INTEGRATED ANNUAL REPORT 2017

B U I L D I N G O U R F U T U R E T O G E T H E R CONTENTS

03 04 CEO MESSAGE STRATEGIC REVIEW 15 26 ECONOMIC PERFORMANCE SOCIAL PERFORMANCE 53 64 ENVIRONMENTAL PERFORMANCE GOVERNANCE 71 APPENDIX

This is TITAN Bulgaria's fourth Integrated Annual Report (IAR 2017). This report uses characteristics of the International Integrated Reporting Council's (IIRC) Guidelines to provide our stakeholders with comprehensive information by giving an overview of our business performance during 2017. The Reporting period is January 1st to December 31st, 2017.

This Report presents the financial and non-financial disclosures of all operations of TITAN Group in Bulgaria, referred to as TITAN Bulgaria, including Zlatna Panega Cement AD (the legal entity for our cement and concrete operations) and all other TITAN Group subsidiaries in Bulgaria (GSPB EAD, Double W Co EOOD, GAEA EAD). Throughout the Report, TITAN Bulgaria is used wherever we refer to combined disclosures, except for specific cases where the exact name of the subsidiary is explicitly mentioned for pertinent figures and other disclosures. The main content of the Report includes an overall presentation of TITAN Bulgaria activities, goals and achievements, quantitative data and financial information for 2017.

The IAR 2017 is independently verified for non-financial disclosures regarding the consistency to the UN Global Compact Communication on Progress principles and criteria. The audit expresses a limited assurance conclusion that the published disclosures and indicators for Health and Safety and Environmental performance have been established in accordance with the respective sectoral guidelines and protocols of the Cement Sustainability Initiative (CSI), which operates under the framework of the World Business Council for Sustainable Development (WBCSD).

For contact and additional information: [email protected] The report in PDF format can be found at: www.integratedreport2017.titan.bg 2017 PERFORMANCE HIGHLIGHTS

TURNOVER TOTAL ASSETS BGN '000 83 779 BGN '000 175 174

EBITDA CAPITAL EXPENDITURE BGN '000 7 657 BGN '000 3 454

EMPLOYEES FATAL ACCIDENTS (direct employees as of 31.12.2017) (of direct employees) 267 0 CEO MESSAGE

Dear Stakeholders,

It gives me great pleasure to share with you the first audited TITAN Bulgaria Integrated Annual Report. By ensuring a higher level of transparency through a third-party assurance, we at TITAN Bulgaria clearly articulate our commitment to give information on the company's overall performance in 2017 to our stakeholders in an honest and comprehensive manner.

In 2017, the company experienced a deterioration in its financial performance. The growth in cement demand in the country led to a 21% rise in our revenues, however, EBITDA was down with 39%, partially affected by increased fuel costs. Although there are several economic indicators showing that Bulgaria has a promising potential for future growth as its standard of living will converge to the EU average, the current cement consumption in the country is estimated to have not even reached half of the pre-crisis consumption levels.

While dealing with the immediate financial challenges we faced, at TITAN Bulgaria we remained dedicated also to our long-term commitment to the UN Sustainable Development Goals (SDGs). In 2017, we conducted a materiality assessment review to update the material issues for the company and to align their new formulation with the relevant SDGs. Structuring a sustainable development strategy on this basis, allows us to enhance our business from financial as well as from environmental, social, and governance perspectives.

Ensuring a healthy and safe working environment is more than a priority for our business – it is an integral part of our values. For this reason, we focus our continuous efforts on preventing serious incidents by persistently revitalizing and strengthening the safety culture within our areas of operation. In 2017, we revised and improved our „Lock out – Tag out – Try out” (LOTOTO) procedure, a fundamental procedure for safety operation on the working site, and provided 2 sufficient training for all our employees and contractors.

Our employees are a keystone for the company's future. We continue to provide them with equal opportunities to grow professionally and personally, fostering workplace diversity as part of our corporate culture. Being an employer of choice, we invest in attracting young employees to complement the valuable expertise of longtime members of the team. In 2017, strengthening its collaborations with academia, the company gave young talented people the opportunity to learn about processes and activities in a real work environment through plant visits and student internships.

Our determination to share value and support the sustainable development of the local communities stays unabated. We continued to strengthen and expand our long-term partnership with the „Teach for All” Bulgaria Foundation, which has improved the elementary education in the villages along the Zlatna Panega River. By the end of 2017, 19 new teachers have been working with over 500 schoolchildren from families with low socio-economic status concentrating on the pupils' motivation, functional literacy and proactivity and achieving exceptional results. In addition, the various initiatives organized by our Environmental department aimed at raising environmental awareness amongst young people is the surest and most sustainable approach to nurture care for the nature and keep the beauty of the region.

In 2017, we continued reducing our environmental footprint, mitigating climate change and protecting water quality along our Group's 2030 sustainability targets. We focused on operational excellence and encouraging environmental leadership in all management positions. Although our results in the utilization of alternative fuels and alternative raw materials did not reach our highest achievements in 2017, we still managed to save in excess of 17 000 tons of CO2 . To contribute to the circular economy, we have implemented resource efficiency in all strategic objectives of the company and used it as a basis of several new projects for utilizing waste in the clinker production as an alternative to natural raw materials. Realizing that water is essential to life and is a key resource for our industry, we have developed a sustainable approach addressing water efficiency and quality through our water treatment and recycling system based on the best available techniques.

Finally yet importantly, we realize that a company's strength to persevere, endure and inspire regardless of the challenges of time comes with a governance, in which transparency and ethics are strongly embedded. The key components that guide our professional life – respect and fairness, open dialogue, personal responsibility, open-mindedness to change, commitment to work with a focus on health and safety, are set in the Code of Conduct and the Policies of TITAN Group.

We recognize that we are living in a transformation phase where the society and the industry have to respond successfully to environmental, societal and economic changes. We feel confident that all of us, with the support of our partners, will stand up to the challenges and continue to deliver value to all our stakeholders by growing the company in a sustainable way.

Adamantios Frantzis CEO TITAN Bulgaria 03 CEO MESSAGE STRATEGIC REVIEW

01

TITAN GROUP

ZLATNA PANEGA CEMENT AD – TITAN BULGARIA

WHO WE ARE, AND WHAT WE DO

OUR STRATEGY FOR SUSTAINABLE DEVELOPMENT

STRATEGIC REVIEW 04 TITAN GROUP

Founded in 1902 as a family company in the town of Elefsina, Greece, TITAN Cement Company S.A., has built the first cement plant in Southeastern Europe. At the present time, the TITAN Group is a leading cement manufacturer with more than 115 years' experience in the industry, holding more than 40 companies and owning 14 cement plants in various locations – Greece, Southeastern Europe, the USA, South America and the Eastern Mediterranean. In Western Europe, the company has established cement distribution terminals in Italy, France and the United Kingdom.

Greece

Cement plants 1 1 Thessaloniki Greece 2 Kamari 3 Patras 2 3

1

USA USA

Cement plants 1 Roanoke – Virginia 2 Pennsuco – Florida

2

1

Brazil

Brazil Joint venture Cement plant 1 Quixere

05 STRATEGIC REVIEW Southeastern Europe Serbia 1 Cement plants Bulgaria 2 1 Kosjeric – Serbia Kosovo 3 2 Zlatna – Bulgaria 4 3 Sharr – Kosovo 5 4 Usje – FYROM FYROM 5 Antea – Albania Albania

Turkey

Joint venture

1 Cement plant 1 Tokat Turkey

1

2

EEgyptgypt

Eastern Mediterranean

Cement plants 1 Alexandria 2 Beni Suef

STRATEGIC REVIEW 06 ZLATNA PANEGA CEMENT AD – TITAN BULGARIA 1907 1966 1998 In the region of The small factory was As a result of the Zlatna Panega replaced by a large state privatization village, in a small plant named „Zlatna policy Heidelberg family factory Panega Cement”, Cement AD cement was equipped with 5 new acquired ownership produced for the first cement production of the company. time in Bulgaria. lines.

2004 The company is acquired by the international manufacturer TITAN Cement S.A. and joined the Group under the name of Zlatna Panega Cement AD.

07 STRATEGIC REVIEW WHO WE ARE, AND WHAT WE DO

Zlatna Panega Cement AD is part of the TITAN Group family and is one of the main manufacturers of high quality cement in Bulgaria. The company is vertically integrated by operating ready-mix concrete plants in 4 big cities and participates through joint venture activities in 12 gravel and sand pits and crushed stone quarries. We are one of the pioneers in alternative fuels utilization within TITAN Group. Our success is ensured by the use of the best available production technology and know-how.

TITAN Bulgaria is the common term that we use to refer to all subsidiaries of TITAN Group in Bulgaria.

Our Production Units

Ruse

Veliko Tarnovo Zlatna Panega

Sofia

Pazardzhik Stara Zagora Plovdiv

Cement Plant Ready-mix Concrete Plants Aggregates Quarries

Zlatna Panega Cement AD is the Zlatna Panega Cement AD – Gravel and Sand Pits - Bulgaria l e g a l e n t i t y f o r o u r c e m e n t Concrete Operations Department (GSPB) EAD, a 100% subsidiary of operations. In the cement plant (previously Zlatna Panega Beton Zlatna Panega Cement AD, holds located in Zlatna Panega village we EOOD) operates eight ready-mix shares in joint ventures, which crush, grind and feed the raw concrete production units in Sofia, operate 12 quarries for sand, gravel material to two clinker kilns to Plovdiv, Veliko Tarnovo and Stara and crushed stone. GSPB EAD alone produce cement clinker, which is Zagora as well as one project based holds concessions for the extraction subsequently milled and mixed with RMC unit. of aggregates in the region of additives in order to produce Kremikovtsi - Sofia Municipality and cement. In the premises of the plant, the Municipality of Slivnitsa. The the subsidiary company Green c o m p a n y h a s a p e r m i t f o r Alternative Energy Assets (GAEA) extraction of gravel and sand from EAD operates an installation for the Danube River in the Municipality p r o d u c t i o n o f P r o c e s s e d of Pirgovo. Double W Co EOOD, a Engineered Fuel that we utilize as 100% subsidiary of GSPB EAD, owns alternative fuel in our kilns. and operates a port in Ruse.

STRATEGIC REVIEW 08 OUR STRATEGY FOR SUSTAINABLE DEVELOPMENT

Our Stakeholders - Collaborations for Achieving Sustainable Development

The TITAN Group participates regularly in the work programs of the World Business Council for Sustainable Development (WBCSD) and in CSR Europe projects for evaluation of non-financial performance. It strives to use the set of tools of CSR Europe in integrating CSR into operational business practice, as well as in dealing with the socio-economic and environmental challenges that it faces.

While engaging in partnerships and collaborative action at local level to share its know-how, experience and best practices and promoting solutions to safeguard the sustainable growth of the business, communities and its stakeholders, TITAN Bulgaria also seeks to contribute meaningfully to global initiatives that the TITAN Group participates in.

Zlatna Panega Cement AD is among the first companies in Bulgaria that has joined the UN Global Compact, and implemented the 10 universal principles in the areas of human rights, labor, environment and anti-corruption.

The TITAN Group supports and coordinates events and actions in the context of UN initiatives on human rights and anti-corruption.

TITAN has been a key member of the Cement Sustainability Initiative (CSI) since its establishment by the World Business Council for Sustainable Development (WBCSD) in 2003, and actively participates in the following working groups:

· Climate Change · Biodiversity · Fuel and Raw Materials · Concrete Sustainability · Health and Safety · Water · Air Emissions · Sustainable Supply Chain

CSR Europe is a leading business network, through which the TITAN Group connects with stakeholders on issues, related to transparency, corporate responsibility, and sustainable development.

