CONSOLIDATED FINANCIAL STATEMENTS FOR PERIOD ENDED 30TH OF SEPTEMBER 2016

Drafted according International Financial Reporting Standards (IFRS)

Cuprins (Contents)

Situatia consolidata a pozitiei financiare (Consolidated statement of financial position) 3
Situatia consolidata a rezultatului global (Consolidated statement of comprehensive income) 5

Situatia consolidata a pozitiei financiare (Consolidated statement of financial position) pentru perioada incheiata la 30 Septembrie 2016 (for the period ended 30 September 2016)

ACTIVE (ASSETS)		30-Sep-16	31-Dec-15
Active imobilizate		LEI	LEI
Non-current assets
Imobilizari corporale	11	112,245,799	114,509,038
Property, plant and equipment
Investitii imobiliare		-	-
Investment property
Imobilizari necorporale	12	352,184	437,597
Intangible
Investitii in actiuni	14	-	-
Investments
Alte active imobilizate		302,564	303,203
Other non-current assets
		112,900,547	115,249,838
Active circulante
Current assets
Stocuri	15	8,339,567	18,588,284
Inventories
Creante comerciale si similare	16	13,975,897	13,097,909
Trade and other receivables
Alte active financiare		528,402	1,027,799
Other financial assets
Numerar si echivalente numerar	27	27,879,055	10,843,224
Cash and cash equivalents
		50,722,921	43,557,216

Active clasificate drept detinute în vederea vânzãrii	11	23,452,457	23,452,457
Assets classified as held for sale

TOTAL ACTIVE (TOTAL ASSETS)		187,075,925	182,259,511

DATORII (LIABILITIES) DATORII CURENTE
CURRENT LIABILITIES
Datorii comerciale si similare	17	11,229,802	9,981,440
Trade and other payables
Imprumuturi	18	4,969,610	4,137,991
Loans and borrowings
Subventii pentru investitii		-	-
Grants received
Datorii privind impozitul pe profit		438,706	-

Situatia consolidate a pozitiei financiare (Consolidated statement of financial position) pentru perioada incheiata la 30 Iunie 2016 (for the period ended 30 Iunie 2016)

Tax liability
Provizioane	20	4,044,555	5,211,793
Provisions
		20,682,673	19,331,224

Datoriile incluse în grupurile destinate cedãrii
DATORII PE TERMEN LUNG
NON-CURRENT LIABILITIES
Datorii comerciale si similare	17	-	-
Non-current trade and other liabilities
Imprumuturi	18	72,176,216	75,708,672
Loans and borrowings
Subventii pentru investitii		1,177,747	1,234,479
Grants received
Impozit amanat	21	-	-
Deferred tax
Provizioane		-	-
Provisions
		73,353,963	76,943,151

TOTAL DATORII (TOTAL LIABILITIES)		94,036,636	96,274,375

ACTIVE NETE (NET ASSETS)		93,039,289	85,985,136

CAPITAL SI REZERVE (EQUITY)
Capital social	23	20,613,571	20,613,371
Issued capital
Beneficii acordate angajatilor in instrumente de
capitaluri proprii		2,024,226	1,307,649
Benefits granted to employees from own equity
instruments
Impozit profit amanat		(1,372,358)	(1,372,358)
Deferred Tax
Actiuni proprii		-	-
Own Shares
Prime legate de emiterea de actiuni		54,850,347	54,850,347
Share premium
Ajustari din retratare		-	-
Translation adjustments
Rezerve	24	29,579,622	29,224,189
Reserves		-

Situatia consolidate a pozitiei financiare (Consolidated statement of financial position) pentru perioada incheiata la 30 Iunie 2016 (for the period ended 30 Iunie 2016)

Rezultat reportat	(12,656,120)	(18,638,062)
Retained earnings	-	-
Interesele care nu controleaza	-	-
Non-controling interest	-	-
TOTAL CAPITALURI (TOTAL EQUITY)	93,039,289	85,985,136

All amounts in Lei, if not otherwise stated

Situatia consolidata a rezultatului global (Consolidated statement of comprehensive income) pentru perioada incheiata la 30 Septembrie 2016 (for the period ended 30 September 2016)

		30-Sep-16	30-Sep-15
		LEI	LEI
Venituri din vanzari	3	72,283,410	55,982,491
Sales revenues
Alte venituri din exploatare	4	3,236,312	2,639,415
Other operating revenues
Castiguri din vanzari de Active		9,535	(688,120)
Revenues related to Sale of Assets
Variatia stocurilor		(6,845,101)	415,344
Change in inventories of FG & WiP
Materii prime si consumabile	15	(14,044,759)	(11,463,851)
Raw material and consumables used
Cheltuieli de personal	6	(12,013,417)	(9,217,941)
Personnel Expenses
Amortizare si deprecieri		(4,950,196)	(4,436,684)
Depreciation and amortisation expenses
Cercetare si dezvoltare		-	-
Research and development
Alte cheltuieli din exploatare	5	(27,747,492)	(23,743,408)
Other operating expenses
Profit / (Pierdere) din exploatare		9,928,292	9,487,246
Profit / (Loss) from operation
Venituri financiare	7	764,380	11,157,989
Financial income
Cheltuieli financiare	8	(3,916,390)	(4,656,462)
Financial expenses
Profit / (Pierdere) inainte de impozitare		6,776,282	15,988,773
Profit / (Loss) before tax
Cheltuieli cu impozite	9	(438,706)	(7,440)
Income tax expenses
Profit / (Pierdere) din activitati continue		6,337,576	15,981,333
Profit/ (Loss) from continuing activities
Profit / (Pierdere) din activitati intrerupte, nete de impozit		-	-
Net Profit/ (Loss) from discontinued activities
Profit / (Pierdere)		6,337,576	15,981,333
Profit after tax

Total alte elemente ale rezultatului global		-	-
Total other elements of other comprehensive income
Total rezultat global		6,337,576	15,981,333
Comprehensive income total

1. Accounting policies 8
2. Accounting estimates 39
3. Revenues 42
4. Other operational revenues 42
5. Operating expenses 43
6. Personnel expenses 44
7. Financial income and expenses 45
8. Taxes 46
9. Earnings per share 47
10. Dividends 47
11. Tangible assets 48
12. Intangible assets 55
13. Goodwill and Depreciation 56
14. Financial assets 57
15. Inventories 58
16. Trade receivables and other receivables 60
Trade receivables and other receivables 60
17. Trade and other liabilities 61
18. Loans 62
19. Employee's Benefits 64
20. Provisions 65
21. Deferred tax 68
22. Assets classified as for sale 69
23. Issued Capital 69
24. Reserves 70
25. Lease 71
26. Transactions with affiliates 72
27. Cash and cash equivalents 74
28. Other financial assets 74
29. Adjustments of accounting errors 74
31. Other information 75
32. Contingents 76

1. Accounting policies

Basis of Consolidation

The consolidated financial statements of the third quarter include the financial statements of SC Cemacon SA, as well as those of the investee company SC Cemacon Real Estate SRL, drafted on 30th September 2016.

The consolidation of the two companies is required by the fact that SC Cemacon Real Estate is a 100% investee of the company SC Cemacon SA.

Information regarding the Group:

Cemacon SA is a Romanian legal person, established as a joint stock company based on the Government Decision HG no. 1200/1991, with headquarters in Cluj-Napoca city, 48 Dorobantilor street, Silver Business Center building, 1st floor, Cluj county. The company has as main field of activity "Manufacture of bricks, roof tiles and construction products, in bakes clay".

The company SC Cemacon Real Estate was established following the agreement signed by Cemacon SA and BCR (Banca Comerciala Romana) in order to transfer a part of the debt and assets under the restructuring process.

The individual financial statements of SC Cemacon Real Estate are drafted according to OMFP (Ordinance of the Public Finances Ministry) 1802/2012.

The consolidation of the financial statements of the parent company SC Cemacon SA and of the investee company SC Cemacon Real Estate has begun in year 2014 and shall continue until there is no control of the parent company over the investee company.

The financial statements of the investee company have been drafted for the same reporting period as those of the parent company, using the same accounting policies.

The International Financial Reporting Standards (IFRS) were applied in the preparation of the consolidated financial statements.

Even though the financial statements of SC Cemacon Real Estate have been prepared according to OMFP 1802/2012, the necessary adjustments have been carried out for the consolidation, in order to reflect the accounting policies of the parent company.

Consolidation procedures

Consolidated financial statements :

a) Combine the similar elements of assets, debts, equity, revenues, expenses and cash flow of Cemacon SA with those of Cemacon Real Estate Srl
b) Eliminates the accounting value of the investment made by Cemacon SA in Cemacon Real Estate Srl and the part of Cemacon SA from the equity of Cemacon Real Estate Srl
c) Completely eliminates the assets and debts, the equity, the revenues, the expenses and the cash-flow from the group, corresponding to the transactions among the companies within the Group (intercompany transactions) (profit and loss resulted from the intercompany transactions, which are recognized in assets, as well as the stocks and fixed assets, are completely eliminated). The loss resulted from the group may indicate a depreciation which requires the acknowledgment in the consolidated financial statements. IAS 12 shall be applied for the accounting of the temporary income tax differences resulting as a consequence of the elimination of profit and of the loss from the intergroup transactions.

Within the consolidation the necessary adjustments have been carried out, in order to guarantee the conformity with the group's accounting policies.

In the consolidated financial statements are included the revenues and expenses as of the date of the audit.

The financial statements of Cemacon SA and Cemacon Real Estate Srl used for consolidation have the same reporting date ( 30th of September 2016).

Drafting principles

The main accounting policies adopted in preparing the financial statements are listed below. These policies have been constantly applied, for all the reported years, unless otherwise provided.

The financial statements are expressed in the national currency (Lei), which is also the entity's functional currency.

Amounts are rounded up to the closest Leu, unless otherwise provided.

These financial statements have been drafted in accordance with:

the International Financial Reporting Standards (IFRS) adopted by the European Union;
the Accounting Law 82/1991, as republished ("Law 82");
Order no. 881/2012 of the Ministry of Finance on the application of the International Financial Reporting Standards ("IFRS") by trading companies whose securities are admitted to trading on a regulated market;
Order no. 1286/2012 of the Ministry of Finance approving the Accounting Regulations in accordance with the International Financial Reporting Standards (IFRS), applicable to trading companies whose securities are admitted to trading on a regulated market, as subsequently amended.

Drafting the financial statements in accordance with the IFRS requires using certain critical accounting estimates. Drafting the financial statements in accordance with Order 1286/2012 of the Ministry of Finance requires that the Group's management makes estimates and hypotheses affecting the reported value of assets and liabilities, the presentation of contingent assets and liabilities upon drafting the financial statements, and the reported income and expenditure for the period. Although these estimates are made by the Group's management based on the best information available on the date of the financial statements, the results obtained may be different from these estimates.

Estimates and judgements are continuously assessed and rely on historic experience and other factors, including the forecasts on future events that are thought to be reasonable under the circumstances.

These financial statements have been drafted according to the principle of business continuity which means that the Group will continue doing its business in the predictable future. To assess the applicability of this assumption, the management analyses the forecasts on future cash inflows.

Based on these analyses, the management believes that the Group will be able to continue doing its business in the predictable future and, therefore, the application of the principle of business continuity in drafting the financial statements is well-founded.

Measurement basis

The financial statements have been drafted based on the historical cost, except for the items mentioned in the notes.

Change of accounting policies

New standards and interpretations entered into force

Starting with 2015 EU has adopted the following IFRS standards and their corresponding amendments:

IFRS 11 Joint ventures replaces IAS 31 Interests in joint ventures and SIC-13 Joint ventures – Non-cash contributions of shareholders. IFRS 11 eliminates the option of the accounting the joint ventures (ECC) applying the proportional consolidation. Instead, ECC which comply with the definition of a joint shall be managed by the equity ethos. Adopting this standard had no impact on the financial statements of the Company.

IFRS 11 Lump commitments (Amendment): Accounting the acquisitions for joint operations shall be applied for annual periods starting from or after the 1st of January 2016. The standard has not been yet adopted by the European Union. The amendment refers to the accounting of the contributions for joint ventures, in the joint operations, explains the accounting method of the associated companies established in an economic activity, indicates the appropriate accounting treatment. The company is now in process of assessing the impact of this amendment on the financial position or on the performance.

The Amendments to IAS 1, Applicable for the financial years starting from or after the 1st of January 2016. Earlier application is allowed. This amendment has been adopted by the European Union in December 2015.

The Amendments to IAS 1 include the following five improvements to the presentation requirements stipulated in the standard. The definition of materiality was modified in order to clarify its applicability on the financial statements taken as a whole and on each presentation requirement within a standard. Likewise, there are amendments regarding the order of notes from the financial statements and the clarification of the fact that companies have flexibility in presenting their accounting policies in the explanatory notes. The company does not consider that these amendments shall have a significant effect on the financial statements.

IAS 16 tangible assets, has been amended by introducing a restriction of using the methods of income depreciation. This is motivated by the fact that the revenues generated by the mentioned assets is also affected by other factors than the use of benefits brought by that asset. The application of this amendment is mandatory beginning with January of 2016. The amendment was adopted by the EU in December 2015.

IAS 27 Individual financial statements (revised), as a consequence of applying the IFRS 10 and IFRS, 12 standard, include provisions limited to the accountancy for subsidiaries, investee companies and associated companies, within the individual financial statements. The amendment was adopted by the EU in December 2015, and the actual applying date is 1st of January 2016.

Standards and interpretations not entered into force

Certain new standards, amendments and interpretations of the existing standards are not yet entered into force for the financial year ended 31st of December 2015 and have not been applied in the preparation of these financial statements.

IAS 28 Investments in associated companies and in joint ventures (revised), following the new standards IFRS 11 Joint ventures and IFRS 12 Presentation of information related to interests in other companies, IAS 28 Investments in associated companies was re-named IAS 28 Investments in associated companies and in joint ventures, and describes the application of the equity method in the investments in investee companies, in addition to the investments in associated companies.

IFRS 10 Consolidated financial statements replaces the fragment of IAS 27 "Individual financial statements" which focuses on the accountancy of the consolidated financial statements. It also includes the aspects from SIC-12 Consolidation – Companies with special purpose. IFRS 10 establishes a unique control pattern which applies to all the companies, including the companies with special purpose. The amendments introduced by IFRS 10 require that the management specifically determine which companies are investee companies and have to be consolidated by a parent company, compared to the IAS 27 requirements (applicable for annual periods starting with or after the 1st of January of 2014);

The amendments to IFRS 10 – Consolidated financial statements, IFRS 12 – Information to be presented related to interests in other companies and IAS 27 (2011) Individual financial statements, introduce the exception from the preparation of the consolidated financial statements of the investment companies, define the investment company and include presentation requirements specific for the investment companies (Investment companies), of the criteria mentioned in IFRS 12 Presentation of the relations with other companies, applicable for annual periods starting from or after the 1st of January 2014, includes all the information previously stipulated in IAS 27 regarding the consolidated financial statements, as well as all the other information previously stipulated in IAS 31 and IAS 28. The information refer to the investments of a company in subsidiaries, joint ventures, structured and associated companies. Likewise, there are new information to be supplied to the users of the financial statements.

IASB uses the term "investment company" for the companies which have as field of activity the investments with exclusive purpose to obtain a yield from the appreciation of capital, revenues from investments or both. Likewise, an investment company must assess the performance of its investments based on the fair value. The amendment relative to the investment companies stipulates an exception from the consolidation requirements provided by IFRS 10 and requires that the investment companies asses the subsidiaries at their fair value through the profit or loss account, instead of consolidating them.

