SİNPAŞ GAYRIMENKUL YATIRIM ORTAKLIĞI A.Ş. AND ITS SUBSIDIARIES

Transcription

1 SİNPAŞ GAYRIMENKUL YATIRIM ORTAKLIĞI A.Ş. AND ITS SUBSIDIARIES CONVENIENCE TRANSLATION INTO ENGLISH OF CONDENSED CONSOLIDATED FINANCIAL STATEMENTS AND NOTES FOR THE PERIOD 1 JANUARY - 30 JUNE 2018 TOGETHER WITH AUDITOR S REVIEW REPORT (ORIGINALLY ISSUED IN TURKISH)

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4 NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE INTERIM PERIOD 1 JANUARY - 30 JUNE 2018 CONTENTS PAGES CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION CONDENSED CONSOLIDATED PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME STATEMENTS... 3 CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY... 4 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS... 5 NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS NOTE 1 GROUP S ORGANISATION AND NATURE OF OPERATIONS NOTE 2 BASIS OF PRESENTATION OF CONSOLIDATED FINANCIAL STATEMENTS NOTE 3 BUSINESS COMBINATION NOTE 4 SIGNIFICANT EVENTS AND TRANSACTIONS RELATED WITH THE PERIOD NOTE 5 INVESTMENT PROPERTIES NOTE 6 SIGNIFICANT CHANGES IN PROVISIONS, CONTINGENT ASSETS AND LIABILITIES NOTE 7 EARNINGS PER SHARE NOTE 8 FINANCIAL INSTRUMENTS AND FINANCIAL RISK MANAGEMENT NOTE 9 SUBSEQUENT EVENTS SUPPLEMENTARY INFORMATION: COMPLIANCE CONTROL OF THE PORTFOLIO RESTRICTIONS

5 CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION AS OF 30 JUNE 2018 (Amounts expressed in Turkish Lira ( TRY ) unless otherwise indicated) ASSETS Reviewed Audited Notes 30 June December 2017 Current assets 2,333,508,588 2,352,760,515 Cash and cash equivalents 29,233,529 37,667,985 Trade receivables 220,080, ,499,996 - Trade receivables from related parties 147,182, ,031,797 - Trade receivables from third parties 72,898, ,468,199 Other receivables 14,890,709 46,289,508 - Other receivables from third parties 14,890,709 46,289,508 Inventories 4 1,793,554,633 1,474,300,212 Prepaid expenses 4 187,609, ,304,373 -Prepaid expenses from third parties 187,609, ,304,373 Current income tax assets 41,224 1,479,027 Other current assets 88,098, ,219,414 Non-current assets 3,221,027,277 1,703,052,734 Trade receivables 64,416, ,186,034 - Trade receivables from related parties 52,406, ,890,769 - Trade receivables from third parties 12,010,244 2,295,265 Other receivables 24,985,494 25,531,186 - Other receivables from related parties 24,029,417 24,729,417 - Other receivables from third parties 956, ,769 Inventories 4 2,317,932,600 1,240,194,424 Prepaid expenses 2,424,708 2,348,171 Investments accounted under equity method 16,000,000 16,000,000 Investment properties 4 736,198, ,292,707 Tangible assets 13,038,476 14,767,128 Intangible assets 1,030,232 82,730 Other non-current assets 45,000,000 13,650,354 TOTAL ASSETS 5,554,535,865 4,055,813,249 The accompanying notes form an integral part of these condensed consolidated financial statements. 1

6 CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION AS OF 30 JUNE 2018 (Amounts expressed in Turkish Lira ( TRY ) unless otherwise indicated) LIABILITES Reviewed Audited Notes 30 June December 2017 Current liabilities 1,250,170,484 1,058,460,722 Short-term portion of long term borrowings 4 941,594, ,463,069 -Short-term portion of long term borrowings from related parties 4 70,258,766 18,910,664 -Short-term portion of long term borrowings from third parties 4 871,336, ,552,405 Trade payables 278,822, ,873,785 -Trade payables to related parties 1,081, ,246 -Trade payables to third parties 277,740, ,062,539 Debts for employee benefits 3,589,414 1,464,314 Other payables 9,640,301 18,259,741 -Other payables to related parties 60,217 60,217 -Other payables to third parties 9,580,084 18,199,524 Deferred revenue 2,814, ,343 Short term provisions 2,776,870 98,342,358 -Provisions for employee benefits 2,776,870 98,342,358 Deriative financial instruments 5,498,465 29,450,359 -Derivative financial instruments for protection from risks 5,498,465 29,450,359 Other current liabilities 5,433,422 5,629,753 -Other current liabilities to third parties 5,433,422 5,629,753 Non-current liabilities 2,516,413,375 2,149,431,885 Long-term borrowings 4 1,865,662,894 1,338,187,806 -Long-term borrowings to related parties 4 199,533,618 2,586,147 -Long-term borrowings to third parties 4 1,666,129,276 1,335,601,659 Other payables - 25,717,058 -Other payables to related parties - - -Other payables to other parties - 25,717,058 Deferred revenue 4 644,025, ,061,680 Long-term provisions 2,902,310 6,927,050 -Long-term provision for employee benefits 2,902,310 6,927,050 Deriative financial instruments 3,823,071 6,538,291 -Derivative financial instruments for protection from risks 3,823,071 6,538,291 EQUITY 1,787,952, ,920,642 Equity attributable to equity holders of the parent 1,787,952, ,920,642 Share capital 873,193, ,000,000 Share reserves 1,548,922, ,561,921 Merger effect of enterprises with common control 71,608,628 71,608,628 Merger offset account (437,822,069) - Treasury shares (-) (81,290,459) (5,664,156) Share premium 62,419,923 62,419,923 Other comprehensive income/expense to be reclassified to profit or loss 25,990,098 (379,615) Gain/loss on revaluation and remeasurement 25,990,098 (379,615) -Fair value gains from financial assets reflected in other comprehensive income/(expense) 25,990,098 (379,615) Restricted reserves 108,855, ,399,365 Retained earnings (241,481,431) (9,109,526) Net loss for the period (142,443,928) (242,915,898) TOTAL LIABILITIES AND EQUITIES 5,554,535,865 4,055,813,249 The accompanying notes form an integral part of these condensed consolidated financial statements. 2