In 2015, TITAN decided to support the achievement of the most important sustainable development goals of UN 2030 for our business, at Group level and through the network of local representatives.

sustainabledevelopment.un.org/sdgs

Along with 50 other leading companies, TITAN signed the European Pact for Youth in order to actively support the European efforts in providing employment opportunities and overcoming the problem of lack of skills among the youths.

csreurope.org/pactforyouth

Detailed information about our collaborations on a global basis can be found in the 2017 Integrated Report of the TITAN Group. integratedreport2017.titan.gr

09 STRATEGIC REVIEW COLLABORATION WITH STAKEHOLDERS

Collaboration with internal and external stakeholders is a key element in the business model of the TITAN Group, which is directly connected to the values and key priorities for sustainable development of the company. The achievement of all this happens through taking responsibility for all the people, who work in the company and/or live in the operating area.

Our Stakeholders

Ide nt ify k an ey Investors and Employees d s m ta a k analysts te e ria h l o i ld ss u e r e s s

n

o i Our n

i t

s

a

Local t e

n Collaboration

e Customers e

community y

o

m

l

e

p Model l

p

m

e

m

i

e

y

g g

a e

t

g

a

n

r

t E

s

Business

partners, Regulators contractors and suppliers

Local and state Scientific authorities community

NGOs

STRATEGIC REVIEW 10 DELIVERING VALUE FOR ALL

'000 BGN 3 454 in investments for future growth

'000 BGN 45 406 to local and international suppliers

'000 BGN 8 730 to employees for salaries, pensions and social benefi ts, including additional benefi ts beyond those provided by law

We strive to deliver value to our stakeholders at every stage of our operations.

1 Products 2 Alternative fuels 3 Environmental activities

We serve the need for safe, To contribute to the preservation We are also committed to durable and sustainable housing of natural resources we utilize reducing the environmental through our products. alternative fuels and raw materials. footprint with a particular focus

on CO 2 emissions through process improvements and investments.

11 STRATEGIC REVIEW '000 BGN 2 533 on environmental improvements

'000 BGN 3 977 in taxes to national and local authorities

'000 BGN 217 in donations

4 Our employees 5 Communities

We provide a healthy and safe We make a meaningful contribution to our local environment and promote lifelong communities by supporting their sustainable learning through continuous development by building on collaborations and training. developing and investing in programs aimed at the most material issues in our region of operation.

STRATEGIC REVIEW 12 SUSTAINABILITY PERFORMANCE Focusing on Material Issues for Our Business and Key Stakeholders

As the society's expectations towards businesses increase, focusing on material issues becomes crucial for elaborating a coherent and comprehensive strategy for sustainable development. An essential step in enabling continuous improvement of this strategy is the materiality assessment process of TITAN Group's significant operations and their stakeholders. The following are the nine most material issues identified for the TITAN Group and its key stakeholders:

TITAN GROUP MATERIAL ISSUES The alignment of the priorities of the company with stakeholders' needs Financial Liquidity and Access to Funding ensures the implementation of an inclusive and consistent strategy for Environmental Management the Group's sustainability. Climate Change Circular Economy To support the Group's long-term commitment to the UN's 2030 Agenda Health and Safety for Sustainable Development, TITAN directly links its 2020 sustainability People Management and Development targets and priorities with the SDGs that have been identified by the Sustainability of Communities materiality assessment process as the most relevant to the business. This is Social and Political Risks and Instability presented in the table below. Governance, Transparency and Ethics

SUSTAINABILITY PERFORMANCE 2020 TARGETS

Specifi c net direct Specifi c dust particulates Specifi c NOx emissions Specifi c SOx emissions CO 2 emissions (g/t Clinker) (g/t Clinker) (g/t Clinker) (kg/t Product ) 1 20% 92% 53% 43% (comp. to 19902 level) (comp. to 20033 level) (comp. to 20033 level) (comp. to 20033 level)

SDGs: 12, 13, 17

Specific water Biodiversity and Energy efficiency 1 Product equals cementitious product as consumption land stewardship defined b y WBCSD/CSI. (lt/t ) Cement 2 1990 is the base year for CO2 emissions, % % in line with the Kyoto protocol. 100 50 3 % Active wholly owned sites with of the Group’s total 2003 is the base year for environmental 40 quarry rehabilitation plans clinker capacity to be covered data other than CO2 emissions. (comp. to 20033 level) Active wholly owned sites of by ISO 50001 biodiversity value with Biodiversity Management Plans

SDGs: 6, 11, 15, 17 SDGs: 7, 17

To be in the top All key operations with 0 Community Engagement 25% Plans related to material Fatalities of WBCSD/CSI members’ issues and Group priorities Employees, contractors performance in Lost Time Injuries Frequency Rate (LTIFR) and third parties for employees

SDGs: 3, 17 SDGs: 3, 4, 9, 11, 17

13 STRATEGIC REVIEW ALIGNING OUR STRATEGIC GOALS AND PRIORITIES WITH THE UN SUSTAINABLE DEVELOPMENT GOALS

Following the sustainable development policy of the TITAN Group, we at TITAN Bulgaria evaluated the importance of all matters, related to our business in terms of their impact on the company and their importance to our key stakeholders.

In 2015, we began reassuring our strategic goals and priorities through conducting a materiality assessment, the evaluation of factors we deem significant. As a next step we aligned the categorized material issues with the UN Sustainable Development Goals (SDGs).

The table shows the most material issues for TITAN Bulgaria and its stakeholders, which were updated in the materiality assessment review process in 2017, and their corresponding UN SDGs.

CATEGORY MATERIAL ISSUE RELEVANT UN SDGS

ECONOMIC CUSTOMERS / PRODUCTS

SAFETY

HEALTH

SOCIAL

PEOPLE MANAGEMENT

SUSTAINABILITY OF COMMUNITIES

ENERGY / CLIMATE

ENVIRONMENTAL

RAW MATERIALS / WATER

GOVERNANCE, TRANSPARENCY GOVERNANCE AND ETHICS

TITAN Bulgaria considers the identification of specific sustainability targets based on the Group's 2020 targets as a substantial next step in the company's sustainability strategy.

The further content of this report is structured along our performance in the above-mentioned four categories (economic, social, environmental and governance) and in relation to our progress on the material issues and the aligned UN SDGs throughout 2017.

STRATEGIC REVIEW 14 ECONOMIC PERFORMANCE

02

FINANCIAL PERFORMANCE

OUR PRODUCTS

OUR BUSINESS PARTNERS

15 ECONOMIC PERFORMANCE FINANCIAL PERFORMANCE

To assess our business performance and our progress against our strategic priorities, we use a range of financial and non- financial indicators. It is important to note that on October 10, 2016, Zlatna Panega Cement AD and Zlatna Panega Beton EOOD made a merger agreement, under which Zlatna Panega Beton EOOD merged with Zlatna Panega Cement AD, and ceased to exist as an independent legal entity. Therefore, as of 2017, all financial and non-financial indicators referring to Zlatna Panega Cement AD include information regarding our Concrete operations department.

Index Calculations (Formula) 2015 2016 2017

Return on invested capital Profit aer tax / Average invested capital 2.6% 0.4% - 4.35%

Return on capital Earnings before interest and taxes / Average equity 2.9% 0.5% - 4.2% capital (Own capital + Net debt)

Ratio net debt / EBITDA Net debt / EBITDA 1.3 2.4 3.7

Profit per share Earnings per share in BGN 0.14 0.02 - 0.21

ECONOMIC SITUATION IN BULGARIA IN 2017

In 2017, the actual GDP growth was 3.6% due to the increased export and final consumption in the country. The unemployment rate in 2017 declined for another consecutive year and reached a record low of 6.6%, while the average salary increased by 10.6% compared to 2016.

By December 2017, the annual inflation rate reached 2.8%. We expect the inflationary trend to continue during 2018. The state budget implementation for 2017 is characterized by a higher increase in revenue over expenditure due to the GDP growth and the reduced infrastructure costs. For a second consecutive year, the state budget had a surplus at the amount of BGN 0.8 billion, as of the end of the year, which was 0.8% of the GDP.

Public debt at the end of 2017 was 25.4% - lower than in 2016 (29.4%).

OVERVIEW OF THE BULGARIAN CEMENT MARKET IN 2017

The cement sales volume on the Bulgarian market in 2017 increased to 2 080 thousand tons, which was about 130 thousand tons more than the cement sales volume in 2016. Our observations show slight growth in the cement import volumes in Bulgaria in 2017.

ECONOMIC PERFORMANCE 16 PERFORMANCE HIGHLIGHTS

640 SALES VOLUME 620 622 600 Zlatna Panega Cement AD registered an 580 increase in cement sales volume. We have sold 560 566 a total of 566 thousand tons of cement 540 (compared to 526 thousand tons in 2016), 35 520 thousand tons of which have been exported. In 526 addition, the company has exported 106 500 thousand tons of clinker. 480 460 2015 2016 2017

Sales volume in '000 tons

90 SALES REVENUE 80 83.8 80.6 70 The sales revenues of Zlatna Panega Cement AD 60 69.1 increased by 21% in 2017 compared to 2016. 50 40 30 20 10 0 2015 2016 2017

Sales revenue BGN '000 000

17 ECONOMIC PERFORMANCE NET PROFIT

As a result of the merger of Zlatna Panega Beton EOOD with Zlatna Panega Cement AD, the increased fuel costs and the increased sales of clinker, the company reported a loss of BGN 6 945 thousand in 2017 (compared to BGN 735 thousand Net profit in 2016).

1800 EARNINGS BEFORE INTEREST, TAXES, 1600 16881 DEPRECATION AND AMORTIZATION 1400 (EBITDA) 1200 12631 1000 EBITDA also marked a decrease and amounted 8000 to BGN 7 657 thousand (in 2016 it was BGN 12 631 thousand). 6000 7657 4000 2000 0 2015 2016 2017

EBITDA in BGN ’000 000

35.0 NET DEBT 30.0

25.0 Due to the optimization of working capital and the reduced investments in 2017, the Net debt of 20.0 Zlatna Panega Cement AD dropped to BGN 28 15.0 040 thousand (BGN 29 969 thousand in 2016).

10.0

5.0

0.0 2015 2016 2017

Net debt in BGN ’000 000

POST BALANCE SHEET EVENTS

On April 27, 2018, additional agreements were signed to extend the concessions of the Zlatna Panega and Koritna quarries to 15 years.

There were no additional notable events subsequent to December 31, 2017, which require corrections and/or additions to the company annual financial report.

ECONOMIC PERFORMANCE 18 OUR PRODUCTS

Zlatna Panega Cement AD is a leading manufacturer of cement, concrete and aggregates. The company strives to sustain a modern, efficient and sustainable production model combining the creation of economic value with environmental protection.

As a result of the active promotion and investment in manufacturing innovation, Zlatna Panega Cement AD creates products, enhancing the quality and stability of construction materials, facilitating construction and reducing the negative impact on the environment.

19 ECONOMIC PERFORMANCE All cement types, produced by Zlatna Panega Cement AD, GREY CEMENT comply with the BDS EN 197-1 Standard.

Normal Early Strength Portland Cement - CEM I 52.5 N This product is used in the production of high-early strength and pre-stressed concrete, of concrete products and precast elements, exposed to periodic freezing/thawing, and of reinforced concrete elements with or without thermal treatment. Available in bulk

High Early Strength Sulfate Resistant Portland Cement - CEM I 42.5 R-SR Intended for use in aggressive sulfate containing waters, the sulfate resistant Portland cement is recommended for the production of concrete and reinforced concrete hydraulic structures, exposed to sulfate aggression, systematically repeated freezing and thawing, or wetting and drying, sulfur-containing gases and seawater. It is also suitable for use in concrete, intended for pressure and non-pressure installations in soils with varying degrees of filtration and sulfate aggression. Available in bulk and packed in 25 kg bags

High Early Strength Limestone Portland Cement - CEM II/A-L 42.5 R Limestone Portland cement is used in the production of small-sized concrete products and components, and such exposed to periodic freezing and thawing. It is also used in reinforced and unreinforced concrete and industrial constructions. Available in bulk and packed in 25 kg bags, in 50 kg bags for the internal market, and in 40 kg bags for export

High Early Strength Limestone Portland Cement - CEM II/B-L 32.5 R This Limestone Portland cement type contains a higher limestone level (up to 35%) and is suitable for various building activities – flooring, masonry, plastering works, etc. Available in bulk and palletized in 25 kg and 50 kg bags

Low Heat Slag Cement with Normal Early Strength - CEM III/A 42.5 N-LH Low heat cement is characterized not only by its low heat of hydration, but also by a slow increase in the early strength characteristics, high sulfate resistance and reduced frost resistance. It is recommended for the production of large-sized (solid) concrete and reinforced concrete parts, such as large-sized elements of tall buildings, concrete dams, etc

Available in bulk

Normal Early Strength Pozzolanic Cement - CEM IV/A (P-V) 32. 5 N Pozzolanic cement is produced by grinding together Portland cement clinker, pozzolans and fly ash. Renowned for its great water resistance and water repellent performance, pozzolanic cement is one of the basic constituents of concrete and reinforced concrete elements, used under water or exposed to high humidity

Palletized in 25 kg and 50 kg bags

Normal Early Strength Pozzolanic Cement - CEM IV/A (P-V) 42. 5 N This Pozzolanic cement type has a lower Portland cement clinker (65 to 89%) and a higher pozzolans and fly ash (11 to 35%) content. It is also used in components, exposed to or constantly under water.

