alkim alkali kimya anonim Şirketi ve bağlı ortaklıklarıalkim.alkim.com/download/2013eng.pdf ·...

(Convenience translation of the independent auditor’s report and consolidated financial statements originally issued in Turkish) Alkim Alkali Kimya Anonim Şirketi ve Bağlı Ortaklıkları Consolidated financial statements at December 31, 2013 together with the independent auditor’s report

CONVENIENCE TRANSLATION INTO ENGLISH OF INDEPENDENT AUDITOR’S REPORT ORIGINALLY ISSUED IN TURKISH

Independent auditor’s report To the Board of Directors of Alkim Alkali Kimya Anonim Şirketi Introduction 1. We have audited the accompanying consolidated statement of financial position of Alkim Alkali

Kimya Anonim Şirketi (“the Company”- the Company) and its subsidiaries (together “the Group”) as at December 31, 2013 and the related consolidated statement of comprehensive income, consolidated statement of changes in shareholders’ equity and consolidated statement of cash flows for the year then ended and a summary of significant accounting policies and explanatory notes.

Group Management's responsibility for the financial statements 2. The Group’s management is responsible for the preparation and fair presentation of these

consolidated financial statements in accordance with the Turkish Accounting Standards published by the Public Oversight Accounting and Auditing Standards Authority (“POA”) and for such internal controls as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to error and/or fraud.

Independent Auditor’s Responsibility 3. Our responsibility is to express an opinion on these consolidated financial statements based on

our audit. We conducted our audit in accordance with generally accepted auditing standards issued by the Capital Markets Board of Turkey. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance whether the financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments; the Group’s internal control system is taken into consideration. Our purpose, however, is not to express an opinion on the effectiveness of internal control system, but to design procedures that are appropriate for the circumstances in order to identify the relation between the consolidated financial statements prepared by the Group and its internal control system. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by Group management, as well as evaluating the overall presentation of the financial statements.

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

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Opinion 4. In our opinion, the accompanying consolidated financial statements present fairly the financial

position of Group as at December 31, 2013 and their financial performance and cash flows for the year then ended in accordance with the Turkish Accounting Standards (Note 2).

Reports on independent auditor’s responsibilities arising from other regulatory requirements 5. In accordance with Article 402 of the Turkish Commercial Code (“TCC”); the Board of Directors

submitted to us the necessary explanations and provided required documents within the context of audit, additionally, no significant matter has come to our attention that causes us to believe that the Company’s bookkeeping activities for the period 1 January – December 31, 2013 is not in compliance with the code and provisions of the Company’s articles of association in relation to financial reporting.

6. Pursuant to Article 378 of Turkish Commercial Code no. 6102, Board of Directors of publicly

traded companies are required to form an expert committee, and to run and to develop the necessary system for the purposes of: early identification of causes that jeopardize the existence, development and continuity of the company; applying the necessary measures and remedies in this regard; and, managing the related risks. According to subparagraph 4, Article 398 of the code, the auditor is required to prepare a separate report explaining whether the Board of Directors has established the system and authorized committee stipulated under Article 378 to identify risks that threaten or may threaten the company and to provide risk management, and, if such a system exists, the report, the principles of which shall be announced by the POA, shall describe the structure of the system and the practices of the committee. This report shall be submitted to the Board of Directors along with the auditor’s report. Our audit does not include evaluating the operational efficiency and adequacy of the operations carried out by the management of the Group in order to manage these risks. As of the balance sheet date, POA has not announced the principles of this report yet so no separate report has been drawn up relating to it. On the other hand, the Company formed Committee of Audit and Corporate Governance on March 29, 2013. This committee was authorized to fulfil the duties of Committee for Early Risk Detection. The Committee is comprised of 5 members.

Güney Bağımsız Denetim ve Serbest Muhasebeci Mali Müşavirlik Anonim Şirketi A member firm of Ernst & Young Global Limited Metin Canoğulları, SMMM Partner 4 March 2014 Istanbul, Turkey

(Convenience translation of the independent auditor’s report and consolidated financial statements originally issued in Turkish) Alkim Alkali Kimya Anonim Şirketi and its Subsidiaries Table of contents Page Consolidated statements of financial position 3 - 4

Consolidated statements of comprehensive income 5

Consolidated statements of changes in shareholder’s equity 6

Consolidated statements of cash flows 7

Notes to the consolidated financial statements 8 – 59

(Convenience translation of the consolidated financial statements originally issued in Turkish) Alkim Alkali Kimya A.Ş. and its Subsidiaries Consolidated statements of financial position as of December 31, 2013 (Amounts expressed in Turkish Lira (“TL”) unless otherwise indicated.)

The accompanying notes form an integral part of these consolidated financial statements

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Current period Prior period

Audited Audited (Restated

(Note 2.4)) Notes December 31, 2013 December 31, 2012 Assets Current assets 139.878.835 126.024.248 Cash and cash equivalents 4 31.527.379 27.051.033 Trade receivables 66.988.281 42.316.457 - Due from related parties 29 53.142 260.556 - Trade receivables from third parties 5 66.935.139 42.055.901 Other receivables 1.233.701 1.368.538 - Due from related parties - 1.221 - Other receivables from third parties 6 1.233.701 1.367.317 Inventories 7 30.469.106 46.040.915 Prepaid expenses 8 2.324.842 2.252.916 Other current assets 9 7.335.526 6.994.389 Non-current assets 133.940.636 139.502.910 Trade receivables - 75.000 - Trade receivables from third parties - 75.000 Other receivables 211.007 195.904 - Other receivables from third parties 6 211.007 195.904 Investments accounted by equity method 10 14.313 14.313 Property, plant and equipment 11 131.181.149 135.849.481 Intangible assets 1.259.609 1.663.728 - Other intangible assets 12 1.259.609 1.663.728 Prepaid expenses 8 1.010.897 1.262.301 Deferred tax assets 27 234.835 307.981 Other non-current assets 28.826 134.202 Total assets 273.819.471 265.527.158

(Convenience translation of the consolidated financial statements originally issued in Turkish) Alkim Alkali Kimya A.Ş. and its Subsidiaries Consolidated statements of financial position as of December 31, 2013 (Amounts expressed in Turkish Lira (“TL”) unless otherwise indicated.)


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(Note 2.4))

Notes December 31,

2013 December 31,

2012 Liabilities Current liabilities 61.705.376 53.949.602 Short-term financial liabilities 14 5.954.697 - Current portion of long term financial liabilities 14 26.884.088 30.692.208 Other financial liabilities 15 7.605.223 414.406 Trade payables 16.219.941 17.246.007 - Due to related parties 29 196 93 - Trade payables, third parties 5 16.219.745 17.245.914 Liabilities for employee benefits 16 3.122.189 2.445.379 Deferred income 17 1.500.415 1.203.767 Current income tax liabilities 27 380.465 750.359 Provisions 5.444 720.246 - Provisions for employee benefits - 623.094 - Other provisions 5.444 97.152 Other current liabilities 32.914 477.230 Non-current liabilities 23.037.628 33.001.486 Long-term financial liabilities 14 16.869.699 26.516.190 Other financial liabilities - 75.000 Provisions 4.722.254 4.703.472 - Provisions for employee benefits 19 4.722.254 4.703.472 Deferred tax liability 27 1.445.675 1.706.824 Total liabilities 84.743.004 86.951.088 Equity 189.076.467 178.576.070 Share capital 20 24.725.000 24.725.000 Adjustment to share capital 26.909.044 26.909.044 Restricted reserves 20.885.203 20.885.203 Accumulated other comprehensive income/(expense) not to be reclassified to profit or loss

(1.030.634) (833.399)

- Actuarial gain/(loss) arising from defined benefit plans (1.030.634) (833.399)

Retained earnings 81.123.596 71.736.725 Net income 16.556.238 15.098.841 Total equity attributable to equity holders of the parent 169.168.447 158.521.414 Non-controlling interests 19.908.020 20.054.656 Total equity and liabilities 273.819.471 265.527.158

(Convenience translation of the consolidated financial statements originally issued in Turkish) Alkim Alkali Kimya A.Ş. and its Subsidiaries Consolidated statement of comprehensive income for the year then ended December 31, 2013 (Amounts expressed in Turkish lira (TL) unless otherwise indicated.)


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Audited

Audited (Restated

(Note 2.4)) January 1 - January 1 -

Notes December 31,

2013 December 31,

2012 Revenue (net) 21 226.926.258 209.526.859 Cost of sales (-) 21 (172.089.911) (161.911.356) Gross profit 54.836.347 47.615.503 General administrative expenses (-) 22 (11.852.701) (11.400.650) Marketing, selling and distribution expenses (-) 22 (20.447.611) (18.091.561) Research and development expenses (-) 22 (145.631) (608.036) Other operating income 24 9.886.628 3.681.491 Other operating expenses (-) 24 (1.920.316) (2.733.081) Operating profit 30.356.716 18.463.666 Income from investment activities 25 764.339 2.119.987 Operating profit before financial income/(expense) 31.121.055 20.583.653 Financial income 26 2.667.763 6.572.115 Financial expense (-) 26 (12.126.955) (6.590.010) Profit before tax from continued operations 21.661.863 20.565.758 Tax income (4.249.951) (4.100.920) - Taxes on income (-) 27 (4.388.646) (3.507.363) - Deferred tax income/(expense) 27 138.695 (593.557) Net income from continued operations 17.411.912 16.464.838 Other comprehensive income / (expense) Actuarial gain/(loss) arising from defined benefit plans (246.543) (369.892) Tax effect of other comprehensive income / (loss) not to be reclassified to

profit or loss 49.308 73.979 - Deferred tax income/(expense) 27 49.308 73.979 Other comprehensive income (197.235) (295.913) Total comprehensive income 17.214.677 16.168.925 Distribution of income for the period: Non-controlling interests 855.674 1.365.997 Attributable to equity holders of the parent 16.556.238 15.098.841 Distribution of total comprehensive income Non-controlling interests 855.674 1.365.997 Attributable to equity holders of the parent 16.359.003 14.802.928 Earnings per share Attributable to equity holders of the parent (in TL) 28 0,6696 0,6107

(Convenience translation of the consolidated financial statements originally issued in Turkish) Alkim Alkali Kimya A.Ş. and its Subsidiaries Statement of changes in shareholders’ equity for the year ended December 31, 2013 (Amounts expressed in Turkish lira (TL) unless otherwise indicated.


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Share capital

Adjustment to share

capital Restricted

reserves

Actuarial gain/(loss) arising

from defined benefit plans

Retained earnings

Profit for

the period

Equity holders

of the parent

Non-

controlling interests Total equity

1 January 2012 24.725.000 26.909.044 19.159.505 - 60.914.597 20.226.911 151.935.057 20.483.456 172.418.513 Change in accounting policy (Note 2.3) - - - (537.486) - 537.486 - - - 1 January 2012 - Restated 24.725.000 26.909.044 19.159.505 (537.486) 60.914.597 20.764.397 151.935.057 20.483.456 172.418.513 Transfers - - 1.725.698 - 19.038.699 (20.764.397) - - - Dividends paid - - - - (8.216.571) - (8.216.571) (1.794.797) (10.011.368) Total comprehensive income - - - (295.913) - 15.098.841 14.802.928 1.365.997 16.168.925 December 31, 2012 24.725.000 26.909.044 20.885.203 (833.399) 71.736.725 15.098.841 158.521.414 20.054.656 178.576.070

Share capital

Adjustment to share

capital Restricted

reserves

Actuarial gain/(loss)

arising from defined benefit plans

Retained earnings

Profit for

the period

Equity holders

of the parent

Non-

controlling interests Total equity

1 January 2013 24.725.000 26.909.044 20.885.203 - 71.199.239 14.802.928 158.521.414 20.054.656 178.576.070 Change in accounting policy (Note 2.3) - - - (833.399) 537.486 295.913 - - - 1 January 2013 - Restated 24.725.000 26.909.044 20.885.203 (833.399) 71.736.725 15.098.841 158.521.414 20.054.656 178.576.070 Transfers - - - - 15.098.841 (15.098.841) - - - Dividends paid - - - - (5.711.970) - (5.711.970) (1.002.310) (6.714.280) Total comprehensive income - - - (197.235) - 16.556.238 16.359.003 855.674 17.214.677 December 31, 2013 24.725.000 26.909.044 20.885.203 (1.030.634) 81.123.596 16.556.238 169.168.447 19.908.020 189.076.467

(Convenience translation of the consolidated financial statements originally issued in Turkish) Alkim Alkali Kimya A.Ş. and its Subsidiaries Consolidated statement of cash flows for the year ended December 31, 2013 (Amounts expressed in Turkish lira (TL) unless otherwise indicated)


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(Note 2.4)) January 1 - January 1 - December 31,

2013 December 31,

2012 A. Cash flows from operating activities 22.650.041 26.419.417

Profit/(loss) before taxation 21.661.863 20.565.758 Adjustment for reconciliation of profit/(loss) before taxation

