including the Group’snon-controlling interests in significant levels are as follows:

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Recydia Kars Çimbeton Other individually Çimento immaterial

subsidiaries

The percentage of non-controlling interest 38,39% 41,62% 49,68%Fixed Assets 360.418 194.574 27.318 65.997

Current Assets 180.510 137.626 48.547 27.528

Long-term debt (6.785) (5.029) (1.773) (27.639)

Short-term debt (142.257) (14.261) (34.893) (30.643)

Net assets 391.886 312.910 39.199 35.243The book value of non-controlling interest 90.056 130.328 15.060 (13.731)Revenues 134.819 60.105 150.414 112.311

Profit 5.042 18.212 1.579 (8.356)

Other comprehensive income (342) (290) (53) (690)

Other comprehensive income 4.700 17.922 1.526 (9.046)Profit allocated to non- controlling interests 638 7.581 798 (3.523)

Other comprehensive income allocated to non- controlling interests (131) (121) (26) 24

Recydia Kars Çimbeton Other individuallyÇimento immaterial

subsidiaries

The percentage of non-controlling interest 36,99% 41,62% 49,68%Fixed Assets 349.858 187.686 27.126 60.144

Current Assets 144.011 123.775 41.745 27.426

Long-term debt (12.659) (5.038) (1.751) (8.775)

Short-term debt (94.024) (11.434) (29.448) (34.225)

Net assets 387.186 294.989 37.672 44.570The book value of non-controlling interest 88.247 122.869 14.288 (7.307)Revenues 116.704 62.138 144.677 103.074

Profit (4.013) 17.701 3.990 (5.958)

Other comprehensive income (480) (465) (195) (240)

Total comprehensive income (4.493) 17.236 3.795 (6.198)Profit allocated to non- controlling interests (4.057) 7.458 1.755 (3.187)

Other comprehensive income allocated to non- controlling interests (1.662) 7.174 1.885 --

4Annual Report 2014


105

Profit distribution proposal;

Although the Company has “term profit” in statutory records in accordance with the “Dividend Communique”No.II-19.1 dated 23.01.2014 of CMB, it has been resolved to retain the profit considering our medium and longterm strategies, the forecasted capital expenditures and financial plans, market and economic conditions,and Cimentas Group Net Debt Position at the end of 2014, and to submit a proposal to the general assembly.

104

107106

Çimentaş Group

Çimentaş İzmir Çimento Fabrikasi Türk A.Ş.Having been established as the 1st cement factory of the region in 1950, Çimentaş is producing clinker in 2kilns and cement in 4 mills located in İzmir plant. With it’s 61-years of history Çimentaş is one of thefundamental establishments of the sector and the region.

Çimentaş İzmir Çimento Fabrikasi Türk A.Ş. Trakya BranchEdirne Lalapaşa Cement Plant was acquired from the Savings Deposit Insurance Fund on the last days of2005 theough an Asset Sale transaction. It has been structured and organized as Trakya Branch of Çimentaşİzmir Çimento Fabrikası Türk A.Ş. Thus, Çimentaş has walked into the biggest cement market of the countryand has created new opportunities in respect of export 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 comprehension of “corporate responsibility”. It is the profitable and efficient establishment in the regionin terms of the economic and social situation.

Çimbeton Hazırbeton Ve Prefabrik Yapi Elemanları San. Ve Tic. A.Ş.

Founded in 1986, Çimbeton A.Ş. is the leading suppliers of region ready mixed concrete market. The company,which indicates the place, meaning and characteristics of the RMC in the construction sector, became themost important institution of the regional market. It is one of the profitable and productive companies of thesector.

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 supply flyash requirements of Çimentaş and Çimbeton.

Recydia Atık Yönetimi, Yenilenebilir Enerji Üretimi, Nakliye Ve Lojistik Hizmetleri Sanayi Ve Ticaret A.Ş.

Recydia A.Ş. founded in 2009, with the aim of taking the various advantages of 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 the 70% of the company Süreko A.Ş., which was already operating with its plantsin Manisa-Kula and Ankara-Kazan. In 2011, Recydia A.Ş. has entered into the disposal sector of the municipial waste by acquiring the operationlicence of the municipial waste processing plant of Istaç establishment that operates under İstanbulMetropolitan Municipality, at İstanbul / Kömürcüoda for a period of 25 years. The Company merged with Hereko İstanbul 1 Atık Yönetimi Nakliye Lojistik Elektrik Üretim Sanayi ve TicaretA. Ş., Elazığ Altınova Çimento Sanayi Ticaret A. Ş. and Bakırçay Çimento Sanayi ve Ticaret A. Ş. during theperiod of 2014.

Recydia Atık Yönetimi, Yenilenebilir Enerji Üretimi, Nakliye Ve Lojistik Hizmetleri Sanayi Ve Ticaret A.Ş. İstanbul Hereko Branch

Hereko İstanbul 1 Atık Yönetimi, Nakliye, Lojistik, Elektrik Üretim Sanayi ve Ticaret A.S., founded early in theyear 2011 as a 100% subsidiary of Recydia A.Ş. has entered into the disposal sector of the municipial waste byacquiring the operation licence of the municipial waste processing plant of Istaç establishment that operatesunder İstanbul Metropolitan Municipality, at İstanbul / Kömürcüoda for a period of 25 years. The Companymerged with Recydia A.Ş. in 2014 and continuous its activities as Recydia A.Ş. İstanbul Hereko Branch.

Recydia Atık Yönetimi Yenilenebilir Enerji Üretimi, Nakliye veLojistik Hizmetleri San. ve Tic. A.Ş. Elazığ Çimento Şubesi

Elaziğ Çimento the acquision of which was accomplished from OYAK-GAMA Joint Venture in September 2006,is one the leading establishments in respect of economic and social development of its region. The Companymerged with Recydia A.Ş. in 2014 and continuous its activities as Recydia A.Ş. Elazığ Çimento Branch.

Süreko Atık Yönetimi Nakliye Lojistik San. ve Tic. 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.

Yapıtek Yapı Teknolojisi Ve Ticaret A.Ş.Yapıtek was established in 1987 to carry out the construction works for Çimentaş Group companies. Itsactivities have been suspended pending possible restructuring according to developments in its potentialmarket. The policy of the company will reveal in the forthcoming term.

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

Destek A.Ş., which provides logistic support, serves as cleaning and other services beside operating an oilservice station, table d’hot and restaurant, also it finances the Çimentaş Education and Health Foundationwith its sources and revenue.

Çimentaş Educatıon 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 atthe past term.

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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Cimentas 2014 ING.qxp Layout 1 · _Cimentas_CopING_BIL2014.qxp_Layout 1 27/04/15 11:29 Pagina 1. ANNUAL REPORT 2014. 2 3 28 Independent Auditor's Report 30 Consolidated Financial