In Every Aspect of Life... ÇİMSA ANNUAL REPORT 2010 Contents

02 Agenda of the Ordinary General Assembly 03 Sustainable Life and Cement 05 Financial Highlights 07 Our Vision-Mission-Values 09 Corporate Profile and Milestones 11 The Chairman’s Message 15 Board of Directors and Audit Committee 16 Senior Management 17 Members of the Board of Directors 19 Senior Management Team 23 Evaluation of 2010 Cement Sector 27 Domestic Cement Facilities 31 Cement Products 35 International Cement Facilities 37 Ready-Mixed Concrete and Aggregate Facilities and Products 41 International Terminals 45 2010 Investments 49 2010 Marketing and Sales Activities 53 Corporate Development and Human Resources 61 Çimsa’s Sustainability Approach 65 Social Responsibility 69 Corporate Governance Principles Compliance Report 77 Consolidated Financial Statements Together with Report of Independent Auditors 147 Addresses

01 Çimsa Çimento Sanayi ve Ticaret A.Ş. 2010 Annual Report Agenda of the Ordinary General Assembly

ÇİMSA ÇİMENTO SANAYİ VE TİCARET A.Ş. The Agenda of the Ordinary General Assembly To be held on the 6th of April 2011

AGENDA:

1- The Opening Session and Representation of Board,

2- Authorization of the board for the Approval of the Meeting Report,

3- Reading and Discussion of the Board of Director’s Annual Report and the Auditors’ Reports,

4- Presenting Donations of the Year to the Shareholders,

5- Reading, Discussion and Approval of the Balance Sheet and Profit and Loss Account; Discussion of the Dividend Distribution Proposal and its Acceptance or Refusal

6- Release of the Members of the Board of Directors and Auditors from their Liabilities,

7- Approval of the New Members Elected by the Board of Directors, for the Discharged Memberships of the Board of Directors during the Term,

8- Re-election of the Audit Committee Member for the Membership Discharged During the Term, and Specification of the Compensation,

9- Approval of the Independent Audit Agency Determined by the Board of Directors,

10- Authorization of the Chairman and Members of the Board of Directors to Conduct Procedures Set Out in Articles 334 and 335 of the Turkish Commercial Code.

Çimsa Çimento Sanayi ve Ticaret A.Ş. 2010 Annual Report 02 Sustainable Life and Cement

ement is one of the key materials have only been possible thanks to the constituting the modern way of incomparable features of cement. And, C life. as the most basic of the construction It is the most fundamental element in materials, cement is a sustainable the construction of the houses that material that links the past to the future. provide shelter to all modern societies; the schools, hotels, hospitals and social Çimsa’s principal aim, during the buildings that satisfy society’s social production and distribution of this needs; and in the industrial structures material essential for civilization and and commercial buildings that ensure modern societies, is to create long economic sustainability. It is the one term additional value for all of its single irreplaceable material in the stakeholders. Çimsa analyses each one construction of infrastructure, the most of its processes through the application prominent indicator of any country’s level of triple accounting, for the society, the of development. environment and the economy.

It is a truly inexpensive and durable Çimsa has prepared and will soon publish material, a material suitable for aesthetic its Sustainability Report for 2011 covering uses, especially in comparison to its activities from 2007-2010 and is now, most other construction materials. within this scope, sharing its short term Contemporary architecture’s best (2012) and long term (2020) goals with all practices and aesthetic masterpieces of its stakeholders.

03 Çimsa Çimento Sanayi ve Ticaret A.Ş. 2010 Annual Report As one of the most essential construction materials, cement is the one indispensable building material constituting the core of every building constructed to meet individuals’ - and society’s - social, commercial and economic needs. Having these features, cement is one of the core elements of modern life: a sustainable material linking the past to the future.

Çimsa Çimento Sanayi ve Ticaret A.Ş. 2010 Annual Report 04

Financial Indicators

(Currency-Turkish Liras)

Primary Balance Sheet Indicators 2010 2009

Liquid Assets 10,681,165 51,088,881 Trade Receivables (net) 124,195,061 103,392,181 Stocks (net) 92,824,407 63,393,847 Total of Current and Floating Assets 247,235,654 285,034,872 Financial Assets (net) 243,304,929 320,148,664 Tangible Assets (net) 482,255,188 436,402,767 Intangible Assets (net) 18,136,992 18.652.621 Total Non-Current and Non-Floating Assets 886,601,146 914,706,515 Total Assets (net) 1,133,836,800 1,199,741,387 Equity 879,807,348 932,100,768

Primary Income Statement Indicators 2010 2009

Sales Revenue (net) 708,480,015 614,924,831 Income and Profit from Other Operations 7,432,900 13,359,157 Operating Profit 141,199,284 138,585,884 Net Profit for the Period 103,249,803 108,132,777

05 Çimsa Çimento Sanayi ve Ticaret A.Ş. 2010 Annual Report

In 2010, Our Clinker production was 4,616,000 tons.

Our Ready-Mixed Concrete production for the year 2010 was 3.3 million cubic meters.

We have increased our sales to 708.5 million TL.

Çimsa Çimento Sanayi ve Ticaret A.Ş. 2010 Annual Report 06 Our Vision Our Mission is to become the most is to become the partners of valuable cement and concrete and concrete company in cement users world-wide. Turkey.

07 Çimsa Çimento Sanayi ve Ticaret A.Ş. 2010Annual Report Our Values Our values are the core qualities of our culture that will carry us into the future: reliability, customer orientation, and collaboration. We are a reliable and collaborative organization who has been working with its customers, employees, suppliers and business partners for a long time. We understand the needs of our customers and we are always increasing the value that we provide to our customers through the creation of new solutions to satisfy their needs.

Çimsa Çimento Sanayi ve Ticaret A.Ş. 2010 Annual Report 08 Corporate Profile

Creating value for all ounded in Mersin in 1972, Çimsa production capacity is now 3.5 million of its stakeholders began operating its first production cubic. With its five facilities producing Ffacility in 1975 in Mersin. Today, aggregate, the company is also an while remaining Çimsa’s clinker production capacity across important player in the aggregate industry. focused on profitable its facilities in Mersin, Kayseri, Eskişehir, growth, Çimsa now Niğde and Ankara has reached 5 million In white cement, Çimsa is one of the three leading brands in the world. seeks to maintain this tons. In addition to grey cement, Çimsa also produces special cements, such as Çimsa is an international cement producer, in the future with its white cement and calcium aluminated with terminals in Seville (Spain), Emden sustainability approach. cement, and leads the Turkish cement (Germany), Constanta (Romania), and ready-mixed concrete industry in Trieste (Italy), Novorossiysk (Russia) innovation. Having entered the ready- and Famagusta (the Turkish Republic of mixed concrete industry in 1988, today Northern Cyprus). Çimsa serves in Adana, Mersin, Kayseri, Antalya, Osmaniye, Kahramanmaraş, With its consolidated net sales for 2010 Nevşehir, Eskişehir, Kütahya, Bursa, having reached 708,5 MTL, Çimsa has Konya, Karaman, Aksaray, Sakarya and generated a total net profit of 103,7 MTL. Bilecik. Çimsa’s ready-mixed concrete

09 Çimsa Çimento Sanayi ve Ticaret A.Ş. 2010 Annual Report Milestones

1990 • The world’s first, and only, customizable gray/ 1972 1975 1988 white clinker production1995 line was commissioned. • Çimsa was founded in Mersin.• Çimsa started production• Çimsa with aentered capacity the of ready-mixed 1 million tonnes/year. concrete industry. • A mill and packaging facility in Kayseri was acquired.

2005 2000 • The Kayseri Plant’s clinker line was • A new white clinker line was commissioned, commissioned. 1996 adding an additional capacity2002 of 600,000 tons per • Standart Çimento was acquired. (Eskişehir • The Malatya packaging terminal was acquired.year. The Mersin plant now became• Turkey’s the first world’s and only Calcium Aluminated Cement Plant and the Ankara Cement Grinding • The Seville, Spain, terminal was established.largest capacity white cementCement plant. production plant began production. Facility)

2008 2010 • Eskişehir’s second line was commissioned. • In February, 60 percent of the shares of Medcon, 2006 • With the acquisition of the Bilecik Ready-Mixed Concretethe owner of the Trieste terminal, were acquired. • The terminal in 2007Northern Cyprus was acquired. Facility, Çimsa became,2009 in terms of the number of its facilities,• Production of Çimsa Super Bims Cement began. • A sales office in• RomaniaÇimsa took was over opened. the Oysa Niğde Factory.the biggest player in• Turkey’sÇimsa’s Russiaready-mixed terminal concrete was commissioned. industry.

Çimsa Çimento Sanayi ve Ticaret A.Ş. 2010 Annual Report 10 The Chairman’s Message

Into the future, Çimsa months to the end of the third quarter of sustainability of its international cement sales 2010 has increased by 8.9%, compared to and distribution, especially with respect is committed to the same period of 2009. to reaching its white cement customers directly. In February 2010, Çimsa obtained maintaining the value Growth in the building trade was more over 60% of the shares of the Medcon than 20% over these three quarters. The Company located in Trieste, renaming the that it is creating for building trade, which has a significant place company Çimsa Adriatico. Çimsa will move in the economic growth of Turkey, further the economy, for the into new markets during the first half of contributes to the sustainability of this 2011 through the terminal soon to be built in environment and for growth through its creation of employment. Alicante, which will become, after the Cimsa society. In our country, where the per capita annual Cementos Seville terminal in Spain, the income now exceeds US$10,000, cement largest white cement market in Europe. consumption per capita now approaches Çimsa’s management is committed to 700 kilograms per year. Turkey is now focusing its activities on increasing today’s Dear Business Partners, giving priority to investments in its energy economic added value, while protecting and transportation infrastructure so that it Following the crash of the developed the value to be created in the future. The can sustain its growth. As a result of these nations’ financial markets in the last company’s performance is assessed only investments, cement consumption per quarter of 2008, in 2009 the financial after taking into account its successes in person is expected to continue increasing. crisis began to affect the real sector in the meeting its social and environmental targets, developed countries. Accompanying rising With a national income now close to US$1 in addition to reaching its economic targets. unemployment in these countries, their trillion, beyond being one of 2010’s fastest Our sustainability approach loss of consumer confidence negatively growing countries, Turkey, thanks to its affected their consumption levels, leading consistent political position, is a growing Looking at our company’s value chain, to an economic contraction. regional leader. An important reason we are now seeking to understand and The income levels in developing countries, why Turkey was one of the countries to improve the social and environmental on the other hand, continued to grow least affected by the global crisis is the impacts that result directly, and indirectly, throughout this period. These countries structural reforms that it has undertaken from our activities in the past, today and were affected by the financial and economic over the last ten years. When speaking in the future. In the second half of 2011, crisis to a more limited extent, thanks to about our country’s performance during we plan to present to the public our their financial systems free of complex 2010, we must also emphasize the role Sustainability Report covering our activities financial instruments, their increasing of its dynamic and ambitious private from 2007 to 2010. sector, a sector that adapts rapidly to populations, increasing consumption, and To adopt a sustainable work model, it is new conditions and which knows how to their economies being comparatively more necessary to protect natural resources protect its global competitiveness. reliant on commodity prices. and to minimize the environmental I believe that Çimsa, with its obvious The new engines of the world’s impacts of industry, in addition to ensuring qualifications of innovativeness and economy profitable growth. During the first quarter efficiency, is one of the private sector’s of 2010, Çimsa increased its productive Again, 2010 has been a year featuring weak leading corporations which will make capacity while decreasing its specific heat growth amongst the developed economies. Turkey’s growth sustainable. consumption, and thus its need for energy, However, the developing economies as a result of the modernization project, Çimsa creates added value for Turkey continued to grow. In 2010, China, with its now completed, in the first line of its gross national product now being greater Çimsa, one of the most profitable Mersin Plant. With the completion of the than Japan’s, became the world’s second companies in the Turkish cement sector, Mersin Exhaust Gas Electricity Production largest economy after United States of has increased its sales incomes by xx% Project, the investment in which began America. The maps of production and of the over the previous year, while further creating in 2010, electricity will now be produced world economy’s trade routes are changing added value for its stakeholders through from the exhaust gases collected from our significantly. Turkey is one of the countries increasing its net profit to xx million TL. clinker stoves. The 8 MW of electricity that at the very core of these changes. Turkey’s Çimsa continues to expand its international will be obtained is equal to a full half of the Gross Domestic Product for the past nine distribution network, aiming to ensure the requirements of two clinker stoves, the

11 Çimsa Çimento Sanayi ve Ticaret A.Ş. 2010 Annual Report exhaust heat of which will be used. The second of our projects destined to have a positive effect on our greenhouse gas emissions is to be implemented at our Eskişehir Plant. Upon the completion of our Hot Disc project, especially designed for combustible wastes that can be consumed in clinker stoves, replacing fossil fuels, our overall goal is to increase our waste fuel usage ratio throughout the plant.

Çimsa leads workplace health and safety Workplace health and safety is our fundamental priority. In 2011, the Kayseri Plant was awarded the grand prize by the Cement Industry Employers Association in the category of Workplace Health and Safety, thanks to the plant’s effective occupational safety policies and procedures throughout its cement operations. We continue this work in our ready mixed concrete plants, with our projects under the title ‘Green and Safe Facilities’. In the competition organized in 2010 by the Turkish Ready Mixed Concrete Association, our İnegöl Ready Mixed Concrete Facility received the ‘Blue Helmet Work Safety Competition Award’, while our Adana-Zeytinli Ready Mixed Concrete Facility not only went on to represent Turkey in international competitions, but also received the ‘International Representation Award’. As Çimsa, I believe that we are moving into a very successful period and our company will elevate its value and position with the performance we will show in our sustainability targets. I would like to thank everyone who has contributed to Çimsa’s leadership, its reputation, its strong market position, effectiveness, its innovativeness and to its Mehmet Göçmen worldwide competitiveness. Chairman Sincerely,

Çimsa Çimento Sanayi ve Ticaret A.Ş. 2010 Annual Report 12 13 Çimsa Çimento Sanayi ve Ticaret A.Ş. 2010 Annual Report Strong Roots As one of the longest-established and strongest companies in the industry, and building on our past experience, we are taking strong steps on into the future.

Çimsa Çimento Sanayi ve Ticaret A.Ş. 2010 Annual Report 14 The Board of Directors and the Audit Committee

6 5

1 2 3 4

The Board of Directors 1- Mahmut Volkan Kara, Member (since 19 July 2010) 2- Levent Demirağ, Member (since 13 July, 2010) 3- Serra Sabancı, Member 4- Mustafa Nedim Bozfakıoğlu, Vice Chairman 5- Mehmet Göçmen, Chairman 6- Mehmet Hacıkamiloğlu, General Manager

The Audit Committee: • İlker Yıldırım • Bahadır Boran

15 Çimsa Çimento Sanayi ve Ticaret A.Ş. 2010 Annual Report Senior Management

4 8 13 2 6 11 3 5 7 9 10 12 14 1

Senior Management 1-Tamer Denizci, Assistant General Manager (Procurement and Logistics) 2-Mehmet Şahin, Plant Manager (Eskişehir) 3-Nevra Özhatay Assistant General Manager (Financial Affairs) 4-Mutlu Doğruöz, Assistant General Manager (Investment and Automation) 5-Şahap Sarıer, Assistant General Manager (Ready-Mixed Concrete) 6-Mehmet Hacıkamiloğlu, General Manager 7-Ayfer Güreş, Assistant General Manager (Corporate Development and Human Resources) 8-Hüseyin Özkan, Assistant General Manager (Marketing and Sales-Cement) 9-Levent Öncel, Plant Manager (Niğde) 10-Ülkü Özcan, Strategy and Business Development Manager 11-Mustafa Şanlı, Internal Audit Manager 12-Doğan Özkul, Plant Manager (Mersin) 13-Uğur Öz, Plant Manager - Deputy (Ankara) 14-Mustafa Turan, Plant Manager (Kayseri)

Basri Dinçer, Technical Adviser Çimsa Çimento Sanayi ve Ticaret A.Ş. 2010 Annual Report 16 Members of the Board of Directors

Mehmet Göçmen He served at Lassa and Kordsa as Chairman the Finance Manager and then as the Born in 1957, Mehmet Göçmen Financial Affairs Vice Manager. He was attended Galatasaray High School and subsequently appointed Head of the the Middle East Technical University’s Budget, Accounting and Consolidation Industrial Engineering department Departments at Hacı Ömer Sabancı from which he received his Bachelor’s Holding, where he still works as the degree. After completing his master’s Secretary General. degree at Syracuse University in the U.S. in the field of Industrial Engineering Serra Sabancı and Operational Research, in 1983 he Member started his career at Çelik Halat ve Tel Born in 1975 in Adana, Serra Sabancı San. A.Ş. Between 1996 and 2002 Mr. completed her higher education at Göçmen was first the General Manager the University of Portsmouth and at of Lafarge Ekmel Beton A.Ş. before Istanbul Bilgi University’s Economics becoming the Lafarge Turkey Business Department, where she graduated Development and Foreign Relations with the best degree of her year. Vice President. As of June 2003, he After working at Temsa, Ms. Sabancı started to serve as the General Manager received training in the fields of of Akçansa, leaving this position in Company Acquisition and Board August, 2008. From 15 September Membership at London’s Institute of 2004 to 9 September 2005 he held the Directors. Serra Sabancı is still the position of Vice Chairman of Çimsa. Head of the Board of Directors at He was then re-elected to the Board Sabancı Holding, in addition to various of Directors on the 2nd of May 2006, other Group companies, while also holding his position as Vice Chairman serving as a Member of the Board until July 20th, 2009. Since then, while of Trustees of Sabancı Vakfı. On remaining chairman of Sabancı Holding December 18, 2009, she became a Cement group, Mr. Göçmen has been Member of Board of Directors of Çimsa Chairman of the Board of Directors. Çimento Sanayi ve Ticaret A.Ş.

Mustafa Nedim Bozfakıoğlu Levent Demirağ Vice Chairman (Since July 13, 2010) Born in Tarsus in 1950, Nedim Member Bozfakıoğlu graduated in 1972 from The Born in 1959 in Erzurum, Levent Istanbul University School of Economics. Demirağ graduated from the Ankara

17 Çimsa Çimento Sanayi ve Ticaret A.Ş. 2010 Annual Report University Faculty of Political Sciences 1996. Külcü began his career as an worked as a Plant Manager at the in 1980. From 1980 to 1992 he worked Electrical Engineer at TEK’s Ninth Büyükçekmece Plant from 1996-1999, as a financial analyst for the Ministry Region Directorate. Subsequently he and at the Çimsa Çimento San. ve Tic. of Finance. Having served since worked as Afyon Çimento’s Operating A.Ş. Kayseri Facility from 2004 to 2005. 1994 in various positions within Hacı Manager, the Assistant Manager of Until 31 October 2007 Mr. Şener served Ömer Sabancı A.Ş., Levent Demirağ Söke Çimento Sanayi, the General as the General Manager of OYSA remains the manager of the Sabancı Manager of Elazığ Çimento, Çorum Çimento San. ve Tic. A.Ş.; on the 8th of Holding Financial Affairs and Finance Çimento’s General Manager and April 2008, he became a member of the Department. the General Manager of Gaziantep Board of Directors of Çimsa Çimento Çimento. Following these positions, he Sanayi ve Ticaret A.Ş. He left the board Mahmut Volkan Kara became Çitosan’s Head of Electrical on June 1, 2010. (Since July 19, 2010) Power Resources Department, the Member company’s Technical Assistant General Mehmet Hacıkamiloğlu Born in Istanbul in 1973, Volkan Kara Manager, a Member of Board of General Manager graduated from Robert College and Directors and then Niğde Çimento’s After earned a bachelor’s degree in Civil from the Mechanical Engineering General Manager. Külcü was appointed Engineering from Boğaziçi University, Mehmet Hacıkamiloğlu completed the Department of Istanbul Technical General Manager of Çimsa Çimento International Business Specialization University. He completed his graduate Sanayi ve Ticaret A.Ş. on the 1st of Program at Istanbul University and education at the University of North April 1994. He resigned from Board the Executive-MBA program at Carolina’s Kenan-Flagler School of of Directors of Çimsa Çimento Sanayi Sabancı University. Hacıkamiloğlu Management with an M.B.A. degree. ve Ticaret A.Ş. on July 19, 2010, a then joined Sabancı as the Facility In the USA he worked in Austin Texas position that he had held since 01 Manager of Betonsa, moving on to at Dell Computers, in Chicago Illinois August 2006. become the company’s Investment at A.T. Kearney and then in Milwaukee and Planning Specialist. From 1997 Wisconsin at SAB Miller. His current Mehmet Hayrettin Şener to 1999 Hacıkamiloğlu served as the position is the Corporate Strategy (Until June 1, 2010) Strategy Development and Planning Manager for Akçansa, and then as and Planning Director of the Sabancı Member Agregasa’s Company Manager from Holding Strategy and Business Mehmet Hayrettin Şener started his 1999 to 2001. After a subsequent Development Group Presidency. career by working as an Assistant two years as Akçansa’s Financial Engineer at Çanakkale Çimento Sanayi Coordinator, he joined Çimsa as Yılmaz Külcü ve T.A.Ş. from 1979 to 1981. Since Assistant General Manager for Financial (Until July 19, 2010) 1981, he has worked at Akçimento and Administrative Affairs. Since the 1st Member Ticaret A.Ş. as a Production Supervisor, of August 2006 Mehmet Hacıkamiloğlu Born in 1944 in Afyon, Yılmaz Külcü Production Manager, the Enterprises has been Çimsa’s General Manager. graduated from the Istanbul Technical Group Manager and then as the University’s School of Electronics in Assistant General Manager. He also

Çimsa Çimento Sanayi ve Ticaret A.Ş. 2010 Annual Report 18 Senior Management

Mehmet Hacıkamiloğlu Resources Manager of Çimsa Çimento. Strategy and Business Development General Manager Ayfer Güreş is currently working as Director in 2008. Since the start of 2009, Please see page 18 for resume Assistant General Manager for Corporate Özhatay has been Çimsa’s Assistant information.. Development and Human Resources. General Manager for Financial Affairs.

Tamer Denizci Mutlu Doğruöz Şahap Sarıer Assistant General Manager Assistant General Manager Assistant General Manager (Purchasing and Logistics) (Investment and Automation) (Ready-Mixed Concrete) Tamer Deniz began his career as the An electrical engineering graduate from Şahap Sarıer started his career in Financial Affairs Supervisor at Dusa Boğaziçi University, Mutlu Doğruöz began 1995 as a Field Engineer at Betonsa Endüstriyel Sanayi. Following his five his career in 1983 as an Electronics after completing his Civil Engineering years of professional experience at Dusa, Supervisor at Enka Teknik, where for qualification at Dokuz Eylül University. he became Manager of Financial and five years he was in charge of the Continuing as Betonsa’s Operating Administrative Affairs at Yes International maintenance and operation of their Supervisor from 1995 to 1997, Sarıer A.S. from 1992 to 1994. In 1994, he automation systems. In 1989 he was worked as the Regional Manager of moved to Lafarge Beton A.S. as their appointed a Deputy Project Manager at Akçansa Ready-Mixed Concrete from Financial Affairs Manager, following which Saudi Services Group. Following four 1998 to 2004. For the next two years he served as Lafarge Aslan Çimento’s years of experience there he joined Çimes he was Karçimsa’s Operations Manager. Export and Sales Director. In 2006, Elektronik Sanayi. At Çimes, Doğruöz In 2006 Sarıer began to work at Çimsa Denizci joined Çimsa as the company’s served as Company Manager, Assistant Çimento as Assistant General Manager Financial Affairs Assistant General General Manager and General Manager for Ready-Mixed Concrete, a position he Manager, and he continues to work respectively. In 2006, Mutlu Doğruöz still holds. Sarıer received an Executive at Çimsa as Purchasing and Logistics joined Çimsa Çimento as the company’s MBA from Sabancı University . Assistant General Manager. Denizci is a Investment Manager. He continues to graduate of İstanbul Technical University’s work at Çimsa as the Assistant General Hüseyin Özkan Department of Management Engineering. Manager for Investments. Assistant General Manager (Marketing and Sales-Cement) Ayfer Güreş Nevra Özhatay A graduate of METU’s Economics Assistant General Manager Assistant General Manager Department, in 1983 Hüseyin Özkan (Corporate Development and Human (Financial Affairs) started his career as a Marketing Resources) After completing her MBA at Exeter Supervisor at Exsa Export A.Ş. In Ayfer Güreş has bachelor’s degree in University in UK, following a bachelor’s 1986 he joined Çimsa Çimento as their Psychological Counseling and Guidance degree in Business Administration from Internal and External Trade Supervisor, from Boğaziçi University and a master’s Boğaziçi University, Nevra Özhatay began being promoted to Sales and Marketing degree in Organizational Psychology working in 1994 as a Financial Expert, Manager. Since 1999 he has been the from Columbia University. Güreş began while being a Talent Pool candidate, in company’s Assistant General Manager for her career at Mudo A.S. as Human the Sabancı Holding Cement Group. Marketing and Sales. Resources Specialist. After completing In 1996 Özhatay joined Akçansa as her post graduate education, she joined their Management Support Manager, Sabancı Holding as a specialist in 1994. becoming their Strategy and Business From 1997 to 2007 she was Sabancı Development Expert in 1998, their Holding’s Human Resources Manager, Planning and Control Manager in 2000, and in 2007 she was appointed the their Strategy and Business Development Corporate Development and Human Manager in 2004, and their Logistics,

19 Çimsa Çimento Sanayi ve Ticaret A.Ş. 2010 Annual Report Levent Öncel Engineer, Process Control Supervisor Administration, in 1994 Mustafa Şanlı Plant Manager (Niğde) and R&D Manager respectively. In 2005 began working as the Assistant Inspector Levent Öncel received his bachelor’s Mehmet Şahin was appointed Çimsa at Oyak General Management. In 2005 degree in Chemical Engineering from Kayseri’s Plant Manager. Since xxxxxxx he was appointed Oysa Çimento’s METU and a master’s degree in Geology Şahin has been the Plant Manager at the Manager of Financial and Administrative Engineering from Mersin University. He Eskişehir plant. Affairs. Mustafa Şanlı joined Çimsa in began to work as Production Engineer 2007, working on their Corporate Risk Mustafa Turan at Berdan Tekstil in 1988. He then joined Management Project during 2008 and Plant Manager (Kayseri) Çimsa’s Mersin Plant in 1990, where 2009. Becoming Çimsa’s Internal Audit A 1985 graduate from Istanbul Technical he worked as their Quality Control Manager in 2009, Mustafa Şanlı was University’s Department of Mechanical Engineer, Process Control Supervisor, appointed Purchasing Manager on 31 Engineering, Mustafa Turan received Quality Control Manager and Production December 2010. his master’s degree from the same Manager respectively. In 2008 he was department in 1989. After his graduation, appointed Plant Manager of Niğde, a Basri Dinçer Turan worked as a semi-finished position he still holds. Technical Adviser production assistant engineer at Çimsa’s After graduating from Istanbul Technical Mersin Plant, where he served as the Doğan Özkul production supervisor on the white University’s Department of Chemistry Plant Manager (Mersin) production line until 2005. After working Engineering, in 1979 Basri Dinçer took Completing his undergraduate and as the Production Manager at the a position as the Operating Engineer graduate education at Istanbul Kayseri Plant from 2005 to 2010, Turan of Çanakkale Çimento. After one year University’s Department of Chemistry was appointed to the position of Plant of experience at Nuh Çimento as their Engineering, Doğan Özkul worked Manager on December 1, 2010. Quality Control Supervisor during as the Quality Control Supervisor at 1982, Dinçer became Enka Teknik’s Çanakkale Çimento from 1978 to 1983. Ülkü Özcan Operations Manager. Leaving this position In 1983 he joined Enka Teknik, where Strategy and Business Development after six years, Dinçer then worked at he served as their Quality Control and Manager Çimsa Çimento, holding the position of Production Manager for four years, before After graduating from Galatasaray Production Manager from 1989 to 2003. being appointed Production Manager High School and Marmara University’s He was appointed Assistant General of Akçansa Çimento in 1988. Özkul Department of Business Administration Manager Responsible for Cement was promoted to Company Manager (English), in 1999 Ülkü Özcan began her Production in 2003. On May 1st, 2010 he of Karçimsa in 2006 before becoming career at Lafarge Turkey. From 1999 to was appointed Çimsa’s Technical Adviser. Plant Manager of Niğde for Çimsa 2003 she was their Strategic Planning Çimento from 2007 to 2008. Since 2008 Expert, becoming their Strategy and Doğan Özkul has been the Mersin Plant Business Development Manager in 2003, Manager. and their Marketing Project Manager in 2005. In January 2010, Özcan joined Mehmet Şahin Çimsa Çimento as Strategy and Business Plant Manager (Eskişehir) Development Manager. After receiving a master’s degree from Hacettepe University’s Department of Mustafa Şanlı Physical Engineering, in 1979 Mehmet Internal Audit Manager Şahin began his career as a Research After graduating from Kayseri High School Specialist at TÇMB, a position he held and Ankara University’s Faculty of Political until 1985. In 1985 he joined Çimsa Sciences Department of Business Çimento, working as their Assistant

Çimsa Çimento Sanayi ve Ticaret A.Ş. 2010 Annual Report 20 21 Çimsa Çimento Sanayi ve Ticaret A.Ş. 2010 Annual Report Strategy Oriented We prepare for the future with alternative scenarios

Çimsa Çimento Sanayi ve Ticaret A.Ş. 2010 Annual Report 22 An Assessment of the Cement Industry for 2010

Turkey’s construction he regional differences in the USA and India. In total, 65 plants industry showed growth cement industry observed operate in the Turkish cement industry, Tduring 2009 in Turkey and 48 of which are integrated while the of over 15% during the throughout the world continued in other 17 are grinding and packing first three quarters of 2010. Considering the world in general, plants. 2010. This growth is demand for cement was comparatively low in developed countries, while it While cement production in Turkey expected to continue increased in developing countries. increased by 11% in 2010 as compared during 2011. The recovery period stimulated by low to 2009, cement and clinker exports interest rates and government incentives shrank by 8%. In 2010, cement continued during the second half of production for Turkey’s domestic market 2009, as well as in 2010. While there reached 69 million tonnes, and the was industry growth of 8% in Asia, 5% in industry’s total turnover reached US$4.5 North America and 3% in Latin America, billion. Domestic cement consumption is demand in the Western and Eastern now 50 million tonnes, with 18.5 million Europe markets shrank by 1-2%. Turkey, tonnes of cement and clinker being along with Egypt and Nigeria, is one exported. Of these exports, 16 million of the key countries for the industry in the Mediterranean and the Middle East. Although Turkey’s cement industry has grown significantly in terms of quantity, it grew much less in terms of turnover. Surplus capacity continued to create pressure on prices. Despite increasing volume due to intense competition in both domestic and foreign markets, increases in revenue were not achieved at the same rate.

The construction industry in Turkey experienced a growth of over 15% during the first three quarters of 2010. This growth is expected to continue during 2011.

Regarding cement production, Turkey is the largest producer in Europe and the fourth largest worldwide after China,

23 Çimsa Çimento Sanayi ve Ticaret A.Ş. 2010 Annual Report tonnes were cement, while clinker export was 2.5 million tonnes. Almost 70% of the 16 million tonnes of cement exported was sent to the Middle Eastern and North African markets: Iraq, Syria, Israel, Egypt, Libya and Algeria. Exports to Europe decreased to a total of 2 million tones, by a 25% decrease as compared to the previous year. Turkey is the third largest cement exporter worldwide.

Turkey’s cement consumption has grown by 16% in comparison to the previous year, totaling 50 million tonnes for the 2010 year.

Considering cement consumption in terms of regions, the highest increase to the end of 2010 was seen in the Eastern Anatolian Region at 35%, where intensive infrastructural investments are being undertaken. Next was the Black Sea Region with 26%, the Marmara Region and the Central Anatolian Region with 20%, and a growth of 8% in the Aegean Region. The cement consumption in the Mediterranean Region remained at the same levels as in the previous year. While cement production in Turkey increased In the cement industry, “sustainable by 11% in 2010 compared to 2009, cement and progress” was a prominent topic during 2010. In our country, using waste fuels clinker exports shrank by 8%. to both decrease energy costs and to reduce the amount of carbon dioxide released into the atmosphere is another important topic for 2010 and after.

Çimsa Çimento Sanayi ve Ticaret A.Ş. 2010 Annual Report 24 25 Çimsa Çimento Sanayi ve Ticaret A.Ş. 2010 Annual Report Leading Çimsa is the industry’s leader, due to its innovative practices, its search for quality and its broad range of products.

Çimsa Çimento Sanayi ve Ticaret A.Ş. 2010 Annual Report 26 Domestic Cement Plants

In its production plants, Mersin Plant This facility, capable of producing The First Facility Production Line both grey and white clinker depending Çimsa ensures fuel- This facility started production in on requirements, has a grey clinker efficiency via projects 1975. It features a rotary kiln 5.25 m production capacity of 1,845 tonnes/day in diameter and 83 m long with two and a white clinker production capacity of that it has developed pre-heater cyclone lines, each with 1,470 tonnes/day. for waste disposal, four stages. In 1983 the facility was modernized by adding a coal grinding Thanks to new investments and and contributes to and burning system to reduce fuel costs. a continued operational focus on the protection of The facility has two crushers, one pre- sustainability, the facility will soon satisfy homogenization facility, two ball mills for 50% of its own electricity needs, in the environment by raw materials, two raw meal silos and two combination with the First Facility. reducing the use of closed clinker stock halls. Third Facility Production Line fossil fuels. The investments made in Mersin to The Hacı Sabancı White Cement gain sustainability and protection of the Production Facility began operating in environment continued in 2010. December 1999, with a rotary kiln of a 3.75 m diameter and a length of 57 m. The Third In the first quarter of 2010, the facility Facility has a production capacity of 1,750 was modernized. The current planet- tonnes/day. The facility contains a crusher, type clinker cooling system was a raw material mill with pre-homogenization replaced, and an FLS SF-Cooler type facilities, a coal mill, a raw meal silo, a rotary grate cooler system was installed. After kiln and a clinker stock hall. this investment, the plant’s production capacity reached approximately 4,000 The Mersin Plant also has four cement tonnes/day, compared to 3,400 tonnes/ mills, three of which are ball mills and one day before its upgrade. In addition, the being a vertical mill. total heat required for clinker production has been reduced. This system has Calcium Aluminate Cement contributed significantly to the First Production Facility Facility’s de-dusting practices. This facility, commissioned in 2002, has two kilns and a clinker production capacity The new investments to be made during of two tonnes/hour, a cement mill with 2011 will satisfy up to 50% of the facility’s a grinding capacity of five tonnes/hour electricity needs. and a packaging unit. In 2007, upon the commissioning of a second kiln having a Second Facility Production Line clinker production capacity of two tonnes/ The Second Facility’s rotary kiln, hour, the production capacity of the commissioned in December 1989, is facility was improved. In addition, after capable of producing both grey and white a packaging unit was installed in 2009, clinker. It has a diameter of 3.6 m and product is now offered to customers in a length of 49 m. The facility contains packages of 25 kg, in pallets, and in large crushers, a raw material mill with pre- bags of 1.5 tonnes. homogenization systems, a coal mill, two raw meal silos, a rotary kiln and a clinker Paper Bag Plant stock hall. In 2010, 26 million paper bags were

27 Çimsa Çimento Sanayi ve Ticaret A.Ş. 2010 Annual Report produced in the Mersin paper bag plant. the drying of trass. This meant that These were used in the Mersin, Kayseri, damp trass, extracted from a quarry only Niğde, Eskişehir and Ankara Plants. 10.3 kilometers away, can now be used instead of trass provided from a quarry The Mersin plant has a total of four 180 kilometers away. cement mills, three of which are ball mills and one a vertical mill. This unique project, supported by TUBITAK as part of its TEYDEP 1501 Industry R&D Kayseri Plant program, had further advantages such as The Çimsa Kayseri Plant was established eliminating the necessity for the installation in 1992 by Akçimento, a Sabancı Holding of a new drying unit, and the absence of any company, with an annual capacity for 1.6 additional fuel consumption to dry the trass. million tonnes of cement grinding and packaging. It was acquired by Çimsa in Eskişehir Plant 1995. A pre-grinding system was added The Eskişehir Cement Plant was to the cement mill in 2005 in order to commissioned in 1957, with a wet kiln improve its cement grinding capacity 3.6 m in diameter, 125 m long and and to reduce its energy consumption. possessing a capacity of 150,000 The foundation of the clinker production tonnes/year. This plant operated until line was laid on the 9th of October 2004, 1987. The first line that operates today a step towards making the facility into was commissioned in 1976. This line an integrated cement plant. The first has a capacity of 275,000 tonnes/year, a production of clinker took place on 26 three stage pre-heater, and a dry system December 2005, after the completion kiln 3.6 m in diameter and 52 m long, of all construction, installation and which increased the line’s total capacity commissioning operations at the plant. to 425,000 tonnes/year.