- Adjustment for depreciation and amortisation expense 15.306.536 14.355.053 - Adjustment for provisions 764.934 782.694 - Adjustment for unrealized foreign currency translation differences 1.526.980 (99.581) - Adjustment for interest income and expense 930.096 1.415.619 - Adjustment for (gain) / loss on sales of property, plant and

equipment, net (88.863) (1.015.445) Changes in working capital

- Adjustment for increase/decrease in inventories 15.571.809 (8.557.839) - Adjustment for increase/decrease in trade receivables (26.512.438) (1.481.434) - Adjustment for increase/decrease in other receivables related with

operations 63.453 1.583.397 - Adjustment for increase/decrease in trade payables (637.432) 2.300.930 - Adjustment for increase/decrease in other payables related with

operations (185.662) 695.381 Cash flows from operating activities

- Tax payments/returns (4.807.848) (3.363.807) - Other cash inflow/outflow (943.387) (761.309) B. Cash flows from investing activities (9.483.372) (7.926.319)

Interest received 661.850 810.160 Cash inflows from the sale of property, plant and equipment and intangible assets 219.215 1.444.417 Cash outflows from the purchase of property, plant and equipment and intangible assets (10.364.437) (10.180.896)

C. Cash flows from financing activities (8.690.323) (20.425.001)

Cash inflows from financial liabilities (384.097) (8.187.854) Dividends paid (6.714.280) (10.011.368) Interest paid (1.591.946) (2.225.779)

Net increase/decrease in cash and cash equivalents 4.476.346 (1.931.903) E. Cash and cash equivalents at beginning of period 27.051.033 28.982.936 Cash and cash equivalents at end of period 31.527.379 27.051.033

(Convenience translation of the consolidated financial statements originally issued in Turkish) Alkim Alkali Kimya A.Ş. and its Subsidiaries Notes to the consolidated financial statements for the years ended 31 December 2013 and 2012 (Amounts expressed in Turkish lira (TL) unless otherwise indicated)

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1. Organisation and Nature of Operations Alkim Alkali Kimya A.Ş (the “Company”) was established in 1948 as Alkali Madencilik Limited Şirketi. Since October 1963, the Company has continued its operations as Alkim Alkali Kimya A.Ş. The nature of the operation of the Company is the mining of ores and the production and distribution of all kinds of chemical materials in domestic and foreign markets as disclosed in the articles of association. The nature of the businesses of the Subsidiaries is as follows: Subsidiaries Country Nature of business - Alkim Kağıt Sanayi ve Ticaret A.Ş. (“Alkim Kağıt”) Türkiye Production and sales of paper products - Alkim Sigorta Aracılık Hizmetleri Ltd. Şti. (“Alkim Sigorta”) Türkiye Insurance The Company and its subsidiaries (“the Group”) are registered in Turkey. The Company and its subsidiary Alkim Kağıt, are publicly quoted companies and 35,23% (December 31, 2012 - 35,23%) of the Company’s shares, 20,00% (December 31, 2012 - 20,00%) of Alkim Kağıt shares are quoted on the Stock Exchange Istanbul (“BİST”). As of December 31, 2013 average number of employees of the “Group” is 321 (December 31,2012 was 344). The address of the registered office is as follows: Gümüşsuyu Mahallesi İnönü Caddesi No: 13 34437 Taksim - İstanbul As of October 17, 2012, the Company reported to BIST that the shareholders of the Company, who are members of the Kora Family (Cihat Kora, M. Reha Kora, Arkın Kora, A. Haluk Kora, Ferit Kora, Özay Kora, Tülay Önel, Mithat Kora) and own 67,2831% of the Company’s shares, have signed an agreement with İş Yatırım Menkul Değerler A.Ş. for consultancy services related to the sale of the shares they own to the interested parties. Approval of consolidated financial statements Consolidated financial statements are approved for issue by board of directors on March 04, 2014. Statutory financial statements that from the basis of these consolidated financial statements are subject to the approval of General Assembly.

(Convenience translation of the consolidated financial statements originally issued in Turkish) Alkim Alkali Kimya A.Ş. and its Subsidiaries Notes to the consolidated financial statements for the years ended 31 December 2013 and 2012 (continued) (Amounts expressed in Turkish lira (TL) unless otherwise indicated)

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2. Basis of presentation of consolidated financial statements and accounting policies 2.1 Basis of presentation Basis of Preparation of Financial Statements The consolidated financial statements and disclosures have been prepared in accordance with the communiqué numbered II-14,1 “Communiqué on the Principles of Financial Reporting In Capital Markets” (the Communiqué) announced by the Capital Markets Board (“CMB”) (hereinafter will be referred to as “the CMB Reporting Standards”) on 13 June 2013 which is published on Official Gazette numbered 28676. In accordance with article 5th of the CMB Reporting Standards, companies should apply Turkish Accounting Standards/Turkish Financial Reporting Standards and interpretations regarding these standards as adopted by the Public Oversight Accounting and Auditing Standards Authority of Turkey (“POA”). With the decision taken on March 17, 2005, the CMB announced that, effective from January 1, 2005, the application of inflation accounting is no longer required for listed companies in Turkey. The Group’s financial statements have been prepared in accordance with this decision. All items with significant amounts and nature, even with similar characteristics, are presented separately in the financial statements. Insignificant amounts are grouped and presented by means of items having similar substance and function. When the nature of transactions and events necessitate offsetting, presentation of these transactions and events over their net amounts or recognition of the assets after deducting the related impairment are not considered as a violation of the rule of non-offsetting. As a result of the transactions in the normal course of business are presented as net provided that if the nature of the transaction or the event qualify for offsetting. The consolidated financial statements are prepared based on the historical cost convention in Turkish Lira (“TL”) which is the Company’s and its subsidiaries’ functional and presentation currency. 2.2 The new standards, amendments and interpretations The accounting policies adopted in preparation of the consolidated financial statements as at December 31, 2013 are consistent with those of the previous financial year, except for the adoption of new and amended TFRS and TFRIC interpretations effective as of 1 January 2013. The effects of these standards and interpretations on the Group’s financial position and performance have been disclosed in the related paragraphs.


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2. Basis of presentation of consolidated financial statements and accounting policies (continued)

The new standards, amendments and interpretations which are effective as at 1 January 2013 are as follows: TFRS 7 Financial Instruments: Disclosures – Offsetting Financial Assets and Financial Liabilities (Amended) The amendment requires the disclosure of the rights of the entity relating to the offsetting of the financial instruments and some information about the related regulations (e.g. collateral agreements). New disclosures would provide users of financial statements with information that is useful in; i) evaluating the effect or potential effect of netting arrangements on an entity’s financial position and, ii) analyzing and comparing financial statements prepared in accordance with TFRSs and other

generally accepted accounting standards. New disclosures have to be provided for all the financial instruments in the balance sheet that have been offset according to TAS 32. Such disclosures are applicable to financial instruments in the balance sheet that have not been offset according to TAS 32 but are available for offsetting according to main applicable offsetting regulations or other financial instruments that are subject to a similar agreement. The amendment affects disclosures only and did not have any impact on the consolidated financial statements of the Group. TAS 1 Presentation of Financial Statements (Amended) – Presentation of Items of Other Comprehensive Income The amendments to TAS 1 change only the grouping of items presented in other comprehensive income. Items that could be reclassified (or ‘recycled’) to profit or loss at a future point in time would be presented separately from items which will never be reclassified. The amendments will be applied retrospectively. The amendment affects presentation only and did not have an impact on the financial position or performance of the Group. TAS 19 Employee Benefits (Amended) Numerous changes or clarifications are made under the amended standard. Among these numerous amendments, the most important changes are removing the corridor mechanism, for determined benefit plans recognizing actuarial gain/(loss) under other comprehensive income and making the distinction between short-term and other long-term employee benefits based on expected timing of settlement rather than employee entitlement. The Group used to recognize the actuarial gain and loss in profit and loss statement before this amendment. The Group, disclosed the retrospective effect of the changes for the year ended December 31, 2013 (Note 2.4). Additionally, based on the amendment in the presentation of short term employee benefits, vacation pay liability previously presented in the short term provisions has been reclassified to long term provision for employee benefits. TAS 27 Separate Financial Statements (Amended) As a consequential amendment to TFRS 10 and TFRS 12, the TASB also amended TAS 27, which is now limited to accounting for subsidiaries, jointly controlled entities, and associates in separate financial statements. This amendment did not have any material impact on the financial position or performance of the Group.


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TAS 28 Investments in Associates and Joint Ventures (Amended) As a consequential amendment to TFRS 11 and TFRS 12, the POA also amended TAS 28, which has been renamed TAS 28 Investments in Associates and Joint Ventures, to describe the application of the equity method to investments in joint ventures in addition to associates. Transitional requirement of this amendment is similar to TFRS 11. The Group is in the process of assessing the impact of the new standard on the financial position and performance of the Group. TFRS 10 Consolidated Financial Statements TFRS 10, replaces the parts of previously existing TAS 27 Consolidated and Separate Financial Statements that addresses the accounting for consolidated financial statements. A new definition of control is introduced, which is used to determine which entities are consolidated. This is a principle based standard and require preparers of financial statements to exercise significant judgment. The Group is in the process of assessing the impact of the new standard on the financial position and performance of the Group. TFRS 11 Joint Arrangements The standard describes the accounting for joint ventures and joint operations with joint control. Among other changes introduced, under the new standard, proportionate consolidation is not permitted for joint ventures. The standard has no impact on the Group’s financial condition and performance. TFRS 12 Disclosure of Interests in Other Entities TFRS 12 includes all of the requirements that are related to disclosures of an entity’s interests in subsidiaries, joint arrangements, associates and structured entities. The standard affects presentation only and did not have an impact on the disclosures given by the Group. TFRS 13 Fair Value Measurement The new Standard provides guidance on how to measure fair value under TFRS but does not change when an entity is required to use fair value. It is a single source of guidance under TFRS for all fair value measurements. The new standard also brings new disclosure requirements for fair value measurements. The new disclosures are only required for periods beginning after TFRS 13 is adopted. The Group is in the process of assessing the impact of the new standard on the financial position and performance of the Group. TFRIC 20 Stripping Costs in the Production Phase of a Surface Mine Entities will be required to apply its requirements for production phase stripping costs incurred from the start of the earliest comparative period presented. The Interpretation clarifies when production stripping should lead to the recognition of an asset and how that asset should be measured, both initially and in subsequent periods. The interpretation is not applicable for the Group and did not have any impact on the financial position or performance of the Group.


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Transition Guidance (Amendments to TFRS 10, TFRS 11 and TFRS 12) The amendments change the transition guidance to provide further relief from full retrospective application. The date of initial application is defined as ‘the beginning of the annual reporting period in which TFRS 10 is applied for the first time’. The assessment of whether control exists is made at ‘the date of initial application’ rather than at the beginning of the comparative period. If the control assessment is different between TFRS 10 and TAS 27/SIC-12, retrospective adjustments should be determined. However, if the control assessment is the same, no retrospective application is required. If more than one comparative period is presented, additional relief is given to require only one period to be restated. For the same reasons TFRS 11 and TFRS 12 has also been amended to provide transition relief. The Group has reflected the effects of the Standard on its financial position and performance to its financial statements. Improvements to TFRSs Annual Improvements to TFRSs - 2009 - 2011 Cycle, which contains amendments to its standards, is effective for annual periods beginning on or after 1 January 2013. This project did not have an impact on the financial position or performance of the Group. TAS 1 Financial Statement Presentation: Clarifies the difference between voluntary additional comparative information and the minimum required comparative information. TAS 16 Property, Plant and Equipment: Clarifies that major spare parts and servicing equipment that meet the definition of property, plant and equipment are not inventory TAS 32 Financial Instruments: Presentation: Clarifies that income taxes arising from distributions to equity holders are accounted for in accordance with TAS 12 Income Taxes. The amendment removes existing income tax requirements from TAS 32 and requires entities to apply the requirements in TAS 12 to any income tax arising from distributions to equity holders. TAS 34 Interim Financial Reporting: Clarifies the requirements in TAS 34 relating to segment information for total assets and liabilities for each reportable segment. Total assets and liabilities for a particular reportable segment need to be disclosed only when the amounts are regularly provided to the chief operating decision maker and there has been a material change in the total amount disclosed in the entity’s previous annual financial statements for that reportable segment. Standards issued but not yet effective and not early adopted Standards, interpretations and amendments to existing standards that are issued but not yet effective up to the date of issuance of the consolidated financial statements are as follows. The Group will make the necessary changes if not indicated otherwise, which will be affecting the consolidated financial statements and disclosures, after the new standards and interpretations become in effect.


