(ORIGINALLY ISSUED IN TURKISH)

Transcription

1 EİS ECZACIBAŞI İLAÇ, SINAİ VE FİNANSAL YATIRIMLAR SANAYİ VE TİCARET A.Ş. AND ITS SUBSIDIARIES CONVENIENCE TRANSLATION INTO ENGLISH OF CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE INTERIM PERIOD 1 JANUARY - 30 JUNE 2016 AND REVIEW REPORT (ORIGINALLY ISSUED IN TURKISH)

2 DRT Bağımsız Denetim ve Serbest Muhasebeci Mali Müşavirlik A.Ş. Maslak No 1 Plaza Eski Büyükdere Caddesi No: 1 Maslak, Sarıyer İstanbul, Turkey Tel: Fax: Mersis No: Ticari Sicil No: REVIEW REPORT ON CONDENSED CONSOLIDATED INTERIM FINANCIAL INFORMATON To the Board of Directors of EİS Eczacıbaşı İlaç, Sınai ve Finansal Yatırımlar Sanayi ve Ticaret A.Ş Istanbul Introduction We have reviewed the accompanying condensed consolidated statement of financial position of EİS Eczacıbaşı İlaç, Sınai ve Finansal Yatırımlar Sanayi ve Ticaret A.Ş. (the Company ) and its subsidiaries (together referred as the Group ) as of 30 June 2016 and the related condensed consolidated statements of profit or loss and other comprehensive income, changes in equity and cash flows for the six-month period then ended. The Group Management is responsible for the preparation and presentation of this consolidated interim financial information in accordance with Turkish Accounting Standards 34 Interim Financial Reporting ( IAS 34 ). Our responsibility is to express a conclusion on this condensed consolidated interim financial information based on our review. Scope of Review We conducted our review in accordance with Independent Auditing Standard on Review Engagements 2410, Review of Interim Financial Information Performed by the Independent Auditor of the Entity. A review of consolidated interim financial information consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with Independent Auditing Standards and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion. Conclusion Based on our review, nothing has come to our attention that causes us to believe that the accompanying condensed consolidated interim financial information is not prepared, in all material respects, in accordance with IAS 34 Interim Financial Reporting. DRT BAĞIMSIZ DENETİM VE SERBEST MUHASEBECİ MALİ MÜŞAVİRLİK A.Ş. Member of DELOITTE TOUCHE TOHMATSU LIMITED Yaman Polat Partner Istanbul, 19 August Member of Deloitte Touche Tohmatsu Limited

3 CONTENTS PAGE CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION CONDENSED CONSOLIDATED STATEMENT OF PROFIT OR LOSS... 4 CONDENSED CONSOLIDATED STATEMENT OF OTHER COMPREHENSIVE INCOME... 5 CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY... 6 CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS NOTE 1 ORGANISATION AND NATURE OF THE GROUP NOTE 2 BASIS OF PRESENTATION OF CONDENSED FINANCIAL STATEMENTS NOTE 3 INVESTMENTS ACCOUNTED FOR USING EQUITY METHOD NOTE 4 SEGMENT REPORTING NOTE 5 NOTES TO THE STATEMENT OF CASH FLOWS NOTE 6 FINANCIAL INVESTMENTS NOTE 7 FINANCIAL LIABILITIES NOTE 8 TRANSACTIONS AND BALANCES WITH RELATED PARTIES NOTE 9 TRADE RECEIVABLES AND PAYABLES NOTE 10 INVENTORIES NOTE 11 PREPAID EXPENSES AND DEFERRED INCOME NOTE 12 CURRENT INCOME TAX ASSETS NOTE 13 INVESTMENT PROPERTIES NOTE 14 PROPERTY, PLANT AND EQUIPMENT NOTE 15 INTANGIBLE ASSETS NOTE 16 PROVISIONS, CONTINGENT ASSETS AND LIABILITIES AND COMMITMENTS NOTE 17 EMPLOYEE BENEFITS NOTE 18 OTHER ASSETS AND LIABILITIES NOTE 19 CAPITAL, RESERVES AND OTHER EQUITY ITEMS NOTE 20 REVENUE NOTE 21 RESEARCH AND DEVELOPMENT EXPENSES, MARKETING EXPENSES AND GENERAL ADMINISTRATIVE EXPENSES NOTE 22 EXPENSES BY NATURE NOTE 23 OTHER OPERATING INCOME / EXPENSES NOTE 24 INCOME / EXPENSES FROM INVESTING ACTIVITIES NOTE 25 FINANCIAL INCOME / EXPENSES NOTE 26 TAXES ON INCOME (DEFERRED TAX ASSET AND LIABILITIES INCLUDED) NOTE 27 EARNINGS PER SHARE NOTE 28 FINANCIAL INSTRUMENTS AND FINANCIAL RISK MANAGEMENT NOTE 29 EVENTS AFTER THE REPORTING PERIOD NOTE 30 DISCLOSURES OF OTHER MATTERS, WITH MATERIAL EFFECT ON CONSOLIDATED FINANCIAL STATEMENTS, REQUIRED FOR THE PURPOSE OF UNDERSTANDING AND INTERPRETING THE FINANCIAL STATEMENTS... 63

4 CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION AS OF 30 JUNE 2016 Reviewed Audited Notes 30 June December 2015 ASSETS Current assets Cash and cash equivalents 5 488, ,023 Financial investments - Restricted bank balances 6 2,649 1,277 - Financial assets at fair value through profit and loss Trade receivables - Trade receivables due from related parties 8 10,342 4,713 - Trade receivables due from third parties 9 364, ,391 Other receivables - Other receivables due from related parties 8 45, Other receivables due from third parties Derivative financial instruments 57 - Inventories , ,900 Prepaid expenses 11 12,242 5,597 Current income tax assets ,050 Other current assets 18 19,821 24,296 Total current assets 1,085,743 1,090,342 Non-current assets Trade receivables - Trade receivables due from third parties Other receivables - Other receivables due from third parties Financial investments - Restricted bank balances 6-2,533 - Financial assets at fair value through profit and loss 6 2,014 2,238 - Financial investments available for sale 6 1,678,739 1,677,886 Investments accounted for using equity method 3 88,615 86,348 Investment properties , ,971 Property, plant and equipment , ,181 Intangible assets - Goodwill 24,117 24,117 - Other intangible assets 15 34,865 33,348 Prepaid expenses 11 2,970 11,855 Deferred tax assets 26 21,370 19,704 Other non-current assets 18 19,215 23,100 Total non-current assets 2,353,741 2,279,488 Total assets 3,439,484 3,369,830 The accompanying notes form an integral part of these consolidated financial statements. 1