Palletized in 25 kg and 50 kg bags

ECONOMIC PERFORMANCE 20 MICRONIZED LIMESTONE

Micronized Limestone is a finely ground, natural calcium carbonate. This high quality fine filler has a wide range of applications, such as production of building materials: asphalt, concrete and dry construction mixes. It is also used in agriculture, for purification of sulphur-containing TPP exhaust gases, in glass production, in production of paper, paint, plastics, etc. Available in bulk

CONCRETE PRODUCTS

Zlatna Panega Cement AD – Concrete Operations Department offers a wide range of products used for reinforced and non-reinforced constructions. Our ready-mix plants produce the following classes of concrete established and certified in accordance with the BDS EN 206 and BDS EN 206/NA Standards.

In terms of compressive strength class, our concrete ranges from C8/10 ÷ C50/60 and S1 ÷ S5 classes of slump (consistence). As to the maximum diameter of the aggregates in concrete, our concrete mixes have Dmax = 11.2 mm and Dmax = 22.4 mm (the nominal upper aggregate size of the coarsest fraction Dmax is used for classification).

For structures and facilities that have intermittent or permanent contact with water we offer the following water tightness classes: Cw 0,4 ÷ Cw 1,0. Clients choose the class depending on the thickness of the structure and the hydrostatic pressure value. The concretes of the frost resistance classes (Cfr75 ÷ Cfr200) are used in structures and facilities exposed to frequent freezing and thawing.

We produce exposure classes concrete related to environmental actions, intended for constructions exposed to the following environmental risks: corrosion induced by carbonation (XC1 ÷ XC4), chlorides other than from seawater (XD1÷ XD3), chlorides from seawater (XS1÷ XS3); freeze/thaw attack with or without de-icing agents (XF1÷ XF4); chemical attack (XA1÷ XA3).

The company also works with customers' prescriptions.

FLOOR SCREED MORTARS We manufacture floor screed mortars based on cement and in full compliance with the BDS EN 13813. We offer the following floor screed mortars classes as per compressive strength: C12, C16, C20, C25, C30.

CEMENT BOUND GRANULAR MIXTURE T h e c e m e n t b o u n d g r a n u l a r m i x t u r e w e p r o d u c e c o m p l i e s w i t h t h e B D S E N 1 4 2 2 7 - 1 . This product is used for construction and maintenance of roads, airports and other traffic-intensive areas.

21 ECONOMIC PERFORMANCE OUR NEW CONCRETE PRODUCTS

In 2017, we have developed the following concretes for special application in highly demanding projects.

Low Heat Concrete The Low heat concrete was developed for the special needs of two highly demanding construction sites in Sofia – Sky Fort Skyscraper (205 m) and Zlaten Vek Tower (126 m). The big and deep foundations required concrete with low exothermic properties, due to the danger of cracks. The new concrete was produced with a specially developed type of cement CEM III/A 42, 5 N – LH.

Pouring of 3 000 m 3 foundation of the Zlaten Vek Tower. Torcrete C 25/30 (Dmax=8mm) S4 W0.8 Bo3.0 XC2 C 30/37 (Dmax=8mm) S4 W0.6 Bo3.0

Torcrete is developed for the construction of metro tunnels in Sofia. Due to project time restrictions, this concrete is produced 24/7.

High strength concrete Concrete type C 50/60 was developed for the special needs of the Sky Fort Skyscraper (205 m). The concrete is designated for vertical elements and the anti-seismic core of the building. This product is produced with cement CEM I 52, 5 N and polycarboxilate admixture.

Pouring 9 000 m 3 foundation of the Sky Fort Skyscraper

ECONOMIC PERFORMANCE 22 OUR BUSINESS PARTNERS – CUSTOMERS AND SUPPLIERS

CUSTOMERS

In 2017, the cement market showed a slight rise in cement consumption, despite the expectations for a significant positive change in market trends. The predictions of market growth were supported by the increased demand for housing in the big cities as well as the advancement of the running EU-funding Programming Period 2014-2020 with expected considerable investments in the national infrastructure of Bulgaria - construction of highways, railway tracks and major environmental projects.

Despite the positive trend in market consumption, TITAN Bulgaria carried out its operating activities in the context of sharpening competition.

Our main priority during the year was again satisfying the needs of all our customers. Sales team representatives focused on more frequent customer visits to improve service and get feedback. The efforts of the Sales and Logistics departments were highly successful in maintaining constant contact with all customers to prevent any supply and quality issues.

We have also managed to sustain the high quality of the products and supply service in the cement bulk consumption. In this respect, we received commendation from our partners represented by multinational companies in the country such as Bramac, Semmelrock Stein+Design, Baumit, etc.

In 2017, we attracted as partners companies involved in major infrastructure projects such as the construction of the Struma Motorway, Sofia Metro, etc.

In the packaged cement market, we continued following our strategy for selling products in different price segments to satisfy the needs and requirements of customers from different groups.

To guarantee our clients' safety during the service, we have introduced a system for constant monitoring of our cement delivery vehicles' technical condition.

23 ECONOMIC PERFORMANCE SUMMARY STATISTICS

56 written enquiries from companies about cement products purchase

43 of the companies that had made enquiries were attracted as our clients

7 of them have signed long-term contracts for cement purchase with the company

CUSTOMERS' SATISFACTION STUDY

42 questionnaires filled in by different clients from Sofia and the Southwest, the North and the South region.

34 of them are clients of Zlatna Panega Cement AD for more than 3 years.

53% of the respondents assessed the quality of our cement as VERY GOOD.

About 81% of the respondents evaluated the customer service of our Sales Department as VERY GOOD, while the rest evaluate it as GOOD.

The efficient and easy communication with all departments, quality and timely service, responsiveness to the clients' needs, adequate feedback, promptness, good customer relations and accuracy of the staff were pointed as a plus of the relations with the Sales Department at every level.

The respondents pointed as very appreciated the following advantages of our Logistics Department: fast and quality deliveries, adequate reactions to questions and issues, good organization of the logistics process of execution of bulked and packaged cement orders, which leads to reliability of the deliveries and earned trust.

Excellent cement quality is the benefit of our products that our customers value most.

ECONOMIC PERFORMANCE 24 SUPPLIERS

Zlatna Panega Cement AD maintains a very well organized supply chain, in which special attention is given to suppliers. Methods of selection, control and evaluation of suppliers are governed by the Code of Conduct for Procurement of the TITAN Group, in which the categories of quality, reliability, adaptability and location of business are the key criteria of assessment. To ensure selecting and working with suppliers, which are consistent with TITAN's values and standards, we require our partners in the supply chain to respect our health and safety policy, labor and human rights, and environmental standards and regulations.

In line with its corporate social responsibility policy to support local communities and local businesses, the company makes effort to invite all local suppliers that can offer a required product or service to a tender bidding process. In addition, while selecting the most acceptable bid, we give priority to local suppliers, if their offers are approximate to the price of a supplier who is not operating in the region of the Zlatna Panega plant.

The company works also with international suppliers providing goods, such as fuels, specialized spare parts, and cement paper bags. The deliveries of these international suppliers are centralized.

NUMBER OF MAJOR NUMBER OF MAJOR % LOCAL SUPPLIERS TOTAL NUMBER OF SUPPLIERS LOCAL SUPPLIERS LARGE CONTRACTS

47 11 23.40% 62

25 ECONOMIC PERFORMANCE SOCIAL PERFORMANCE

03

OCCUPATIONAL HEALTH AND SAFETY

PEOPLE MANAGEMENT

SUSTAINABILITY OF COMMUNITIES

SOCIAL PERFORMANCE 26 OCCUPATIONAL HEALTH AND SAFETY

Health and safety are material issues that affect the lives of our employees and contractors every day, as well as their families and communities. TITAN Bulgaria is committed to maintain the best working environment conducive to developing quality workforce, enhancing efficiency and productivity and ensuring physical and mental wellbeing. We also urge our contractors and other business partners to adopt similar policies.

27 SOCIAL PERFORMANCE OUR COMMITMENT TO SAFETY

In order to ensure our commitment to safety at work, we implement effective programs covering a variety of issues that focus on the working conditions.

We started the positive practice of reporting, investigating and accounting incidents without consequences (near misses) for the employees, equipment and the environment in 2010. In 2017, 166 near miss and incidents reports have been submitted by employees and contractors. Each report was reviewed, investigated and the identified occupational risks were communicated to the employees and eradicated. The monthly rewarding of the participants in eliminating the hazards has been successfully applied as a motivating method since 2014. The incorporation of the practice of reporting, investigating and accounting incidents without consequences in the Concrete operations department of the company is currently in process.

The procedure „Permit to Work” ensures that authorized and well-qualified and trained people have identified the potential risks and these risks have been minimized through the use of appropriate safety regulations and measures of control. This procedure was fully revised in 2017. During the year 6 755 permits were issued, incl. 2 071 electrical permits to work.

The „Lock out – Tag out – Try out” (LOTOTO) procedure ensures the identification of all potentially dangerous sources of energy for each facility or technological area. During operation all the identified sources are turned off, marked and locked by the supervisors in charge and by all employees in that particular work station. In 2017, the LOTOTO procedure was revised, reassessed and improved.

The company also monitors its contractors' compliance to the health and safety procedures. A number of services are provided on the territory of the plant by a variety of specialized companies. To establish sound cooperation with reliable companies, we have launched a contractors' database. Apart from the assessment of the services' quality, the database comprises the level of compliance to our health and safety programs.

In 2017, we continued the practice of safety audits of production areas and processes. 12 teams, including representatives from different departments and external organizations conduct the audit in 12 areas of the plant. Every month each team checks the conditions in one of these areas. They complete a report with the identified dangerous conditions and actions of employees. The reports are being analyzed and measures for eliminating the risks are taken.

To guarantee our direct employees' and contractor employees' safety, we regularly inspect, mark and ensure the reliability of high-risk facilities in the plant, as well as provide protective equipment and supervise its use by all employees. Our fire-fighting system is being inspected monthly. Fire-extinguishers are regularly maintained and reloaded. We have also arranged a 24-hour available team, which is ready to react in the initial stage of fire.

In 2017, there were three lost time injuries (LTIs) in TITAN Bulgaria. The first incident had a lighter impact (ankle injury during lunch break), whereas the second was a serious fracture in the neck caused by falling from small height during cleaning of a belt conveyor, and attributed to sudden dizziness. The third was a thigh injury of a direct employee from our Concrete operations department. This incident occurred during the works on the Hemus highway project. All incidents were thoroughly investigated and corrective measures were taken to prevent other similar incidents in the future.