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TAS 32 Financial Instruments: Presentation - Offsetting Financial Assets and Financial liabilities (Amended) The amendments clarify the meaning of “currently has a legally enforceable right to set-off” and also clarify the application of the TAS 32 offsetting criteria to settlement systems (such as central clearing house systems) which apply gross settlement mechanisms that are not simultaneous. These amendments are to be retrospectively applied for annual periods beginning on or after 1 January 2014. The Group does not expect that these amendments will have significant impact on the financial position or performance of the Group. TFRS 9 Financial Instruments – Classification and measurement

As amended in December 2011, the new standard is effective for annual periods beginning on or after 1 January 2015. Phase 1 of this new TFRS introduces new requirements for classifying and measuring financial instruments. The amendments made to TFRS 9 will mainly affect the classification and measurement of financial assets and measurement of fair value option (FVO) liabilities and requires that the change in fair value of a FVO financial liability attributable to credit risk is presented under other comprehensive income. Early adoption is permitted. The Group is in the process of assessing the impact of the new standard on the financial position or performance of the Group. TFRIC Interpretation 21 Levies The interpretation clarifies that an entity recognizes a liability for a levy when the activity that triggers payment, as identified by the relevant legislation, occurs. It also clarifies that a levy liability is accrued progressively only if the activity that triggers payment occurs over a period of time, in accordance with the relevant legislation. For a levy that is triggered upon reaching a minimum threshold, the interpretation clarifies that no liability should be recognized before the specified minimum threshold is reached. The interpretation is effective for annual periods beginning on or after 1 January 2014, with early application permitted. Retrospective application of this interpretation is required. The Group does not expect that this amendment will have any impact on the financial position or performance of the Group. Amendments to TAS 36 - (Recoverable Amount Disclosures for Non-Financial assets) As a consequential amendment to TFRS 13 Fair Value Measurement, some of the disclosure requirements in TAS 36 Impairment of Assets regarding measurement of the recoverable amount of impaired assets have been modified. The amendments required additional disclosures about the measurement of impaired assets (or a group of assets) with a recoverable amount based on fair value less costs of disposal. The amendments are to be applied retrospectively for annual periods beginning on or after 1 January 2014. Earlier application is permitted for periods when the entity has already applied TFRS 13. The Group does not expect that this amendment will have any impact on the financial position or performance of the Group.


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Amendments to TAS 39 - Novation of Derivatives and Continuation of Hedge Accounting Amendments to TAS 39 Financial Instruments: Recognition and Measurement, provides a narrow exception to the requirement for the discontinuation of hedge accounting in circumstances when a hedging instrument is required to be novated to a central counterparty as a result of laws or regulations. The amendments are to be applied retrospectively for annual periods beginning on or after 1 January 2014. The Group does not expect that this amendment will have any impact on the financial position or performance of the Group. The new standards, amendments and interpretations that are issued by the International Accounting Standards Board (IASB) but not issued by POA The following standards, interpretations and amendments to existing IFRS standards are issued by the IASB but not yet effective up to the date of issuance of the financial statements. However, these standards, interpretations and amendments to existing IFRS standards are not yet adapted/issued by the POA, thus they do not constitute part of TFRS. The Group will make the necessary changes to its consolidated financial statements after the new standards and interpretations are issued and become effective under TFRS. IFRS 10 Consolidated Financial Statements (Amendment)

IFRS 10 is amended to provide an exception to the consolidation requirement for entities that meet the definition of an investment entity. The exception to consolidation requires investment entities to account for subsidiaries at fair value through profit or loss in accordance with IFRS 9 Financial Instruments. There will be no impact of the new standard on the financial position or performance of the Group. IFRS 9 Financial Instruments – Hedge Accounting and amendments to IFRS 9, IFRS 7 and IAS 39 -IFRS 9 (2013) In November 2013, the IASB issued a new version of IFRS 9, which includes the new hedge accounting requirements and some related amendments to IAS 39 and IFRS 7. Entities may make an accounting policy choice to continue to apply the hedge accounting requirements of IAS 39 for all of their hedging relationships. The standard does not have a mandatory effective date, but it is available for application now; a new mandatory effective date will be set when the IASB completes the impairment phase of its project on the accounting for financial instruments. The Group is in the process of assessing the impact of the standard on financial position or performance of the Group. Improvements to IFRSs In December 2013, the IASB issued two cycles of Annual Improvements to IFRSs – 2010–2012 Cycle and IFRSs – 2011–2013 Cycle. Other than the amendments that only affect the standards’ Basis for Conclusions, the changes are effective 1 July 2014. Earlier application is permitted.


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Annual Improvements to IFRSs – 2010–2012 Cycle IFRS 2 Share-based Payment: Definitions relating to vesting conditions have changed and performance condition and service condition are defined in order to clarify various issues. The amendment is effective prospectively. IFRS 3 Business Combinations Contingent consideration in a business acquisition that is not classified as equity is subsequently measured at fair value through profit or loss whether or not it falls within the scope of IFRS 9 Financial Instruments. The amendment is effective for business combinations prospectively. IFRS 8 Operating Segments The changes are as follows: i) Operating segments may be combined/aggregated if they are consistent with the core principle of the standard. ii) The reconciliation of segment assets to total assets is only required to be disclosed if the reconciliation is reported to the chief operating decision maker. The amendments are effective retrospectively. IFRS 13 Fair Value Measurement As clarified in the Basis for Conclusions short-term receivables and payables with no stated interest rates can be held at invoice amounts when the effect of discounting is immaterial. The amendment is effective immediately. IAS 16 Property, Plant and Equipment and IAS 38 Intangible Assets The amendment to IAS 16.35(a) and IAS 38.80(a) clarifies that revaluation can be performed, as follows: i) Adjust the gross carrying amount of the asset to market value or ii) determine the market value of the carrying amount and adjust the gross carrying amount proportionately so that the resulting carrying amount equals the market value. The amendment is effective retrospectively. IAS 24 Related Party Disclosures The amendment clarifies that a management entity – an entity that provides key management personnel services – is a related party subject to the related party disclosures. The amendment is effective retrospectively. Annual Improvements to IFRSs – 2011–2013 Cycle IFRS 3 Business Combinations The amendment clarifies that: i) Joint arrangements are outside the scope of IFRS 3, not just joint ventures ii) The scope exception applies only to the accounting in the financial statements of the joint arrangement itself. The amendment is effective prospectively. IFRS 13 Fair Value Measurement The portfolio exception in IFRS 13 can be applied to financial assets, financial liabilities and other contracts. The amendment is effective prospectively.


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IAS 40 Investment Property The amendment clarifies the interrelationship of IFRS 3 and IAS 40 when classifying property as investment property or owner-occupied property. The amendment is effective prospectively. These amendments did not have an impact on the financial position or performance of the Group. Resolutions promulgated by the Public Oversight Authority In addition to those mentioned above, the POA has promulgated the following resolutions regarding the implementation of Turkish Accounting Standards. “The financial statement examples and user guide” became immediately effective at its date of issuance; however, the other resolutions became effective for the annual reporting periods beginning after December 31, 2012. 2013-1 Financial Statement Examples and User Guide The POA promulgated “financial statement examples and user guide” on May 20, 2012 in order to ensure the uniformity of financial statements and facilitate their audit. The financial statement examples within this framework were published to serve as an example to financial statements to be prepared by companies obliged to apply Turkish Accounting Standards, excluding financial institutions established to engage in banking, insurance, private pensions or capital market. The Group made reclassifications stated in Note 2.4 in order to comply with the requirements of this regulation. 2013-2 Accounting of Combinations under Common Control In accordance with the resolution it has been decided that i) combination of entities under common control should be recognized using the pooling of interest method, ii) and thus, goodwill should not be included in the financial statements and iii) while using the pooling of interest method, the financial statements should be prepared as if the combination has taken place as of the beginning of the reporting period in which the common control occurs and should be presented comparatively from the beginning of the reporting period in which the common control occurred. This resolution did not have any impact on the consolidated financial statements of the Group. 2013-3 Accounting of Redeemed Share Certificates Clarification has been provided on the conditions and circumstances where the redeemed share certificates shall be recognized as a financial liability or equity based financial instruments. This resolution did not have any material impact on the consolidated financial statements of the Group. 2013-4 Accounting of Cross Shareholding Investments If a subsidiary of an entity holds shares of the entity then this is defined as cross shareholding investment. Accounting of this cross investment is assessed based on the type of the investment and different recognition principles adopted accordingly. With this resolution, this topic has been assessed under three main headings below and the recognition principles for each one of them has been determined. i) the subsidiary holding the equity based financial instruments of the parent, ii) the associates or joint ventures holding the equity based financial instruments of the parent, iii) the parent’s equity based financial instruments are held by an entity, which is accounted as an

investment within the scope of TAS 38 and TFRS 9 by the parent. This resolution did not have any material impact on the consolidated financial statements of the Group.


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2.3 Basis of consolidation The consolidated financial statements include the accounts of the parent company, Alkim Alkali Kimya A.Ş. and its Subsidiaries. The financial statements of the companies included in the consolidation have been prepared as of the date of the consolidated financial statements in conformity with Turkey Financial Reporting Standards and applying uniform accounting policies and presentations. Subsidiaries Subsidiaries are companies which Alkim Alkali Kimya A.Ş. owns, directly or over other subsidiaries, in terms of capital and management relations, 50% or over 50% of the shares, voting power or the majority in management or electing the majority of the management. The table below sets out all Subsidiaries included in the scope of consolidation and shows their shareholding structure:

Subsidiaries

Direct shares owned by parent

company (%)

Indirect shares owned by

parent company (%)

Non controlling interest (%)

Alkim Kağıt (*) 79,93 - 20,07 Alkim Sigorta 50,00 39,96 10,04

(*) According to the decision of Board of Directors dated March 29, 2007 and April 15, 2004; the Company

has applied to the CMB on May 28, 2007 and September 16, 2004 for the sale of 12,51% and 18,77% shares (25% shares of its subsidiary Alkim Kağıt), and delivered the shares to İstanbul Stock Exchange Settlement and Custody Bank. Sale of the related shares has not been realised yet as of the date of these consolidated financial statements.

Offsetting All items with significant amounts and nature, even with similar characteristics, are presented separately in the financial statements. Insignificant amounts are grouped and presented by means of items having similar substance and function. When the nature of transactions and events necessitate offsetting, presentation of these transactions and events over their net amounts or recognition of the assets after deducting the related impairment are not considered as a violation of the rule of non-offsetting. As a result of the transactions in the normal course of business, revenue other than sales described in “Revenue Recognition” are presented as net provided that if the nature of the transaction or the event qualify for offsetting.


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2.4 Comparative information

In order to allow for the determination of the financial situation and performance trends, the Group’s consolidated financial statements have been presented comparatively with the previous year. The classifications made in the statement of financial position of the Company as of December 31, 2012 and the consolidated statement of comprehensive income for the period ended December 31, 2012 are as follows:

- According to the amendments on IAS 19 “Employee Benefits”, the actuarial gain / (loss) of employee benefits are recognized under other comprehensive income. The amendment is effective for the periods after 1 January 2013 and the Group applied the changes retrospectively. Actuarial gain and losses arising from defined benefit plans which were shown under cost of sales amounting to TL 343.427, under general administrative expenses amounting to TL 15.083, under marketing, selling and distribution expenses amounting to TL 11.382 in the consolidated profit or loss statements for the period ended December 31, 2012 are reclassified under statement of other comprehensive income. Actuarial losses amounting to TL 369.892 which were disclosed under profit before tax in consolidated statement of cash flows for the period ended December 31, 2012 are reclassified under provision for employee benefits.

- Provision for vacation pay liability of the Group amounting to TL 294.274 which were previously

reported under short - term provisions in the statements of financial position as of December 31, 2012 is reclassified to provision for employee benefits under long - term provisions group.

(i) Prepaid expenses amounting to TL 36.428 shown in other receivables were classified under the

prepaid expenses account. (ii) Interest accrual from time deposits amounting to TL 13.381 shown in other current assets were

classified under the cash and cash equilevents account. (iii) Shipping-freight services income amounting to TL 324.380 shown in revenue was net off with

marketing, selling and distribution expenses account. The Group presented the consolidated statement of financial position as of December 31, 2013 comparatively with the consolidated statement of financial position as of December 31, 2012, presented the consolidated statement of comprehensive income, consolidated statement of cash flows and consolidated statement of changes in equity for the year ended December 31, 2013 comparatively with the consolidated financial statements for the year ended December 31, 2012.