Equipped with state of the art On 27 December 2005, TMSF transferred technologies, the facility’s main unit the Eskişehir Plant to Çimsa Çimento consists of an ILC type low NOx emission Sanayi ve Ticaret A.Ş. Following the pre-calcination system, a pre-heater with acquisition of the plant by Çimsa in May five stages of cyclones and a rotary kiln of 2007, the First Production Line had 55 m long and 3.60 m in diameter. With a dynamic separator added to its raw a clinker production capacity of 2,175 tonnes/day, this facility also features a raw material crusher, pre-homogenization Çimsa aims to achieve worldwide business facilities for both clay and limestone, one excellence through its quality, environment coal ball mill, one vertical raw meal mill and two cement ball mills. and workplace health and safety management systems. The Kayseri Plant produces puzzolanic cement meeting the TS EN 197 CEM IV /B (P) 32.5 R standard. In this production, material mill, the current clinker cooler “trass” is used as an additive. was replaced, the rotary kiln’s burning systems, dosage systems and its new The Kayseri “trass drying project” enabled electro-filter units were renewed. As a

Çimsa Çimento Sanayi ve Ticaret A.Ş. 2010 Annual Report 28 Domestic Cement Plants

First and Second Facilities in 2007 and 2008 respectively, the Eskişehir plant’s dust emissions have been significantly reduced. In addition, the dust cyclone on the line that fed hot gas from the second facility to the new coal mill has been replaced with a more efficient cyclone. Dust leakages in the plant have been reduced by renewing and modernizing the plant’s raw material and clinker hall.

It is Çimsa’s goal to become one of Turkey’s leading waste disposal companies. Çimsa’s Hotdisc Project, to be installed at its Eskişehir plant, is one indicator of the strength of the company’s resolution in this regard.

It is planned that the Hotdisc project, an automatic waste feeding and burning result of these investments, a clinker system, will begin operating some production capacity of 600,000 tonnes time before October 2011. The project per year was achieved. A new closed was designed by the Danish company circuit cement mill with a capacity of 85 FLSmidth. The Hotdisc project will control tonnes/hour was also commissioned. both the kiln’s processes and its overall product quality, in addition to generating In September 2007, a completely 30% of its total calorific consumption new coal vertical mill system was from waste. commissioned. This could serve both production lines and has a capacity of 40 The hazardous and non-hazardous tonnes/hour. The old coal systems were solid wastes and used vehicle tires to decommissioned. be disposed of in the system will be fed into specialized “bunkers”, individually In January 2008, a completely new second weighed, and then used as fuel by the production line was commissioned. This kiln. Another feature of the Eskişehir line had a similar structure to that of Cement Plant is that it includes an the current Kayseri plant, a capacity of environmental habitat zone, created by 790,000 tonnes/year, bringing the plant’s the cement plant: a first for Turkey. This total production capacity to 1,390,000 habitat zone, the first and only example in tonnes/year The Eskişehir Cement Turkey, was created by converting a large Plant became a modern production pit, previously used as a clay pit, into a facility following the installation of a raw pond. The area surrounding the pond material crusher and a raw material has been planted with more than 10,000 pre-homogenization system, which trees and more than 150 kinds of other were installed together with the second plants. Walking tracks and recreational production line in January 2008. Cement areas have been made around the pond, silos were installed in 2009. The plant also helping the habitat to serve not only features three ball cement mills used for nature, but also the facility’s workers. production of the final cement product. Niğde Plant With the installation of new, modern Established in 1957, the Niğde Cement electro-filters on the rotary kiln lines of the Plant started production in 1964 following

29 Çimsa Çimento Sanayi ve Ticaret A.Ş. 2010 Annual Report the completion of its production line. It was the site in order to make the necessary Packing Facility has a single cement mill a wet system with a capacity of 85,000 improvements. The reduction of dust with a capacity of 85 tonnes/hour, one tonnes/year. The total production capacity inconveniences in the packing unit is one raw material crusher, two cement silos of the plant increased to 350,000 tonnes/ indicator of the positive results of the work and a packing unit. year after the commissioning of its second done so far, particularly in this section of dry system production line on 2 September the plant. In May 2010, a system to assist Marmara Rota Port Cement Packing 1976. Over the following years, the wet in the continuous tracking of the plant’s Facility system clinker line was shut down as exhaust gas emissions was established Located on the Kocaeli Yarımca Gulf Rota it had reached the end of its economic by making an online connection from Port, the Marmara Facility was leased by and technological life, while production the plant to the Provincial Department of Çimsa in June 2008. It has an installed continued using the dry system’s rotary kiln. Environment and Forestry. silo capacity of 5,000 tonnes, and a bagged and bulk cement packing/loading After the plant was privatized, the The facility sees the environment and capacity of 100 tonnes/hour. Çimsa super kiln’s capacity of 850 tonnes/day was sustainable growth as its two priorities white cement is sent from Mersin in bulk increased to 1,150 tonnes/day following during any operation that it performs, and stored in the 5,000 tonne horizontal the investments in 1993 such as a and the facility’s staff demonstrated this silo. From the Marmara Facility, leased cyclone replacement for the Rotary Kiln sensitivity by planting 15,000 thousand especially to be closer to customers in unit, a modernization of its transport, trees during 2010. the Marmara Region, white cement is cooling and burning systems, and sold both packaged and in bulk. replacement of its exhaust gas fan and Ankara Cement Grinding and Packing electro-filter. Facility Malatya Cement Packing Facility The Ankara Lalahan Cement Grinding Located near the Malatya Battalgazi Pursuant to the Competition Authority’s and Packing Facility, the foundation of Train Station established in 1996, the ruling of November 1, 2007 regarding the which was laid in January 2001, was Malatya Cement Packing Facility has termination of the “Sabancı and Oyak” commissioned in July 2002. It was a processing and packing capacity partnership, the Oysa Niğde Cement Plant acquired by Çimsa, along with the of 60,000 tonnes/year. In the facility was renamed to the “Çimsa Çimento Eskişehir Cement Plant, in 2005. As the there are three cement silos with a San. ve Tic. A.Ş. Niğde Cement Plant”, Ankara Plant does not have a rotary kiln, total capacity of 900 tonnes. Cement continuing production under this name. the clinker supplied from other Çimsa is sold here both packaged and in plants is ground here, converted into bulk. Çimsa aims to achieve worldwide After it was acquired by Çimsa, many cement, and then sold. business excellence through its quality, improvements concerning production environment and workplace health and and energy efficiency were made, and its The Ankara Cement Grinding and safety management systems. clinker production line had its capacity increased to today’s level of 1190 tonnes/ day. In addition to the rotary kiln, with a 4-stage pre-heater and grate cooler, a diameter of 3.8 m and a length of 52 m, the plant has one production line and one hammer crusher, one ball raw meal mill, a vertical coal mill and a cement mill with a single roller press grinding system. Developing innovative products to satisfy every one of its customers’ needs, in 2010 Çimsa created and then started to produce its “Super Bims” Cement at its Niğde Plant.

A team working on bag filters to de- dust the factory’s site has been formed. This team measured the performance of bag filters at important points around

Çimsa Çimento Sanayi ve Ticaret A.Ş. 2010 Annual Report 30 Domestic Cement Facilities

Çimsa Facility Information

Manufacturing Clinker Raw Mill Cooler Type Mill Type Lines Manufacturing Kiln Capacity (tonnes/day) Diameter (m)

Mersin Çimsa First Facility 3,700 gray clinkersr 5,25 Cross bar cooler Ball mill Second Facility 1,845 gray clinkers 3,60 Grid cooler Roller mill or Second Facility 1,470 white clinkers 3,60 Grid cooler Roller mill Third Facility 1,750 white clinkers 3,75 Grid cooler Roller mill

First Isıdaç-40 55 Isıdaç-40 clinkers Second Isıdaç-40 55 Isıdaç-40 clinkers

Kayseri Çimsa Manufacturing Line 2,300 grey clinkers 3,60 Grid cooler Roller mill

Eskişehir Çimsa Manufacturing Line I 1,750 grey clinkers 3,60 Grid cooler Ball mill

Manufacturing Line II 2,300 grey clinkers 3,60 Cross bar cooler Vertical mill

Niğde Çimsa Manufacturing Line 1,240 grey clinkers 3,80 Grid cooler Ball mill

Mill Manufacturing Grinding Facility Mill Diameter (m) Mill Length (m) Cement mill Type Capacity (tonnes/day)

Ankara Çimsa 2,040 4,20 13 Ball mill

ManufacturingKlinker Figures Üretimi for the 2010 year Clinker Cement Manufacturing Manufacturing Grey Clinker 3,576,716 tons Grey Clinker 4,337,364 tons White Clinker 997,589 tons White Clinker 997,030 tons Isıdaç-40 Clinker 24,000 tons Isıdaç-40 23,907 tons EkoHarç 39,078 tons Sulphate Resistant Clinker 19,032 tons Total 5,414,365 tons Total 4,616,236 tons

The Capacity Utilization of the Rotary Kilns for the 2010 year Mersin Rotary Kiln I 91% Mersin Rotary Kiln II 92% Mersin Rotary Kiln III 98% Kayseri Rotary Kiln 94% Mersin Rotary Kiln I 92% Mersin Rotary Kiln II 94% Niğde Rotary Kiln 95%

31 Çimsa Çimento Sanayi ve Ticaret A.Ş. 2010 Annual Report CE Certified Products

EN 197-1 CEM I 52.5 N White Portland Cement Kitemark Certified Products EN 197-1 CEM I 42.5 N Gray Portland Cement EN 14647 Calcium Aluminate Cement BS EN 197-1 CEM I 52.5 N White Portland Cement EN 197-1 CEM II/B-L 42.5 R White Portland Calcareous Cement EN 197-1 CEM II/B-M (V-L) 32.5 R Portland Composite Cement EN 413-1 MC 12.5 X Mortar Cement EN 197-1 CEM II/B-M (P-L) 32.5 R Portland Composite Cement EN 197-1 CEM II/A-M (P-L) 42.5 N Portland Composite Cement Spain Standards Compliance Certification EN 197-1 CEM II/A-M (P-L) 42.5 R Portland Composite Cement BL I 52.5 N UNE 80305 White Portland Cement EN 197-1 CEM IV/B (P) 32.5 R Puzzolana Cement EN 197-1 CEM II/A-L 42.5 R Portland Calcareous Cement

TSE Compliance Certification Other Certifications TS 21 - BPÇ 52.5 N/85 White Portland Cement TSE-ISO-EN 9001:2000 TS EN 197-1 CEM I 42.5 N Gray Portland Cement TSE ISO EN 14001-2004 TS 6271 Calcium Aluminate Cement TSE_SG-OHSAS 18001 TS EN 197-1 CEM II/B-L 42.5 R White Portland Calcareous Cement TS EN 197-1 CEM II/B-M (V-L) 32.5 R Portland Composite Cement TS EN 413-1 MC 12.5 X Mortar Cement EKOHARÇ TS EN 197-1 CEM II/B-M (P-L) 32.5 R Portland Composite Cement TS EN 197-1 CEM II/A-M (P-L) 42.5 N Portland Composite Cement TS EN 197-1 CEM II/A-M (P-L) 42.5 R Portland Composite Cement TS EN 197-1 CEM IV/B (P) 32.5 R Puzzolana Cement TS EN 197-1 CEM II/A-L 42.5 R Portland Calcareous Cement TS 10157 SDÇ 42.5 R Sulphate Resistant Cement

The Production of Çimsa’s Products Mersin Kayseri Eskişehir Niğde Ankara Plant Plant Plant Plant Plant TS EN 197-1 CEM I 42.5 R Portland Cement (Gray) x x x x x TS EN 197-1 CEM II B-M(V-L) 32,5 R Portland Composite Cement x TS EN 197-1 CEM I 52,5 N Portland Cement (White) x TS EN 197-1 CEM II B-L 42,5 R Portland Calcareous Cement (White) x EN 413-1 MC 12.5 X Mortar Cement (Ekoharç) x x x EN 14647 Calcium Aluminate Cement x TS EN 197-1 CEM II/A-M(P-L) 42,5 R Portland Composite Cement x x x TS EN 197-1 CEM II/A-M(P-L) 42,5 N Portland Composite Cement x TS EN 197-1 CEM II B-M (P-L) 32,5 R Portland Composite Cement x x TS EN 197-1 CEM II/A-L 42,5 R Portland Calcareous Cement x TS EN 197-1 CEM IV-B (P) 32,5 R Puzzolana Cement x x TS 10157 SDÇ 42,5 R Sulphate Resistant Cement x

Packaging Types and Variations Bagged Loading Capacity 3 tiers bagged 3 tiers craft paper 50 kg. 4 tiers bagged 4 tiers craft paper 50 kg. 2+1+1 bagged 1 tier white, 1tier laminated dark and 2 tiers dark craft paper 50 kg. 3+1+1 bagged 1 tier white, 1tier laminated dark and 3 tiers dark craft paper 50 kg. 4+1+1 bagged 1 tier white, 1tier laminated dark and 4 tiers dark craft paper 50 kg. 2+1+1 bagged 1 tier white, 1tier laminated dark and 2 tiers dark craft paper 25 kg. 2+1 bagged 2 tiers dark craft, 1 tier laminated dark craft 25 kg. 1 tier bagged 1 tier laminated polypropylene 50 kg. 2 tiers bagged 50 kg. Sling Paletless 39 bags 1.95 tonnes 800 tonnes/day Big Bag 1.5 tonnes 800 tonnes/day Laminated Polypropylene 1.5 tonnes 800 tonnes/day Slingbag 1.5 tonnes Laminated Polypropylene 1 tonnes 800 tonnes/day Palette Wooden 15x100x120 cm. 30-40 bags (50 kg) 1.5-2 tonnes 800 tonnes/day Palette Wooden 15x100x120 cm. 64 bags (25 kg.) 1.6 tonnes 800 tonnes/day Other Bulk Lime Truck 15-40 tonnes 4000 tonnes/day Clinker Bulk Ship 2500 tonnes/day Big Bag Laminated Polypropylene 1-1.5 tonnes 800 tonnes/day

Çimsa Çimento Sanayi ve Ticaret A.Ş. 2010 Annual Report 32 Cement Products

Manufacturing special Portland Cement group of cements having the highest early Complying with the TS EN 197-1-CEM resistance in its class. While its hydration types of cement, I 42.5R standard and containing high temperature is low, its early resistance including white cement amount of C3S, Portland Cement is high. Çimsa’s Portland Composite ensures high and increasing levels of Cement has been EC certified by the and calcium aluminate applied stress can be sustained. It Council for Quality and the Environment cement, Çimsa is is the most commonly used type of (CQE), giving it the right to display the CE consistently innovative cement in environments that require high trademark. resistances and in the construction of and continues to lead multi-storey buildings. It is particularly Puzzolana Cement the market due its dominant in prestressed, prefabricated Puzzolana Cement is developed through implementations and in tunnel formwork a process of grinding its mineral additives flexible, customized systems. Çimsa’s Portland Cement has (puzzolana) to the degree specified products and services. been EC certified by the Council for in its S EN 197-1:2002 CEM IV/B (P) Quality and the Environment (CQE), giving 32.5 R standard, that is to a maximum it the right to display the CE trademark. of 55%, with a specific proportion of Portland Cement clinker and limestone. Portland Composite Cement Çimsa’s Puzzolana Cement has been Portland Composite Cement is a group of EC certified by the Council for Quality cements with elevated early resistance, in and the Environment (CQE), giving it compliance with the TS EN 197-1-CEM the right to display the CE trademark. IIB-M (V-L) 32.5R standard. In addition During the concrete’s testing processes, to Portland Cement, it is composed its water : cement ratio is relatively high. of around 35% very finely ground Thanks to its high levels of concrete volatile cinder and limestone. This very agents, its hydration temperature remains fine additional backfill material fills the low, but it has greatly elevated levels of micro-pores in the concrete, increasing resistance to alkali-aggregate reactions the concrete’s impermeability as it is and to other external chemical reactions. compressed. Puzzolana Cement is generally utilized in construction, repairs, plastering and in the The siliceous volatile cinder utilized in manufacture of construction chemicals. the manufacture of Portland Composite Cement accelerates the concrete’s Sulphate Resistant Cement internal reactions as it sets, and increases TS 10157 SDÇ 32.5 R cement is the resultant concrete’s resistance against obtained by grinding SDÇ clinker, having exterior impacts, ensuring that its final a precise ratio of C3A and C4AF, with a pressure tolerance is high. specified amount of limestone.

Çimsa’s Portland Composite Cement The declaration of conformity of Sulphate manufactured to the TS EN 197-1:2002 Resistant Cement against its affiliated CEM II/A-M (P L) 42.5 R standard standard (TS 10157) has been approved, contains portland clinker, puzzolana in accordance with the Ordinance on and 21% limestone. It is classified in the National Regulations (Nr: YİG-15/2006-7)

33 Çimsa Çimento Sanayi ve Ticaret A.Ş. 2010 Annual Report binding on all construction materials that Çimsa EkoHarç is easy to use in are not required to hold a CE trademark implementations that do not require but that are covered by the Construction pressure resistance, such as masonry Materials Ordinance (89 / 106 / EEC). and alum plastering. Interacting directly The proportion of C3A (tricalcium with the end user in affordable, long aluminate) in Sulphate Resistant Cement lasting and high quality constructions, is limited to 5% while the total C4AF + this is an ecologically and environment 2*C3A is limited to 25%. The preparation friendly product, a product that generates of the raw materials and the furnacing much lower levels of gas emissions than techniques applied to this concrete cements or limestone products. shows slight differences in comparison EkoHarç Mortar Cement (MC 12.5 X) to gray clinkers. Only a few plants is a finely ground, homogenous and manufacture this type of concrete. As water-proof connector that to enhance this type of cement is effectively inert its resistance contains at least 40% against sulphate-containing waters, it is inorganic components, including Portland utilized in harbors, waste water facilities, Cement clinker and natural puzzolana. dams, underground flood channels, Its components neither increase the irrigation channels and in refinery facilities. corrosion rate on any metal parts in It is a type of cement suitable for any contact with the mortar, nor do they construction that requires substantial deteriorate under the impact of fire. Its resistance to chemical reactions, classification under the Turkish standards including environments that interact system is TS 22-1 ENV 413-1. with seawater or sulphates. Its 28-day The amount of air contained within the resistance measurement is above that fresh mortar once it is mixed with the of the 42.5 R resistance class, falling mortar cement (MC 12.5 X) is 4% by between 46 and 50 N/mm2. volume. The EkoHarç Mortar Cement has a water retention value of 85%. Mortar Cement (EkoHarç/Economic Mortar) The specified air content ensures an Offering a high adhesive power, Çimsa’s adequate level of bonding, while the EkoHarç enables the production of a water retention value ensures proper high breaking strength mortar plaster. performance and cohesion at either Reducing the risk of thermal stress low or high degrees of saturation. The through its low contraction and hydration resistance values for cement with a ratio parameters, the mortars and plasters water:mortar ratio of 0.5 are 12.5 N/ developed with Çimsa’s EkoHarç also mm for seven days and 22.5 N/mm for display high levels of resistance due their 28 days. Mortar Cement (MC 12.5 X) low water permeability. Requiring only blends at a suitable rate of malleability silica and water, this is a product that after mixing in only water and silica, to the enables the quick and easy production of amounts appropriate for the task at hand, a mortar of plaster, without the usage of without requiring any further additives. any lime. For all sorts of fine construction work - including plastering, ground alum,

Çimsa Çimento Sanayi ve Ticaret A.Ş. 2010 Annual Report 34 Cement Products

mosaics, hothouses, weather-resistant with an actual 28 day strength of 60 moldings, wall and floor tiles, glazed tiles MPa. Due to its strength, it reduces or and natural stones - mortar cement (MC entirely eliminates the steam cure phase 12.5 X) only requires the mixing in of the from the prefabrication of construction correct amounts of silica and water. components. Again, due to its strength, it In alum concretes it is has a lower risk of delivers the best performance amongst all stress due to its low contractile qualities; cements available for the manufacturing in external plasters it exhibits elevated of high strength construction resilience against humidity and harsh components. Given the demand for climactic conditions; in internal plasters the property of high resistance in it ensures smoothness, rigidness and manufacturing of construction chemicals, respiration. Superwhite Portland Cement is the most widely used cement. SuperBims Cement Providing high levels of insulation against Being less alkaline than other cements, both heat and sound, resistant to fire it significantly reduces the alkaline-silica and earthquake, lightweight, affordable, reactions that can occur, over time, healthy and an environment friendly with aggregates. Thus, it then helps to construction material, Bims Blocks are extend and protect the life of the fibers a feasible alternative to bricks and gas in both fiber reinforced concrete (FRC) concrete for the internal and external and in insulated precast exterior siding walls of buildings. coatings. It increases buildings’ durability, prevents stress and maintains high levels After identifying the requirements of of impermeability. Its volume expansion those looking to use Bims Blocks, a is also very low, so this cement reduces construction material that is rapidly the impact of freeze-thaw where the day/ expanding its share of the construction night temperature differences are high. material market in response to energy Superwhite Portland Cement maintains efficiency concerns, Çimsa produced very high and stable level of whiteness, a cement tailor made for the market’s a minimum of 85%, so that more specific customer expectations: early homogenous, brighter and non-fading molding, early high strength and low colors are now available for colored water requirements. This product is mortars and concretes. Further, as its Çimsa’s SuperBims cement. adsorbs much less solar and other radioactive energy due to its white color, SuperBims concrete is manufactured it extends the life of the construction in compliance with the TS EN 197-1 components manufactured from it. standard, and permission to apply the CE In addition to being an R type cement trademark has been given by the Council with high levels of early resistance, its for Quality and Environment. strength acquisition rate and its final peak strength are also high. At the Superwhite Portland Cement same time, due the very fine grinding of Çimsa BPÇ 52.5 R/85 Superwhite its components, it delivers high levels Cement is a top tier cement. It has the of adherence resistance. This also highest strength of any cement in Turkey, contributes to it being the most widely

35 Çimsa Çimento Sanayi ve Ticaret A.Ş. 2010 Annual Report preferred product for facilities with 22-40 MPa. Only six hours are required construction chemicals. for Isıdaç 40 to attain a strength which Utilizing the advanced technology of regular cements take 28 days to attain. Çimsa’s BPÇ 52,5 Superwhite Cement As it is highly resilient against abrasive ground from refined raw materials, you effects, it is utilized in engineering can produce - from gross concretes - implementations such as tarmacs, perfectly smooth surfaces for aesthetic bridges, the flues of dams, highways, and decorative products, art products paving, mining, pipe works and for waste and even for statues. water systems.

Ekobeyaz (Economic White) Cement As it is highly resilient against chemicals (White Calcareous Cement) and the effects of acids, it is utilized as Ekobeyaz Cement presents stable and the internal casings of sewage systems, high levels of whiteness (a minimum in animal shelters, industrial boilers, 85%), making available optimal color staircases, lintels, girders and in water choices. Its resistance is compliant with collection drains. the 42,5R standard, so as to reduce the plastic contraction cracks on surface and Due to its ability to take plugs rapidly, it is ensure lower contraction and temperature also used for concrete components that hydration. are to be exposed to sulphate-containing water or salt water, for ground tiles that Categorized as a TS EN 197-1-CEM need to be ready quickly, for plastering II/B-L 42.5R concrete, Ekobeyaz is and for various types of repair work. presented to our customers as a more Due to its aluminate composition it is affordable, useful and ecology friendly resistant to high temperatures: it only alternative. It contains around 25% refractors at 1280°C and it holds its high quality and refined marble powder, resiliency up to 1300°C. It is utilized generating a standard rate of whiteness extensively in the refractory industry for of 86%. Ekobeyaz Cement is a high the manufacture of refractory mortars, early resistance cement. It is reasonably fire resistant plates, furnaces, fireplaces, resilient and is highly impervious to alkali - barbecues, and industrial boilers. aggregate reactions. It is used in precast Furthermore, blended with Portland work, mill mixed plasters, joint filters, Cement, it can be used with door, urban furniture, tile manufacturing and all window and mirror braces to prevent sorts of artistic work. water leaks during repairs and anchorage works. Calcium Aluminate Cement – Isıdaç 40 Isıdaç 40 is the first and only calcium aluminate cement manufactured in Turkey. Having an alumina content of 40%, Isıdaç 40 is a calcium aluminate cement compliant with the EN 14647 standard, which allows it to be utilized in extremely cold weather conditions (-10 ºC). Its 6 hour pressure resistance is

Çimsa Çimento Sanayi ve Ticaret A.Ş. 2010 Annual Report 36 Ready Mixed Concrete and Aggregate Products & Facilities

Through investments Project” focuses on quality of service inspections for the year. Based on those by fulfilling all shipment requirements on inspections, our Kozan Facility was specifically aligned time, delivering the highest added value, awarded the honor of first place, being with nationwide increasing customer satisfaction and entitled to carry the banner of “Green and customer loyalty. Safe Facility” for the following year. construction and During 2009 and 2010, Mersin and Adana Relying on its Occupational Health and infrastructure demand, were selected as pilot regions for the Safety approach to the production of centralization of our ready mixed concrete ready mixed concrete, Çimsa studied its while remaining facilities’ customer order processing. By facilities, its transport operations and the focused on quality, calculating the specific distances and costs construction sites it interacts with. Through for delivery from each production facility to these investigations, the elimination of occupational safety each destination construction area, taking errors and deficiencies at their sources’ are and the environment, into account customer requirements, the sought through base-cause analyses. most feasible and profitable shipment Within the scope of our “Green and Safe Çimsa now has steady method was then selected for each delivery. Facility Project”, unsafe conditions and and sustainable growth During 2011 this project will expand to the activities at each of our facilities are now Sakarya Region. closely monitored, and as a consequence in its ready mixed After beginning the replacement of all our accident ratios have all rapidly concrete division. facilities’ manufacturing software in 2010, decreased. The reporting and information all of Çimsa’s data flows can now be exchange system at each Çimsa ready automatically transferred from its plants mixed concrete facility have been to the central facilities. In fact, Çimsa will improved, teamwork has been refined and soon become the first company in Turkey extended, resulting in a safer, cleaner and imsa Ready Mixed Concrete was using its own manufacturing software at more organized work environment. first manufactured in 1998 at its all of its facilities. As a result of this work, Çimsa’s İnegöl ÇZeytinli Ready Mixed Concrete While already fulfilling our customers’ Ready Mixed Concrete Facility has been facility. After expanding its activities to ready mixed concrete demands through awarded the honor of first place in the Adana, Mersin, Kayseri, Antalya, Osmaniye, our established facilities, through our inaugural Blue Helmet Job Safety Contest Kahramanmaraş, Nevşehir, Aksaray, mobile facilities and our business organized by Turkish Ready Mixed Karaman, Konya, Bilecik, Adapazarı, partners, we also satisfy the requirements Concrete Association, entitling the site to Konya, Bursa, Eskişehir, and Kütahya, for major projects. The second stage of receive an International Representation Çimsa now has an extensive distribution the Ankara-İstanbul High Speed Train network of 46 ready mixed concrete project, the İnönü-Köseköy line and the facilities: 28 wet and 18 dry plants. Hacınınoğlu Enerjisa dam could be said to be the primary projects that we provided Following technological and scientific services for during 2010. improvements closely, the company Our occupational health and safety passes each practical advance on to its improvements throughout our ready customers in the form of new products, mixed concrete division continued new machines and new services. With a on through 2010. Under the titles total of 131 experienced and specialized of “Occupational Safety”, “The employees, the facilities feature 305 Environment”, and “Quality”, as part of transmixers with 73 mobile and 5 fixed our “Green and Safe Facilities Project” pumps. which we initiated during 2010, each Çimsa maintains a customer oriented ready mixed concrete facility was approach. Our “Centralized Shipment inspected three times, a total of ninety

37 Çimsa Çimento Sanayi ve Ticaret A.Ş. 2010 Annual Report Award. The Adana-Zeytinli Ready Mixed ready mixed concrete facilities, is now Concrete Facility also won a Blue Helmet 50%. Having increased our capacity in Job Safety Contest Award and an our Mersin / Tarsus quarry during 2010, International Representation Award. essential investments in Job Safety and the Environment were completed with the The dust emissions at each ready successful installation of additional silica mixed concrete facility are inspected machinery and a sieve. and measured at regular intervals by organizations certified for such work Through our licensing and establishing of by the Ministry of the Environment and facilities that we will conduct throughout Forestry, in accordance with the relevant 2011, our work towards creating a regulations. These measurements are regional distribution network will continue, then reported and tracked. Several ensuring quality and continuity of supply. investments have been already made, Furthermore, while the completion of and a number of efforts initiated, to our modernization and environmental further reduce the plants’ dust emissions, investments on our Mersin / Tarsus furnace even though these are all already is planned, our TSE and CE branding comfortably below regulatory limits. initiatives for our aggregate facilities continue. Our rates of growth are being Aggregate Facilities maintained through our infrastructural Aiming to become the aggregate works and the company is rapidly supplier of choice for the construction advancing to becoming an institutional industry, as already achieved for ready aggregate supplier. Çimsa will be seen as mixed concrete, Çimsa has made some a model company, being sensitive to the significant achievements in both its environmental and societal values of each infrastructure and its capacity. region’s community.

To align this division with our strategy of profitable growth, the Aggregate Manufacturing operations have been included as one of our main business lines. As a result, Çimsa is now rapidly advancing beyond just manufacturing and supplying aggregates to its own facilities, to being an aggregate supplier and service provider to the construction industry nationwide.

In addition to our Mersin / Tarsus and Bursa / İnegöl quarries, during 2010 we extended our activities in five regions with the addition of three new furnaces and a crushing and screening facility. Having record sales of 1.3 million tons, an increase of 72%, our market share for the provision of services, excluding our

Çimsa Çimento Sanayi ve Ticaret A.Ş. 2010 Annual Report 38 Ready Mixed Concrete and Aggregate Facilities / Products

Closely monitoring Dost Beton (Self-Settling, Self- Drabeton is a new introduction to the technological and Tightening Concrete) market. It is resistant to contraction stress Settling easily where it is poured, settling due to its content of highly resistant scientific improvements under its own weight and without any materials such as dralif. Likewise, due in its fields of operation, requirement for vibration whatsoever, its dramix content, it is highly resistant Çimsa continues to Dost Beton is a special type of to tensile stress without any sort of concrete featuring very consistent flow additional reinforcement. develop innovative characteristics, solid tightening due to products and solutions its special, highly resilient design while Road Concrete (High Strength and to meet the varying showing no signs at all of either exudation Reinforced Resistance against demands of its or disintegration. Flexural Stress) Cement is utilized as the concrete’s customers. Aqua Beton (Underwater Concrete) binder material in road superstructures. Able to be poured, settle and tighten Its lifetime and bearing strength are both without any external intervention such greater than those of asphalt binders. as the use of a vibrator, free of any sign of disintegration, underwater washing, Sıvamiks (Ready to Use Wet Plaster) or any type of quality loss, Aqua Beton Sıvamiks is a substitute for the plaster stands out due to its continuous flow, known in the market as “dark plaster” holds high viscosity, reliable levels of resistance, no persistence and traceability in its quality. and very low permeability. Created through Çimsa’s technological efforts, Sıvamiks adheres better to surfaces, Art Beton (Decorative Colored ensures better water and temperature Pressed Concrete) insulation because it is not composed of Known as Textured Decorative Colored lime or such materials, it delivers great Concrete, or Pressed Concrete, Art savings in the amount of paint that needs Beton is a floor covering material that to be applied to it, and its short setting can easily be used in both indoor and time of 72 hours means that jobs can be outdoor locations. Some typical attributes completed quickly. Due to these attributes, of Art Beton concrete are its acquiring of Sıvamiks is much more affordable than its surface appearance directly from the hand manufactured plasters. concrete, and then wearing and aging at the same rate as the concrete. Colored Concrete Colored Concrete delivers an esthetic Drabeton (Dramix and Fiber appearance and strength of form with Concrete) the need for any sort of additional Drabeton, used as a field concrete, a construction materials, for use in surface covering concrete, and as the architectural, esthetic and artistic shotcrete in bearing and partition walls, products. In addition to these attributes,

39 Çimsa Çimento Sanayi ve Ticaret A.Ş. 2010 Annual Report any desired color can be obtained by utilizing the correct pigment materials, while any desired surface shape may be produced through specially textured moulds. Being hydraulically active, Colored Concrete products feature increased manufacturing speed and increased product quality.

Colored Concrete is a low alkaline type of cement, requiring no steam curing processes during the manufacture of prefabricated concrete components.

Using Colored Concrete, any sort of concrete that needs to satisfy either the High Resistance Concrete (C50-C200) or the TSE standards can be manufactured. This is another demonstration of how Çimsa operates as a company significantly focused its customers’ satisfaction, on continuous improvement, and on quality.

UyuBet (Sleeping Concrete) Designed by Çimsa for locations requiring long distance transport of concrete, Sleeping Concrete makes no compromises on either quality or standards compliance. By limiting the hydration temperature within the concrete, the concrete’s setting period is deferred, thus preventing the loss of strength. After extensive field and laboratory studies, UyuBet has been designed to eliminate all concerns about the loss of concrete quality which could otherwise occur over long transport and waiting times when casting is required in remote locations.

Çimsa Çimento Sanayi ve Ticaret A.Ş. 2010 Annual Report 40 International Terminals

While Çimsa exported Çimsa-Adriatico S.R.L Trieste (Italy) cement-based floor covering materials for 1.2 million tonnes in Following Çimsa’s acquisition of the some particular customers in Spain, as majority of the shares of Medcon on well as selling Çimsa’s Isıdaç-40 cement. 2010, the company the 9th of February 2010, the company is now working to became the owner of the majority Çimsa has started work on a second increase its presence in shares of a terminal at the Port of Trieste terminal in Alicante, Spain in order to comprising four storage silos with a total increase its share of the Spanish market. its international markets capacity of 5,000 tonnes. On 26 April The facility, complete with packaging through extensions to 2010 the company’s name was changed systems and two vertical storage silos its international terminal to Çimsa Adriatico SRL. with a total capacity of 5,000 tonnes network. should become operational during 2011. The terminal now allows the Çimsa to access the Italian market, the third largest CSN Cement Sales North GmbH cement consumer in Europe after Spain, (Germany) Germany and France. The terminal, The CSN Company in Germany, a 50/50 thanks to its favorable location, can make joint venture between Çimsa and the sales not only to North Italy, but also to German company CTN GmbH, markets the markets of the developing nations white cement and Isıdaç-40 from its of Bosnia and Herzegovina, Slovenia 7,500 tonne bulk cement storage silo and Croatia, as well as to the developed to Germany, France and to the Benelux South East of Germany and to Austria. countries.

The terminal can store and package The Company also serves these white, gray cement and Isıdaç-40 cement markets through its sales offices in (calcium alimunated cement). Hamburg and its administrative office in Emden. Isıdaç-40 (calcium alimunated Çimsa Cementos Espana S.A.U. cement) sold from by the joint venture is (Spain) dispatched from Turkey pre-packaged. This terminal is in Seville, one of the largest ports in Spain. The site, which The German white cement market, along began operating in 1996, is wholly with the white cement market of Spain, owned by Çimsa. Çimsa Super White is one of the most important markets in cement is dispatched in bulk from Mersin, Europe. Since 2000 Çimsa has made following which it is held in the terminal’s sales directly into this market under its two storage silos with a total capacity own brand and through its own terminals. of 5,000 tonnes, and then provided to the Spanish market, either in bulk or packaged. This facility also handles white,

41 Çimsa Çimento Sanayi ve Ticaret A.Ş. 2010 Annual Report Çimsa-Rus Cement Trading Company The gray cement produced by Çimsa’s Limited (Russia) Mersin Cement Plant is shipped to In 2008, Çimsa decided to establish Famagusta where it is loaded into the a terminal in the city of Novorossiysk Çimsa Cement Free Zone’s storage silos. in order to meet the demands of the The cement is sold from the silos in bulk. fast growing Russian market. The Bagged cement is imported from Çimsa’s establishment of the CIMSA-RUS CTK Mersin Plant and sold to customers that company was completed in July 2008. need bagged cement.

While the terminal and the packaging facility was originally intended only for white cement, its commercial activities now also include gray cement and Isıdaç-40 (calcium alimunated cement).

Due to its location, the Russian market can also serve a number of special customers.

Cimsarom Marketing Distributie S.R.L. (Romania) Cimsarom Marketing Distributie was set up in Constanta to serve the Romanian markets, which developed quickly after its gained membership of the EU. From here, Çimsa mostly markets white cement and Isıdaç-40 (calcium alimunated cement) to Romania and into its adjacent markets.