SOCIAL PERFORMANCE 28 PERFORMANCE/YEAR 2015 2016 2017

Fatalities 1 0 0 0

LTI 2 1 0 3

Safety Audits 155 157 151

Near Misses 3- Direct Employees 7 4 6

Near Misses 3- Contractors 0 6 4

Permits to Work 5 998 7 595 6 755

H&S Training Hours 7 842 9 517 9 400

1 Fatality - A death resulting from a work-related accident, with no time limit between the date of the accident and the date of death; fatalities are reported for direct employees, contractors/subcontractors and third parties as defined by the CSI Health and Safety Measuring and Reporting Guidelines (ver. 4.0, 2013)

2 LTI (Lost Time Injury) - Injury at work is any injury due to which an employee is absent from work, for one or more working days, excluding the day of injury as defined by the CSI Health and Safety Measuring and Reporting Guidelines (ver. 4.0, 2013)

3 Near Misses – Reported incidents with no consequences as defined by the TITAN Guidance in place (numbers for 2015 and 2016 adjusted according to the updated TITAN Guidance as of 2017)

29 SOCIAL PERFORMANCE OUR COMMITMENT TO HEALTH

Health is an integral part of the company's commitment to caring for its employees' well-being. Apart from considering the health hazards of the working environment and taking measures to avoid them, the company has established additional health practices.

In order to safeguard the health of our employees in the Zlatna Panega plant to the maximum extent, we have built a medical center on the plant premises, which is fully equipped. A medical specialist is available 24/7 in the center in case first aid or a consultation on a health issue is required.

A new Health Policy was announced to the personnel by the management of Zlatna Panega Cement AD in 2016. The created Health Program became an additional measure for securing a healthy working place and protecting the health of every employee. In 2017, materials and information boards on a variety of health issues were positioned in the plant.

Тhe company also provides annual preventive medical check-ups for all its direct employees, adapted to their health hazard exposure and other specific needs.

During а routine safety walk asbestos containing plates were detected in the cable channels. Because of the health hazards of asbestos exposure, immediate action was taken. Due to the specific treatment needed for this material, we hired a certified company. All permissions according to the Bulgarian legislation were prepared before starting. The asbestos-containing plates were removed, packed and exported from the plant territory.

Removing asbestos-containing plates in full compliance with the safety regulations

CASE STUDY NEW H&S INITIAL BRIEFING VIDEO

We updated the video materials used in the initial briefing of visitors in the plant to reflect the technical and organizational changes in the production process. The video materials are bilingual – in Bulgarian and in English. The materials are designated for visitors as well as newly recruited employees.

SOCIAL PERFORMANCE 30 HEALTH AND SAFETY – GAEA EAD

Due to the specifics of the alternative fuels (AF) business, the main focus in the field of health and safety is on people continuous development. Targeted trainings were done based on business, individual and legislation needs not only for own personnel but also for permanent contractors. In addition, several improvements were done along the PEF line, such as mechanical LOTOTO, blocking systems, safety covers and fences, access platforms to service the equipment, etc.

During the year, several external audits were done by VDZ (AF Quality control), TUV (ISO integrated management system for quality, safety and environment protection), Regional Environment Authorities in Pleven (compliance with waste legislation), TITAN H&S Dept. All of them proved very good status of GAEA operation, as well as full compliance with legislation, best practices and procedures.

31 SOCIAL PERFORMANCE OCCUPATIONAL HEALTH AND SAFETY TRAINING

The concept that health and safety matters are of vital significance for our progress in life, is a guiding principle in our business philosophy. Well-trained and informed employees establish a solid foundation for work safety and reduced accident risks.

In 2017, 9 400 man-hours of health and safety trainings have been conducted for TITAN Bulgaria key managers, heads of departments and employees, directly employed in the company, whereas 3 032 man-hours of trainings have been attended by contractors' employees.

Training of key managers and heads of departments Training of contractors

Training for conducting an initial H&S briefing All contractor employees are invited and encouraged to participate in the monthly health and safety Discussions on the changes in the H&S legislation meetings

Defensive driving training for the employees Fire-safety training driving company cars Training on the renewed Permit to Work and LOTOTO procedures Training of employees In 2017, an average of 14 man-hours of trainings per Qualification trainings: liing equipment training; employee were organized for the contractors' maintaining of natural gas equipment; electrical safety employees qualification, etc.

Working with biological agents (in cooperation with GAEA EAD)

Monthly H&S meetings with all employees on the following topics: „Safety signs under Bulgarian law”, „Fire safety and fire extinguishers”, „Personal Protective Equipment”, „Emergency plans”, „Rules and norms for manual work with weights”, “LOTOTO”, “Working with compressed gas cylinders”, „Safety at the office”, „Crystalline silica”, „How to avoid specific dangers at work”,

„Training for the prevention of serious accidents” – the program, commenced in 2016, features a series of narrative sessions, presenting serious incidents at various TITAN Group locations over the years, and analysis of the actions and decisions that have led to these accidents. In 2017, the program focused on: „Overhead and underground power lines”, „Falling rocks” and „Rollovers”

„Protection against falling” training – includes a cycle of 4 trainings, first of which was conducted in 2017

Weekly training – 54 media-supported discussions, held for the executive staff, complemented with the best practices of CEMBUREAU

First-aid training of employees participating in the first- aid teams

Training on the renewed Permit to Work procedure

SOCIAL PERFORMANCE 32 WORKPLACE SAFETY

In 2017, an audit on cement carrier trucks and other company vehicles was conducted. This audit has become an annual practice to ensure vehicles' technical reliability and reduce winter driving risks.

The alcohol testers installed at the plant entry point contribute to dealing with workplace incidents, absenteeism and reduced productivity caused by alcohol abuse.

In 2017, the following workplace safety projects were completed: installation of safety railings and barriers in the Mills Department; secure service areas and staircases constructed for the Preheater tower, and in the Kilns and Raw mills department.

33 SOCIAL PERFORMANCE STAKEHOLDER ENGAGEMENT ON HEALTH AND SAFETY

The employees of our Health and Safety Department are members of the Health and Safety Experts club in Pleven, where they discuss changes in health and safety legislation, and share best practices.

The company is also actively participating in the Health and Safety Association.

A representative of the department is a member of the Bulgarian Chamber of Mining and Geology. This Chamber works on safety regulations in the mining industry.

In 2017, we conducted again a one-day training for students from the Medical Academy in Pleven, who were acquainted with the cement production technology, occupational risks - dust, noise, microclimate, and good practices for preventing risks.

SOCIAL PERFORMANCE 34 PEOPLE MANAGEMENT

We believe that the employees are a key part of our success, so we strive to build long-term relationships with them as well as with our contractors and the local community. Care for their development is our priority and we strive to provide equal opportunities for professional and personal development. We are confident that the knowledge, skills and competencies that result from the long working experience of the employees in TITAN Bulgaria, are a pledge for the company's prosperity.

35 SOCIAL PERFORMANCE PERFORMANCE/YEAR 2015 2016 2017

Average Employment 287 289 295

New Hires 22 16 32 1

Share of women in employment 27.62% 26.99% 27.12%

Share of women in management 37.14% 35.29% 32.43%

Employees from local community 84.27% 85.47% 84.75%

Training hours 12 244 18 359 18 379

37% of our employees have over 10 years of service in TITAN Bulgaria, 18 % - between 10 and 20 and 9% - over 30 years.

9% 21% Percentage of employees by years of employment in TITAN Bulgaria 18% up to 5 yrs 15% 5 to 10 yrs 10 to 20 yrs 20 to 30 yrs over 30 yrs 37%

SOCIAL PERFORMANCE 36 TITAN Bulgaria also seeks to invest in attracting new employees to complement the valuable expertise of longtime members of the team. Compared to the previous year, in 2017, the proportion of newly recruited employees under 30 is nearly doubled from 37.5 % to 62.5% of all new hires.

6.25%

Age distribution of employees newly hired by TITAN Bulgaria owned companies in 2017

31.25%

under 30 years 62.50% 30 to 50 years over 50 years

We are engaged in the care of local communities - traditionally, our employees live near the location we are developing our business. In 2017, 84.75% of the employees of TITAN Bulgaria are local residents.

TITAN Bulgaria is committed to providing equal opportunities for all. Gender and age diversity are recorded in hiring (new employees) and in management. In 2017, again the highest percentage of women in management positions was registered in Serbia (35.71%), Bulgaria (32.43%) and FYROM (28%). TITAN Bulgaria is second in the Group, where the average rate for this indicator is 15.69%.

Men

Women Gender distribution of employees on managerial positions in TITAN Bulgaria 2017

32.43% 67.57%

37 SOCIAL PERFORMANCE The largest share of female employees in TITAN Bulgaria is employed in the Production and Quality sectors (30%), Finance and IT and Administration (19%). Compared to 2016, there is an increase of 3% for Production and Quality, 1% for Finance and IT and 7% for Administration. In 2017, 43.75% of all newly hired direct employees are female, whereas the total percentage of women in TITAN Bulgaria corresponds to 27.12%.

5% 15% 12% Percentage of women by department in TITAN Bulgaria 2017

Management Production and Quality 19% Finance and IT 30% Administration Sales Human Resources 19%

SOCIAL PERFORMANCE 38 TRAINING AND DEVELOPMENT

As an employer, TITAN is aware that the talent, skills, personal qualities and creativity of the employees have a strong impact on the Group's performance. The investment in employee development remained a top priority in 2017 - more than 80% of the Group's employees participated in training programs. The emphasis in the programs is again in the area of health and safety. An increase of the training in the categories of environmental protection, compliance with the Code of Conduct and Human Rights Policy is being observed.

Increasing the competence of our teams and the continuous learning are a key indicator for the achievement of our business goals. In the past 2017 TITAN Bulgaria's investments in trainings amounted to a total of 18 379 man-hours - a strong trend continuing from 2016, when a total of 18 359 man-hours were invested in trainings.

16000 14000 Total number of man-hours of trainings for direct 12000 employees in TITAN Bulgaria in 2017 10000

8000 15603 Zlatna Panega Cement AD 6000 Concrete operations department 4000 GAEA – Green Alternative Energy Assets EAD 1620 1060 2000 Double W Co EOOD 96 0

We continue to develop the technical competence of our employees. In 2017, 4 006 man-hours were generated in this key business category. At the same time, attention is paid also to non-technical trainings (1 125 man-hours), foreign languages (3 022 man-hours) and people management (687 man-hours).

139

3022 4006 Total training hours 1125 per category Environmental Protection 687 Technical Trainings Health and Safety Management Trainings Non-technical Trainings Language Trainings 9400

39 SOCIAL PERFORMANCE Compared to 2016, in 2017 there is a drastic increase in the man-hours dedicated to technical training (141.76 %) and environmental protection (82.89 %).

In average, 62 training hours per employee were invested in 2017. There is also a positive trend towards a higher share of women who received training – the ratio trained women/trained men increased from 35.15% in 2016 to 40.18% in 2017.

We are committed to train both - our directly hired employees and the employees of our contractors. In 2017, the contractors' employees received training for 3 139 man-hours, 3 032 of which dedicated to health and safety topics and 107 - to environmental protection.

107

Total number of man-hours of training of indirect employees

Health and Safety Environmental Protection

3032

Health and safety trainings remain a key part of TITAN Bulgaria's training program, and in 2017 this category represents 51% of all trainings for direct employees (9 400 man-hours).

Direct employees

Indirect employees Total hours of Health and Safety 9400 trainings in TITAN Bulgaria

3032

SOCIAL PERFORMANCE 40 Cmentors Industrial Program

The Cmentors industrial program, launched in December 2016, continued in 2017. 22 staff members of TITAN Bulgaria spent a total of 2 182 training hours in training. 856 hours were spent in lectures and field work. The remaining 1 326 man hours were generated by the self-training of participants in the internet-based VDZ program (Verein Deutscher Zementwerke - Association of German Cement Producers).

The duration of the training was 1 year and covered three main modules on the following topics:

Quarry, crushing and preparation of raw materials

Grinding, homogenization and processing of raw materials and solid fuels

Pre-heater tower, calcination and emissions

Cmentors is a program focused on learning by experience. A pre-formed focus group went through field training at the end of each module. It included tours of the cement plant, during which the participants mapped out specific steps for improvement of material quality and facility operations.

At the final stage of each module, the group prepared a report with suggestions for operations improvements.