IFRS 9, "Financial Instruments (2009)"- (effective date: annual periods starting with the 1st of January of 2018). This standard has not been adopted by the European Union. The standard replaces the IAS 39 regulations, "Financial Instruments: Acknowledgment and Evaluation", regarding the classification and evaluation of the financial assets and liabilities, eliminates the categories of securities owned up to their maturity date, available for sale and credits and receivables, existent in IAS 39. The financial assets shall be classified at their initial acknowledgment as: financial assets evaluated at depreciated cost or financial assets evaluated at their fair value. A financial asset is evaluated at a depreciated cost if it complies with the following two conditions: (i) -the asset is owned within a business pattern whose objective is holding of shares with the purpose of obtaining future cash-flows according to the contractual clauses; and (ii) – the contractual terms provide the generation of cash-flows on

determined dates, representing only principal and interest payments corresponding to the current principal. The profits and loss from the revaluation of the financial assets evaluated at their fair value are recognized in the profit or loss account, except an investment in an equity instrument not held for transaction. IFRS 9 stipulates, at the initial recognition, an irrevocable choice to present all the changes of fair value corresponding to the investments in the comprehensive result situation. The choice is available at the individual level (share by share). No amount recognized in the comprehensive result is not re-classified in the profit or loss account at a subsequent date.

IFRS 15 – Revenues from contracts with customers (in force for the periods starting from or after the 1 st of January 2017) – has not been adopted by EU. The standard issued 28th of May 2014 replaces IAS 11, AIS 18, IFRIC 13, IFRIC 15, IFRIC 18 and SIC – 31. The standard is applicable to the contracts with customers, others than the insurance ones, financial instruments, leases. The standard provides a unique model of analysing the contracts with customers and two approaches of income recognition – at one moment or during the period of contract, depending on the moment of complying with the obligation according to the contract. The management of the company and of the entities in which it owns more than 50% considers that these amendments shall not have a significant effect on the separate financial statements.

In September 2015 an amendment of this standard, providing the deferment of the effective date of application of this standard until January 2018.

Revenue recognition

Revenues include the fair value of the amounts collected or to be collected as a result of selling the provided goods and services.

Sales revenues from selling goods are recognized if the following conditions are complied with:

1. the significant risks and rewards resulting from the ownership of goods have been transferred to the purchaser;
1. the company does not manage the sold goods as it would normally do in case of holding the ownership over them and does not have the effective control over them;
1. the revenues can be reliably evaluated;
1. it is probable that the economic benefits related to the transaction are generated by the company; and
1. the costs borne or to be borne by in relation to the mentioned transaction can be reliably evaluated.

The revenues from "bill & hold" sales (escrow at seller) through which the purchaser becomes the owner of the goods and accepts their invoicing, but the delivery is deferred at its request.

The revenues are recognized when the purchaser has the ownership of goods under the following conditions:

a) it is probable that the delivery of goods takes place
b) Upon the recognition of the sale, the goods are available, identified and ready to be delivered to the purchaser
c) The purchaser clearly confirms the instructions for the deferment of delivery; and
d) The usual payment conditions are complied with.

The revenues are not recognized if there is only the intention of acquiring or producing the goods in due time in order to be delivered.

If the Group registers significant risks related to the ownership, the transaction does not represent a sale and the revenue are not recognized.

If the company registers only an insignificant risk related to the ownership right, than the transaction represents a sale and the revenues are recognized.

Sales revenues from the provision of services are recognized if they can be credibly measured.

The revenues related to the transaction must be recognized depending on the execution phase of the transaction at the closing of the balance. The result of a transaction can be reliably evaluated if the following conditions are complied with:

a) the value of the revenues may be reliably evaluated;

b) it is probable that the economic benefits related to the transaction are generated for the entity; c) the phase of transaction completed at the end of the reporting period may be reliably evaluated; and

d) the costs borne for the transaction and the cost of transaction completes may be reliably evaluated.

When the result of a transaction involving provision of services can not be reliably evaluated, the revenues are recognized only to the extent of the recognized expenses that can be recovered.

Rental and royalty revenues are recognized based on the principles of commitment accounting in accordance with the economic substance of the relevant contracts.

Interest revenues are recognized on a regular basis, proportionally, as such revenues are generated, based on the commitment accounting method.

Dividend revenues are recognized upon determining the right of the shareholder to receive the payment.

Revenues from reduction or cancellation of provisions, and from the adjustments for depreciation or impairment, are recognized if they are not justified any more, the risk or the expense becoming enforceable.

Commercial discounts granted after issuing the invoice are booked in the profit and loss account as part of the operating revenues.

In these financial statements, the income and expenditure are presented as gross amounts. In the balance sheet, liabilities and receivables involving the same partners are presented as net amounts if there is a compensation right.

The gains from the sale of assets are presented at their fair value.

Conversion of foreign currency transactions

The Group's transactions in foreign currencies are booked based on the exchange rates announced by the National Bank of Romania ("NBR") for the transaction date.

At the end of each month, foreign currency balances are converted into Lei based on the exchange rates announced by the NBR for the last banking day of the month.

Gains and losses deriving from the settlement of foreign currency transactions and from the conversion of monetary assets and liabilities expressed in foreign currencies are recognized in the profit and loss account, as part of the financial result.

Financial assets

The Group classifies the financial assets into one of the categories presented below, depending on the purpose they were purchased for.

Evaluation based on the fair value through the profit and loss account achieved only for categories of derivatives kept for sale. These are recognized in the balance sheet at their fair value, whereas changes in value are recognized in the profit and loss account.
Recognition as debt or receivable – this category is for assets having a fixed maturity or that can be easily determined and are not quoted on an active market. These usually appear from formed provisions relevant to the commodities or services for the customer, but may also incorporate other types of monetary assets relevant to contracts. These are initially recognized at their fair value plus the transaction costs, directly attributable to the purchase or issue, being later recognized at the amortized value using the market interest rate method less the impairment adjustment.

The impairment adjustment is recognized when there is strong proof that the entity will not be able to collect all the amounts having reached maturity according to the collection deadlines, the adjustment sum is given by the difference between the net book value and the present value of the future cash flows relevant to the adjusted receivables. For receivables presented as net value such adjustments are booked on separate adjustment accounts, whereas the loss is recognized as administrative expenditure in the global result statement. The moment the failure to collect is certain, the gross value of the asset is canceled by the relevant provision value.

At regular time intervals, the Group will renegotiate the contractual terms regarding the outstanding receivables for customers who have had a good transaction history. Such renegotiations will determine changes in the collection time and the expected new cash inflows will be discounted using the initial interest, any difference resulting from the application of the method will be recognized in the profit and loss account.

The Group's financial assets consist of trade receivables, other receivables, cash and cash equivalents, included in the statement of financial position.

The cash and cash equivalents include: the petty cash and cash in current bank accounts, term deposits, other short-term investments with very high liquidity or falling due within 3 months, and for the purpose of drafting the statement of cash flow – bank overdraft – it is presented under the current liabilities and loans in the statement of financial position.

The accounting of foreign currency monetary operations is kept both in the currency they were conducted and in the national currency, the conversion into the national currency is made according to the accounting policies regulating the conversion of foreign currency transactions, presented earlier herein.

Financial liabilities

The Group classifies the financial liabilities into one of the categories presented below, depending on the purpose they were engaged for.

Evaluation based on the fair value through the profit and loss account achieved only for categories of derivatives kept for sale. These are recognized in the balance sheet at their fair value, whereas changes in value are recognized in the profit and loss account.
Other financial liabilities: – this category includes the following:

Bank loans are initially recognized at their fair value less the transaction costs directly attributed to obtaining the loans.

Liabilities and other short-term monetary liabilities are initially recognized at their fair value, being later presented at their cost value using the market interest rate method.

Commercial liabilities are booked at the value of the amounts to be paid for the received assets or services.

Equity

The financial instruments issued by the Group are classified as equity only to the extent that they cannot be classified as financial liabilities or financial assets.

The ordinary shares of the Group are classified as equity instruments.

Indebtedness cost

Indebtedness costs are recognized as financial expenses according to the contractual provisions for the period when the indebtedness costs fall due or are actually engaged.

Indebtedness costs that are directly attributable to the purchase, construction or production of an asset having long production cycle are included in the cost of that asset.

The production cost of assets having a long production cycle includes only indebtedness costs relating to the production period.

The indebtedness costs that are included in the production cost of assets having a long production cycle are the following:

total interest expense;
financial expense relevant to financial leasing contracts;
exchange rate differentials relevant to foreign currency loans, as far as these are construed as an adjustment of the interest expense.

The cost capitalization starts when:

expenses for such asset are borne;
indebtedness costs are borne, and
the necessary activities for preparing the asset in view of using it as pre-established or selling it are on-going.

The indebtedness cost capitalization is interrupted during extended periods when no work is being conducted to achieve that asset.

The indebtedness cost capitalization is ceased when most of the necessary activities for preparing the asset that has a long production cycle in view of using it as pre-established or selling it are conducted, even if some of the administrative works may still continue.

The indebtedness costs borne during periods when capitalization is interrupted or after their capitalization ceases, are recognized in the financial expenditure entries.

Pensions and other post-retirement benefits

During the normal course of business, the Group makes payments to the public health fund, pensions fund, and unemployment fund on behalf of its employees, at the statutory rates. All the Group's employees are members of the pension scheme of the Romanian state. These costs are recognized in the profit and loss account at the same time wages are recognized.

According to the collective employment contract, the Group rewards the employees at their retirement age by giving them financial bonuses depending on their seniority in the company. The Group does not independently manage a private pension scheme.

Other long-term benefits

Other employee benefits expected to be settled entirely within 12 months after the end of the reporting period are presented as short-term liabilities.

Other employee benefits that are not extinguished within 12 months as of the end of the reporting period are presented as long-term liabilities and are calculated using discount rates. This is the case of employee benefits upon retirement. For more details, please refer to Note 19 – Employee Benefits.

Leasing contracts

The leasing contracts for tangible fixed assets whereby the Group undertakes all the risks and benefits relevant to the property are classified as financial leasing contracts.

The financial lease is the leasing operation which transfers the largest part of the risks and rewards corresponding to the ownership right to the asset and which complies with at least one of the following conditions:

a) the ownership right over the good is transferred to the lessee until the end of the period of the leasing contract;

b) the Group has the option to purchase the good at a price sufficiently low compared to the fair value when the option becomes exercisable, so that at the beginning of the lease contract there is reasonably the certainty that the option shall be applied;

c) the duration of the leasing contract covers most of the useful life of the good, even if the title deed is not transferred;

CEMACON SA Notes to Consolidated Financial Statements for the period ended 30th of September 2016

Accounting policies (continued)

d) the total value of the lease payments, except the accessory costs, is higher or equal to the original cost of the good, represented by the value it was purchased by the financer, that is the acquisition cost;

e) the goods representing the object of the leasing contract have a special nature, so that only the lessee may use them without major changes.

Financial leasing costs are capitalized at the estimated discounted value of payments. Each payment is divided between the principal component and the interest component in order to obtain a constant interest rate during the reimbursement period. The payable amounts are included in the short-term or long-term liabilities. The interest component is included in the profit and loss account during the contract period. Assets held based on financial leasing contracts are capitalized and amortized during their useful life.

The leasing contracts where a significant part of the risks and benefits associated to the property is withheld by the lessor are classified as operational leasing contracts. The payments made based on such a contract (net of any facilities granted by the lessor) are recognized in the profit and loss account on a linear basis during the contract period.

Intangible assets

a) Purchased intangible assets

Intangible assets include computer software created by entities or purchased from third parties for internal needs, such as recipes, formulas, patterns, projects and prototypes.

An intangible asset is recognized only if:

the future economic benefits estimated to be attributable to the asset are obtained by the company; and
the cost of the asset may be credibly evaluated.

If an intangible asset is purchased separately, its cost may be evaluated with loyalty and is composed by:

purchase price, import duties and other non-recoverable taxes, transport expenses, commissions, notary fees, permit related expenses and other expenses that may be directly attributable to the acquisition of those assets.
Commercial discounts approved by the supplier and registered on the purchase invoice are deducted from the purchase price.

Other intangible assets can be subject to straight-line amortization for a period of 3 years.

Expenses allowing intangible fixed assets to generate future economic benefits beyond the originally foreseen performance are added up to their original cost.

b) Internally generated fixed assets (development costs)

Development is the application of the research discoveries or other knowledge in a plan or project focusing on the production of materials, devices, products, processes, systems or services, new or substantially improved, before the initiation of the commercial production or use.

An asset generated by development is recognized if and only if all the following elements can be proved:

technical feasibility for accomplishing the intangible fixed asset, so that it is available for use or sale;
the company's intent of accomplishing the intangible fixed asset and of using or selling it;
the capacity of using or selling the intangible fixed asset;
the way the intangible fixed asset generates probable future economic benefits, the existence of a market for the production generated by the intangible fixed asset or for the intangible fixed asset as such;
the availability of technical, financial or other resources suitable for complementing the development and for using or selling the intangible fixed asset;
the capacity to credibly assess the expenses attributable to the intangible fixed asset during its development period.

The development expenses are recognized at their production cost.

The tangible and intangible fixed assets production activity requires a separation of the process into a research stage and a development stage.

When a distinction between the research stage and the development stage of an internal project for creating an intangible fixed asset cannot be made, the expenses relevant to that project are considered as having to do with the research stage, and are recognized in the profit and loss account.

No fixed asset deriving from research or from the research stage of an internal project is recognized. Research expenses are recognized as expenditure in the profit and loss account as soon as they are generated.

Research is the original and planned investigation conducted in view gaining new knowledge or scientific or technical meanings.

The production cost of the fixed assets originating from the development stage includes:

direct expenses relevant to production, such as direct materials, power consumed for technological purposes, costs representing employee wages, legal contributions, testing costs regarding the correct operation of the asset, professional fees and charges paid in connection with the asset, the cost for obtaining the necessary authorizations;

Development expenses that are recognized as intangible fixed assets are amortized for the period during which the Group expects to obtain benefits following the developed products.

c) Concessions, patents, licenses, trade marks, rights and similar assets

CEMACON SA Notes to Consolidated Financial Statements for the period ended 30th of September 2016

Accounting policies (continued)

Concessions, patents, licenses, trade marks, rights and similar assets representing contribution, purchased or acquired by other means, are recognized in the intangible assets account at their purchase cost or their contribution value, where appropriate.

When the concession agreement does not provide an amortizable value of the concession, but only the payment of some monthly royalties, the concession can not be recognized as an asset.

When the concession agreement provides a duration and a total value of the concession, this is recognized as an intangible asset in the balance.

The depreciation of the concession is to be recognized during its period of use, established according to the contract.

The patents, licenses, trade marks, rights and other similar assets are depreciated during the period established for their use.

d) Goodwill

The internally generate goodwill is not recognized as an intangible asset. Goodwill can be recognized as intangible asset only in the case of transferring all the assets or a part of them, and of debts and equity, as appropriate.

Goodwill may result from purchasing a business or as a consequence of some fusion operations.

For the recognition of the assets and debts received during this transfer, the Group must proceed to the evaluation of the fair value of the received elements, with the purpose of determining their individual value.

The goodwill resulting from a business acquisition represents the difference between the paid value and the fair value of the acquired net assets.

Tangible assets

a) Stripping costs, during the production stage of a surface mine.

The group Cemacon SA conducts Clay exploitation activities by performing mining works in the open in the exploitation perimeter Recea Cemacon, Varsolt commune, Salaj county. The clay deposit has the shape of a gentle hill, covered by a layer of vegetal soil having an average thickness of 0.3 m. In some areas of the deposit, under the vegetal soil layer, there is sandy clay that is not subject to exploitation. The thickness of the sandy clay layers varies between 1m and 5m. For the exploitation activity to be conducted under optimal conditions, the exploitation perimeter must be prepared by removing the covering consisting of vegetal soil and sandy clay, which cover the deposit.

The clay exploitation in the quarry is conducted in exploitation steps.

CEMACON SA Notes to Consolidated Financial Statements for the period ended 30th of September 2016

Accounting policies (continued)

Following the activity conducted in the quarry, the following types of materials may result: Rubbish: vegetal soil and sandy clay – as a result of the stripping activity, unused in the production activity or capitalized in any other way.

Useful substance: yellow clay and blue clay – as a result of the exploitation activity, used in the production activity.

Rubbish (stripping) – as a result of the stripping activity, unused in the production activity, will be registered according to the International Financial Reporting Standards IFRIC 20.