Çimsa Cement Free Zone Ltd. (Cyprus) Since 2005, Çimsa has provided services to the Cypriot market through its terminal in the Turkish Republic of Northern Cyprus’ (TRNC) Famagusta Free Port Area. The terminal features 5,000 tonnes of gray cement storage capacity.

Çimsa Çimento Sanayi ve Ticaret A.Ş. 2010 Annual Report 42 43 Çimsa Çimento Sanayi ve Ticaret A.Ş. 2010 Annual Report An Entrepreneur We look to our future always full of excitement, and we carry the value that we create today into this future though each of our new investments and enterprises.

Çimsa Çimento Sanayi ve Ticaret A.Ş. 2010 Annual Report 44 Investments During 2010

During 2010, Çimsa imsa, both the leading and the decreased significantly. Moreover, at the most innovative company in same time there was a further remarkable spent US$24.3 Çthe cement and ready-mixed improvement with the de-dusting of the million on domestic concrete industry, achieves sustainable First Facility through a newly established investments and US$5.5 growth by maintaining its profitability. electro filter process on the clinker cooling million on investments Çimsa reinforces its leading position in system. the industry through its investments while in international always raising the bar when it comes A project to use the Mersin Plant’s First and terminals, a total of to sustainability, the environment and Second Facilities’ kilns’ exhaust gases to US$29.8 million. occupational safety. generate electricity was signed off, and the design phase of the project was completed Çimsa integrates sustainability into its before the end of 2010. The project’s business model through establishing values implementation will begin around the and focusing on long term growth. In 2010, start of 2011. The total investment in this Çimsa’s domestic investments focused on project will be around US$20 million, with modernization and innovation, especially the intention being of this project being sustainability, while its international operational by the end of 2011. investment projects worked towards the extension of the company’s international The construction of a 70,000 tonne terminal network. The total investments closed clinker storage silo at the Eskişehir made during 2010 were US$29.8 million. Plant, which started at the beginning of September 2010, is planned for The investments made during 2010 are completion by the end of the first quarter summarized in this following section. of 2011. At the same time the existing stock hall’s reinforcement, roofing and Domestic Investments other facing works continued, and will also be completed around the same time. The Mersin Plant’s First Facility Rotary Kiln and Clinker Cooling System Modernization The installation of a system required for investment, the construction and assembly the control of the cooling water for the operations on which accelerated towards Eskişehir cement mills was completed the end of 2009, was completed towards and has now been commissioned. the end of the first quarter of 2010. The clinker cooling and kiln units, formerly The Waste Burning (Hotdisc) Unit with out-of-date and costly to maintain project for Eskişehir’s Second Facility’s technologies, were modernized, while the rotary kiln has started, with a targeted production capacity of clinker increased, commissioning date of the end of the and the clinker’s specific total heat inputs first half of 2011. The usage of fossil fuels

45 Çimsa Çimento Sanayi ve Ticaret A.Ş. 2010 Annual Report at the Eskişehir Plant will be significantly reduced due to this unit.

The installation of a trass drying system in the clinker cooling unit has been completed at the Kayseri Plant, with R&D support from the Turkish Scientific and Technical Research Institution (TÜBİTAK). A separate bottleneck was removed by changing the site’s exhaust gas fan, motor and drive systems, resulting in clinker production capacity being greatly increased.

In the Niğde Plant, a bottleneck was resolved with the renewal of the site’s exhaust gas fan and motor drive systems, following which clinker production significantly increased.

Investments in landscaping, storage silo filter automation and Workplace Health and Safety were made in many of our Ready-Mixed Concrete facilities.

At the Misis, Osmaniye, and Zeytinli facilities in the Adana region, and the International Investments Yenihal facility in the Mersin region, each of which formerly operated a dry system, All assembly processes required for were all converted into wet system plants. the establishment of the Çimsa’s new cement terminal in Novorossiysk, Russia Work to increase the capacity of the were completed and the facility was Sucular Agregate Facility has been commissioned in June 2010. completed. The construction and production work at the new Sığırlıdağ The assembly processes for the new facility are complete, and the assembly cement terminal in Alicante, Spain are process has started. It is planned for almost complete and it is planned for the the site to become operational at the facility to become operational at the end beginning of February 2011. of the first quarter of 2011.

Çimsa Çimento Sanayi ve Ticaret A.Ş. 2010 Annual Report 46 47 Çimsa Çimento Sanayi ve Ticaret A.Ş. 2010 Annual Report Innovative We display innovative business practices exceeding expectations due to our understanding of our clients’ needs and demands.

Çimsa Çimento Sanayi ve Ticaret A.Ş. 2010 Annual Report 48 Marketing and Sales Activities During 2010

imsa compensated for the understanding of its client demands, consumption fluctuations seen the company’s production of more Çin recent years by developing a appropriate products, and on the creation flexible production and sales network. of new usage areas for these products. Due to the superior features of its Super The number of white cement and White cement, Çimsa permitted its white Isıdaç-40 export markets was increased cement to be used by the Ankara-Konya by creating logistical alternatives and by Express Train Project, the first time in the paying close attention to our marketing world that this has happened. activities. As part of the marketing activities in While white cement exports increased 2010, various technical support activities by 8% compared to the previous year, were undertaken both in the Cement Isıdaç-40 exports increased by 20%. Practice Center’s laboratories and on site, in order to increase customer In 2008 activities began seeking to satisfaction, to increase their loyalty, and increase the usage of white cement in to satisfy both their pre-sale and post- the precast concrete industry. These sale requirements. The Cement Practice operations are ongoing. White cement’s Center conducted studies on the usage usage in the precast industry has of white, gray, Portland and calcium increased due to its early high-strength, alimunated cements, and then shared meaning that the normal curing phase the results of these studies with Çimsa’s can be bypassed and formwork can be customers. removed early. Due to these activities, undertaken since 2008, a totally new Market research and customer loyalty white cement market, around 10% of surveys were conducted in both Turkey Turkey’s total white cement market, has and abroad to better understand been created. There are to be various customers’ needs so that Çimsa could projects during 2011 to build on these then offer them more appropriate foundations, with the aim of increasing products and services. Further, a market total domestic white cement demand. and customer information infrastructure was created to track market dynamics The success of Çimsa in the white and to support the creation of responsive cement industry is based on its action plans. Marketing plans were

49 Çimsa Çimento Sanayi ve Ticaret A.Ş. 2010 Annual Report prepared for each region to organize and prioritize that region’s marketing activities based on its customers’ needs and expectations.

During 2010, Çimsa took part in a number of international construction fairs in Syria, Iraq and Brazil, as well as the Turkey’s Istanbul Construction Fair and the Adana Construction Fair (as always), not only to improve its brand image and to increase its brand recognition, but also to interact with its customers.

As part of its social responsibility project, through a university-industry cooperation program, a joint study with the Mersin University’s Faculty of the Arts was undertaken. As usual, in 2010 the “Environment and Sculpture” class was The success of Çimsa in the white cement conducted in the Çimsa Cement Practice industry is based on understanding its client’s Center’s workshop. demands, producing the appropriate products and through its creating of new usage areas for The TÇMB Concrete-Art Architecture Summer School, which TÇMB its products. traditionally organizes every year to explain the concepts behind cement and cement products to the architects of tomorrow, and as a general contribution to architectural education, was this year held at Çimsa’s Mersin Plant.

Çimsa Çimento Sanayi ve Ticaret A.Ş. 2010 Annual Report 50 51 Çimsa Çimento Sanayi ve Ticaret A.Ş. 2010 Annual Report Informed Our well-informed, ambitious and experienced employees, developed in a corporate culture of success, play a very important role in our profitable growth.

Çimsa Çimento Sanayi ve Ticaret A.Ş. 2010 Annual Report 52 Corporate Development and Human Resources

A series of “Assessment he SADE (Accounatbility- The “Assessment Center” programs have Center” programs Clarity-Change-Effeciency) been undertaken to implement these TProject changes successfully and to identify were implemented to When we started the SADE project our the related developmental needs, while determine our staff’s goals were: “to have an organizational studies supporting the creation of the developmental needs, structure which supports our growth, training and development programs to be closer to the market and to our required to support these needs have what is needed for them customers, to make sure everyone been initiated to prepare both the to achieve the required feels more accountable for their work, management team and the all related changes and to design to define our tasks more clearly, to employees. development activities manage change efficiently and with more employee participation, and to conduct SADE has launched designed to and training programs our business more efficient through the sustain the success of Çimsa in the to support them. proper infrastructure”. future. Ensuring the proper evolution of the operational model, by redesigning For sustainable success… of the processes and the organizational Today, our targeted operating model, structure requires questioning of existing organizational structure and process paradigms, approaches habits and ways designs have all been completed, and of doing business. As a part of this project, a detailed Implemantation Roadmap development activities for individuals containing each of the many projects and for the Company as a whole are scheduled for 2011 has been created. determined and started to conduct.

53 Çimsa Çimento Sanayi ve Ticaret A.Ş. 2010 Annual Report Training and Development Activities

or Çimsa, which aims to be ready The installation of aSAPTraining and training programs on two critical subjects for the future today, 2010 was the Development Module in order to were developed and pilot trainings were Fyear in which development and enhance the company’s education delivered in 2010. During the design improvement needs in terms of processes, processes has been completed and will process, which took sixth months, the systems and human resources. were go live in 2011. The SAP Training and content to be delivered in the training defined in detail. As part of its SADE Development Module will allow all relevant sessions was reviewed and improved at project, companywide development needs information to be managed through a regular meetings of the Çimsa Cement based on the company’s newly required single database, so simplifying the steps Academic Advisory Committee which competencies have been identified required to evaluate the employees’ includes Plant Managers, a Technical while individual development needs, knowledge and competencies attitudes Adviser and the Process Improvement competencies and potentials have been while enabling activities to measure the Manager. identified by the Assessment Center effectiveness of training practices beyond studies.. In addition, all senior and middle merely evaluating participants’ reactions. The Cement Academy Advisory level management, a significant proportion Committee has drawn a 2011 roadmap of supervisors, engineers and specialists For 2011,the training program will for The Çimsa Cement Academy, and the participated in the assessment studies. include continous trainings on ‘Health Academy will clearly continue to develop Training programs designed based on and Safety’, ‘Environment and Waste to set an example to the industry. the common development areas and Management’, and ‘Quality Management prioritized development areas have been Systems’. And trainings designed started. to address the developmental areas identified in 2010. Another focus of 2010’s development activities was the effective management The Çimsa Cement Academy of Çimsa’s ongoing change process. The In 2009, the foundations of the Çimsa first component of this was the workshop Cement Academy were laid. The named“Systems Thinking and the Dance academy which will raise the sustainability of Evolution” where possible obstacles norms in the cement industry, the will for change have been shared with senior serve to different number of objectives; management while activities to overcome to transfer Çimsa’s cement industry these obstacles were discussed in experience to its employees using a systems thinking discipline. systematic approach, especially those at the beginning of their career in the sector; Regarding the technical development to create and maintain Çimsa’s corporate activities of 2010, the first that should memory; to better equip all technical be noted are the studies of the Cement employees; and to establish a network Academy. These studies were followed for sharing knowledge and experience by training programs which aimed to train throughout all Çimsa plants and facilities. and develop the engineers and operators working in the Maintenance Department.

Çimsa Çimento Sanayi ve Ticaret A.Ş. 2010 Annual Report 54 Learning Organization Teams for High Performance Culture

Çimsa has started to everal teamwork projects for covered in the national media and shared Learning Organization improvement, development at several important events over the Sand problem solving related recent years. In 2010, this happened practices in 2004 to to cost reduction,, efficiency savings, at the international stage for the first strengthen team work, environment that had been contiously time, we shared our experience with and to develop habit done have become more systematic leraning Organization at the SoL’s Greek and people-oriented since 2004 through Conference, organized by the Geek of finding permenant the implementation of our “ Learning section of the Society for Organizational solutions to problems Organization Practice Teams ” project. Learning (SoL), an organization at a reflex level that comprised of entities from many countries are critical for the In 2010, Learning Organization Practice that have the purpose of creating a Teams continued to contribute to our learning society. Çimsa’s presentation, implementation of our business results, our organizational which supplied the conference with many vision of “Creating climate and our corporate image. This practical experiences, was followed with a High Performance is an instrument of cultural change that great interest by Greek business people, fits to the organizational climate and experts in systems thinking and science Culture”, management culture that we want to of management and by the organizational strengthen at Cimsa learning gurus in attendance.

The Learning Organization Sharing Day, The subjects to be dealt with by the hosted by a different plant each year, Çimsa Practice Teams of the Learning was hosted by the Mersin Plant this year. Organization during 2011 have been Being a learning organization calls for selected based on the criteria of improvements every year, thus this year ‘contribution to the environment’, some of the teams focused on society ‘society’ and ‘profitability’. and customer related subjects while we used to work on Çimsa internal subjects in the past.

The Niğde Plant’s Learning Organization Practice Team (Team EQ), which worked to improve university-industry cooperation, while a team from the Mersin Plant, Cem-Up, worked to increase the sale of special products in some specific locations.

The work of Çimsa’s Learning Organization Practice Teams have been

55 Çimsa Çimento Sanayi ve Ticaret A.Ş. 2010 Annual Report Çimsa Practice Teams of Learning Organization

Team Location Subject of Work Logo

Cartesian Eskişehir Reducing water usage

Decreasing the temperature of the Metal Legs Ankara mill’s origin neck bearing

Improving Team EQ Niğde University and industry cooperation

Decreasing the heat consumption The Last Spark Kayseri and the CO2 emissions of the rotary kiln

Introducing and improving the usage Çim(Eko)Sa Mersin of waste, alternative and secondary fuels

Market research in support of special Cem-Up Mersin products in order to increase their sales

The commercial utilization, evaluation Cash Repatriation İstanbul and management of Çimsa’s inactive real estate

Çimsa Çimento Sanayi ve Ticaret A.Ş. 2010 Annual Report 56 Working Environment and Employee Engagement Research

In the year-end he ‘Employee Satisfaction causal relationships into account. Research’ studies that have been Employee suggestions were shared meetings, the results Tused in the business world for the with location and function managers, of the Employee last 50 years have now been replaced improvement actions were defined Engagement Research by “employee engagement” studies, and follow-up meetings were then were shared with since there is no direct, or at least periodically held. The measurement strong, correlation relationship between application, “Pulse Check”, which was employees. In 2011, employee satisfaction and performance, designed based on 2009 survey and appropriate action plans particularly since engagement is more which focuses on general management will be undertaken and likely to explain labor behavior. practices rather than the details was again used in 2010 to measure the followed up periodically. In the light of this new understanding, in effectiveness of the studies undertaken. 2009 Employee Engagement Research was undertaken instead of the former As in previous year, the results concerning Employee Satisfaction Studies. The management practices were evaluated in research’s results were then analyzed line with the model, and the analysis was on a per-function and a per-location then shared with Çimsa’s employees. In basis. The analyses and findings were 2011, action plans will be developed and shared with employees in workshops, periodically followed up in light of both and employee feedback on possible the detailed analysis of the program’s improvements was collected. findings and as a result of employees’ suggestions. Employees’ contributions to The model used in the research aimed problem areas and opportunities are of to reveal opportunities for improvements key importance for obtaining new ideas that would have a high impact on on sustainability and for the spreading employee engagement, while taking and adoption of related awarenesses.

57 Çimsa Çimento Sanayi ve Ticaret A.Ş. 2010 Annual Report Idea Factory

Idea Factory: the Number of suggestions submitted in 2010

11

Ankara 63 125 Eskişehir 159 İstanbul Kayseri he “Idea Factory” application was Mersin built to support the integration of 245 98 Niğde Tthe employees’ creative ideas and opinions into the company’s improvement Hazır Beton and development activities. It is the most 7 important communication platform on Total Number of Suggestions: 708 which Çimsa’s internal stakeholders can have their suggestions heard.

The Idea Factory was developed in 2008 The most important of these to avoid dismissing any ideas that cannot with the participation of employees from arrangements was the Idea Silo be implemented due to some, possibly all locations and functions, and it was application. The Idea Silo was designed transient, constraint at the time being. rolled out to all Çimsa employees in 2010, with the purpose of reviewing ideas that growing with their participation. Several could not be implemented due to their The following graphic shows the arrangements were made in 2010 to costs or due to the available equipment number of ideas submitted since the make the Idea Factory a living system and in the current budget period; if necessary, establishment of the Idea Factory, and in to increase its day-by-day effectiveness, these ideas may be allocated the required 2010. an initial objective specified during the resources and then implementing in a design of the Idea Factory. following year. The aim of the Idea Silo is Employee Movement, Collective Bargaining Agreement, Compensation and Benefits a) Employee Movement: by the Cement and Clay Products Industry employee may be provided with additional As of 31 December 2010, a total of Employers’ Association on 21 March 2008 benefits such as private life insurance, 998 personnel were working in Çimsa and was put into effect for three (3) years private health insurance, private pension business sites. beginning from 01 January 2008. The plan, GSM and company car. Between 01 January 2010 and 31 agreement has terminated on 31 December December 2010 a total of 70 personnel 2010. Negotiations on new Collective Personnel covered by the Collective have left Çimsa and 104 Bargaining Agreement still continue. Bargaining Agreement (Blue-collar) have new employees have been recruited. monthly base gross salary and also four c) Compensation and Benefits: base gross in each three months per b) Collective Bargaining Agreement: All white collar workers have monthly year.. In addition to monthly gross social The Collective Bargaining Agreement base gross salary per month and also aid payments, blue-collar employees are that expired on 31 December 2007 was four base gross salary bonus in each also provided with pecuniary support for then renegotiated by the Turkish Cement, three months per year. clothing, birth, death, marriage, food and Glass and Ceramic Workers’ Union and Depending on the position, a white-collar transportation

Çimsa Çimento Sanayi ve Ticaret A.Ş. 2010 Annual Report 58 59 Çimsa Çimento Sanayi ve Ticaret A.Ş. 2010 Annual Report Respectful Our principle is to use natural resources in the most effective and efficient way and to respect the environment and all people.

Çimsa Çimento Sanayi ve Ticaret A.Ş. 2010 Annual Report 60 Çimsa’s Sustainability Approach

Çimsa places imsa sees that integrating its importance on three dimensional sustainability Çapproach (managing its understanding its economic, environmental and social major environmental impacts as a whole) into all company and social impacts, functions will increase the innovative power of the corporation and help it to defining each of achieve its objectives. The company its risks, creating focuses on integrating its principles of appropriate solutions sustainability into its business model and continuously in line with its objective of growing through the creation of value for all developing a dialogue of the company’s key stakeholders, with its stakeholders with its vision of “being Turkey’s most in order to improve valuable cement and ready-mixed concrete company”. Being a sustainable the sustainability of its construction materials company is one corporate performance. of the primary objectives of Çimsa for the its social and environmental interactions, coming 10-year period. As part of this, individually reviewed each relevant topic the company aims to understand and and then created the “Çimsa Strategic improve on its social and environmental Sustainability Matrix”. impacts that already result from, or that will be a result of, its past, its current or its Çimsa supports sustainable development future activities, each through taking into by using natural resources in most account its entire value chain. efficient way, especially as both energy and raw materials are used so intensely Çimsa places importance on continuously in the cement sector. To this end, the improving its dialogue with its company places importance on reducing stakeholders in order to understand each its use of fossil fuels, while increasing its of its major environmental and social use of alternative raw materials. impacts, define its risks, create solutions and to improve its corporate sustainability Çimsa thinks of climate change as an performance, particularly given the obstacle to sustainable development, as sensitivities of its sector. With the purpose well being an environmental problem. The of ensuring the sustainability of the company focuses on energy efficiency benefits that it delivers to its stakeholders and alternative fuel use in order to through sustainable and smart reduce its carbon dioxide emissions and growth, Çimsa first determined its key to efficiently use its resources to fight shareholders in terms of the density of against global climate change.

61 Çimsa Çimento Sanayi ve Ticaret A.Ş. 2010 Annual Report Çimsa works to ensure that the mining activities that it conducts to supply the raw materials that it needs are conducted with the minimum possible social and economic impacts and are carried out in full respect of the environment. It also makes rehabilitation plans for the reclamation of all damaged lands. Çimsa has accomplished an exemplary rehabilitation project with the As Çimsa, we prepared our sustainability transformation of a former clay quarry at report based on the reporting framework the Eskişehir Plant area into an artificial pond surrounded by a habitat area set down by the Global Reporting Initiative housing various plants, trees and animals. (GRI).

As Çimsa, we have prepared a sustainability report based on the reporting framework set down by the Global Reporting Initiative (GRI). GRI, a worldwide organization with multiple stakeholders, works in close cooperation with the United Nations Environment Programme (UNEP) and with the UN’s Global Compact.

GRI has developed a globally applicable Sustainability Reporting Guide which provides a framework for companies to report on their environmental, social Sustainable and economic activities in relation to Development sustainability, as well as in relation to the consequences of these activities. Approximately 1000 companies in 60 countries are preparing sustainability reports based on the GRI’s framework. Çimsa has collated and produced its first sustainability report, detailing its performance in its three key areas during its 2007-2010 operating period.

Çimsa Çimento Sanayi ve Ticaret A.Ş. 2010 Annual Report 62 63 Çimsa Çimento Sanayi ve Ticaret A.Ş. 2010 Annual Report Excited As Çimsa, we are striving towards success, a team with a team spirit, a team that gains strength from its stakeholders and its business partners, a team that respects both its competitors and the rules.

Çimsa Çimento Sanayi ve Ticaret A.Ş. 2010 Annual Report 64 Social Responsibility

imsa, the leading cement and concrete while increasing awareness ready-mixed concrete company about the environment and about Çin Turkey, as well as focusing the environment’s physical qualities. on economic growth, acts with a sense The Summer school is named after of economic and social responsibility the Betonart magazine, published in order to make its rapid growth for architects by the Turkish Cement sustainable. Manufacturers’ Association through the sponsorship of Çimsa. Therefore, Çimsa regards its biggest responsibilities to society to be its A piece of work discussing modern observation of all legal and moral reinforced concrete architecture principles in each and every one of its yesterday, today and tomorrow was activities; it’s using of natural resources “Betonarme Estetik”, prepared and in the most effective and efficient way; published with the cooperation of Doğan its constant increasing of the value that it Kuban, one of the most important creates for its stakeholders, primarily for architectural academics in Turkey. its employees, shareholders and small This article was distributed by Çimsa investors; and finally making the value to all universities, libraries and related that it creates sustainable. professional organizations in Turkey.

Çimsa continues to hold occupational Çimsa undertakes many social support and informative training sessions that projects to contribute to society and contribute to the improvement of the to the social quality of life, both in the sector as a whole. The sessions aim regions in which the company operates to support the formation of basic as well as on the national level. The agreements and consciousness about company supports social investments safe construction, the development of that are implemented in cooperation aesthetical characteristics of living spaces with local administrations, academic of our society and safety standards in institutions and with Turkey’s leading these living spaces, especially given that nongovernmental organizations. our country is located in a seismically active zone. Çimsa, the leading member of the Turkish cement sector, provided material aid to During 2010, the Ninth Betonart nursery classes of the Şehit Yıldıray Kılınç Architecture Summer School for and the Kolsuz primary schools in the architecture students was held in Mersin. Ulukışla District’s Eminlik Village, in Niğde, The summer school supports research where the company has a production into alternative uses of cement and center. Çimsa’s business partners as well

65 Çimsa Çimento Sanayi ve Ticaret A.Ş. 2010 Annual Report as plant employees contributed to the aid organized by Çimsa’s Niğde Plant. A range of needs of the children were met with the materials provided. In addition, the restroom that was located outside of the school was moved inside while the nursery school building was restored by Çimsa’s employees.

Çimsa continues to take part in university- industry cooperative activities. As part of this, a conference on the Kyoto Protocol and Global Climate Changes was held in cooperation with Niğde University.

Çimsa continues to reclaim areas that are at the end of their economic life. In 2010, nearly 40,000 more trees were planted at Çimsa facilities as one sign of Çimsa’s awareness of the importance of environmental protection and environmental improvement. In Mersin and Niğde 15,600 trees were planted, 9,210 in Ankara, 1,500 in Eskişehir and 10,000 trees were planted in Kayseri.

Employees of the Çimsa Mersin Plant helped cleaning the Mersin coast road as part of activities marking World Environment Day.

In 2010, 400 environmental and civil engineering students from universities in Mersin, Niğde and Ankara received training on production and environment issues as part of “Open Door Days” organized by the Turkish Cement Manufacturers’ Association. The training sessions had the theme “Sustainable Cement Production”.

Çimsa Çimento Sanayi ve Ticaret A.Ş. 2010 Annual Report 66 67 Çimsa Çimento Sanayi ve Ticaret A.Ş. 2010 Annual Report Strong Roots We share the experience of our long history with our stakeholders and with society, while we create added value for every walk of life through our conscious, strong and responsible steps.

Çimsa Çimento Sanayi ve Ticaret A.Ş. 2010 Annual Report 68 2010 Annual Report

1) Title of the Partnership: Çimsa In the Board of Directors meeting held Çimento Sanayi ve Ticaret A.Ş. on 07 April 2010 Mehmet Göçmen was elected as the Chairman, and Mustafa 2) Period of the Report: 01.01.2010 Nedim Bozfakıoğlu was elected as the -31.12.2010 Vice Chairman.

3) Management and Audit Mehmet Hayrettin Şener resigned on Committees of the Annual Period: 13 July 2010, and Levent Demirağ was elected as a member in his place to Board of Directors complete the remaining term and to be 1. Mehmet Göçmen - Chairman presented to the approval of the partners 2. Mustafa Nedim Bozfakıoğlu - Vice in the first General Assembly meeting. Chairman 3. Serra Sabancı Member Yılmaz Külcü resigned on 19 July 2010, 4. Levent Demirağ - Member and Mahmut Volkan Kara was elected as (Since 13 July 2010) a member in his place to complete the 5. Mahmut Volkan Kara-Member remaining term and to be presented to (Since 19 July 2010) the approval of the partners in the first 6. Mehmet Hayrettin Şener - Member General Assembly meeting. (Until 01 June 2010) 7. Yılmaz Külcü- Member (Until 19 July Audit Committee: 2010) İlker YILDIRIM Bahadır BORAN There are no executive members in the Board of Directors. In the Ordinary General Assembly Meeting held on 07 April 2010 Audit Board of Directors is composed of Committee members whose terms five members that will be elected from had expired were re-elected, and their the shareholders as per the Articles terms were specified as three years until of Association of the Company. In the 2013 Ordinary General Assembly the General Assembly, there are no meeting, at which activity results of 2012 independent members among the will be discussed. elected members. 4) Financial Sources and Risk In the Ordinary General Assembly Management Policies of the Meeting held on 07 April 2010 elections Business: to replace Board Members whose terms of service had expired were held, and The financing of the investment and their terms of service were specified operating capital needs of the company as three years until the 2013 Ordinary are met through short- and medium to General Assembly meeting, at which long-term export and Turkish Lira and the results of the 2012 activities will be foreign currency loans. discussed.

69 Çimsa Çimento Sanayi ve Ticaret A.Ş. 2010 Annual Report Identifying and monitoring all possible based approach. In the most basic risks for our company constitutes terms, scenario-based strategic planning the basis of our risk management. is defined as developing the strategic Corporate risk management applications options required for being successful in have started in parallel with the risk the possible future scenarios. Therefore, management and applications procedure Çimsa will determine the best strategic that our partner Hacı Ömer Sabancı orientation for each possible future Holding A.Ş. group companies apply. All scenario instead of planning on the basis risks that our Company may encounter of a single projection of the future, and are classified according to their priority this provides Çimsa flexibility in terms of and monitored by the Company senior preparing and planning for the future. management and the Board of Directors. In order to eliminate the risks for all 6) R&D Acitivities: of our facilities that can directly affect the financial standing of the Company, The “trass drying project” which has been Sabancı Holding has been insured with successfully performed in Kayseri enabled a global insurance policy, in line with the the drying of trass. This meant that risk management policies. damp trass, extracted from a quarry only 10.3 kilometers away, can now be used The foreign exchange risks that may instead of trass provided from a quarry result from the Company’s foreign 180 kilometers away. currency loans are naturally eliminated This unique project, supported by with export revenues, and appropriate TUBITAK as part of its TEYDEP 1501 financial instruments are also considered. Industry R&D program, has further advantages such as eliminating the In order to prevent financial risks necessity for the installation of a new associated with exchange rate drying unit, and the absence of any fluctuations based on future transactions, additional fuel consumption to dry the the Company arranges forward purchase trass. / sales contracts that do not exceed 12 months so as to avoid cash flow risk. 7) Amendments in the Articles of Association During the Period: With the reduction of TRY loan costs, TRY credit loan began to be used. There have been no amendments in the Financing costs are aimed to be reduced Articles of Association in 2010. by using short term TRY loan. 8) The nature and amount of any 5) Projections Regarding the capital market instruments issued: Development of the Company: There are no capital market instruments As a Sabancı Cement Group member, issued. Çimsa enriches the usual strategic planning process by adopting a scenario-

Çimsa Çimento Sanayi ve Ticaret A.Ş. 2010 Annual Report 70 2010 Yılı Faalİyet Raporu

9) Çimsa’s Place in the Industry: Famagusta (the Turkish Republic of Northern Cyprus). The purchasing and Founded in Mersin in 1972, Çimsa began investment processes of the terminal operating its first production facility in investments made particularly within 1975 in Mersin. Today, Çimsa’s clinker the scope of establishing white cement production capacity across its plants in distribution channels abroad (Italy- Mersin, Kayseri, Eskişehir, Niğde and Russia) have been completed, and the Ankara has reached 5 million tons. investments for the Alicante terminal, whose construction process is still In addition to grey cement, Çimsa also ongoing, have reached its final stage. produces special cements, such as white cement and calcium aluminated cement, 10) Preventive Actions Envisaged and leads the Turkish cement and ready- In Order To Improve the Corporate mixed concrete industry in innovation. Financial Structure:

5.4 million tons of cement was produced In addition to implementing action plans in 2010. 4.3 million tons of cement with the aim of efficient corporate capital was sold domestically, and total of 1.4 management within the scope of current million tons of cement and clinker were market conditions, Çimsa conducts exported. investments and processes for improving the infrastructure, marketing and costs Having entered into the ready-mixed in order to boost profitability. Çimsa concrete sector in 1988, today Çimsa plans the cash flows and requirement for serves in Adana, Mersin, Kayseri, Antalya, the current TL, foreign currency values Osmaniye, Kahramanmaraş, Nevşehir, and manages the financial structure in Eskişehir, Kütahya, Bursa, Konya, Karaman, accordance with the procedures. Aksaray, Sakarya and Bilecik. Ready-mixed concrete production has reached 3.5 11) Sales: million cubic meters. Having sold 3.3 million cubic meters of ready-mixed concrete in Our Domestic sales turnover for the 2010, the company procured ready-mixed period of January 1 to December 31, concrete for the largest infrastructure and 2010 has been announced as 539.2 energy projects of Turkey. million TL by an increment of 32%, compared to the same period within the Çimsa is becoming a major player with previous year. Our international sales the investments made in 2010 on the turnover, on the other hand, has been aggregate quarries located in the regions announced as 205.8 million TL by a of Mersin, Eskişehir, and Bilecik, and still decline of 15%. continues to pace a rapid progress in this line of business. 12) Details About the Donations Made During the Year: Çimsa is an international cement producer, with terminals in Sevilla (Spain), During the year 66,226.28 TL was Emden (Germany), Constanta (Romania), donated to various public institutions and Trieste (Italy), Novorossisk (Russia) and organizations.

71 Çimsa Çimento Sanayi ve Ticaret A.Ş. 2010 Annual Report CORPORATE GOVERNANCE PRINCIPLES COMPLIANCE REPORT

1. Corporate Governance Principles on the Company’s corporate website distributed to partners participating in the Compliance Statement (www.cimsa.com.tr) within the required General Assembly, in which the partners Çimsa Çimento Sanayi ve Ticaret notice time. were informed about the previous A.Ş. pays strict attention to our In 2010, information requests concerning year’s activities. Members of Board of implementation of the principles laid out previous capital increases, dividend Directors and of the Audit Committee in the Corporate Management Principles distributions, exchanges of stock, were selected in accordance with the document issued by the Capital Markets dematerialization and the general shareholder’s recommendations. The Board (CMB), and we continue our assembly were handled by telephone, General Assembly’s meeting minutes improvement efforts in this regard. e-mail, fax and in face-to face are available from the Company’s communications. Additionally, twelve headquarters to any shareholder upon SECTION I-SHAREHOLDERS annual reports were requested and request. The meeting’s minutes were posted to shareholders. published in the Turkish Trade Registry 2. Shareholder Relations Unit Shareholders can obtain current Gazette. Additionally, a table listing the Our company has a Corporate Investors information about the Company through General Assembly’s attendants and Relations Unit set up to manage our www.cimsa.com.tr, from specific event the meeting’s minutes was published relationships with our shareholders. This disclosures on the Public Disclosure on www.cimsa.com.tr, the company’s department is coordinated by our Assistant Platform (www.kap.gov.tr) and from website. General Manager (Financial Affairs) Nevra newspaper advertisements. Özhatay ([email protected]). Also, Company Articles of Association In the General Assembly, important Haydar Yüzüak ([email protected]) does not have a provision in regard to decisions as specified in the Turkish and Borhan Tosun ([email protected]. assignment of a private auditor. In 2010, Trade Registry Gazette are submitted tr) work as specialists in this department. no such requests were received from the to shareholder’s approval. Once legal This department’s phone number 0 (216) shareholders. compliance with the Corporate Governance 651 53 00 and its fax number 0 (216) 651 Principles has been ensured, all important 14 15 can both be used to contact this 4. Information about the General decisions regarding the amended laws will department’s staff. Assembly be submitted to shareholders for approval An Extraordinary Meeting of the General by the General Assembly. This department maintains the company’s Assembly was held on 07 April 2010, and relationships with its shareholders. In the quorum of the meeting was 73.69%. 5. Voting Rights and Minority Rights 2010, the company held meetings with The stakeholders who wished to do so The Articles of Association do not twenty seven corporate shareholders and participated in the General Assembly contain privileged voting rights. The participated in two investor conferences. after completing the required processes. Articles of Association do not have any An exchange of stock was conducted Invitation to the General Assembly arrangements for cumulative voting. As, with seven of our shareholders who did was made in compliance with Turkish given the current partnership percentages not seek to participate in the previous Commercial Code and with the Articles of and the partnership structure, the year’s capital increase. Association, and approved by the Ministry granting of any cumulative voting rights of Industry and by the Trade Commissary. will ruin the harmony of the Company’s 3. The Use of the Shareholders’ Right Prior to the General Assembly, a meeting management structure, no such to Information notice and the meeting’s agenda were arrangement has been made. In our company, no shareholder has published on the Public Disclosure privilege or priority in the use of their Platform, in the Turkish Trade Registry 6. Dividend Distribution Policy and rights to information. To expand the Gazette, in the Dünya Newspaper, and it the Dividend Distribution Period shareholder’s right to information and to was announced directly to shareholders. The company’s dividend distribution maintain the proper uses of this right, policy is specified in article 26 of its all the required information, documents During the meeting, shareholders had Articles of Association. Accordingly, and financial statements are continuously the right to ask questions and they a dividend is distributed from the updated and made available to received the necessary explanations. company’s net profit, after subtracting shareholders, in both Turkish and English, An activity report was prepared and mandatory taxes from the gross profit.