41 SOCIAL PERFORMANCE THE PACT FOR YOUTH

In 2017, TITAN Bulgaria continued to work with young people, giving them the opportunity to learn about processes and activities in a real work environment. In March, we invited teachers and students from the Technical University of Sofia to visit the cement plant in the village of Zlatna Panega.

Our guests were acquainted with the projects for the modernization of the electrical equipment at the plant as well as with the main activities related to the electrical maintenance and automation of the machines. The Head of Quarry and Crushers Department, the Head of Electrical Maintenance, the Head of Process Automation and the Deputy Head of Mechanical Maintenance of the Plant introduced the students and the teachers to their activities through their fascinating presentations.

The Human Resources Department has provided valuable advice to young professionals on how to prepare and successfully present a job interview, including how to write a resume and a cover letter. The students also learned about the internship opportunities that the company offers.

The visit ended with an exploratory tour, during which students had the opportunity to see the processes and work at the factory, as well as ask questions to the colleagues who accompanied them.

INTERNSHIP PROGRAM 2017

In 2017, 15 students took part In the traditional internship program of TITAN Bulgaria. They were trained and developed applied skills in a real work environment in the following departments:

Electrical maintenance Environmental

Investments (Civil Engineers) Information Technology

Production and Quality Business Projects

Our internship program is aimed at active and ambitious young people - 3rd and 4th years of the following degrees: Silicate Technologies, Electrical Engineering and Electrical Equipment, Mechanical Engineering and Technology, Construction of Buildings and Facilities and Finance.

1 1 4 Distribution of interns by 1 department in 2017

Electrical maintenance Investments (Civil Engineers) 2 Production and Quality Environmental Business projects Information Technology 6

SOCIAL PERFORMANCE 42 SUSTAINABILITY OF COMMUNITIES

Due to the remoteness of the cement plant from big cities, our company has strong interaction with local communities. Developing and sustaining a working relationship with the communities where we operate is fundamental to building trust with local stakeholders. Therefore, we have acknowledged the sustainability of communities as a material issue. To ensure that we have a positive impact on society and the local communities' sustainable development, we have not only engaged in collaborative projects, but have developed our own. While taking action at local level, we also seek to contribute meaningfully to global initiatives such as the European Pact for Youth.

43 SOCIAL PERFORMANCE ECOLOGY AND ENVIRONMENTAL PROTECTION PROJECTS

TITAN Bulgaria engages with communities to protect biodiversity and preserve local flora and fauna in the beautiful region where the cement plant operates. We have established traditions in working with local schools in order to raise the level of environmental education among youngsters through organizing a variety of projects and initiatives. We believe that making young people feel closer to nature while exploring its beauty is a sustainable way of enhancing their ecological culture.

Annual River Cleaning – A new tradition in the region

In spring 2017, we conducted for a fih consecutive year the annual river cleaning campaign. Organized for the first time in 2013, today this initiative has become a tradition, uniting the efforts of a constantly increasing number of volunteers for a cleaner environment and a better image of the region. Among the participants, removing litter from the banks and bed of the Zlatna Panega River were employees of TITAN Bulgaria, students and teachers from the local schools, representatives of fisher clubs and of other partnering organizations and institutions. The volunteers from the village of Rumyantsevo cleaned not only the banks of the river, but also the school, the kindergarten and the park in their village.

The participants collected separately combustible and non-combustible waste. At the end, the combustible waste was transported to the cement plant to be utilized in the kilns.

SOCIAL PERFORMANCE 44 Zlatna Panega River Stocking

In May 2017, together with The Old Otters Fishing Club – the largest fishing club in Bulgaria, we ran our third campaign for restocking the Zlatna Panega River with 10 000 baby fish of the endangered Balkan trout (Salmo trutta fario). The annual river stocking also contributes to the sustainable development of the villages along the river by attracting tourists fond of trout fishing.

KARST PROTECTION

Zlatna Panega Cement AD operates in a beautiful karst region, close to the largest karst spring in Bulgaria - Glava Panega. Recognizing its responsibility for the protection of the karst territories, the company joins a variety of karst protection initiatives. Their main initiator is the National Institute of Geophysics, Geodesy and Geography at the Bulgarian Academy of Sciences (BAS).

45 SOCIAL PERFORMANCE „Travelling School of Karst“– Our Partnership with BAS

In September 2017, TITAN Bulgaria supported for the second time the initiative „Travelling School of Karst’’ of the National Institute of Geophysics, Geodesy and Geography (NIGGG) at the Bulgarian Academy of Sciences, as the plant in the village of Zlatna Panega was included in the project program. During their plant visit the participants were acquainted with the production cycle and the environmental policy of the company, aimed at keeping the integrity of karst formations and the protection of biodiversity in karst regions.

The Travelling School of Karst is part of the ProKARSTerra-Edu specialized educational strategy developed by the Experimental Laboratory of Karstology at NIGGG-BAS in international cooperation and with the support of UNESCO. Participants in the project are teachers and students with declared interest in karst from Bulgaria and partner countries. The program of the travelling school includes visits of protected natural and cultural-historical sites where participants have the opportunity to learn about various karst forms: caves, surface karst complexes, plateaus, karst springs, marshes, etc. The organized lectures, discussions, work with research facilities, measurements, analyzes, and field experiments help create rich and lasting knowledge of the origin and nature of the karst, protected karst areas and their biodiversity.

Student Ecofilm

A direct result of the company's efforts for environmental education of the young people in the region is the film on ecological topics prepared by pupils from the village of Zlatna Panega. The film is a product of the pupils' participation in the „School Miracles” project. In this project, the participants choose an issue of importance to the local community and work to create solutions for this issue. The team of pupils from Zlatna Panega chose to address the issue of the clean drinking water in their village and the role of each member of the local community in its preservation.

To support the students in their initiative, the company introduced the project organizers with a karst specialist at NIGGG-BAS. The expert organized a tour tracking the water flow, where he acquainted the participants with the formation of rocks in their village, told them about the underground tunnels and karst waters and how they are related to the water they are drinking.

As a result of the training, the students learned that the waste dumped on the ground pollutes the groundwater that flows into the Glava Panega spring, which is a source of drinking water for the village of Zlatna Panega. They organized a waste cleaning campaign and, in their educational ecofilm, called for local people to follow their example - to clean the place where they live and not to contaminate it, because they pollute the water they drink themselves.

SOCIAL PERFORMANCE 46 ACCESS TO QUALITY EDUCATION

Empowering young people with skills for jobs has been identified as a material issue for our local stakeholders. By supporting the right of access to quality education for youths, the company contributes to strengthening the local community and helps tackling issues such as unemployment and a high percentage of people living below the poverty line in the region of operation of Zlatna Panega Cement AD.

47 SOCIAL PERFORMANCE OUR PARTNERSHIP WITH THE “TEACH FOR BULGARIA” FOUNDATION

In 2013, TITAN Bulgaria involved the „Teach for Bulgaria” Foundation in its initiatives in the region and started its long-term support for the right of education for every child.

The mission of Teach for Bulgaria is to encourage and prepare capable and ambitious young people to become inspiring teachers and leaders. Within a two-year program of professional and leadership development, they receive targeted training and support to work as teachers of pupils from vulnerable communities in schools all over Bulgaria. The organization believes that every child in the country should learn from teachers who support their students and help them unleash their full potential.

Zlatna Panega Cement AD supported both financially and through establishing relationships with local principals the Teach for Bulgaria program in the Lovech region. By the end of 2017, 19 new teachers have been working with over 500 schoolchildren from families with low socio-economic status in four elementary schools in Yablanitsa Municipality in the villages of Oreshene, Brestnitsa, Zlatna Panega and Dermantsi and one elementary school in the village of Cherni Osam in the Municipality of Troyan. For five years in a row, the teachers, participating in the program, have been focusing their efforts on the development of functional literacy, entrepreneurial and communication skills of the students, providing them with opportunities to learn through interesting and entertaining methods and extracurricular activities. Many teachers continue to teach or remain active advocates of education in the region aer the two-year program.

Impact of TITAN Bulgaria and Teach for Bulgaria Foundation partnership on the education in the Lovech region:

Increase in school attendance through regular interactions with parents, focused on addressing students' motivation to attend school and see the value of education.

Increasing students' reading literacy through interactive games, extracurricular activities like reading clubs and competitions, and providing additional aer school support to students who have fallen behind.

Increasing students' results on subject tests from the diagnostic test taken at the start of the school year to the final assessment taken at the end. Historically, students' results improve by 10-15% in a school year on average.

Students from the villages continue their education in high-schools in the region, including in language and professional high-schools. For many of the students, they are the first in their families to continue their studies past grade 7.

Developing local leaders among the students participating in extracurricular activities. These activities also help students improve their reading literacy, emotional intelligence, team work and resolving complex issues skills.

SOCIAL PERFORMANCE 48 „Gramotko’’ - a literacy competition

In May 2017, in the Brestnitsa village, the Gramotko competition was held for the first time. Four teams of pupils from three primary schools in the villages of Zlatna Panega, Brestnitsa and Oreshene competed in three rounds: reading, writing and mathematics.

The initiator of the competition is a teacher from the „Teach for All” program, working in the Brestnitsa village. She included her enthusiastic colleagues, who worked in the Zlatna Panega and Oreshene village schools. The pupils (1st – 4th grade), who wanted to participate in the competition, were strongly motivated to work hard during the school year. The competition encouraged the pupils to develop their team work skills as well as their ability to rise to challenges.

„Gramotko” was exciting for the pupils and for their parents as well, who were proud of their childrens' results and grateful to their teachers for all the efforts. The contest also motivated the rest of the teachers at the Brestnitsa school which is a step in the development of the whole school.

Case Study

49 SOCIAL PERFORMANCE „School Miracles’’ – Care for my Community

School Miracles is an initiative of Teach for Bulgaria teachers working in the villages of Brestnitsa, Oreshene and Dermantsi, which started as a series of events for the local schools, but in 2017 it grew into a long-term program for students' leadership. At present, it includes student leadership teams from 11 villages and towns in the municipalities of Yablanitsa, Lukovit and Troyan. Most of the students in the program come from poor families and a problematic social environment. School Miracles aims to develop in them the skills and attitudes to help them analyze and find solutions to problems in their communities. Within the project the students choose an issue, which is important for their own community.

Pollution and unregulated landfills, non-compliance and vandalism in school, early marriages – these were some of the issues the students chose to work on. The pupils chose different means to tackle the issues and create awareness in the local community – discussions, presentation of the problem through a theatre play, which the participants wrote, building a fitness site, organizing cleaning campaigns, etc. With the help of volunteer mentors, purposeful trainings, diverse activities and School Miracles team support the students are encouraged to initiate the change they want to see in their community and birthplace.

Case Study

SOCIAL PERFORMANCE 50 STRATEGIC PARTNERSHIP FOR THE BULGARIAN EDUCATION

The experience gathered at local level allows TITAN Bulgaria to share good practices and to extend its support for education at national level. In 2017, TITAN Bulgaria joined the Education Bulgaria 2030 Association, thus following the commitment of TITAN Group to the European Pact for Youth that sets as a main goal the improvement of opportunities for social inclusion and professional development of the European youth. The association unites the efforts of more than 40 organizations from the public, private and social sectors, around a common vision for achieving the desired improvements in Bulgarian education quality and access through monitoring the evolution of key indicators, promoting best practices through informing and advocating for relevant policy changes.

TITAN Bulgaria actively participates in the working group for advocacy of educational policies in front of relevant institutions as well as in strategic meetings for Bulgarian education, organized by Education Bulgaria 2030.

RAISING AWARENESS ON HEALTH AND SAFETY TOPICS

Early starting education on health and safety ensures that it will become a natural part of children's life and games. Therefore, we share our experience in the field of health and safety through initiatives organized in collaboration with local schools to raise the awareness of the pupils.

In 2017, we conducted a one-day training in the plant for students in 10th grade from the Vasil Levski secondary school in Yablanitsa. They were presented the topics „Safety training for young people” and „H&S Good practices in Zlatna Panega Cement”. A tour of the plant was also organized for the students.