The fixed asset will be called "Stripping activity asset"

This asset must be recognized only if the following conditions are met:

1. It is likely that the future economic benefit relevant to the stripping activity devolves on the entity;

2. The Group can identify the component of the lode to which the access has been improved;

3. The costs relevant to the stripping activity regarding that component can be reliably evaluated;

The asset relevant to the stripping activity will be booked as an additional item or as an improvement of an existing asset.

The initial evaluation of the asset is made at the cost value, which is an accumulation of the costs directly borne for conducting the stripping activity through which the access to the identified ore component is improved, plus an allocation of the directly attributable management expenses.

The asset relevant to the stripping activity must be systematically depreciated or amortized, in accordance with the accounting policies regarding the amortization.

b) Purchased Tangible Assets

The assets complying with the following recognition conditions are recognized in the category of fixed assets:

they are assets generating future economic benefits;
the cost of the element may be reliably evaluated

The acquisition cost includes:

the purchase cost, import duties and other non-recoverable taxes, transport expenses, handling, commissions, notary fees, permit related expenses and other expenses that may be directly attributable to the acquisition of those assets.
Commercial discounts approved by the supplier and registered on the purchase invoice are deducted from the purchase price of the assets.
Transport expenses are also included in the acquisition cost when the provision function is outsourced end when is carried out by own means.
any costs directly attributable to adjusting the asset in order to function according to the company's rules.

c) Internally generated tangible assets

The production of the assets includes:

costs representing the employee benefits, resulting directly from the building or purchasing the tangible assets element;
costs resulting from the development of the location;
initial delivery and handling costs;
installation and assembly costs;
testing costs regarding the correct operation of the asset, after deducting the net charges resulting from the sale of the elements produced during the transportation of the asset to the locations and during the adjustment of the asset for operation (for example the samples produced upon testing the equipment) and
professional fees.

Indebtedness cost

Indebtedness costs that are directly attributable to the purchase, construction or production of an asset having long production cycle are included in the cost of that asset, just like it was presented in the present accounting policies.

The costs subsequent to a tangible assets are recognized:

as expenses at the moment of their occurrence, if they are considered repairs or their purpose is to guarantee the continuous use if the asset, keeping the initial technical parameters; or
as a component of the asset, as subsequent expenses, if the conditions of being considered investments are complied with.

Conditions for the recognition as investments in fixed assets:

they are assets generating future economic benefits;
the element cost may be reliably evaluated.

The purchased fixed assets are initially recognized at their acquisition or production cost depending on the modality of being registered in the patrimony. Later, they are recognized, depending on the type of asset, at the following values:

Lands are evaluated at their reevaluated value
Buildings are evaluated at their reevaluated value
Equipment is evaluated at its historical cost.

If a completely amortized tangible asset can still be used, upon doing its reevaluation a new value and a new economic useful life are established, relevant to the period during which it is estimated to continue being used.

In order to reflect the expected consumption rhythm of the future economic benefits of the assets, the company uses different amortization methods. The amortization methods applied to the assets are annually revised to see if there are significant changes compared to the initial estimates.

a) Straight-line amortization:

The amortization is calculated based on the entry value, using the straight-line method along the estimated useful life of assets, as follows:

Asset	Years
Constructions	5 - 45
Technical plants and machinery	3 - 20
Other plants, equipment and furniture	3 - 30

The amortization is calculated starting with the month following their start-up, until the full recovery of their entry value.

Lands are not amortized because they are considered to have an indefinite useful life.

b) Amortization calculated per product unit

Regarding the equipment within the production factory at Recea, the Groups management has decided that its amortization be calculated per product unit.

The amortization method calculated per product unit is applied because the nature of the tangible fixed asset justifies the application of such an amortization method, the useful life of fixed assets is expressed using the number of units produced expected to be obtained by the enterprise by using that asset, in the Company's case 8,470,000 sqm.

According to this method, the amortization rate is determined by dividing the monthly/annual production to the total number of products.

Since this type of amortization is difference from the fiscal (straight-line) depreciation, the company calculates and books a deferred tax relevant to the difference between the fiscal depreciation and the amortization per product unit.

Amortization is ceased for assets classified for sale.

Tangible fixed assets that are quashed or sold are eliminated from the balance sheet together with the relevant accumulated amortization. Any profit or loss resulting as a difference between the revenues generated by the quashing and its unamortized value, including the expenses caused by such an operation, is included in the profit and loss account under "Net value", as gains from sale of assets.

When the Group recognizes the cost of a partial replacement (replacement of a part) in the book value of a tangible fixed asset, the book value of the replaced part, with its relevant amortization, is quashed.

When selling or quashing reevaluated assets, the amounts included in the reevaluation reserves are transferred to reevaluation surplus.

Depreciation of assets

Tangible and intangible fixed assets are tested for depreciation when facts and circumstances indicate that the book value may not be recoverable.

An impairment loss is recognized as the sum by which the book value of the asset exceeds the recoverable sum. The recoverable sum is the largest of the fair value of the asset less the sale costs and the utility value.

To evaluate the depreciation, assets are grouped down to the lowest level where separately identifiable cash flows exist.

Revaluation of assets

For assets whose value after recognition is reevaluated, the company carries out sufficiently regular revaluations in order to guarantee that the book value is not significantly different from that determined by using the fair value at the end of the reporting period.

If an asset element is reevaluated, then the entire tangible assets class corresponding to that element must be reevaluated.

Upon the revaluation of a tangible asset, any amortization accumulated at the reevaluation date is:

recalculated proportional to the change in the gross book value of the asset, so that the book value of the asset after revaluation is equal to its reevaluated value. This method is used in case the asset is reevaluated with an index in order to reach the replacement cost, less the corresponding amortization; or
eliminated from the gross book value of the asset and the net value recalculated at the reevaluated value of the asset. For example, this method is used for the buildings reevaluated at their market value.

Revaluation differences are recognized according to the applicable standards (IAS 16 "Tangible assets" paragraphs 39, 40)

Fixed assets held for sale

Fixed assets are classified as held for sale the moment they:

are available for immediate sale
the company's management has committed a sale plan
there are only slight chances that the sale plan suffer major changes or be withdrawn
an active program for finding purchasers is started
the asset group is traded at a reasonable price in comparison to the fair value
the sale is expected to be concluded within 12 months as of classifying the assets as held for sale.

Assets held for sale are evaluated at the lowest of the book value and the fair value.

Assets held for sale are not amortized.

Dividends

Dividends are recognized when they can be duly paid:

In the case of interim dividends, payable to the existing shareholders, the recognition is effective when they are declared by the Directors.
In the case of final dividends, their recognition is effective when they are approved at a General Meeting of Shareholders

Deferred tax

The assets and liabilities regarding the deferred tax are recognized if the book value of an asset or liability in the statement of financial position differs from its taxation base, except for differences appearing on:

the initial recognition of the goodwill
the initial recognition of an asset or liability in a transaction that is not a combination of enterprises and at the transaction time does not affect the bookkeeping or the taxable profit, and
investments in subsidiaries and jointly-controlled entities, if the group is capable of controlling the time of taking charge of the difference, and if it is likely that the difference does not reverse in the near future.

The recognition of receivables regarding the deferred tax is limited to cases where it is likely that the taxable profit is available as compared to the difference that can be used.

As regards the assets having to do with the deferred tax deriving from real estate investments evaluated at their fair value, it will be presumed that the recovery is achieved rather by sale than by utilization.

The value of the asset or of the liability is determined using the taxation rates already adopted or largely adopted until the reporting date and are expected to apply is the deferred tax liabilities / (assets) are discounted / (recovered).

Assets and liabilities regarding the deferred tax are compensated when the company has the legal right to compensate the current fiscal assets and liabilities and the deferred tax assets and liabilities when they refer to the taxes collected by the same fiscal authority from the same company.

Inventories

Inventories are current assets:

held in order to be sold along the normal development of the activity;
in process of production, in order to be sold in the normal development of the activity; or
as raw materials, materials and other consumables to be used in the production process or for providing services.

CEMACON SA Notes to Consolidated Financial Statements for the period ended 30th of September 2016

Accounting policies(continued)

Inventories are originally recognized based on their cost value and later based on the lowest of the cost value and the net realizable value. The cost is composed of all the purchase costs, the conversion cost and other costs borne in order to bring the inventories to the current location, in their current condition.

In the case of end products, the production cost includes the acquisition cost of raw materials and consumables and the production expenses directly attributable to the asset. The cost is determined based on the "First-in, First-out" (FIFO) method.

Where necessary, adjustments are made for stocks, physically and morally outdated. The net realizable value is estimated based on the sale price netted against the sale expenses.

If the book value of inventories is larger than the book value (net realizable value), the value of the inventories is reduced down to the net realizable value by making an impairment adjustment. Assets in the form of inventories are evaluated based on the book value, less the acknowledged impairment adjustments.

Due to the nature and specificity of the activity, for certain categories of inventories such as raw materials, spare parts, auxiliary materials, and end products, the inventories are analysed on the balance sheet date and an adjustment is made for products that are deteriorated or morally outdated.

Subsidies

Subsidies received in view of purchasing assets such as tangible fixed assets are booked as investment subsidies and are recognized in the balance sheet as deferred income. The deferred income is recognized in the profit and loss account as the amortization expenses are booked or upon quashing or assigning the assets purchased using such subsidy.

Provisions

The Group will record a provision in its accounting books only when:

(a) it has a current liability (legal or implied) generated by a previous event;
(b) it is likely (there are more chances for it to happen than not to happen) that a resource outflow affecting the economic benefits be required in order to extinguish the liability; and
(c) a relevant estimate of the liability value can be made

The sum booked as a provision is the best estimate of the payments required for extinguishing the current liability on the balance sheet date; in other words, the amount the entity would normally pay on the balance sheet date in order to extinguish the liability or transfer it to a third party, at that particular time.

In the provision evaluation process, the Group will take into account the following:

a) risks and uncertainties are taken into account. However, uncertainties do not justify the creation of excessive provisions or the deliberate overvaluation of liabilities.

b) discount the provisions if the effect of the time-value of money is significant, using a discount rate(s), before taxation, reflecting the current evaluations on the market of the time-value of money, and the liability-specific risks that have not been reflected in the best estimate of expenses. If a discount is used, the provision increase due to the passage of time is booked as an interest expense;

c) future events are taken into account, such as legislation amendments or technological changes, if there is sufficient proof that they would occur; and

d) not take into account gains from the forecasted assignment of assets, even if such prospective assignments are tightly related to the forecast generating event.

Provisions will be reanalysed on each balance sheet date and will be adjusted so as to reflect the best current estimate. If it is no longer likely that resource outflows – affecting the economic benefits – are required to extinguish the liability, the provision will be canceled.

The provisions will only be used for the purposes they were originally formed.

The Group will not recognize provisions for future losses from the exploitation activity.

The value recognized as provision will be the best estimate of the necessary costs for extinguishing the current liability on the balance sheet date.

The best estimate of the necessary costs for extinguishing the current liability is the sum the Group will reasonably pay in view of extinguishing the liability on the balance sheet date or to transfer it to a third party at that particular time. Often, it can be impossible or highly expensive to extinguish or transfer a liability on the balance sheet date. However, the estimate of the amount the Group will reasonably pay in view of extinguishing or transferring a liability is the expression of the best estimate of the necessary costs for extinguishing the current liability on the balance sheet date.

The estimates of the financial results and effects are determined by the analysis methods of the Group's management, considering the experience gained in similar transactions and, in some cases, the reports drafted by independent experts. The elements taken into account include any proof provided by events occurring after the balance sheet date. However, the estimate of the sum that the Group will reasonably pay to extinguish or transfer a liability is the expression of the best estimate of the necessary costs for extinguishing the current liability on the balance sheet date.

The estimates of the financial results and effects are determined by the analysis methods of the enterprise's management, considering the experience gained in similar transactions and, in some cases, the reports drafted by independent experts. The elements taken into account include any proof provided by events occurring after the balance sheet date.

Doubtful elements regarding the sum to be recognized as a provision are treated in different ways, depending on the circumstances. If the provision to be evaluated involves a wide range of elements, the liability is estimated by weighing all the possible results with the probabilities to achieve each of them. This statistical method of evaluation is called "forecasted value". Therefore, the provision will differ depending on the probability (e.g. 60% or 90%) for a certain loss to be suffered. If there is a continuous range of possible results and if the probability for each of them to occur is equal, the middle point of the range will be used.

If a single liability is evaluated, the most probable individual result may form the best estimate of the debt. However, even in such situation, the entity will also take into account other possible results. Where other possible results are either higher or lower than the most probable result, the best estimate would be a larger or smaller amount. For example, if the Group must remedy an error in the

CEMACON SA Notes to Consolidated Financial Statements for the period ended 30th of September 2016

Accounting policies (continued)

construction of a factory built for a customer, the most probable result would be that the repair is successfully conducted since the first attempt at a cost of 1,000, but a provision is formed for a larger amount if it is more likely that several attempts could be necessary.

The provision is evaluated before tax since the effects of taxation on the provision and changes of the latter are contemplated by IAS 12 "Profit Tax".

If a part of or all the expenses necessary to extinguish a provision are expected to be reimbursed by a third party, the reimbursement must be recognized only when it is certain that it will be received if the company extinguishes its liability. The reimbursement must be considered as a separate asset. The sum recognized for reimbursement must not exceed the amount of the provision.

In the profit and loss account, costs related to a provision will be presented at its value reduced by the amount recognized for reimbursement.

Provisions will be revised with each balance sheet and adjusted so as to reflect the best current estimate if a resource outflow incorporating the economic benefits is no longer probable; to extinguish a liability, the provision must be canceled.

If a discount is used, the book value of a provision increases during each period in order to reflect the passage of time. This increase is recognized as indebtedness cost.

Affiliated parties

An affiliated party is an individual or a company associated to the Group preparing and presenting the financial statements.

Affiliated persons:

A person or a close member of the family is associated to the reporting Group if:

Is in control or associative control of the reporting Group
Has significant influence on the reporting Group
Is a member of the key management of the reporting Group or of the parent company

Affiliated entities:

A company is an affiliated party if one of the following conditions is applicable:

the entity and the reporting company belong to the same group (which means that each parent company, subsidiary and other subsidiary companies reporting to the same parent company are affiliated parties to one another).
the entity is a shareholder or a partnership of the entity
both companies are affiliated or associated in partnership with the same third party
the entity is a partnership of a third party and the other entity is a shareholder of the same third party
the entity is controlled or controlled in a partnership by an affiliated person, as defined under affiliated persons.
the affiliated party having control or associative control of the reporting entity has significant influence on the entity (which is considered to be an affiliated party) or is a member of the key management of the entity.

Transactions with the affiliated parties are defined as a transfer of resources, services or liabilities between the reporting entity and the affiliated party, regardless of whether a price is paid.

All the transactions with the affiliated parties are made based on the transfer pricing principles.

Risk factors

Internal risks

Accomplishing of the strategic and operational objectives is directly influenced both by the opportunities and by multiple risks and uncertainties generated by external factors like the evolution of the residential construction market, the seasonality and the weather conditions, but also by various internal factors.

Cemacon Group has implemented a risk management process characterized by the identification, quantification and proactive management of potential risks by measures of reducing them at a reasonable and consciously assumed level.

The risk management process include the following key elements:

the objectives assumed by the management are feasible,
the significant risks are objectively identified and evaluates, for all the processes and departments,
appropriate resources are designated for the reduction, transference or elimination of the significant risks,
the necessary measures are defined and implemented for the preventive control, reduction of risks and minimization of losses in case of occurrence of a negative event,
the stage of implementing the control measures is constantly monitored,
the organization risk level is periodically reevaluated,
the pending risks are communicates and made aware in the organization.

At the level of the Group there are the internal control and risk management functions, which monitor the business risks and coordinate the committee of risk management in the main activity fields. A biannual updating of the risk map is carried out, which is discussed in the management committee and presented before the Board of directors. The annual budget package also includes an analysis of the major risks and measures taken into account by the management for their administration.