Çimsa Çimento Sanayi ve Ticaret A.Ş. 2010 Annual Report 72 KURUMSAL YÖNETİM İLKELERİ UYUM RAPORU

The proportion issued as a dividend is was disclosed to the public through a 9. The Disclosure of Specific Events specified in the proposal of the Board of Specific Event disclosure on 30 April In 2010, our company made thirteen Directors and is approved by the General 2009; and it is available at www.cimsa. (13) specific event disclosures, in Assembly in accordance with the Articles com.tr. The Information Policy was initially accordance with the requirements of of Association, taking into account the presented to the company’s partners at the Capital Markets Board and the legal requirements for reserve funds and the Extraordinary General Meeting of 28 İstanbul Stock Exchange. The company all relevant CMB Legislation. August 2009. submitted Specific Event Disclosures for its shareholders’ information as part Çimsa’s dividend distribution policy was In accordance with this policy, the of its Public Disclosure Project. Such detailed in a separate section in the independently audited financial statements disclosures were made in a timely manner annual report. This information was also of the 6th and 12th month of each year, as and no sanctions have been imposed disclosed to the shareholders and to the well as the non-audited financial statements by the CMB or by the ISE. Stocks of our public before the General Assembly. of the 3rd and 9th month of each year are company are not traded on any foreign disclosed to the public. The announcement exchange markets. The company’s dividend is distributed of consolidated reports prepared to within the legal period. The company has International Financial Reporting Standards 10. The Company’s Web Site and its adopted the policy of “before the end of (IFRS) were made within the legally required Content May following the end of the accounting period specified by the CMB. The company has a website at www. period, distributing a minimum of 50% of cimsa.com.tr, and all the information the distributable profit to the company’s The public disclosure of information about specified in article 1.11.5 of Chapter II of partners”. the Company is made through press the CMB Corporate Governance Policy is releases, e-mail messages, telephone available on the company’s website. Our This policy may be reviewed by the Board communications and through interviews website contains information about the of Directors each year, depending on the conducted with media organizations and corporation, its products and services, its national and global economic conditions, press agents. financial indicators, its annual reports, its the company’s current projects and investor relations, its financial statements, the state of its funds. No privileges are Additionally, information about the its information policy, the activities it available for any shareholder in the company is available on its web site, as has organized due to its sense of social dividend distribution. recommended by the CMB Corporate responsibility, and its human resources Management Principles regarding policies. 7. The Transfer of Shares Information Policies. Content on the website was arranged The Company’s Articles of Association do The sections of the Çimsa website, under in accordance with the resolution in the not have any provision to limit the transfer its Investor section, are as follows: Capital Markets Board meeting dated 10 of shares. December 2004, no 48/1588. • Partnership Structure SECTION II - PUBLIC DISCLOSURE • Articles of Association 11. Disclosure of Real Person AND TRANSPARENCY • Trade Registration Data Ultimate Controlling Shareholder or • Information Policy Shareholders 8. Corporate Information Policy • Corporate Compliance Principles Our company does not have a real The Board of Directors is authorized • Dividend Distribution person ultimate controlling shareholder. and responsible for tracking, monitoring • General Assembly Information and improving the public disclosure and • Annual Report 12. Public Disclosure of the information policy of Çimsa Çimento • All Financial Data Company’s Insider Trading List Sanayi ve Ticaret A.Ş. • Resolutions of the Board of The Members of the Company’s Board The company’s Information Policy was Directors of Directors, the Auditors and the Senior created and approved by the Board of • The Disclosure of Specific Events Managers on the Insider Trading List Directors in accordance with the CMB • Frequently Asked Questions are each listed in the company’s annual Corporate Governance Principles; it report. In addition, the insider trading

73 Çimsa Çimento Sanayi ve Ticaret A.Ş. 2010 Annual Report list includes the Strategy and Marketing its employees and their feedback is Agreement in effect. We also have units Manager, the Financial Affairs Manager, collected. to manage our relationships with all the Budget and Finance Manager, the of our employees, such as Corporate Information Technologies and Automation Within our business excellence practices, Development and Human Resources, Manager, the Internal Controls Manager, our learning organization efforts and as Corporate Communications, Code of the Corporate Risk Manager and the part of our recommendation system, Ethics Consultancy and Labor Health company’s Independent Audit Agency. team work is encouraged. Thus it is and Security, as well as detailed written ensured that the project team participates guidelines and procedures that embody CHAPTER III - STAKEHOLDERS in issues such as goal setting, process all the relevant regulations and practices improvements and in all investments that related to business life. 13. Notification of Stakeholders are of interest to the Company. Notifications to all stakeholders are made To date, no discrimination issues have through the İstanbul Stock Exchange by Partners participate in the Company’s been reported by our employees. periodic public notifications, as required management through the Ordinary and by the relevant legislation and through the the Extraordinary General Assembly 16. Information about Relationships specific events disclosure forms. Matters Meetings. with Clients and Vendors such as ordinary and extraordinary Our relationships with our clients are general assembly meetings and dividend Partners also participate in the managed by the Vice General Manager distributions are announced in newspaper Company’s management through retailer (Sales). We organize mass notifications as advertisements as stipulated in the meetings and client engagement surveys. well as one-to-one meetings. relevant legislation and in the Company’s Client Meetings: Our sales teams Articles of Association. Notifications are 15. Human Resources Policy periodically visit our clients to collect their also made through meetings with the The Company’s corporate development recommendations, their expectations and press, press releases and in interviews and human resources vision is to create to report on their satisfaction levels. with media organizations. a culture of high performance while Meetings and Travels for Client/Distributor its mission is to ensure organizational Sharing Furthermore, Company employees are change and development. Accordingly, In our regional meetings organized a few notified through the Company’s quarterly our core Corporate Development and times each a year, we inform our clients newsletter, through information sent by Human Resources Strategies aiming to about the developments happening in e-mail, in internal training sessions, via the make our organizational development our Company. Each year, we organize Çimsa Portal and at annual notification continuous and effective are: international travel and meetings for our meetings. high-performing clients and distributors, To establish an organizational and human within the framework of our distributor Notifications for clients are made through resources infrastructure that will ensure and client performance management annual meetings, in publicity activities, the continuity of the company’s profitable principles. and through trainings and seminars. growth; and to continuously improve current business processes; Fairs Partners are concurrently notified of all To extend the culture of high Our clients can find opportunities to information, other than of confidential and performance, to elevate leaderships discuss with our Company’s sales team trade secret information, in an accurate skills at every level, and to increase about our new products and applications and clear manner. the knowledge and skill levels of our at the building materials fairs that we employees; and attend. 14. Participation of Stakeholders in To measure and continuously improve our Management organizational climate. Leaflets and Booklets At least once a year, the Company Introductory and explanatory leaflets organizes meetings where activities All issues relating to employees who about products are shared with our of the previous year are evaluated, are union members are managed clients. targets for the next year are shared with within the scope of the Collective Labor

Çimsa Çimento Sanayi ve Ticaret A.Ş. 2010 Annual Report 74 KURUMSAL YÖNETİM İLKELERİ UYUM RAPORU

The Evaluation of Client Complaints, 3. As a demonstration of Çimsa’s role(s) outside the company, and these Requests and Feedback environment protection and improvement additional roles are not limited and Each request and complaint related to sensitivity, nearly 40,000 trees were subject to any specific rules. Upon the any Çimsa product or service is recorded planted around Çimsa sites during 2010. resolution of the General Assembly, Board and all necessary notifications and Employees of Çimsa’s Mersin Plant Members are entitled to carry out the assignments are performed within the helped clean the Mersin coast road to transactions described in articles 334 and company. As part of this process, the mark World Environment Day. 335 of the Turkish Commercial Code. client’s information is communicated to the organization, the necessary actions 4. In 2010, as part of the “Open Door 19. Qualifications of the Board and corrective activities related to the Days” organized by Turkish Cement Members issue are planned and the client is replied Manufacturers’ Association, the Although there are no provisions in the to within the shortest possible time. company trained 400 students from the Articles of Association regarding the environment and civil engineering faculties minimum qualifications required for those 17. Social Responsibility of the universities in Mersin, Niğde and seeking election to the Board Members, Our Company conducts its social Ankara. The main theme of this work was all Board Members comply with articles responsibility efforts with an “Sustainable Cement Production”. 1/3/01, 1/3/02 and 1/3/05 of Section IV understanding of “sustainability” and of the Capital Markets Board’s Corporate “creating social value”. The company CHAPTER IV – THE BOARD OF Management Principles. carries out its social responsibility DIRECTORS projects focusing primarily on the social 20. Company’s Mission, Vision and and cultural structure of its local society, 18. The Structure and Constitution Strategic Objectives and on the development of the building of the Board of Directors and its The Company’s Board of Directors has industry. Within this scope, the following Independent Members identified the Company’s vision and activities were conducted in 2010: mission, and it has announced these to The Board of Directors the public in its activity report, and on the 1. The Ninth Betonart Architecture 1 Mehmet GÖÇMEN company’s corporate web site Summer School for architecture students Chairman (www.cimsa.com.tr). The rate of was held in Mersin. The summer school 2 Mustafa Nedim BOZFAKIOĞLU attainment of targets set by annual supports research into alternative uses Vice Chairman budgets are presented to the Board of of cement and concrete while increasing 3 Serra SABANCI Directors both as comparison within the awareness about the environment Member financial year in terms of ‘budget versus and about the environments physical 4 Levent DEMİRAĞ actual’, as well as in comparison to the quality. The Summer school is named Member same period of previous years. The Board after the Betonart magazine, published 5 Mahmut Volkan KARA of Directors repeats this process every for architects by the Turkish Cement Member month. Manufacturers’ Association through the Mehmet HACIKAMİLOĞLU sponsorship of Çimsa. General Manager Our Vision: To be Turkey’s most valuable There are no executive members of the cement and concrete company 2. The company provided material Board of Directors. Our Mission: Being a business assistance to the Şehit Yıldıray Kılınç partner to cement and concrete users and the Kolsuz Primary School’s Nursery The Board of Directors is composed of internationally. Classes of Ulukışla town’s Emirlik village five members elected by the shareholders in Niğde, where the company conducts as stipulated in the Company’s Articles Strategic targets are prepared through production activities. of Association. There are no independent the company’s annual strategic planning members among the members elected process, based on work conducted 3. A conference was held in cooperation by the General Assembly. by the strategic planning department with Nigde University on Kyoto Protocol and with the active participation of the and Global Climate Change. Board Members may assume additional Company’s senior and middle level

75 Çimsa Çimento Sanayi ve Ticaret A.Ş. 2010 Annual Report managers. At the end of this process, 21. Risk Management and Internal internal audits the company’s compliance the targets are presented to the Board of Control Mechanisms with the law, with internal procedures Directors and approved by the Board of Our Corporate Risk Management Unit and with instructions is each assessed. Directors. works to ensure that risk management The risks in the system and control is effectively used by the Board of mechanisms are assessed based on the Our main strategic objectives: Directors. As part of the work of the current findings and attention is paid to Provide operational excellence: Set Corporate Risk Management Unit, it has making improvements and establishing targets for every function in our developed and implemented processes new control mechanisms in points that fall value chain processes, including for use in Company-based effective risk behind. management, production, sales and management. delivery; follow these targets with key With Corporate Risk Management Unit, performance indicators; make continuous Similarly, Internal Control Mechanisms the company measures, evaluates and improvements in performance process; have also been established within the prioritizes the operational, financial, establish a corporate information/data Company. The Internal Audit Unit within strategic and external environmental risks base; take each necessary measure the Company effectively conducts the that may prevent them from attaining the identified by scenario-based detailed duties assigned to it by the Board of general strategy and targets, assesses follow-up of cash flow forecasts; deliver Directors. The Audit Committee has been resource requirements and provides operational excellence by managing each formed in accordance with the existing coordination, takes action against critical of these through “system approach” Internal Audit Regulations. risks identified and regularly follows them. discipline. The operation and effectiveness of With the establishment of Corporate Be a sustainable construction products risk management and internal control Risk Management, the aim was to company: Starting with our stakeholders mechanisms within the Company can be develop a risk management culture and who are most affected by our social summarized as follows; perspective in all company units, develop and environmental impacts, effectively proactive approaches, reveal possible manage our communication with all of Company policies and procedures opportunities, protect and increase the our stakeholders; create long term value that have been established covering company’s value, develop natural hedging both for our stakeholders and for our production, sales, stock, commercial and portfolio management, and further Company. and financial issues and human increase the stakeholders’ trust and resources ensure that such activities are reliance. Be market and customer oriented: conducted with the appropriate levels Listen to and understand the needs and of discipline. Work flows are organized The Corporate Risk Management Unit will requests of our customers by making in such a way that the executor and the report to the board of directors whether the market and our customers the focal controller of the work are different people, current actions have created the desired point of all of our activities; thus create and auto-control mechanisms have impact and improvement in regards to added value for our customers; be the been established at each appropriate risks, and the results achieved by recent most preferred business partner by our point. Reporting systems that control actions. The Board of Directors has customers. production, purchasing and sales decided that the Internal Audit Manager activities and particular expense items will report to the Committee Responsible Grow Profitably/Reasonably: Make have been developed, and meetings at for Audit. investments in new and attractive that different level and environments where will create synergies with Çimsa’s current such reports are assessed have become 22. Authority and Responsibilities operations markets in such a way that a Company tradition. The making of each of Members of the Board and of they will create added value for other transaction in any administrative, financial Managers primary targets of our company and help and commercial matters is subject to the The Company Board of Directors’ the company to grow sustainably. approval of a specific authorization grade. management rights and representative In addition to this internal control system authorities are defined in general terms within the company, during periodic in the Company’s Articles of Association.

Çimsa Çimento Sanayi ve Ticaret A.Ş. 2010 Annual Report 76 KURUMSAL YÖNETİM İLKELERİ UYUM RAPORU

The rights and responsibilities of did not present any apologies for any The members of the Audit Committee are managers, on the other hand, are not absences, was provided by the Board of chosen as Committee members in order included in the Company’s Articles of Directors’ meetings. Since the Members to harness their global experiences and Association. However, these authorities of the Board of Directors did not have any their knowledge. and responsibilities are defined by the questions regarding these issues, they Company’s Board of Directors. were not appended to the record. The There are no executive or independent Members of the Board of Directors are members of the Board of Directors. 23. Board of Directors’ Principles of not entitled with majority vote right and/or Activity veto right with regards to these decisions. There has been no conflict of interest As mentioned in company’s articles of during 2010 due to the current member association, Çimsa’s Board of Directors 24. Prohibition of Transaction and structure of the committees. consists of five (5) members to be Competition with the Company selected among shareholders during the During the current period, the Members 27. Financial Benefits Provided to the General Assembly. As mentioned in the of the Board of Directors did not perform Board of Directors company’s articles of association, the any activities that should be identified as According to the Articles of Association, members of Çimsa’s Board of Directors transaction with, or competition with, the each right, benefit and salary provided are elected for three (3) years at the most, company. to the Members of the Board will be and members whose time has ended determined by the General Assembly. No may be elected again. As mentioned in 25. Ethical Rules membership dividend was paid to the the company’s articles of association, the Rules of Business ethics are established Board of Directors in 2010. members of the Board of Directors elect a and implemented by our company. The Vice President to represent the President rules of business ethics are published on During 2010, the Company did not lend in his or her absence. The Board of the corporate web site and announced to any money to any Member of the Board Directors gathers at least once a month the public. The employees are informed of Directors; it did not give any loans; it (as required by the articles of association) about these rules through the publication did not give extra time for any existing to review the monthly operation results. of the rules on the company’s internal debts or loans; it did not improve any communication portal, in printed booklets such conditions; it did not allow the use The agenda of the Company’s Board that are distributed to all employees, of loans in the name of personal loans of Directors meetings is defined and and in training sessions. In addition, at through third persons, and it did not give advised by the Company’s General the end of each year, each employee any assurances such as bailment in their Manager. The Financial Affairs Assistant refreshes their knowledge of business favor. General Manager assumes the duties ethics through an e-learning program, of the secretariat and ensures supply of and they renew their commitment to the information to, and communication of, the rules of business ethics on the “Business members of the Board of Directors. Ethic Compliance Declaration” they fill out and sign. Çimsa’s Board of Directors met 25 times during 2010 and made 56 decisions. 26. The Number, Structure and Independence of the Committees During the meetings held in 2010, no established by the Board of Directors opinions were expressed in opposition to Reporting to the Board of Directors, the decisions made by the Members of Audit Committee is formed from the the Board of Directors. non-executive members of the Board of Directors. As the Board of Directors of the While the issues contained in SPK Company is concerned personally with Corporate Management Principles IV. Corporate Compliance Principles and part 2.17.4. were being resolved, the compliance to them, it was not deemed actual participation of Members, who necessary to form a separate committee.

77 Çimsa Çimento Sanayi ve Ticaret A.Ş. 2010 Annual Report AUDITORS’ REPORT To ÇİMSA ÇİMENTO SANAYİ VE TİCARET A.Ş. GENERAL ASSEMBLY

-Partnership’s:

Title : Çimsa Çimento Sanayi ve Ticaret A.Ş. Headquarter : Istanbul Capital : 135,084,442.-TL

Subject of activity : Cement Production and Trade

-Auditors’

Full Name : İlker YILDIRIM-Bahadır BORAN Terms of Service : One year - One year Shareholder Status : They are not a shareholder of the Company.

-The Number of Board Meetings Attended : There are no Board meetings attended. Audit Committee Meetings Conducted Audit Committee held four meetings.

-Scope, implementation date and final conclusion Within the framework of Trade Law and Tax Regulation, audit was for the audit conducted on the partnership accounts, conducted for the periods of June-September December 2010 ledgers and documents: and February 2010, and no issue identified requiring review. It has been acknowledged that the decisions about the corporate management were recorded on the resolution ledger that is properly maintained.

-Number and results of the partnership teller proofs The conducted teller proofs are acknowledged to be in conformity conducted in accordance with clause 353/1-3 under with the cash ledger records. Turkish Commercial Code:

-Dates and resolutions for the audit conducted in Based on the monthly audits conducted, essential documents and accordance with clause 353/4 under Turkish files are acknowledged to be present and in conformity with the Commercial Code: ledger records.

-Complaints and irregularities submitted and the There are not any submitted complaints. proceedings conducted against them:

We have reviewed the accounts and transactions of ÇİMSA Çimento Sanayi ve Ticaret A.Ş. for the period of 1/1/10-12/31/10 in accordance with the Turkish Commercial Code, the Partnership’s Articles of Association and other legislation and generally accepted accounting policies and standards.

We consider that the attached balance sheet made by 12/31/10, whose contents we adopted, reflects the real financial standing of the partnership at the above mentioned date, and the Income Statement of the 1/1/10-12/31/10 period reflects the real activity results, and the Annual Report and the proposal of distribution of profit, which have been found realistic, are determined to be conforming to laws and the Partnership Articles of Association.

We present the approval of the Balance Sheet and the Income Statement and the release of the Board of Directors to your votes.

03.03.2011

AUDIT COMMITTEE

İlker YILDIRIM Bahadır BORAN

Çimsa Çimento Sanayi ve Ticaret A.Ş. 2010 Annual Report 78 79 Çimsa Çimento Sanayi ve Ticaret A.Ş. 2010 Annual Report Trustworthy Creating value for the Turkish economy, Çimsa will continue its sustainable profitability and growth through its strategic domestic and international investments.

Çimsa Çimento Sanayi ve Ticaret A.Ş. 2010 Annual Report 80 ÇİMSA ÇİMENTO SANAYİ VE TİCARET ANONİM ŞİRKETİ AND ITS SUBSIDIARIES

CONVENIENCE TRANSLATION INTO ENGLISH OF CONSOLIDATED FINANCIAL STATEMENTS AT 31 DECEMBER 2010 TOGETHER WITH INDEPENDENT AUDITOR’S REPORT (Convenience translation of financial statements and footnotes originally issued in Turkish) Çimsa Çimento Sanayi ve Ticaret Anonim Şirketi and its Subsidiaries

Table of contents

Page Report of independent auditors 84-85 Consolidated balance sheet 86-87 Consolidated income statement 88 Consolidated comprehensive income statement 89 Consolidated statement of changes in equity 90 Consolidated cash flow statement 91 Notes to the consolidated financial statements 92 - 152

83 Çimsa Çimento Sanayi ve Ticaret A.Ş. 2010 Annual Report DRT Bağımsız Denetim ve Serbest Muhasebeci Mali Müşavirlik A.Ş. Sun Plaza Bilim Sok. No: 5 Maslak, Şişli 34398 İstanbul, Türkiye

Tel : +90 (212) 366 6000 Fax: +90 (212) 366 6010 www.deloitte.com.tr

INDEPENDENT AUDITOR’S REPORT

To the Board of Directors of Çimsa Çimento Sanayi ve Ticaret Anonim Şirketi

We have audited the accompanying consolidated financial statements of Çimsa Çimento Sanayi ve Ticaret Anonim Şirketi and its subsidiaries (hereafter together referred to as “the Group”) which comprise the consolidated balance sheet as of 31 December 2010, consolidated income statement, consolidated comprehensive income statement, consolidated statement of changes in equity, consolidated statement of cash flow for the year then ended and a summary of significant accounting policies and other explanatory notes.

Management’s responsibility for the financial statements

Management is responsible for the preparation and fair presentation of these financial statements in accordance with Financial Reporting Standards published by Capital Market Board. This responsibility includes designing, implementing and maintaining internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances.

Auditor’s responsibility

Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with generally accepted auditing standards issued by Capital Market Board. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance whether the financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Çimsa Çimento Sanayi ve Ticaret A.Ş. 2010 Annual Report 84 Opinion

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of Çimsa Çimento Sanayi ve Ticaret Anonim Şirketi and its subsidiaries as of 31 December 2010, and its financial performance and cash flows for the year then ended in accordance with financial reporting standards published by Capital Market Board.

Other Matter

The audit of the Group’s consolidated financial statements for the year ended 31 December 2009 was performed by another independent auditing firm. The predecessor auditing firm expressed an unqualified opinion in the auditor’s report dated 17 March 2010 on the consolidated financial statements as of 31 December 2009.

Additional paragraph for convenience translation into English

The accounting principles described in Note 2 to the consolidated financial statements (defined as “CMB Financial Reporting Standards”) differ from International Financial Reporting Standards (“IFRS”) issued by the International Accounting Standards Board with respect to the application of inflation accounting for the period between 1 January - 31 December 2005. Accordingly, the accompanying consolidated financial statements are not intended to present the financial position and results of operations in accordance with IFRS.

İstanbul, 17 March 2011

DRT BAĞIMSIZ DENETİM VE SERBEST MUHASEBECİ MALİ MÜŞAVİRLİK A.Ş. Member of DELOITTE TOUCHE TOHMATSU LIMITED

Berkman Özata Partner

85 Çimsa Çimento Sanayi ve Ticaret A.Ş. 2010 Annual Report (Convenience translation of financial statements and footnotes originally issued in Turkish) Çimsa Çimento Sanayi ve Ticaret Anonim Şirketi and its Subsidiaries Consolidated balance sheet as at 31 December 2010

(Currency - Turkish Lira (TL), unless otherwise indicated)

Current period Prior period Audited Audited

Assets Notes 31 December 2010 31 December 2009

Current assets 247.235.654 285.034.872

Cash and cash equivalents 6 10.681.165 51.088.881 Trade receivables Trade receivables from related parties 27 3.133 254.366 Other trade receivables 9-a 124.191.928 103.137.815 Other receivables 10-a 1.828.087 1.594.814 Inventories 11 92.824.407 63.393.847 Other current assets 18-a 17.706.934 65.565.149

Non-current assets 886.601.146 914.706.515

Other receivables 10-a 1.057.500 768.485 Available for sale investments 7 149.521.837 73.736 Investments accounted under equity method 12 93.783.092 320.074.928 Property, plant and equipment 13 482.255.188 436.402.767 Intangible assets 14 18.136.992 18.652.621 Goodwill 15 136.717.579 136.710.208 Deferred tax assets 25 1.763.146 - Other non-current assets 18-a 3.365.812 2.023.770

Total assets 1.133.836.800 1.199.741.387

The accompanying policies and explanatory notes on pages 7 through 67 form an integral part of the consolidated financial statements.

Çimsa Çimento Sanayi ve Ticaret A.Ş. 2010 Annual Report 86 (Convenience translation of financial statements and footnotes originally issued in Turkish) Çimsa Çimento Sanayi ve Ticaret Anonim Şirketi and its Subsidiaries Consolidated balance sheet as at 31 December 2010

(Currency - Turkish Lira (TL), unless otherwise indicated)

Current period Prior period Audited Audited

Notes 31 December 31 December Liabilities 2010 2009

Current liabilities 188.281.640 231.500.036

Financial liabilities 8 87.478.461 106.389.488 Trade payables Trade payables to related parties 27 5.315.541 949.549 Other trade payables 9-b 65.876.690 45.553.655 Other payables 10-b 6.184.518 5.241.306 Income tax payable 25 5.741.083 5.059.970 Provisions 16 6.297.346 3.361.314 Other current liabilities 18-b 11.388.001 64.944.754

Non - current liabilities 65.747.812 36.140.583

Financial liabilities 8 26.908.284 6.267.047 Provisions 16 1.780.130 1.532.210 Provisions for employee benefits 17 10.393.076 8.568.947 Deferred tax liabilities 25 26.631.995 19.596.795 Other non - current liabilities 34.327 175.584

Shareholders’ equity 879.807.348 932.100.768

Equity attributable to the equity holders of the parent Paid - in share capital 19 135.048.442 135.084.442 Inflation adjustments to share capital 19 41.741.516 41.741.516 Share premium 19 30.131 30.131 Financial assets fair value reserve 12-19 35.586.272 66.613.728 Foreign currency translation difference 762.424 (158.613) Restricted reserves allocated from net profit 19 89.441.175 81.930.480 Retained earnings 19 468.597.985 498.726.307 Net profit for the year 103.667.716 108.132.777 Non-controlling interests 4.895.687 -

Total liabilities and equity 1.133.836.800 1.199.741.387

The accompanying policies and explanatory notes on pages 7 through 67 form an integral part of the consolidated financial statements.

87 Çimsa Çimento Sanayi ve Ticaret A.Ş. 2010 Annual Report (Convenience translation of financial statements and footnotes originally issued in Turkish) Çimsa Çimento Sanayi ve Ticaret Anonim Şirketi and its Subsidiaries Consolidated statement of income for the year ended 31 December 2010

(Currency - Turkish Lira (TL), unless otherwise indicated)

Current period Prior period Audited Audited 1 January - 1 January - 31 31 December, December, Notes 2010 2009

Net sales 20 708.480.015 614.924.831 Cost of sales (-) 20 (519.896.312) (433.725.048)

Gross profit 188.583.703 181.199.783

Selling, marketing and distribution expense (-) 21 (7.607.034) (5.820.137) General and administrative expense (-) 21 (35.057.167) (29.788.200) Research and development expense 21 (354.055) (184.883) Other operating income 23 7.432.900 13.323.737 Other operating expense (-) 23 (11.799.063) (19.629.238)

Operating profit 141.199.284 139.101.062

Profit/loss from investments accounted under equity method 12 (4.410.311) 4.222.209 Financial income (+) 24 78.129.502 48.803.649 Financial expense (-) 24 (84.440.152) (58.891.243)

Net income before taxes 130.478.323 133.235.677

Tax expense for continuing operations (27.228.520) (25.102.900) - Tax income / (expense) for the period 25 (27.913.316) (20.802.579) - Deferred tax income / (expense) 25 684.796 (4.300.321)

Net profit 103.249.803 108.132.777

Attributable to: Non-controlling interests (417.913) - Owners of the parent 103.667.716 108.132.177

Earnings per share (Kr) 26 0,0076 0,0080

The accompanying policies and explanatory notes on pages 7 through 67 form an integral part of the consolidated financial statements.

Çimsa Çimento Sanayi ve Ticaret A.Ş. 2010 Annual Report 88 (Convenience translation of financial statements and footnotes originally issued in Turkish) Çimsa Çimento Sanayi ve Ticaret Anonim Şirketi and its Subsidiaries Consolidated statement of comprehensive income for the year ended 31 December 2010

(Currency - Turkish Lira (TL), unless otherwise indicated)

Current period Prior period

Audited Audited 1 January - 1 January - 31 31 December, December, Notes 2010 2009

Net profit 103.249.803 108.132.777

Other comprehensive income: Far value increase in financial assets 31.265.370 116.783.967 Currency translation difference 921.037 (299.047)

Other comprehensive income / (expense) (net of deferred tax) 32.186.407 116.484.920

Total comprehensive income / (expense) 135.436.210 224.617.697

Attributable to: Non-controlling interests (417.913) - Owners of the parent 135.854.123 224.617.697

The accompanying policies and explanatory notes on pages 7 through 67 form an integral part of the consolidated financial statements.

89 Çimsa Çimento Sanayi ve Ticaret A.Ş. 2010 Annual Report - -

Total Total Total Total equity equity 5.313.600 32.186.407 932.100.768 103.249.803 108.132.777 116.484.920 932.100.768 (58.005.260) 135.436.210 879.807.348 765.488.331 224.617.697 (111.182.058) (81.861.172) ------

Total Total Total interests interests non-controlling 5.313.600 (417.913) (417.913) 4.895.687 non controlling non - - -

Total Total 32.186.407 (58.005.260) 135.854.123 874.911.661 765.488.331 224.617.697 932.100.768 116.484.920 108.132.777 932.100.768 103.667.716 (81.861.172) (111.182.058) - - - -

- Net profit Net profit 76.504.114 (18.498.854) (58.005.260) 108.132.777 103.667.716 103.667.716 108.132.777 108.132.777 108.132.777 (81.861.172) (26.271.605) for the period 103.667.716 for the period ------

- earnings Retained earnings Retained 13.373.750 468.597.985 485.352.557 498.726.307 (48.889.232) 498.726.307 18.760.910 ------

- net profit net profit net profit 7.510.695 5.125.104 89.441.175 76.805.376 81.930.480 allocated from allocated from allocated from allocated from Restricted reserves Restricted reserves 81.930.480 Restricted reserves Restricted reserves ------

921.037 921.037 762.424 140.434 Currency Currency (299.047) (158.613) (299.047) (158.613) Currency Currency translation differences translation differences differences ------

Value Value reseve reseve increase/ Financial 31.265.370 31.265.370 66.613.728 35.586.272 66.613.728 (50.170.239) 116.783.967 116.783.967 (62.292.826) (decrease) fund (decrease) assets fair value ------

- Share Share Share premium premium 30.131 30.131 30.131 30.131 ------

- share capital share share capital share Adjustments to 41.741.516 41.741.516 41.741.516 41.741.516 Adjustments to ------

- capital capital Paid in share Paid in share 135.084.442 135.084.442 135.084.442 135.084.442 Paid in share Paid in share

The accompanying policies and explanatory notes on pages 7 through 67 form an integral part of the consolidated financial statements. The accompanying policies and explanatory notes on pages 7 through

(Convenience translation of financial statements and footnotes origina lly issued in Turkish) Subsidiaries its and Şirketi Anonim Ticaret ve Sanayi Çimento Çimsa 2010 December 31 ended year the for equity in changes of statement Consolidated Lira (TL), unless otherwise indicated) - Turkish (Currency Dividends paid Balances as of 1 January 2010 Transfers of the associate (Note 12, 19) Spin-off Acquisition of a subsidiary for the year Net profit income Other comprehensive income / loss comprehensive Total Balances as of 31 December 2010 Balances as of 1 January 2010 Transfers Dividends paid for the year Net profit income Other comprehensive income comprehensive Total Balances as of 31 December 2010

Çimsa Çimento Sanayi ve Ticaret A.Ş. 2010 Annual Report 90 (Convenience translation of financial statements and footnotes originally issued in Turkish) Çimsa Çimento Sanayi ve Ticaret Anonim Şirketi and its Subsidiaries Consolidated statement of cash flow for the year ended 31 December 2010

(Currency - Turkish Lira (TL), unless otherwise indicated)

Current period Prior period Audited Audited 31 December 31 December Notes 2010 2009

Cash flows from operating activities

Profit before tax from continuing operations 130.478.323 133.235.677 Reconciliation between net profit and cash generated from operating activities Depreciation and amortization 22 35.304.861 30.693.350 (Gain) / loss on sale of property, plant and equipment 23 (37.362) 66.329 Negative goodwill 5 (816.792) - Provision for employee termination benefits 17 2.379.133 1.897.977 Seniority incentive premium, net 17 95.586 180.302 Vacation pay liability 16 179.637 266.590 Interest expense from borrowings 24 10.973.260 9.984.579 Interest income 24 (3.014.419) (1.583.455) Profit/loss from investments accounted under equity method 12 4.410.311 (4.222.209) Provision for litigations 16 2.198.811 1.222.867 Recultivation provision 16 205.440 361.210 Bonus provisions 16 1.390.181 - Other provisions 116.363 (123.312) Inventory impairment provision 11 - 1.111.219 Fixed asset impairment provision 13 - 668.029 Unrealized foreign exchange loss 192.335 476.186 Fair value decrease of derivative financial instruments 28 805.928 -

Operating profit before changes in working capital 184.861.596 174.235.339

Changes in net working capital Trade receivables and other receivables (16.409.054) 13.577.763 Inventories (27.847.064) 41.217.607 Other assets and other liabilities (11.325.471) 13.799.581 Trade payables and payables to related parties 19.497.980 4.529.303 Employee termination benefits paid 17 (874.717) (894.731) Income taxes paid (27.232.203) (15.982.370) Litigation, vacation and termination benefits paid 16 (906.480) (1.088.246)

Net cash provided by operating activities 119.764.587 229.394.246

Cash flows from investing activities: Purchase of property, plant and equipment 13 (46.195.261) (24.198.408) Purchase of intangible assets 14 (1.034.023) (645.222) Proceeds from sales of tangible assets 1.225.127 1.049.471 Net cash paid for the acquisition of a subsidiary 5 (7.363.117) - Interest received 3.014.419 1.526.556

Net cash used in investing activities (50.352.855) (22.267.603)

Cash flows from financing activities Dividend payments (81.861.172) (58.005.260) Proceeds from borrowings 156.638.175 105.018.160 Repayment of borrowings (177.301.023) (211.972.286) Interest paid (8.304.329) (8.074.791) Net cash provided by dividend income - 7.692.750

Net cash used in financing activities (110.828.439) (165.341.427)

Translation differences on cash and cash equivalents 1.008.901 (296.226)

Net increase/(decrease) in cash and cash equivalents (40.407.716) 41.488.990

Cash and cash equivalents at the beginning of the period 6 51.088.881 9.599.891

Cash and cash equivalents at the end of the period 6 10.681.165 51.088.881

The accompanying policies and explanatory notes on pages 7 through 67 form an integral part of the consolidated financial statements.

91 Çimsa Çimento Sanayi ve Ticaret A.Ş. 2010 Annual Report (Convenience translation of financial statements and footnotes originally issued in Turkish) Çimsa Çimento Sanayi ve Ticaret Anonim Şirketi and its Subsidiaries Notes to the consolidated financial statements for the year ended 31 December 2010

(Currency - Turkish Lira (TL), unless otherwise indicated)

1. Corporate information

General

Çimsa Çimento Sanayi ve Ticaret A.Ş. (“Çimsa” or the “Company”) was founded with registration date of 16 December 1972 and announced at Turkish Trade Registry Gazette numbered 4729 and dated 21 December 1972. Operations of the Group consist of production and sales of cement, clinker and ready mix concrete. The ultimate shareholder of the Group is Hacı Ömer Sabancı Holding A.Ş. (“Sabancı Holding”).

The registered office address of the Group is Kısıklı Cad. No:4 Sarkuysan-Ak İş Merkezi S Blok Kat:2 Altunizade, Üsküdar / İstanbul.

A certain amount of the shares of the Company is traded on Istanbul Stock Exchange.

Subsidiaries and jointly controlled entities

As of 31 December 2010 and 31 December 2009, information related to the Company’s consolidated subsidiaries and jointly controlled entities are as follows:

Effective shareholding of the Company Operating and Date of establishment Şirket establishment locations Principal activities 31 December 2010 31 December 2009

Çimsa Cement Free-Zone Limited (Çimsa Cement) (*) 12 October 2005 TRNC Cement packaging, sales and 99,99% 99,99% marketing CIMSAROM Marketing Distributie S.R.L. (Çimsarom) (*) 8 February 2006 Romania Cement packaging, sales and 99,99% 99,99% marketing Çimsa Cementos Espana, S.A.U. (Cementos Espana, 7 July 2006 Spain Sales of bulk and bagged cement 99,99% 99,99% S.A.U.) (*) to white cement market Cement Sales North Gmbh (CSN) (**) 27 June 2006 Germany Marketing of white cement 50% 50% Çimsa Mersin Serbest Bölge Şubesi (*) 12 December 2007 Mersin Export of cement 99.99% 99.99% Regent Place Limited (Regent) (*) 21 May 2008 British Virgin Financial investment and holding 99.99% 99.99% Islands group OOO Çimsa Rus CTK (OOO Russia) (*) 16 July 2008 Russia White cement packaging, sales 99.99% 99.99% and marketing Cimsa Adriatico Srl (*) 9 February 2010 Italy Cement sales and marketing 60% -

(*) Full consolidation method has been applied. (**) Proportional consolidation method has been applied.

Çimsa Çimento Sanayi ve Ticaret A.Ş. 2010 Annual Report 92 (Convenience translation of financial statements and footnotes originally issued in Turkish) Çimsa Çimento Sanayi ve Ticaret Anonim Şirketi and its Subsidiaries Notes to the consolidated financial statements for the year ended 31 December 2010

(Currency - Turkish Lira (TL), unless otherwise indicated)

1. Corporate information (Continued)

The Company acquired 60% of MED.CON Srl’s capital (60% of shares), owner of a cement terminal at Trieste Port, founded in accordance with the Italian regulations with a capital of EUR 4.054.545, registered in the Trieste Port with number of 00119610327 and is headquartered in Trieste, Riva Alvise Cadamosta 8, Italy; for EUR 3.550.714 on 9 February 2010. The above mentioned company’s title is converted to Cimsa Adriatico Srl on 26 April 2010. Cimsa Adriatico Srl’s financial statements are consolidated using full consolidation method as of 31 December 2010 (Note 5).