5 CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION AS OF 30 JUNE 2016 LIABILITIES Current liabilities Short term borrowings Reviewed Audited Notes 30 June December Financial liabilities due to related parties 8 120, ,125 - Financial liabilities due to third parties 7 98,295 80,837 Trade payables - Trade payables due to related parties 8 137, ,422 - Trade payables due to third parties 9 189, ,725 Employee benefit obligations 17 2,426 2,801 Other payables - Other payables due to third parties 6,659 13,872 Deferred income 11 15,813 2,884 Current income tax liabilities 26 4,134 - Short term provisions - Short term provisions for employee benefits 17 6,916 5,042 - Other short term provisions 16 3,556 3,199 Other current liabilities 18 3,499 5,019 Total current liabilities 588, ,926 Non-current liabilities Long term liabilities - Financial liabilities due to related parties 8-33,504 - Financial liabilities due to third parties 7 30,516 29,576 Deferred income Long term provisions - Long term provisions for employee benefits 17 7,645 7,533 Deferred tax liabilities 26 79,433 79,775 Other non-current liabilities 18-2,533 Total non-current liabilities 118, ,844 The accompanying notes form an integral part of these consolidated financial statements. 2

6 CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION AS OF 30 JUNE 2016 EQUITY Reviewed Audited Notes 30 June December 2015 Attributable to equity holders of the Company 2,721,709 2,736,132 Share capital , ,208 Adjustments to share capital , ,777 Items that will not be reclassified subsequently to profit or loss - Defined benefit plans re-measurement gains/losses (4,634) (4,646) Items that may be reclassified subsequently to profit or loss - Cumulative translation differences 10,010 10,010 - Gains / losses on available for sale financial assets due to revaluation or/and reclassification 1,457,307 1,456,903 Restricted reserves , ,763 Retained earnings 156, ,470 Net income for the period 111,689 67,647 Non-controlling interests 11,454 3,928 Total equity 2,733,163 2,740,060 Total liabilities and equity 3,439,484 3,369,830 The interim condensed consolidated financial statements for six months period ended 30 June 2016 were approved by the Board of Directors on 19 August 2016 and signed on its behalf by Bülent Avcı, Financial Director and by Gülnur Günbey Kartal, CMB Relations and Reporting Manager. The accompanying notes form an integral part of these consolidated financial statements. 3

7 CONDENSED CONSOLIDATED STATEMENT OF PROFIT OR LOSS Reviewed Not reviewed Reviewed Not reviewed 1 January - 1 April - 1 January - 1 April - Notes 30 June June June June 2015 Revenue , , , ,479 Cost of sales (-) 20 (530,566) (273,755) (457,397) (223,726) Gross profit 181,493 89, ,292 62,753 General administrative expenses (-) 21 (47,629) (27,181) (49,015) (25,807) Marketing expenses (-) 21 (92,650) (48,431) (76,623) (38,806) Research and development expenses (-) 21 (876) (508) (713) (352) Other operating income 23 70,184 46,138 95,114 36,654 Other operating expense (-) 23 (54,811) (26,192) (23,806) (9,781) Operating profit / (loss) 55,711 33,295 77,249 24,661 Income from investing activities 24 60,023 59, Expenses from investing activities (-) 24 (809) (6) (93) (3) Share of profit / (loss) of investments accounted for using equity method 3 11,427 (3,339) (5,003) 2,279 Operating income / (loss) before finance expense 126,352 89,869 72,659 27,247 Finance income 25 1,477 (954) - - Financial expenses (-) 25 (11,822) (6,025) (11,126) (6,629) Profit / (loss) before tax 116,007 82,890 61,533 20,618 Tax income / (expense) from continuing operations (4,231) (4,376) (13,495) (3,881) Income tax expense (-) 26 (6,282) (4,872) (14,725) (5,250) Deferred tax income / (expense) 26 2, ,230 1,369 Profit / (loss) for the period 111,776 78,514 48,038 16,737 Attributable to - Non-controlling interests 87 2,554 (2,561) (1,544) - Equity holders of the parent ,689 75,960 50,599 18,281 Net profit / (loss) for the period 111,776 78,514 48,038 16,737 Weighted average number of ordinary shares with face value of KR 1 each 54,820,800,000 54,820,800,000 54,820,800,000 54,820,800,000 Basic and diluted earnings / (loss) per share (Kurus) The accompanying notes form an integral part of these consolidated financial statements. 4

8 CONDENSED CONSOLIDATED STATEMENT OF OTHER COMPREHENSIVE INCOME Reviewed Not reviewed Reviewed Not reviewed 1 January - 1 April - 1 January - 1 April - Notes 30 June June June June 2015 Profit / (loss) for the period 111,776 78,514 48,038 16,737 Other comprehensive income / (expenses) Items that will not be reclassified subsequently to profit or loss - Gain / (loss) on remeasurement of defined benefit plans of investments accounted for using equity method Items that will be reclassified subsequently to profit or loss - Currency translation differences - - (1,788) (1,076) - Gains / (losses) on available for sale financial assets due to revaluation or/and reclassification Group s share in equity method accounted investments comprehensive income 3 (35) (3) Tax relating to items that may be reclassified subsequently 26 (43) (26) (28) (20) Other comprehensive income (after tax) (293) (613) Total comprehensive income / (loss) 112,563 79,007 47,745 16,124 Total comprehensive income / (loss) attributable to - Non-controlling interest 458 2,816 (2,293) (1,413) - Equity holders of the parent 112,105 76,191 50,038 17,537 Total comprehensive income / (loss) 112,563 79,007 47,745 16,124 The accompanying notes form an integral part of these consolidated financial statements. 5