We present below the main operational risks in 2016 influencing the Group's performance and some observations regarding their evolution:

1. Commercial credit

Under the conditions of increasing the credit limits awarded to clients and of the financial difficulties relative to the construction area, the commercial credit represents one of the most relevant risk dimensions for the Group.

Nevertheless, due to a commercial credit management system implemented in 2013 and developed in the following years, a commercial policy was applied which stimulated the payment on due date and establishing securities by customers, and by the efficient and proactive application of the management procedures of the commercial credit and recovery of receivables.

Within the financial department there is a special person on the position of credit controller; to reduce the credit risk, the company has used in 2016, the fourth consecutive year, a commercial credit insurance with the market leader – the French company Coface -, as well as retainage guarantees from the customers, including letters of bank guarantee, mortgages, lens and guaranteed payment instruments.

The trade receivables of the Group consist of a large number of customers. The credit controller carries out a continuous evaluation of the balances and the non collection risk; customers are distributed in classes of risk, following a complex analysis considering the Coface rating, the caps covered by the commercial credit insurance, the securities and their quality, the customer's payment behaviour, as well as other quality information collected directly from the market by sales agencies and from other sources. Depending on the class of risk, periodical controls are applied relative to the bankruptcy proceedings, ONRC status, pending law cases, ANAF debts, CIP, as well as analyses on updated financial information with annual/biannual frequency.

2. Restarting the production line in Zalau

The restarting and optimal functioning of the production operations in Zalau factory, in suspension from year 2011, was an important opportunity which greatly contributed to the accomplishment of the annual objectives in 2015, as well as in the first half of 2016, through the product volumes, product quality and operational costs.

Thus, the restarting the production line in Zalau in 2015 was a success, being eliminated the risk factors and standing out the efficiency and capacity of the line and the contribution to the financial performance of the Group.

3. Guarantee a constant supply flow, with energy and raw materials

There have been no interruptions during the production process due to the lack of raw material. The power outages have been within the determined limits and have not disturbed the production and functionality program of equipment and machines.

4. Technical failures

The down-times due to accidental failures in machines and equipment have not influenced in a negative way the fulfillment of the annual production scheme and the maintenance budget. The production team has shown a greater concers for actions of preventive maintenance, quality and improvement of the specialization level of the intervention internal teams.

5. Compliance with the legal requirements

During the last year the company has had no fines or other penalties relative to the fiscal, anticompetitive, environmental and occupational safety aspects. No work accident has occurred. The management team is engaged in the observance and full compliance with all the legal requirements of any kind. Any identified nonconformity must be repaired as quickly as possible.

6. Actions of competition

During the first quarter of year 2016 the company has registered some situations of price positioning higher than the competition, which on a price sensitive market have generated disruptions in the completion of the monthly sales and deliveries schedule. The actions of the competition were counteracted by implementing a promotional campaign and by additional motivation of the traditional business partners.

7. Development of the portfolio of products

The Group has a balanced portfolio of ceramic block-type products, however the Group is always concerned with identifying innovative design solutions and releasing products which generate additional advantages for the beneficiaries.

The risk management process not only protects the company from unfavourable events, but also contributes to the identification of new opportunities of performance development and improvement of the operating mode in the organization, essential elements in order to generate high financial results and value for the shareholders.

External risks

Risk of exchange rate variations

The Group's currency transactions are recorded in the accounting records at the exchange rate as of their date, earnings and losses resulting from the settlement of such transactions and from the conversion of monetary assets and liabilities denominated in foreign currency, being recognized as expenses or income in the profit or loss account.

The cash balances in foreign currency are converted in RON at the exchange rate as of the end of the year.

Interest rate risk

The interest rate risk has the risk that the value of a financial instrument fluctuates due to the variation of interest rates on the market. The Group's exposure to the risk of changes in interest rates primarily relates to variable interest bearing loans at a competitive edge which the Company has on the longterm. In order to reduce this risk, the management considers signing an interest rate swap.

Liquidity risk

The management of the liquidity risk belongs to the Group's management, which established a proper framework for the risk management regarding the short- and average-term provision of funds. The Group manages the liquidity risk by continuously monitoring the real cash flow and by mapping the maturity profiles of financial assets and debts.

The cash available at the end of the first quarter of 2016 is of 20,484,214 lei, over 50% of the turnover, and the necessity for working capital was financed during the period 2009 – 2015 without additional financing.

Risks on shares

In terms of value of transactions or market capitalization, the Bucharest Stock Exchange can be considered a small size stock exchange compared to other markets in the world, there being such risks related to the low market liquidity and high volatility of the traded share price.

The low market liquidity may determine the impossibility to buy or sale the Group's shares without a significant impact on the price of that share, thus generating a high volatility of share price.

Currently, the Group is majoritarily owned by investment funds, portfolio investors, has a small free float, fact which determines a lower liquidity on the Stock.

Border market risk

The border market investors must be aware that such markets have a great risk than the markets of countries with developed economy and mature legal and political systems. This risk is determined by the need to adapt the legal system to create efficient instruments both legally and economically to ensure the required framework of a functional market economy.

The Romanian capital market classifies at the current level of development in the category of border markets, which have greater risks compared to developed markets, although they can provide greater performance to investors. The country risk is generated by the probability of political, social and economic contingencies, repeated legal changes, and fluctuations of exchange rate or high rates of inflation.

Risk determined by the correlation with global market evolution

The events on the global financial market have a direct and indirect impact on the evolution of the Romanian economic market which is reflected on the evolution of the Romanian capital market in the last years. Therefore, the global evolutions affect both the Issuer's activity and its evolution on the capital market.

The Romanian economy, as any developing economy, is sensitive to the fluctuation of global business. The political, economic, social and any other type of events on the global market have a significant impact on the economic climate in which the Issuer carries out its activity.

Risks generated by the legislative instability

The results of Issuer's initiatives are difficult to predict and may suffer from the Romanian legislative instability. The frequent modification of norms, including those involving a direct impact on the Issuer's activity may generate risks for the Issuer.

The Issuer's effort to constantly adapt to the changing legislative requirements may generate significant additional costs and the possible future changes in the legislative framework may negatively influence the Issuer's activity and profitability.

Internal control system

The internal control system represents the set of measures and actions implemented at all levels, with the purpose of complying with all the Group's objectives through the optimal risk management, ensuring the efficiency and effectiveness of the operations, the accuracy of the financial reports and the compliance with the legal requirements. Control is an integral part of each process and responsibility of all employees, regardless of their role in the organization.

The internal control system implemented by the Group is based on several components, the following being the most important:

Internal procedures manual, based on the good practices adapted to the activity field, which define the control activities and responsibilities for all the Group's risk areas and is periodically revised,
Quality, Environment, Occupational Health and Security Integrated Management System, providing the coordination, consistency and improvement of processes and operative mode and the compliance with the legal requirements,
Budgeting and budget monitoring system, providing the determination and monitoring of the financial and operational objectives,
Internal reporting system, providing relevant and accurate and information in due time for the monitoring of the processes and the taking of decisions,
Periodical performance analyses, carried out for the evaluation of the functioning of the processes and operational results,
Automation of processes and transactions in the information system, by the management of an information system very well configured, used and secured,
Carrying out internal and external audits, which guarantee the effectiveness and compliance with the control and financial reporting standards.

An important objective of the Internal Control System is the implementation of the best practices by the optimization and automation of the control procedures within the Group, so that the control activities are not omitted or doubled, the processes are well done at the first try, the errors or mistakes are prevented, and the necessary corrective measures are taken in due time.

The functioning and performance of the internal control system is annually audited and the Management team is engaged in increasing the professional competence standards and implementing all the necessary corrective and improving measures in order to provide a strong reliable base and an insurance relative to management of risks and fulfillment of goals.

Events after the reporting date

The events after the balance sheet date are those events, both favourable and unfavourable, occurring between the balance sheet date and the date until the financial statements are authorized for lodging. Two types of events can be identified:

a) Those proving the conditions existing on the balance sheet date (events determining an adjustment of the financial statements), and

b) Those providing indications about conditions having occurred after the balance sheet date (events that do not determine an adjustment of the financial statements).

The financial statements of the Group are subject to approval by its shareholders after being issued, the approval date of the financial statements issue is the financial statements issue date, not the date when these were approved by the shareholders.

The events after the balance sheet date include all the events occurring until the date until the financial statements are authorized for lodging, even if such events occur after publishing an announcement on the profit or other financial information selected.

The Group will adjust the recognized values in its financial statements in order to reflect the events determining an adjustment of the financial statements.

The Group will not adjust the recognized values in its financial statements in order to reflect the events not determining an adjustment of the financial statements.

If the dividends of the holders of equity instruments (as defined in IAS 32, Financial instruments: presentation and description) are proposed or declared after the balance sheet date, the entity does not have to recognize such dividends as debt on the balance sheet date.

According to IAS 1 "Presentation of financial statements", the Group must present the value of dividends proposed or declared after the balance sheet date, but before authorizing the financial statement for lodging.

The Group may make these presentations of information either: a) in the balance sheet, as a separate component of the equity, or b) in the notes to the financial statements.

The Group will not draft the financial statements based on the business continuity principle if the management bodies determine after the balance sheet date either that they intend to wind-up the Group or cease its trading activity, or that they have no other realistic variant besides these.

A deterioration of the operating results and of the financial position following the balance sheet date indicates the need to consider whether the business continuity principle is still suitable. If the business continuity principle is no longer suitable, the effect is so persistent that this IAS 10 Standard "Events after the reporting period" requires a fundamental change of the accounting basis rather than an adjustment of the values recognized on the initial accounting basis.

The Group must present the date when the financial statements were authorized for lodging, as well as who gave such authorization. If the Group's owners or others have the power to amend the financial statements after their issue, the Group will state this fact.

The Group will publish the moment the financial statements were authorized for lodging because users must know that financial statements do not reflect events subsequent to that date.

If the Group receives, after the balance sheet date, information on the conditions having existed on the balance sheet date, the entity must update the information presented with regard to such conditions, in the light of the new information.

In some cases, the Group needs to update the information presented in its financial statements in order to reflect the information received after the balance sheet date, even if such information does not affect the values the Group recognizes in its financial statements.

Share-based payment

The Group will apply the provisions of IFRS 2 "Share-based payment" to distribute to accounts the following share-based payment transactions, including:

Equity-settled share-based payment transactions, where the group receives goods or services as consideration for the capital instruments of the Group (stock or stock options),
Cash-settled share-based payment transactions, where the Group purchases goods or services by engaging debts towards the supplier or provider of the same for the amounts consisting of the price (or value) of the Group's shares or other capital instruments of the entity, and
Transactions where the Group receives or purchases goods or services and the contractual terms confer the Group or the provider of goods/supplier of services the possibility to settle the transaction in cash (or other assets) or by issuing capital instruments,

The shareholders' transfer of the Group's equity instruments to third parties having provided goods or services to the entity (including the employees) are share-based payment transactions only if the transfer is made for a purpose different than the payment for the goods or services provided to the Group. This is also applicable to transfers of equity instruments of the holding or of equity instruments of another entity of the group to the parties having provided goods or services to the entity.

A transaction with an employee (or some other third party) acting as holder of the equity instruments of the Group is not a share-based payment transaction. For example, if the Group grants to all holders of a certain class of equity instruments the right of additionally purchasing equity instruments of that entity at a price that is lower than the fair value of the instruments, and an employee receives such a right because he/she is the holder of equity instruments of that class, the granting or exercising of that right is not the object of a transaction classified as a share-based payment transaction.

Share-based payment transactions are those share-based payment transactions where the Group purchases or receives goods or services. Goods include: inventories, consumables, machinery, equipment, plants, intangible assets and other non-financial assets. However, the Group must not apply this IFRS to transactions where the Group purchases goods as part of the net assets purchased in a combination of enterprises to which IAS 22 is applicable. Therefore, the equity instruments issued in a combination of enterprises in exchange to obtaining control over the purchased company does not fall within its scope.

The Group will recognize the goods or services received or purchased in a share-based payment transaction when it obtains the goods or when the services are provided. The Group must recognize a suitable increase in its equity if the goods or services have been received in the share-based payment transaction, or a debt if the goods or services have been purchased in a cash-settled share-based payment transaction. If the goods or services purchased or received in a share-based payment transaction do not qualify to be recognized as assets, they will be recognized as expenditure.

For equity-settled share-based payment transactions, the Group must assess the goods or services received and, accordingly, increase its equity to the fair value of the received goods or services, only if the fair value cannot be credibly determined. If the Group cannot credibly estimate the fair value of the goods or services received, the Group must determine their value and their relevant increase in equity, indirectly, by referring to the fair value of the granted equity instruments.

For transactions with employees and third parties providing similar services*, the Group must evaluate the fair value of the services received by referring to the fair value of the granted equity instruments since the fair value of the received services cannot be credibly estimated. The fair value of these equity instruments must be assessed on the assignment date.

Stocks, stock options or other equity instruments are granted to employees as remuneration, in excess of the wage and other employee benefits. Usually, the direct evaluation of the services received is not possible for certain components of the employee remuneration. Also, the remuneration cannot be evaluated independently from the fair value, without directly evaluating the fair value of the granted equity instruments. Moreover, stocks or stock options are granted rather as part of a bonus contract than as part of a basic remuneration, for example as an incentive for the employees to remain with the company or to recompense them for their efforts to improve the entity's performance. By granting options or stock options in excess of other remunerations, the Group pays additional remunerations in order to get additional benefits. The estimation of the fair value of such additional benefits is very difficult to make. Because of the difficulty to evaluate the fair value of the services received, the Group must evaluate the fair value of the employee services received by referring to the fair value of the granted equity instruments.

There must be a presumption that the fair value of the goods and services received can be credibly estimate. The fair value must be determined on the date the entity gets the goods or the other party provides the services. In few cases, if the Group rejects the presumption because it cannot credibly estimate the fair value of the goods and services received, the Group must evaluate the goods and services received and accordingly increase its equity by referring to the fair value of the granted equity instruments, evaluated at the date the Group obtains the goods or the other party provides the services.

The Group will distribute those services to accounts the moment they are provided by the third party during the benefit entitlement period, while increasing its equity accordingly. For example:

if stock options are granted to an employee only if he/she has three years of service, then the Group assumes the services provided by the employee as consideration for the stock options to be received during the three years, during the benefit entitlement period.
if an employee receives stock options conditional on performance and remains an employee until the achievement of that performance, and the benefit obtaining period depends on meeting such condition, the Group will assume the services to be provided by the employee as consideration for the stock options to be received during the benefit entitlement period. The Group estimates the benefit granting period upon granting them, based on the probability of meeting the performance condition. If the performance condition is a market-determined condition, the estimation of the length of the benefit entitlement period is consequent on the assumptions used in estimating the fair value of the granted options and will not be subsequently revised. If the performance condition is not a market-determined condition, the Group must revise the estimation made with regard to the length of the benefit granting period if subsequent information indicates that the length differs from the previously estimated one.

For transactions made by referring to the fair value of the granted equity instruments, the Group must evaluate the fair value of the granted equity instruments on the evaluation date, based on the market prices, if available, considering the terms and conditions until such equity instruments were granted.

If the market prices are not available, the Group must estimate the fair value of the granted equity instruments using an evaluation technique to evaluate what the price of the equity instruments may have been on the evaluation date in a transaction where the price is objectively determined. The evaluation technique must be consequent on the generally accepted evaluation methodology for the evaluation of financial instruments and must incorporate all the factors and all the presumptions contemplated by the market players in establishing the price.

For cash-settled share-based payment transactions, the Group must evaluate the goods or services purchased and the engaged debt at its fair value. Until the debt is settled, the Group must reevaluate the faire value of the debt on each reporting date and on the settlement date, with any amendments in the fair value recognized in the profit and loss account of the period.

EUA Certificates

Pursuant to the environment regulations in force, the Group receives certification of greenhouse gas emissions (EUA Emission Unit Allowance), according to the program developed during the years 2013 – 2020.