7 CONDENSED CONSOLIDATED STATEMENTS OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME FOR THE INTERIM PERIOD ENDED 30 JUNE 2018 AND 2017 Reviewed Reviewed Reviewed Reviewed 1 January- 1 April- 1 January- 1 April- PROFIT AND LOSS Notes 30 June June June June 2017 Revenue 72,861,386 26,518, ,336, ,414,456 Cost of sales (-) (41,487,430) (22,616,076) (229,532,378) (128,023,153) Revenue 31,373,956 3,902,163 61,803,802 31,391,303 Marketing expenses (-) (43,621,031) (17,324,737) (37,746,675) (18,440,140) General administrative expenses (-) (28,625,942) (16,535,724) (35,107,796) (20,115,636) Increase in investment property 162,158,944 14,888, Other operating incomes 81,900,889 60,829, ,880,144 50,658,369 Other operating expenses (-) (57,614,773) (45,910,717) (82,010,022) (30,726,487) OPERATING PROFIT 145,572,043 (151,478) 88,819,453 12,767,409 Income from investing activities 2,324,691 2,324, Expense from investing activities (-) 375, ,000 (11,046,995) (937,500) Share of profit of investments accounted under equity method ,041 (190,418) OPERATING PROFIT BEFORE FINANCIAL (EXPENSE)/INCOME ,548,213 78,022,499 11,639,491 Financial income 26,935,258 11,722,124 5,468,101 3,122,491 Financial expenses (-) (317,650,920) (228,886,417) (145,418,706) (41,964,316) (LOSS)/PROFIT BEFORE TAX FROM CONTINUING OPERATIONS ( ) (214,616,080) (61,928,106) (27,202,334) (LOSS)/PROFIT BEFORE TAX FROM CONTINUING OPERATIONS ( ) (214,616,080) (61,928,106) (27,202,334) NET (LOSS)/PROFIT (142,443,928) (214,616,080) (61,928,106) (27,202,334) Earnings per share Earninigs/(loss) per share from operating 7 (0.1631) (0.2458) (0.1032) (0.0453) OTHER COMPREHENSIVE (LOSS)/INCOME Other comprehensive income/(loss) not to be reclassified to profit or loss 26,369,713 28,187,353 (61,354) (66,050) Remesurement of employee benefits 26,369,713 28,187,353 (61,354) (66,050) Other comprehensive income/(loss) to be reclassified to profit or loss - - 7,397,851 - Profit/(loss) from revaluation of financial assets - - 7,397,851 - OTHER COMPREHENSIVE INCOME 26,369,713 28,187,353 7,336,497 (66,050) TOTAL COMPREHENSIVE (LOSS)/INCOME (116,074,215) (186,428,727) (54,591,609) (27,268,384) The accompanying notes form an integral part of these consolidated financial statements. 3

8 CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY FOR Share capital Adjustment to share capital Merger offset account Treasury shares Share premium Other comprehensive income/loss to be reclassified to profit or loss Gain/(loss) from revaluation of financial assets Other comprehensive income/loss not to be reclassified to profit or loss Retained earnings Remeasurement losses of defined benefit plans Restricted reserves Retained earnings Net loss/profit for the year Total shareholders equity 1 January ,000, ,888,864 - (5,664,156) 62,419,923 (7,397,851) (754,504) 35,261, ,384,797 (54,846,914) 997,291,344 Transfers (54,846,914) 54,846,914 - Merger effect of enterprises with common control ,608, ,608,628 Other ,397, ,397,851 Total comprehensive income (61,354) - - (54,591,609) (54,652,963) 30 June ,000, ,888,864 71,608,628 (5,664,156) 62,419,923 - (815,858) 35,261, ,537,883 (54,591,609) 1,021,644,860 1 January ,000, ,561,921 71,608,628 (5,664,156) 62,419,923 - (379,615) 119,399,365 (9,109,526) (242,915,898) 847,920,642 Transfers (242,915,898) 242,915,898 - Merger/division/ liquidation effect 273,193,432 1,296,360,518 (437,822,069) (10,543,992) 10,543,993-1,131,731,882 Increase /(decrease) in shares due to repurchase transactions (75,626,303) (75,626,303) Merger effect of enterprises with common control Total comprehensive income ,369, (142,443,928) (116,074,215) 30 June ,193,432 1,548,922,439 (366,213,441) (81,290,459) 62,419,923-25,990, ,855,373 (241,481,431) (142,443,928) 1,787,952,006 The accompanying notes form an integral part of these condensed consolidated financial statements. 4