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Pursuant to the decree taken in the CMB’s meeting dated June 7, 2013 and numbered 20/670, for capital market board institutions within the scope of the Communiqué on Principles Regarding Financial Reporting in the Capital Market, financial statement templates and a user guide have been published, effective as of the interim periods ended after March 31, 2013. Various classifications were made in the Group’s statement of financial position pursuant to these formats which have taken effect. The classifications made in the statement of financial position of the Company as of December 31, 2012 and the consolidated statement of comprehensive income for the period ended December 31, 2012 are as follows: - Advance given for inventories amounting to TL 200.275 shown in inventory were classified

under the prepaid expenses account, - Advance given for fixed assets amounting to TL 1.250.487 and long term prepaid expenses

amounting to TL 11.814 shown in other non-current asset were classified under the prepaid expenses account,

- Prepaid insurance expense amounting to TL 29.076 shown in other trade receivables were classified under the prepaid expenses account,

- Payable to personnel and employee taxes payable amounting to TL 2.430.129 shown under other liabilities were classified under liabilities for employee benefits,

- Advance taken amounting to TL 1.203.767 thousand shown in advance taken were classified under “deferred income”,

- Retirement pay liability provision amounting to TL 623.094 shown in other current liabilities were classified under the short term provisions for employee benefits,

- Expense provision for supplier amounting to TL 78.617 shown in other current liabilities were classified under the trade payables, third parties account,

- Vacation pay liability provision amounting to TL 294.274 shown in other current liabilities were classified under the long term provisions for employee benefits,

- Provision for litigation amounting to TL 97.149 shown in other current liabilities were classified under the short term other provisions,

- Rent income amounting to TL 974.289 shown in other income account were classified under the other operating income,

- Compensation income from insurance companies amounting to TL 848.792 shown in other income account were classified under the other operating income,

- Income from scrap sales amounting to TL 179.150 shown in other income account were classified under the other operating income,

- Gain on sales of property, plant and equipment amounting to TL 1.309.827 shown in other income account were classified under the income from investment activities,

- Incentive income amounting to TL 571.835 shown in other income account were classified under the other operating income,

- Loss from sales of property, plant and equipment amounting to TL 294.382 shown in other expense account were classified under the other operating expense,

- Interest income on deposits amounting to TL 810.160 shown in financial income account were classified under the income from investment activities,

- Due date income from receivables and payables amounting to TL 100.142 shown in financial income account were classified under the other operating income,

- Foreign exchange loss from receivables and payables amounting to TL 2.195.769 shown in financial expense account were classified under the other operating expense,

- Foreign exchange gain from receivables and payables amounting to TL 430.611 shown in financial income account were classified under the other operating income,

- Rediscount interest income amounting to TL 41.067 shown in financial income account were classified under the other operating income,

- Rediscount interest espense amounting to TL 34.594 shown in financial expense account were


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classified under the other operating expense, 2. Basis of presentation of consolidated financial statements and accounting policies

(continued)

2.5 Summary of significant accounting policies Significant accounting policies applied in the preparation of these consolidated financial statements are summarized below: Revenue recognition Revenues are recognised on an accrual basis at the time deliveries are made, services are given and significant risks and rewards are transferred to the buyer, the amount of revenue can be measured reliably and it is probable that the economic benefits associated with the transaction will flow to the Group at the fair value of considerations received or receivable. Net sales represent the invoiced value of goods shipped less sales returns, sales discounts and commissions (Note 21). Rent income is recognised on an accrual basis, interest income is recognised on an accrual basis with effective yield method calculation. Dividend income is recognised when the right to receive dividend is possessed. Inventories Inventories are valued at the lower of cost or net realisable value. Net realisable value is the estimated selling price in the ordinary course of business, less the costs of completion and selling expenses. The cost components of inventories include materials, conversion costs and other costs that are necessary to bring the inventories to their present location and condition. The cost of inventories is determined on the process costing method and Group values its inventories based on weighted average cost.(Note 7). The Company fulfills the raw material need of the production facility located in Çayırhan/Ankara by using solution mining technique for processing sodium sulfate reserves (glaubert and thenardite layers). The Company accounts for related reserves in two ways. The first one is reserves in underground production panels that are in the process of industrial production, second one is reserves available in underground production panels which are not extracted and not used in production as of balance sheet date. The Company is recording the first form of mineral stocks by making proven and probable reserve calculation related with underground reserve amount and extracted sodium sulfate amount from panels. The Company uses proven and probable mine reserve calculation and books only extracted part of reserves. Property, plant, equipment and related depreciation Property, plant and equipment acquired before January 1, 2005 are carried at cost in purchasing power of TL as at December 31, 2004; less accumulated depreciation and impairment losses. Property, plant and equipment acquired after January 1, 2005 are carried at cost less accumulated depreciation and impairment losses. Property, plant and equipments are capitalized and depreciated when they are fully commissioned and in a physical state to meet their designated production capacity.


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Depreciation is provided using the straight-line method based on the estimated useful lives of the assets (Note 11). Land is not depreciated as it is deemed to have an indefinite life. Residual values of property plant and equipment are considered to be immaterial. The estimated useful lives for property, plant and equipment are as follows: Years Land improvements 7 - 50 Buildings 25 - 50 Machinery and equipment 5 - 30 Motor vehicles 4 - 10 Furniture and fixtures 3 – 20

Property, plant and equipment are reviewed for impairment losses whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the carrying amount of the asset exceeds its recoverable amount. Gain or losses on disposals of property, plant and equipment with respect to their restated net book values are included in the related income and expense accounts (Note 11). Repair and maintenance expenditures are charged to the comprehensive income as they are incurred. Repair and maintenance expenditures are capitalised if they result in an enlargement or substantial improvement of the respective assets and depreciated over remaining useful life of related asset. Intangible assets Intangible assets comprise of computer software programmes and development costs. The acquired before January 1, 2005 are carried at cost in the purchasing power of TL as at December 31, 2004; less accumulated amortization and impairment losses; those acquired after January 1, 2005 are carried at cost less accumulated amortization and impairment losses, which are amortized using the straight-line method over three to ten years following the acquisition date in either case. In case of impairment, the carrying amount of an intangible asset is written down to its recoverable amount (Note 12). Development costs Research costs are charged to statement of comprehensive income when incurred. Development costs (or the improvement phase of an intergroup project) are recognised as intangible assets when the following criteria are met: - it is technically feasible to complete the intangible asset so that it will be available for sale or for

use, - completion of intangible assets , there is an intention to use or sell, - it can be demonstrated how the intangible asset will generate probable future economic benefits, - management intends to complete the intangible asset, use or sell it, - adequate technical, financial and other resources to complete the development or sell the

intangible asset are available, and - the expenditure attributable to the intangible asset during its development can be reliably

measured.


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2. Basis of presentation of consolidated financial statements (continued) Other development expenditures that do not meet these criteria are recognised as an expense as incurred. Development costs previously recognised as an expense are not recognised as an asset in a subsequent period. Development costs are amortised in five years following capitalization (Note 12). Impairment of assets Except for deferred tax assets each class of assets are reviewed for impairment losses at each balance sheet date whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the carrying amount of the asset or any cash generating unit of that asset exceeds its recoverable amount which is the higher of an asset’s net selling price and value in use. Impairment losses are accounted for in the statement of income. Impairment loss on assets can be reversed, to the extent of previously recorded impairment losses, in cases where increases in the recoverable value of the asset can be associated with events that occur subsequent to the period when the impairment loss was recorded. Borrowings and borrowing cost If the maturity of the borrowings is less than 12 months, these borrowings are classified in current liabilities and if more than 12 months, classified in non-current liabilities (Note 14). Borrowings are stated at amortised cost using the effective yield method. Any proceeds and the redemption value are recognised in the consolidated statement of income as borrowing cost over the period of the borrowings. Borrowing costs directly attributable to the acquisition, construction or production of an asset that necessarily takes a substantial period of time to get ready for its intended use or sale are capitalised as part of the cost of the respective assets. All other borrowing costs are expensed in the period they occur. Borrowing costs consist of interest and other costs that an entity incurs in connection with the borrowing of funds. Financial assets Loans and receivables constitute non-derivative financial instruments, which are not quoted in active markets and have fixed or scheduled payments. Loans and receivables arise, without held-for-sale intention, from the Group’s supply of goods, service or direct fund to any debtor. They are classified as current assets when they have a maturity less than 12 months, and non-current assets when they have a maturity more than 12 months as of balance sheet date. Loans and receivables are recognised initially at their fair value plus transaction costs directly attributable to the acquisition or issue of the financial asset. These loans and receivables are included in trade receivables and other receivables in the balance sheet. Loans are recorded at the proceeds received, net of any transaction costs incurred. In subsequent periods, loans are stated at amortised cost using the effective yield method. Recognition and derecognition of financial assets and liabilities Group recognizes a financial asset or financial liability in its balance sheet when only when it becomes a party to the contractual provisions of the instrument. Group derecognizes a financial asset or a portion of it only when the control on rights under the contract is discharged. Group derecognizes a financial liability when the obligation under the liability is discharged or cancelled or expires.


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2. Basis of presentation of consolidated financial statements (continued) All regular way financial asset purchase and sales are recognized at the date of the transaction, the date the Group committed to purchase or sell. The mentioned purchases or sales are ones which require the delivery of the financial assets within the time interval identified with the established practices and regulations in the market. Foreign currency transactions and balances Transactions in foreign currencies during the year have been translated at the exchange rates prevailing at the dates of the transactions. Monetary assets and liabilities denominated in foreign currencies have been translated into TL at the exchange rates prevailing at the balance sheet dates. Foreign exchange gains or losses arising from the settlement of such transactions and from the translation of monetary assets and liabilities are recognized in the consolidated statements of income. Earnings per share Earnings per share indicated in the consolidated statements of comprehensive income are determined by dividing consolidated net income for the year by the weighted average number of shares that have been outstanding during the year concerned (Note 28). In Turkey, companies can increase their share capital by making a pro-rata distribution of shares ("bonus shares") to existing shareholders from retained earnings and revaluation surplus. For the purpose of earnings per share computations, the weighted average number of shares outstanding during the year has been adjusted in respect of bonus shares issues without a corresponding change in resources, by giving them retroactive effect for the year in which they were issued and for each earlier year. In case of dividend distribution, earnings per share is calculated by dividing net income by the number of shares, rather than dividing by weighted average number of shares outstanding. Events after the balance sheet date Subsequent events, announcements related to net profit or even declared after other selective financial information has been publicly announced, include all events that take place between the balance sheet date and the date when balance sheet was authorized for issue (Note 32). In case the events require a correction subsequent to the balance sheet date, the Group makes the necessary corrections to the consolidated financial statements. Moreover, the events that occur subsequent to the balance sheet date and not require a correction to be made are disclosed in accompanying notes, when they may affect decision of making of users of financial statements. Provisions, contingent assets and contingent liabilities Provisions are recognized when the Group has a present legal or constructive obligation as a result of past events; it is more likely than not that an outflow of resources will be required to settle the obligation; and the amount has been reliably estimated.


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2. Basis of presentation of consolidated financial statements (continued) In cases where the time value of money is material, provisions are determined at the present value of expenses required to be made to settle the liability. The rate used to discount provisions to their present values is determined taking into account the interest rate in the related markets and the risk associated with the liability. This discount rate does not consider risks associated with future cash flow estimates. Possible assets or obligations that arise from past events and whose existence will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the Group are treated as contingent assets or liabilities. The Group does not recognise contingent assets and liabilities (Note 18). Accounting policies, changes in accounting estimates and errors Significant changes in accounting policies and errors are applied on a retrospective basis and reflected upon previous periods’ consolidated financial statements. Changes in accounting estimates involving single periods are reflected upon the current period when the change occurs; changes involving future periods are reflected both upon the current period when the change occurs and the future period, on a prospective basis. Leases Leases of property, plant and equipment are classified regarding the belonging of all the risks and rewards of ownership to lessor or lessee. According to this principle, leases of property, plant and equipment where the Group has substantially all the risks and rewards of ownership are classified as finance leases (Note 14). Leases of property, plant and equipment excluding finance leases are classified as operating leases. Payments for assets leased out under operating leases are reflected to statement of income as expense on a straight-line basis over the lease term even if the installments are not fixed. Rental income is also recognised on a straight-line basis over the lease term and reflected to statement of income as income; uncommitted to period of collections. Related Parties

Parties are considered related to the Company if; (a) A person or a close member of that person's family is related to a reporting entity if that person:

(i) has control or joint control over the reporting entity; (ii) has significant influence over the reporting entity; or (iii) is a member of the key management personnel of the reporting entity or of a parent of the

reporting entity. (b) The entity and the reporting entity are members of the same group (which means that each

parent, subsidiary and fellow subsidiary is related to the others). (i) The entity and the company are members of the same group. (ii) One entity is an associate or joint venture of the other entity (or an associate or joint

venture of a member of a group of which the other entity is a member). (iii) Both entities are joint ventures of the same third party. (iv) One entity is a joint venture of a third entity and the other entity is an associate of the third

entity.


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(v) The entity is a post-employment benefit plan for the benefit of employees of either the

reporting entity or an entity related to the reporting entity. If the reporting entity is itself such a plan, the sponsoring employers are also related to the reporting entity.

(vi) The entity is controlled or jointly controlled by a person identified in (a). (vii) A person identified in (a)(i) has significant influence over the entity or is a member of the

key management personnel of the entity (or of a parent of the entity). A related party transaction is a transfer of resources, services or obligations between related parties, regardless of whether a price is charged (Note 29). Segment reporting Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision maker. The chief operating decision-maker, who is responsible for allocating resources and assessing the performance of the operating segments, has been identified as the steering committee that makes strategic decisions. As the Group is engaged in two major business segments, namely mining and paper production, the financial information regarding business segments are reported in Note 3. Taxation on income Taxation on income includes current income tax liability and deferred income taxes. Current income tax liability includes the taxes payable calculated on the taxable portion of period income with tax rates enacted on the balance sheet date and the correction adjustments related to prior period tax liabilities (Note 27). Deferred tax assets and liabilities are provided, using the liability method, for all temporary differences arising between the tax bases of assets and liabilities and their carrying values for financial reporting purposes with the enacted tax rates as of the balance sheet date (Note 27). Deferred tax assets or liabilities are reflected to the financial statements to the extent that they will provide an increase or decrease in the taxes payable for the future periods where the temporary differences will reverse. Deferred tax liabilities are recognised for all taxable temporary differences, where deferred income tax assets resulting from deductible temporary differences are recognised to the extent that it is probable that future taxable profit will be available against which the deductible temporary difference can be utilised. To the extent that deferred tax assets will not be utilised, the related amounts have been deducted accordingly. Deferred tax assets and deferred tax liabilities related to income taxes levied by the same taxation authority are offset accordingly, at individual entity level. Consequently, the net deferred tax positions of the parent company and the individual subsidiaries and joint venture are not offset in the consolidated financial statements (Note 27).