In order to recognize these certificates the company has developed an accounting policy based on the treatment described in OMFP 1802, section 4.5.4. Green certificates in accounting, as follows:

The certificates to be received are to be booked based on a Receivable (461 = 758), similar to the note suggested by OMFP. The evaluation is carried out depending on the quantity to be received and the transaction price upon the recognition of receivable, on the exchange rates announced by the National Bank of Romania NBR for the transaction date.

The reception of certificates is completed by the extinguishing the receivable and its recognition in the 508 account (Other short term investments and similar receivables). The evaluation is carried out based on the quantity to be received and the transaction price upon the recognition of receivable, on the exchange rates announced by the National Bank of Romania BNR for the transaction date.

The price difference between the estimate on the date of entering the receivable and the reception date shall be recognized as expense /income.

At the end of the financial year, the green certificates registered in the 508 account (Other short term investments and similar receivables) are evaluated at the transaction price from the last day of the financial year, based on the exchange rate of NBR communicated for the end of the financial year.

The compliance with the EUA certificates is carried out the next year for the previous year, that is why the company books in the current year an operating cost corresponding to a debt (658=462). The evaluation shall be carried out depending on the refunded amount, at the transaction price of the last day of the financial year, evaluated on the exchange rate of NBR communicated for the end of the financial year.

The return of the certificates is carried out the year after the extinguishing of debt and deducts the certificates from the balance. The evaluation shall be carried out depending on the refunded amount

and the transaction price at the return date, evaluated on the exchange rate of NBR communicated for the return date.

The price difference between the estimate on the date of debt entering and on the date of its return shall be recognized as expense/income.

* The accounting policies presented in the explanatory notes to the financial statements are not exhaustive. They present the main elements according to which the company develops its financial activity and they are drafted according to IFRS (International Financial reporting Standards). Their interpretation shall be carried out according to the present standards. In case of omissions or different interpretations compared to the above mentioned regulations the dispositions presented in the International Financial reporting Standards (IFRS) shall apply.

2. Accounting estimates

The Group carries out some estimates and assumptions relative to the future. The estimates and judgments are continuously evaluates based on the historical experience and on other factors, including expectations regarding the future events considered to be reasonable under the given circumstances. In the future, the actual experience may differ from these estimates and assumptions. The estimates and assumptions with a significant risk to cause an important adjustment of the accounting values of the assets and liabilities in the next financial exercise are presented below.

Estimates and Assumptions IFRS 13 Fair value Measurement

A number of assets and liabilities in the financial statements of the Group require a fair value measurement and / or presentation.

IFRS 13 defines fair value as the price that would be charged by selling an asset or paid by transferring a liability in a transaction regulated between market participants at the assessment date (i.e. an exit price). The definition of fair value emphasizes that fair value is a market-based assessment, not an entity-specific value.

IFRS 13 applies when another IFRS requires or permits fair value measurements or disclosures about fair value measurements except for the following cases:

a) Share-based payment transactions covered by IFRS 2

b) Lease transactions that fall under IAS 17

c) Assessments which are similar to fair value, without being fair value, such as net realizable value which falls under IAS 2.

d) Assets in the charts of accounts measured at fair value in accordance with IAS 19.

e) Investment in pension schemes assessed at fair value in accordance with IAS 26.

f) Assets the recoverable amount of which is fair value less costs related to transfer in accordance with IAS 36.

The Fair Value Hierarchy – in order to improve the consistency and comparability of fair value measurements and related disclosures, this hierarchy is classified in 3 levels:

Level 1 Input Data quoted prices unadjusted in active markets for identical assets and liabilities, to which the company has access to the assessment data.
Level 2 Input Data input data different from quotation prices included in Level 1 that are observable directly or indirectly for the asset or liability.
Level 3 Input Data unobservable input data for the asset or liability.

Litigation

The Group analyses existing disputes subsequent events existing at the reporting date to assess the need for provisions or disclosures in the financial statements.

Among the factors considered in making decisions on provisions are: the nature of the dispute, claim or assessment, the proceedings and potential level of damages in the jurisdiction in which the dispute

Accounting estimates (Continued)

was brought, the progress of the case (including the progress as of the date of the financial statements, and before those statements are issued), the views and opinions of legal advisors, experience in similar cases and any decision of the Group management on how to respond to the litigation.

Depreciation at product level

For the equipment in Recea production plant, the Group's management decided that depreciation should be calculated per unit of product.

The depreciation method calculated per unit of product is applied because the nature of the tangible fixed asst justifies such depreciation method, the useful life of the fixed assets is expresses by the number of the produced units expected to be obtained by the Group using the mentioned asset, in case of the company 8,470,000 m3.

According to this method, the depreciation rate shall be determined dividing the monthly /annual production to the total number of products.

Corporate tax

The Group believes that its commitments to tax liabilities are adequate for all years open to review, based on the evaluation of many factors including past experience and interpretations of tax laws.

This assessment is based on estimates and assumptions and may involve a number of complex judgments about future events. To the extent that the final tax outcome of these transactions is different than the amounts recorded, such differences will impact the corporate tax expense in the period in which such determination is made.

Provision for pensions

Provisions for pensions: according to the collective labour agreement valid in 2013, the Group's employees will receive on retirement, according to the seniority in the Group the following compensation only once:

< 5 years	0
5 – 20 years	1 individual salary on retirement date
> 20 years	2 individual salaries on retirement date

Provisions for unused leaves

Provisions for unused leaves: the Group registered provisions for leave-related expenses unused by the employees in 2015. The provisioned amounts were estimated based on the number of leave days related to 2015 which remained to be used by the Group's employees and related leave indemnities. The Group estimates that the amounts related to such provisions shall be done in 2016.

Accounting estimates (Continued)

Environmental reclamation provisions

Environmental reclamation provisions: due to the fact that the Group also carries out activities related to mineral resource exploitation (clay) under the operating permits and licenses, it is liable to make environmental reclamation expenses related to the exploited perimeters. The related expenses are estimated to be achieved by the end of the exploitation period, which is why the Group established provisions related to such expenses.

Other provisions

Within such categories, various provisions are included for which the Group is expected to achieve short-term cash outflows but with uncertain value. To estimate such amounts, the Group used the best estimates and knowledge on the generating facts on the 31st of December, 2015, which are updated in order to reflect the value in time of the money, for they are long term settled amounts.

3. Revenues

Sales revenues	30-Sep-16	30-Sep-15
Sales of finished products	65,884,898	52,345,904
Sales of goods	6,211,449	3,495,227
Sales of services	187,063	141,360
Services pending	-	-
Rental revenues	-	-
Trade discounts	-	-

Total	72,283,410	55,982,491
All amounts in Lei, if not otherwise stated

The main revenues earned by the Group in the first nine months of year 2016 are considered the sales of finished products 65.88 mil lei, sales of merchandise 6.21 mil lei and the provision of services 0.18 mil lei, and the value of the commercial discounts, corresponding to the product sales was of 2.65 mil lei.

As a consequence of the specificity of the activity during the year 2015, the Group has has "Bill & Hold" type sales. These sales have complied with the principles of recognition the income from finished product sale as a consequence of applying this kind of policy; furthermore, the products have been delivered to the customers in compliance with the medium delivery dates and the medium collection dates.

4. Other operational revenues

Other operating revenues are generated by activities that are not part of the overall scope of activity of the company and are therefore presented separated from sales revenue.

Other operating income	30-Sep-16	30-Sep-15
Revenues from various activities	361	50,449
Revenues from the sale of assets	-	-
Cancellation of impairment of uncertain receivables	17,305	(11,719)
Cancellation of impairment inventories	-	214,685
Cancellation of other provisions	2,420,734	1,590,800
Miscellaneous	797,912	795,200

	3,236,312	2,639,415

All amounts in Lei, if not otherwise stated

Income corresponding to the reversal of provisions has numbered 2.42 mil lei (for more details, see Note 20 "Provisions").

Income corresponding to greenhouse gas emissions certificates received during 2016 is of 0.37 mil lei.

CEMACON SA Notes to Consolidated Financial Statements for the period ended 30th of September 2016

Other operating income in amount of 0.28 mil lei.

Income corresponding to adjustments of inventories and receivables in amount of 0.017 mil lei. In 2010 the Group received a subsidy for investments in amount of 1.6 mil lei, and in 2016 the company has recognized as income corresponding to these subsidies the amount of 0.037 mil lei.

Income from subsidies are recognized related to the depreciation of the corresponding fixes assets.

The subsidy recognized refers to the 15% of the credit received by the Group from BERD sources, for the energy efficiency project started during year 2009, together with the new brick factory in Recea.

In the first nine months of 2016, the Group has gained 0.0095 mil lei from the sale of assets.

Revenues from sale of assets	30-sep-2016	30-sep-2015
Income from sale of assets	11,602	22,256,722
Expense from sale of assets	2,068	22,944,842
Revenues from sale of assets	9.534	-688,120

All amounts in Lei, if not otherwise stated

5. Operating expenses

Other operating expenses	30-Sep-16	30-Sep-15
Utilities	7,647,781	6,942,436
Repairs	1,107,805	859,291
Rent	337,671	176,795
Insurances	457,927	347,807
Fees	584,517	589,679
Publicity	938,642	1,850,372
Travel and transport	10,527,406	6,948,482
Post and telecommunications	111,992	116,635
Other services provided by third parties	2,755,220	2,317,841
Taxes to the state budget	1,243,368	1,497,080
Environmental protection	-	-
Losses and adjustments for uncertain debts	43,178	160,280
Adjustments of stocks	-	-
Other provisions	1,229,353	1,181,599
Miscellaneous	762,632	755,111
	27,747,492	23,743,408

All amounts in Lei, if not otherwise stated

6. Personnel expenses

The Group has implemented since 2014 a complex employee performance management system. The performance management system in Cemacon is based on the Balanced Scorecard methodology and is 100% implemented at the individual level of each employee. The individual goals are determined by cascading at the department / subdepartment / person level of the annual goals of Cemacon Group.

The level of goal fulfillment is periodically evaluated, following the evaluation the employees receive a monthly/quarterly and annually performance bonus proportional to the evaluation result and depending on the company's performance as a whole.

Personnel expenses	30-Sep-16	30-Sep-15
Salaries	5,291,029	4,584,122
Bonuses	2,223,894	1,512,429
Civil contracts	0	0
Taxes and social contributions	1,738,395	1,403,818
Other benefits	300,289	296,147
Total	9,553,607	7,796,516

Salaries paid at the end of the period	422,955	344,474

All amounts in Lei, if not otherwise stated

Key Management

Key Management consists of those persons having the authority and responsibility to plan, direct and control the activities of the entity.

a) Allowances granted to members of administration, management and supervision boards.

Cheltuiala indemnizatiile:	30-Sep-16	30-Sep-15
Managers	212,946	167,040
Bonuses	796,082	453,500
Directors	400,399	539,519
Payment based of shares	716,577
Taxes and contributions	333,806	261,366
Total	2,459,810	1,421,425

Salaries payable at the end of the period:	30-Sep-16	30-Sep-15
Managers	97,827	13,068
Directors	10,372	17,192
Total	108,199	30,260

All amounts in Lei, if not otherwise stated

During year 2016 the Group has had 2 directors: General Manager – Stoleru Liviu-Ionel, Financial Manager - Sologon Daniel.

CEMACON SA Notes to Consolidated Financial Statements for the period ended 30th of September 2016

The directors' income consist of the monthly compensation and the annual bonus calculated based on the operational profit, as well as the share-based compensation (for details, see Note 30).

The Group's managers are represented by:

Members of the Board of de Directors

Orion Strategy Solution SRL – by Liviu Stoleru
RSL Capital Advisors SRL- by Razvan Lefter
Consultanta Andrei & Andrei SRL - by Anca Manitiu
Ana Bobirca
Tiberiu Stratan

b) A Advances and loans granted to members of the administrative, management and supervisory boards:

During year 2016 were not granted any advances or loans to the members of the administrative, management and supervisory boards.

Employees

The structure and average number of employees (equivalent to full time) is: 191

Average number of employees	30-sep-16	30-sep-15
Management staff	62	64
Production staff	129	126
	191	190

7. Financial income and expenses

Financial income	30-sep-2016	30-sep-2015
Income from securities disposed	-	77,208
Adjustment of investments	-	-
Interest income	23,242	50,192
Interest costs	(2,106,324)	(3,006,570)
Other financial income	-	8,987,245
Other financial expenses	(1,438,823)	(952,817)
Exchange differences	369,895	1,346,269

Net income / (costs)	(3,152,010)	6,501,527

All amounts in Lei, if not otherwise stated

The financial expenses consist mainly of the following categories: Interest expenses 2.1 mil lei, Financial discounts expenses (according to the sales policy) 1.43 mil Lei, Exchange differences 0.37 mil lei.

Financial income are represented by exchange differences in amount of 0.741 mil lei and interest expenses in amount of 0.023 mil lei.

The structure of income and expenses from exchange differences corresponding to the period from January to September of 2016

	Revaluation Suppliers	Revaluation Leasing	Revaluation available	Revaluati on credits
Expenditure on foreign exchange differences	5,479	36,394	18,171	311,199
Revenues regarding exchange currency differences	9,015	52,438	214	679,471

8. Taxes

Current tax	30-sep-2016	30-sep-2015
Corporate tax expense for the year profit	438.706
Adjustments for previous years profit	-
Total current tax	438.706

Deferred corporate tax	30-sep-2016	30-sep-2015
Total deferred tax at the beginning of the period	187,824	2.634.517
Reversing temporary differences	-	(2,446,693)
Recognition of deferred tax that was not previously recognized	-	-
Total deferred corporate tax	187,824	187,824

Total Tax	187,824	187,824

During the ordinary course of business, transactions and calculations are made for which the determination of final is uncertain. As a result, the Group recognizes tax liabilities based on estimates regarding the certainty that additional taxes and interest will be due. These debts or liabilities are recognized, and despite the fact that the company believes that tax return is probable, the Group believes that certain positions are likely to be challenged and not be fully supported by a possible revision of tax authorities.

9. Earnings per share

Earnings per share	30-Sep-16	30-Sep-15
Weighted average Number of outstanding shares	113,990,218	113,990,218
Operational profit / (loss) (EBITDA)	14,878,488	13,923,930
Operational profit / (loss) (EBITDA) per share	0.1305	0.1222
Profit / (loss) from operation (EBIT)	9,928,292	9,487,246
Profit / (loss) from operation per share	0.0871	0.0832
Total profit/ (loss)	6,337,576	15,981,333
Total profit/ (loss) per share	0.0556	0.1402

The basic earnings per share has been calculated dividing the profit to the number of the outstanding ordinary shares issued on the 30th of September 2016.

For details relative to the number of shares, see Note 23 – "Capital stock".

10. Dividends

In 2016 the Group did not pay any dividends.

According to the credit contract no. 2 of 19th of March 2015 signed between the Group Cemacon SA and Romanian Commercial Bank (Banca Comerciala Romana), the dividends may be paid only with the bank's consent.