9 1 January - 1 January - 30 June June 2017 CASH FLOWS FROM OPERATING ACTIVITIES 370,514, ,386,695 Loss for the year (142,443,928) (47,088,166) Adjuustments related to reconciliation of profit for the period 1,431,641,091 62,136,591 Adjustments related with unrealized foregin exchange differences 445,145,853 36,519,296 Adjustments related with interest income and expenses 16,359,320 5,138,665 Adjustment related with fair value losses/(gains) in derivative financial instruments (26,667,114) - Adjustments related with depreciation and amortiziation 9,250, ,151 Adjustments related with provisions (92,329,809) (131,605) -Provision for employee benefits (95,394,801) (131,605) -Other provisions 3,064,992 - Adjustments to other items that cause cash flows from investing or financing activities 1,082,475,291 - Adjustments related to undistributed profits or investments valued by equity method - 10,109,495 Adjustment related to devident (income)/expenses (268,144) 7,397,851 Other adjustments related to profit/loss reconciliation (2,324,691) 2,538,738 Changes in working capital (918,413,901) 95,512,640 Adjustments related with increase/decrease in trade receivables 524,123,305 24,407,682 Adjustments related with increase/decrease in trade payables 139,948,634 (28,024,490) Adjustments related to increase/decrease in inventory (1,396,992,597) 49,192,698 Adjustments related to increase/decrease in prepaid expenses (57,381,574) (2,133,754) Adjustments related to increase/decrease in deferred incomes (126,199,261) 69,110,810 Adjustments related to increase/decrease in working capital (1,912,408) (17,040,306) - Adjustments related to operating increase/decrease in other assets 34,153,741 (9,045,341) - Adjustements related to operating increase/decrease in other liatbilities (36,066,149) (7,994,965) Net cash generated by operating activities 370,783, ,561,065 Employment termination benefits paid (537,007) (174,370) Dividend income 268,144 - CASH FLOWS FROM INVESTING ACTIVITIES (621,050,633) (777,675) Dividend received 2,324,691 - Cash inflow from purchase of tangible and intangible assets (8,469,235) (747,872) Cash outflow from purchase of investment properties (614,906,089) - Other cash inflows / (outflows) - (29,803) CASH FLOWS FROM FINANCING ACTIVITIES 242,101,778 2,681,284 Cash inflow from borrowings 483,764,265 58,301,782 Cash outflow from borrowings (225,303,167) (53,950,576) Cash outflow from derivative instruments - 2,654,350 Interest paid (16,359,320) (4,324,272) Net increase / decrease in cash and cash equivalents before the effect of foreign currency translation differences (8,434,456) 112,290,304 EFFECT ON FOREIGN CURRENCY TRANSLATION DIFFERENCES ON CASH AND CASH EQUIVALENTS NET CHANGE IN CASH AND CASH EQUIVALENTS (8,434,456) 112,290,304 CASH AND CASH EQUIVALENTS AT THE BEGINNING OF THE PERIOD 37,667,985 21,013,920 CASH AND CASH EQUIVALENTS AT THE END OF THE PERIOD 29,233, ,304,224 The accompanying notes form an integral part of these consolidated financial statements 5

10 NOTE 1 - GROUP S ORGANISATION AND NATURE OF OPERATIONS Sinpaş Gayrimenkul Yatırım Ortaklığı Anonim Şirketi ( Sinpaş REIC or the Company ) which was registered as Sinpaş İnşaat A.Ş. ( Sinpaş İnşaat ) in İstanbul, Turkey, has been applied with a change in the Articles of Association published on Trade Registry Gazette on 22 December 2006, the Company has been converted into Real Estate Investment Company ( REIC ) with the trade name Sinpaş Gayrimenkul Yatırım Ortaklığı A.Ş. and was registered on 3 May The Group s main scope of operation is to develop residential real estate projects to primarily for sale. The Group operates under Sinpaş Group Companies which is one of the leading real estate investment and development groups in Turkey. Main shareholders of the Company is Sinpaş Yapı Endüstrisi A.Ş. and Avni Çelik. It was decided to merge Sinpaş GYO and Sinpaş Yapı Endüstri ve Ticaret A.Ş. ("Sinpaş Yapı"), which are operating in the same sector, with the minutes of the Board of Directors dated 21 November 2017, while taking into consideration the synergies that will result from the economic, operational and competitive advantages of the merger and the opportunities that will arise from the company's size that will emerge after the merger will be provided to all the Capital Markets stakeholders, within the provisions of the related legislation regarding the decision of the Board of Directors with the figures of 30 June After the approval of the necessary permissions, it was decided at the Extraordinary General Assembly meeting held on 29 December 2017 that the takeover will be finalised and the Companies will be merged on behalf of Sinpaş GYO. Extraordinary General Assembly meeting was registered on 28 February The issued capital of Sinpaş GYO increased from TRY 600,000,000 to TRY 873,193,432 due to the merger. The merger has been realized in accordance with TFRS standards. Total number of employees of the Group is 257 as of 30 June 2018 (31 December 2017: 178). The registered address of the Group is Sinpaş Plaza, Dikilitaş Mahallesi Yenidoğan Sokak. No: Beşiktaş, Istanbul. Approval of consolidated financial statements: Consolidated financial statements have been approved by the Board of Directors and authorized for publication on 27 August Subsidiaries of the Group are operating in Turkey and the main activities are as follows: 6

11 NOTE 1 - GROUP S ORGANISATION AND NATURE OF OPERATIONS (Continued) Subsidiary As of 30 June 2018, the parent company directly or indirectly, have 50% or more of the voting power or have a voting right of over 50% or have control over their activities and subject to the full consolidation method are as follows: Subsidiaries Samandıra Mobilya Sanayi ve Ticaret A.Ş. ( Samandıra Mobilya ) S.S. Modern Bursa Konut Yapı Kooperatifi ( S.S. Modern Bursa ) Sinpaş CO. Associates Ottoman Gayrimenkul Yat. İnş. ve Tic. A.Ş. Boğaziçi Eğitim Hizmetleri ve Ticaret A.Ş. Nature of Business Manufacture, import and export of the, home garden and office furniture made of wood, plastic, marble, steel and all kinds of metal and materials. Puchasing and combining of land, preparation and costing of infrastructure investments. To invest in real estate projects. Nature of Business Engaged in developing and selling real estate projects for residence purpose. Educational services Results of operations and assets and liabilities of associates are accounted for using the equity accounting method in the following financial statements. According to the equity accounting method, subsidiaries which is the result of restatement of the cost of the investment in the net assets of the subsidiary as a result of the post-acquisition change in the Group, shown over the amount obtained as a deduction of any impairment in the subsidiary can t be allowed to record losses that exceed the Group's interest in the subsidiary (including any long-term investment that essentially constitutes part of the Group's net investment in the subsidiary). 7