Training of the youngest pupils (1-4th grade) on H&S rules was held in the Vasil Levski School in Yablanitsa. Representatives from the H&S department of the company spoke about: „Safe behaviour at school and at home”, „Safety when surfing the Internet” and „Students Daily Regimen”. All pupils were given a „Fire Safety Handbook for Children’’.

51 SOCIAL PERFORMANCE DONATIONS

The company supports the sustainable development of local communities also through donations in cash and in kind for schools and community centers, construction of churches and temples, sports activities etc.

2015 1 20161 20171

Schools and community centers 110 000 21 000 80 000

Mayoralties and municipalities 25 000 61 000 60 000

Churches 17 000 37 000 45 000

Sports 15 000 32 000 10 000

Others 40 000 26 000 22 000

Total 207 000 177 000 217 000

Donations made by the company in the period of 2015 – 2017, in BGN

1 As of 2017, the data shows total donations of TITAN Bulgaria, while in 2015 and 2016 data does not include donations by Zlatna Panega Beton EOOD.

SOCIAL PERFORMANCE 52 ENVIRONMENTAL PERFORMANCE

04

ENERGY AND CLIMATE

WATER

RAW MATERIALS

53 ENVIRONMENTAL PERFORMANCE 2017 ENVIRONMENTAL HIGHLIGHTS

In regards to environment, 2017 can be characterized as a year of change and adaptation to the new context in which the organization operates - new emission standards according to the conclusions on best available techniques in cement production, new organizational structure integrating concrete and cement production, new management of the company in the face of the new CEO and his new priorities. The focus was on ensuring stable facility operations and encouraging environmental leadership in all management positions to ensure keeping the low levels of the company's environmental footprint.

The strategic objectives of the company remain unchanged: increasing the share of alternative fuels, reducing carbon dioxide emissions in cement production, working with various stakeholders to achieve sustainable development.

Considering the needs and expectations of the stakeholders, TITAN Bulgaria (with the major environmental impact of the operations being under Zlatna Panega Cement AD) continued to perform the following activities:

Program for raising the ecological engagement of the students in local schools, which includes seasonal water quality monitoring, biomonitoring, ornithological observations; harvesting seeds from regionally specific plant species to restore natural habitats; cleaning of the waste along the banks and the bed of the Zlatna Panega river.

Maintaining a mini waste collection system along the Zlatna Panega river;

Restocking the Zlatna Panega river with Balkan trout;

Cooperation with Bulgarian Academy of Science on educational projects.

In 2017, environmental management costs and investment in environmental friendly technologies have an approximately equal share in the total amount of environmental costs – 44.1% and 43.9% respectively. The first group includes all the maintenance costs of the treatment facilities, maintenance of the industrial site cleanliness, ecological monitoring costs, incl. such as calibration of continuous emission monitoring devices, costs of environmental studies, audits, etc. In terms of investment, in 2017, predominant are those that aim at increasing the amount of alternative fuels used, maintaining low dust emissions and new analyzers for automatic emissions monitoring in the atmosphere.

ENVIRONMENTAL PERFORMANCE 54 4%

2017

44% 44% Environmental management costs Reclamation of plant site costs Investments in environmental equipment costs Waste management costs 8% 3 800 The focus on ensuring stable operation of the facilities and the striving for continuous improvement has led to 700 mg/Nm a significant reduction in emissions of pollutants into the

600 atmosphere.

1 500 Sulfur dioxide emissions are reduced by 66% compared to 2016. NOx emissions 1 marked a 12% 400 decline compared to 2016, while Carbon monoxide emissions 1 dropped by 27%. 300

200

100 42 17 7 14 2 3 1 Monitored and reported in accordance with the WBCSD/CSI Guidelines for Emissions Monitoring and Reporting in the Cement 0 2015 2016 2017 Industry (ver. 2.0, 2012); Emissions concentrations refer to 273.15 K

SО 2 – kiln No 4, mg/Nm 3 SО 2 – kiln No 5, mg/Nm 3 SO 2 - ELV, mg/Nm3 temperature, 101.3 kPa pressure, dry gas, 10% 0₂ 3 40

mg/Nm 35 3 1,200 30

25

mg/Nm 1,000

800 20

600 15

10 400 326 338 343 295 290 5 200 272 2.36 1.19 0.74 0.81 0.68 0.24 0 0 2015 2016 2017 2015 2016 2017

NOx – kiln No 4, mg/Nm3 Nox – kiln No 5, mg/Nm3 Nox - ELV, mg/Nm3 Dust – kiln No 4, mg/Nm 3 Dust – kiln No 5, mg/Nm3 Dust - g/t clinker

Dust emissions decreased by 53% in 2017 as the average annual dust particulates concentration in the exhaust gases of the two kilns remained below 1 mg/Nm 3 at an emission limit value of 20 mg/Nm 3.

55 ENVIRONMENTAL PERFORMANCE ENERGY AND CLIMATE

EMISSIONS OF GREENHOUSE GASES AND ENERGY EFFICIENCY

TITAN Bulgaria, and in specific the operation under Zlatna Panega Cement AD, as part of TITAN Group, is actively working to reduce greenhouse gas emissions and strengthen its resilience to climate change threats. In 2017, the specific NET CO 2 emissions of the company are 709.90 kgCO 2 /t cementitious product. A share of 60% of these emissions is resulting from the decarbonization of the raw materials – these are the so-called process emissions and are hardly reducible. The other 40% are emitted during fuel combustion process and their reduction is a matter of energy efficiency and low carbon fuel mix. The main tool to minimize the CO 2 emissions from fuels is to replace the fossil fuels with waste fuels (alternative fuels). At Group level, Zlatna Panega Cement AD is a pioneer in the utilization of alternative fuels and alternative raw materials. The effective operation of the subsidiary company of TITAN Group, 'GAEA' (Green Alternative Energy Assets) EAD has established innovative services in waste management, utilization of materials and production of alternative fuels. GAEA EAD is a good example of how TITAN Group puts the circular economy at the heart of its operations.

CO2 emissions:

1 2 1 2 2016 Gross CO 2 emissions (kg CO 2/t Product ): 716 2017 Gross CO 2 emissions (kg CO 2/t Product ): 739

1 2 1 2 2016 Net CO 2 emissions (kg CO 2/t Product ): 673 2017 Net CO 2 emissions (kg CO 2/t Product ): 710

Aer several consecutive years of steady improvements in alternative fuels (AF) utilization, as well as reaching highest results in 2016 in terms of substitution rates, the AF thermal substitution rate was decreased in 2017, mainly due to the limited capacity of the alternative fuels feeding system. Total substitution for the year for both kilns reached 18.0% p.a., wherein 8.9% with Processed Engineered Fuel (PEF) and 9.1% with tires. The focus of the engineering staff of the Production and Maintenance departments in 2017 was to study the possibilities to optimize the processing and feeding operations and identify areas for improvement.

30

20 17.0%

10.1% 8.9%

10

10.6% 10.0% 9.1%

0

Tires (% h.b.) PEF (% h.b.) AF (% h.b.)

1 Reported in accordance with the WBCSD/CSI CO 2 and Energy Protocol: CO 2 and Energy Accounting and Reporting Standard for the Cement Industry (ver. 3.0, 2011)

2 Product equals cementitious product as defined by WBCSD/CSI

ENVIRONMENTAL PERFORMANCE 56 The challenging circumstances required:

significantly decreasing waste supplies without losing streams or customers, and

optimizing costs wherever possible so that the cement plant does not incur losses from PEF due to very low volume.

With all efforts made by Zlatna Panega Cement and GAEA teams approximately 13 ktons of waste were rediverted from the landfills and utilized and an average of 17 ktons of CO2 emissions were saved, thereby honoring the company's long-term environmental engagement. The carbon-neutral biomass constituted 7.2% of the alternative fuel mix in 2017.

А new waste mix was designed in a way to maximize the local supplies, especially pushing for hazardous waste where the increase was 41% in volume compared to 2016.

Several new projects started in 2017 with test supplies, which would have the potential to substantially increase the local volumes. The aim is to double the volume of high quality local streams of waste within the next 1-2 years.

Mixed plastics – this stream is a residue from plastics recycling with very high quality

Textile – the stream is a residue from second hand clothes

Other streams – different types of high quality material from waste collection systems and waste management companies

Local RDF – few small sorting facilities with potential volume up to 2 ktons p.a.

Hazardous waste – further increase the volume of sludge mixes up to 2-3 ktons p.a.

The PEF volume for the year 2017 was low, decreasing by more than double compared to 2016. Despite high downtime and irregular work schedule due to frequent interruptions of PEF consumption, the targets were to align the PEF production process with kilns consumption and to continue improving the PEF quality with the new waste mix.

In order to increase flexibility for feeding ready-made material and bypass part of the installation, a mobile feeding belt and bunker were delivered and installed at site. This will allow certain savings from operational costs, ability to feed PEF during maintenance of the PEF line and avoid losing material with the rejects.

The PEF quality has been steadily improving over the years, where highest results were achieved in 2017. At present, PEF quality is comparable to coal on a stable basis.

57 ENVIRONMENTAL PERFORMANCE Nearly 50% of the company's investments in 2017 were focused on PEF Volumes and Quality increasing energy efficiency and using alternative fuels. Amongst the most important projects is the reconstruction of the raw meal 20,000 homogenization and storage complex. The project is expected to be completed in early 2019 and to lead to a reduction of the specific 15,000 15731 electricity consumption for the homogenization of raw meal by 77%. 10,000 12624 Electrical energy consumption: 5,000 7223

2016 2017 0 2015 2016 2017

PEF Production (tons) 73.05 74.91 Gwh p.a. Gwh p.a.

ADAPTATION TO CLIMATE CHANGE

In the context of strengthening the capacity to adapt natural ecosystems to climate change, the company implements projects related to the conservation and restoration of natural habitats. Zlatna Panega Cement AD maintains its own nursery with forest species that are typical for the area of the cement plant and uses these plants for reclamation of depleted quarry terrains 1 . For the main quarry of the cement plant – the Zlatna Panega Quarry, a Biodiversity Management Plan 2 has been developed and executed for the fourth year.

Pupils voluntarily take part in the planting of new seeds in the plant's nursery.

A key part of the fight against climate change and its consequences is the education and awareness of the community. In 2017, TITAN Bulgaria continued the work with the local schools pupils to increase their environmental commitment, emphasizing in part of the lectures the impact of climate change on ecosystems and quality of life.

1 In line with the WBCSD/CSI Guidelines on Quarry Rehabilitation (2011) 2 Developed in compliance with the WBCSD/CSI Biodiversity Management Plan (BMP) Guidance (2014)

ENVIRONMENTAL PERFORMANCE 58 WATER

Preservation of water quality and its efficient use are among the main priorities of Zlatna Panega Cement AD. The company maintains a system for water treatment and recycling of water in production, using the best available techniques. The quantity of water used is monitored by an electronic system of water meters, which enables an in- depth and timely analysis of the received data. The specific water consumption for 2017 was 308 l/t cement - significantly below the target set for ZLatna Panega for 2020 by TITAN Group. In 2017, 59% of the utilized water used for production was recycled water. Although, this share is smaller than in 2016 and 2015, the tendency of using recycled water for cooling and cleaning of the production site to save fresh water is generally maintained. A large share of the fresh water in the cement plant is used for irrigation and maintenance of the green areas. The quality of discharged wastewater is periodically monitored. In 2017, the limit values of observed parameters were not exceeded. The appropriate waste water quality is sustained by a three-stage Waste Water Treatment Plant, a flotator for industrial cooling water and a system of sludge-retainers for rainwater from the production site.

Water quality is sustained by a three-stage Waste Water Treatment Plant, a flotator for industrial cooling water and a system of sludge-retainers for rainwater from the production site.

Specific water consumption:

2016 2017

293 308 l/t cement l/t cement

The cement plant operates near the biggest karst spring in Bulgaria – „Glava Panega”. To guarantee the quantity and quality of the groundwater, specific methods of mining are introduced in the Zlatna Panega quarry, strict rules for work in the quarry and the cement plant have been established, as well as water quality monitoring. By chemical composition and properties, the water from the „Glava Panega” spring meets the requirements for drinking water.