11. Tangible assets

Gross value of assets as at 30th of September 2016

Tangible assets	Initial balance	Acquisitions	Value increase	Revaluation increase	Disposals	Revaluation movements (held for sale)	Revaluation decreases	Final balance
Land	5,136,018	-	-					5,136,018
Land improvements	388,922	-	24,143	-	-	-	-	413,065
Buildings	33,741,093		169,687					33,910,780
Machinery, Plant and Equipment	102,205,574	2,121,247	136,108	-	77,122		-	104,385,807
Furniture and office equipment	216,666	13,408		-			-	230,074
Fixed assets in progress	1,846,382	2,583,895	-	-	2,448,663	-	-	1,981,614
Total	143,534,655	4,718,550	329,938	0	2,525,785	-	0	146,057,358

Cost value of assets as at 31st of December 2015

Tangible assets	Initial balance	Acquisiti ons	Value increase	Revaluation increase	Disposals	Revaluation movements (held for sale)	Revaluation decreases	Final balance
Land	7.561.127	-	-	52.471	-	287.457	13.047	7.313.094
Land improvements	336.076	-	52.846	-	-	-	-	388.922
Buildings	34.398.068	336.400	465.485	520.236	-	516.211	1.461.160	33.742.818
Machinery, Plant and Equipment	100.299.545	1.061.669	860.424	-	16.065	-	-	102.205.573
Furniture and office equipment	168.603	27.038	11.047	-	6.760	(21.496)	-	221.424
Fixed assets in progress	691.433	4.085.603	-	-	2.930.654	-	-	1.846.382
Total	143.454.852	5.510.710	1.389.802	572.707	2.953.479	782.172	1.474.207	145.718.213

CEMACON SA Notes to Consolidated Financial Statements

for the period ended 30th of September 2016

Tangible assets (Continued)

Amount of depreciation and impairment as at 30th of September 2016

Depreciation	Initial balance	Depreciatio n and impairment s during the year	Depreciation related to fixed assets transferred	Depreciation of fixed assets held for sale	Adjustments established during the year	Adjustments resumed on income	Final balance
Depreciation of land arrangements	183,909	20,287	-	-	-	-	204,196
Depreciation of buildings	-	1,167,864		-	-	-	1,167,864
Depreciation of machinery, plant, equipment	24,065,089	3,648,662	75,054	-	-	-	27,638,697
Depreciation of furniture and office equipment	61,529	17,702		-	-	-	79,231
Adjustments for impairment of land	68,124	-		-	-	-	68,124
Adjustments for impairment of machines, equipment and plant	4,653,447	-	-	-	-	-	4,653,447
Total	29,032,098	4,854,515	75,054	-	-	-	33,811,559

Amount of depreciation and impairment as at 31st of December 2015

Depreciation	Initial balance	Depreciation and impairments during the year	Depreciation related to fixed assets transferred	Depreciation of fixed assets held for sale	Adjustments established during the year	Adjustments resumed on income	Final balance
Depreciation of land arrangements	134.560	49.349	-	-	-	-	183.909
Depreciation of buildings	-	-	-	-	-	-	-
Depreciation of machinery, plant, equipment	19.800.124	4.416.323	58.784	92.574	-	-	24.065.089
Depreciation of furniture and office equipment	54.301	19.381	6.760	5.393	-	-	61.529
Adjustments for impairment of land	2.322.080	-	-	-	-	76.879	2.245.201
Adjustments for impairment of machines, equipment and plant	4.653.447	-	-	-	-	-	4.653.447
Total	26.964.512	4.485.053	65.544	97.967	-	76.879	31.209.175

CEMACON SA Notes to Consolidated Financial Statements for the period ended 30th of September 2016

Net value of tangible assets as of 30th of September 2016

Tangible assets Sept. 2016	Gross value at 30.Sept. 2016	Revaluations for sale	Depreciation	Adjustments	Net value at 30 Sept. 2016
Land	5,136,018	-	-	68,124	5,067,894
Land improvements	413,065	-	204,196	-	208,869
Buildings	33,910,780	-	1,167,864	-	32,742,916
Machinery, Plant and Equipment	104,385,807	-	27,638,697	4,653,447	72,093,663
Furniture and office equipment	230,074	-	79,231	-	150,843
Fixed assets in progress	1,981,614	-	-	-	1,981,614
Total	146,057,358	-	29,089,988	4,721,571	112,245,799

Net value of tangible assets as of 31st of December 2015

Tangible assets December 2015	Gross value at 31.Dec 2015	Revaluations for sale	Depreciation	Adjustments	Net value at 31 dec 2015
Land	7.313.094	-	-	2.245.201	5.067.893
Land improvements	388.922	-	183.909	-	205.013
Buildings	33.742.818	-	-	-	33.742.818
Machinery, Plant and Equipment	102.205.573	-	24.065.089	4.653.447	73.487.037
Furniture and office equipment	221.424	-	61.529	-	159.895
Fixed assets in progress	1.846.382	-	-	-	1.846.382
Total	145.718.213	-	24.310.527	6.898.648	114.509.038

Tangible assets (Continued)

Fixed assets held for sale

The following major classes of assets have been classified as held for sale in the financial position situation on 30th of September 2016:

Fixed assets	Book value as of 31st of Dec. 2015	Amortizations	Inflows	Outflo ws	Book value as of 30th of Sept 2016
Lands	4,887,683	-	-	-	4,887,683
Buildings	8,378,883	-	-	-	8,378,883
Machinery, plant, equipment	10,177,505	-	-	-	10,177,505
Furniture and office equipment	8,386	-	-	-	8,386
Total	23,452,457	-	-	-	23,452,457

Asset relevant to the stripping activity

The Group conducts Clay exploitation activities by performing mining works in the open in the exploitation perimeter Recea Cemacon, Varsolt commune, Salaj county (Group's own quarry)

Following the activity conducted in the quarry, the following types of materials may result:

Rubbish: vegetal soil and sandy clay as a result of the stripping activity, unused in the production activity or capitalized in any other way.
Useful substance: yellow clay and blue clay as a result of the exploitation activity, used in the production activity.

Rubbish (stripping) – as a result of the stripping activity, unused in the production activity, will be registered according to the International Financial Reporting Standards IFRIC 20.

The fixed asset will be called "Stripping activity asset"

The costs relevant to the stripping activity include:

a) costs of materials and services used or consumed for the stripping works;
b) costs of employee benefits, generated from the stripping asset.

Net value of the stripping asset as of 30.09.2016

Assets September 2016	Initial balance	Amortizati on and depreciatio n	Addition of value	Final balance
Stripping	587,379	77,448	164,831	674,762
Total	587,379	77,448	164,831	674,762

Notes to Consolidated Financial Statements for the period ended 30th of September 2016

Tangible assets (Continued)

In 2016, the Group recognized an Asset relevant to the stripping activity in amount of 164.831 lei.

The stripping shall be depreciated using the straght-line depreciation method during a period of 12 years.

Revaluation of fixed assets

The assets held by the Group on 31st of December 2015 have been evaluated at their fair value by the appraisal company SC CS INVEST CONSULTING SRL, independent appraiser.

The revaluation has been carried out for lands and buildings.

For the assets in Zalau classified for sale the evaluation has been prepared, and the recognition has been made at the lowest value between the revaluated value and the book value.

In order to determine fair value the following methods were used:

Locations	The valuation procedure
Recea (Factory)	The landwas appraised by direct comparison technique (Level 1 property) and the buildings by the cost - net replacement cost approach, and the results were checked by the income approach (Level 3 property)
Panic plot of land (locality of Hereclean)	The land was appraised by direct comparison technique. (Level 1 property)
Beltiug (warehouse land)	The land was appraised by direct comparison technique (Level 1 property), and buildings by the cost - net replacement cost approach. (Level 3 property)

Revaluation differences were recorded either on account of capital in the revaluation reserve, either in the profit and loss account.

By applying these methods and related techniques, a set of values was obtained, which was interpreted by the appraiser and by their reconciliation was formed the appraiser's opinion on the possible market value obtainable in the relevant area on the appraisal date.

Changes of the revaluation reserve during the financial year are presented below:

Movements of revaluation reserves	2016
Revaluation reserve at the beginning of financial year	25.926.562
Increases from the revaluation reserve	-
Deductions from the revaluation reserve	-
Amounts transferred from the reserve during the financial year	-
Revaluation reserve at the end of the financial year	25.926.562

Tangible assets (Continued)

On 30th of September 2016, there were no restrictions on the distribution of the revaluation surplus.

Treatment of revaluation reserve for tax purposes

According to tax laws in Romania, by May 1, 2009, revaluation reserves of tangible assets became taxable only when their destination was changed.

Subsequently to changing the tax code, starting May 1, 2009 revaluation reserves of fixed assets made after January 1, 2004, which are deducted from the calculation of the taxable income through tax depreciation or expenditure on sold assets and / or retired, taxation is made at the same time with deduction of tax depreciation, that is at the discharge of these fixed assets, as appropriate.

Impairment losses according to IAS 36, as reflected in the profit and loss account

Tangible assets are tested for impairment when facts and circumstances indicate that the carrying value may not be recoverable.

An impairment loss is recognized as the amount by which the asset's carrying amount exceeds the recoverable amount. The recoverable amount is the higher value of the asset's fair value less sales costs and value in use. In order to appraise impairment, assets are grouped at the lowest level at which separately identifiable cash flows exist.

Considering the recommendations of paragraph 36 of IAS 36.12, the entity examined the factors that might lead to clues to impairment on September 30, 2016.

Considering the aspects analysed, the entity believes that there is no evidence on impairment of assets in Recea factory and therefore the calculation of depreciation for assets from Recea on September 30, 2016 in accordance with paragraph 36.9 of IAS 36 is not necessary.

Currently, from all the assets of Cemacon Group, the income generating activity is focused on Recea factory assets, land, buildings and equipment representing a clay quarry exploitation, preparation halls, and production, production line (press, dryer, oven etc), storage area and quarry machinery and logistics.

	Land	Building	Machinery and Equipment	Furniture	Total
Initial balance	-	-	4.653.447	-	4.653.447
Increases	-	-	-	-	-
Discounts	-	-	-	-	-
Final balance	-	-	4.653.447	-	4.653.447

The value of adjustments for impairment for location Recea is as follows:

CEMACON SA Notes to Consolidated Financial Statements for the period ended 30th of September 2016

Tangible assets pledged and restricted

Tangible assets pledged and restricted 30.09.2016	Final balance
Lands	9,948,283
Land arrangements	413,065
Buildings	42,311,231
Machinery, plant, equipment	114,561,634
Furniture and office equipment	238,460
Fixed assets in progress	1,981,614
Total	169,454,287

12. Intangible assets

Structure of intangible assets:

30th of September 2016

Intangible assets	Initial balance	Internal development	Acquisitions	Final balance
Development expenses	771,343	-	-	771,343
Concessions, patents, licenses	96,413		10,268	106,681
Other intangible assets	106,411		-	106,411
Total	974,167	-	10,268	984,435

31st of December 2015

Intangible assets	Initial balance	Internal development	Acquisitions	Final balance
Development expenses	489,058	282285		771,343
Concessions, patents, licenses	87,992		8,421	96,413
Other intangible assets	99,417		6994	106,411
Total	676,467	282285	15,415	974,167

The structure of depreciation and value adjustments for intangible assets is as follows:

Depreciation and adjustments for assets 30 September 2016	Initial balance	Depreciation by year	Adjustments for depreciation	Final balance
Development expenses	389,573	69,234	-	458,807
Concessions, patents, licenses	70,943	12,943	-	83,886
Other intangible assets	76,053	13,505	-	89,558
Total	536,569	95,682	-	632,251

Depreciation and adjustments for assets 31st of Dec. 2015	Initial balance	Depreciation by year	Final balance
Development expenses	345,637	43,936	389,573
Concessions, patents, licenses	55,189	15,754	70,943
Other intangible assets	59,474	16,579	76,053
Total	460,300	76,269	536,569

CEMACON SA Notes to Consolidated Financial Statements for the period ended 30th of September 2016

Net value of intangible assets:

	2015		2016
Asset Type	Stock value	Net value	Stock value	Net value
Development expenses	771,343	381,770	771,343	312,536
Concessions, patents, licenses	96,413	25,470	106,681	22,795
Other intangible assets	106,411	30,358	106,411	16,853
Total	974,167	437,598	984,435	352,184

The expenses of intangible assets depreciation, in the profit and loss account, are booked in the amortizations and depreciations of the Total Result.

13. Goodwill and Depreciation

The Group does not hold on 30th of September 2016 any intangible assets as goodwill.

Tangible and intangible assets are tested for depreciation when facts and circumstances indicate that the carrying value may not be recoverable. An impairment loss is recognized as the amount by which the asset's carrying amount exceeds the recoverable amount. The recoverable amount is the higher value of the asset's fair value less sales costs and value in use. To appraise impairment, assets are grouped at the lowest level at which separately identifiable cash flows exist.

Notes to Consolidated Financial Statements for the period ended 30th of September 2016

14. Financial assets

Investments in shares	30-sep-16	31-dec-15
Investments in associates	-	-
Investments in jointly controlled entities	-	-
Investments available for sale	1.278.223	1.278.223
Depreciation	(1.278.223)	(1.278.223)
Amounts payable for investments	-	-
	0	0

Long-term securities are valued at historical cost less possible adjustments for impairment. Classification of securities in financial assets or short-term investments is made depending on the intention of the Group of holding securities up to a year or more than a year.

Activities and the percentage of the share capital held by the Group in businesses representing securities held as financial assets are summarized below:

Name of company	Country of registration	Date of registration	Object of activity	Percenta ge held
Cercon Ariesul SA	Romania	2004	Production of construction materials; bankruptcy	11,45%

On September 30, 2016, the Group held shares with an acquisition cost of RON 1,278,223, for which in 2010 a provision for impairment of shares was recorded, amounting to RON 1,278,223 (December 31, 2010: RON 1,278,223), the reason being that SC Cercon Aries SA entered bankruptcy proceedings starting June 11, 2009.

On September 30, 2016, the Group had securities for rented spaces and securities for environmental reclamation at ANRM, totalizing 114.741 lei.

On September 30, 2016, the Group had no loans granted at SC Cercon Aries S. A. and it did not guarantee for any of the loans contracted by S.C. Cercon Ariesul S.A.

CEMACON SA Notes to Consolidated Financial Statements

for the period ended 30th of September 2016

15. Inventories

Inventories	30-Sep-16	31-Dec-15
Raw materials and consumables	5,808,767	8,499,274
Adjustments	(377,520)	(377,520)
Production in progress	78,140	86,183
Adjustments	-	-
Semi-products and finished products	2,398,289	9,110,190
Adjustments	(58,591)	(58,591)
Goods	596,645	1,434,912
Adjustments	(106,163)	(106,163)
Total	8,339,567	18,588,284

The main sums included in the value of Inventories on 30th of September 2016 are represented by salable products and raw and used materials in the production process.

The cost of inventories recognized in the profit and loss account have the following structure:

Raw materials and consumables	30-Sep-16	30-Sep-15
Raw materials	3,462,414	3,267,700
Additional material	2,367,287	2,192,148
Goods	5,381,726	3,112,668
Inventory items	122,900	67,756
Other supplies	32,986	24,337
Miscellaneous	2,677,446	2,799,242
	14,044,759	11,463,851

Adjustments of Inventories

If necessary, adjustments shall be carried out for Inventories, physically or morally used. The probable value of completion is estimated based on the sale price less the sale expenses.