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Employee benefits/provision for employment termination benefits (a) Defined benefit plans: In accordance with existing social legislation in Turkey, the Group is required to make lump-sum termination indemnities to each employee who has completed over one year of service with the Group and whose employment is terminated due to retirement or for reasons other than resignation or misconduct. In the financial statements, the Group has recognized a liability using the “Projected Unit Credit Method” based upon factors derived using the Group’s experience of personnel terminating and being eligible to receive benefits, discounted by using the current market yield at the balance sheet date on government bonds (Note 19). All actuarial gains and losses are recognized in the comprehensive income statement. (b) Defined contribution plans: The Group pays contributions to the Social Security Institution on a mandatory basis. The Group has no further payment obligations once the contributions have been paid. The contributions are recognized as an employee benefit expense when they are due. (c) Useful lives Tangible and intangible assets are depreciated by their estimated useful lives. Useful lives determined by management are disclosed in Note 2.4. Statement of cash flows In the statement of cash flows, cash flows are classified into three categories as operating, investing and financing activities. Cash flows from operating activities are those resulting from the Group’s operating activities. Cash flows from investing activities indicate cash inflows and outflows resulting from fixed asset and financial investments. Cash flows from financing activities indicate the resources used in financing activities and the repayment of these resources. For the purposes of the cash flow statement, cash and cash equivalents comprise of cash in hand accounts, bank deposits, mutual funds and loans originated by the Group by providing money directly to a bank under reverse repurchase agreements with a predetermined sale price at fixed future dates of less than or equal to three months. Trade receivables and impairment of receivables Trade receivables that are created by the Group by way of providing goods or services directly to a debtor are carried at amortised cost, using the effective interest rate method, less the unearned financial income. Short duration receivables with no stated interest rate are measured at original invoice amount unless the effect of imputing interest is significant. A credit risk provision for trade receivables is established if there is objective evidence that the Group will not be able to collect all amounts due. The amount of the provision is the difference between the carrying amount and the recoverable amount, being the present value of all cash flows, including amounts recoverable from guarantees and collateral, discounted based on the original effective interest rate of the originated receivables at inception.


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2. Basis of presentation of consolidated financial statements (continued) If the amount of the impairment subsequently decreases due to an event occurring after the write-down, the release of the provision is credited to other income in the consolidated statements of income (Note 24). Trade receivables from certain customers that are assigned to a factor by the Company, are followed as long and short term trade receivables in the accompanying balance sheet and commission paid to factoring company as a result of the mentioned transaction. Payable to factoring company is followed as long and short term other financial liabilities in the balance sheet (Note 5 and 15). Trade payables Trade payables are initially recognized at fair value and subsequently measured at amortised cost using the effective interest method (Note 5). Share capital and dividends Share capital is classified as capital and dividends distributed from common stocks are deducted at the period of the declaration from the retained earnings. 1.5 Significant accounting estimates and decisions Preparation of consolidated financial statements requires disclosure of reported assets and liabilities, contingent assets and liabilities as at balance sheet date and utilisation of estimates and assumptions that can effect income and expense balances of the reporting period. Estimations and assumptions can differ from actual results in spite of these estimations and assumptions are based on Group management’s best knowledge. Significant accounting estimates are as follows: a) Income taxes There are many transactions and calculations for which the ultimate tax determination is uncertain during the ordinary course of business and significant judgment is required in determining the provision for income taxes. The Group recognises tax liabilities for anticipated tax issues based on estimates of whether additional taxes will be due and recognises tax assets for the carry forward tax losses and unused investment tax credits to the extent that the realisation of the related tax benefit through the future taxable profits is probable (Note 27). Where the final tax outcome of these matters is different from the amounts that were initially recorded, such differences will impact the income tax and deferred tax provisions in the period in which such determination is made. b) Provision for employment termination benefits: To calculate the employee benefit provision actuarial assumptions relating to turnover ratio, discount rate and salary increase are used. Calculation details are given in Employee benefits disclosure (Note 19). c) Economic useful lives: Tangible assets, and intangible assets, have been depreciated and amortized by using estimated useful lives. Estimated useful lives determined by management have been disclosed in Note 2.4


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3. Segment reporting The Group’s primary reporting format is business segments. A business segment is a group of assets and operations engaged in providing products or services that are subject to risk and return that are different from those of other business segments. The Group is organised mainly into three main business segments. - Chemical products: Production and sales of Sodium Sulphate and derivatives - Paper: Production and sales of paper products - Other operations segment Other operations of the Group mainly comprise insurance which is not significant enough to qualify as an individual reportable segment in accordance with CMB Financial Reporting Standards. Segment assets consist primarily of property, plant and equipment, intangible assets, inventories, receivables and operating cash. They exclude deferred income tax assets. Segment liabilities comprise operating liabilities. They exclude items such as bank borrowings, taxation on income and deferred income tax liabilities. Capital expenditure comprises additions to property, plant and equipment and intangible assets. The segment results for the year ended December 31, 2013 are as follows:

Chemical products Paper Other Total

Total gross segment sales 111.811.100 116.486.824 347.708 228.645.632 Inter-segment sales (6.242) (30.787) (1.682.345) (1.719.374) Net sales 111.804.858 116.456.037 (1.334.637) 226.926.258 Operating profit segment result 22.228.446 8.027.501 100.769 30.356.716 Income from investment activities 331.986 431.452 901 764.339 Financial income 1.675.446 946.086 46.231 2.667.763 Financial expense (8.010.178) (4.109.175) (7.602) (12.126.955) Profit before taxes on income 16.225.700 5.295.864 140.299 21.661.863 Taxes on income (3.099.409) (1.150.542) - (4.249.951) Net profit for the year 13.126.291 4.145.322 140.299 17.411.912


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3. Segment reporting (continued) The segment results for the year ended December 31, 2012 are as follows:


Total gross segment sales 88.237.246 122.055.975 297.429 210.590.650 Inter-segment sales (6.321) (26.317) (1.031.153) (1.063.791) Net sales 88.230.925 122.029.658 (733.724) 209.526.859 Operating profit segment result 9.807.743 8.555.762 100.161 18.463.666 Income from investment activities 1.513.507 605.193 1.287 2.119.987 Financial income 5.742.394 819.185 10.536 6.572.115 Financial expense (5.294.394) (1.276.343) (19.273) (6.590.010) Profit before taxes on income 11.769.250 8.703.797 92.711 20.565.758 Taxes on income (2.225.147) (1.857.181) (18.592) (4.100.920) Net profit for the year 9.544.103 6.846.616 74.119 16.464.838

The segment assets and liabilities at December 31, 2013 and capital expenditure for the year then ended are as follows:


Assets 119.659.163 153.448.206 477.267 273.584.636 Deferred income tax assets (Note 27) 234.835 - - 234.835

119.893.998 153.448.206 477.267 273.819.471

Liabilities 9.624.612 22.211.070 1.372.698 33.208.380 Bank borrowings and financial liabilities 23.586.710 26.121.774 - 49.708.484 Provision for income taxes (Note 27) 209.362 171.103 - 380.465 Deferred income tax liabilities (Note 27) - 1.445.675 - 1.445.675 33.420.684 49.949.622 1.372.698 84.743.004 Capital expenditures 7.544.741 2.751.047 - 10.295.788 The segment assets and liabilities at December 31, 2012 and capital expenditure for the year then ended are as follows: Chemical products Kağıt Diğer Grup Assets 121.315.922 143.584.666 318.589 265.219.177 Deferred income tax assets (Note 27) 307.981 - - 307.981

121.623.903 143.584.666 318.589 265.527.158

Liabilities 11.116.371 14.827.260 1.341.876 27.285.507 Bank borrowings and financial liabilities 34.636.164 22.572.234 - 57.208.398 Provision for income taxes (Note 27) 582.897 148.870 18.592 750.359 Deferred income tax liabilities (Note 27) - 1.706.824 - 1.706.824 46.335.432 39.255.188 1.360.468 86.951.088 Capital expenditures 7.994.136 2.186.760 - 10.180.896


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4. Cash and cash equivalents

December 31, 2013 December 31, 2012 Cash 36.836 34.890 Banks 31.128.451 26.874.068 - TL denominated time deposits 22.825.000 14.061.552 - TL denominated demand deposits 169.368 292.594 - Foreign currency denominated time deposits 7.811.829 12.377.468 - Foreign currency denominated demand deposits 322.254 142.454 Other 362.092 142.075 31.527.379 27.051.033

As of December 31, 2013, maturity of TL denominated time deposits is less than one month (2012: less than one month) and the effective interest rate is %7,56 (2012 – 5,78%). Details of foreign currency denominated deposits are provided in Note 30.As of December 31,2013, maturity of foreign currency time deposits is less than one month (2012:less than one month) and effective interest rate is %1,02 (2012 - %2,19). The fair values of cash and cash equivalents are estimated to approximate their carrying values including income accrued as of balance sheet date. 5. Trade receivables and payables a) Trade receivables from third parties December 31,

2013 December 31,

2012 Post-dated cheques and notes receivable, net 38.843.995 22.529.542 Customer current accounts, net 20.485.921 19.115.251 Receivables given to factoring 7.605.223 411.108 Doubtful receivables 644.229 686.433 67.579.368 42.742.334 Provision for doubtful receivables (644.229) (686.433) 66.935.139 42.055.901 Maturities of trade receivables as of December 31, 2013 and 2012 are as follows:

December 31, 2013

December 31, 2012

Overdue 479.282 150.014 0-30 days 14.384.309 23.982.138 31-60 days 8.162.124 9.946.209 61-90 days 13.742.877 4.037.467 91 days and thereafter 30.166.547 3.940.073 66.935.139 42.055.901

Aging and credit risk analysis of overdue trade receivables as of December 31, 2013 and 2012 are disclosed in detail in Note 30.


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5. Trade receivables and payables (continued) The movement of provision for doubtful receivables is as follows: 2013 2012 January 1 686.433 788.497 Collections (42.204) (102.064) December 31 644.229 686.433

The Group has provided provision for doubtful receivables considering past experience of their collection trends. Group management does not foresee any collection risk in trade receivables except for the receivables, which have been identified as doubtful receivable and provisions have been accounted for. b) Trade payables from third parties

December 31, 2013

December 31, 2012

Supplier current accounts 16.219.745 17.245.914 16.219.745 17.245.914

6. Other receivables from third parties

December 31, 2013

December 31, 2012

Other short term receivables from third parties Value-added Tax (“VAT”) receivable 1.144.005 1.246.325 Deposits and guarantees given 89.696 120.992 1.233.701 1.367.317 Other short term receivables from third parties Deposits and guarantees given 211.007 195.904 211.007 195.904


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7. Inventories December 31, 2013 December 31, 2012 Raw materials and consumables 16.284.938 23.139.121 Semi finished goods 1.760.739 4.161.819 Finished goods Merchandises

3.239.050 31.122

7.302.116 -

Other inventories Goods in transit

1.616 9.151.641

56.294 11.381.565

30.469.106 46.040.915

The cost of inventories recognised as expense and included in cost of goods sold amounted to TL 106.132.168 (December 31, 2012 - TL 97.723.994) (Note 23). 8. Prepaid expenses December 31, 2013 December 31, 2012 a) Short term prepaid expenses Prepaid expenses 2.098.738 2.052.641 Advances given for inventories 226.104 200.275 2.324.842 2.252.916 b) Long term prepaid expenses Prepaid expenses 11.727 11.814 Advances given for fixed assets 999.170 1.250.487 1.010.897 1.262.301 Total prepaid expenses 3.335.739 3.515.217

9. Other current assets December 31, 2013 December 31, 2012 Transferred VAT 7.207.285 6.837.827 Receivables from personnel 78.469 77.287 Job advances given 41.872 62.976 Other 7.900 16.299 7.335.526 6.994.389


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10. Investments accounted by equity method

11. Property, plant and equipment January 1, 2013 Additions Disposals Transfers December 31, 2013 Cost: Land 6.515.923 - - - 6.515.923 Land improvements 17.046.875 138.073 (31.551) 2.698.401 19.851.798 Buildings 44.394.309 57.714 - 2.085.594 46.537.617 Machinery and equipment 176.480.274 1.430.880 (25.084) 2.614.285 180.500.355 Motor vehicles 10.167.196 340.026 (372.903) 17.550 10.151.869 Furniture and fixtures 8.696.086 386.816 (67.065) 282.083 9.297.920 Other tangible assets 23.618 1.459 (1.614) - 23.463 Leasehold improvements 15.930 - - 15.930 Construction in progress 3.274.020 7.986.195 - (7.722.003) 3.538.212 266.614.231 10.341.163 (498.217) (24.090) (*) 276.433.087 Accumulated depreciation: Land improvements (7.358.473) (1.420.781) 15.118 - (8.764.136) Buildings (13.668.065) (1.446.890) - - (15.114.955) Machinery and equipment (95.412.608) (10.517.990) 22.512 - (105.908.086) Motor vehicles (7.166.526) (987.303) 261.556 - (7.892.273) Furniture and fixtures (7.144.240) (475.630) 67.065 - (7.552.805) Other tangible assets (5.442) (1.497) 1.614 - (5.325) Leasehold improvements (9.396) (4.962) - - (14.358)

(130.764.750) (14.855.053) 367.865 (145.251.938) Net book value 135.849.481 131.181.149

December 31, 2013 December 31, 2012

Carrying

value Share% Carrying

value Share% İtaş İzmir Teknopark Tic. A.Ş. 14.285 0,12 14.285 0,12 Kristal Rafine Tuz A.Ş. 28 less than 0,1 28 less than 0,1 14.313 14.313


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11. Property, plant and equipment (continued) January 1, 2012 Additions Disposals Transfers December 31, 2012 Cost: Land 6.210.910 - - 305.013 6.515.923 Land improvements 15.205.134 142.252 - 1.699.489 17.046.875 Buildings 37.568.030 61.400 (139.953) 6.904.832 44.394.309 Machinery and equipment 169.189.263 1.373.174 (452.738) 6.370.575 176.480.274 Motor vehicles 8.770.979 1.112.011 (413.756) 697.962 10.167.196 Furniture and fixtures 8.095.229 416.739 (24.839) 208.957 8.696.086 Other tangible assets 17.536 6082 - - 23.618 Leasehold improvements 15.930 - - - 15.930 Construction in progress 12.432.464 7.046.469 - (16.204.913) 3.274.020 257.505.475 10.158.127 (1.031.286) (18.085) (*) 266.614.231 Accumulated depreciation: Land improvements (6.221.213) (1.137.260) - - (7.358.473) Buildings (12.590.214) (1.217.804) 139.953 - (13.668.065) Machinery and equipment (85.691.825) (9.890.463) 169.680 - (95.412.608) Motor vehicles (6.396.699) (1.048.057) 278.230 - (7.166.526) Furniture and fixtures (6.710.408) (448.283) 14.451 - (7.144.240) Leasehold improvements (7.439) (1.957) - - (9.396) Other tangible assets (1.149) (4.293) - - (5.442) (117.618.947) (13.748.117) 602.314 - (130.764.750) Net book value 139.886.528 135.849.481 (*) Related amounts indicate transfers to intangible assets.