12 NOTE 2 - BASIS OF PRESENTATION OF FINANCIAL STATEMENTS 2.1 Basis of preparation Financial statements of preparation The accompanying financial statements are prepared in accordance with Communiqué Serial II, No:14.1, Principles of Financial Reporting in Capital Markets ( the Communiqué ) and in accordance with TAS 34 as of 30 June Entities, in accordance with TAS 34, Interim financial reporting regarding disclosure of information, can prepeare their interim financial statements in either full set or condensed. Group has preferred to prepare to its interim financial statements in condensed. Consolidated financial statements have been approved by the Board of Directors and authorized for publication on 27 August Declaration of conformity to TAS The consolidated financial statements of the Group have been prepared in accordance with the communiqué numbered II-14,1 Communiqué on the Principles of Financial Reporting In Capital Markets ( the Communiqué ) announced by the Capital Markets Board ( CMB ) (hereinafter will be referred to as the CMB Accounting Standards ) on 13 June 2013 which is published on Official Gazette numbered In accordance with article 5th of the CMB Accounting Standards, companies should apply Turkish Accounting Standards/Turkish Financial Reporting Standards ( TAS/TFRS ) and interpretations regarding these standards as adopted by the Public Oversight Accounting and Auditing Standards Authority ( POA ). The TAS Taxonomy of 2016 developed on the basis of Article 9 (b) of Decree Law No. 660 was approved by the Board decision dated 2 June 2016 and numbered 30 in order to ensure that the financial statements conforming to TAS are shared with users in the format of "Extensible Enterprise Reporting Language". This TAS taxonomy has been taken into account in the attached financial statements. Functional and presentation currency Items included in the financial statements of each of the Group s entities are measured using the currency of the primary economic environment in which the entity operates ( the functional currency ). The Group s functional and presentation currency is TL. Going concern The Group's consolidated financial statements are prepared under the going concern assumption. 2.2 New or amended standards The Group will evaluate the effects of the above amendments on its operations and they apply the necessary ones. a. Standards, amendments and interpretations applicable as at 30 June 2018: - TFRS 9, Financial instruments ; effective from annual periods beginning on or after 1 January This standard replaces the guidance in TAS 39. It includes requirements on the classification and measurement of financial assets and liabilities; it also includes an expected credit losses model that replaces the current incurred loss impairment model. - TFRS 15, Revenue from contracts with customers ; effective from annual periods beginning on or after 1 January TFRS 15, Revenue from contracts with customers is a converged standard from the IASB and FASB on revenue recognition. The standard will improve the financial reporting of revenue and improve comparability of the top line in financial statements globally. 8

13 NOTE 2 - BASIS OF PRESENTATION OF FINANCIAL STATEMENTS (Continued) 2.2 New or amended standards (Continued) - Amendment to TFRS 15, Revenue from contracts with customers, effective from annual periods beginning on or after 1 January These amendments comprise clarifications of the guidance on identifying performance obligations, accounting for licences of intellectual property and the principal versus agent assessment (gross versus net revenue presentation). New and amended illustrative examples have been added for each of those areas of guidance. The IASB has also included additional practical expedients related to transition to the new revenue standard. - Amendments to TFRS 4, Insurance contracts regarding the implementation of TFRS 9, Financial Instruments, effective from annual periods beginning on or after 1 January These amendments introduce two approaches: an overlay approach and a deferral approach. The amended standard will: give all companies that issue insurance contracts the option to recognise in other comprehensive income, rather than profit or loss, the volatility that could arise when TFRS 9 is applied before the new insurance contracts standard is issued; and give companies whose activities are predominantly connected with insurance an optional temporary exemption from applying TFRS 9 until The entities that defer the application of TFRS 9 will continue to apply the existing financial instruments standard TAS Amendment to TAS 40, Investment property relating to transfers of investment property, effective from annual periods beginning on or after 1 January These amendments clarify that to transfer to, or from, investment properties there must be a change in use. To conclude if a property has changed use there should be an assessment of whether the property meets the definition. This change must be supported by evidence. - Amendments to TFRS 2, Share based payments on clarifying how to account for certain types of share-based payment transactions; effective from annual periods beginning on or after 1 January This amendment clarifies the measurement basis for cash-settled, share-based payments and the accounting for modifications that change an award from cash-settled to equitysettled. It also introduces an exception to the principles in TFRS 2 that will require an award to be treated as if it was wholly equity-settled, where an employer is obliged to withhold an amount for the employee s tax obligation associated with a share-based payment and pay that amount to the tax authority. - Annual improvements ; effective from annual periods beginning on or after 1 January These amendments impact 2 standards: TFRS 1, First-time adoption of TFRS, regarding the deletion of short-term exemptions for first-time adopters regarding TFRS 7, TAS 19, and TFRS 10 effective 1 January TAS 28, Investments in associates and joint ventures regarding measuring an associate or joint venture at fair value effective 1 January IFRIC 22, Foreign currency transactions and advance consideration, effective from annual periods beginning on or after 1 January This IFRIC addresses foreign currency transactions or parts of transactions where there is consideration that is denominated or priced in a foreign currency. The interpretation provides guidance for when a single payment/receipt is made as well as for situations where multiple payments/receipts are made. The guidance aims to reduce diversity in practice. 9