Furthermore, Exsa Export Sanayi Mamülleri Satış ve Araştırma A.Ş. (Exsa) are consolidated using equity method accounting.

For the purpose of presentation of the consolidated financial statements, Çimsa, its subsidiaries and its jointly controlled entity will be together referred as “the Group”.

Nature of activities

The Group is engaged in production and sales of cement, clinker and ready mix concrete.

The consolidated financial statements were authorized for issue by the Board of Directors of Çimsa on 17 March 2011. The General Assembly and certain regulatory bodies have the power to amend the statutory financial statements after issuance.

The Group has an average of 563 blue collar employees as of 31 December 2010 (31 December 2009 - 545) and on average 424 white collar employees (31 December 2008 – 438).

2. Basis of preparation of financial statements

2.1 Basis of preparation

The Company and its Turkish subsidiaries maintain their books of account and prepare their statutory financial statements in accordance with accounting principles in the Turkish Commercial Code (“TCC”) and tax legislation. Subsidiaries that are registered in foreign countries maintain their books of account and prepare their statutory statements in accordance with the prevailing accounting principles in their registered countries. The Group maintain its consolidated financial statements in accordance with the accounting and reporting principles (CMB Accounting Standards) published by Capital Markets Board (CMB).

In accordance with the CMB’s “Communiqué on Financial Reporting in Capital Market” Serial XI, No:29, published in the Official Gazette dated 9 April 2008, effective from 1 January 2008, listed companies are required to prepare their financial statements in conformity with International Accounting/Financial Reporting Standards (IAS / IFRS) adopted by European Union (thereafter referred as CMB Communiqué). Çimsa maintains its books of accounts and prepares its statutory financial statements in Turkish Lira (TL) in accordance with the regulations on accounting and reporting framework and accounting standards promulgated by the CMB, (for publicly traded companies) and Turkish Commercial Code and Tax Legislation and the Uniform Chart of Accounts issued by the Ministry of Finance. The foreign subsidiaries maintain their books of accounts in accordance with the laws and regulations in force in the countries where they are registered. The consolidated financial statements have been prepared from statutory financial statements of the Group and presented in TL with adjustments and reclassifications for the purpose of fair presentation in accordance with the CMB Accounting Standards. Main adjustments are related with the consolidation, accounting for goodwill, deferred taxes, discounting of receivables and payables, employee termination benefits and provisions.

93 Çimsa Çimento Sanayi ve Ticaret A.Ş. 2010 Annual Report (Convenience translation of financial statements and footnotes originally issued in Turkish) Çimsa Çimento Sanayi ve Ticaret Anonim Şirketi and its Subsidiaries Notes to the consolidated financial statements for the year ended 31 December 2010

(Currency - Turkish Lira (TL), unless otherwise indicated)

2. Basis of preparation of financial statements (Continued)

2.1 Basis of preparation (Continued)

Until the differences of the IAS/IFRS adopted by the European Union from those issued by the International Accounting Standards Board (“IASB”) are announced by the Turkish Accounting Standards Board (“TASB”), financial statements are prepared in accordance with IAS/IFRS based on the CMB Communiqué No: XI-29. The financial statements and explanatory notes are presented using the compulsory standard formats as published by the Communiqué Serial XI, No: 29 declared by the CMB on 17 April 2008 and 9 January 2009 including the compulsory disclosures.

Functional and presentation currency

As of 31 December 2010, the functional and presentation currency of the Company is TL.

With the decision taken on 17 March 2005, the CMB has announced that, effective from 1 January 2005, for companies operating in Turkey and preparing their financial statements in accordance with CMB Financial Reporting Standards, the application of inflation accounting is no longer required. Accordingly, non-monetary assets and liabilities and components of shareholders’ equity including share capital reported in the balance sheets as of 31 December 2010 and 31 December 2009 are derived by indexing the additions occurred until 31 December 2004 to 31 December 2004 and carrying the additions after this date with their nominal amounts.

Functional currency of Çimsa Cement Free Zone Limited is United States Dollar (USD), functional currency of Cement Sales North Gmbh, Çimsa Cementos Espana S.A.U., Regent Place Ltd. and Çimsa Adriatico SRL is Euro, the functional currency of Çimsarom Marketing Sı Distribute Srl is New Romanian Lei and functional currency of OOO Çimsa – Rus Ctk is Ruble. Based on International Accounting Standard IAS 21, for subsidiaries operating in countries without high inflation rates, the exchange rate used for translating the balance sheet items is the exchange rate at the balance sheet date; for income statement balances, the average exchange rate of the related period and the consolidated financial statements are presented in TL. The resulting foreign currency gain/loss is recorded under the ‘Currency Translation Differences’ account in equity.

Restatement on financial statements of previous year

The seniority incentive premium amounting TL 315.273 which has been presented under the long-term provisions in the consolidated balance sheet as of 31 December 2009 is reclassified to provision for employee benefits.

2.2. New Standards and Interpretations

The following new and revised Standards and Interpretations have been adopted in the current period and have affected the amounts reported and disclosures in these financial statements. Details of other standards and interpretations adopted in these financial statements but that have had no material impact on the financial statements are set out in the related paragraphs.

Çimsa Çimento Sanayi ve Ticaret A.Ş. 2010 Annual Report 94 (Convenience translation of financial statements and footnotes originally issued in Turkish) Çimsa Çimento Sanayi ve Ticaret Anonim Şirketi and its Subsidiaries Notes to the consolidated financial statements for the year ended 31 December 2010

(Currency - Turkish Lira (TL), unless otherwise indicated)

2. Basis of preparation of financial statements (Continued)

2.2. New Standards and Interpretations (Continued)

(a) New and Revised IFRSs affecting presentation and disclosure only

Amendments to IAS 7 Statement of Cash Flows (as part The amendments to IAS 7 specify that only expenditures that result in a of Improvements to IFRSs issued in 2009) recognised asset in the statement of financial position can be classified as investing activities in the statement of cash flows.

Amendments to IAS 1 Presentation of Financial Statements The amendments to IAS 1 clarify that an entity may choose to present (as part of Improvements to IFRSs issued in 2010) the required analysis of items of other comprehensive income either in the statement of changes in equity or in the notes to the financial statements.

(b) New and Revised IFRSs affecting the reported financial performance and / or balance sheet

IFRS 3 (revised in 2008) Business Combinations

IFRS 3 (revised), “Business Combinations” and consequential amendments to IAS 27, “Consolidated and separate financial statements”, IAS 28, “Investments in associates”, and IAS 31, “Interests in joint ventures”, are effective prospectively to business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after 1 July 2009. The main impact of the adoption is as follows:

a) to allow a choice on a transaction-by-transaction basis for the measurement of non-controlling interests (previously referred to as ‘minority’ interests) either at fair value or at the non-controlling interests’ share of the fair value of the identifiable net assets of the acquire. b) to change the recognition and subsequent accounting requirements for contingent consideration. c) to require that acquisition-related costs be accounted for separately from the business combination, generally leading to those costs being recognized as an expense in profit or loss as incurred. d) in step acquisitions, previously held interests are to be remeasured to fair value at the date of the subsequent acquisition with the value included in goodwill calculation. Gain or loss arising from the re-measurement shall be recognized as part of profit or loss. e) IFRS 3 (2008) requires the recognition of a settlement gain or loss when the business combination in effect settles a pre-existing relationship between the Group and the acquiree.

Since the Group applied IFRS 3 (revised) standard, the Group should also apply IAS 27 (revised) “Consolidated and Separate Financial Statements”. In accordance with IAS 27 (revised), the effects of all the transactions with the non-controlling interests, in case there is no change in control, should be accounted for under equity without affecting goodwill and other comprehensive income. The standard also clarifies the accounting transactions in case the control is lost. The share left at the entity is remeasured according to the fair value and the gain or loss is accounted for in the statement of income. Since the equity of the non-controlling interests is not a negative balance, IAS 27 (revised) had no effect in the current period. There is no transaction where the non-controlling interests are lost and any shares are left at the entity.

As explained in detail in Note 5, the Group acquired a subsidiary in the current period. The fair value determination of the acquired company’s net assets is performed by Çelen Kurumsal Gayrimenkul Değerleme ve Danışmanlık A.Ş. on 28 February 2011.

95 Çimsa Çimento Sanayi ve Ticaret A.Ş. 2010 Annual Report (Convenience translation of financial statements and footnotes originally issued in Turkish) Çimsa Çimento Sanayi ve Ticaret Anonim Şirketi and its Subsidiaries Notes to the consolidated financial statements for the year ended 31 December 2010

(Currency - Turkish Lira (TL), unless otherwise indicated)

2. Basis of preparation of financial statements (Continued)

2.2. New Standards and Interpretations (Continued)

(c) Standards, amendments and interpretations effective in 2010, but not relevant to the Group

IAS 27 (revised in 2008) Consolidated and Separate Financial Statements

The application of IAS 27(2008) has resulted in changes in the Group’s accounting policies for changes in ownership interests in subsidiaries.

Specifically, the revised Standard has affected the Group’s accounting policies regarding changes in ownership interests in its subsidiaries that do not result in loss of control. In prior years, in the absence of specific requirements in IFRSs, increases in interests in existing subsidiaries were treated in the same manner as the acquisition of subsidiaries, with goodwill or a bargain purchase gain being recognized, when appropriate; for decreases in interests in existing subsidiaries that did not involve a loss of control, the difference between the consideration received and the adjustment to the non-controlling interests was recognized in profit or loss. Under IAS 27(2008), all such increases or decreases are dealt with in equity, with no impact on goodwill or profit or loss.

When control of a subsidiary is lost as a result of a transaction, event or other circumstance, the revised Standard requires the Group to derecognize all assets, liabilities and non-controlling interests at their carrying amount and to recognize the fair value of the consideration received. Any retained interest in the former subsidiary is recognized at its fair value at the date control is lost. The resulting difference is recognized as a gain or loss in profit or loss.

These changes in accounting policies have been applied prospectively from 1 January 2010 in accordance with the relevant transitional provisions.

Since there is no change in the ownership interest of the Group’s subsidiary, this interpretation is not applied.

IAS 28 (revised in 2008) Investments in Associates

As per the revisions to IAS 28, when significant influence over an associate is lost, the Group measures any investment retained in the former associate at fair value, with any consequential gain or loss recognized in profit or loss.

As part of Improvements to IFRSs issued in 2010, IAS 28(2008) has been amended to clarify that the amendments to IAS 28 regarding transactions where the investor loses significant influence over an associate should be applied prospectively.

Since the Group has no associates, this interpretation is not applied.

Amendments to IFRS 5 Non-current Assets Held for Sale and Discontinued Operations (as part of Improvements to IFRSs issued in 2009) , effective for annual periods beginning on or after 1 July 2009. Since the Group has no non-current assets held for sale and discontinued operations, this interpretation is not applicable.

IFRIC 17, “Distributions of non-cash assets to owners”, effective for annual periods beginning on or after 1 July 2009. This is not currently applicable to the Group, as it has not made any non-cash distributions.

IFRIC 18, “Transfers of assets from customers”, effective for transfer of assets received on or after 1 July 2009. This is not relevant to the Group, as it has not transferred any assets from customers.

Çimsa Çimento Sanayi ve Ticaret A.Ş. 2010 Annual Report 96 (Convenience translation of financial statements and footnotes originally issued in Turkish) Çimsa Çimento Sanayi ve Ticaret Anonim Şirketi and its Subsidiaries Notes to the consolidated financial statements for the year ended 31 December 2010

(Currency - Turkish Lira (TL), unless otherwise indicated)

2. Basis of preparation of financial statements (Continued)

2.2. New Standards and Interpretations (Continued)

(c) Standards, amendments and interpretations effective in 2010, but not relevant to the Group, (Continued)

“Additional exemptions for first-time adopters” (Amendment to IFRS 1) was issued in July 2009. The amendments are required to be applied for annual periods beginning on or after 1 January 2010. This is not relevant to the Group, as it is an existing IFRS preparer.

IFRS 2, “Share-based Payments – Group Cash-settled Share Payment Arrangements” is effective for annual periods beginning on or after 1 January 2010. This is not currently applicable to the Group, as the Group does not have share-based payment plans.

Amendments to IFRS 5 Non-current Assets Held for Sale and Discontinued Operations (as part of Improvements to IFRSs issued in 2008) clarify that all the assets and liabilities of a subsidiary should be classified as held for sale when the Group is committed to a sale plan involving loss of control of that subsidiary, regardless of whether the Group will retain a non- controlling interest in the subsidiary after the sale.

Improvements to International Financial Reporting Standards 2009 were issued in April 2009. The improvements cover the standards/intepretations described below: IFRS 2 Share-based Payments, IFRS 5 Non-current Assets Held for Sale and Discontinued Operations, IFRS 8 Operating Segments, IAS 1 Presentation of Financial Statements, IAS 7 Statement of Cash Flows, IAS 17 Leases, IAS 18 Revenue, IAS 36 Impairment of Assets, IAS 38 Intangible Assets, IAS 39 Financial Instruments: Recognition and Measurement, IFRIC 9 Reassessment of Embedded Derivatives, IFRIC 16 Hedges of Net Investment in a Foreign Operation. The effective dates of these improvements vary for each standard but most are effective from 1 January 2010.

(d) New and Revised IFRSs in issue but not yet effective and are expected to be preadopted by the Group

IFRS 1 (amendments) First-time Adoption of IFRS – Additional Exemptions

Amendments to IFRS 1 which are effective for annual periods on or after 1 July 2010 provide limited exemption for first time adopters to present comparative IFRS 7 fair value disclosures.

On 20 December, IFRS 1 is amended to provide relief for first-time adopters of IFRSs from having to reconstruct transactions that occurred before their date of transition to IFRSs and provide guidance for entities emerging from severe hyperinflation either to resume presenting IFRS financial statements or to present IFRS financial statements for the first time. The amendment above will be effective for annual periods beginning on or after 1 July 2011.

These amendments are not relevant to the Group, as it is an existing IFRS preparer.

IFRS 7 Financial Instruments: Disclosures

In October 2010, IFRS 7 Financial Instruments: Disclosures is amended by IASB as part of its comprehensive review of off balance sheet activities. The amendments will allow users of financial statements to improve their understanding of transfer transactions of financial assets (for example, securitizations), including understanding the possible effects of any risks that may remain with the entity that transferred the assets. The amendments also require additional disclosures if a disproportionate amount of transfer transactions are undertaken around the end of a reporting period. The amendment will be effective for annual periods beginning on or after 1 July 2011. The Group has not yet had an opportunity to consider the potential impact of the adoption of this revised standard.

97 Çimsa Çimento Sanayi ve Ticaret A.Ş. 2010 Annual Report (Convenience translation of financial statements and footnotes originally issued in Turkish) Çimsa Çimento Sanayi ve Ticaret Anonim Şirketi and its Subsidiaries Notes to the consolidated financial statements for the year ended 31 December 2010

(Currency - Turkish Lira (TL), unless otherwise indicated)

2. Basis of preparation of financial statements (Continued)

2.2. New Standards and Interpretations (Continued)

(d) New and Revised IFRSs in issue but not yet effective and are expected to be preadopted by the Group (Continued)

IFRS 9 Financial Instruments: Classification and Measurement

In November 2009, the first part of IFRS 9 relating to the classification and measurement of financial assets was issued. IFRS 9 will ultimately replace IAS 39 Financial Instruments: Recognition and Measurement. The standard requires an entity to classify its financial assets on the basis of the entity’s business model for managing the financial assets and the contractual cash flow characteristics of the financial asset, and subsequently measure the financial assets as either at amortized cost or at fair value. The new standard is mandatory for annual periods beginning on or after 1 January 2013. The Group has not yet had an opportunity to consider the potential impact of the adoption of this standard.

IAS 12 Income Taxes

In December 2010, IAS 12 is amended. IAS 12 requires an entity to measure the deferred tax relating to an asset depending on whether the entity expects to recover the carrying amount of the asset through use or sale. It can be difficult and subjective to assess whether recovery will be through use or through sale when the asset is measured using the fair value model in IAS 40 Investment Property. The amendment provides a practical solution to the problem by introducing a presumption that recovery of the carrying amount will, normally be , be through sale. The amendment will be effective for annual periods beginning on or after 1 January 2012. The Group has not yet had an opportunity to consider the potential impact of the adoption of this revised standard.

IAS 24 (Revised 2009) Related Party Disclosures

In November 2009, IAS 24 Related Party Disclosures was revised. The revision to the standard provides government-related entities with a partial exemption from the disclosure requirements of IAS 24. The revised standard is mandatory for annual periods beginning on or after 1 January 2011. The Group has not yet had an opportunity to consider the potential impact of the adoption of this revised standard.

IAS 32 (Amendments) Financial Instruments: Presentation and IAS 1 Presentation of Financial Statements

The amendments to IAS 32 and IAS 1 are effective for annual periods beginning on or after 1 February 2010. The amendments address the accounting for rights issues (rights, options or warrants) that are denominated in a currency other than the functional currency of the issuer. Previously, such rights issues were accounted for as derivative liabilities. However, the amendment requires that, provided certain conditions are met, such rights issues are classified as equity regardless of the currency in which the exercise price is denominated. The Group has not yet had an opportunity to consider the potential impact of the adoption of this amendment to the standard.

IFRIC 14 (Amendments) Pre-payment of a Minimum Funding Requirement

Amendments to IFRIC 14 are effective for annual periods beginning on or after 1 January 2011. The amendments affect entities that are required to make minimum funding contributions to a defined benefit pension plan and choose to pre-pay those contributions. The amendment requires an asset to be recognized for any surplus arising from voluntary pre-payments made. The Group does not expect any impact of the adoption of this amendment on the financial statements.

Çimsa Çimento Sanayi ve Ticaret A.Ş. 2010 Annual Report 98 (Convenience translation of financial statements and footnotes originally issued in Turkish) Çimsa Çimento Sanayi ve Ticaret Anonim Şirketi and its Subsidiaries Notes to the consolidated financial statements for the year ended 31 December 2010

(Currency - Turkish Lira (TL), unless otherwise indicated)

2. Basis of preparation of financial statements (Continued)

2.2. New Standards and Interpretations (Continued)

(d) New and Revised IFRSs in issue but not yet effective and are expected to be preadopted by the Group (Continued)

IFRIC 19 Extinguishing Financial Liabilities with Equity Instruments

IFRIC 19 is effective for annual periods beginning on or after 1 July 2010. IFRIC 19 addresses only the accounting by the entity that issues equity instruments in order to settle, in full or part, a financial liability. The Group has not yet had an opportunity to consider the potential impact of the adoption of this amendment to the standard.

Annual Improvements May 2010

Further to the above amendments and revised standards, the IASB has issued Annual Improvements to IFRSs in May 2010 that cover 7 main standards/intepretations as follow: IFRS 1 First-time Adoption of International Financial Reporting Standards; IFRS 3 Business Combinations; IFRS 7 Financial Instruments: Disclosures; IAS 27 Consolidated and Separate Financial Statements; IAS 34 Interim Financial Reporting and IFRIC 13 Customer Loyalty Programmes. With the exception of amendments to IFRS 3 and IAS 27 which are effective on or after 1 July 2010, all other amendments are effective on or after 1 January 2011. Early adoption of these amendments are allowed. The Group has not yet had an opportunity to consider the potential impact of the adoption of these amendments to the standards.

2.3 Critical accounting judgments and key sources of estimation uncertainty

The preparation of the financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of balance sheet date. Actual results may vary from the current estimates. These estimates are reviewed periodically, and, as adjustments become necessary, they are reported in earnings in the periods in which they become known.

Significant judgments which may affect the amounts reflected to the financial statements and significant estimates and judgments made considering the key sources which exist as of the balance sheet date or may exist in the future are as follows: a) Provision for retirement pay is determined by using actuarial assumptions such as discount rates, future salary increase and employees’ turnover rates. The estimations include significant uncertainties due to their long term nature. The details about reserve for employee benefits are provided in Note 17. b) Provision for doubtful receivables is an estimated amount that management believes to reflect possible future losses on existing receivables that have collection risk due to current economic conditions. During the impairment test for the receivables, the debtors, other than the key accounts and related parties, are assessed with their prior year performances, their credit risk in the current market, their performance after the balance sheet date up to the issuing date of the financial statements; and also the renegotiation conditions with these debtors are considered. The provision for doubtful receivables is mentioned in the Note 9. c) In determining of provision for litigations, the Group considers the probability of legal cases to be resulted against the Group and in case it is resulted against the Group considers its consequences based on the assessments of legal advisor. The Group management makes its best estimates using the available data are provided in Note 16.

99 Çimsa Çimento Sanayi ve Ticaret A.Ş. 2010 Annual Report (Convenience translation of financial statements and footnotes originally issued in Turkish) Çimsa Çimento Sanayi ve Ticaret Anonim Şirketi and its Subsidiaries Notes to the consolidated financial statements for the year ended 31 December 2010

(Currency - Turkish Lira (TL), unless otherwise indicated)

2. Basis of preparation of financial statements (Continued)

2.3 Significant accounting judgments and estimates (Continued) d) The Group makes its impairment analysis on goodwill by using discounted cash flows. In these analyses, there are certain assumptions about discount rates used and the Group’s future operations (Note 15). e) The Group makes assumptions based on views of the technical personnel in the calculation of provision for recultivation of exploitation lands. f) During the assessment of the reserve for obsolete inventories, inventories are physically and historically analyzed, usefulness of the inventories are determined based on the view of the technical personnel and if it is necessary, allowance is booked. Sales prices listed, average discount rates given for sale and expected cost incurred to sell are used to determine the net realizable value of the inventories. As a result of this, the inventories with the net realizable values below the costs are written down as disclosed in the Note 11.

2.4 Summary of Significant accounting policies

Basis of consolidation

Subsidiaries

Subsidiary is consolidated from the date on which control is transferred to the Company until the date on which the control is transferred out of the Company.

This control is normally evidenced when Çimsa owns, either directly or indirectly, more than 50% of the voting rights of a group’s share capital and is able to govern the financial and operating policies of an enterprise so as to benefit from its activities. Accordingly, the financial statements of Çimsa Cement, Cementos Espana, Çimsarom, Regent, OOO Russia and Çimsa Adriatico Srl are fully consolidated in accordance with IAS 27 “Consolidated and Separate Financial Statements”.

Non-controlling interests in the net assets of the consolidated subsidiaries are separately presented within the Group’s equity as non-controlling interests. Non-controlling interests are composed of the sum of those emerged at the initial business combination and non-controlling interests in the changes in equities occurred in the aftermath of the business combination.

Jointly controlled entities

CSN is jointly controlled by Çimsa and other shareholders, with a participation ratio of 50%.

Balance sheet and income statement items of this company have been added to the balance sheet and income statement items of Çimsa by considering the shareholding percentage of Çimsa in the joint venture. Receivables and payable balances of Çimsa from/to this companies and income statement items have been eliminated based on the shareholding interest.

Consolidated financial statements include the financial statements of Çimsa and its subsidiaries and jointly controlled entity. Financial statements of the subsidiaries and jointly controlled entities are prepared using uniform accounting policies for like transactions and other events in similar circumstances for the same reporting year.

Çimsa Çimento Sanayi ve Ticaret A.Ş. 2010 Annual Report 100 (Convenience translation of financial statements and footnotes originally issued in Turkish) Çimsa Çimento Sanayi ve Ticaret Anonim Şirketi and its Subsidiaries Notes to the consolidated financial statements for the year ended 31 December 2010

(Currency - Turkish Lira (TL), unless otherwise indicated)

2. Basis of preparation of financial statements (Continued)

2.4 Summary of Significant accounting policies (Continued)

Investments accounted under the equity method

The associate of the Group, Exsa, is accounted under the equity method, which is classified under the Group’s financial assets. The investment in an associate is carried on the balance sheet at cost plus post-acquisition changes in the Group’s share of net assets of the associates. Consolidated income statement reflects the share of the Group on the results of operations of the associate.

Changes in equity of associate that have not yet been reflected in the profit or loss of the associate may require necessary adjustments in the associate’s book value by considering the shareholding percentage of the Group in associate. The share of the Group of such adjustment is accounted directly in the Group’s own equity.

Exsa Export Sanayi Mamülleri Satış ve Araştırma A.Ş.’s financia statements are prepared for the same period and with respect to the same accounting policies.

The Group considers at each balance sheet date whether there is impairment on the investments accounted under the equity method.

Offsetting

Financial assets and liabilities are offset and the net amount is reported in the balance sheet when there is a legally enforceable right to set off the recognized amounts and there is an intention to settle on a net basis or realize the asset and settle the liabilities simultaneously.

Cash and cash equivalents

For the purposes of the presentation of consolidated cash flow statement, cash and cash equivalents comprise cash on hand, cash in banks, checks readily convertible to known amounts of cash and short-term deposits with an original maturity of three months or less.

Inventories

Inventories are valued at the lower of cost or net realizable value. Costs incurred in bringing each product to its present location and conditions are accounted for as follows:

Raw materials - purchase cost on a monthly average basis

Finished goods and work-in-process - cost includes direct material and labor cost, the applicable allocation of fixed and variable overhead costs (considering normal operating capacity) on the basis of monthly average basis.

Net realizable value is the estimated selling price in the ordinary course of business, less estimated costs of completion and estimated costs necessary to make the sale.

101 Çimsa Çimento Sanayi ve Ticaret A.Ş. 2010 Annual Report (Convenience translation of financial statements and footnotes originally issued in Turkish) Çimsa Çimento Sanayi ve Ticaret Anonim Şirketi and its Subsidiaries Notes to the consolidated financial statements for the year ended 31 December 2010

(Currency - Turkish Lira (TL), unless otherwise indicated)

2. Basis of preparation of financial statements (Continued)

2.4 Summary of Significant accounting policies (Continued)

Property, plant and equipment

Property, plant and equipment are stated at cost less accumulated depreciation and any impairment in value. The initial cost of property, plant and equipment comprises its purchase price and non-refundable purchase taxes and any directly attributable costs of bringing the asset to its working condition and location for its intended use. Expenses for the repair of property, plant and equipment are normally charged against income. They are, however, capitalized in exceptional cases if they result in an enlargement or substantial improvement of the respective assets. Gains or losses on disposals of property, plant and equipment are determined by comparing proceeds with their carrying amounts and are included in the related income and expense accounts, as appropriate.

Land is not subject to depreciation. Depreciation is calculated on all property, plant and equipment on a straight-line basis over the estimated useful life of the asset as below. The economic useful lives of property, plant and equipments are as follows:

Useful lives

Land and land improvements 8-50 years Buildings 10-50 yeas Machinery and equipment 3-25 years Furniture and fixtures 3-50 years Motor vehicles 5-14 years Other 5-10 years Leasehold Improvements Lease period

Intangible assets

Intangible assets which mainly comprise of software and mining rights are measured at cost. Intangible assets may be capitalized in case when they generate economical benefit and costs can ne measured accurately. Subsequent to initial recognition, internally-generated intangible assets are reported at cost less accumulated amortization and accumulated impairment losses. Where no internally-generated intangible asset can be recognized, development expenditure is charged to profit or loss in the period in which it is incurred. The estimated useful lives of the intangible assets are determined as either a specific time or perpetual. Amortization is calculated using the straight-line method over the estimated useful life. The estimated useful life and amortization method are reviewed at the end of each annual reporting period, with the effect of any changes in estimate being accounted for on a prospective basis.

The amortization expenses of the intangible assets with certain estimated useful lives are reflected into the income statement in accordance with the function of the intangible asset. Intangible assets which mainly comprise of software and mining rights are capitalized at cost. Except for mining rights, intangible assets are amortized with respect to straight-line method over the estimated useful life (5 years) of the related intangible asset. Mining rights are amortized based on the ratio of depletion of mining reserves to total reserves. The remaining amortization period depends on the depletion rate of the reserves.

The Group does not have any intangible asset with indefinite useful life.

The carrying values of intangible assets are reviewed for impairment when there is any event or changes in circumstances indicate that the carrying value may not be recoverable.

Çimsa Çimento Sanayi ve Ticaret A.Ş. 2010 Annual Report 102 (Convenience translation of financial statements and footnotes originally issued in Turkish) Çimsa Çimento Sanayi ve Ticaret Anonim Şirketi and its Subsidiaries Notes to the consolidated financial statements for the year ended 31 December 2010

(Currency - Turkish Lira (TL), unless otherwise indicated)

2. Basis of preparation of financial statements (Continued)

2.4 Summary of Significant accounting policies (Continued)

Impairment on assets

At each balance sheet date, the Company assesses whether there is any indication that book value of tangible and intangible assets, calculated by acquisition cost less accumulative amortization, is impaired. When an indication of impairment exists, the Company estimates the recoverable amount of such assets. When individual recoverable value of assets cannot be measured, recoverable value of cash generating unit of that asset is measured.

Recoverable amount is the higher of value in use or fair value less costs to sell. Value in use is the present value of the future cash flows expected to be derived from an asset or cash-generating unit by using discount rates before taxes that reflects risks related with that asset. The main estimates that are used during these analyses comprise expected inflation rates, expected increase in sales and cost of sales, expected changes in export-domestic market composition and expected growth rate of the country.

If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognized immediately in the consolidated statement of income.

Where an impairment loss subsequently reverses, the carrying amount of the asset (cash-generating unit) is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognized for the asset (cash-generating unit) in prior years. Impairment loss on goodwill cannot be reversed in the consolidated statement of income in future periods.

Goodwill

Goodwill arising on an acquisition of a business is carried at cost as established at the date of acquisition of the business less accumulated impairment losses, if any.

For the purposes of impairment testing, goodwill is allocated to each of the Group’s cash-generating units (or groups of cash-generating units) that is expected to benefit from the synergies of the combination.

A cash-generating unit to which goodwill has been allocated is tested for impairment annually, or more frequently when there is indication that the unit may be impaired.

If the recoverable amount of the cash-generating unit is less than its carrying amount, the impairment loss is allocated first to reduce the carrying amount of any goodwill allocated to the unit and then to the other assets of the unit pro rata based on the carrying amount of each asset in the unit. Any impairment loss for goodwill is recognised directly in profit or loss in the consolidated income statement. An impairment loss recognised for goodwill is not reversed in subsequent periods.

On disposal of the relevant cash-generating unit, the attributable amount of goodwill is included in the determination of the profit or loss on disposal.

103 Çimsa Çimento Sanayi ve Ticaret A.Ş. 2010 Annual Report (Convenience translation of financial statements and footnotes originally issued in Turkish) Çimsa Çimento Sanayi ve Ticaret Anonim Şirketi and its Subsidiaries Notes to the consolidated financial statements for the year ended 31 December 2010

(Currency - Turkish Lira (TL), unless otherwise indicated)

2. Basis of preparation of financial statements (Continued)

2.4 Summary of Significant accounting policies (Continued)

Business combinations

The acquisition of subsidiaries and businesses are accounted for using the acquisition method. The consideration transferred in a business combination is measured at fair value, which is calculated as the sum of the acquisition-date fair values of the assets transferred by the Group, liabilities incurred by the Group to the former owners of the acquiree and the equity interests issued by the Group in exchange for control of the acquiree. Acquisition-related costs are generally recognised in profit or loss as incurred.

At the acquisition date, the identifiable assets acquired and the liabilities assumed are recognized at their fair value at the acquisition date, except that:

· Deferred tax assets or liabilities and liabilities or assets related to employee benefit arrangements are recognised and measured in accordance with IAS 12 Income Taxes and IAS 19 Employee Benefits respectively; · Liabilities or equity instruments related to share-based payment arrangements of the acquiree or share-based payment arrangements of the Group entered into to replace share-based payment arrangements of the acquiree are measured in accordance with IFRS 2 Share-based Payment at the acquisition date; and · Assets (or disposal groups) that are classified as held for sale in accordance with IFRS 5 Non-current Assets Held for Sale and Discontinued Operations are measured in accordance with that Standard.

Goodwill is measured as the excess of the sum of the consideration transferred, the amount of any non-controlling interests in the acquiree, and the fair value of the acquirer’s previously held equity interest in the acquiree (if any) over the net of the acquisition-date amounts of the identifiable assets acquired and the liabilities assumed. If, after reassessment, the net of the acquisition-date amounts of the identifiable assets acquired and liabilities assumed exceeds the sum of the consideration transferred, the amount of any non-controlling interests in the acquiree and the fair value of the acquirer’s previously held interest in the acquiree (if any), the excess is recognised immediately in profit or loss as a bargain purchase gain.

Non-controlling interests that are present ownership interests and entitle their holders to a proportionate share of the entity’s net assets in the event of liquidation may be initially measured either at fair value or at the non-controlling interests’ proportionate share of the recognized amounts of the acquiree’s identifiable net assets. The choice of measurement basis is made on a transaction-by-transaction basis. Other types of non-controlling interests are measured at fair value or, when applicable, on the basis specified in another IFRS.

When the consideration transferred by the Group in a business combination includes assets or liabilities resulting from a contingent consideration arrangement, the contingent consideration is measured at its acquisition-date fair value and cluded as part of the consideration transferred in a business combination. Changes in the fair value of the contingent consideration that qualify as measurement period adjustments are adjusted retrospectively, with corresponding adjustments against goodwill. Measurement period adjustments are adjustments that arise from additional information obtained during the ‘measurement period’ (which cannot exceed one year from the acquisition date) about facts and circumstances that existed at the acquisition date.

The subsequent accounting for changes in the fair value of the contingent consideration that do not qualify as measurement period adjustments depends on how the contingent consideration is classified. Contingent consideration that is classified as equity is not remeasured at subsequent reporting dates and its subsequent settlement is accounted for within equity. Contingent consideration that is classified as an asset or a liability is remeasured at subsequent reporting dates in accordance with IAS 39 Financial Instruments: Recognition and Measurement, or IAS 37 Provisions, Contingent Liabilities and Contingent Assets, as appropriate, with the corresponding gain or loss being recognised in profit or loss.

Çimsa Çimento Sanayi ve Ticaret A.Ş. 2010 Annual Report 104 (Convenience translation of financial statements and footnotes originally issued in Turkish) Çimsa Çimento Sanayi ve Ticaret Anonim Şirketi and its Subsidiaries Notes to the consolidated financial statements for the year ended 31 December 2010

(Currency - Turkish Lira (TL), unless otherwise indicated)

2. Basis of preparation of financial statements (Continued)

2.4 Summary of Significant accounting policies (Continued)

When a business combination is achieved in stages, the Group’s previously held equity interest in the acquiree is remeasured to fair value at the acquisition date (i.e. the date when the Group obtains control) and the resulting gain or loss, if any, is recognised in profit or loss. Amounts arising from interests in the acquiree prior to the acquisition date that have previously been recognised in other comprehensive income are reclassified to profit or loss where such treatment would be appropriate if that interest were disposed of.

If the initial accounting for a business combination is incomplete by the end of the reporting period in which the combination occurs, the Group reports provisional amounts for the items for which the accounting is incomplete. Those provisional amounts are adjusted during the measurement period (see above), or additional assets or liabilities are recognised, to reflect new information obtained about facts and circumstances that existed at the acquisition date that, if known, would have affected the amounts recognised at that date.

Business combinations that took place prior to 1 January 2010 were accounted for in accordance with the previous version of IFRS 3.

Foreign currency transactions

The Company and its subsidiaries translate the transactions in foreign currencies during the period at the exchange rates prevailing at the dates of the transactions. Monetary assets and liabilities denominated in foreign currencies have been translated at the exchange rates prevailing at period-end. Exchange gains or losses arising on the settlement and translation of foreign currency items have been included in the statement of income. Non-monetary items carried at fair value that are denominated in foreign currencies are retranslated at the rates on the initial transaction date. Non-monetary items carried at fair value that are denominated in foreign currencies are retranslated at the rates prevailing on the date when the fair value was determined.

Foreign currency translation rates used as of respective year-ends are as follows:

Date TL/USD TL/EUR

31 December 2010 1,5460 2,0491 31 December 2009 1,5057 2,1603

Borrowing costs

Borrwing costs in 2008 and before are expensed in the period they occurred. Since 1 January 2009, borrowing costs directly attributable to the acquisition, construction or production of an asset that necessarily takes a substantial period of time to get ready for its intended use or sale are capitalized as part of the cost of the respective assets. All other borrowing costs are expensed in the period in which they occur. Borrowing costs include interests and other costs related to the borrowing activity.

105 Çimsa Çimento Sanayi ve Ticaret A.Ş. 2010 Annual Report (Convenience translation of financial statements and footnotes originally issued in Turkish) Çimsa Çimento Sanayi ve Ticaret Anonim Şirketi and its Subsidiaries Notes to the consolidated financial statements for the year ended 31 December 2010

(Currency - Turkish Lira (TL), unless otherwise indicated)

2. Basis of preparation of financial statements (Continued)

2.4 Summary of Significant accounting policies (Continued)

Provisions, contingent assets and liabilities

Provisions

Provisions are recognized when the Group has a present legal constructive obligation as a result of past events, it is probable that an outflow of resources will be required to settle the obligation, and a reliable estimate of the amount can be made. If the effect of the time value of money is material, provisions are determined by discounting the expected future cash flows at the balance sheet date. Where discounting is used, the increase in the provision due to the passage of time is recognized as an interest expense.