9 CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY Items that will not be reclassified subsequently to profit or loss Items that may be reclassified subsequently to profit or loss Retained Earnings Defined Financial Attributable to Adjustments benefit plans Currency assets Net profit / equity holders Non- Share to share re-measurement translation fair value Restricted Retained (loss) for of the controlling Total capital capital gains / losses differences reserve reserves earnings the period Company interest Equity As of 1 January , ,777 (2,534) 9,566 1,495, , ,348 (43,293) 2,743,841 17,204 2,761,045 Transfers ,225 (47,518) 43, Dividends paid (43,857) - (43,857) - (43,857) Total comprehensive income / (loss) (811) ,599 50,038 (2,293) 47, June , ,777 (2,534) 8,755 1,495, , ,973 50,599 2,750,022 14,911 2,764,933 As of 1 January , ,777 (4,646) 10,010 1,456, , ,470 67,647 2,736,132 3,928 2,740,060 Transfers ,485 43,162 (67,647) Dividends paid (219,283) - (219,283) - (219,283) Increase (decrease) through other changes, (Effect of transactions with equity holders acting in their capacity as equity holders) ,755-92,755 7,068 99,823 Total comprehensive income / (loss) , , , June , ,777 (4,634) 10,010 1,457, , , ,689 2,721,709 11,454 2,733,163 The accompanying notes form an integral part of these consolidated financial statements. 6

10 CONDENSED CONSOLIDATED CASH FLOWS A. Cash flows from operating activities Reviewed Reviewed 1 January - 1 January - Notes 30 June June 2015 Income / (loss) for the period 111,776 48,038 Adjustments for reconciliation of profit / loss for the period: Adjustments for depreciation and amortisation 22 10,669 8,917 Adjustments for provisions related with employee benefits 17 2,918 2,704 Adjustments for (reversal of) lawsuit and/or penalty provisions Adjustments for impairments of receivables Adjustments for impairment of inventories Adjustments for losses (gains) on disposal of non-current assets (127) Adjustments for share of profit of investments accounted for using the equity method 3 (14,305) 5,003 Adjustments for interest income 23 (20,268) (16,999) Adjustments for interest expense 23, 25 16,884 13,480 Adjustments for tax income / expense 26 4,231 13,495 Adjustments for fair value losses (gains) of derivative financial instruments 25 (1,359) - Adjustments for dividend (income) expenses 24 (59,705) (269) Adjustments for unrecognized foreign exchange differences 1,404 (48,285) Other adjustments for non-cash items (expense / income accruals) 9 (10,164) (8,604) Other adjustments for other investing or financing transactions (gain on sale of financial assets) - (16) 43,481 18,619 Changes in working capital: Adjustments for increase / decrease in trade receivables (143,862) (61,501) Adjustments for increase / decrease in inventories (11,244) 422 Adjustments for increase / decrease in trade payables 71,075 33,335 Adjustments for increase / decrease in other operating receivables 8,288 3,104 Decrease (increase) in prepaid expenses 1,107 (9,721) Adjustments for increase / decrease in other operating payables (6,804) (5,034) Increase (decrease) in deferred income 12,533 (11,535) (25,426) (32,311) Cash flows from operating activities: Interest received 20,491 17,625 Interest paid (6,350) (6,167) Taxes paid - (12,120) Payments related with provisions for employee benefits 17 (932) (832) (12,217) (33,805) The accompanying notes form an integral part of these consolidated financial statements. 7

11 CONDENSED CONSOLIDATED CASH FLOWS B. Cash flows from investing activities Reviewed Reviewed 1 January - 1 January - Notes 30 June June 2015 Cash outflows for the acquisition of tangible and intangible assets 14, 15 (23,071) (20,970) Cash inflows from the sale of tangible and intangible assets 14, 15, Cash inflows from the sale of investment properties 13 1, Cash outflows for the acquisition of investment properties 13 (68,479) (75,815) Cash outflows for the capital advance payments to joint ventures and associates 3 (33,900) (2,514) Dividends received 8, 24 59, Cash inflows from sale of shares of other business organizations or funds or debt instruments C. Cash flows from financing activities (64,019) (97,769) Cash inflows / outflows from bank borrowings (4,723) 26,932 Cash flows from derivative financial instruments 1,302 - Dividends paid (219,283) (43,857) Interest paid (10,254) (7,363) Other inflows of cash (Effect of transactions with equity holders acting in their capacity as equity holders) 99,823 - (133,135) (24,288) Net increase / (decrease) in cash and cash equivalents before the impact of foreign currency translation differences (A+B+C) (209,371) (155,862) D. Impact of foreign currency translation differences on cash and cash equivalents (692) 52,109 Net decrease in cash and cash equivalents (A+B+C+D) (210,063) (103,753) E. Cash and cash equivalents at the beginning of the period 5 698, ,361 Cash and cash equivalents at the end of the period (A+B+C+D+E) 5 488, ,608 The accompanying notes form an integral part of these consolidated financial statements. 8