14 NOTE 2 - BASIS OF PRESENTATION OF FINANCIAL STATEMENTS (Continued) 2.2 New or amended standards (Continued) b) Standards, amendments and interpretations that are issued but not effective as at 30 June 2018: - Amendment to TFRS 9, Financial instruments ; effective from annual periods beginning on or after 1 January This amendment confirm that when a financial liability measured at amortised cost is modified without this resulting in de-recognition, a gain or loss should be recognised immediately in profit or loss. The gain or loss is calculated as the difference between the original contractual cash flows and the modified cash flows discounted at the original effective interest rate. This means that the difference cannot be spread over the remaining life of the instrument which may be a change in practice from TAS Amendment to TAS 28, Investments in associates and joint venture ; effective from annual periods beginning on or after 1 January These amendments clarify that companies account for long-term interests in associate or joint venture to which the equity method is not applied using TFRS 9. - TFRS 16, Leases ; effective from annual periods beginning on or after 1 January 2019, with earlier application permitted if TFRS 15 Revenue from Contracts with Customers is also applied. This standard replaces the current guidance in TAS 17 and is a farreaching change in accounting by lessees in particular. Under TAS 17, lessees were required to make a distinction between a finance lease (on balance sheet) and an operating lease (off balance sheet). TFRS 16 now requires lessees to recognise a lease liability reflecting future lease payments and a right of use asset for virtually all lease contracts. The IASB has included an optional exemption for certain short-term leases and leases of low-value assets; however, this exemption can only be applied by lessees. For lessors, the accounting stays almost the same. However, as the IASB has updated the guidance on the definition of a lease (as well as the guidance on the combination and separation of contracts), lessors will also be affected by the new standard. At the very least, the new accounting model for lessees is expected to impact negotiations between lessors and lessees. Under TFRS 16, a contract is, or contains, a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration. - IFRIC 23, Uncertainty over income tax treatments ; effective from annual periods beginning on or after 1 January This IFRIC clarifies how the recognition and measurement requirements of TAS 12 Income taxes, are applied where there is uncertainty over income tax treatments. The TFRS IC had clarified previously that TAS 12, not TAS 37 Provisions, contingent liabilities and contingent assets, applies to accounting for uncertain income tax treatments. IFRIC 23 explains how to recognise and measure deferred and current income tax assets and liabilities where there is uncertainty over a tax treatment. An uncertain tax treatment is any tax treatment applied by an entity where there is uncertainty over whether that treatment will be accepted by the tax authority. For example, a decision to claim a deduction for a specific expense or not to include a specific item of income in a tax return is an uncertain tax treatment if its acceptability is uncertain under tax law. IFRIC 23 applies to all aspects of income tax accounting where there is an uncertainty regarding the treatment of an item, including taxable profit or loss, the tax bases of assets and liabilities, tax losses and credits and tax rates. 10

15 NOTE 2 - BASIS OF PRESENTATION OF FINANCIAL STATEMENTS (Continued) 2.2 New or amended standards (Continued) - TFRS 17, Insurance contracts, effective from annual periods beginning on or after 1 January This standard replaces TFRS 4, which currently permits a wide variety of practices in accounting for insurance contracts. TFRS 17 will fundamentally change the accounting by all entities that issue insurance contracts and investment contracts with discretionary participation features. - Annual improvements ; effective from annual periods beginning on or after 1 January 2019.These improvements include following changes: TFRS 3, Business combinations, a company remeasures its previously held interest in a joint operation when it obtains control of the business. TFRS 11, Joint arrangements, a company does not remeasure its previously held interest in a joint operation when it obtains joint control of the business. TAS 12, Income taxes a company accounts for all income tax consequences of dividend payments in the same way. TAS 23, Borrowing costs a company treats as part of general borrowings any borrowing originally made to develop an asset when the asset is ready for its intended use or sale. - Amendments to TAS 19, Employee benefits on plan amendment, curtailment or settlement ; effective from annual periods beginning on or after 1 January These amendments require an entity to: use updated assumptions to determine current service cost and net interest for the reminder of the period after a plan amendment, curtailment or settlement; and recognise in profit or loss as part of past service cost, or a gain or loss on settlement, any reduction in a surplus, even if that surplus was not previously recognised because of the impact of the asset ceiling. The Group will evaluate the effects of the above amendments on its operations and they apply the necessary ones. NOTE 3 BUSINESS COMBINATION It was decided to merge Sinpaş GYO and Sinpaş Yapı Endüstri ve Ticaret A.Ş. ("Sinpaş Yapı"), which are operating in the same sector, with the minutes of the Board of Directors dated 21 November 2017, while taking into consideration the synergies that will result from the economic, operational and competitive advantages of the merger and the opportunities that will arise from the company's size that will emerge after the merger will be provided to all the Capital Markets stakeholders, within the provisions of the related legislation regarding the decision of the Board of Directors with the figures of 30 June After the approval of the necessary permissions, it was decided at the Extraordinary General Assembly meeting held on 29 December 2017 that the takeover will be finalised and the Companies will be merged on behalf of Sinpaş GYO. Extraordinary General Assembly meeting was registered on 28 February The issued capital of Sinpaş GYO increased from TRY 600,000,000 to TRY 873,193,432 due to the merger. The merger has been realized in accordance with TFRS standards. 11

16 NOTE 3 BUSINESS COMBINATION (Continued) In the Official Gazette on 21 July 2013, the POA issued a resolution on the principle of "Accounting for Business Combinations under Common Control" in the Official Gazette on 21 July This policy decision, accounting for business combinations subject to the common control, the use of the method of consolidation of rights (pooling of interest) and the comparative information on prior periods should be retrospectively restated in accordance with TAS 8 within the scope of accounting policy. As required by TAS 8, the balance sheet, profit or loss and other comprehensive income, consolidated statement of changes in equity, cash flow statement and related notes to the consolidated financial statements on 31 December 2017 and 30 June 2017 was re-arranged and presented as a comparative for the interim periods ending 30 June NOTE 4 - SIGNIFICANT EVENTS AND TRANSACTIONS RELATED WITH THE PERIOD a) Factors affecting the net profit The Group has transferred Marmaris Land and Ankara GOP lands to investment properties as a result of the change in the Group s investment plans as of 31 March 2018 which were previously classified as inventory. Group is planning to construct health hotel in Marmaris Land and shopping mall in Ankara GOP Land with the decision of the Board of Directors on 20 April 2018 Number 2018/9 b) Account items with significant changes affecting the balance sheet are as follows: i. Inventory As of 30 June 2018 and 31 December 2017, the inventories are as follows: Short-term inventories 30 June December 2017 Non completed residential units under construction 1,154,803,163 1,406,735,067 Completed constructions 638,751,470 67,565,145 Total 1,793,554,633 1,474,300,212 Long-term inventories 30 June December 2017 Land (*) 2,236,564,987 1,189,055,107 Non completed residential units under construction (**) 81,367,613 51,139,317 Total 2,317,932,600 1,240,194,424 (*) Balance consists of the land which is not yet under construction and ongoing projects as of 30 June (**) Balance consists of the construction costs related to the projects whose delivery dates will be longer than 1 year. 12