Current period depreciation and amortization expenses of 14.750.886 TL (2012 - 13.354.510 TL) part of the cost of goods sold 394.749 TL (2012 - 489.963 TL) part of the general and administrative expenses (Note 22) 92.396 TL (2012 - 483.146 TL) amounting to research and development expenses (Note 22), 38.958 TL (2012 - 27.434 TL) part of the marketing, selling and distribution expenses (Note 22) were included and 29.547 TL is part of the stocks (2012- None).

The Company didn’t capitalize borrowing costs that are incurred from long-term Euro borrowings obtained to finance investments. As of December 31, 2013 tangible fixed assets acquired through finance leases amounts to TL 752.782 (December 31, 2012 752.782 TL). As of December 31,2013 total accumulated depreciation amounts to TL 363.845 (December 31, 2012 TL 213.288). December 31, 2013 and as of December 31, 2012 There are no pledged on assets. As of December 31, 2013 and 2012 costs of tangible assets which are fully amortized but currently being used are as follows: December 31, 2013 December 31, 2012 Land improvements 2.316.106 2.257.329 Buildings 355.976 284.765 Machinery and equipment 41.599.101 36.864.742 Motor vehicles 4.641.945 3.653.814 Furniture and fixtures 6.506.936 5.186.872 Leasehold improvements 656.475 651.567 56.076.539 48.899.089


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12. Intangible assets The movement of intangible assets for the year ended December 31, 2013 is as follows:

January 1, 2013 Additions Transfers December 31, 2013 Research and development costs 6.067.943 - - 6.067.943 Rights – software 2.094.696 23.275 24.090 2.142.061 Less: Accumulated amortization (6.498.912) (451.483) - (6.950.395)

Net book value 1.663.727 (428.208) 24.090 1.259.609 The movement of intangible assets for the year ended December 31, 2012 is as follows:

January 1, 2012 Additions Transfers December 31, 2012 Research and development costs 6.049.906 - 18.085 6.067.991 Rights – software 2.071.880 22.769 - 2.094.649 Less: Accumulated amortization (5.891.976) (606.936) - (6.498.912) Net book value 2.229.810 (584.167) 18.085 1.663.728

As of December 31, 2013 and 2012 are currently being used fully amortized cost of intangible fixed assets are as follows:

December 31, 2013 December 31, 2012 Rights – software 502.222 445.122 502.222 445.122

13. Government grants In the 3rd quarter of 2010, within the scope of the decree of the Council of Ministers dated 7 July 2009 and numbered 2009/15199, the Company has been granted a regional investment incentive for Çayırhan sodium sulfate factory. The related investment has been completed and the closure process has been started in the Turkish Ministry of Economy. The total amount of investment allowances within the scope of the regulations and which will be used by the Company with a discount rate of 50% over the corporate tax which will result solely from Çayırhan factory profits in the following years is total to be 8.838.454 TL. Company in 2013, resulting from incentives 209,997 TL (2012 - None) tax benefits on income earned from the investment of corporate tax by paying discount has recorded. The remaining investment allowance 8.628.457 TL (2012 - None) amounts. 6486 No. "Social insurance and general health insurance law and some laws amending the law" in the insurance premium employer share support for the 2013/30 numbered circular under the provisions of the Company's Afyonkarahisar / Dazkırı in the manufacturing plant in 2013 5.455 TL(2012 -None) employer's share of insurance premiums in the amount of income support was obtained.


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14. Financial liabilities

December 31, 2013 December 31, 2012 Short-term borrowings 5.954.697 - Short-term portion of long-term borrowings 26.696.460 30.523.135 Short-term lease obligations 187.628 169.073 Short-term financial liabilities 32.838.785 30.692.208 Long-term borrowings 16.785.568 26.244.431 Long-term lease obligations 84.131 271.759 Long-term financial liabilities 16.869.699 26.516.190 Total financial liabilities 49.708.484 57.208.398

a) Borrowings

December 31, 2013 December 31, 2012 Weighted

average annual effective interest

rate % TL

Weighted average annual

effective interest rate % TL

Short-term borrowings: USD borrowings 2,55 5.954.697 - - 5.954.697 - Short-term lease obligations: TL borrowings 9,96 187.628 9,96 169.073 187.628 169.073 Short-term portion of long-term borrowings:: USD borrowings 0,63-6,85 17.697.997 0,86-6,90 15.001.014 EUR borrowings (**) Euribor+%1,45 8.998.463 Euribor+%1,45 15.522.121 26.696.460 30.523.135 Long-term borrowings: USD borrowings 0,68-6,85 6.997.235 0,84-6,90 11.350.331 EUR borrowings (**) Euribor+%1,45 9.788.333 Euribor+%1,45 14.894.100 16.785.568 26.244.431 Long-term lease obligations: TL borrowings 9,96 84.131 9,96 271.759 84.131 271.759 (**) The interest rates of the EUR denominated bank borrowings vary between Euribor+1,45%

+2,20%.


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14. Financial liabilities (continued) The redemption schedule of long-term bank borrowings as of December 31, 2013 and 2012 is as follows: December 31, 2013 December 31, 2012 2014 - 16.515.875 2015 15.806.735 8.944.656 2016 978.833 783.900 16.785.568 26.244.431

As of December 31, 2013 and 2012, the analysis of borrowings in terms of periods remaining to contractual repricing dates is as follows: Up to 3

months 3-12 months More than

1 year Total December 31, 2013 Financial liabilities with floating interest rates 1.166.667 7.831.796 9.788.333 18.786.796 Total 1.166.667 7.831.796 9.788.333 18.786.796

Up to 3 months 3-12 months

More than 1 year Total

December 31, 2012 Financial liabilities with floating interest rates 3.623.807 11.898.314 14.894.100 30.416.221 Total 3.623.807 11.898.314 14.894.100 30.416.221

b) Leasing obligations:

December 31, 2013 December 31, 2012 TL equivalent TL equivalent Short-term 187.628 169.073 Long-term 84.131 271.759 271.759 440.832

15. Other financial liabilites As of December 31, 2013, other financial liabilities, which entered into revocable liabilities reflects the provision for receivables given to factoring, amounted to TL 7.605.223. (As of December 31, 2012 financial liabilities amounting to TL 414.406 are classified as short-term financial liabilities, whereas the liabilities amounting to TL 75.000 are disclosed under other long – term financial liabilities).


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16. Liabilities for employee benefits December 31, 2013 December 31, 2012

Salaries and wages payable 1.254.286 954.775 Salaries and wages income tax 1.232.575 893.058 Social security withholdings payment 634.598 597.546 Other 730 -

3.122.189 2.445.379 17. Deferred income December 31, 2013 December 31, 2012

Order advances received 1.500.415 1.203.767 1.500.415 1.203.767

18. Provisions, contingent assets and contingent liabilities

December 31, 2013 December 31, 2012 a) Guarantees received: Bails 24.000.000 12.000.000 Mortgages - 5.250.000 Guarantee letters 5.173.647 5.366.911 Trade receivables insurance (*) 4.213.878 5.449.674 Guarantee cheques 3.102.328 3.144.226 Guarantee notes 2.305.000 902.189 38.794.853 32.113.000

(*) It is a service received from an international professional organization in order to cover credit risks like

customer insolvency, bad debts, overdue accounts, commercial risks and political risks December 31, 2013 December 31, 2012 b) Guarantees given: Letter of guarantees 14.287.570 17.474.021 14.287.570 17.474.021


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18. Provisions, contingent assets and contingent liabilities (continued) c) As of December 31, 2013 and December 31, 2012 the Group's guarantee, pledge and

mortgage (GPM) position is as follows: Grup tarafından verilen TRİ’ler December 31, 2013 December 31, 2012 A. Total amount of CPM’s given for companies own legal personality 14.287.570 17.474.021 B. Total amount of CPM’s given on behalf of fully consolidated companies - - C. Total amount of CPM’s given for continuation of its economic activities on behalf of third parties - - D. Total amount of other CPM’s - -

i. Total amount of CPM’s given on behalf of the majority shareholder - - ii. Total amount of CPM’s given to on behalf of other Group companies which are not in scope of B and C - - iii. Total amount of CPM’s given on behalf of third parties which are not in scope of C - -

Total 14.287.570 17.474.021

d) Contingent assets: None (2012 – None). e) Registered mining fields of the Group are as follows:

Place Registry

No Licence No Hectare Duration

Licence beginning

date

Licence end date

83) Sulphate and Sodium Chlorine Fields:

Afyon – Dazkırı 7.422 3260 283 60 07/08/1991 2051 Konya – Cihanbeyli 231 2197 1.128 60 09/03/1987 2047 Afyon – Dazkırı 1.015 2188 1.307 30 08/03/2004 2034 Afyon – Dinar 2.144 2355 6.383 30 05/03/2004 2034 Afyon – Dazkırı 1.014 1712 1.031 30 05/03/2004 2034 Afyon – Dazkırı 363 1944 1.048 30 05/03/2004 2034 Afyon – Dazkırı 73 1945 1.944 30 03/03/1987 2017 ii) Sodium Sulphate, Sodium Chlorine and Magnesium Salt Fields: Konya – Cihanbeyli 159 19 5.483 60 03/06/1987 2047

83) Sodium Sulphate and gypsum Fields: Ankara – B. Pazarı 17.951 3927 9.487 30 23/08/1993 2023

83) Chrome Fields

Eskişehir – Merkez 3155193 200801935 1.183 10 01/08/2008 2018


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19. Provision for employment termination benefits

a) Short term provision for employee benefits

December 31, 2013 December 31, 2012 Provision for employment termination benefits - 623.094 - 623.094

b) Long term provision for employee benefits


Provision for unused vacation 309.390 294.274 Provision for employment termination benefits 4.412.864 4.409.198

4.722.254 4.703.472 Provision for employment termination benefits has been calculated as follows: Under the Turkish Labour Law, the Group is required to pay termination benefits to each employee who has completed one year of service and whose employment is terminated without due cause, or who is called up for military service, dies or retires after completing 25 years of service (20 years for women) and achieves the retirement age (58 for women and 60 for men). The amount payable consists of one month’s salary limited to a maximum of TL 3.254 for each year of service as of December 31, 2013 (December 31, 2012 - TL 3.034). The liability is not funded, as there is no funding requirement. The provision has been calculated by estimating the present value of the future probable obligation of the Group arising from the retirement of the employees. Accordingly, the following actuarial assumptions were used in the calculation of the total liability: December 31, 2013 December 31, 2012 Discount rate (%) 10,34% 8,60%

Turnover rate to estimate the probability of retirement (%) 6,00% 5,00% The principal assumption is that the maximum liability for each year of service will increase in line with inflation. Thus, the discount rate applied represents the expected real rate after adjusting for the anticipated effects of future inflation. The maximum amount of TL 3.254 which is effective from July 1, 2013 (July 1, 2012 - TL 3.034) has been taken into consideration in calculating the provision for employment termination benefits of the Group.