12 NOTE 1 - ORGANISATION AND NATURE OF THE GROUP EİS Eczacıbaşı İlaç, Sınai ve Finansal Yatırımlar Sanayi ve Ticaret A.Ş. (the Company ) was established on 24 October The Company has no production activity; but has a holding structure with its subsidiaries, joint ventures and associates. The Company directly operates in the real estate development industry and in health, personal care and cosmetics industries through its joint ventures, subsidiaries and associates. The Company s registered address is as follows: Büyükdere Caddesi, Ali Kaya Sokak No: 5 Levent 34394, Istanbul. The Company is registered with the Capital Markets Board of Turkey ( CMB ) and its shares have been quoted on the Borsa İstanbul A.Ş. ( BIST ) since As of 30 June 2016, 20.17% (31 December 2015: 20.92%) of total shares are quoted on the BIST. The ultimate parent company of the Group is Eczacıbaşı Holding A.Ş., which possesses 50.62% (31 December 2015: 50.62%) shares of the Company (Note 19). As of 30 June 2016, personnel number of Group is 1,116 (31 December 2015: 1,024). The Company and its consolidated subsidiaries, joint ventures and associates are referred to as the Group in this report. The operations of the subsidiaries, joint ventures and associates included in the consolidation are stated below: Subsidiaries The Company s subsidiaries (the Subsidiaries ), the nature of businesses of the Subsidiaries and their business segments are as follows: Companies accounted by line by line consolidation: Subsidiaries Nature of business Segment EİP Eczacıbaşı İlaç Pazarlama A.Ş. ( EİP ) Eczacıbaşı İlaç Ticaret A.Ş. ( EİT ) Eczacıbaşı İlaç (Cyprus) Ltd. ( Eczacıbaşı Cyprus ) (*) Marketing and selling of pharmaceuticals Marketing and selling of pharmaceuticals Marketing and selling of pharmaceuticals Health Health Health Eczacıbaşı Girişim Pazarlama Tüketim Ürünleri Marketing and selling of Personal care Sanayi ve Ticaret A.Ş. ( Eczacıbaşı Girişim ) personal care products Eczacıbaşı Hijyen Ürünleri Sanayi ve Ticaret A.Ş. Marketing and selling of Personal care ( Eczacıbaşı Hijyen ) personal care products Eczacıbaşı Profesyonel Ürün ve Hizmetler Sanayi Marketing and selling of Personal care ve Ticaret A.Ş. ( Eczacıbaşı Profesyonel ) personal care products Eczacıbaşı Gayrimenkul Geliştirme ve Yatırım A.Ş. Real estate development Construction ( Eczacıbaşı Gayrimenkul ) (*) All Subsidiaries of the Company, except for Eczacıbaşı İlaç (Cyprus) Ltd. registered in Northern Cyprus Turkish Republic, are registered in Turkey. 9

13 NOTE 1 - ORGANISATION AND NATURE OF THE GROUP (Continued) Joint Ventures The Company s joint ventures (the Joint Ventures ) are listed below. All Joint Ventures are registered in Turkey. The nature of business of the Joint Ventures and their respective businesses segments for the purpose of the consolidated financial statements are as follows: Joint Ventures Nature of business Partner Segment Eczacıbaşı-Baxter Hastane Ürünleri Pharmaceuticals and Baxter S.A. Health Sanayi ve Ticaret A.Ş. ( EBX ) serum production Eczacıbaşı-Monrol Nükleer Ürünler Sanayi Production and sales Uğur Bozluolçay and Health ve Ticaret A.Ş. ( Eczacıbaşı-Monrol ) of radiopharmaceuticals Şükrü Bozluolçay Eczacıbaşı-Schwarzkopf Kuaför Sale of personal Hans Schwarzkopf Personal care Ürünleri Pazarlama A.Ş. ( ESK ) care products Gmbh & Co. KG Associates The associates of the Group ( Associates ) and their respective business segments are as follows: Associates Ekom Eczacıbaşı Dış Ticaret A.Ş. ( Ekom ) Vitra Karo Sanayi ve Ticaret A.Ş. ( Vitra Karo ) Eczacıbaşı Sağlık Hizmetleri A.Ş. ( ESH ) Eczacıbaşı Ortak Sağlık ve Güvenlik Birimi A.Ş. ( OSGB ) Eczacıbaşı-Baxalta Sağlık Ürünleri Sanayi ve Ticaret A.Ş. ( EBAXA ) Nature of business Export services Production of ceramic tiles Special care and nursing services Occupational health and safety services Sales and marketing of pharma The Company s proportion of voting power and ownership interest on its subsidiaries, joint ventures and associates included in the consolidation are disclosed in Note 2 of the consolidated financial statements as of 31 December 2015 and there is no change in these ratios in the current period. NOTE 2 - BASIS OF PRESENTATION OF CONDENSED FINANCIAL STATEMENTS 2.1 Basis of Presentation Statement of compliance The Company and its subsidiaries operating in Turkey maintains its books of account and prepares its statutory financial statements in accordance with accounting principles in the Turkish Commercial Code ( TCC ) and tax legislation. Subsidiaries of the company which currently operate in foreign countries maintain their books of account and prepare their financial statements in accordance with the local tax legislations of the countries where they are operating and they maintain their books of account and prepare their financial statements in terms of national currency. The accompanying condensed interim consolidated financial statements are prepared in accordance with the CMB s Communiqué Serial II, No: 14.1, Basis of Financial Reporting in Capital Markets ( the Communiqué ) published in the Official Gazette numbered on 13 September According to the article 5 of the Communiqué, financial statements are prepared in accordance with Turkish Accounting Standards ( TAS ) and its addendum and interpretations ( IFRIC ) issued by Public Oversight Accounting and Auditing Standards Authority ( POA ). The condensed interim consolidated financial statements have been prepared for the six month period ended 30 June 2016 in accordance with Turkish Accounting Standard ( TAS ) 34 Interim Financial Reporting. 10