Contingent assets and liabilities

Contingent liabilities are not recognized in the financial statements, but are disclosed. Contingent assets are not recognized in the financial statements, but disclosed when an inflow of economic benefits is probable.

Income tax

Tax expense (income) is the aggregate amount included in the determination of net profit or loss for the period in respect of current and deferred tax.

Deferred income tax is provided, using the liability method, on all temporary differences at the balance sheet date between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes. Deferred income tax liabilities are recognized for all taxable temporary differences.

Deferred tax assets are recognized for all deductible temporary differences and unused tax losses, to the extent that it is probable that taxable profit will be available against which the deductible temporary differences and unused tax losses can be utilized. The carrying amount of deferred income tax assets is reviewed at each balance sheet date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred income tax asset to be utilized.

Deferred income tax assets and liabilities are measured at the tax rates that are expected to apply to the period when the asset is realized or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted at the balance sheet date.

Deferred tax can be directly related to equity accounts if it’s related to the transactions in connection with share capital in the same or different period.

Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax liabilities and when they relate to income taxes levied by the same taxation authority and the Group intends to settle its current tax assets and liabilities on a net basis. a) Defined benefit plan:

In accordance with existing social legislation in Turkey, the Group is required to make lump-sum termination indemnities to each employee who has completed over one year of service with the Group and whose employment is terminated due to retirement or for reasons other than resignation or misconduct.

Çimsa Çimento Sanayi ve Ticaret A.Ş. 2010 Annual Report 106 (Convenience translation of financial statements and footnotes originally issued in Turkish) Çimsa Çimento Sanayi ve Ticaret Anonim Şirketi and its Subsidiaries Notes to the consolidated financial statements for the year ended 31 December 2010

(Currency - Turkish Lira (TL), unless otherwise indicated)

2. Basis of preparation of financial statements (Continued)

2.4 Summary of Significant accounting policies (Continued)

As indicated in Note 17 in detail, in the accompanying financial statements, the Company has reflected a liability using the “Projected Unit Credit Method” based on the actuarial valuation performed by independent actuaries. The employee termination benefits are discounted to the present value of the estimated future cash outflows using the interest rate estimate of qualified actuaries.

All actuarial gain and loss is recognized in income statement at the amount that exceeds 10% of net present value of provision for employee termination benefits to be amortized in remaining years to average retirement of current employees by using corridor method in accordance with IAS 19. In the consolidated balance sheets, employee termination benefits are reflected under non-current liabilities as a separate line item. b) Defined contribution plans:

The Group pays contributions to the Social Security Institution of Turkey on a mandatory basis. The Group has no further payment obligations once the contributions have been paid. The contributions are recognized as employee benefit expense when they are due. c) Provision for seniority incentive premium

The Group has a liability to pay seniority incentive premium to the blue collar workers for five years period in accordance with the collective labor agreement. The Group discounts each first future payment and records the amounts to its consolidated income statement.

Leases

Leasing – as lessee

Financial leasing

Finance leases, which transfer to the Company substantially all the risks and benefits incidental to ownership of the leased item, are capitalized at the inception of the lease at the fair value of the leased property or, if lower, at the present value of the minimum lease payments. Lease payments are apportioned between the finance charges and reduction of the lease liability so as to achieve a constant rate of interest on the remaining balance of the liability. Finance charges are charged directly against income. Capitalized leased assets are depreciated over the estimated useful life of the asset.

Operating Lease

Leases of assets under which substantially all the risks and rewards of ownership are effectively retained by the lessor, are classified as operating leases. Lease payments under an operating lease are recognized as an expense on a straight-line basis over the lease term.

107 Çimsa Çimento Sanayi ve Ticaret A.Ş. 2010 Annual Report (Convenience translation of financial statements and footnotes originally issued in Turkish) Çimsa Çimento Sanayi ve Ticaret Anonim Şirketi and its Subsidiaries Notes to the consolidated financial statements for the year ended 31 December 2010

(Currency - Turkish Lira (TL), unless otherwise indicated)

2. Basis of preparation of financial statements (Continued)

2.4 Summary of Significant accounting policies (Continued)

Related parties

A party is related to the Company if:

(a) Directly, or indirectly through one or more intermediaries, the party: (i) controls, is controlled by, or is under common control with, the entity (this includes parents, subsidiaries and fellow subsidiaries; (ii) has an interest in the entity that gives it significant influence over the entity; or (ii) has joint control over the entity; (b) the party is an associate of the entity; (c) the party is a joint venture in which the entity is a venturer; (d) the party is a member of the key management personnel of the entity or its parent; (e) the party is a close member of the family of any individual referred to in (a) or (d); (f) the party is an entity that is controlled, jointly controlled or significantly influenced by or for which significant voting power in such entity resides with, directly or indirectly, any individual referred to in (d) or (e); or (g) the party is a post-employment benefit plan for the benefit of employees of the entity, or of any entity that is a related party of the entity.

A related party transaction is a transfer of resources, services, or obligations between related parties, regardless of whether a price is charged.

Revenue recognition

Revenue is recognized to the extent that it is probable that the economic benefits will flow to the Group and the revenue can be reliably measured. Revenues are stated net of discounts, value added and sales taxes. The following specific recognition criteria must also be met before revenue is recognized:

Sales of goods

Revenue is recognized when the significant risks and rewards of ownership of the goods have passed to the buyer at the invoiced values and the amount of revenue can be measured reliably. Net sales represent the invoiced value of goods shipped net of sales discounts commission and value added tax.

Rendering of services

Waste disposal and ash volatile revenue from rendering services is recognized by reference to the stage of completion when it can be measured reliably. Where the contract outcome cannot be measured reliably, revenue is recognized only to the extent of the expenses recognized that are recoverable.

Interest

Revenue is recognized as the interest accrues unless collectability is in doubt. Interest income for financial asset that carried at amortized cost and that includes interest is reflected to income statement by using the effective interest rate method.

Dividends

Revenue is recognized when the shareholders’ have the right to receive the payment.

Çimsa Çimento Sanayi ve Ticaret A.Ş. 2010 Annual Report 108 (Convenience translation of financial statements and footnotes originally issued in Turkish) Çimsa Çimento Sanayi ve Ticaret Anonim Şirketi and its Subsidiaries Notes to the consolidated financial statements for the year ended 31 December 2010

(Currency - Turkish Lira (TL), unless otherwise indicated)

2. Basis of preparation of financial statements (Continued)

2.4 Summary of Significant accounting policies (Continued)

Earnings per share

Basic earnings per share are calculated by dividing the net profit for the period by the weighted average number of ordinary shares outstanding during the period.

In Turkey, companies can increase their share capital by making distribution of free shares to existing shareholders from various internal resources. For the purpose of the earnings per share calculation such share issues are regarded as issued stock. Accordingly, the weighted average number of shares used in earnings per share calculation is derived by giving retroactive effect to the issue of such shares.

Subsequent events

Post period-end events that provide additional information about the Group’s position at the balance sheet date are reflected in the financial statements. Post-period-end events that are not adjusting events are disclosed in the notes when material.

Trade and settlement date accounting

All purchases and sales of financial assets are recognized on the trade date, in other words, the date the Group commits to purchase the asset. Regular way purchases or sales are purchases or sales of financial assets that require delivery of assets within the time frame generally established by regulation or convention in the market place.

Financial instruments

A financial instrument is any contract that gives rise to both a financial asset of one enterprise and a financial liability or equity instrument of another enterprise.

A financial asset is any asset that is: • cash, • a contractual right to receive cash or another financial asset from another enterprise, • a contractual right to exchange financial instruments from another enterprise under conditions that are potentially favorable, or, • an equity instrument of another enterprise.

A financial liability that is a contractual obligation: • to deliver cash or another financial asset to another enterprise, or • to exchange financial instruments with another enterprise under conditions that are potentially unfavorable.

When a financial asset or financial liability is recognized initially, it is measured at its cost, which is the fair value of the consideration given (in the case of an asset) or received (in case of a liability) for it. Transaction costs are included (deducted for financial liabilities) in the initial measurement of all financial assets and liabilities.

109 Çimsa Çimento Sanayi ve Ticaret A.Ş. 2010 Annual Report (Convenience translation of financial statements and footnotes originally issued in Turkish) Çimsa Çimento Sanayi ve Ticaret Anonim Şirketi and its Subsidiaries Notes to the consolidated financial statements for the year ended 31 December 2010

(Currency - Turkish Lira (TL), unless otherwise indicated)

2. Basis of preparation of financial statements (Continued)

2.4 Summary of Significant accounting policies (Continued)

Fair value of financial instruments

The fair value is the amount for which a financial instrument could be exchanged in a current transaction between ceiling parties, other than in a faced sale or liquidation, and this best evidenced by a quoted market price, if one exist.

The methods and assumptions in fair value estimation of the financial instruments of the Group is explained in Note 29.

Financial assets

Loans and receivables

Loans and receivables which are with fixed or determinable payments that are not quoted in an active market are classified to this category. Such financial assets are carried at amortized cost using the effective interest rate method less any impairment.

Trade receivables are recognized and carried at original invoice amount less an allowance for any uncollectible amounts using the effective interest rate method.

Notes and post-dated checks which are classified within trade receivables are measured at discounted cost using the effective interest rate method.

Available for sale investments

All investments are initially recognized at cost, being the fair value of the consideration given, and including acquisition charges associated with the investment.

After initial recognition, investments which are classified as available-for-sale are measured at fair value. Gains or losses on available-for-sale investments are recognized as a separate component of equity until the investment is sold, collected or otherwise disposed of, or until the investment is determined to be impaired, at which time the cumulative gain or loss previously reported in equity is included in income.

For investments that are actively traded on the organizational structures, fair value is determined by reference to market prices at the close of business on the balance sheet date. Investments which are not actively traded on the organizational structures are stated at cost less any impairment in value.

Çimsa Çimento Sanayi ve Ticaret A.Ş. 2010 Annual Report 110 (Convenience translation of financial statements and footnotes originally issued in Turkish) Çimsa Çimento Sanayi ve Ticaret Anonim Şirketi and its Subsidiaries Notes to the consolidated financial statements for the year ended 31 December 2010

(Currency - Turkish Lira (TL), unless otherwise indicated)

2. Basis of preparation of financial statements (Continued)

2.4 Summary of Significant accounting policies (Continued)

Impairment on financial assets

Financial assets are assessed at each balance sheet date whether there is any objective evidence that a financial asset or a group of financial assets is impaired. A financial asset or a group of financial assets is deemed to be impaired if, and only if, there is objective evidence of impairment as a result of one or more events that had occurred after the initial recognition of the asset and that loss event has an impact on the estimated future cash flows of the financial asset or the group of financial assets that can be reliably estimated.

For loans and receivables impairment loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows calculated using effective interest rate. The Group follows its receivables separately. The Group also includes a financial asset to the financial assets with the same risk properties and assesses for impairment as a whole in case there is not a specific and separate event determined that causes impairment. Except for trade receivables, which is reduced through the use of an allowance account, impairment on all other financial assets are directly written off in the related account. In case trade receivables cannot be collected, the related amount is written off from allowance account. The change in allowance account is accounted in the income statement.

The allowance for doubtful receivables is established through a provision charged to expenses. Provision is made when there is objective evidence that the Group will not be able to collect the debts.

The allowance is an estimated amount that management believes to be adequate to absorb possible future losses on existing receivables that may become uncollectible due to current economic conditions and inherent risks in the receivables. Bad debts are written off when identified.

When the fair value of an available-for-sale financial asset that carried at its fair value is below its cost value of the financial asset due to the fluctuations in the market, the Group assesses the impairment by considering if the fair value decline is material, permanent and not recoverable in the long-term. In accordance with the Group’s accounting estimations and policies, in order to assess the fair value decline in the available-for-sale financial asset to be permanent and not recoverable in the long-term, at least one year should pass from the date that the fair value is below its cost of the financial asset. In case there is any impairment, such impairment is transferred from equity to statement of income.

Financial liabilities

Financial liabilities are recognized initially at fair value and at directly attributable transaction costs and after initial recognition; financial liabilities are subsequently measured at amortized cost by using the effective interest rate method.

Effective interest rate method is the amortized cost method and allocation of the related interest expenses to the related periods. Effective interest rate is the rate reducing the future expected cash payments to present value of the financial liability within an expected life of the asset or in a shorter period.

111 Çimsa Çimento Sanayi ve Ticaret A.Ş. 2010 Annual Report (Convenience translation of financial statements and footnotes originally issued in Turkish) Çimsa Çimento Sanayi ve Ticaret Anonim Şirketi and its Subsidiaries Notes to the consolidated financial statements for the year ended 31 December 2010

(Currency - Turkish Lira (TL), unless otherwise indicated)

2. Basis of preparation of financial statements (Continued)

2.4 Summary of Significant accounting policies (Continued)

Bank borrowings

All borrowings are initially recognized at cost, being the fair value of the consideration received net of issue costs associated with the borrowing.

After initial recognition, borrowings are subsequently measured at amortized cost using the effective interest rate method. Amortized cost is calculated by taking into account any issue costs, and any discount or premium on settlement.

Gains and losses are recognized in net profit or loss when the liabilities are derecognized, as well as through the amortization process.

Trade payables

Trade and other payables are carried at amortized cost which is the fair value of the consideration to be paid in the future for goods and services received, whether or not billed to the Group.

Recognition and derecognition of financial instruments

The Group recognizes a financial asset or financial liability in its balance sheet when it becomes a party to the contractual provisions of the instrument. The Group derecognizes a financial asset or a portion of financial asset when and only when it loses control of the contractual rights that comprise the financial asset or a portion of financial asset and when risk and benefit related to property. The Group derecognizes a financial liability when a liability is extinguished that is when the obligation specified in the contract is discharged, cancelled and expires.

Çimsa Çimento Sanayi ve Ticaret A.Ş. 2010 Annual Report 112 (Convenience translation of financial statements and footnotes originally issued in Turkish) Çimsa Çimento Sanayi ve Ticaret Anonim Şirketi and its Subsidiaries Notes to the consolidated financial statements for the year ended 31 December 2010

(Currency - Turkish Lira (TL), unless otherwise indicated)

3. Segment reporting

Since major portion of foreign sales of the Group is made on a one-off basis to different locations, the distribution of sales to specific locations are not consistent between years. Therefore, details of revenues are disclosed as foreign and domestic sales in Note 20.

The Group manages and organizes its operations depending on the content of provided services and goods. The Group prepares its segment reporting in accordance with IFRS 8. Transfer prices between segments are prepared on the same basis with third parties. As of 31 December 2010 and 31 December 2009, the information about the Group’s segments consists of revenues and profits obtained from cement (including clinker and agrega) and ready mix concrete.

1 January – 31 December 2010 Ready mix Cement concrete Undistributed Elimination Total

Net sales 589.281.469 206.141.756 - (86.943.210) 708.480.015 Cost of sales (-) (399.390.119) (207.449.403) - 86.943.210 (519.896.312)

Gross profit 189.891.350 (1.307.647) - - 188.583.703

Operating expense (-) (35.159.868) (251.354) (7.607.034) - (43.018.256) Other operating income / expense (-), net (2.831.777) (1.534.386) - - (4.366.163)

Operating profit 151.899.705 (3.093.387) (7.607.034) - 141.199.284

Profit/loss from investments accounted under equity method - - (4.410.311) - (4.410.311) Financial income / expense (-), net - - (6.310.650) - (6.310.650)

Net income before taxes from continuing operations 151.899.705 (3.093.387) (18.327.995) - 130.478.323

Tax expense for continuing operations, net - - (27.228.520) - (27.228.520)

Tax expense for the year (-) - - (27.913.316) - (27.913.316) Deferred tax income / (expense) - - 684.796 - 684.796

Net profit from continuing operations 151.899.705 (3.093.387) (45.556.515) - 103.249.803

31 December 2010 Ready mix Cement concrete Undistributed Elimination Total

Assets and liabilities

Segment assets 776.265.888 108.079.525 - - 884.345.413 Available for sale financial assets 149.521.837 149.521.837 Investments accounted under equity method - - 93.783.092 - 93.783.092 Undistributed assets - - 6.186.458 - 6.186.458

Total assets 774.246.697 102.553.771 322.940.919 - 1.133.836.800

Segment liabilities 166.318.461 87.710.992 - - 254.029.453 Undistributed liabilities - - 879.807.347 - 879.807.347

Total liabilities 166.318.461 87.710.992 879.807.347 - 1.133.836.800

113 Çimsa Çimento Sanayi ve Ticaret A.Ş. 2010 Annual Report (Convenience translation of financial statements and footnotes originally issued in Turkish) Çimsa Çimento Sanayi ve Ticaret Anonim Şirketi and its Subsidiaries Notes to the consolidated financial statements for the year ended 31 December 2010

(Currency - Turkish Lira (TL), unless otherwise indicated)

3. Segment reporting (Continued)

1 January – 31 December 2010

Ready mix Other segment information Cement concrete Undistributed Elimination Total

Capital expenditures (expenses) Tangible fixed assets 41.064.481 5.130.780 - - 46.195.261 Intangible fixed assets 1.034.023 - - - 1.034.023

Total capital expenditures 42.098.504 5.130.780 - - 47.229.284

Depreciation expenses (27.519.610) (6.119.255) - - (33.638.865) Amortization expenses (1.522.081) (143.913) - - (1.665.994)

1 January – 31 December 2009 Ready mix Cement concrete Undistributed Elimination Total

Net sales 518.135.141 162.957.144 - (66.167.454) 614.924.831 Cost of sales (-) (340.080.391) (159.812.111) - 66.167.454 (433.725.048)

Gross profit 178.054.750 3.145.033 - - 181.199.783

Operating expense (-) (28.884.862) (1.088.221) (5.820.137) - (35.793.220) Other operating income / expense (-), net (5.654.807) (650.694) - - (6.305.501)

Operating profit 143.515.081 1.406.118 (5.820.137) - 139.101.062

Profit/loss from investments accounted under equity method - - 4.222.209 - 4.222.209 Financial income / expense (-), net - - (10.087.594) - (10.087.594)

Net income before taxes from continuing operations 143.515.081 1.406.118 (11.685.522) - 133.235.677

Tax expense for continuing operations, net - - (25.102.900) - (25.102.900)

Tax expense for the year - - (20.802.579) - (20.802.579) Deferred tax income/(expense) - - (4.300.321) - (4.300.321)

Net profit from continuing operations 143.515.081 1.406.118 (36.788.422) - 108.132.777

31 December 2009 Ready mix Cement concrete Undistributed Elimination Total

Assets and liabilities

Segment assets 774.246.697 102.553.771 - - 876.800.468 Available for sale financial assets - - 73.736 - 73.736 Investments accounted under equity method 320.148.664 320.074.928 Undistributed assets - - 2.792.255 - 2.792.255

Total assets 774.246.697 102.553.771 322.940.919 - 1.199.741.387

Segment liabilities 189.899.710 77.740.909 - - 267.640.619 Undistributed liabilities - - 932.100.768 - 932.100.768

Total liabilities 189.899.710 77.740.909 932.100.768 - 1.199.741.387

Çimsa Çimento Sanayi ve Ticaret A.Ş. 2010 Annual Report 114 (Convenience translation of financial statements and footnotes originally issued in Turkish) Çimsa Çimento Sanayi ve Ticaret Anonim Şirketi and its Subsidiaries Notes to the consolidated financial statements for the year ended 31 December 2010

(Currency - Turkish Lira (TL), unless otherwise indicated)

3. Segment reporting (Continued)

1 January – 31 December 2009

Ready mix Other segment information Cement concrete Undistributed Elimination Total

Capital expenditures (expenses) Tangible fixed assets 21.415.163 9.405.483 - - 30.820.646 Intangible fixed assets 645.222 - - - 645.222

Total capital expenditures 22.060.385 9.405.483 - - 31.465.868

Depreciation expenses (23.226.835) (6.221.760) - - (29.448.595) Amortization expenses (1.244.676) (80) - - (1.244.756)

The Group does not have any particular customer which comprises 10% or more of the total sales.

4. Joint ventures

Current assets, non-current assets, short-term liabilities, revenues and expenses of CSN, which is consolidated by proportional consolidation method, are as follows (the amounts are multiplied by the shareholding rate of 50%):

31 December 2010 31 December 2009

Current assets 992.626 1.873.526 Non-current assets 112.070 97.073 Short-term liabilities 703.582 1.544.060

Revenues 6.901.024 7.452.196 Expenses (6.862.505) (7.303.062)

5. Business combinations

The determination of the fair value of the assets Med. Con SRL (title changed to Cimsa Adriatico Srl on 26 April 2010), which has been acquired by the Group on 9 February 2010 and accounted for on a provisional basis according to IFRS 3 “Business Combinations”, is performed by Çelen Kurumsal Gayrimenkul Değerleme ve Danışmanlık A.Ş. on 28 February 2011. The negative goodwill of TL 816.792 resulting from the fair value determination is accounted for under other income in the Group’s consolidated statement of income.

Current assets 7.413.675 Non-current assets 34.506098 Short-term liabilities 13.135.741 Long-term liabilities 15.150.850

Net assets 13.633.182 60% of net assets 8.179.909 Acquisition cost 7.363.117 Negative goodwill (*) (816.792)

(*) A translation difference of (TL 9.688) emerged while the Group accounted for the goodwill amount on 31 December 2010, of the entity which was accounted for on the date of acquisition.

115 Çimsa Çimento Sanayi ve Ticaret A.Ş. 2010 Annual Report (Convenience translation of financial statements and footnotes originally issued in Turkish) Çimsa Çimento Sanayi ve Ticaret Anonim Şirketi and its Subsidiaries Notes to the consolidated financial statements for the year ended 31 December 2010

(Currency - Turkish Lira (TL), unless otherwise indicated)

5. Business combinations (Continued)

Cimsa Adriatico Srl (Med.Con SRL)’s revenue and net loss for the period between the acquisition date and the balance sheet date, included in the attached financial statements, are TL 17.883.582 and TL 1.188.155, respectively.

If Cimsa Adriatico Srl (Med.Con SRL) is assumed to be acquired on 1 January 2010, it would increase the Group’s revenue by TL 2.161.663 TL and decrease the profit for the period by TL 198.678.

6. Cash and cash equivalents

31 December 2010 31 December 2009

Cash 9.190 - Bank deposits 9.696.085 50.391.956 Checks in collection with maturities before year end 975.890 696.925

Total 10.681.165 51.088.881

Depending on the immediate cash requirements of the Group, the due dates of time deposits is 1 day. (31 December 2009 – 29-35 days). Interest rates fluctuate between 2% - 5% (31 December 2009 – 9,60%-10,60%).

The Group does not have restricted deposits as of 31 December 2010 and 31 December 2009.

7. Available for sale financial investments

31 December 2010 31 December 2009

Percentage of Percentage of Şirket ownership (%) Amount ownership (%) Amount Hacı Ömer Sabancı Holding A.Ş. (*) 1,0553 149.448.101 - - Mesbaş Mersin Serbest Böl. İşl. A.Ş (Mesbaş) 0,41 52.712 0,41 52.712 Batı Akdeniz Liman İşl. A.Ş. (Batı Akdeniz) 8,32 9.258 8,32 9.258 Anfaş Antalya Fuar. A.Ş. (Anfaş) 0,02 4.266 0,02 4.266 Temsa Araştırma, Geliştirme ve Teknoloji A.Ş. - 7.500 - 7.500 149.521.837 73.736

(*) The shares of Akbank within the portfolio of Exsa which is accounted for under equity method are transferred to Sabancı Holding as real capital via spin-off process in January 2010. Among the increased capital of Sabancı Holding with nominal value of TL 140.403.931, TL 57.102.763 is distributed to the shareholders of Exsa other than Sabancı Holding, so that TL 1 nominal value of Exsa share corresponds to 0,55985982 shares of Sabancı Holding with TL 1 nominal value. Out of the increased capital, free shares with a nominal value of TL 21.534.308 are given to the Company on 18 January 2010. Following this share acquisition, the Company’s share in Hacı Ömer Sabancı Holding A.Ş. increased to 1,0554%.

Except for the shares of Hacı Ömer Sabancı Holding A.Ş. (“Sabancı Holding”); since the shares in available-for-sale financial assets are composed of shares of unlisted entities and their fair values can not be measured reliably, these assets (adjusted for inflation until the end of 2004) are stated at cost less provision for diminution in value, if any.

Hacı Ömer Sabancı Holding A.Ş.’s shares are valued according to the quoted market price. The value of Hacı Ömer Sabancı Holding A.Ş.’s shares according to the quoted market price is TL 149.448.101.

Çimsa Çimento Sanayi ve Ticaret A.Ş. 2010 Annual Report 116 (Convenience translation of financial statements and footnotes originally issued in Turkish) Çimsa Çimento Sanayi ve Ticaret Anonim Şirketi and its Subsidiaries Notes to the consolidated financial statements for the year ended 31 December 2010

(Currency - Turkish Lira (TL), unless otherwise indicated)

8. Financial liabilities (net)

Short-term financial liabilities

31 December 2010 Balance Maturity Balance Currency Original TL

Unsecured loans TL(**) 63.365.114 2 January - 25 May 2011 63.365.112 Euro(***) 255.274 25 May 2011 523.083 Current portion of long-term loans TL(**) 14.294.745 10 January - 23 December 2011 14.294.745

Secured loans Euro(****) 1.615.739 31 March 2011 3.310.811

USD 204.474 31 January 2011 316.117 Current portion of long-term loans USD (*) 480.714 17 March - 17 December 2011 743.184 Current portion of long-term loans Euro (**) 1.061.276 1 January - 1 July 2011 2.174.661 Current portion of long-term loans Euro (**) 345.306 10 April - 10 October 2011 707.567

Leasing Current portion of long term-leasing Euro 997.111 20 January - 20 December 2011 2.043.181

87.478.461

31 December 2009 Balance Maturity Balance Currency Original TL

Unsecured loans TL (****) 642.874 642.874 TL (***) 48.434.927 24 May 2010 48.434.927 USD (**) 20.131.736 8 February - 5 April 2010 30.312.355 Euro (***) 1.261.829 25 May 2010 2.725.928 Current portion of long-term loans USD 14.102.207 22 December 2010 21.233.694

Secured loans

Current portion of long-term loans USD 536.521 31 December 2010 807.839

Leasing Current portion of long-term leasing Euro 1.033.130 20 December 2010 2.231.871

106.389.488

(*) Payment of the principal and interest will be made quarterly and semi-annually, respectively. (**) Payment of the principal and interest will be made semi-annually. (***) Payment of the principal and interest will be made annually. (****) Short-term loans to be repaid within one month.

117 Çimsa Çimento Sanayi ve Ticaret A.Ş. 2010 Annual Report (Convenience translation of financial statements and footnotes originally issued in Turkish) Çimsa Çimento Sanayi ve Ticaret Anonim Şirketi and its Subsidiaries Notes to the consolidated financial statements for the year ended 31 December 2010

(Currency - Turkish Lira (TL), unless otherwise indicated)

8. Financial liabilities (net) (Continued)

Long-term financial liabilities

31 December 2010 Balance Maturity Balance Currency Original TL

Unsecured loans TL(**) 18.294.745 18.294.745 4 January 2012 - 20 June 2012 Current portion of long-term loans TL(**) (14.294.745) (14.294.745) 10 January 2011 - 23 December 2011

Secured loans Euro (**) 1.725.274 10 April 2012 - 10 October 2015 3.535.260 Euro (**) 6.924.790 1 January 2012 - 1 July 2019 14.189.586 Euro (**) 2.250.000 16 September 2012 - 16 September 2017 4.610.475 USD (*) 1.682.500 17 March 2012 - 17 December 2014 2.601.145 Current portion of long-term loans USD (*) (480.714) (743.184) 17 March - 17 December 2011 Current portion of long-term loans Euro (**) (1.061.276) (2.174.661) 1 January 2011 - 1 July 2011 Current portion of long-term loans Euro (**) (345.306) (707.567) 10 April - 10 October 2011

Leasing

Long-term leasing Euro 1.776.590 20 January 2012 - 20 November 2012 3.640.411 Current portion of long-term leasing Euro (997.111) (2.043.181) 20 January - 20 December 2011

26.908.284

31 December 2009 Balance Maturity Balance Currency Original TL

Unsecured loans USD (**) 14.102.207 21.233.694 22 December 2010 Current portion of long-term loans USD (14.102.207) (21.233.694)

Secured loans USD (*) 2.276.851 31 December 2014 3.428.254 Current portion of long-term loans USD (*) (536.521) (807.839)

Leasing Euro 2.721.151 20 November 2012 5.878.503 Current portion of long-term leasing Euro (1.033.130) (2.231.871)

6.267.047

(*) Payment of the principal and interest will be made quarterly and semi-annually. (**) Payment of the principal and interest will be made semi-annually.

Çimsa Çimento Sanayi ve Ticaret A.Ş. 2010 Annual Report 118 (Convenience translation of financial statements and footnotes originally issued in Turkish) Çimsa Çimento Sanayi ve Ticaret Anonim Şirketi and its Subsidiaries Notes to the consolidated financial statements for the year ended 31 December 2010

(Currency - Turkish Lira (TL), unless otherwise indicated)

8. Financial liabilities (net) (Continued)

Repayment schedule of long-term borrowings is as follows:

31 December 2010 31 December 2009

Repayment within 1-2 years 7.355.312 724.565 Repayment within 2-3 years 3.339.360 724.565 Repayment within 3-4 years 3.320.646 1.171.285 Repayment within 4-5 years 2.933.086 - Repayment in 5 years and later 8.362.650 -

25.311.054 2.620.415

The weighted average effective interest rates for the Group’s TL, USD and Euro borrowings as of 31 December 2010 are 7,87% (31 December 2009: 12,8%), 6,37% (31 December 2009: 6,79%) and 2,23% (31 December 2009: 2,65%), respectively.

Financial leasing commitments

In 2009, the Group signed a leasing agreement related with the purchase of transmixers. Lease payments related to the financial lease agreement have commenced on 19 November 2009 and will be paid in monthly equal installments until 20 November 2012.

Repayment schedule of financial leasing commitments is as follows:

Financial leasing commitment 31 December 2010 31 December 2009

In 1 year 2.172.018 2.467.447 1-5 years 1.631.063 3.818.130

Total financial lease obligations 3.803.081 6.285.577

Interest (162.670) (407.074)

Net present value of total financial lease obligations 3.640.411 5.878.503

The weighted average effective interest rate for the Group’s liabilities resulting from leasing transactions is 6,63% (31 December 2009: 6,63%).

119 Çimsa Çimento Sanayi ve Ticaret A.Ş. 2010 Annual Report (Convenience translation of financial statements and footnotes originally issued in Turkish) Çimsa Çimento Sanayi ve Ticaret Anonim Şirketi and its Subsidiaries Notes to the consolidated financial statements for the year ended 31 December 2010

(Currency - Turkish Lira (TL), unless otherwise indicated)

9. Trade receivables and payables a. Short-term other trade receivables

31 December 2010 31 December 2009

Trade receivable, net 87.613.643 73.760.776 Notes receivable and post-dated checks 38.374.183 31.045.823 Less : Allowance for doubtful receivables (1.795.898) (1.668.784)

124.191.928 103.137.815

Trade receivables’ collection terms vary based on the type of the product and agreements made with customers and the average term is 65 days (31 December 2009 – 65 days). Average collection term of notes receivable and post-dated checks are 31 days (31 December 2009 – 30 days). Effective interest rates are 10,00% for TL, 0,28% for USD and 0,81% for EUR (2009 – TL: 7,69%, USD: 0,43%, EUR: 0,94%).

The movement of the provision for doubtful receivables for the years ended 31 December 2010 and 31 December 2009 is as follows:

31 December 2010 31 December 2009

1 January 1.668.784 1.553.280 Charge for the year 127.114 115.504

31 December 1.795.898 1.668.784

As of 31 December 2010 and 31 December 2009, the maturity analysis of the receivables past due but not impaired are as follows:

Past due but not impaired Neither past due nor Less than More than impaired one month 1-2 months 2-3 months 3 months Total

31 December 2010 111.986.037 9.263.805 704.726 362.103 1.875.257 124.191.928 31 December 2009 96.335.462 4.053.292 1.064.601 158.400 1.081.953 102.693.708

Çimsa Çimento Sanayi ve Ticaret A.Ş. 2010 Annual Report 120 (Convenience translation of financial statements and footnotes originally issued in Turkish) Çimsa Çimento Sanayi ve Ticaret Anonim Şirketi and its Subsidiaries Notes to the consolidated financial statements for the year ended 31 December 2010

(Currency - Turkish Lira (TL), unless otherwise indicated)

9. Trade receivables and payables (Continued) a) Short-term other trade receivables (Continued)

Letters of guarantee

As of 31 December 2010 and 31 December 2009, guarantees/mortgages received from suppliers and customers are as follows:

31 December 2010 31 December 2009 Currency Original TL Original TL Type amount equivalent amount Equivalent

Letters of guarantee received Euro 6.206.343 12.717.417 5.875.003 12.691.769 Letters of guarantee received USD 1.634.500 2.526.937 1.514.500 2.280.383 Letters of guarantee received TL 81.305.938 81.305.938 72.535.160 72.535.160 Mortgages received TL 36.475.154 36.475.154 42.790.025 42.790.025 Cheques and notes received TL 20.295.475 20.295.475 19.789.344 19.789.344 Cheques and notes received Euro 12.400 25.409 192.400 415.642 Cheques and notes received USD 52.300 80.856 55.424 83.452 Treasury bond received TL - - 520.910 520.910 Pledges TL 6.691.408 6.691.408 6.262.778 6.262.778

Total guarantees received 160.118.594 157.369.463 b) Short-term other trade payables

As of 31 December 2010 and 31 December 2009, Group‘s trade payables amount to TL 65.876.690 and TL 45.553.655, respectively. Average payment period of trade payable is 44 days (31 December 2009 - 40 days). Interest rates used when determining the amortized cost are 10% for TL, 0,28% for USD and 0,81% for Euro. (31 December 2009 – TL: 7,69%, USD: 0,43%, Euro: 0,94%).

121 Çimsa Çimento Sanayi ve Ticaret A.Ş. 2010 Annual Report (Convenience translation of financial statements and footnotes originally issued in Turkish) Çimsa Çimento Sanayi ve Ticaret Anonim Şirketi and its Subsidiaries Notes to the consolidated financial statements for the year ended 31 December 2010

(Currency - Turkish Lira (TL), unless otherwise indicated)

10. Other receivables and other payables a) Other short and long-term receivables

As of 31 December 2010 and 31 December 2009, Group’s short-term other receivables are TL 1.828.087 and TL 1.594.814, respectively. Among the short-term other receivables, the receivables from personnel as of 31 December 2010 and 31 December 2009 are TL 135.501 and TL 272.602, respectively.

As of 31 December 2010 and 31 December 2009, Group’s long-term other receivables are TL 1.057.500 and TL 768.485, respectively, and they mainly include deposits given to governmental institutions. b) Short-term other liabilities

31 December 2010 31 December 2009

Advances received from customers 2.278.661 1.275.039 Taxes and duties payable 1.695.514 2.036.941 Social security payables 1.299.811 1.006.616 Payables to shareholders (Note 27) 327.334 492.657 Payables to personnel 583.198 378.125 Other payables - 51.928

6.184.518 5.241.306

11. Inventories

31 December 2010 31 December 2009

Raw materials 58.898.225 40.405.363 Work-in-process 17.833.749 12.982.768 Finished goods 14.617.197 9.009.285 Goods in transit 2.586.455 2.107.650 Inventory impairment provision (1.111.219) (1.111.219)

92.824.407 63.393.847

Movement of inventory impairment provision

31 December 2010 31 December 2009

Opening balance (1.111.219) - Period charge - (1.111.219)

Closing balance (1.111.219) (1.111.219)

The portion amounting to TL 891.827 of the inventory impairment provision is due to the spare parts whose net realizable values are below their costs and the remaining portion of TL 219.392 is due to the spare parts of the revolving oven which is not usable.