On September 30, 2016 the following Inventories are considered as tangible assets as security without dispossession of future receivables for loans held "for details see note 18»

Pledged Inventories Romanian Commercial Bank (Banca Comerciala Romana)

No.	Product name ceramic block	Quantity MU/pc	Storage
1	EVOCERAMIC 29 240/290/238 CLS I /V0 /72 (pcs)	309,384	Beltiug
2	EVOCERAMIC 12 NF 460/120/238 CLS I /V0 /96 (pcs)	120,000	Beltiug
	EVOCERAMIC 44 SUPER TH LM 240/440/238 CLS II /V2 /60
3	(pcs)	42,060	Recea
4	EVOCERAMIC 29 240/290/238 CLS I /V0 /72 (pcs)	30,672	Zalau
5	EVOCERAMIC 29 240/290/238 CLS I /V2 /96 (pcs)	28,992	Recea
6	EVOCERAMIC 12 NF 460/120/238 CLS I /V0 /96 (pcs)	22,848	Zalau
7	EVOCERAMIC 12 NF 460/120/238 CLS II /V0 /96 (pcs)	20,832	Zalau

Notes to Consolidated Financial Statements for the period ended 30th of September 2016

8	EVOCERAMIC 24 LM 430/240/238 CLS I /V2 /60 (pcs)	14,640	Recea
	EVOCERAMIC 44 SUPER TH 240/440/238 CLS II /V0 /48
9	(pcs)	13,296	Zalau
10	EVOCERAMIC 20 NF 450/200/238 CLS II /V2 /60 (pcs)	11,700	Recea
11	EVOCERAMIC 24 DLM 430/240/238 CLS II /V2/60 (pcs)	11,640	Recea
12	EVOCERAMIC 20 NF 450/200/238 CLS I /V2 /60 (pcs)	4,500	Recea
13	EVOCERAMIC 20 NF 450/200/238 CLS I /V2 /60 (pcs)	4,020	Beltiug
14	EVOCERAMIC 1/2 29 115/290/238 CLS I /V2 /160 (pcs)	4,000	Recea
	EVOCERAMIC 44 SUPER TH LM 240/440/238 CLS I /V2 /60
15	(pcs)	3,780	Recea
	EVOCERAMIC 1/2 44 SUPER TH 115/440/238 CLS I /V2 /96
16	(pcs)	3,360	Recea
17	EVOCERAMIC 29 240/290/238 CLS II /V2 /96 (pcs)	1,728	Recea
18	POROBLOC 29AR LM (pcs)	1,438	Zalau
19	EVOCERAMIC 29 240/290/238 CLS II /V0 /72 (pcs)	1,296	Zalau

Notes to Consolidated Financial Statements for the period ended 30th of September 2016

16. Trade receivables and other receivables

Trade receivables and other receivables	30-sep-16	31-dec-15
Trade receivables	14,591,624	13,158,081
Adjustments for trade receivables	(1,400,480)	(1,357,302)
Intragroup receivables	-	-
Adjustments for intragroup receivables	-	-
Receivables to partners / shareholders	-	-
Employees	-	-
Corporate tax	7,440	-
Other debts against the State Budget	196,674	200,418
Subsidies	-	-
Sundry debtors and other receivables	(10,903)	46
Adjustments for other receivables	-	-
Interest receivable	10,168	-
Total financial assets other than cash,
classified as loans and receivables	13,394,523	12,001,243
Advances	581,374	1,096,666

Total	13,975,897	13,097,909

The structure of receivables according to their age on September 30, 2016 is as follows:

Analysis of age		30-Sep-16	31-Dec-15
Outstanding receivables		11,620,054	9,799,556
Unadjusted outstanding receivables
	Up to 3 months	1,634,883	1,744,014
	months 3 to 6	15,576	237,520
	months 6 to 12	169,322	6,082
	over 12 months	95,857	22,269
Total		13,535,692	11,809,441

Adjustments	30-Sep-16	31-Dec-15
At the beginning of the period	1,357,302	1,564,709
Constituite in timpul anului Costuri in perioada cu creante irecuperabile	60,483	37,708
Anulari ajustari neutilizate Diferente de curs valutar	-17,305	-245,115
At the end of the period	1,400,480	1,357,302

CEMACON SA Notes to Consolidated Financial Statements

for the period ended 30th of September 2016

Through the credit control system, the Group has diminished the losses from doubtful debts, along the year 2015 they totalized 37.708 lei, and efforts were constantly made in order to recover old debts/receivables, as it shows the dynamic of adjustments for trade receivables.

The Group's trade receivables consist of a large number of customers. The permanent evaluation of the customer credits is carried out on the financial condition of the customers.

In order to reduce the credit risk, the group has established a commercial credit insurance with the company Coface.

On 30th of September 2016 the number of customers insured with Coface is of 207 out of a total of 260 active customers. The total value of these limits offers a significant coverage of the non-collection risk.

Trade and other liabilities	30-sep-16	31-dec-15
Trade liabilities	5,719,202	7,228,194
Suppliers of fixed assets	137,732	95,384
Intra-group liabilities		-
Lease liabilities	21,094	20,106
Debt related to employees	547,691	417,488
Taxes and social contributions	476,947	428,047
Other tax liabilities	2,926,784	107,497
Other liabilities	363,648	1,062,982
Interest to pay	818,482	567,921
Total debt less loans classified as measured
at amortized cost	11,011,580	9,927,618

Dividends	-	-
Advances	218,222	41,645
Revenue in advance	-	12,178

Total	11,229,802	9,981,440

17. Trade and other liabilities

18. Loans

The classification of short-term and long-term loans on the 30th of September 2016 is the following:

Loans	30-Sep-16	31-Dec-15
Current
Short-term loans and overdraft
Current long-term loans	3,999,600	3,333,000
Bonds	-	-
Loans from non-banking institutions
Financial lease	970,010	804,991
Loans from affiliates	-	-
	4,969,610	4,137,991
Long-term loans
Long-term loans	70,867,750	74,394,573
Bonds	-	-
Financial lease	1,308,466	1,314,099
Other debts		-
	72,176,216	75,708,672
Total	77,145,826	79,846,136

On 30th of September 2016, the structure of loans is as follows:

	30-sept-16		31-Dec-15
Loan Institution	Lei	Currency	Lei	Currency
Romanian Commercial Bank	RON 52,605,850	€ 0	RON 55,105,600	€ 0
Romanian Commercial Bank	RON 22,261,500	€ 5,000,000	RON 22,622,500	€ 5,000,000
Romanian Commercial Bank	RON 0	€ 0	RON 0	€ 0
Romanian Commercial Bank	RON 0	€ 0	RON 0	€ 0
Interests	RON 818,482	€ 144,280	RON 567,921	€ 0
TOTAL	RON 75,685,832	€ 5,144,280	RON 78,296,021	€ 5,000,000

In 2016 the Group did not have unused loan facilities.

The bank guarantees consisting in non-current assets on the 30th of September, 2016 related to the contracted loans have the following structure:

Pledged and restricted tangible assets 30.09.2016	Final
	balance
Lands	9,948,283
Land arrangements	413,065
Buildings	42,311,231
Machines, plants and equipment	114,561,634
Furniture and office appliance	238,460
Assets in progress	1,981,614
Total	169,454,287

Other bank securities related to loans:

Security interest in real property without dispossession of the credit balance of the accounts/ subaccounts opened by the Group at the Bank, in the Electronic Archive for Security Interests in Movable Property registered;

Security interest in real property without dispossession of inventories of finished products consisting of:

No.	Ceramic block product name	Quantity um/pc.	Storage
1	EVOCERAMIC 29 240/290/238 CLS I /V0 /72 (pcs)	309,384	Beltiug
2	EVOCERAMIC 12 NF 460/120/238 CLS I /V0 /96 (pcs)	120,000	Beltiug
	EVOCERAMIC 44 SUPER TH LM 240/440/238 CLS II /V2
3	/60 (pcs)	42,060	Recea
4	EVOCERAMIC 29 240/290/238 CLS I /V0 /72 (pcs)	30,672	Zalau
5	EVOCERAMIC 29 240/290/238 CLS I /V2 /96 (pcs)	28,992	Recea
6	EVOCERAMIC 12 NF 460/120/238 CLS I /V0 /96 (pcs)	22,848	Zalau
7	EVOCERAMIC 12 NF 460/120/238 CLS II /V0 /96 (pcs)	20,832	Zalau
8	EVOCERAMIC 24 LM 430/240/238 CLS I /V2 /60 (pcs)	14,640	Recea
	EVOCERAMIC 44 SUPER TH 240/440/238 CLS II /V0 /48
9	(pcs)	13,296	Zalau
10	EVOCERAMIC 20 NF 450/200/238 CLS II /V2 /60 (pcs)	11,700	Recea
11	EVOCERAMIC 24 DLM 430/240/238 CLS II /V2/60 (pcs)	11,640	Recea
12	EVOCERAMIC 20 NF 450/200/238 CLS I /V2 /60 (pcs)	4,500	Recea
13	EVOCERAMIC 20 NF 450/200/238 CLS I /V2 /60 (pcs)	4,020	Beltiug
14	EVOCERAMIC 1/2 29 115/290/238 CLS I /V2 /160 (pcs)	4,000	Recea
	EVOCERAMIC 44 SUPER TH LM 240/440/238 CLS I /V2 /60
15	(pcs)	3,780	Recea
	EVOCERAMIC 1/2 44 SUPER TH 115/440/238 CLS I /V2
16	/96 (pcs)	3,360	Recea
17	EVOCERAMIC 29 240/290/238 CLS II /V2 /96 (pcs)	1,728	Recea
18	POROBLOC 29AR LM (pcs)	1,438	Zalau
19	EVOCERAMIC 29 240/290/238 CLS II /V0 /72 (pcs)	1,296	Zalau

Property of SC GRUPUL CEMACON SA, registered in the Electronic Archive for Security Interests in Movable Property.

Assignments of all future and present debts and collections coming from or related to the present and future commercial contracts of the company.

First lien mortgage over: banking accounts, amounts of money from accounts, insurances, debts, tangible assets, intellectual property rights.

19. Employee's Benefits

The debts regarding the employees' benefits consist of:

1) Indemnity for annual leave which is annually granted for the leaves used in the reference year. For the unused leaves, the company established at the end of the year a provision for unused leaves.

2) Upon retirement, according to the collective labour agreement valid in 2016, the employees shall receive once, according to the seniority in the company, the following indemnities:

< 5 years	0
5 – 20 years	1 individual salary on the retirement date
> 20 years	2 individual salaries on the retirement date

For this type of indemnity, the company established a provision with the value of benefits granted at retirement. For details, see note 20 Provisions.

Employee's benefits	30-sep-16	31-dec-15
Benefits upon retirement	394.774	394.774
Provision related to the annual leave	42.197	205.766
Employee Bonuses	824.988	1.130.057
Management bonuses	396.693	1.127.108
Total	1.658.652	2.857.705

Structure of Benefits	30-sep-16	31-dec-15
Short-term	1.263.878	2.462.931
Long-term	394.774	394.774
Total	1.658.652	2.857.705

In case of unjust dismissal of the General Manager, he/she shall be entitled in addition to other compensations under the law or this agreement to receive an amount equal to the remaining amount which he/she would have received until the end of term, but not more than €60,000 (in net amount), as compensation for his/her dismissal.

In case of unjust dismissal of the Financial Manager, he/she shall be entitled in addition to other compensations under the law or this agreement to receive an amount equal to the remaining amount which he/she would have received until the end of term, but not more than €48,000 (in net amount), as compensation for his/her dismissal.

In case of unjust dismissal of the President of the Board of Directors – Orion Strategy Solution, he/she shall be entitled in addition to other compensations under the law or this agreement to receive an amount equal to the remaining amount which he/she would have received until the end of term, but not more than €60,000 (in net amount), as compensation for his/her dismissal.

20. Provisions

The structure of provisions on the 30th of September 2016 is the following:

Provision	Initial balance	Additional provisions	Used amounts	Reversal of unused amounts	Increases regarding the discount of amounts once with the passing of time	Effects of the discount rate change	Final balance
Disputes	1.728.391	-	-	-	-	-	1.728.391
Unused leaves	205.766	-	163.569	-	-	-	42.197
Pensions	394.774	-	-	-	-	-	394.774
Environmental reclamation provision	401.720	24.143	-	-	-	-	425.863
Bonus provision for employees	1.130.057	824.988	1.130.057	-	-	-	824.988
Bonus provision for management Other provisions	1.127.108 223.977	396.693 7.672	1.127.108 -	- -	- -	- -	396.693 231.649
Total	5.211.793	1.253.496	2.420.734	-	-	-	4.044.555

The structure of short-term and long-term provisions is the following:

Structure of provisions	Short term	Long term
Disputes	1.728.391	-
Unused leaves	42.197	-
Pensions	-	394.773
Environmental reclamation
provision	-	425.863
Other provisions	1.453.331	-
Total	3.223.919	820.636

During the year 2016 the group reversed a series of provisions referring to the following elements:

Cancellation of provisions of employee and management bonuses, established at the end of 2015 and granted in 2016 for year 2015 in amount of 2.25 mil lei. Cancellation other provisions in amount of 0.16 mil lei

On 30th of September 2016 the Company had provisions established for risks and expenses in amount of 4.04 mil lei. The main sums refer to:

Notes to Consolidated Financial Statements for the period ended 30th of September 2016

Dispute with the company Viezental Money Management SRL, requiring the payment of EURO 300,000 success fee + legal expenses, as a consequence of the provision of services contract of 21st of May 2012
Provision for management bonuses in amount of 1.22 mil lei
Dispute with Ana Pop, requiring the payment of 71,041 updated with the legal interest + legal expenses, as a consequence of the management contract of year 2006 and the corresponding addenda.
Provision for unused leaves related to year 2015 in amount of 0.04 mil lei
Other provisions in amount of 1.05 mil lei.

The Group established provisions for the following events which shall generate future cash outflows as a result of past events:

Dispute provisions: under the existing disputes on the 30th of September, 2016, and using the best estimates regarding their settlement, the company established provisions for the estimated amounts to be paid. The presented amounts include both the estimated compensations on the 30th of September, 2016, and the related legal expenses.
Provisions for unused leaves: the company registered provisions for leave-related expenses unused by the employees in 2015. The provisioned amounts were estimated based on the number of leave days related to 2015 which remained to be used by the company's employees and related leave indemnities. Most of these amounts have been done in the first half of 2016.
Environmental reclamation provisions: due to the fact that the company also carries out activities related to mineral resource exploitation (clay) under the operating permits and licenses, it is liable to make environmental reclamation expenses related to the exploited perimeters. The related expenses are estimated to be achieved by the end of the exploitation period, which is why the company established provisions related to such expenses.
Other provisions: within such categories, various provisions are included for which the entity is expected to achieve short-term cash outflows but with uncertain value. To estimate such amounts, the company used the best estimates and knowledge on the generating facts on the 30th of September, 2016.

CEMACON SA Notes to Consolidated Financial Statements for the period ended 30th of September 2016

List of Disputes on 30th of September 2016

Number of file	Plaintiff	Defendant	Object	Court	Stage	Value of dispute	Explanations
4772/337/2012	Crisan Alexa	SC CEMACON SA	Claims	Zalau Court	Retrial	293.000 lei	Retrial of the case after the appeal, following the unfavourable settlement in the lower court, with a compensation of 100.000 lei. The actual value of the dispute is given by the amount of the relevant reports, it is not the value currently granted by the court.
5595/337/2015	POP ANA PRIN AV VULTUR IOAN	CEMACON	Sue petition	Zalau Court	Substance	71.041 lei	Dispute in claims related to the total amount due as reversal compensation without just cause in case of a former member of the company´s management (demanding a larger amount of this compensation).
1674/1285/2015	VIZENTAL MONET MANAGEMENT	CEMACON	Sue petition	Complex Business Court Cluj	Substance	300.000 euro	Success fee required by court action, not granted by the company as a consequence of a legal opinion, independent in this sense (non granting) .

21. Deferred tax

Deferred income tax	30-sep-16	31-dec.15
Total deferred tax at the beginning of the period	187,824	2,634,517
Temporary reversed differences	-	(2,446,693)
Acknowledgment of the deferred tax receivables which were not previously acknowledged	-	-
Total Deferred income tax	187,824	187,824

Total tax	187,824	187,824

For the equipment in Recea production factory, the Group calculates depreciation per product unit, case in which there is a difference between the calculated depreciation according to the fiscal model and the applicable one. For this difference, the company calculates and registers the deferred income tax.

The receivable from the deferred income tax incurred as a result of accrued fiscal losses registered by the entity in the previous years. The fiscal loss was mostly caused by the financial costs related to the loans which the company has.

22. Assets classified as for sale

Urmatoarele clase majore de active au fost clasificate ca fiind detinute in vederea vanzarii in situatia pozitiei financiare la 30 Septembrie 2016:

Fixed assets	Book value on 31 Dec.2015	Amortizations	Outflows	Inflows	Book value on 30 Sept.2016
Fields	4,887,683	-	-	-	4,887,683
Buildings	8,378,883	-	-	-	8,378,883
Machinery, Plant, Equipment	10,177,505	-	-	-	10,177,505
Furniture and office equipment	8,386	-	-	-	8,386
Total	23,452,457	-	-	-	23,452,457

23. Issued Capital

On the 30th of September 2016 the structure of issued capital was as follows:

Structure of issued capital	30.sept.16	31.dec.15
Number of authorized shares	113,990,218 buc	113,990,218 buc
Number of subscribed and paid-up shares	113,990,218 buc	113,990,218 buc
Number of subscribed and unpaid-up shares	-	-
Nominal value of a share	0.10 lei	0.10 lei
Issued capital value	11.399.022 lei	11.399.022 lei

All shares of the company are common and have the same voting right.