14 NOTE 2 - BASIS OF PRESENTATION OF CONDENSED FINANCIAL STATEMENTS (Continued) 2.1 Basis of Presentation (continued) Statement of compliance (continued) Some of disclosures and notes that are required to be included in TAS/TFRS financial statements under decree are summarised in accordance with TAS 34 or not included in the financial statements. The Group s condensed consolidated financial statements do not contain all necessary explanations and disclosures presented in the year-end financial statements, therefore should be read in conjunction with the annual financial statements for the year ended 31 December The financial statements have been prepared on the historical cost basis except for the financial assets and liabilities which are expressed with their fair values. Historical cost is generally based on the fair value of the consideration given in exchange for assets. Functional 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 consolidated financial statements are presented in TL, which is the functional currency of the Company and the presentation currency of the Group. Restatement of the financial statements in Hyperinflationary periods With the decision taken on 17 March 2005, the CMB announced that, effective from 1 January 2005, for companies operating in Turkey and preparing their financial statements in accordance with CMB Financial Reporting Standards, the application of inflation accounting is no longer required. Accordingly, TAS 29, Financial Reporting in Hyperinflationary Economies has not been applied in the financial statements for the accounting periods starting 1 January Comparative information and restatement of prior period financial statements The Group has applied the same significant accounting policies, presentation and estimates that are used for the preparation of consolidated financial statements for the year end on 31 December 2015 for the preparation of accompanying condensed consolidated financial statements except for the new and revised accounting standards effective for annual periods beginning on 1 January Consolidated financial statements of the Group have been prepared comparatively with the prior period in order to give accurate trend analysis regarding financial position and performance. In order to maintain consistency with current year consolidated financial statements, comparative information is reclassified and significant changes are disclosed where necessary TAS Taxonomy, which is prepared in accordance with paragraph 9(b) of Decree Law No.660 to enable users to analyse TAS financial statements in Extensible Business Reporting Language XBRL format, was approved upon the POA s decision No.30 as at 2 June TAS Taxonomy is taken into account in the accompanying condensed financial statements. Differences arising from reclassifications of previous years financial statements are detailed below: The Group has reclassified restricted bank balances of 2015 amounting TL 1,277 thousand from Other Current Assets to Financial Investments in current assets. The Group has reclassified restricted bank balances of 2015 amounting TL 2,533 thousand from Other Non-Current Assets to Financial Investments in non-current assets. These reclassifications have no effect on statement of profit or loss. 2.2 Changes in accounting policies Significant changes in accounting policies are applied retrospectively and prior period financial statements are restated. The Group s significant accounting policies that are used for the preparation of condensed consolidated financial statements for the six months interim period ended 30 June 2016 are consistent with accounting policies presented in the consolidated financial statements as 31 December

15 NOTE 2 - BASIS OF PRESENTATION OF CONDENSED FINANCIAL STATEMENTS (Continued) 2.3 Changes in the accounting estimates and errors If changes in estimates are for only one period, changes are applied to the current year but if changes in estimates are for the following periods, changes are applied both to the current and following years prospectively. The Group did not have any major changes in the accounting estimates during the current year. Significant accounting errors are corrected retrospectively, by restating the prior period consolidated financial statements. 2.4 New and Revised Turkish Accounting Standards a) Amendments to TAS affecting amounts reported and/or disclosures in the consolidated financial statements None. b) New and Revised TFRSs effective since the year 2016 with no material effect on financial statements with amendments and interpretations on current TFRSs Amendments to TAS 16 and TAS 38 Amendments to TAS 16 and TAS 41 and amendments to TAS 1, TAS 17, TAS 23, TAS 36 and TAS 40 Clarification of Acceptable Methods of Depreciation and Amortisation 1 Agriculture: Bearer Plants 1 Amendments to TFRS 11 and TFRS 1 Accounting for Acquisition of Interests in Joint operations 1 Annual Improvements to Cycle TFRS 1 2 Amendments to TAS 1 Disclosure Initiative 2 Annual Improvements to Cycle TFRS 5, TFRS 7, TAS 34, TAS 19 2 Amendments to TAS 27 Equity Method in Separate Financial Statements 2 Amendments to TFRS 10 and TAS 28 Sale or Contribution of Assets between an Investor and its Associate or Joint Venture 2 Amendments to TFRS 10, TFRS 12 and Investment Entities: Applying the Consolidation Exception 2 TAS 28 TFRS 14 Regulatory Deferral Accounts 2 1 Effective for annual periods beginning on or after 31 December Effective for annual periods beginning on or after 1 January Amendments to TAS 16 and TAS 38 Clarification of Acceptable Methods of Depreciation and Amortisation This amendment clarifies that that a depreciation method that is based on revenue that is generated by an activity that includes the use of an asset is not appropriate for property, plant and equipment, and introduces a rebuttable presumption that an amortisation method that is based on the revenue generated by an activity that includes the use of an intangible asset is inappropriate, which can only be overcome in limited circumstances where the intangible asset is expressed as a measure of revenue, or when it can be demonstrated that revenue and the consumption of the economic benefits of the intangible asset are highly correlated. The amendment also adds guidance that expected future reductions in the selling price of an item that was produced using an asset could indicate the expectation of technological or commercial obsolescence of the asset, which, in turn, might reflect a reduction of the future economic benefits embodied in the asset. 12