17 NOTE 4 - SIGNIFICANT EVENTS AND TRANSACTIONS RELATED WITH THE PERIOD (Continued) ii. Inventories Group, measures its inventories at lower of cost or net realizable value as required. The Group has accounted its inventories that acquired from the merger with Sinpaş Yapı with their fair values at the acquisition date. These fair values were accepted as the costs of the related inventories and the related stocks will be measured at the lower of cost value or net realizable value in the subsequent periods. iii. Prepaid expenses Short-term prepaid expenses 30 June December 2017 Advances given (*) 186,329, ,398,435 Short-term deferred income 1,279, ,938 Total 187,609, ,304,373 (*) As of 30 June 2018 and 31 December 2017, the details of the advances given are as follows: Advances given 30 June December 2017 Advances given for purchase of land 97,786,153 92,511,089 Advance payments for construciton projects 73,983,743 19,525,832 Other 14,560,000 17,361,514 Total 186,329, ,398,435 iv. Financial liabities Financial borrowings 30 June December 2017 Short-term portions of long-term borrowings Financial leases 70,258,766 18,910,664 Bank borrowings 871,336, ,552,405 Long-term portions of short-term borrowings 941,594, ,463,069 Long-term borrowings Financial leases 199,533,618 2,586,147 Bank borrowings 1,666,129,276 1,335,601,659 Total of long-term borrowings 1,865,662,894 1,338,187,806 Total of financial liabilities 2,807,257,826 2,103,650,875 13

18 NOTE 4 - SIGNIFICANT EVENTS AND TRANSACTIONS RELATED WITH THE PERIOD (Continued) Maturity of financial liabilities 30 June December 2017 Less than 1 year 941,594, ,463, year 884,321, ,278, year 434,819, ,893, year 299,455, ,405, year 217,298,365 43,610,693 Over 5 years 29,767,621 - Total 2,807,257,826 2,103,650,875 Maturity analysis of the banks are as follows: Maturity of bank loans 30 June December 2017 Less than 1 year 871,336, ,552, year 818,279, ,692, year 377,753, ,893, year 249,019, ,405, year 191,309,115 43,610,693 More than 5 years 29,767,621 - Total 2,537,465,442 2,082,154,064 The maturity of financial leases are as follows: Maturity of financial leases 30 June December 2017 Less than 1 year 70,258,766 18,910, year 66,041,931 2,586, year 57,066, year 50,436, year 25,989,250 - Total 269,792,384 21,496,811 14

19 NOTE 4 - SIGNIFICANT EVENTS AND TRANSACTIONS RELATED WITH THE PERIOD (Continued) As of 30 June 2018, foreign currency details of financial liabilities are as follows: Currency Average effective interest rate (%) Short-term portion of longterm borrowigs Long-term borrowings EURO ,682,357 1,039,017,700 USD ,250, ,111,577 TRY ,403,678 - Total 871,336,166 1,666,129,276 As of 31 December 2017, foreign currency details of financial liabilities are as follows: Currency Average effective interest rate (%) Short-term portion of longterm borrowigs Long-term borrowings EURO ,991,285 1,141,251,653 USD ,146, ,350,006 TRY ,414,520 - Total 746,552,405 1,335,601,659 v. Deferred incomes Short-term deferred incomes 30 June December 2017 Advances received for ongoing construciton projects (*) 2,814, ,343 Total 2,814, ,343 Long-term deferred incomes 30 June December 2017 Advances received for ongoing construciton projects (*) 644,025, ,061,680 Total 644,025, ,061,680 (*) Advanced received regarding housing projects in progress consists of collections realized in term of notes recevable settled with designated terms as at balance sheet date. As of 30 June 2018, The Group's uncollected receivables related to the residential units are TRY879,830,339 (31 December 2017: TRY521,159,257). The mentioned notes receivables are classified as collateral bill since they have not been collected in cash. 15

20 NOTE 5 - INVESTMENT PROPERTIES The Group has not obtained valuation reports for its investment properties as of 30 June Fair values have been determined by the reports dated 2 October 2017 by Harmoni Gayrimenkul Değerleme ve Danışmanlık A.Ş. and Reel Gayrimenkul Değerleme A.Ş. The fair value of investment properties are TRY736,198,960 based on the reports prepared by the appraisal firms (31 December 2017: TRY121,292,707). The movement schedule of investment properties as of 30 June 2018 and 30 June 2017 are as follow: Investment Properties 1 January 2018 Additions Disposals Merger effect Transfers Fair value change 30 June 2018 Altınoran Teleferik Kayak Merkezi& Site Yönetimi - 17, ,009, ,027,000 Starium Avm 56.BB - 561,717-70,434, ,996,000 I Tower 50,849, , ,974,958 Altınoran Ticari Ünite -(Mektebim Okulları) - 6,321-47,777, ,784,000 Altınoran Agora Çarşı Projesi 47.BB - 391,701-42,016, ,407,980 Bursa Modern 16,298, ,298,902 İstanbul Sarayları 12,136, ,136,498 Gop Bina 10,898, , ,036,851 İncek Blue 10,620, ,620,182 Aquacity 8,850, ,850,000 Ege Boyu 7,520, ,532 (1,250,000) ,373,532 Ege Yakası 3,822,159 (489) ,821,670 İncek Life 297, ,966 Total 121,292,707 1,345,349 (1,250,000) 267,237, ,625,539 Investment Properties 1 January 2018 Additions Disposals Merger effect Transfers Fair value change 30 June 2018 Marmaris Arazisi(*) ,698, ,901, ,600,000 Ankara GOP Arazisi AVM -Ofis Projesi (**) ,715,325 52,257, ,973,257 Total ,414, ,158, ,573,257 General Total 121,292,707 1,345,349 (1,250,000) 267,237, ,414, ,158, ,198,796 (*) The Group has transferred Marmaris Land to investment properties as a result of the change in the Group s investment plans as of 31 March 2018 which were previously classified as inventory. Group is planning to construct health hotel in Marmaris Land with the decision of the Board of Directors on 20 April 2018 Number 2018/9. The total area of the land is m² and its precedent is m². (**) The Group has transferred Ankara GOP Land to investment properties as a result of the change in the Group s investment plans as of 31 March 2018 which were previously classified as inventory. Group is planning to construct shopping mall in Ankara GOP Land with the decision of the Board of Directors on 20 April 2018 Number 2018/9. According to licenses numbered 125-1, and were obtained as of 28 September 2017, it is planned to construct office for m 2, shopping mall for m 2, residential units for m 2. 16