The Glava Panega spring – a photo by Lyubomir Profirov

The Glava Panega lake – a photo by Lyubomir Profirov

59 ENVIRONMENTAL PERFORMANCE RAW MATERIALS

The use of natural resources is the basis of the modern economic model, but their increasingly tangible scarcity has forced the adoption of a number of international programs aimed at sustainable use of natural resources and reducing the negative impact on the environment caused by their use. The UN Sustainable Development 2030 Agenda sets specific targets in this respect and the European Commission adopts an action plan for the circular economy, the implementation of which provides an appropriate regulatory and financial framework to stimulate resource efficiency and waste minimization. Resource efficiency has been embedded in all strategic objectives of Zlatna Panega Cement AD and is the basis of a number of specific projects 1. In 2017, several new alternative additives to clinker were tested. These additives constitute waste from other industries, which is used to replace significant quantities of natural raw materials in cement clinker production. During the year, 20 ktons of industrial and hazardous waste were utilized in the production of cement clinker and about 30 ktons in the cement production. TITAN Bulgaria investment plans for 2018 include the reconstruction of the clinker feeding installation, providing conditions for the use of increased in volume and variety alternative raw materials.

Biodiversity conservation is directly related to the sustainable use of natural resources for cement products. We have been executing for four years a Biodiversity Management Plan,2 which we developed for our main quarry – the Zlatna Panega quarry.

Case Study Biomonitoring Activities with Local Schools

In 2015, our project for voluntary monitoring received and successfully utilized grant funding via the Financial Mechanism of the European Economic Area.

The project was developed in cooperation with the Regional Environmental Center for Central and Eastern Europe – Branch Bulgaria, Section „Nature” of the Regional Historical Museum in Pleven and the Environment and Public Health Office Kjos District – Iceland. The main objective of the project is to raise awareness of the environmental status of rivers located near industrial plants and to include students in voluntary monitoring and conservation activities.

Aer the official end of the project in 2016, Zlatna Panega Cement AD resumed the activities of voluntary biomonitoring carried out with students from the local schools. In May, June and October 2017, employees of the Environmental Protection Department and a specialist from Regional Historical Museum, Pleven, conducted educational trips along the river for groups of local pupils. The children monitored the status of the river ecosystem by using equipment purchased at the beginning of the project to measure pH, dissolved oxygen content, and water flow speed. They learned the indicators of a clean aquatic environment while the specialist from the Regional Museum in Pleven held lectures on the typical plants and herbs in the region, their harvesting, storage and benefit. The lectures ended with a game in which the pupils applied their knowledge in the discovery and recognition of certain plant species.

1 In line with the WBCSD/CSI Guidelines for Co-Processing Fuels and Raw Materials in Cement Manufacturing, v.2.0 (2014). 2 Developed in compliance with the WBCSD/CSI Biodiversity Management Plan (BMP) Guidance (2014)

ENVIRONMENTAL PERFORMANCE 60 61 ENVIRONMENTAL PERFORMANCE Case Study

Birdwatching with Pupils in the Karlukovo Karst Region

In May 2017, TITAN Bulgaria organized a birdwatching event for the pupils, who participate in the ecological clubs in the schools of the Zlatna Panega and Rumyantsevo villages. Employees of the Environmental Protection Department of the company, Mr. Lubomir Profirov, Environmental Consultant „Ornithology and Protected Areas” and Ms. Antonia Dimovska, representative of the Bulgarian Society for the Protection of Birds also took part in the initiative. Before heading to the Prohodna cave in Karlukovo, Mr. Profirov introduced the students to the diversity of birds in Bulgaria, as well as the differences between males and females, through a presentation with rich photo material. For the children the walk in and around the Prohodna Cave was filled with a lot of excitement because of the beauty and the extraordinary variety of plant and animal species that this site offers. They had the opportunity to see 14 bird species. Of these, 8 species are in the Karlukovo karst area, which is a protected area under the Natura 2000 Birds Directive.

ENVIRONMENTAL PERFORMANCE 62 In 2017, we continued conducting ornithological studies in the company's quarries and in the cement plant site. Birds' habitats were surveyed between April and September, using the transect method (Bibby et al., 1992). In 2017, 58 species of birds were observed, six of which were listed in the Red Book of the Republic of Bulgaria (2015).

The conditions in the Zlatna Panega quarry are suitable for a variety birds species to nest and hunt. Among these species is the common raven (Corvus corax), nesting in the Eastern areas of the Zlatna Panega quarry. Its conservation status in the Red Book is near-threatened.

There is a variety of birds species, which find suitable conditions for breeding, food and the needed tranquility on the cement plant premises. Among them is the endangered species Falco peregrinus. The rich ornithological variety in the quarries and cement plant of Zlatna Panega Cement AD is a sign of a clean ecological environment and production practices that are in line with the protection of the environment.

Case Study

The Peregrine Falcon Rescue

In the middle of July 2017, a small bird of prey was found on the plant premises in Zlatna Panega. The bird, who later turned out to be a young male representative of the protected falcon species, was scared, very weak and infected with parasites. Our Environmental Protection Department employees consulted an ornithologist the same day. Aer that the falcon was transported to the Wildlife Rescue Center in Stara Zagora, where its condition began to improve at a fast pace and he was soon released into the nature. According to the rescue center experts, the reason for his fall was the inexperience of the young male and the excessive exhaustion caused by weakness and parasite infection.

63 ENVIRONMENTAL PERFORMANCE GOVERNANCE

05

GOVERNANCE 64 GOVERNANCE HIGHLIGHTS

Good corporate governance, in which transparency and ethics are strongly embedded, creates long-term value for our business and stakeholders. We adhere to international and European standards in this area.

65 GOVERNANCE GOVERNANCE, TRANSPARENCY AND ETHICS

STRATEGIC PRIORITIES - OUR GUIDING PRINCIPLES FOR ACHIEVING GROWTH AND SUCCESS

OUR COMMON VISION To be one of the most economically, environmentally and socially responsible producers of building materials.

OUR GOVERNING OBJECTIVE The successful combination of entrepreneurial spirit and operational excellence with respect for people, society and the environment.

FOCUS ON HUMAN CAPITAL AND CONTINUOUS IMPROVEMENT IN CORPORATE SOCIAL RESPONSIBILITY A COMPETITIVE MARKET POLICY TITAN Bulgaria strives to continuously optimize We are constantly developing and striving for the technical equipment, structure and continuous improvement of our relations with organization of work by investing in assets all stakeholders, based on mutual respect and application of new methods and and understanding. Within TITAN Group we processes. Our goal is to strengthen the share our best practices to improve the skills competitive position of the company on the and efficiency of every Group member in Bulgarian market. meeting the strategic priorities.

TO REACH THIS OBJECTIVE WE FOCUS ON:

CONSTANT DRIVE TOWARDS SUSTAINABLE DEVELOPMENT VERTICAL INTEGRATION The company believes that the pursuit of OF PRODUCTION financial stability is bound to sustainable development. The operation of the cement TITAN Bulgaria seeks to expand its activities in plant in Zlatna Panega village contributes to other areas of the cement product chain in a improving the living standards in the region. pursuit of better customer service and access The company supports a number of to new opportunities for revenue generation. environmental, social and cultural initiatives.

GOVERNANCE 66 CORPORATE VALUES

Our values are the core of our company, providing the foundations of our success and growth.

In the context of our values, we nurture a culture of collective ambition and cooperation, and encourage personal responsibility for achieving our common goal. At the same time, we insist on mutual trust and respect.

CONTINUOUS INTEGRITY IMPROVEMENT

Ethical business practices Learning organization Transparency Willingness to change Open communication Rise to challenges

COMMITMENT VALUE TO THE TO RESULTS CUSTOMER

Shareholder value Anticipation of customer needs Clear objectives Innovative solutions High standards High quality products and services

CORPORATE COMMITMENT SOCIAL TO RESULTS RESPONSIBILITY

Enhancement of our Safety first knowledge base Sustainable development Proficiency in every function Stakeholder engagement Excellence in core competencies

67 GOVERNANCE IMPLEMENTATION OF TITAN GROUP'S POLICIES IN TITAN BULGARIA

To us the good corporate governance is synonymous with ethical business practices, transparency, open communication, accountability and sustainable development.

Corporate policies are an essential guide to maintaining a healthy business process. To ensure consistency with TITAN Group's principles, ethics and beliefs, TITAN Bulgaria implements the Group's policies in all its business operations.

The table below shows the level of implementation of each TITAN Group policy in TITAN Bulgaria as of 2017.

Group Policy/Level of Implementation Launched by Implemented by Assessed by by TITAN Bulgaria TITAN Bulgaria TITAN Bulgaria TITAN Bulgaria

Group People Management Framework ✔ ✔

Group Occupational Health and Safety Policy, and Framework ✔ ✔ ✔

Group CSR Policy ✔ ✔

Group Human Rights Policy (Freedom of association, child labor) ✔ ✔

Group Environmental Policy ✔ ✔ ✔

Group Climate Mitigation Strategy ✔ ✔ ✔

Group Anti-Bribery and Corruption Policy (Compliance, grants, donations and contributions) ✔

Group Sanctions Policy ✔

Group Competition Law Compliance Policy and Guidelines (compliance, customers and suppliers) ✔

Launched by TITAN Bulgaria: The policy has been translated in Bulgarian and communicated through corporate means (i.e. Intranet, Announcement Boards, or else)

Implemented by TITAN Bulgaria: Policy implementation is supported with induction courses and formal training sessions directed to managers and employees

Assessed by TITAN Bulgaria: Policy is incorporated in regular audit activities either conducted by third parties or by corporate experts and results are used for improving performance and sharing best practice throughout the region or the Group

GOVERNANCE 68 OUR INTEGRATED MANAGEMENT AND REPORTING SYSTEM

In the years following the company's privatization, management systems meeting international standards were gradually introduced:

ISO 9001 Quality Management System (certified in 2001);

SO 14001 Environmental Management System (certified in 2003);

BS OHSAS 18001 Health and Safety System (certified in 2009).

In 2009, the above three systems - for quality, environment and occupational health and safety, were united in one integrated system, which was of great help for the application of good practices in the company activities.

In 2015, following TITAN Group's principles for transparency, open communication and reporting, TITAN Bulgaria started the voluntary publishing of its Integrated Annual Report.

FINANCIAL AND NON-FINANCIAL RISKS

During operations, TITAN Bulgaria inherently faces risks of financial and non-financial nature, which our management seeks to prevent or mitigate. Effective risk management is essential for achieving the company strategic goals and long- term sustainable development. The company has developed flexible systems for monitoring and eliminating or minimizing various potential and significant risks.

TYPE OF RISK IMPORTANCE OF RISK MITIGATING ACTIVITIES

Liquidity management involves use of various credit lines in Company loans are secured by corporate guarantees order to ensure a bigger share long-term credit lines with a issued by the parent company. The parent company is commitment to the bank. The company closely monitors on LIQUIDITY RISK registered in an EU country, undergoing economic reforms. a daily basis the levels of utilization of its credit lines. By the If these reforms fail, the company will face additional 31st of December, 2017 the company had utilized loans liquidity risk. amounting to BGN 280 million and unused credit lines of BGN 8 million. 32% of the utilized loans are long-term loans.

The company closely monitors its customers' financial status and on this basis sets a credit limit for each customer. The company is not exposed to significant credit risks. Additional collateral from customers is required to secure CREDIT RISK Receivables from customers come from a wide customer payments. Impairment of receivables is applied in the base. case of inability of the customers to settle the amounts owed to the company.

All credit lines of the company are in local currency. Thus, The company faces a currency risk with payments to the receivables from customers are hedged in a natural FOREIGN CURRENCY foreign suppliers or in case of using foreign currency way as they are almost entirely in local currency. EXCHANGE credits.