16 NOTE 2 - BASIS OF PRESENTATION OF CONDENSED FINANCIAL STATEMENTS (Continued) 2.4 New and revised Turkish Financial Reporting Standards (continued) b) New and Revised TFRSs effective since the year 2016 with no material effect on financial statements with amendments and interpretations on current TFRSs (continued) Amendments to TAS 16 and TAS 41 and Amendments to TAS 1, TAS 17, TAS 23, TAS 36 and TAS 40 Agriculture: Bearer Plants This amendment include bearer plants within the scope of TAS 16 rather than TAS 41, allowing such assets to be accounted for a property, plant and equipment and measured after initial recognition on a cost or revaluation basis in accordance with TAS 16. The amendment also introduces a definition of bearer plants as a living plant that is used in the production or supply of agricultural produce, is expected to bear produce for more than one period and has a remote likelihood of being sold as agricultural produce, except for incidental scrap sales, and clarifies that produce growing on bearer plants remains within the scope of TAS 41. Amendments to TAS 16 and TAS 41 also led to amendments in related provisions of TAS 1, TAS 17, TAS 23, TAS 36 and TAS 40, respectively. Amendments to TFRS 11 and TFRS 1 Accounting for Acquisition of Interests in Joint operations This amendment requires an acquirer of an interest in a joint operation in which the activity constitutes a business to: apply all of the business combinations accounting principles in TFRS 3 and other TAS, except for those principles that conflict with the guidance in TFRS 11, disclose the information required by TFRS 3 and other TAS for business combinations. Amendments to TFRS 11 also led to amendments in related provisions of TFRS 1. Annual Improvements Cycle TFRS 1: Clarify which versions of TAS can be used on initial adoption (amends basis for conclusions only). Amendments to TAS 1 Disclosure Initiative This amendment addresses perceived impediments to preparers exercising their judgment in presenting their financial reports. Annual Improvements Cycle TFRS 5: Adds specific guidance in TFRS 5 for cases in which an entity reclassifies an asset from held for sale to held for distribution or vice versa and cases in which held-for-distribution accounting is discontinued. TFRS 7: Additional guidance to clarify whether a servicing contract is continuing involvement in a transferred asset, and clarification on offsetting disclosures in condensed interim financial statements. TAS 34: Clarify the meaning of elsewhere in the interim report and require a cross-reference. Annual Improvements to Cycle also led to amendments in related provisions of TAS 19. Amendments to TAS 27 Equity Method in Separate Financial Statements This amendment permits investments in subsidiaries, joint ventures and associates to be optionally accounted for using the equity method in separate financial statements. 13

17 NOTE 2 - BASIS OF PRESENTATION OF CONDENSED FINANCIAL STATEMENTS (Continued) 2.4 New and revised Turkish Financial Reporting Standards (continued) b) New and Revised TFRSs effective since the year 2016 with no material effect on financial statements with amendments and interpretations on current TFRSs (continued) Amendments to TFRS 10 and TAS 28 Sale or Contribution of Assets between an Investor and its Associate or Joint Venture. This amendment clarifies the treatment of the sale or contribution of assets from an investor to its associate or joint venture. Amendments to TFRS 10, TFRS 12 and TAS 28 Investment Entities: Applying the Consolidation Exception This amendment addresses issues that have arisen in the context of applying the consolidation exception for investment entities by clarifying the following points: The exemption from preparing consolidated financial statements for an intermediate parent entity is available to a parent entity that is a subsidiary of an investment entity, even if the investment entity measures all of its subsidiaries at fair value. A subsidiary that provides services related to the parent s investment activities should not be consolidated if the subsidiary itself is an investment entity. When applying the equity method to an associate or a joint venture, a non-investment entity investor in an investment entity may retain the fair value measurement applied by the associate or joint venture to its interests in subsidiaries. An investment entity measuring all of its subsidiaries at fair value provides the disclosures relating to investment entities required by TFRS 12. TFRS 14 Regulatory Deferral Accounts TFRS 14 Regulatory Deferral Accounts permits an entity which is a first-time adopter of Turkish Financial Reporting Standards to continue to account, with some limited changes, for regulatory deferral account balances in accordance with its previous TFRS, both on initial adoption of TFRS and in subsequent financial statements. TFRS 14 also led to amendments in related provisions of TFRS 1. c) New and revised TFRSs in issue but not yet effective The Group has not applied the following new and revised TFRSs that have been issued but are not yet effective: TFRS 9 Amendments to TFRS 9 and TFRS 7 Financial Instruments Mandatory Effective Date of TFRS 9 and Transition Disclosures TFRS 9 Financial Instruments TFRS 9, issued in November 2009, introduces new requirements for the classification and measurement of financial assets. TFRS 9 was amended in October 2010 to include requirements for the classification and measurement of financial liabilities and for derecognition. Amendments to TFRS 9 and TFRS 7 Mandatory Effective Date of TFRS 9 and Transition Disclosures The mandatory effective date of TFRS 9 will be no earlier than annual periods beginning on or after 1 January The Group evaluates the effects of these standards, amendments and improvements on the consolidated financial statements. 14

18 NOTE 3 - INVESTMENTS ACCOUNTED FOR USING EQUITY METHOD 30 June December 2015 Associates Vitra Karo - - Ekom 16,421 13,570 ESH - - Joint Ventures Eczacıbaşı-Monrol 20,392 20,392 ESK EBX 18,829 51,411 EBAXA 32,973-88,615 86, As of 1 January 86, ,369 The Group s share in investments accounted for using equity method profit / (loss) (*) 14,305 (5,003) Capital advance payments 33,900 2,514 Differences due to actuarial gains and losses 12 - Change in the fair value of available-for-sale financial assets (35) (16) Increases due to currency translation differences Dividends paid / accrued (45,915) (802) As of 30 June 88, ,039 (*) Transactions with EBX has been eliminated by the Company s interests in EBX. TL 2,878 thousand has been eliminated from the profit of EBX for the period ended 30 June The Group s share in the assets, liabilities as of 30 June 2016 and 31 December 2015, net sales of the associates for the periods ended 30 June are presented below: 30 June 2016 Goodwill Net Total attributable profit / (loss) proportion of to equity for the ownership Assets Liabilities holders Net sales period interests (%) Ekom 1,676,928 1,614, ,872 3,803 26% Vitra Karo 918,529 1,168, ,208-25% ESH 9,086 18,234-19,622-48% Eczacıbaşı-Monrol 256, ,342 20,392 61,069-50% ESK 13,384 13,892-8,402 (975) 47% EBX 179, , ,994 9,526 50% EBAXA 134,886 68,940-99,592 (927) 50% 11,427