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19. Provision for employment termination benefits (continued) Movements of the provision for employment termination benefits during the year are as follows: 2013 2012 January 1 4.409.198 4.387.813

Interest cost 255.201 120.573 Actuarial losses 246.543 369.892 Paid during the year (962.169) (761.309) Increase during the year 464.091 292.229 December 31 4.412.864 4.409.198 Total provision expense for employee termination benefits of TL 719.292 TL (2012 – 412.802 TL) for the year has been allocated to cost of sales which amounted to 658.355 TL (2012 – 231.044 TL), to marketing, selling and distribution expenses amounted to 35.716 TL (2012 - 55.832 TL) and to general administrative expenses amounted to 25.221 TL (2012 - 125.926 TL) (Note 22). Movements of the provision for unused vacation during the year are as follows: 2013 2012 January 1 294.274 243.139 Increase during the year 15.116 51.135 December 31 309.390 294.274 20. Equity Share capital consists of 2.472.500.000 units of shares (December 31, 2012 - 2.472.500.000 units) with a nominal value of Kr 1 each. The Company is not subject to registered capital system. The Company’s shareholders and their shareholding percentages as of December 31, 2013 and 2012 are as follows:

December 31, 2013 December 31, 2012 Shareholding Shareholding Shareholding Shareholding Shareholders: rate (%) amount (TL) rate (%) amount (TL) Publicly offered 35,23 8.711.249 35,23 8.711.249 Arkın Kora 20,00 4.945.000 20,00 4.945.000 Cihat Kora 12,14 3.001.383 12,14 3.001.383 M. Reha Kora 10,75 2.657.938 10,75 2.657.938 Diğer 21,88 5.409.430 21,88 5.409.430 Paid-in capital 100,00 24.725.000 100,00 24.725.000 Adjustments to share capital (*) 26.909.044 26.909.044 51.634.044 51.634.044

(*) Adjustment to share capital represents the restatement effect of cash and cash equivalent contributions to

share capital measured in accordance with the CMB Financial Reporting Standards.


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20. Equity The Company’s capital consists of registered groups of shares A, B, C, D and group E-coupon shares and group E shares are traded in Istanbul Stock Exchange. Shareholders of A, B, C and D groups have privileges concerning voting rights in the General Assembly and recommending candidates to management board. The legal reserves consist of first and second reserves, appropriated in accordance with the Turkish Commercial Code (“TCC”). The TCC stipulates that the first legal reserve is appropriated out of statutory profits at the rate of 5% per annum, until the total reserve reaches 20% of the Company’s paid-in capital. The second legal reserve is appropriated at the rate of 10% per annum of all cash distributions in excess of 5% of the paid-in capital. Under the TCC, the legal reserves can be used only to offset losses and are not available for any other usage unless they exceed 50% of paid-in capital. Based on the decision of CMB dated January 27, 2010, it is decided not to determine any minimum dividend payment distribution requirement for publicly held companies. Inflation adjustments to issued capital and historical amount of extraordinary reserves can be used for in kind capital increase, dividend distribution in cash or the net loss deduction. In case inflation adjustment to issued capital is used as dividend distribution in cash, it is subject to corporation tax. Dividend distribution Listed companies distribute dividend in accordance with the Communiqué No. II-19.1 issued by the CMB which is effective from February 1, 2014. Companies distribute dividends in accordance with their dividend payment policies settled and dividend payment decision taken in general assembly and also in conformity with relevant legislations. The communiqué does not constitute a minimum dividend rate. Companies distribute dividend in accordance with the method defined in their dividend policy or articles of incorporation. In addition, dividend can be distributed by fixed or variable installments and advance dividend can be paid in accordance with profit on interim financial statements of the Company. In accordance with the Turkish Commercial Code (TCC), unless the required reserves and the dividend for shareholders as determined in the article of association or in the dividend distribution policy of the company are set aside, no decision may be made to set aside other reserves, to transfer profits to the subsequent year or to distribute dividends to the holders of usufruct right certificates, to the members of the board of directors or to the employees; and no dividend can be distributed to these persons unless the determined dividend for shareholders is paid in cash. On March 29, 2013, Alkim Kimya A.Ş.’s ordinary General Assembly meeting, it was decided to distribute gross (cash) dividend of TL 5.712.013 and net (cash) dividend of TL 4.855.211 (TL 0,20 per share) to Company’s shareholders. On April 12, 2012, Alkim Kimya A.Ş.’s ordinary General Assembly meeting, it was decided to distribute gross (cash) dividend of TL 8.426.913 and net (cash) dividend of TL 7.231.564 (TL 0,29 per share) to Company’s shareholders.


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20. Equity (continued) Balances of shareholders equity items (as per Statutory Financial Statements of the Company) are as follows:


Share capital 24.725.000 24.725.000 Adjustment to share capital 26.909.044 26.909.044 Legal reserves 22.754.586 22.292.480 Extraordinary reserves 36.813.498 29.529.585 Special funds 2.428.464 1.502.258 Retained earnings 27.044.605 27.044.605 Net profit for the year 16.931.570 14.529.533

157.606.767 146.532.505

Provision for corporate tax decleration 3.034.856 1.586.556 21. Sales and cost of sales January 1 - January 1 -

December 31,

2013 December 31,

2012 Domestic sales 211.676.911 192.298.600 Export sales 16.913.823 19.052.266 228.590.734 211.350.866 Less: Sales returns and discounts (1.664.476) (1.824.007) Net sales 226.926.258 209.526.859 Cost of sales (172.089.911) (161.911.356) Gross profit 54.836.347 47.615.503


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22. Research and development expenses, marketing, selling and distribution expenses and general administrative expenses

January 1 - January 1 - December 31,

2013 December 31,

2012 a) Research and development expenses: Depreciation and amortization (Note 11 ve 12) 92.396 483.146 Personnel 53.227 124.030 Other 8 860 145.631 608.036


2013 December 31,

2012 b) Marketing, selling and distribution expenses: Transportation 15.786.651 13.917.868 Personnel 1.986.400 1.383.408 Packaging 1.358.093 1.178.532 Advertising 392.353 146.793 Travel 172.569 125.382 Commission expense 100.963 161.365 Warehouse 76.205 - İnsurance 61.411 58.301 Rent 51.600 51.600 Depreciation and amortization (Note 11 ve 12) 38.958 27.434 Taxes and duties 36.901 34.785 Communication 32.365 37.407 Other 353.142 968.686 20.447.611 18.091.561


2013 December 31,

2012 c) General administrative expenses: Personel 8.526.138 7.168.334 Consultancy 914.674 610.386 Depreciation and amortization (Dipnot 11 ve 12) 394.749 489.963 Outsourced services 245.965 321.672 Board of directors attendance fee 215.695 398.099 Taxes and duties 196.338 105.152 Travel costs 183.899 197.089 Vehicle maintenance 143.472 146.296 Office expenses 116.972 161.732 Communication 113.783 99.291 Representation and hosting expenses 66.377 78.937 Cleaning 59.900 56.624 Rent 50.033 47.015 Provision for doubtful receivables 42.204 654.858 Provision for law expenses - 97.034 Other 582.502 768.168 11.852.701 11.400.650


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23. Expenses by nature

January 1 - January 1 -

December 31, 2013

December 31, 2012

Raw materials and consumables (Note 7) 106.132.168 97.723.994 Personnel 32.761.958 29.708.447 Energy 29.300.791 27.189.777 Transportation 16.475.627 15.066.302 Depreciation and amortisation (Note 11 ve 12) 15.276.989 14.355.053 Outsourced services 2.606.730 3.614.658 Other 1.981.591 4.353.372 204.535.854 192.011.603

24. Other operating income / expenses


December 31, 2013

December 31, 2012

a) Other operating income: Foreign exchange gains from trade receivables and payables, net 6.530.345 430.611 Credit finance gains 1.194.698 100.142 Rent income (Note 29) 857.117 974.289 Compensation income from insurance companies 341.186 299.006 Income from scrap sales 313.156 848.792 Rent and contribution income 218.905 216.515 Provisions no longer required 191.635 571.835 Other 239.586 240.301 9.886.628 3.681.491


December 31, 2013

December 31, 2012

b) Other operating expense: Foreign exchange loss from trade receivables and payables, net 1.539.540 2.195.769 Rediscount interest income 174.752 34.594 Loss on sales of property plant and equipment 13.626 294.382 Other 192.398 208.336 1.920.316 2.733.081


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25. Income from investment activities


December 31, 2013

December 31, 2012

Interest income from deposits 661.850 810.160 Gain on sales of property plant and equipment 102.489 1.309.827 764.339 2.119.987

26. Financial income / expenses January 1 - January 1 -

December 31, 2013

December 31, 2012

a) Financial income: Foreign exchange gains, (net) 2.667.763 6.572.115 2.667.763 6.572.115


December 31, 2013

December 31, 2012

b) Financial expense: Foreign exchange losses, (net) 10.535.009 4.364.231 Interest expenses 1.591.946 2.225.779

12.126.955 6.590.010 27. Tax assets and liabilities December 31,

2013 December 31,

2012 Current income tax expense 4.388.646 3.507.363 Less: Prepaid taxes (4.008.181) (2.757.004) Current income tax provision-net 380.465 750.359 Current income tax provision 380.465 750.359 Prepaid income tax - -


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27. Tax assets and liabilities (continued) Corporation tax is payable at a rate of 20% for 2013 (2012 - 20%) on the total income of the Companies after adjusting for certain disallowable expenses, exempt income (e.g income from associates exemptions, investment incentive allowance exemptions) and investment and other allowances. No further tax is payable unless the profit is distributed.Dividends paid to non-resident corporations, which have a place of business in Turkey, or resident corporations are not subject to withholding tax. Otherwise, dividends paid are subject to withholding tax at the rate of 15% except for the provisions of dual agreements. An increase in capital via issuing bonus shares is not considered as a profit distribution and thus does not incur withholding tax. Under the Turkish taxation system, tax losses can be carried forward to be offset against future taxable income for up to five years. However, tax losses cannot be carried back to offset profits from previous periods. In Turkey, there is no procedure for a final and definitive agreement on tax assessments. Companies file their tax returns within the 25th of the fourth month following the close of the financial year to which they relate. Tax returns are open for five years from the beginning of the year that follows the date of filing during which time the tax authorities have the right to audit tax returns, and the related accounting records on which they are based, and may issue re-assessments based on their findings. Reconciliation of the taxation on income for the years ended December 31, 2013 and 2012 is as follows:


2013 December 31,

2012

Profit before tax 21.661.863 20.565.758 Tax expense calculated on profit before tax (4.332.373) (4.113.152)

Expenses not deductible for tax purposes (119.753) (48.871) Income not subject to tax 209.997 72.432 Other (7.822) (11.329) Income tax expense (4.249.951) (4.100.920)

Deferred tax The Group recognises deferred tax assets and liabilities based upon temporary differences arising between their financial statements as reported under CMB Financial Reporting Standards and their statutory tax financial statements. Deferred income taxes for entities operating in Turkey are calculated on temporary differences that are expected to be realised or settled based on the taxable income in coming years under the liability method using a principal tax rate of 20% (December 31 2012 - %20).


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27. Tax assets and liabilities (continued) The breakdowns of cumulative temporary differences and the resulting deferred tax assets/liabilities provided as of December 31, 2012 and 2011 using principal tax rates are as follows: Cumulative temporary

differences Deferred tax asset /

(liability) December 31,

2013 December 31,

2012 December 31,

2013 December 31,

2012 Difference between the carrying values

and tax base of property, plant, equipment and intangible assets (12.330.983) (13.342.592) (2.466.197) (2.668.519)

Provision for employment termination benefits 4.412.864 4.409.198 882.573 881.840 İnventory - (446.640) - (89.328) Provision for doubtful receivable 9.195 51.400 1.839 10.280 Other 1.854.704 2.334.419 370.945 466.884 Deferred tax assets - - 234.835 307.981 Deferred tax liabilities - - (1.445.675) (1.706.824) Deferred tax liabilities – net (6.054.220) (6.994.215) (1.210.840) (1.398.843) Turkish tax legislation does not permit a parent company and its subsidiaries to file a consolidated tax return. Therefore, provisions for taxes, as reflected in these consolidated financial statements, have been calculated on an individual-entity basis. December 31, 2013 December 31, 2012 Deferred tax Deferred tax Assets liabilities Net Assets liabilities Net - Alkim Alkali Kimya A.Ş. 417.481 (182.646) 234.835 642.714 (334.733) 307.981 - Alkim Kağıt 846.066 (2.291.741) (1.445.675) 759.024 (2.465.848) (1.706.824) 1.263.547 (2.474.387) (1.210.840) 1.401.738 (2.800.581) (1.398.843) Movement of deferred taxes is as follows: 2013 2012 January 1 (1.398.843) (879.265) Charge to the consolidated income statement 138.695 (593.557) Tax effect of other comprehensive income / (loss) not to be reclassified to profit or loss 49.308 73.979 December 31 (1.210.840) (1.398.843)


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27. Tax assets and liabilities (continued) Earnings per share stated in the income statement are calculated by dividing the net income to weighted average number of shares in the current period. In Turkey, companies can increase their share capital by making a pro-rata distribution of shares ("bonus shares") to existing shareholders from retained earnings. For the purpose of earnings per share computations, the weighted average number of shares outstanding during the year has been adjusted in respect of bonus shares issues without a corresponding change in resources, by giving them retroactive effect for the year in which they were issued and for each earlier year. Earnings per share are determined by dividing net income of the shareholders by the weighted average number of shares that have been outstanding during the related year concerned. In order to ensure the distribution of profit; it is required to allocate legal reserves over the statutory financial statements, in accordance with the requirements of Turkish Commercial Code. Net distributable profit calculated through financial statements adjusted in accordance with the Communiqué should be distributed if it would be covered by statutory distributable profit; otherwise total amount calculated through statutory financial statements will be subject to distribution of profit. January 1 - January 1 -