21 NOTE 5 - INVESTMENT PROPERTIES (Continued) The movement schedule of investment properties as of 30 June 2017 are as follow: Investment Properties 1 January 2017 Additions Disposals Transfers Fair value change 30 June 2017 I Tower 48,732, ,732,975 Bursa Modern 14,753, ,753,631 Aquacity 14,053, ,053,500 İstanbul Sarayları 11,830, ,830,000 Gop 10,000, ,000,000 İncek Blue 9,537, ,537,065 Ege Boyu 7,306, ,306,000 Ege Yakası 3,066, ,066,132 İncek Life 295, ,000 Total 119,574, ,574,303 NOTE 6 - SIGNIFICANT CHANGES IN PROVISIONS, ASSETS AND LIABLILITIES Contructual Obligations: As of 30 June 2018, the Group has no significant change regarding to previously disclosed liabilities in the financial statements as of 31 December Lawsuits against the Group: As of 30 June 2018, the number of the lawsuit against the Group is 212, 84 cases are employees case, 128 cases are legal and administrative cases. The number of the lawsuits and proceedings are 156. As of 30 June 2018, there are various lawsuits against the Group related with the Group's activities amounting to TRY12,126,939 (31 December 2017: TRY12,126,939). The results of these lawsuits are not certain as of 30 June Since these lawsuits have not a significant effect on Group s operating results, financial position or liquidity, based on the Group management decision the Group have not booked provision for these lawsuits. Encumbrances: As of 30 June 2018, there are encumbrances and lawsuits on some share portions of Company s acquired lands. As per Campany s investment strategy, it is planned to gain higher profit margins by purchasing these lands from cheaper prices, solving the problem and selling them from higher prices. The Company management does not consider about any existing condition about the encumbrances which could lead to a risk of provisions/impairment in the financial statements. As of 30 June 2015, there are no existing mortgages on lands. Guarentees given: As of 30 June 2018, the amount of the guarentee letter given to third parties are TRY120,895,015 (31 December 2017: TRY ). Mortgages given: The Group pledged a mortgage of EUR20,000,000 and USD30,000,000 over its own assets for the purpose of using credit within the period. 17

22 NOTE 7 - EARNINGS PER SHARE The earning per share stated in income statement is calculated by dividing net income for the period by the weighted average number of Company s share for the period. The companies in Turkey are allowed to increase their paid-in capital by issuing free shares which represent the increases from retained earnings and revaluation funds. The issue of such shares is treated as the issuance of ordinary shares in the calculation of earnings per share. The weighted average number of shares includes such shares and their retrospective effects. The earning per share amount is calculated by dividing net income for the period by the weighted average number of Company s shares for the period. Between 1 June and 30 June 2018, earnings per share which have nominal value of 1 TL are as follow: Calculation is made as,1 share= 1 TL= 1 Lot 1 January- 30 June March- 30 June January- 30 June March- 30 June 2017 Average number of ordinary shares with nominal value TRY each 873,193, ,193, ,000, ,000,000 Net profit for current year (142,443,928) (214,616,080) (61,928,106) (27,202,334) Earnings per share (loss)/profit (0.1631) (0.2458) (0.1032) (0.0453) NOTE 8 - NATURE AND LEVEL OF RISK ARISING FROM FINANCIAL INSTRUMENTS There is no significant change risk policies and credit risk management compared to perior periods. Foreign exchange risk Foreign currency operations expose the Company to foreign currency risks. The Group s assets and liabilities denominated in foreign currencies as of 30 June 2018 and 31 December 2017 are as follows: 30 June December 2017 Assets 117,716,271 1,732,720 Liabilities (2,475,986,382) (875,671,397) Net balance sheet position (2,358,270,111) (873,938,677) 18

23 NOTE 8 - NATURE AND LEVEL OF RISK ARISING FROM FINANCIAL INSTRUMENTS (Continued) As of 30 June 2018, the details of foreign currency assets and liabilities are as follows: Current assets USD EUR TRY Equivalent Financial assets 149,012 21,989, ,427,282 Trade receivables 63, ,989 Other Total assets 212,377 21,989, ,716,271 Short-term liabilities Financial liabilities (55,529,018) (107,130,676) (822,029,376) Long-term liabilities Financial liabilities (159,053,657) (174,896,593) (1,653,957,006) Total liabilities (214,582,675) (282,027,269) (2,475,986,382) Net balance position (214,370,298) (260,037,575) (2,358,270,111) As of 31 December 2017, the details of foreign currency assets and liabilities are as follows: Current assets USD EUR TRY Equivalent Financial assets 130, , ,555 Trade receivables 204, ,165 Total assets 334, ,983 1,732,720 Short-term liabilities Financial liabilities (34,622,006) (45,068,575) (334,097,895) Long-term liabilities Financial liabilities (32,720,411) (92,604,448) (541,573,502) Total liabilities (67,342,417) (137,673,023) (875,671,397) Net balance position (67,007,523) (137,569,040) (873,938,677) 19