19 NOTE 3 - INVESTMENTS ACCOUNTED FOR USING EQUITY METHOD (Continued) 31 December June 2015 Goodwill Net Total attributable profit / proportion of to equity (loss) for ownership Assets Liabilities holders Net sales the period interests (%) Ekom 1,590,376 1,538, , % Vitra Karo 889,063 1,117, , % ESH 9,403 10,572-16,493 (2,514) 48% Eczacıbaşı-Monrol 226, ,174 20,392 57,016 (3,497) 50% ESK 11,010 8,935-10,241 (483) 47% EBX 368, , , % EBAXA 115 (152) NOTE 4 - SEGMENT REPORTING (5,003) The Group determined its operating segments based upon the reports reviewed and used by the Board of Directors while giving strategic decisions. During evaluations made for the requirements of TFRS 8 Operating Segments effective as of 1 January 2009, the Group decided that operating segments shown below in the disclosures prepared in line with CMB requirements are compatible with the reports presented to Decision Making Authorities related to current operations and that there is no new reportable segment. The Group continues to operate primarily in three reportable segments as of 30 June 2016: 1. Health Production and sale of human health and veterinary medicine. 2. Personal care Production, marketing and sale of personal care and consumption products. 3. Real estate development Kanyon The sale and lease of the real estate constructed with a 50% - 50% partnership with İş Gayrimenkul Yatırım Ortaklığı A.Ş. ( İŞ GYO ) located on Büyükdere Caddesi, in the Şişli district of Istanbul. The lease regards to half of the shopping mall and whole of the office building. Ormanada project The Company acquired half of the 22 pieces of land with a total area of 196, m² in Yorgancı Çiftliği Mevkii, Uskumru Mahallesi, Sarıyer district in Istanbul. The size of houses varies between 170 and 700 square meters with sales price range from USD 500 thousand to USD 2.2 million in Ormanada. 16

20 NOTE 4 - SEGMENT REPORTING (Continued) 3. Real estate development (continued) Ayazağa facilities leased to EBX Lease is related to serum facilities located in Ayazağa district of Istanbul. Lands In addition to the aforementioned lands of Ayazağa facilities, the Company acquired all the shares of Yeni Tekstil Sanayi A.Ş. which owns a land plot in Ayazağa Cendere Valley, Urban Transformation Area as well as merged with it by facilitated merging transaction method on 7 December Moreover the Company acquired 21 fields with the total surface area of 265,930 m2 located in province of Istanbul, district of Silivri, Kurfallı village, Uğur Bıçaker Street, a field with the total surface area of 5,250 m2 located in province of Istanbul, district of Silivri, Yoğurtdere on 1 March 2016 and a field qualified as a parcel numbered 2007 with the total surface area of 685,026 m2 located in province of Istanbul, district of Silivri, Akören village, Karasinan Street. Eczacıbaşı Gayrimenkul Providing consulting services regarding land development and project management to Eczacıbaşı Group companies which are operating in real estate development sector. Segment assets consist of cash and cash equivalents (except the cash and cash equivalents of the parent company), trade and other receivables, inventories, tangible and intangible assets and other current and non-current assets. Financial assets at fair value through profit or loss, financial assets available for sale and deferred tax assets are excluded from segment assets. Segment liabilities consist of liabilities related to operations. Current and deferred tax liabilities, financial liabilities and financial liabilities provided by related parties are excluded from segment liabilities. Capital expenditures consist of purchases of tangible and intangible assets, investment property and goodwill arisen as a result of acquisitions in the current year. Financial information has not been reported in geographical segments since primary sales and purchases of the Group are performed in Turkey and the majority of the assets of the Group are in Turkey. Segment assets and liabilities as of 30 June 2016 and 31 December June December 2015 Assets Liabilities Assets Liabilities Health 170,271 (113,482) 93,171 (59,497) Personal care 584,534 (498,118) 540,627 (473,697) Real estate development 505,643 (8,426) 453,000 (12,352) Undistributed 2,179,036 (86,295) 2,283,032 (84,224) Total 3,439,484 (706,321) 3,369,830 (629,770) 17

21 NOTE 4 - SEGMENT REPORTING (Continued) Capital expenditures and non-cash expenses of segments for the interim periods ended 30 June Personal Real estate Inter-segment 1 January - 30 June 2016 Health care development Undistributed elimination Total Capital expenditures (Notes 13, 14 and 15) 5,334 18,719 73, ,049 Non-cash expenses: - Depreciation and amortisation (Notes 13, 14 and 15) 1,360 5,333 3, ,669 - Provision for diminution in value of inventories (Note 10) Provision for employment termination benefits and actuarial - - loss (Note 17) Provision for unused vacation (Note 17) 1, ,003 - Provision for litigations (Note 16) (698) 1, Provision for doubtful receivables (Note 9) Expense accruals (Note 9) 108 2, ,180 1 January - 30 June ,351 10,141 4, ,676 Capital expenditures (Notes 13, 14 and 15) 1,064 14,758 87, ,738 Non-cash expenses: - Depreciation and amortisation (Notes 13, 14 and 15) 1,097 3,570 4, ,917 - Provision for diminution in value of inventories (Note 10) Provision for employment termination benefits and actuarial - - loss (Note 17) ,447 - Provision for unused vacation (Note 17) ,257 - Provision for litigations (Note 16) Provision for doubtful receivables (Note 9) Expense accruals 427 3, ,513 2,689 9,181 4, ,416 18

22 NOTE 4 - SEGMENT REPORTING (Continued) Segment results for the interim periods ended 30 June Personal Real estate Inter-segment 1 January - 30 June 2016 Health care development Undistributed elimination Total Total sales 202, ,147 49, ,932 Elimination of sales within the Group (-) (25) (50,100) (748) - - (50,873) Sales to third parties 202, ,047 48, ,059 Cost of sales (-) (133,483) (379,977) (17,106) - - (530,566) Gross profit 68,762 81,070 31, ,493 Marketing, sales and distribution expenses (-) (42,581) (44,526) (5,543) - - (92,650) General administrative expenses (-) (16,776) (24,062) (2,664) (4,127) - (47,629) Research and development expenses (-) - (876) (876) Other operating income 5,487 9, ,002-69,704 Other operating expenses (-) (1,907) (11,119) - (41,785) - (54,811) Operating profit 12,985 10,160 23,996 8,090-55,231 1 April - 30 June 2016 Total sales 92, ,127 25, ,553 Elimination of sales within the Group (-) (18) (29,923) (388) - - (30,329) Sales to third parties 92, ,204 24, ,224 Cost of sales (-) (65,779) (198,470) (9,506) - - (273,755) Gross profit 26,613 47,734 15, ,469 Marketing, sales and distribution expenses (-) (21,335) (24,328) (2,768) - - (48,431) General administrative expenses (-) (8,828) (13,759) (1,576) (3,018) - (27,181) Research and development expenses (-) - (508) (508) Other operating income 2,374 7, ,452-45,658 Other operating expenses (-) 151 (6,019) 2 (20,326) - (26,192) Operating(loss) / profit (1,025) 10,611 11,121 12,108-32,815 19