The movements of the capital structure during year 2016 are presented in the following table:

	30.sept.16		31.dec.15
	Number	Value	Number	Value
Ordinary shares of RON 01 each	113,990,218 buc	11,399,022 lei	82,191,053 buc	8,219,105 lei
Reduction by entrainment of losses	-	-	-	-
Emissions during the year	-	-	31,799,165 buc	3,179,917lei
Acquisitions of own shares	-	-	-	-
TOTAL	113,990,218 buc	11,399,022 lei	113,990,218 buc	11,399,022 lei

The changes at the equity level in 2015 were generated by the conversion in shares of a debt totalizing RON 58 millions, indicating the completion of the restructuring process and the entering among Cemacon´s shareholders of the investment fund Business Capital for Romania-Oportunity Fund Cooperatied U.A from Holland.

The structure of the shareholders on 30th of September 2016 is as follows:

CEMACON SA Notes to Consolidated Financial Statements for the period ended 30th of September 2016

Shareholder	Number of shares	Percent
BUSINESS CAPITAL FOR ROMANIA-OPPORTUNITY FUND COOPERATIEF U.A., AMSTERDAM NLD	31.799.068	27,8963%
KJK CARAMIDA SRL, BUCURESTI, 1st DISTRICT	31.799.065	27,8963%
SC CONSULTANTA ANDREI&ANDREI SRL, ARAD, ARAD county	17.586.728	15,4283%
S.S.I.F. BROKER S.A. CLUJ-NAPOCA, CLUJ county	16.657.252	14,6129%
Other shareholders / others	16.148.105	14,1662%
TOTAL	113.990.218	100%

Source: CENTRAL DEPOSITORY, Date: 06/30/2016

KJK, Consultanta Andrei & Andrei, S.S.I.F Broker declared to act together.

Credit agreement no. 2 of 19th of March 2015, signed between Cemacon S.A and Romanian Commercial Bank (Banca Comerciala Romana) is guaranteed by a share pledge, representing 51% of the capital of SC Grupul Cemacon S.A, shares belonging to the main institutional shareholders of Group Cemacon S.A.

24. Reserves

The following describe the nature and type of each reserve from own capitals:

Type of reserve	Description and purpose
Legal reserve	They are annually established from the company's profit in the quantities and limits provided by the law. In 2015, the limits are 5% applied on the accounting profit until it reaches 20% of the paid-up subscribed capital. At the end of 2015, the company's reserves reached 20% of the subscribed capital, which is why in 2015 there are reserves in amount of 454.548 lei
Revaluation reserve	The revaluation reserves are established from the differences resulted from the revaluation of tangible and intangible assets. The presentation of the revaluation reserves shall be done according to each type of non-current asset and on each revaluation operation which took place. In 2015, the company made the revaluation and registered the revaluation results according to the accounting policies.
Other reserves	There are other reserves not provided by the law which were optionally established on the net profit to cover the accounting losses or for other purposes, under the decision of the general meeting of shareholders, by complying with the legal provisions. In 2015, the company did not register other reserves.

Type of reserve	Initial balance	Increases	Reduction	Final balance
Legal reserves	1.596.694	-	-	1.596.694
Revaluation reserves	25.926.561	-	-	25.926.561
Other reserves	1.700.933	-	-	1.700.933
Total	29.224.188	-	-	29.224.188

25. Lease

On the 30th of September 2016 the group concluded financial lease agreements with the following lease companies:

Lease company	Type of lease	Leased property
PORSCHE LEASING ROMANIA IFN IMPULS LEASING	Financial lease	Vehicles Machines,
	Financial lease	equipment

The situation of debts regarding the financial lease on the 30th of September, 2016 is the following:

Leased assets	Initial balance	Increases	Reduction	Final balance
Buildings
Vehicles	785212	94699	327298	552613
Equipment	1333351	667617	336531	1664437
Total	2118563	762316	663829	2217050

The due date of the lease payments during 2016-2017 is presented in the following table:

2016

Lease payment due date	Total value	Interest	Net value

less than 1 year	1014869	71226	943643
between 1-5 years	1350857	42391	1308466
over 5 years	0	0	0
Total	2365726	113617	2252109

26. Transactions with affiliates

The company's affiliates are:

Cercon Ariesul with registered office in Campia Turzii, 1 Ialomitei str. Cluj county; Cemacon holds shares in this company SA – bankruptcy
Consultanta Andrei&Andrei Srl with registered office in Bucharest, 1st district, 14 Jandarmeriei str., building A2, 3rd entrance, ap. 2; tax identification no. CIF: RO 17345454, Trade Register no J40/14670/2011; Director of Group Cemacon SA
KJK Fund II SICAV-SIF with the registered office in Luxembourg, 412F Esch Road, code L-2086 Director of Cemacon, KJK Caramida Srl (subsidiary wholly owned by KJK Fund II) with registered office in Bucharest, 1st district, 22 Gheorghe Marasoiu str., Ap. 5, tax identification no. CIF 34187516, Trade Register no. J40/2627/2015. Declared to act together with Consultanta Andrei& Andrei, S.S.I.F Broker
Orion Strategy Solution Srl with the registered office in Cluj County, Cluj-Napoca, 7 Artelor Str.; Tax identification number RO 26118990; Trade Register number J12/3026/2013; Chairman of Cemacon SA Board of Directors Liviu-Ionel Stoleru, General Manager of Cemacon SA, is the Director of Orion Strategy Solution Srl and representative of this entity of the Board of Directors of Group Cemacon SA.
KJK Caramida SRL, Bucharest, 1st district, 22 Gheorghe Marasoiu str., ap. 5, Tax identification number CIF 34187516, Trade Register no. J40/2627/2015.
Business Capital for Romania –Opportunity Fund Cooperatief U.A., Holland.
RSL Capital Advisors SRL, Bucharest, CIF Tax identification number 33165056, Trade Register no. J40/5774/2014, Director of Group Cemacon SA

Transactions with affiliates (Continued)

The transactions with affiliates are summarized in the following table:

Service sales			Service acquisitions
Affiliates	1 Jan – 30 Sept. 2016		1 Jan - 31 Dec. 2015	1 Jan – 30 Sept. 2016		1 Jan - 31 Dec. 2015
Cercon Ariesul		-	-		-
Consultanta Andrei&Andrei Srl		-	-		164,601	138,103
KJK Fund II SICAV-SIF		-	-		127,868	113,097
Orion Strategy Solution Srl		-	-		533,203	605,081
Casa de insolventa Transilvania		-		-	-
RSL Capital Advisor SRL					42,541
Total		-		-	868,213	856,281

Amounts in Lei

The balances with affiliates are summarized in the following table:

	Receivables from affiliates		Debts to affiliates
Affiliates	30-Sep-16	31-Dec-15	30-Sep-16	31-Dec-15
Consultanta Andrei&Andrei Srl	-	-	65,455	-
KJK Fund II SICAV-SIF	-	-	84,987	299,477
Orion Strategy Solution Srl	-	-	89,015	51,200
Total		-	239,457	350,677

Amounts in Lei

*Director of Cemacon SA

CEMACON SA Notes to Consolidated Financial Statements for the period ended 30th of September 2016

27. Cash and cash equivalents

Cash and cash equivalents	30-sep.16	31-dec-15
Cash at bank	27,835,533	10,842,261
Cash and cash equivalents	43,522	963
Deposits	-	-
Miscellaneous	-	-
Total	27,879,055	10,843,224

28. Other financial assets

On 30thof September 2016 the Group had a number of 17.180 certificates of greenhouse gas emissions in amount of 528.402 entered at their market price. They are received on a free basis according to the regulations in force and to the plan of assigning the certificates of greenhouse gas emissions, for the period 2013-2020, or purchased by the company, depending upon the number of certificates corresponding to the company.

29. Adjustments of accounting errors

In 2016 the Group did not have adjustments of accounting errors corresponding to the previous years.

30. Share Based Payments

Considering the decision no. 1 of the Ordinary General Meeting of Shareholders of Group Cemacon SA as of the 25th of October, 2013, implemented by the Decision no. 108 of the Board of Directors of Group Cemacon SA as of the 24th of September, 2014 and management agreements signed with the company's managers whereby there is the obligation to grant a bonus in the Company's shares to the management, more exactly, during 2014-2016, within the total limit of 5% of the Company's issued capital during the aforementioned period and within the minimum annual limit of 1.6% of the Company's issued capital.

The bonus shares for the management refer to 5% of the capital stock of Group Cemacon S.A, and shall be granted on a free basis.

On 30.09.2016, the group has evaluated the share based payment, with settlement in equity instruments, achieving the corresponding growth directly in ownership equity, in amount of 2.024.226.

Notes to Consolidated Financial Statements for the period ended 30th of September 2016

	2016	2016	2015	2015
	Weighted average of the acquisition price (RON)	Number of shares	Weighted average of the acquisition price (RON)	Number of shares
Unpaid at the beginning of period	0.3374	3,875,664	0.3374	3,875,664
Granted during the year	0.3374	2,123,821	0.3374	2,123,821
Cancelled during the year	-	-	-	-
Used during the year	-	-	-	-
Expired during the year	-	-	-	-
Unpaid at the end of period	0.3374	5,999,485	0.3374	5,999,485

The total number of shares to be granted within the agreement is 5.999.485.

The management of Cemacon Group maintains the level of share price previously calculated, starting from a share value of 0.3374 lei/per share. This price started from the market value of the share, public on BVB on the reference date upon the establishment of the provision, and we keep considering it as the most relevant indicator based on which the provision is established.

More, since the calculation of the provision, period during which all the stages of debt restructuring were implemented, including the conversion of the debt of over 13 million euros in shares, the evolution of the share has fluctuated around this determined value as a reference value.

Upon the date of drafting this report, the share is traded with 0.3380 lei/per share. In order to obtain the fair value of the share, the group used level 2 information.

31. Other information

Information on the Company's presentation:

The bases of conversion used to express in national currency the assets and liabilities, income and expenses initially outlined in a foreign currency:

The way used to express the property items in national currency, income and expenses emphasized in a foreign currency is presented in Note 1. The main exchange rates used for RON conversion of balances expressed in foreign currency on the 31st of December, 2015, and 30th of September, 2016, are:

		Exchange rate
Foreign currency	Abbreviation	30-sept-16	31-dec-15
US Dollar	USD	3,9822	4.1477
Euro	EUR	4,4523	4.5245

Fees paid to auditors

All paid fees refer to the audit services on the individual financial statements prepared by the Company under IFRS.

The present financial statements have not been audited. The Group shall carry out the auditing of the financial statements according to the legal regulations.

Amendments

The directors are not entitled to subsequently amend the financial statements.

The financial statements together with the notes to the financial statements are authorized in order to be published on the 7th of November 2016.

After they are published the financial statements cannot be subject to any more amendments.

32. Contingents

Taxation

The Group deems that it paid on time and fully all taxes, fees, penalties and penalty interest, if applicable.

All amounts due to the State for taxes and fees were paid or registered on the balance date. The Romanian tax system is undergoing consolidation and harmonization with the European legislation, there being different interpretations of the authorities in connection with the tax legislation, which may give rise to taxes, fees and additional penalties. If the state authorities discover violations of the Romanian legal provisions, they may be determined as applicable: confiscation of the concerned amounts, imposition of additional tax liabilities, imposition of fines, application of delay increases (applied to remaining actual payment amounts). Therefore, the tax sanctions resulted from violations of the legal provisions may lead to important amounts to be paid to the State.

In Romania, the tax year is opened for verifications for a period of 5 years.

Transfer price

Under the relevant tax legislation, the tax assessment of a transaction with the affiliates is based on the market price concept related to that transaction. Under this concept, the transfer prices must be adjusted so as to reflect the market prices which would have been established between the entities between which there is no relation of affiliation and which act independently under "normal market conditions".

Notes to Consolidated Financial Statements for the period ended 30th of September 2016

It is likely that the transfer price verifications are carried out in the future by the tax authorities to determine whether these prices comply with the principle of "normal market conditions" and that the taxable base of the Romanian taxpayer is not distorted.

General Manager	Financial Manager
Stoleru Liviu	Sologon Daniel
Signature __	Signature __
Company's stamp

** This document was translated from Romanian to English by an authorized translator. Cemacon SA is not responsible for any translation errors or misinterpretation of information contained in this document. Reporting language is Romanian and in case of misinterpretation the Financial Statements issued in Romanian shall apply.

***The information included in the present document is provided according to the International Financial Reporting Standards (IFRS). The Company has made all the necessary efforts to guarantee that the information presented are complete, exact and without clerical errors. Both the Company and the management have used, where applicable, the professional reasoning in conjunction with the International Financial Reporting Standards, in order to present the information in a manner consistent with the specific character of the activity. The interpretation of the information presented in this document is to be carried out in accordance with mentioned standards. In case of omissions or interpretations different from the indicated regulations, the provisions included in the International Financial Reporting Standards shall be applied (IFRS). The unaudited financial information presented above are preliminary and subject to adjustments and amendments. The adjustments and amendments to the financial statements can be identified during the audit activity, which might lead to significant differences in relation to these preliminary unaudited financial information.

AI Terminal

Cemacon S.A.

2320_rns_2016-11-07_6a826815-51a3-4473-9ede-1015fef31172.pdf

CONSOLIDATED FINANCIAL STATEMENTS FOR PERIOD ENDED 30TH OF SEPTEMBER 2016

Cuprins (Contents)

Situatia consolidata a pozitiei financiare (Consolidated statement of financial position) pentru perioada incheiata la 30 Septembrie 2016 (for the period ended 30 September 2016)

Situatia consolidata a rezultatului global (Consolidated statement of comprehensive income) pentru perioada incheiata la 30 Septembrie 2016 (for the period ended 30 September 2016)

1. Accounting policies

Basis of Consolidation

Drafting principles

Measurement basis

Change of accounting policies

New standards and interpretations entered into force

Standards and interpretations not entered into force

Revenue recognition

Conversion of foreign currency transactions

Financial assets

Financial liabilities

Equity

Indebtedness cost

Pensions and other post-retirement benefits

Other long-term benefits

Leasing contracts

CEMACON SA Notes to Consolidated Financial Statements for the period ended 30th of September 2016

Accounting policies (continued)

Intangible assets

a) Purchased intangible assets

b) Internally generated fixed assets (development costs)

CEMACON SA Notes to Consolidated Financial Statements for the period ended 30th of September 2016

Accounting policies (continued)

d) Goodwill

Tangible assets

CEMACON SA Notes to Consolidated Financial Statements for the period ended 30th of September 2016

Accounting policies (continued)

b) Purchased Tangible Assets

c) Internally generated tangible assets

Indebtedness cost

b) Amortization calculated per product unit

Since this type of amortization is difference from the fiscal (straight-line) depreciation, the company calculates and books a deferred tax relevant to the difference between the fiscal depreciation and the amortization per product unit.

Depreciation of assets

Revaluation of assets

Fixed assets held for sale

Dividends

Deferred tax

Inventories

CEMACON SA Notes to Consolidated Financial Statements for the period ended 30th of September 2016

Accounting policies(continued)

Subsidies

Provisions

CEMACON SA Notes to Consolidated Financial Statements for the period ended 30th of September 2016

Accounting policies (continued)

Affiliated parties

Affiliated persons:

Affiliated entities:

Risk factors

Internal risks

1. Commercial credit

2. Restarting the production line in Zalau

3. Guarantee a constant supply flow, with energy and raw materials

4. Technical failures

5. Compliance with the legal requirements

6. Actions of competition

7. Development of the portfolio of products

External risks

Risk of exchange rate variations

Interest rate risk

Liquidity risk

Risks on shares

Border market risk

Risk determined by the correlation with global market evolution

Risks generated by the legislative instability

Internal control system

Events after the reporting date

Share-based payment

EUA Certificates

2. Accounting estimates

Estimates and Assumptions IFRS 13 Fair value Measurement

Litigation

Accounting estimates (Continued)

Depreciation at product level