69 GOVERNANCE Due to the cyclical development of the industry, fuel prices To mitigate this risk, the company will continue investing in also vary cyclically. The fuel, electricity and raw material equipment, aiming at the reduction of conventional fuel PRODUCTION COSTS costs form the largest segment of the company's utilization and increasing the alternative fuels substitution production costs. Price changes in conventional fossil fuels rate. pose the risk of large variation in production costs

To ensure safe working conditions, the company employs health and safety professionals, who possess the necessary experience. The company also provides training programs Safety is the key to maintaining the work permits of the HEALTH AND SAFETY for employees and has implemented systems and company. procedures for the application of safe working conditions. The main goal of the company is achieving a level of performance with zero occupational accidents.

The company collaborates efficiently with both trade unions – the Confederation of Independent Trade Unions in The company recognizes the importance of trade unions Bulgaria and Podkrepa. Union representatives are involved LABOR RIGHTS and associations of workers in the process of improving in the committees, dealing with working conditions in the working conditions and protecting labor rights. company, and have the opportunity to express their views and proposals.

The company is making exceptional efforts to reduce the WATER The company is operating on the territory of a karst area risk of water contamination, and has built facilities for CONSERVATION that is supplying the neighboring villages with water. purification and filtration of wastewater.

BOARD OF DIRECTORS

Zlatna Panega Cement AD is a trading company with one-tier corporate governance system. The Board of Directors includes five members and in 2017 it consisted of:

Alexander Adamantios Christos Lukas Konstantinos Chakmakov Frantzis Panagopoulos Petkidis Derdemezis

Chаirman of the Chief Executive Regional Director Regional Chief Regional Director, Board of directors Officer Bulgaria and Turkey Financial Officer, Southeastern Europe Southeastern Europe and and Eastern Eastern Mediterranean Mediterranean

GOVERNANCE 70 APPENDIX

06

FINANCIAL STATEMENTS

ENVIRONMENTAL PROTECTION PROGRESS REVIEW

MEMBERSHIPS AND PARTNERSHIPS

INDEPENDENT LIMITED ASSURANCE REPORT

71 APPENDIX FINANCIAL STATEMENTS

STATEMENT OF COMPREHENSIVE INCOME

FOR THE YEAR ENDED 31ST DECEMBER 2017 2017 2016 000 BGN 000 BGN

Cement sale revenue 63,262 65,907 Clinker sale revenue 5,077 3,005 Concrete sale revenue 14,389 - Rendering of concrete pump services 956 - Others 95 167 Revenue 83,779 69,079

Cost of sales (80,251) (58,468) Gross profit 3,528 10,611

Other income 763 1,609 Selling and distribution costs (1,032) (908) Administrative expenses (10,194) (8,811) Other expenses 1,316 (1,103)

Operating (loss)/profit (5,619) 1,398 Finance income 15 242 Finance expense (1,613) (728)

Profit before tax (7,217) 912 Income tax expense 417 (122) Profit for the year (6,800) 790 Actuarial (losses)/gains on defined benefit plans (161) (61) Income tax effect 16 6

Other comprehensive income, not to be reclassified to profit or loss in subsequent periods, net of tax (145) (55)

Total comprehensive income for the period (6,945) 735

APPENDIX 72 BALANCE SHEET

AS OF 31ST DECEMBER 2016 2017 2016 000 BGN 000 BGN

ASSETS

Long-term assets Property, machinery and equipment 136,905 129,241 Investment property 1,406 1,406 Intangible assets 267 325 Investments in subsidiaries 1,661 16,605 Available-for-sale financial assets 47 47 Other financial assets 300 219 140,586 147,843 Short-term assets Inventories 22,357 21,188 Trade receivables and other receivables 10,963 10,274 Receivables from related parties 16 15,005 Loans to related parties 144 9,213 Prepayments 50 105 Cash and cash equivalents 367 202 33,897 55,987 Non-current assets held for sale 691 - 34,588 55,987 TOTAL ASSETS 175,174 203,830

EQUITY AND LIABILITIES

Equity Issued capital 55,941 55,941 Legal reserve 3,217 3,217 Retained earnings 72,307 96,864

Total equity 131,465 156,022

Non-current liabilities Interest-bearing loans from banks 9,265 19,197 Finance lease liabilities 160 - Restoration provision 1,817 4,476 Retirement benefit liability 1,198 812 Deferred tax liability 894 1,327 13,334 25,812 Current liabilities Trade and other payables 9,966 10,248 Interest-bearing loans 18,982 10,974 Finance lease liabilities 105 - Payables to related parties 764 710 Loans from related parties 558 26 Income tax obligations - 38 30,375 21,996

Total liabilities 43,709 47,808 TOTAL EQUITY AND LIABILITIES 175,174 203,830

73 APPENDIX SEPARATE STATEMENT OF CHANGES IN EQUITY

ISSUED LEGAL RETAINED FOR THE YEAR ENDED 31ST DECEMBER 2017 TOTAL CAPITAL RESERVE EARNINGS

As of 1st January 2016 55,941 3,217 96,129 155,287 Profit for the year - - 790 790 Other comprehensive income for the year - - (55) (55) Total comprehensive income for the year - - 735 735 As of 31st December 2016 55,941 3,217 96,864 156,022 As of 1st January 2017 55,941 3,217 96,864 156,022 Merger effect - - (17,612) (17,612) Profit for the year - - (6,800) (6,800) Other comprehensive income for the year (145) (145) Total comprehensive income for the year (145) (145) Аs of 31st December 2017 55,941 3,217 72,307 131,465

SEPARATE STATEMENT OF CASH FLOW

FOR THE YEAR ENDED 31ST DECEMBER 2016 2017 2016 000 BGN 000 BGN OPERATING CASH FLOW Profit before tax (7,217) 912 Adjustments for reconciliation of profit before interest and tax to net cash Non-cash: Depreciation of property, plant and equipment 13,190 11,118 Amortisation of intangible assets 88 117 (Profit)/Loss on disposal of property, plant and equipment (121) 18 Impairment loss of investment property - 20 Movement in doubtful debt allowance 618 540 Movement in restoration provision (2,659) 57 Expenses for employee benefit liability 117 78 Impairment of an investment 391 - Interest income (2) (242) Interest expenses 784 272

Working capital adjustments: (Increase)/Decrease in inventories (872) (5,930) (Increase)/Decrease in trade and other receivables 3,260 (2,238) Increase in advances paid 108 138 Decrease in other financial assets (25) (20) Increase/(Decrease) in trade and other payables (1,860) (600) Income tax (paid)/received (38) (413) Net cash flows from operating activities 5,762 3,827

CASH FLOWS FROM INVESTING ACTIVITIES Proceeds from sale of property, plant and equipment 194 148 Purchase of property, plant and equipment (3,450) (11,455) Purchase of intangible assets (4) (92) Loans to related parties (79) (8) Proceeds from loans from related parties 100 - Interest received - 260 Net cash flows used in investing activities (3,239) (11,147)

CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from borrowings 68,430 57,073 Repayment of borrowings (70,353) (49,568) Payments under financial leases (99) - Repayment of loans from related parties (193) - Interest paid (781) (266) Net cash used in financing activities (2,996) 7,239 Net decrease in cash and cash equivalents (473) (81) Merger effect 638 - Cash and cash equivalents at 1st January 202 283 Cash and cash equivalents at 31st December 367 202

APPENDIX 74 ENVIRONMENTAL PROTECTION PROGRESS REVIEW

Zlatna Panega Cement AD

CATEGORY INDICATOR 2015 2016 2017

Climate Total direct CO2 emissions (gross), million metric tons 474705 462871 474234 Change Direct* CO 2 emissions (gross), kg/t cementitious** 711.96 715.91 739.01 Energy efficiency, kcal/kg Clinker 886.95 871.81 881.45 Alternative fuel substitution rate, %Thermal basis 20.55 27.2 17.95 Alternative fuels Biomass in kiln fuel, % Thermal basis 6.97 11.15 7.20 Alternative raw materials (clinker and cement), %Dry 12.18% 5.24% 5.06% Clinker to cement ratio 83% 84% 86% Total dust particulates, metric tons 2.43 1.8 0.84 Dust particulates, g/t clinker 4.34 3.20 1.49 Total NOx, metric tons 612.70 588.57 518.84 NOx, g/t clinker 1092.18 1045.22 921.31 Total SOx, metric tons 13.92 47.30 16.12 SOx, g/t clinker 24.81 83.99 28.62 Total CO, metric tons 3190.15 2205.92 1605.45 CO, g/t clinker 5686.63 3917.43 2850.78 Total TOC, metric tons 25.82 24.24 22.25 TOC, g/t clinker 46.03 43.05 39.51 HCl, metric tons 7.08 1.96 2.79 HCl, g/t clinker 12.63 3.48 4.96 HF, metric tons 0.50 0.82 0.19 HF, g/t clinker 0.89 1.46 0.34 Hg, metric tons 0.001 0.002 - Hg, g/t clinker 0.001 0.003 - Cd+Tl, metric tons - 0.01 - Cd+Tl, g/t clinker - 0.02 - Total (Sb, As, Pb, Cr, Co, Cu, Mn, Ni, V), metric tons - 0.50 - Total (Sb, As, Pb, Cr, Co, Cu, Mn, Ni, V), g/t clinker - 0.89 - POPs, grams 0.011 0.003 0.016 POPs, g/t clinker 0.00000002 0.000000005 0.00000003 Total heat consumption, TJ 2140 2104 2132 Total alternative fuels, metric tons 20429 22739 12878 Additional Total electrical energy consumption, Gwh 74.82 73.05 74.91 indicators Total indirect*** CO2 emissions, million metric tons 46981 44998 46143 Total water consumption, million m 3 179449 156771 172753 Water consumption, lt/t Cement 287 293 308

* Direct CO2 emissions – emissions related to the decarbonization of the raw materials and burning of fuels in the clinker production process.

** Cementitious - as defined by WBCSD/CSI

*** Indirect CO 2 emissions – emissions released to the atmosphere by the power plants for the production of electricity consumed at the cement plant. The data for the CO 2 emissions of the power plants is average for the country.

TITAN Bulgaria

CATEGORY INDICATOR 2015 2016 2017

Raw material consumed • for cement production, million metric tons (dry) 898466 885543 883834 • for ready-mix, dry mortar and block production, million metric tons (wet) 332388 286253 338 057 Natural Resources Total heat consumption, TJ 2140 2104 2133 Total electrical energy consumption, TJ * 77.18 76.09 77.61 Total water consumption, million m 3 * 211289 191679 210915 Recycled (externally) waste material, metric tons 6767 2699 1180 Local Active quarry sites with biodiversity issues 1 1 1 impacts Active quarry sites with biodiversity management plans 1 1 1

* GAEA – Green Alternative Energy Assets EAD data included

75 APPENDIX MEMBERSHIPS AND PARTNERSHIPS

TITAN Bulgaria is a member of the following organizations in Bulgaria:

Bulgarian Association of Cement Industry (since 2007) www.bacibg.org Bulgarian Association of Aggregates Producers (since 2009) www.bapim.org American Chamber of Commerce and Industry (since 2010) www.amcham.bg Hellenic Business Council in Bulgaria (since 2010) www.hbcbg.com Bulgarian Federation of Industrial Energy Consumers (since 2013) www.bfiec.org Bulgarian Chamber of Mining and Geology (since 2015) www.bmgk-bg.org Education Bulgaria 2030 Association (since 2017) www.edu2030.bg

At Group level TITAN cooperates with international organizations such as:

CSR Europe www.csreurope.org European Cement Association (CEMBUREAU) www.cembureau.be European Round Table of Industrialists (ERT) www.ert.eu UN Global Compact www.unglobalcompact.org World Business Council for Sustainable Development (WBCSD) www.wbcsd.org World Economic Forum www.weforum.org

APPENDIX 76 77 APPENDIX APPENDIX 78 ZLATNA PANEGA CEMENT AD 5760 Zlatna Panega 2 Shipka Str. Phone: + 359 2 882 01 01 Phone: + 359 2 976 00 70 www.titan.bg