Çimsa Çimento Sanayi ve Ticaret A.Ş. 2010 Annual Report 122 (Convenience translation of financial statements and footnotes originally issued in Turkish) Çimsa Çimento Sanayi ve Ticaret Anonim Şirketi and its Subsidiaries Notes to the consolidated financial statements for the year ended 31 December 2010

(Currency - Turkish Lira (TL), unless otherwise indicated)

12. Investments accounted under equity method

Associate 31 December 2010 31 December 2009 Effective Effective percentage of percentage of Entity Principal activities ownership (%) Book value ownership (%) Book value

Exsa Intermediary for import and export 32,875 93.783.092 32,875 320.074.928 93.783.092 320.074.928

The assets, liabilities and net profit calculated by using the effective percentage of ownership as of 31 December 2010 and 31 December 2009, of Exsa which is consolidated by equity method are as follows:

31 December 2010 31 December 2009 Assets 311.422.704 979.670.514 Liabilities (26.150.940) (6.058.566) Group’s share 93.783.092 320.074.928

Value increase/(decrease) differences, net (*) 18.638.287 202.627.310 Group’s share 6.127.338 66.613.728

31 December 2010 31 December 2009 Revenues 106.108.977 31.562.326 Expenses (119.524.373) (18.719.105) Net profit/(loss) (13.415.396) 12.843.221 Group’s share (4.410.311) 4.222.209

(*) Presented under other comprehensive income/expenses

As explained in Note 7, due to the spin-off process of Exsa, there has been a decline of TL 189.483.884 in the financial assets value increase/decrease fund in Exsa’s equities and the effect of this decline to the Group is TL 62.292.826. Besides this transaction, in the current period, there has been an increase of TL 5.494.861 in Exsa’s financial assets value increase/ decrease fund. The effect of this increase to the Group is TL 1.806.436.

As a result of Exsa spin-off process, besides the decrease in financial assets increase/decrease fund, the portion of the decrease in Exsa’s equity allocated to the Group is TL 48.889.232. Since the transaction is performed by entities under common control, with the decision of the parent entity, it’s accounted for in the retained earnings under equity without being accounted for in the comprehensive statement of income.

As a result of the tax investigation performed by the Ministry of Finance about the spin-off; related to Corporate Tax; TL 30.850.560,82 tax and 30.850.560,82 penalty, related to Prepaid Corporate Tax; TL 35.070.525,73 tax and TL 78.621.304,66 penalty, related to Income Withholding Tax; TL 41.214.817,93 tax and TL 61.822.226,9 penalty, related to unjust tax refund; TL 1.342.851,19 tax and TL 1.342.851,19 penalty, have been assessed. Exsa agreed with the Ministry of Finance on paying TL 21.000.000 TL including tax principals and overdue interests.

The above-mentioned amount is reflected into Exsa’s financial statements as of 31 December 2010 and the effect to the Group is a loss amounting TL 6.903.750.

123 Çimsa Çimento Sanayi ve Ticaret A.Ş. 2010 Annual Report - Total 126.564 (1.187.829) (2.956.462) 37.313.752 46.195.261 (33.638.865) 436.402.767 482.255.188 482.255.188 (778.550.279) 1.260.805.467 - - - - in (67.014) (570.436) progress 33.766.295 40.893.267 28.980.448 28.980.448 28.980.448 (45.041.664) Construction - - - - 475.045 (197.735) (374.103) 1.157.566 1.060.773 2.134.776 1.060.773 Leasehold (1.074.003) Improvements - (911) Other assets (60.463) 129.082 127.734 976.281 436.964 (640.626) (149.324) tangible 1.459.363 2.099.989 1.459.363 and fixture 11.924 (10.028) (23.640) 134.208 427.804 331.592 (657.640) Furniture 2.571.000 2.785.220 9.137.239 2.785.220 (6.352.019) - (1.364) (64.746) 233.942 698.661 Vehicles (100.417) (5.939.672) 27.478.496 22.304.900 93.939.577 22.304.900 (71.634.677) and (48.584) (228.595) 2.495.516 (1.831.162) Machinery 15.770.558 37.777.170 equipment (19.825.441) 212.567.700 246.677.162 838.207.936 246.677.162 (591.530.774) 21.825 (66.527) 420.402 (976.451) Buildings 2.921.809 (5.096.087) 15.429.722 (84.148.787) 108.225.456 120.880.149 205.028.936 120.880.149 - - - Land (5.675) 52.967 3.099.084 (1.596.598) 13.435.513 14.985.291 38.154.684 14.985.291 (23.169.393) improvements - - - - Land (2.203) 628.940 (194.102) 5.617.588 37.071.659 43.121.882 43.121.882 43.121.882 Property, plant and equipment assets (net) Property, 31 December 2009, net by business combinations Assets acquired (Note 5) translation difference Currency Additions Sales / disposals, net Transfers Impairment for the year charge Depreciation 31 December 2010, net 31 December 2010 Cost Accumulated depreciation Net book value (Currency - Turkish Lira (TL), unless otherwise indicated) - Turkish (Currency 13. plant and equipments for the year ended 31 December 2010: The table below summarizes the net movement of property, (Convenience translation of financial statements and footnotes origina lly issued in Turkish) Subsidiaries its and Şirketi Anonim Ticaret ve Sanayi Çimento Çimsa 2010 December 31 ended year the for statements financial consolidated the to Notes

Çimsa Çimento Sanayi ve Ticaret A.Ş. 2010 Annual Report 124 - Total 163.865 (668.029) (1.115.800) 30.820.646 (29.448.595) 436.402.767 436.402.767 436.650.680 (747.928.051) 1.184.330.818 - - - - in (29.396) progress 33.766.295 33.766.295 33.766.295 20.953.808 27.510.516 (14.668.633) Construction - - (2.243) 13.138 30.000 (376.689) 1.157.566 2.207.382 1.157.566 1.493.360 (1.049.816) Leasehold Improvements - - - (47) Other 76.313 assets (90.387) 129.082 846.515 129.082 143.203 (717.433) tangible - and 3.408 (5.751) fixture 123.119 265.549 (618.518) Furniture 2.571.000 8.871.559 2.571.000 2.803.193 (6.300.559) - 1.389 (48.194) Vehicles 2.163.556 7.835.290 (4.997.561) 27.478.496 93.497.710 27.478.496 22.524.016 (66.019.214) and 33.757 (668.029) (753.721) 7.222.292 1.086.484 Machinery equipment (17.164.183) 212.567.700 786.615.069 212.567.700 222.811.100 (574.047.369) - 460.590 153.573 (240.910) Buildings 4.336.726 (4.658.138) (78.197.020) 108.225.456 186.422.476 108.225.456 108.173.615 - Land 1.181 75.567 (64.981) 809.802 (1.543.119) 13.435.513 35.032.153 13.435.513 14.157.063 (21.596.640) Improvements ------Land 37.045 37.071.659 37.071.659 37.071.659 37.034.614 Property, plant and equipment assets (net) (Continued) Property, Net book value Accumulated depreciation Accumulated depreciation 31 December 2009 Cost 31 December 2009, net Depreciation charge for the year charge Depreciation Impairment Transfers Sales / disposals, net Additions Currency translation difference Currency 31 December 2008, net (Currency - Turkish Lira (TL), unless otherwise indicated) - Turkish (Currency 13. plant and equipments for the year ended 31 December 2009: The table below summarizes the net movement of property, as of 31December 2010 except for the tangible assets amounting TL 29.328.560 (31 December 2009 - 6.946.361). is no pledge or mortgage on assets of the Group There still in use is TL 496.238.539 (31 December 2009 - but are fully depreciated/amortized plant and equipment intangible assets which are As of 31 December 2010, total cost property, TL 497.431.207). obtained by financial leasing amount to TL 6.622.239 and 1.103.705, plant and equipment which are of property, As of 31 December 2010, total cost and accumulated depreciation (31 December 2009 - TL 6.622.239 and 157.672). respectively (Convenience translation of financial statements and footnotes origina lly issued in Turkish) Subsidiaries its and Şirketi Anonim Ticaret ve Sanayi Çimento Çimsa 2010 December 31 ended year the for statements financial consolidated the to Notes

125 Çimsa Çimento Sanayi ve Ticaret A.Ş. 2010 Annual Report (Convenience translation of financial statements and footnotes originally issued in Turkish) Çimsa Çimento Sanayi ve Ticaret Anonim Şirketi and its Subsidiaries Notes to the consolidated financial statements for the year ended 31 December 2010

(Currency - Turkish Lira (TL), unless otherwise indicated)

14. Intangible assets (net)

Other Mining intangible rights assets Total

31 December 2009, net 18.651.616 1.005 18.652.621 Amortization charge for the period (1.587.205) (78.789) (1.665.994) Cost of assets acquired by business combinations (Note 5) - 211.508 211.508 Accumulated amortization of assets acquired by business combinations (Note 5) - (93.264) (93.264) Translation difference - (1.902) (1.902) Additions 1.000.000 34.023 1.034.023 31 December 2010, net 18.064.411 72.581 18.136.992

31 December 2010 Cost 24.403.382 244.965 24.648.347 Accumulated amortization (6.338.971) (172.384) (6.511.355)

Net book value 18.064.411 72.581 18.136.992

Other Mining intangible rights assets Total

31 December 2008, net 19.250.228 1.927 19.252.155 Amortization charge for the period (1.243.834) (922) (1.244.756) Additions 645.222 - 645.222

31 December 2009, net 18.651.616 1.005 18.652.621

31 December 2009 Cost 23.404.112 33.185 23.437.297 Accumulated amortization (4.752.496) (32.180) (4.784.676)

Net book value 18.651.616 1.005 18.652.621

Mining rights are amortized in proportion to the reserves consumed in current year to total reserve amount. Remaining amortization time depends on the depletion time of the remaining reserves.

15. Goodwill

The goodwill amount presented in the Group’s financial statements as of 31 December 2010 is related to Eskişehir and Ankara Cement Factories (Standart Çimento) acquired in 2005, Çimsa Cement located in TRNC, and Bilecik Ready Mix Cement Facilities acquired in 2008.

As of 31 December 2010, the Group performed an impairment analysis on cash generating unit related with goodwill and as a result, did not detect any need for impairment allowance. The Group used the approved financial budgets covering the period until 2018 for the estimated discounted cash flows in TL with the principal assumptions of weighted average cost of capital of 13%, and increase in the sales prices and costs by 7%.

Çimsa Çimento Sanayi ve Ticaret A.Ş. 2010 Annual Report 126 (Convenience translation of financial statements and footnotes originally issued in Turkish) Çimsa Çimento Sanayi ve Ticaret Anonim Şirketi and its Subsidiaries Notes to the consolidated financial statements for the year ended 31 December 2010

(Currency - Turkish Lira (TL), unless otherwise indicated)

15. Goodwill (Continued)

31 December 2010 Opening Translation difference Total

Eskişehir and Ankara Factories 132.140.806 - 132.140.806 Ready Mix Cement Facilities 4.293.971 - 4.293.971 Çimsa Cement Free Zone Ltd 275.431 7.371 282.802

136.710.208 7.371 136.717.579

31 December 2009 Opening Translation difference Total

Eskişehir and Ankara Factories 132.140.806 - 132.140.806 Ready Mix Cement Facilities 4.293.971 - 4.293.971 Çimsa Cement Free Zone Ltd 276.638 (1.207) 275.431 136.711.415 (1.207) 136.710.208

16. Provisions, contingent assets and liabilities

Short-term provisions

31 December 2010 31 December 2009

Vacation pay liability 1.671.407 1.639.038 Provision for litigations 3.157.652 1.718.053 Provision for bonuses 1.390.181 - Other 78.106 4.223 6.297.346 3.361.314

The table below summarizes the movement of the provision for bonuses as of 31 December 2010 and 31 December 2009:

Provision for bonuses 31 December 2010 31 December 2009

1 January - - Paid in current period - - Charge for the period 1.390.181 - 1.390.181 -

The table below summarizes the movement of the vacation pay liability and provision for litigations as of 31 December 2010 and 31 December 2009:

Vacation pay liability 31 December 2010 31 December 2009

1 January 1.639.038 1.577.133 Paid in current period (147.268) (204.685) Charge for the period 179.637 266.590 1.671.407 1.639.038

127 Çimsa Çimento Sanayi ve Ticaret A.Ş. 2010 Annual Report (Convenience translation of financial statements and footnotes originally issued in Turkish) Çimsa Çimento Sanayi ve Ticaret Anonim Şirketi and its Subsidiaries Notes to the consolidated financial statements for the year ended 31 December 2010

(Currency - Turkish Lira (TL), unless otherwise indicated)

16. Provisions, contingent assets and liabilities (Continued)

Short-term provisions (Continued)

Provision for litigations 31 December 2010 31 December 2009

1 January 1.718.053 1.182.274 Paid in current period (759.212) (687.088) Charge for the period 2.198.811 1.222.867 3.157.652 1.718.053

Long-term provisions

31 December 2010 31 December 2009

Recultivation expense provision 1.737.650 1.532.210 Other 42.480 - 1.780.130 1.532.210

Possible contingencies relating to environment law and land protection and utilization law

The operations of the Group such as mining, cement production are subject to the Environment Law, and to the Land Protection and Utilization Law. All liabilities such as taxes, duties and emission fees resulting from this legislation have been fulfilled by the Group. This legislation addresses the costs that could arise from recovering the damage, pollution in the land while vacating the mines. Accordingly, the management calculated the estimated cost of plans that is deemed to meet the requirements of legislation related with the mining area the Group operates on. As a result, related with the surface area which is already excavated as of 31 December 2010, the Group has accounted for a recultivation provision at an amount of TL 1.737.650 in “Long-term provisions” (31 December 2009 – TL 1.532.210).

Guarantee letters

As of 31 December 2010 and 31 December 2009, guarantees which are mainly given to vendors, Akbank, HSBC and Eximbank are as follows: 31 December 2010 31 December 2009 Original Original Guarantee TL Equivalent Guarantee TL Equivalent Currency Amount Amount A. Given on behalf of its own legal entity TL 18.887.766 18.887.766 15.769.977 15.769.977 USD 28.106.662 43.452.900 24.682.582 37.164.564 Euro 11.207.500 22.965.288 - - B. Given in favor of partnership within full scope of consolidation - - - - C. Given for the third parties that are in the context of commercial activities - - - - D. Other - - - - i. In favor of the parent company - - - - ii. Given in favor of group companies that are not in - - - - the scope of clauses B and C iii. Given in favor of the third parties that are not in the - - - - scope of clause C Total 85.305.954 52.934.541

Çimsa Çimento Sanayi ve Ticaret A.Ş. 2010 Annual Report 128 (Convenience translation of financial statements and footnotes originally issued in Turkish) Çimsa Çimento Sanayi ve Ticaret Anonim Şirketi and its Subsidiaries Notes to the consolidated financial statements for the year ended 31 December 2010

(Currency - Turkish Lira (TL), unless otherwise indicated)

16. Provisions, contingent assets and liabilities (Continued)

Short-term provisions (Continued)

The ratio of other GPMs to the Group’s equities as of 31 December 2010 is 0% (as of 31 December 2009 - 0%). GPMs given by the Group on behalf of its own legal entity are composed of mortgages amounting to TL 26.756.100 (2009: TL 37.164.764) and guarantee letters amounting to TL 58.549.854 (2009: TL 15.769.777).

Litigations

- As a result of the tax inspection covering the years 2000-2003, a tax/penalty notification amounting to TL 23.164.298, consisting of additional tax and tax penalty at the amounts of TL 9.966.409 and TL 13.197.890, respectively, has been declared by the Tax Office to the Company on 11 July 2006, based on the report of the income controller. In the report of the income controller, the recording of foreign currency differences and interest payments of the loans taken from Akbank in 1999 as expense, and not calculating interest for the receivables from Exsa have been criticized. Considering that these tax and penalties are unfair, the management did not prefer a reconciliation with the Tax Authority and instead filed a lawsuit at Mersin Tax Court, as the Company management believed that the lawsuit will result in favor of the Company. As of the date of preparation of the consolidated financial statements, the lawsuit was resulted in favor of the Company; however the tax office appealed the decision.

- As of 31 December 2010, the total amount of outstanding lawsuits filed against the Group is approximately TL 5.441.814 (31 December 2009 – TL 2.548.673). As of 31 December 2010, based on the consultation to the legal advisors, the Group has reflected a provision amounting to TL 3.157.652 (31 December 2009 – TL 1.718.053) considering that their probable resolution will be against the Group.

17. Employee termination benefits

Reserve for employee benefits – long-term 31 December 2010 31 December 2009

Reserve for retirement pay 9.982.217 8.253.674 Seniority incentive premium 410.859 315.273

10.393.076 8.568.947

In accordance with existing social legislation in Turkey, the Group is required to make lump-sum termination indemnities to each employee who has completed over one year of service with the Group and whose employment is terminated due to retirement or for reasons other than resignation or misconduct. Such payments are calculated on the basis of 1 month’s pay limited to a maximum of TL 2.517 at 31 December 2010 (2009 – TL 2.365) per year of employment (as of 1 January 2011, seniority indemnity ceiling is increased to TL 2.623). As of 31 December 2010, this liability is reflected in the consolidated financial statements by using “Projection Method” based on actuary method and assumptions made by professional actuaries.

The principal actuarial assumptions used to calculated the liability at the balance sheet date are as follows:

31 December 2010 31 December 2009

Discount rate %10 %11 Estimated salary increase rate %5,1 %4,8 Personnel turnover rate %13,73 %11,81

129 Çimsa Çimento Sanayi ve Ticaret A.Ş. 2010 Annual Report (Convenience translation of financial statements and footnotes originally issued in Turkish) Çimsa Çimento Sanayi ve Ticaret Anonim Şirketi and its Subsidiaries Notes to the consolidated financial statements for the year ended 31 December 2010

(Currency - Turkish Lira (TL), unless otherwise indicated)

17. Employee termination benefits (Continued)

Movement of the provision for the employee termination benefits for the periods ended 31 December 2010 and 31 December 2009 is as follows:

Provision for employee termination benefits 31 December 2010 31 December 2009

1 January 8.253.674 7.250.428 Retirement pay liability paid (874.717) (894.731) Interest expense (Note 24) 825.367 797.547 Actuarial loss/(gain) (119.865) (292.217) Charge for the year, net 1.673.631 1.392.647 Effect of acquisition of subsidiary 110.304 - Translation differences 113.823 -

Year end 9.982.217 8.253.674

18. Other assets and liabilities a) Other current and non-current assets

Other current assets

31 December 2010 31 December 2009

Deferred VAT 10.337.007 40.002.375 VAT receivable 3.781.103 23.213.006 Advances given to suppliers 1.093.614 371.909 Prepaid insurance expense 726.895 456.012 Job advances 506.134 278.999 Prepaid taxes and funds 155.880 239.761 Other miscellaneous current assets 1.106.301 1.003.087

17.706.934 65.565.149

Other non-current assets

31 December 2010 31 December 2009

Advances given 2.963.864 1.552.823 Prepaid expenses 401.948 470.947

3.365.812 2.023.770 b) Other short-term liabilities

31 December 2010 31 December 2009

VAT payable 7.534.629 23.172.357 Advances received 2.156.112 1.343.437 Derivative financial instruments (Note 28) 805.928 - Deferred VAT payable - 39.997.207 Other short term liabilities 891.332 431.753

11.338.001 64.944.754

Çimsa Çimento Sanayi ve Ticaret A.Ş. 2010 Annual Report 130 (Convenience translation of financial statements and footnotes originally issued in Turkish) Çimsa Çimento Sanayi ve Ticaret Anonim Şirketi and its Subsidiaries Notes to the consolidated financial statements for the year ended 31 December 2010

(Currency - Turkish Lira (TL), unless otherwise indicated)

18. Other assets and liabilities (Continued) b) Other short-term liabilities (Continued)

According to VAT Law no 11/c, the VAT amount regarding to the goods which are rendered to export dealers by manufacturers is not collected, and are recorded to export VAT and deferred VAT accounts. Uncollected VAT is declared on related VAT declaration, accrued VAT is deferred and recorded to deferred VAT accounts. After verification of the realization of export, tax administration makes cancellation for the deferred VAT accordingly amounts in export VAT and deferred VAT are netted off.

19. Equity

31 December 2010 31 December 2009

Number of ordinary shares (authorized and outstanding) 1 Kr per value 13.508.444.200 13.508.444.200

As of 31 December 2010 and 31 December 2009, the composition of shareholders and their respective percentage of ownership can be summarized as follows:

31 December 2010 31 December 2009 Amount % Amount %

Hacı Ömer Sabancı Holding A.Ş. 66.765.209 49,43 66.765.209 49,43 Adana Çimento San. ve Tic. A.Ş. (*) 12.880.921 9,54 19.074.226 14,12 Akçansa Çimento San. ve Tic. A.Ş. 12.130.560 8,98 12.130.560 8,98 Hacı Ömer Sabancı Vakfı 146.000 0,11 146.000 0,11 Other and publicly traded shares 43.161.752 31,94 36.968.447 27,36

Nominal share capital total 135.084.442 100,00 135.084.442 100,00

Restatement effect of inflation 41.741.516 41.741.516

Total 176.825.958 176.825.958

(*) Adana Çimento Sanayi ve Ticaret A.Ş. (Adana Çimento) sold TL 6.193.305 portion of the nominal shares in the Group’s capital amounting to TL 19.074.226 and percentage of 14,12%, for a total of TL 56.978.406 and TL 9,2 per share, on 17 December 2010. Adana Çimento’s percentage of ownership in the Group declined to 9,54%.

131 Çimsa Çimento Sanayi ve Ticaret A.Ş. 2010 Annual Report (Convenience translation of financial statements and footnotes originally issued in Turkish) Çimsa Çimento Sanayi ve Ticaret Anonim Şirketi and its Subsidiaries Notes to the consolidated financial statements for the year ended 31 December 2010

(Currency - Turkish Lira (TL), unless otherwise indicated)

19. Share capital (Continued)

Financial assets fair value reserve

As of 31 December 2010, financial assets fair value reserve amounting to TL 35.586.272, is composed of the change in financial assets fair value reserve of Exsa, which is consolidated by equity method and the increase in value of Hacı Ömer Sabancı Holding A.Ş.’s shares, net of the deferred tax effect, which are accounted for within the available-for-sale financial assets. The movements are as follows:

The changes in Financial Assets Fair Value Reserve of Exsa, which is consolidated by equity method, are as follows (Note 12):

Group’s share Exsa total 32,875% Financial Assets Fair Value Reserve 1 January 2010 opening 202.627.310 66.613.728 Financial Assets Fair Value Reserve current period increase 5.494.861 1.806.436 Financial Assets Fair Value Reserve spin-off effect (189.483.884) (62.292.826) 31 December 2010 Balance 18.638.287 6.127.338

The movement of the value increase of Hacı Ömer Sabancı Holding A.Ş. shares, accounted for under the available-for-sale financial assets, between the date of inclusion in the portfolio and 31 December 2010 using the quoted market prices is as follows:

Deferred tax Market value effect Net value Affiliate 18 January recorded amount 118.438.697 (5.921.935) 112.516.762 Affiliate 31 December 2010 revalued amount 149.448.101 (7.472.405) 141.975.696 Current period increase/decrease 31.009.404 (1.550.470) 29.458.934

Profit reserves – retained earnings

Legal reserves

The legal reserves consist of first and second legal reserves in accordance with the Turkish Commercial Code. The first legal reserve is appropriated out of the statutory profits at the rate of 5%, until the total reserve reaches a maximum of 20% of the Company’s share capital. The second legal reserve is appropriated at the rate of 10% of all distributions in excess of 5% of the Company’s share capital. The legal reserves are not available for distribution unless they exceed 50% of paid-in share capital, however, can be used to offset losses in the condition that extraordinary reserves are exhausted.

Retained earnings

Retained earnings are composed of the increase in extraordinary reserves which is not distributed from profit of 2009 amounting to TL 18.760.910; the Group’s share of the decrease in Exsa’s equity, which is accounted for under equity method, amounting to TL 42.967.297; and, the deferred tax liability of Hacı Ömer Sabancı Holding A.Ş.’s value on the recorded date, which is accounted for within the available-for-sale financial assets, amounting to TL 5.921.935.

Çimsa Çimento Sanayi ve Ticaret A.Ş. 2010 Annual Report 132 (Convenience translation of financial statements and footnotes originally issued in Turkish) Çimsa Çimento Sanayi ve Ticaret Anonim Şirketi and its Subsidiaries Notes to the consolidated financial statements for the year ended 31 December 2010

(Currency - Turkish Lira (TL), unless otherwise indicated)

19. Share capital (Continued)

Foreign currency translation differences

According to IAS 21 “Effects of Changes in Foreign Exchange Rates”, during the consolidation, the assets and liabilities of Group’s subsidiaries and joint ventures in foreign countries are translated to Turkish Lira with respect to the exchange rates on the balance sheet date. Income and expense items are translated via the average exchange rates of the period. The differences emerged as a result of using the closing and average exchange rates are accounted for as foreign currency translation differences in the comprehensive statement of income.

Quoted companies are subject to dividend requirements regulated by the Turkish Capital Market Board as follows:

Based on the CMB Decree 02/51, dated 27 January 2010;

The companies which are liable to prepare consolidated financial statements have to calculate net distributable profit by considering the net income included in the consolidated financial statements prepared in accordance with Communiqué No. XI-29 of CMB as long as the statutory reserves are sufficient for a such profit distribution, it was also decided that there will be no dividend distribution requirement for the listed companies whose shares are traded in the stock exchange.

Inflation adjustments to issued capital and historical amount of extraordinary reserves can be used for in kind capital increase, dividend distribution in cash or the net loss deduction. However, the inflation adjustment to issued capital is subject to corporate tax if used in dividend distribution in cash.

Distributable profit of the Group in 2010 from the resources in the accounts in accordance with the financial reporting standards issued by the Capital Markets Board of Turkey is TL 103.667.716. Moreover, resources those can be treated as distributable profit amount to TL 78.452.534 which are composed of undistributed retained profit of previous year amounting to TL 40.503.662 and gain on sale of real estate which is exempt from corporate tax amounting to TL 37.948.872. However, TL 37.827.636 and TL 121.236 of gain on sale of real-estate cannot be distributed until the year 2012 and 2015, respectively, according to corporate tax law. Otherwise, such amount will be subject to corporate tax together with tax penalty.

As of 31 December 2010 and 31 December 2009, the composition of consolidated legal reserves, extraordinary reserves, accumulated profit, share premium and other reserves can be summarized as follows:

31 December 2010 31 December 2009

Legal reserves 93.661.816 86.151.121 Other capital reserves 34.854.007 34.854.007 Extraordinary reserves 40.503.662 40.076.045 Accumulated profit due to inflation difference 68.538.570 68.538.570 Share premium 30.131 30.131 Special funds 39.518.667 17.984.358

Non-controlling Interests

All non-controlling shares are eliminated from equity accounts, including paid-in capital, of consolidated subsidiaries and presented as non-controlling interest in shareholders’ equity in the consolidated balance sheet.

133 Çimsa Çimento Sanayi ve Ticaret A.Ş. 2010 Annual Report (Convenience translation of financial statements and footnotes originally issued in Turkish) Çimsa Çimento Sanayi ve Ticaret Anonim Şirketi and its Subsidiaries Notes to the consolidated financial statements for the year ended 31 December 2010

(Currency - Turkish Lira (TL), unless otherwise indicated)

20. Sales and cost of sales

1 January – 1 January – 31 31 December 2010 December 2009

Sales income (Net)

Domestic sales 539.243.425 408.768.660 Export sales 205.865.541 241.819.799 Other income - 268.080 Other deductions (-) (31.594.841) (32.480.511) Sale discounts (-) (5.034.110) (3.451.197)

708.480.015 614.924.831

1 January – 1 January – 31 31 December 2010 December 2009

Cost of sales

Direct material and supplies expenses (87.981.908) (66.489.783) Direct labor expenses (4.920.259) (4.579.021) Depreciation and amortization expenses (30.899.380) (25.466.701) Other production expenses (404.400.205) (295.852.397)

Total production cost (528.201.752) (392.387.902)

Change in work-in-process 4.850.981 (21.455.795) Beginning WIP (12.982.768) (34.438.563) Ending WIP 17.833.749 12.982.768

Change in finished goods 5.607.912 (4.206.966) Beginning finished goods (9.009.285) (13.216.251) Ending finished goods 14.617.197 9.009.285

Cost of merchandises sold (2.153.453) (15.674.385)

(519.896.312) (433.725.048)

Çimsa Çimento Sanayi ve Ticaret A.Ş. 2010 Annual Report 134 (Convenience translation of financial statements and footnotes originally issued in Turkish) Çimsa Çimento Sanayi ve Ticaret Anonim Şirketi and its Subsidiaries Notes to the consolidated financial statements for the year ended 31 December 2010

(Currency - Turkish Lira (TL), unless otherwise indicated)

21. Marketing, selling and distribution expenses and general administrative expenses

1 January – 1 January – 31 December 2010 31 December 2009

General administrative expenses (35.057.167) (29.788.200) Marketing, selling and distribution expenses (7.607.034) (5.820.137) Research and development expenses (354.055) (184.883)

(43.018.256) (35.793.220)

General administrative expenses Personnel expenses (15.807.476) (14.347.933) Consulting expenses (2.950.951) (2.138.491) Travel expenses (1.589.094) (1.106.439) Depreciation and amortization expenses (1.240.419) (1.855.873) Employee termination expenses (874.717) (1.100.430) Communication and advertisement expenses (895.558) (729.931) IT expenses (809.997) (821.210) Rent expenses (720.141) (542.517) Tax, duty and charge expenses (598.565) (570.447) Insurance expenses (289.140) (113.790) Repair and maintenance expenses (230.357) (120.229) Other miscellaneous expenses (9.050.752) (6.340.910)

(35.057.167) (29.788.200)

1 January – 1 January – 31 31 December 2010 December 2009

Marketing, selling and distribution expenses Personnel expenses (3.701.210) (3.106.571) Outsourced services (1.058.226) (355.096) Travel expenses (503.887) (326.406) Advertising expenses (332.411) (250.704) Rent expenses (150.645) (139.847) Insurance expenses (108.560) (114.313) Depreciation and amortization expenses (65.366) (162.021) Other miscellaneous expenses (1.686.729) (1.365.179)

(7.607.034) (5.820.137)

1 January – 1 January – 31 December 2010 31 December 2009

Research and development expenses Personnel expenses (354.055) (159.582) Consulting expenses - (25.301)

(354.055) (184.883)

135 Çimsa Çimento Sanayi ve Ticaret A.Ş. 2010 Annual Report (Convenience translation of financial statements and footnotes originally issued in Turkish) Çimsa Çimento Sanayi ve Ticaret Anonim Şirketi and its Subsidiaries Notes to the consolidated financial statements for the year ended 31 December 2010

(Currency - Turkish Lira (TL), unless otherwise indicated)

22. Nature of expenses

1 January – 1 January – 31 December 2010 31 December 2009

Depreciation and amortization expenses

Property, plant and equipment Cost of production (29.441.276) (24.390.609) Other operating expenses (2.953.425) (3.125.357) General administrative expenses (1.181.885) (1.777.453) Marketing, selling and distribution expenses (62.279) (155.176)

Total depreciation expenses (Note 13) (33.638.865) (29.448.595)

Intangible fixed assets Cost of production (1.458.104) (1.076.092) Other operating expenses (146.271) (83.399) General administrative expenses (58.534) (78.420) Marketing, selling and distribution expenses (3.087) (6.845)

Total amortization expenses (Note 14) (1.665.996) (1.244.756)

Personnel expenses Wages and salaries (27.089.172) (42.577.184) Provision for employee termination benefits (764.286) (1.897.977) Employer’s share of social security premiums (3.959.325) (4.047.860)

(31.812.783) (48.523.021)

23. Other operating income / (expense)

1 January – 1 January – 31 December 2010 31 December 2009

Other operating income

Waste disposal and ash volatile income 1.375.814 5.058.684 Negative goodwill (Note 5) 816.792 - Gain on sale of property, plant and equipment 96.380 136.775 Litigation income (*) - 3.297.219 Other 5.143.464 4.831.059

7.432.900 13.323.737

(*) The lawsuit which was filed by the Company in 2003 related to the mining fund paid to government during the importation of petrol cock was resolved in favor of the Company and amount was collected in current year.

Çimsa Çimento Sanayi ve Ticaret A.Ş. 2010 Annual Report 136 (Convenience translation of financial statements and footnotes originally issued in Turkish) Çimsa Çimento Sanayi ve Ticaret Anonim Şirketi and its Subsidiaries Notes to the consolidated financial statements for the year ended 31 December 2010

(Currency - Turkish Lira (TL), unless otherwise indicated)

23. Other operating income / (expense) (Continued)

1 January – 1 January – 31 December 2010 31 December 2009

Other operating expenses (-)

Other taxes and duties (2.500.329) (1.198.389) Provision expenses (1.730.078) (731.878) Indemnity and punishments (759.212) (318.017) Idle capacity expense (363.738) (6.204.318) Recultivation provisions (205.440) (361.210) Duties and contribution expenses (159.068) (198.987) Court and execution expenses (126.073) (149.361) Donations (68.226) (3.326.407) Loss on sale of property, plant and equipment (59.468) (203.104) Provision on inventory impairment (Note 11) - (1.111.219) Provision on fixed asset impairment (Not 13) - (668.029) Other (5.827.431) (5.158.319)

(11.799.063) (19.629.238)

24. Financial income / (expenses)

1 January – 1 January – 31 December 2010 31 December 2009

Foreign exchange gain 72.357.672 45.823.669 Interest income 3.014.419 1.583.455 Term difference income 595.067 1.385.286 Other financial income 2.162.344 11.239

Total financial income 78.129.502 48.803.649

Exchange losses (72.641.525) (47.920.131) Interest expenses (10.973.260) (9.984.579) Interest expense of retirement pay liability (825.367) (797.547) Other financial expenses - (188.986)

Total financial expenses (84.440.152) (58.891.243)

137 Çimsa Çimento Sanayi ve Ticaret A.Ş. 2010 Annual Report (Convenience translation of financial statements and footnotes originally issued in Turkish) Çimsa Çimento Sanayi ve Ticaret Anonim Şirketi and its Subsidiaries Notes to the consolidated financial statements for the year ended 31 December 2010

(Currency - Turkish Lira (TL), unless otherwise indicated)

25. Tax assets and liabilities

General information

The Group is subject to taxation in accordance with the tax procedures and the legislation effective in the countries where the Group is operating.

In Turkey, the corporation tax rate is 20%. Corporate tax returns are required to be filed until the twentyfifth of the fourth month following the balance sheet date and paid in one installment until the end of the fourth month. The tax legislation provides for a temporary tax of 20% to be calculated and paid based on earnings generated for each quarter. The amounts thus calculated and paid are offset against the final corporate tax liability for the year.

In Turkey, the tax legislation does not permit a parent group and its subsidiaries to file a consolidated tax return. Therefore, provision for taxes, as reflected in the consolidated financial statements, has been calculated on a separate-entity basis.

Corporate tax losses can be carried forward for a maximum period of five years following the year in which the losses were incurred. The tax authorities can inspect tax returns and the related accounting records for a retrospective maximum period of five years.

The dividend payments made other than to the companies resident in Turkey that are not responsible from the corporate and income tax and the dispensed ones and to resident and nonresident individuals and nonresident legal entities in Turkey are due to 15% income tax. The dividend payments made from the resident companies in Turkey to again resident companies in Turkey are not due to tax, and in case of not calculating the profit or not adding to capital, the income tax is not calculated.

In accordance with the “General Communiqué” (Serial no:1) on “Disguised Profit Distribution Through Transfer Pricing” was published in November 2007, the forms should be prepared until the deadline of annual corporate tax return. The Group has completed its work and made the related declarations.

As of 31 December 2010 and 31 December 2009, income taxes payables are summarized as follows:

31 December 2010 31 December 2009

Current period corporate tax (27.913.316) (20.802.579) Prepaid tax in current period 22.172.233 15.742.609

Tax (liabilities)/assets from net income for the year (5.741.083) (5.059.970)

Major components of income tax expense are as follows:

31 December 2010 31 December 2009

Consolidated income statement Current period corporate tax (27.913.316) (20.802.579) Deferred tax income/(expense) 684.796 (4.300.321)

Income tax expense reported in the consolidated income statement (27.228.520) (25.102.900)

Çimsa Çimento Sanayi ve Ticaret A.Ş. 2010 Annual Report 138 (Convenience translation of financial statements and footnotes originally issued in Turkish) Çimsa Çimento Sanayi ve Ticaret Anonim Şirketi and its Subsidiaries Notes to the consolidated financial statements for the year ended 31 December 2010

(Currency - Turkish Lira (TL), unless otherwise indicated)

25. Tax assets and liabilities (Continued)

Deferred tax assets and liabilities

The details of deferred tax assets and liabilities of the Group as of 31 December 2010 and 31 December 2009 are as follows:

Deferred tax assets Deferred tax liabilities Net 31 31 31 31 31 31 December December December December December December 2010 2009 2010 2009 2010 2009

Temporary differences on property, plant and equipment 3.851.815 4.083.377 (515.216) (112.175) 3.336.599 3.971.202 Temporary differences on intangible assets - - (1.995.624) (2.494.474) (1.995.624) (2.494.474) Goodwill - - (24.245.804) (24.074.045) (24.245.804) (24.074.045) Inventories - 255.899 (107.149) - (107.149) 255.899 Revaluation of available-for –sale investments - - (7.472.405) - (7.472.405) - Provision for employee termination benefit 1.996.443 1.650.735 - - 1.996.443 1.650.735 Retained earnings 876.147 - - - 876.147 - Provision for litigations 631.530 282.289 - - 631.530 282.289 Provision for recultivation 347.530 306.442 - - 347.530 306.442 Provision for unused vacation pay 334.281 327.808 - - 334.281 327.808 Provision for bonuses 278.036 - - - 278.036 - Rediscount of receivable and payables 165.801 59.711 (53.590) (33.456) 112.211 26.255 Provision for seniority incentive premium 82.172 63.055 - - 82.172 63.055 Other 957.184 88.039 - - 957.184 88.039

9.520.939 7.117.355 (34.389.788) (26.714.150) (24.868.849) (19.596.795)

Movement table of net deferred tax liabilities is as follows:

31 December 2010 31 December 2009

1 January balance 19.596.795 15.296.474 Deferred tax expense/(income) recognized in income statement (684.796) 4.300.321 Recorded in the statement of equity (*) 7.472.405 - Effect of acquisition by business combination (1.515.555) -

Net balance 24.868.849 19.596.795

(*) The deferred tax effect of the valuation of 1,056% of the shares of Hacı Ömer Sabancı Holding A.Ş., acquired by the the Group on 18 January 2010, using the quoted market prices as of 31 December 2010, is accounted for under equity.