23 NOTE 4 - SEGMENT REPORTING (Continued) Segment results for the interim periods ended 30 June (continued) Personal Real estate Inter-segment 1 January - 30 June 2015 Health care development Undistributed elimination Total Total sales 126, ,355 39, ,874 Elimination of sales within the Group (-) (12) (43,543) (630) - - (44,185) Sales to third parties 126, ,812 38, ,689 Cost of sales (-) (85,240) (357,001) (15,156) - - (457,397) Gross profit 41,706 66,811 23, ,292 Marketing, sales and distribution expenses (-) (30,142) (41,644) (4,597) (240) - (76,623) General administrative expenses (-) (18,024) (23,522) (3,015) (4,454) - (49,015) Research and development expenses (-) - (713) (713) Other operating income 3,500 9, ,854-95,114 Other operating expenses (-) (6,334) (6,874) (227) (10,371) - (23,806) Operating (loss) / profit (9,294) 3,671 16,082 66,790-77,249 1 April - 30 June 2015 Total sales 47, ,733 20, ,201 Elimination of sales within the Group (-) (12) (21,395) (315) - - (21,722) Sales to third parties 47, ,338 20, ,479 Cost of sales (-) (32,064) (185,162) (6,500) - - (223,726) Gross profit 15,735 33,176 13, ,753 Marketing, sales and distribution expenses (-) (14,689) (21,693) (2,184) (240) - (38,806) General administrative expenses (-) (9,340) (11,927) (1,204) (3,336) - (25,807) Research and development expenses (-) - (352) (352) Other operating income 2,465 5, ,448-36,654 Other operating expenses (-) (2,667) (3,821) (200) (3,093) - (9,781) Operating (loss) / profit (8,496) 1,045 10,333 21,779-24,661 20

24 NOTE 4 - SEGMENT REPORTING (Continued) Reconciliation of operating profits related to operating segments with profit before tax: 1 January - 1 April - 1 January - 1 April - 30 June June June June 2015 Operating profit / loss related to operating segments 47,141 20,707 10,459 2,882 Undistributed income / expenses (-) 8,090 12,108 66,790 21,779 Gain / losses shares from associates 11,427 (3,339) (5,003) 2,279 Income from investing activities 60,503 60, Expenses from investing activities (-) (809) (6) (93) (3) Financial income 1,477 (954) - - Financial expenses (-) (11,822) (6,025) (11,126) (6,629) Profit / (loss) before tax 116,007 82,890 61,533 20,618 NOTE 5 - NOTES TO THE STATEMENT OF CASH FLOWS 30 June December 2015 Cash in hand Banks 488, ,003 - demand deposits 6,851 4,369 - time deposits 481, , , ,023 Interest rates for TL denominated time deposits vary between 11.00% and 11.50% (31 December 2015: 12.00% %). Maturity dates of these deposits are 1 July Interest rates for foreign currency denominated time deposits vary between 1.00% and 2.70% (31 December 2015: 1.65% %). Maturity dates of foreign currency time deposits are between 1 July 2016 and 4 August The weighted average interest rates per annum for TL, USD and EUR denominated time deposits are 11.49%, 1.31% and 2.55%, respectively (31 December 2015: 13.01%, 2.48% and 1.78%). Time deposits at banks are denominated as follows: 30 June December 2015 TL denominated time deposits 15, ,851 TL Equivalent of USD denominated time deposits 346, ,687 TL Equivalent of EUR denominated time deposits 119, , , ,634 Cash and cash equivalents included in the consolidated statements of cash flows for six months interim periods ended 30 June are presented below: 30 June December June December 2014 Cash and cash equivalents 488, , , ,606 Interest accruals (-) (396) (619) (619) (1,245) 488, , , ,361 21

25 NOTE 6 - FINANCIAL INVESTMENTS The details of financial investments included in current assets as of 30 June 2016 and 31 December 2015 are as follows: 30 June December 2015 Restricted bank balances 2,649 1,277 Financial assets at fair value through profit and loss Financial investments, current 3,554 2,065 Financial assets available-for-sale 1,678,739 1,677,886 Financial assets at fair value through profit and loss 2,014 2,238 Restricted bank balances - 2,533 Financial investments, non-current 1,680,753 1,682,657 IFRS 13 explain the classifications of valuation techniques. The classification of financial instruments at fair value is shown as following: Level 1: Quoted (unadjusted) prices in active markets for identical assets or liabilities; Level 2: Inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly (i.e., as prices) or indirectly (i.e., derived from prices); Level 3: Inputs for the assets or liabilities that are not based on observable market data (unobservable inputs). According to the observability of the data used in fair value measurement, the fair value hierarchy of the Group s financial assets at fair value is shown as follows: 30 June 2016 Level 1 Level 2 Level 3 Total Financial assets at fair value through profit and loss Financial investments, current Financial assets available-for-sale 44, ,656 1,367,282 1,678,739 Financial assets at fair value through profit and loss - 2,014-2,014 Financial investments, non-current 44, ,670 1,367,282 1,680, December 2015 Level 1 Level 2 Level 3 Total Financial assets at fair value through profit and loss Financial investments, current Financial assets available-for-sale 43, ,656 1,367,282 1,677,886 Financial assets at fair value through profit and loss - 2,238-2,238 Financial investments, non-current 43, ,894 1,367,282 1,680,124 22