24 NOTE 8 - NATURE AND LEVEL OF RISK ARISING FROM FINANCIAL INSTRUMENTS (Continued) Net foreign currency positions are as follows according to currencies: 30 June December 2017 Against USD (977,678,620) (252,745,676) Against EUR (1,380,591,491) (621,193,001) Net Foreign Currency (2,358,270,111) (873,938,677) Foreign currency sensitivity The Company is mainly exposed to Euro and USD risks. The following table details the Company s sensitivity 20% increase/decrease against Euro and USD. 20% is the sensitivity rate used when reporting foreign currency risk internally to key management personel and represent management s assessment of the possible change in foreign exchange rates. The sensitivity analysis includes only ourstanding foreign currency dominated monetary items and adjusts their translation at the period end for a 20% change in foreign currency rates. A positive number indicates an increase in profit or loss and other equity items. 30 June 2018 Profit/loss Equity Appretiation of Depretiation of Appretiation of Depretiation of foreign foreign foreign foreign currency currency currency currency 20% appreciation of USD against TRY 1 - US Dollar net asset / liability (195,535,724) 195,535, Portion protected from US Dollar risk (-) US Dollar net effect (1+2) (195,535,724) 195,535, % appreciation of EUR against TRY 4 - EUR net asset / liability (276,118,298) 276,118, Portion protected from EUR risk (-) EUR net effect (4+5) (276,118,298) 276,118, % appreciation of Other currencies against TRY 7 - Other foreign currency net asset / liability Portion protected from other foreign currency risk (-) Other Foreign Assets net effect (7+8) TOTAL ( ) ( ) December 2017 Profit/loss Equity Appretiation of Depretiation of Appretiation of Depretiation of foreign foreign foreign foreign currency currency currency currency 10% appreciation of USD against TRY 1 - US Dollar net asset / liability (25,274,568) 25,274, Portion protected from US Dollar risk (-) US Dollar net effect (1+2) (25,274,568) 25,274, EUR net asset / liability (62,119,300) 62,119, Portion protected from EUR risk (-) EUR net effect (4+5) (62,119,300) 62,119, Other foreign currency net asset / liability Portion protected from other foreign currency risk (-) Other Foreign Assets net effect (7+8) TOTAL ( ) ( )

25 NOTE 9 - SUBSEQUENT EVENTS TRY has depreciated significantly on foreign currencies, especially in USD between the dates of 30 June 2018 and the approval date of the financial statements on 27 August 2018 (USD: 27%, EUR 24% loss). ADDITIONAL NOTE: CONTROL OF COMPENSATION OF PORTFOLIO LIMITS 30 June December 2017 Financial statements main account items Ralated regulations (TRY) (TRY) A Monetary and capital market instruments Serial III-48.1a. Art.24/ (b) 28,633,989 37,020,205 B Real estates, project based on real estates, Serial III-48.1a. Art.24/(a) 4,757,311,003 2,761,931,931 Right based on real estates - - C Subsidiaries Serial III-48.1a. Art.24/ (b) 88,494,075 88,492,885 Other assets 659,783,446 1,166,603,464 D Total assets Serial III-48.1a. Art.3/ (k) 5,534,222,513 4,054,048,485 E Financial liabilities Serial III-48,1, Art,31 2,807,257,826 2,103,650,875 F Other financial liabilities Serial III-48,1, Art,31 9,321,536 35,988,650 H Due to related parties (non trade) Serial III-48.1a. Art.23/ (f) 60,217 60,217 I Equity Serial III-48.1a. Art.31 1,786,504, ,382,669 Other liabilities 931,078,727 1,067,966,074 D Total liabilities Serial III-48.1a, Art.3/(k) 5,534,222,513 4,054,048, June December 2017 Financial statements main account items Ralated regulations (TRY) (TRY) A1 The portion of money and capital market instruments Serial III-48.1a. Art.24/ (b) Held for payables of properties for the following 3 years - - A2 Time deposit/demand deposit/try/foreign currency Serial III-48.1a. Art.24/ (b) 28,633,989 20,521,910 A3 Foreign capital market instruments Serial III-48.1a. Art.24/ (d) - - A4 Foreign properties. projects based on properties Serial III-48.1a. Art.24/ (d) - - and rights based on properties B2 Idle lands Serial III-48.1a. Art.24/ (dc 584,855, ,034,724 C1 Foreign subsidiaries Serial III-48.1a. Art.24/ (d) - - C2 Investments in affiliated operating companies Serial III-48.1a. Art J Non-cash loans Serial III-48.1a. Art ,895,015 10,008,854 K Mortgage amounts on lands that project to be developed Serial III-48.1a. Art.22/ (e) and the ownership does not belong the partnership - - L Total investments of monetary and capital market instruments at one company Serial III-48.1a. Art.22/ (1) 21,780,643 20,405,702 21

26 THE INTERIM PERIOD ENDED 30 JUNE 2018 AND 2017 ADDITIONAL NOTE: CONTROL OF COMPENSATION OF PORTFOLIO LIMITS (Continued) Portfolio Restrictions Related Regulation Calculation Max/Min Rate 30 June December Mortgage amounts on lands that project to be developed and Max 10% 0.00% 0.00% the ownership does not belong the partnership 2 Real estates. projects based on real estates. Serial III-48.1a, Art..22/e K/D rights based on real estates Serial III-48.1a, Art.24/(a),(b) (B+A1)/D Min 51% 85.96% 68.13% 3 Monetary and capital market instruments Serial III-48.1a, Art.24/(b) (A+C-A1)/D Max 49% 2.12% 3.10% 4 Foreign properties. projects based on properties rights based on properties affiliates capital, market instruments Serial III-48.1a, Art.24/(d) (A3+B1+C1)/D Max 49% 0.00% 0.00% 5 Idle lands Serial III-48.1a, Art.24/1(c) B2/D Max 20% 10.57% 6.17% 6 Subsidiaries (operating companies) Serial III-48.1a, Art.28/1(a) C2/D Max 10% 0.00% 0.00% 7 Borrowing limit Serial III-48.1a, Art.31 (E+F+G+H+J)/İ Max 500% % % 8 TRY and foreign currency time and demand deposits Serial III-48.1a, Art.22/b (A2-A1)/D Max 10% 0.52% 0.51% 9 Total investments of monetary and capital market instruments at one company Serial III-48.1a, Art.22/(1) (L/D) Max 10% 0.39% 0.50% The information below, control of compliance with the portfolio limitations are the condensed information which comprised of Serial: II, No: 14.1 Financial Reporting in Capital Markets Amendment No: 16 and prepared in accordance with Capital Markets Board s Communiqué Serial: III, No: 48.1 Real Estate Investment Company published in the Official Gazette dated 28 May 2013 numbered Capital Markets Board s Communiqué Serial: III, No: 48.1 a Amendment on Real Estate Investment Company published in the Official Gazette dated 23 January 2014 numbered