139 Çimsa Çimento Sanayi ve Ticaret A.Ş. 2010 Annual Report (Convenience translation of financial statements and footnotes originally issued in Turkish) Çimsa Çimento Sanayi ve Ticaret Anonim Şirketi and its Subsidiaries Notes to the consolidated financial statements for the year ended 31 December 2010

(Currency - Turkish Lira (TL), unless otherwise indicated)

25. Tax assets and liabilities (Continued)

Deferred tax assets and liabilities (Continued)

A reconciliation of income tax expense applicable to profit before income tax at the statutory income tax rate to income tax expense reported in the consolidated income statements for the periods ended 31 December 2010 and 31 December 2009 are as follows:

31 December 31 December 2010 2009

Profit before tax 130.478.323 133.235.667 At the effective statutory income tax rate of 20% (26.095.665) (26.647.135) Income exempt from tax 667.006 469.847 Effect of the gain / (loss) of the investments accounted under equity method (882.062) 844.442 Non-deductible expenses (358.976) (269.525) Other (558.823) 499.471

(27.228.520) (25.102.900)

27. Earnings per share

Earnings per share (EPS) is calculated by dividing the net profit for the year attributable to ordinary shareholders by the weighted average number of ordinary shares outstanding during the year.

Earnings per share:

31 December 2010 31 December 2009

Net income for the period 103.249.803 108.132.777 Average number of shares at nominal value of Kr 1 13.508.444.200 13.508.444.200

Earnings per share 0,0076 0,0080

Dividend distributed per share:

For the years ended 31 December 2010 and 31 December 2009, dividends distributed per share are as follows:

31 December 2010 31 December 2009

Dividend distributed 81.861.172 58.005.260 Average number of shares 13.508.444.200 13.508.444.200

Net dividend distributed per share (Kr) 0,0061 0,0043

There have been no other transactions involving ordinary shares or potential ordinary shares since the reporting date and before the completion of these financial statements.

Çimsa Çimento Sanayi ve Ticaret A.Ş. 2010 Annual Report 140 (Convenience translation of financial statements and footnotes originally issued in Turkish) Çimsa Çimento Sanayi ve Ticaret Anonim Şirketi and its Subsidiaries Notes to the consolidated financial statements for the year ended 31 December 2010

(Currency - Turkish Lira (TL), unless otherwise indicated)

27. Related party disclosures

Entities are defined as related if one of the entities has control over the other entity or has a significant influence over the other entity’s financial and administrative decisions. The Group is controlled by Hacı Ömer Sabancı Holding A.Ş. For the consolidated financial statements, the other shareholder of CSN which is a jointly controlled company, shareholder companies and financial assets of Hacı Ömer Sabancı Holding A.Ş. and their affiliates and subsidiaries and also other companies of Sabancı Group are presented separately and these companies and top management of the Group are referred to as related parties. The Group has various transactions with related parties. Related party balances and related party transactions as of and for the years ended 31 December 2010 and 31 December 2009 comprise mainly following:

31 December 2010 31 December 2009

Due from related parties (net)

Associates Exsa - 246.588

Other Other 3.133 9.743

Discounts of receivables from related parties (-) - (1.965)

3.133 254.366

31 December 2010 31 December 2009

Due to related parties (net)

Shareholders Akçansa Çimento Sanayi ve Ticaret A.Ş. (Akçansa) 338.939 578.374 Hacı Ömer Sabancı Holding 15.967 927

Other Bimsa Uluslararası İş Bilgi ve Yönetim Sistemleri A.Ş. (Bimsa) 905.377 257.821 Aksigorta 2.612 21.391 Enerjisa 4.023.467 1.802 Avivasa - 49.339 Teknosa 2.782 23.911 Other 26.397 15.984

5.315.541 949.549

Due to shareholders (*) (Note:10-b) 327.334 492.657

327.334 492.657

(*) The total balance consists of the dividends payable as of 31 December 2010.

141 Çimsa Çimento Sanayi ve Ticaret A.Ş. 2010 Annual Report (Convenience translation of financial statements and footnotes originally issued in Turkish) Çimsa Çimento Sanayi ve Ticaret Anonim Şirketi and its Subsidiaries Notes to the consolidated financial statements for the year ended 31 December 2010

(Currency - Turkish Lira (TL), unless otherwise indicated)

27. Related party disclosures (Continued)

31 December 2010 31 December 2009

Bank balances - Other

Akbank T.A.Ş. (Akbank) (**) 4.376.523 43.968.189

Bank loans - Other

Akbank 81.659.859 64.831.263

Financial leasing - Other

Akleasing 3.640.411 5.878.503

(**) As of 31 December 2010, the total amount is demand deposit. As of 31 December 2009, TL 23.000.000 is time deposit and the remaining amount is demand deposit.

31 December 2010 31 December 2009

Sales to related parties

Shareholders Akçansa 660 1.748.402

Associate Exsa 1.973.351 11.564.119

Other Enerjisa 2.004 12.992 Other 1.790 19.836

1.977.805 13.345.349

Goods purchased from and services rendered by related parties

Shareholders Akçansa 4.110.048 3.352.658 Hacı Ömer Sabancı Holding (Ultimate shareholder of Çimsa) 90.773 157.195

Other Enerjisa 28.156.505 22.071 Aksigorta 2.947.394 2.950.024 Bimsa 1.390.227 997.349 Avivasa Emeklilik A.Ş. 131.534 118.403 Other 83.714 125.090

36.910.195 7.722.790

Çimsa Çimento Sanayi ve Ticaret A.Ş. 2010 Annual Report 142 (Convenience translation of financial statements and footnotes originally issued in Turkish) Çimsa Çimento Sanayi ve Ticaret Anonim Şirketi and its Subsidiaries Notes to the consolidated financial statements for the year ended 31 December 2010

(Currency - Turkish Lira (TL), unless otherwise indicated)

27. Related party disclosures (Continued)

1 January – 31 1 January – 31 December 2010 December 2009

Interest income from related parties Akbank 3.340.311 1.583.455

3.340.311 1.583.455

Interest expense to related parties Akbank 7.138.441 3.577.537

7.138.441 3.577.537

Compensation to top management

In current period, compensation paid to top management like chairman and members of Board of Directors, general manager, general coordinator and deputy general managers, is TL 4.310.482 (31 December 2009 – TL 3.679.534). Net salaries paid are TL 4.173.151 and contributions paid to Social Security Institution are TL 137.331. No employee termination benefit was paid to top management as of 31 December 2010 and 31 December 2009.

28. Financial risk management objectives and policies

Financial risk factors

The Group’s principal financial instruments are cash, short-term time deposits and bank borrowings. The main purpose of use of these financial instruments is to raise finance for the Group’s operations and to hedge interest rate risk. The Group has various other financial instruments such as trade receivables and trade payables, which arise directly from its operations. The main risks arising from the Group’s financial instruments are liquidity risk, foreign currency risk, interest rate risk and credit risk. The Group management reviews and agrees policies for each risk as summarized below.

Foreign currency risk

Foreign currency risk occurs due to the Group’s some liabilities which are denominated in mostly USD and in EUR and other foreign currency denominated held by the Group assets and liabilities. The Group is also exposed to foreign currency risk due to the transactions made in foreign currency. This risk occurs due to purchases, sales and bank borrowings of the Group which are denominated in currencies other than the functional currency.

The Group manages foreign currency risk due to using bank loans in foreign currency by using natural hedges that arise from offsetting foreign currency denominated assets and liabilities.

143 Çimsa Çimento Sanayi ve Ticaret A.Ş. 2010 Annual Report (Convenience translation of financial statements and footnotes originally issued in Turkish) Çimsa Çimento Sanayi ve Ticaret Anonim Şirketi and its Subsidiaries Notes to the consolidated financial statements for the year ended 31 December 2010

(Currency - Turkish Lira (TL), unless otherwise indicated)

28. Financial risk management objectives and policies (Continued)

31 December 2010 TL equivalent (functional currency) USD Euro GBP

1 Trade receivables 5.309.362 794.619 1.981.143 8.926 - Due from related parties - - - - - Other trade receivables 4.863.742 785.240 1.775.819 4.576 Other receivables - - - - Advances given to suppliers – inventory 445.620 9.379 205.324 4.350

2 Monetary financial assets (cash, bank accounts included) 3.127.545 860.423 866.916 8.764

3 Current assets (1+2) 8.436.907 1.655.042 2.848.059 17.690

4 Trade payables 19.152.351 11.558.412 625.710 378 - Due to related parties - - - - - Other trade payables 17.966.933 10.827.544 598.627 378 Advances taken 802.596 517.907 933 - Provisions - - - - Other short term liabilities 382.822 212.961 26.150 -

5 Financial liabilities 1.571.576 685.188 255.274 - Short term financial liabilities 512.275 - 255.274 - Current portion of long-term borrowings 1.059.301 685.188 - - Other financial liabilities - - - -

6 Short term liabilities (4+5) 20.723.927 12.243.600 880.984 378

7 Trade payables - - - -

8 Financial liabilities 1.857.961 1.201.786 - -

9 Long term liabilities (7+8) 1.857.961 1.201.786 - -

10 Total liabilities (6+9) 22.581.888 13.445.386 880.984 378

11 Net foreign currency asset/ (liability) position (3-10) (14.144.981) (11.790.344) 1.967.075 17.312

12 Net foreign currency asset/(liability) position of monetary items (3-10) (14.144.981) (11.790.344) 1.967.075 17.312

13 Export 170.713.385 69.623.949 29.583.182 1.028.159

14 Import 212.260.337 115.184.109 16.652.965 2.390

Çimsa Çimento Sanayi ve Ticaret A.Ş. 2010 Annual Report 144 (Convenience translation of financial statements and footnotes originally issued in Turkish) Çimsa Çimento Sanayi ve Ticaret Anonim Şirketi and its Subsidiaries Notes to the consolidated financial statements for the year ended 31 December 2010

(Currency - Turkish Lira (TL), unless otherwise indicated)

28. Financial risk management objectives and policies (Continued)

31 December 2009 TL equivalent (functional currency) USD Euro GBP

1 Trade receivables 25.502.298 6.464.769 7.294.500 4.180 - Due from related parties - - - - - Other trade receivables 25.502.298 6.464.769 7.294.500 4.180 Other receivables - Advances given to suppliers – inventory - - - -

2 Monetary financial assets (cash, bank accounts included) 13.781.017 5.928.094 1.983.925 238.244

3 Current assets (1+2) 39.283.315 12.392.863 9.278.425 242.424

4 Trade payables 9.677.994 5.255.926 813.878 2.480 - Due to related parties - - - - - Other trade payables 8.806.473 4.715.969 786.795 2.480 Advances taken 461.902 305.430 933 - Provisions - - - - Other short term liabilities 409.619 234.527 26.150 -

5 Financial liabilities 57.311.688 34.770.464 2.294.959 - Short term financial liabilities 33.038.284 20.131.736 1.261.829 - Current portion of long-term borrowings 24.273.403 14.638.728 1.033.130 - Other financial liabilities - - - -

6 Short term liabilities (4+5) 66.989.682 40.026.390 3.108.837 2.480

7 Trade payables - - - -

8 Financial liabilities 6.267.047 1.740.330 1.688.021 -

9 Long term liabilities (7+8) 6.267.047 1.740.330 1.688.021 -

10 Total liabilities (6+9) 73.256.729 41.766.720 4.796.858 2.480

11 Net foreign currency asset/ (liability) position (3-10) (33.973.414) (29.373.857) 4.481.567 239.944

12 Net foreign currency asset/(liability) position of monetary items (3-10) (33.973.414) (29.373.857) 4.481.567 239.944

13 Export 202.490.548 96.011.058 26.342.609 426.402

14 Import 53.836.675 23.051.363 8.854.436 -

145 Çimsa Çimento Sanayi ve Ticaret A.Ş. 2010 Annual Report (Convenience translation of financial statements and footnotes originally issued in Turkish) Çimsa Çimento Sanayi ve Ticaret Anonim Şirketi and its Subsidiaries Notes to the consolidated financial statements for the year ended 31 December 2010

(Currency - Turkish Lira (TL), unless otherwise indicated)

28. Financial risk management objectives and policies (Continued)

Sensitivity to exchange rate risk

Below table summarizes the effect on profit before tax when TL depreciates as a percentage of 10%:

As of 31 December 2010

Gain/loss Equity Appreciation Depreciation Appreciation Depreciation of foreign of foreign of foreign of foreign currency currency currency currency

In case of 10% appreciation of USD against TL:

1- USD denominated net assets, liabilities (1.822.787) 1.822.787 - - 2- USD denominated hedging instruments (-) - - - - 3- Net effect in USD (1.822.787) 1.822.787 - -

In case of 10% appreciation of EUR against TL:

1- EUR denominated net assets, liabilities 404.154 (404.154) - - 2- EUR denominated hedging instruments (-) - - - - 3- Net effect in EUR 404.154 (404.154) - -

In case of 10% appreciation of GBP against TL:

1- Other foreign currency denominated net assets, liabilities 4.135 (4.135) - - 2- Other foreign currency denominated hedging instruments (-) - - - - 3- Net effect in other foreign currency 4.135 (4.135) - -

As of 31 December 2009

Gain/loss Equity Appreciation Depreciation Appreciation Depreciation of foreign of foreign of foreign of foreign currency currency currency currency

In case of 10% appreciation of USD against TL:

1- USD denominated net assets, liabilities (4.422.822) 4.422.822 - - 2- USD denominated hedging instruments (-) - - - - 3- Net effect in USD (4.422.822) 4.422.822 - -

In case of 10% appreciation of EUR against TL:

1- EUR denominated net assets, liabilities 968.753 (968.753) - - 2- EUR denominated hedging instruments (-) - - - - 3- Net effect in EUR 968.753 (968.753) - -

In case of 10% appreciation of GBP against TL:

1- Other foreign currency denominated net assets, liabilities 57.327 (57.327) - - 2- Other foreign currency denominated hedging instruments (-) - - - - 3- Net effect in other foreign currency 57.327 (57.327) - -

Çimsa Çimento Sanayi ve Ticaret A.Ş. 2010 Annual Report 146 (Convenience translation of financial statements and footnotes originally issued in Turkish) Çimsa Çimento Sanayi ve Ticaret Anonim Şirketi and its Subsidiaries Notes to the consolidated financial statements for the year ended 31 December 2010

(Currency - Turkish Lira (TL), unless otherwise indicated)

28. Financial risk management objectives and policies (Continued)

Forward foreign exchange contracts

The Group enters into forward foreign exchange contracts to hedge the risks related to the fluctuations in the foreign exchange rates for the anticipated transactions, with due dates not exceeding 12 months.

The following table details the forward foreign currency contracts outstanding as at reporting date:

Foreign Currency Contract Value Fair Value 2010 2010 2010 TL TL TL

Buy US Dollar Less than 3 months 4.685.326 4.869.900 (184.574) 3-6 months 4.674.555 4.869.900 (195.345) 6-9 months 4.663.218 4.869.900 (206.682) 9-12 months 4.650.573 4.869.900 (219.327) (805.928)

As of 31 December 2010, the unrealized losses resulting from the changes in the fair values of forward foreign exchange contracts and accounted for in financial income/expenses are TL 805.928; and the mentioned fair value is presented under other short-term liabilities on the consolidated balance sheet ( 31 December 2009: None).

Interest rate risk

The Group is exposed to interest rate risk through the impact of rate changes on interest bearing assets and liabilities. The Group manages interest rate risk by using natural hedges that arise from offsetting interest rate of assets and liabilities.

31 December 2010 31 December 2009

Financial instruments with floating interest rate Financial liabilities 25.646.130 36.436.537

The effect of increase by 0,005 in interest rates of borrowings with variable interest rate, on profit before tax is presented in the table below.

Income / (loss) before tax 31 December 2010 31 December 2009

Effect of 0,005 increase in interest rates of USD and Euro with all other variables held constant 1- USD risk amount - (182.183) 2- Hedging instruments (-) - - Net effect - (182.183)

1- Euro risk amount (128.230) (182.183) 2- Hedging instruments - - Net effect (128.230) (182.183)

147 Çimsa Çimento Sanayi ve Ticaret A.Ş. 2010 Annual Report (Convenience translation of financial statements and footnotes originally issued in Turkish) Çimsa Çimento Sanayi ve Ticaret Anonim Şirketi and its Subsidiaries Notes to the consolidated financial statements for the year ended 31 December 2010

(Currency - Turkish Lira (TL), unless otherwise indicated)

28. Financial risk management objectives and policies (Continued)

Credit risk

Credit risk is the risk that one party to a financial instrument will fail to discharge an obligation and cause the other party to incur a financial loss. The Group manages its credit risk by limiting exposure to any one institution and revaluing the credibility of the related institutions continuously.

The Group seeks to manage its credit risk exposure through diversification of sales activities to avoid undue concentrations of risks with individuals or groups of customers in specific locations or businesses. The Group also obtains security when appropriate. Maximum credit risk amount of the Group is carrying value of the financial assets in consolidated financial statement.

As of 31 December 2010 Receivables Deposits Trade receivables Other receivables Deposits in banks Related Other Related Other Related Other Derivative party party party party party party instruments Other Maximum credit risk exposures as of report date (A+B+C+D+E) (1) 3.133 124.191.928 - 1.828.087 4.376.523 6.295.452 - -

- Protected part of Maximum credit risk by guarantees etc. (2) - 44.563.738 ------

A. Net book value of financial assets which are not overdue or not impaired 3.133 111.986.038 - 1.828.087 4.376.523 6.295.452 - - B. Net book value of financial assets of which conditions are negotiated, otherwise considered as impaired or overdue ------C. Net book value of assets which are overdue but not impaired assets - 11.756.341 ------Under guarantee - 8.543.938 ------D. Net book value of impaired assets - 449.549 ------Overdue (gross book value) - 2.245.448 ------Impairment (-) - (1.795.898) ------Protected part of maximum credit risk by guarantees, etc ------Not overdue (gross book value) ------Impairment (-) ------Protected part of maximum credit risk by guarantees, etc - 449.549 ------E. Factors including off balance sheet credit risk ------

(1) When determining the amount, guaranties received and factors increasing the reliability of the loan are not considered. (2) The Group did not have any collection problems with these customers in the past.

Çimsa Çimento Sanayi ve Ticaret A.Ş. 2010 Annual Report 148 (Convenience translation of financial statements and footnotes originally issued in Turkish) Çimsa Çimento Sanayi ve Ticaret Anonim Şirketi and its Subsidiaries Notes to the consolidated financial statements for the year ended 31 December 2010

(Currency - Turkish Lira (TL), unless otherwise indicated)

28. Financial risk management objectives and policies (Continued)

As of 31 December 2009 Receivables Deposits Trade receivables Other receivables Deposits in banks Related Other Related Other Related Other Derivative party party party party party party instruments Other Maximum credit risk exposures as of report date (A+B+C+D+E) (1) 254.366 103.137.815 - 1.594.814 43.968.189 7.120.692 - - - Protected part of Maximum credit risk by guarantees etc. (2) - 57.459.221 ------

- A. Net book value of financial assets which are not overdue or not impaired 155.633 96.335.462 - 1.594.814 43.968.189 7.120.692 - - B. Net book value of financial assets of which conditions are negotiated, otherwise considered as impaired or overdue ------C. Net book value of assets which are overdue but not impaired assets 98.733 6.358.246 ------Under guarantee - 3.668.288 ------D. Net book value of impaired assets - 444.107 ------Overdue (gross book value) - 2.112.891 ------Impairment (-) - (1.668.784) ------Protected part of maximum credit risk by guarantees, etc ------Not overdue (gross book value) ------Impairment (-) ------Protected part of maximum credit risk by guarantees, etc - 444.107 ------E. Factors including off balance sheet credit risk ------

(1) When determining the amount, guaranties received and factors increasing the reliability of the loan are not considered. (2) Guaranties consist of letters of guarantees, guarantee cheques and mortgages taken from customers. The part about the risk of collateral to meet was taken into consideration. (3) The Group did not have any collection problems with these customers in the past.

Liquidity risk

Prudent liquidity risk management implies maintaining sufficient cash and marketable securities, the availability of funding through an adequate amount of committed credit facilities and the ability to close out market positions.

The current and prospective risk of funding the debts is mitigated by matching the cash in and out flow volume supported by committed lending limits from qualified credit institutions.

149 Çimsa Çimento Sanayi ve Ticaret A.Ş. 2010 Annual Report (Convenience translation of financial statements and footnotes originally issued in Turkish) Çimsa Çimento Sanayi ve Ticaret Anonim Şirketi and its Subsidiaries Notes to the consolidated financial statements for the year ended 31 December 2010

(Currency - Turkish Lira (TL), unless otherwise indicated)

28. Financial risk management objectives and policies (Continued)

The breakdown of financial assets and liabilities according to their maturities is disclosed considering the period elapsed from balance sheet date to due date.

As of 31 December 2010 Contractual undiscounted Less than Between Between More Carrying payments 3 months 3-12 1-5 year than 5 Maturities per agreement value (=I+II+III+IV) (I) months (II) (III) years (IV)

Non derivative financial liabilities Bank borrowings 114.386.745 117.260.558 12.078.044 77.432.846 17.934.038 9.815.630 Trade payables 71.192.231 71.460.181 71.460.181 - - - Other payables 6.184.518 6.184.518 6.184.518 - - -

As of 31 December 2009 Contractual undiscounted Between More than payments Less than 3 3-12 Between 5 years Maturities per agreement Carrying value (=I+II+III+IV) months (I) months (II) 1-5 year (III) (IV)

Non derivative financial liabilities Bank borrowings 112.656.535 116.128.747 16.365.513 93.133.354 6.629.880 - Trade payables 46.503.204 46.670.486 46.670.486 - - - Other payables 5.241.306 5.241.306 5.241.306 - - -

Capital management

The Group manages its capital by maintaining permanence of its operations and on the other hand by reviewing terms of the trade receivables, trade payables and financial liabilities and cash from operations by using the debt and equity ratio in the most efficient way. The Group’s top management evaluates the cost of capital and the risks which are associated with every equity account, and presents to Board of Directors those which depend on their decision. The Group’s objective is to maintain the stability of capital structure by taking new debts or repayment of debts and also via dividend payments, depending on the decisions of Board of Directors.

The Company follows up the debt to equity ratio in the capital management in parallel with other companies in the sector. Net debt is calculated by deducting cash and cash equivalents from total liabilities (as shown in the balance sheet, includes financial liabilities). This rate is calculated by dividing net debt to total equity.

31 December 2010 31 December 2009

Total debt 114.386.745 112.656.535

Less: Cash and cash equivalents (Note 6) (10.681.165) (51.088.881)

Net debt 103.705.580 61.567.654

Total shareholders’ equity 879.807.348 932.100.768

Net debt/shareholders’ equity 12% 7%

Çimsa Çimento Sanayi ve Ticaret A.Ş. 2010 Annual Report 150 (Convenience translation of financial statements and footnotes originally issued in Turkish) Çimsa Çimento Sanayi ve Ticaret Anonim Şirketi and its Subsidiaries Notes to the consolidated financial statements for the year ended 31 December 2010

(Currency - Turkish Lira (TL), unless otherwise indicated)

29. Financial instruments (fair value explanations and disclosures within the framework of hedge accounting)

The Group has determined estimated fair values of financial instruments with the current market information and by using appropriate valuation methods. However, evaluating market knowledge and estimating fair values, requires interpretation. In conclusion, these estimations may not be the real indicators of the amounts that can be provided from current market transaction by the Group.

The fair values of financial assets and liabilities carried at cost or amortized cost calculated by effective interest rate method, are as follows:

Financial assets - The fair values of certain financial assets carried at cost, including cash and cash equivalents plus the respective accrued interest and other financial assets are considered to approximate their respective carrying values due to their short-term nature and negligible credit losses. The carrying value of trade receivables along with the related allowance for doubtful receivables is estimated to be their fair values.

Financial liabilities- Trade payables and other monetary liabilities are considered to approximate their respective carrying values due to their short-term nature. The bank borrowings are stated at their amortized costs and transaction costs are included in the initial measurement of bank borrowings. The fair value of long-term bank borrowings with variable interest rates are considered to state their respective carrying values since the interest rate applied to bank borrowings are updated periodically by the lender to reflect active market price quotations. The fair values of long-term bank borrowings with fixed interest rates considered to approximate their respective carrying values due to the fact that fixed rate is the rate applicable as of balance sheet date. The fair values of short-term bank borrowings are considered to approximate their respective carrying values due to their short-term nature.

Fair value hierarchy table

The Company classifies the fair value measurement of each class of financial instruments according to the source, using the three-level hierarchy, as follows;

Level 1: Market price valuation techniques for the determined financial instruments traded in markets (unadjusted)

Level 2: Other valuation techniques including direct or indirect observable inputs

Level 3: Valuation techniques not containing observable market inputs

As of 31 December 2010, the hierarchy table of the Company’s assets and liabilities at fair value is as follows:

Current period Level 1 (*) Level 2 Level 3

a) Assets at fair value

Financial investments Hacı Ömer Sabancı Holding 149.448.101 - -

Total assets 149.448.101

Derivative instruments - (805.928) -

Total liabilities - (805.928) -

(*) Valued by the quoted market price as of the balance sheet date.

151 Çimsa Çimento Sanayi ve Ticaret A.Ş. 2010 Annual Report (Convenience translation of financial statements and footnotes originally issued in Turkish) Çimsa Çimento Sanayi ve Ticaret Anonim Şirketi and its Subsidiaries Notes to the consolidated financial statements for the year ended 31 December 2010

(Currency - Turkish Lira (TL), unless otherwise indicated)

30. Subsequent events

None.

31. Other matters which are significant to the financial statements or which should be disclosed for the purpose of true and fair interpretation of the financial statements

None.

Çimsa Çimento Sanayi ve Ticaret A.Ş. 2010 Annual Report 152

ADDRESSES

HEAD OFFICE Çimsa Çimento San.ve Tic. A.Ş Kozan Hazır Beton Tesisi Kısıklı Cad. No:4 Sarkuysan - Ak İş Mersin Serbest Bölge Şubesi Kozan Organize San. Bölgesi İçi Kozan / Merkezi S Blok Altunizade – İstanbul Yalçın Alabeyoğlu Bulvarı Adana Operator: +90 216 651 53 00 Parkur İş Merkezi Ofis No: 209 Mersin Phone: +90 322 529 20 21 Fax: +90 216 651 05 00 Phone: +90 324 233 47 65 Fax: +90 322 529 20 22 Fax: +90 324 233 47 66 CEMENT FACILITIES ANTALYA REGION Çimsa Mersin READY-MIXED Toroslar Mah. Tekke Cad. Yenitaşkent CONCRETE FACILITIES Manavgat Hazır Beton Tesisi Mersin Köyönü Çeltek Mevkii Sanayi Sitesi Operator: +90 324 454 00 60 ADANA REGION Karşısı Ilıca, Manavgat / Antalya Fax: +90 324 454 00 75 Zeytinli Hazır Beton Tesisi Phone: +90 242 747 61 74 Adana - Mersin Yolu Üzeri 17. Km Kestel Fax: +90 242 747 61 75 Çimsa Kayseri Mevkii Zeytinli Seyhan/Adana Malatya Karayolu 35. Km Phone: +90 322 441 19 01 (3 lines) Alanya Hazır Beton Tesisi Bünyan Kayseri Fax: +90 322 441 18 99 Büyükyer Mahallesi Payallar / Alanya Operator: +90 352 712 16 07 Phone: +90 242 545 42 04 (2 lines) Fax: +90 0352 712 22 59 Karahan Hazır Beton Tesisi Fax: +90 242 545 42 05 Eski Karaisalı Yolu Üzeri Seyhan / Adana Çimsa Eskişehir Phone: +90 322 495 20 21 ESKISEHIR REGION İstanbul Karayolu 22. Km Çukurhisar Fax: +90 322 495 20 22 Eskişehir Çimsa - Eskişehir Hazır Beton Tesisi Operator: +90 222 411 32 00 Misis Hazır Beton Tesisi Muttalip Yolu 500. Metre - Eskişehir Fax: +90 222 411 31 31 Hacı Sabancı Organize Sanayi Bölgesi 6. Plant Eng. Semih Şafak Kandaz Cadde Misis Yüreğir / Adana Phone: +90 222 321 28 12 Çimsa Ankara Phone: +90 322 394 34 20-21 Fax: +90 222 321 18 72 Karşıyaka Mah. Fırat Cad. No: 3 Lalahan Fax: +90 322 394 34 22 Ankara Kutahya Ready Mixed Operator: +90 312 865 23 96 İncirlik Hazır Beton Tesisi Concrete Facility Fax: +90 312 865 23 95 Güzelevler Mah. Girne Bulvarı Bossa - 2 Zafer Tepe Mahallesi Selçuklu Caddesi Fab. Yanı Yüreğir / Adana No:36 Kütahya Çimsa Niğde Phone: +90 322 346 02 39 Phone: +90 274 227 05 88 Hacı Sabancı Bulvarı Niğde Fax: +90 322 346 02 49 Fax: +90 274 227 05 89 Operator: + 90 388 232 09 83 Fax: +90 312 232 09 83 Osmaniye Hazır Beton Tesisi KAYSERİ REGION Tüysüz Beldesi Yolçatı Mevkii D-400 Çimsa Malatya Terminali Karayolu Üzeri Toprakkale / Osmaniye Kumarlı Hazır Beton Tesisi TCDD Yanı Çimento Dolum Tesisi Phone: +90 328 633 24 59 Çevre Yolu Konaklar Mah. Sivas Caddesi Battalgazi Malatya Fax: +90 328 633 24 60 Kavşağı / Kayseri Operator: +90 422 841 36 77 Phone: +90 352 224 67 40 (3 lines) Fax: +90 422 841 32 30 Kahramanmaraş Hazır Beton Tesisi Fax: +90 352 224 67 44 Kayseri Yolu Üzeri 2. Km Galericiler Sitesi Çimsa Marmara Terminali Bitişiği Kahramanmaraş Anbar Hazır Beton Tesisi Sahil Caddesi Rota Limanı İçi Yarımca/ Phone: +90 344 234 13 10 Ankara Karayolu Üzeri Ambar Mevkii Körfez/Kocaeli Fax: +90 344 234 13 11 Bölge Trafik Arkası / Kayseri Operator: +90 262 528 42 33 Phone: +90 352 326 92 43 Fax: +90 262 528 42 36 Fax: +90 352 326 92 46

153 Çimsa Çimento Sanayi ve Ticaret A.Ş. 2010 Annual Report

Toki Hazır Beton Tesisi Karaman Hazır Beton Tesisi FOREIGN TERMINALS Gesi yolu üzeri / Kayseri Organize San. Bölgesi Karaman Phone: +90 352 249 12 16 Phone: +90 338 224 10 26 Cementos Espana S.A.U - Spain Fax: +90 338 224 10 92 Phone: 00 34 95 427 50 68 Nevşehir Hazır Beton Tesisi Fax: 00 34 95 427 19 36 Niğde Yolu Üzeri 7.Km. Göre / Nevşehir Ereğli Hazır Beton Tesisi Adress: Carretera de la Esclusa S/N, Phone: +90 384 232 83 95 Konya Yolu Üzeri 3. Km. Ereğli / Konya Darsena del Batan Notre, Fax: +90 384 232 82 62 Phone: +90 332 710 00 51 41011 Puerto de Sevilla / Spain Fax: +90 332 710 00 52 MERSIN REGION CSN Cement Sales North GmbH Konya Hazır Beton Tesisi Germany Yenihal Hazır Beton Tesisi Horozluhan Mahallesi Anayurt Caddesi Phone: 00 49 40 70 20 93 14 Bahçelievler Mah. 1097 sok. No:2 Yenihal No: 10 Selçuklu / Konya Fax: 00 49 70 20 93 20/22 Yolu Yalınayak Kasabası / Mersin Phone: +90 332 346 11 12 Adress: Nesserlander Strasse, 5 Emden / Phone: +90 324 235 73 14 Fax: +90 332 346 11 13 Germany 26721 Fax: +90 324 235 73 17 SAKARYA REGION Çimsa Cement Free Zone Ltd KKTC Tarsus Hazır Beton Tesisi Phone: 00 90 392 365 49 80 İşyerinin Adresi Çamlıyayla Yolu, Eshab-ı İnegöl Hazır Beton Tesisi Fax: 00 90 392 365 49 81 Kehf Yol Kavşağı, Tarsus / Mersin Cerrah Kasabası Kalburt Mevkii Adress: Serbest Liman, Gazi Magosa/ Phone: +90 324 627 27 97 Dereboyu - İnegöl / Bursa TRNC Fax: +90 324 627 17 57 Phone: +90 224 714 22 00 Fax: +90 224 714 22 03 CİMSAROM Marketing Distributie Tece Hazır Beton Tesisi S.R.L. Romania Cumhuriyet Mah. Mersin-Silifke Karayolu Adapazarı Hazır Beton Tesisi Phone: 00 40 241 585 333 Üzeri, Tece Mevki / Mersin Orta Mah. Plevne Cad. No: 31 Sakarya Fax: 00 40 241 585 333 Phone: +90 324 482 26 07 Phone: +90 264 373 72 00 Adress: Bd Mamaia, Ofice Nr 5, Nr 251 Fax: +90 324 482 26 09 Et 4, Constanta/Romania Pamukova Hazır Beton Tesisi Silifke Hazır Beton Tesisi Yenice Mah. Murualtı Mevkii Pamukova / ÇİMSA-RUS Cement Trading Kabasakallı Köyü Gökçeboyu Mevki, Sakarya Company Limited Rusya Silifke / Mersin Phone: +90 264 551 68 10 Phone: 00 7 918 66 49 344 Phone: +90 324 714 42 77 Fax: +90 264 551 41 95 Adress: Malozemelskaya Str, No: 16, Fax: +90 324 714 42 66 353900 Novorossiysk / Russia Osmaneli Hazır Beton Tesisi NIGDE REGION Camikebir Mah. Çörektepe Mevkii CIMSA ADRIATICO S.R.L. (Former Osmaneli / Bilecik Title: MED CON SRL) Italy Aksaray Hazır Beton Tesisi Phone: +90 228 469 21 32 Phone: 00 39 040 282 09 18 Organize San. Bölgesi Aksaray Fax: +90 228 469 21 31 Fax: 00 39 040 282 09 23 Phone: +90 382 266 21 16 Adress: ası Riva Alvise Cadamosto,8 Fax: +90 382 266 21 18 Bilecik Hazır Beton Tesisi 34147 Trieste / Italy 1. Organize Sanayi Bölgesi 8. Cadde No: Karaman Hazır Beton Tesisi 3 Merkez / Bilecik Organize San. Bölgesi Karaman Phone: +90 228 216 00 21 Phone: +90 338 224 10 26 Fax: +90 228 216 00 25 Fax: +90 338 224 10 92 Bozüyük Hazır Beton Tesisi Phone: +90 530 668 95 02

ÇimsaÇimsa Çimento Çimento Sanayi Sanayi ve ve Ticaret Ticaret A.Ş. A.Ş. 2010 2010 Annual Faaliyet Report Raporu 154 154

Tasarım&Üretim: İndeks İçerik-İletişim Danışmanlık Çimsa Çimento Sanayi ve Ticaret A.Ş.

Kısıklı Caddesi No: 4 Sarkuysan-Ak İş Merkezi S blok Altunizade/İstanbul Tel: +90 216 651 5300 - 651 05 00 - 651 03 85 Fax: +90 216 651 1415 www.cimsa.com.tr