December 31,

2013 December 31,

2012 Net profit for the year attributable to equity holders of the

parent A 16.556.238 15.098.841 Weighted average number of the shares 1 TL each B 24.725.000 24.725.000 Earnings per share A/B 0,6696 0,6107 There are no differences between basic and diluted earnings per share. 29. Related party disclosures December 31,

2013 December 31,

2012 a) Due from related parties: Sodaş Sodyum A.Ş. (“Sodaş”) 53.142 260.556 53.142 260.556

December 31,

2013 December 31,

2012 b) Due to Related Parties Sodaş Sodyum A.Ş. (“Sodaş”) 196 93 196 93


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29. Related party disclosures (continued) c) Sales and services rendered to related parties: January 1 - January 1 - December 31,

2013 December 31,

2012 Sodaş 3.460.031 3.614.209 3.460.031 3.614.209

The Group has transferred a region of its privileged area in Afyon Dazkırı Acıgöl to Sodaş for which the Group collects the 6% of the gross sales of Sodaş as “Rödavans” income amounting to TL 664.160 TL as of December 31, 2013 (December 31, 2012 – TL 743.631 ). d) Product purchases from related parties: January 1 - January 1 - December 31,

2013 December 31,

2012 Sodaş 237.106 10.148 237.106 10.148

e) Remuneration of key management personnel: January 1 - January 1 - December 31,

2013 December 31,

2012 Benefits provided to top management 4.108.190 3.958.432 4.108.190 3.958.432


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30. Nature and extent of risks arising from financial instruments The Group’s activities expose it to a variety of financial risks, including the effects of changes in debt and equity market prices, foreign currency exchange rates and interest rates. The Group’s overall risk management program focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on the financial performance of the Group. Risk management is performed and executed by Group’s high-level management and finance department in accordance with the policies approved by the Board of Directors. The Board provides principles for overall risk management as well as policies covering specific areas, such as foreign exchange risk, interest rate risk and capital risk and closely monitors financial and operational (mainly due to the changes in cellulose prices) risks. The financial risk management objectives of the Group are defined as follows: Safeguarding the Group’s core earnings stream from its major assets through the effective

control and management of foreign exchange risk and interest rate risk; Effective and efficient usage of credit facilities in both the short and long term through the

adoption of reliable liquidity management planning and procedures; Effective monitoring and minimizing risks sourced from counterparts. a) Credit risk: Credit risk arises from deposit at banks, due from related parties and other trade receivables. Owning financial instruments generates the risk that the counterparty may not fulfill agreement requirements. These risks are managed by limiting the aggregate risk from any individual counterparty (excluding related parties) and obtaining sufficient collateral where necessary and making only cash based sales to customers considered as having a higher risk. Collectability of trade receivables are evaluated by Group management depending on their past experiences and current economic condition, and are presented in the consolidated financial statements net of adequate doubtful provision. The credit risk analysis arising from financial instruments as of December 31, 2013 and 2012 are presented below.

Alkim Alkali Kimya A.Ş. and Its Subsidiaries

Notes to the consolidated financial statements at December 31, 2013 (continued) (Amounts expressed in Turkish lira (TL) unless otherwise indicated)

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30. Nature and extent of risks arising from financial instruments (continued)

December 31, 2013: Receivables Trade receivables (1) Other receivables Related

parties Third

parties Related parties

Third parties

Related parties

Third parties

Maximum amount of risk exposed as of reporting date (A+B+C+D+E) (2) 53.142 66.935.139 - 1.233.701 31.128.451 99.350.433 - Secured portion of the maximum credit risk by guarantees, etc. - 38.794.853 - - - 38.794.853 - - - - - - A. Net book value of financial assets neither due nor impaired (3) - - - - - - 53.142 66.455.857 - 1.233.701 31.128.451 98.871.151 B. Net book value of assets whose conditions renegotiated, - - - - - - otherwise will be classified as past due or impaired (3) - - - - - - - - - - - - C. Net book value of assets past due but not impaired (4) - - - - - - - Secured portion covered by guarantees, etc. - 479.282 - - - 479.282 D. Net book value of impaired assets - (479.282) - - - (479.282) - Past due (gross book value) - - - - - - - Impairment amount (-) - 644.229 - - - 644.229 - Secured portion covered with guarantees, etc. - (644.229) - - - (644.229) - Not due (gross book value) - - - - - - - Impairment amount(-) - - - - - - - The part covered with guarantees - - - - - - E. Off-balance sheet items including risk - - - - - -



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30. Nature and extent of risks arising from financial instruments (continued)

December 31, 2012: Receivables Trade receivables (1) Other receivables Related

parties Related parties

Third parties

Bank deposits

Related parties Total

Maximum amount of risk exposed as of reporting date (A+B+C+D+E) (2) 260.556 42.055.901 1.221 1.367.317 26.874.068 70.559.063 - Secured portion of the maximum credit risk by guarantees, etc. - 9.970.833 - - - 9.970.833 A. Net book value of financial assets neither due nor impaired (3) 260.556 41.905.887 1.221 1.367.317 26.874.068 70.409.049 B. Net book value of assets whose conditions renegotiated, otherwise will be classified as past due or impaired (3) - - - - - - - - - - - - C. Net book value of assets past due but not impaired (4) - 150.014 - - - 150.014 - Secured portion covered by guarantees, etc. (150.014) (150.014) D. Net book value of impaired assets - Past due (gross book value) - 686.433 - - - 686.433 - Impairment amount (-) (686.433) (686.433) - Secured portion covered with guarantees, etc. - Not due (gross book value) - - - - - - - Impairment amount(-) - - - - - - - The part covered with guarantees E. Off-balance sheet items including risk - - - - - -

(1) The Group’s trade receivables mainly consist of offset, photocopy paper, glossy paper and sodium sulphate sales. (2) While determining the related amounts, the factors that increase the credit reliability such as guarantees received, have not been considered. (3) Considering past experiences, the Group management does not expect any problems of collection of the related amounts. (4) The Group management does not foresee any collection risk in regards to trade receivables overdue for one month considering their past experience. The aging of trade

receivables past due but not impaired is as follows:



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30. Nature and extent of risks arising from financial instruments (continued) December 31, 2013 Trade receivables Related parties Third parties Total Overdue for 1-30 days - 479.282 479.282 Secured portion covered by guarantees - (479.282) (479.282)

- - - December 31, 2012 Trade receivables Related parties Third parties Total Overdue for 1-30 days - 150.014 150.014 Secured portion covered by guarantees - (150.014) (150.014)

- - - b) Liquidity risk: Prudent liquidity risk management comprises maintaining sufficient cash, the availability of funding through an adequate amount of committed credit facilities and the ability to close out open positions. The ability to fund the existing and prospective debt requirements is managed by maintaining the availability of adequate fund providers from lenders. Group management does necessary follow ups for the timely collection of receivables and tries to be least affected from payment delays. Through agreements with banks the Group has cash and non-cash loan limits in order to use in cases of liquidity shortage. Credit risks exposed by the Group for each financial instrument type as of December 31, 2013 and 2012 are shown below: December 31, 2013 :

Contractual maturities Book value

Total cash outflows (=I+II+III)

Less than 3 months ( I )

3 - 12 months (II)

1 - 5 years (III)

Non-derivative financial liabilities:

Financial liabilities 49.708.483 50.217.204 5.954.697 27.392.808 16.869.699 Due to related parties 196 196 196 - - Trade payables, third parties 16.219.745 16.247.515 16.247.515 - - Liabilities for employee benefits 3.122.189 3.122.189 3.122.189 - - Other current liabilities 32.915 32.915 32.915 - - Other financial liabilities 7.605.223 7.698.120 - 7.698.120 -

76.688.751 77.318.139 25.357.512 35.090.928 16.869.699



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30. Finansal araçlardan kaynaklanan risklerin niteliği ve düzeyi (devamı) December 31, 2012 :

Contractual maturities Book value

Total cash outflows

(=I+II+III) Less than 3 months ( I )

3 - 12 months (II)

1 - 5 years (III)

Non-derivative financial liabilities:

Financial liabilities 57.208.398 58.465.986 7.534.188 23.563.842 27.367.956 Due to related parties 93 93 93 - - Trade payables, third parties 17.245.914 17.263.930 17.263.930 - - Liabilities for employee benefits 2.445.379 2.445.379 2.445.379 - - Other current liabilities 477.233 477.233 477.233 - - Other financial liabilities 489.406 489.406 - 414.406 75.000

77.866.423 79.142.027 27.720.823 23.978.248 27.442.956 c) Market risk: i) Foreign exchange risk The Group is exposed to foreign exchange risk due to rate changes on the translation of foreign currency assets and liabilities to local currency. The Group maintains a balanced foreign currency policy in order to decrease foreign exchange risk. Current risks are regularly evaluated and the foreign exchange position is regularly monitored by Group Audit Committee and Board of Directors. Foreign currency position December 31, 2013 December 31, 2012 TL TL equivalent USD EURO Other equivalent USD EURO Other 1. Trade receivables 40.539.990 18.604.961 283.134 - 28.431.688 14.058.475 1.433.453 -

2a. Monetary financial assets (Cash, bank accounts included) 8.139.588 1.591.360 1.615.238 - 3.886.590 447.079 1.313.784 -

2b. Non-monetary financial assets - - - - - - - - 3. Other - - - - 630142 142054 160274 3.500 4. Current assets (1+2+3) 48.679.578 20.196.321 1.898.372 - 32.948.420 14.647.608 2.907.511 3.500 5. Trade receivables - - - - - - - - 6a. Monetary financial assets - - - - - - - - 6b. Non-monetary financial assets - - - - - - - - 7. Other - - - - - - - - 8. Non-current assets (5+6+7) - - - - - - - - 9. Total assets (4+8) 48.679.578 20.196.321 1.898.372 - 32.948.420 14.647.608 2.907.511 3.500 10. Trade payables 8.153.241 3.649.581 123.937 - 8.296.117 4.288.540 276.976 - 11. Financial liabilities 32.458.755 11.080.560 3.000.000 - 31.053.272 13.755.191 2.778.104 - 12a. Other monetary liabilities 1.234.745 578.501 17 - 49.285 27.648 - 12b. Other non-monetary liabilities - - - - - - - - 13. Current liabilities (10+11+12) 41.846.741 15.308.642 3.123.954 - 39.398.674 18.071.379 3.055.080 -



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30. Nature and extent of risks arising from financial instruments (continued) December 31, 2013 December 31, 2012 TL TL equivalent USD EURO Other equivalent USD EURO Other 14. Trade payables - - - - - - - - 15. Financial liabilities 16.785.567 3.278.468 3.333.333 - 26.244.431 6.367.290 6.333.333 - 16a. Other monetary liabilities - - - - - - - - 16b. Other non-monetary

liabilities - - - - - - - - 17. Non-current liabilities

(15+16+17) 16.785.567 3.278.468 3.333.333 - 26.244.431 6.367.290 6.333.333 - 18. Total liabilities (13+17) 58.632.308 18.587.110 6.457.287 - 65.643.105 24.438.669 9.388.413 - 19. Net asset/liability position

of off-balance sheet derivatives (19a-19b) - - - - - - - -

19a. Hedged amount of foreign currency assets - - - - - - - -

19b. Hedged amount of foreign currency liabilities - - - - - - - -

20. Net foreign currency position (9-18+19) (9.952.730) 1.609.211 (4.558.966) - (32.694.685) (9.791.021) (6.480.902) 3500

21. Monetary items net foreign currency asset/ liability position (UFRS 7.B23)

(=1+2a+5+6a-10-11-12a-14-15-16a) (9.952.730) 1.609.211 (4.558.966) - (33.324.827) (9.933.115) (6.641.176) -

22. Fair value of financial assets for foreign currency hedge - - - - - - - -

23. Export 15.694.375 2.559.812 3.662.079 23.277.955 9.602.024 2.619.971 - 24. Import 40.499.772 15.452.393 2.560.780 - 69.677.780 39.002.557 7.350.000 - As of December 31, 2013 foreign exchange rates as follow: 2,1343 TL = 1 Usd, 2,9365 TL = 1 Euro, (December 31,2012: 1,7826 TL = 1 Usd ve 2,3517 TL = 1 Euro). Foreign exchange rate sensitivity analysis December 31, 2013 Profit/Loss Equity Appreciation of

foreign currency Depreciation of

foreign currency Appreciation of


foreign currency 10% change in USD rate: 1- USD net asset/liability 343.454 (343.454) - - 2- Hedged amount (-) - - - - 3- USD net effect (1+2) 343.454 (343.454) - - 10% change in Euro rate: - - - - 4- Euro net asset/liability (1.338.726) 1.338.726 - - 5- Hedged amount (-) - - - - 6- Euro net effect (4+5) (1.338.726) 1.338.726 - - 10% change in other rate: - - - - 4- Other net asset/liability - - - - 5- Hedged amount (-) - - - 9- Other net effect (7+8) - - - - Total (3+6+9) (995.272) 995.272


Notes to the consolidated financial statements at December 31, 2013 (Amounts expressed in Turkish lira (TL) unless otherwise indicated)

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30. Nature and extent of risks arising from financial instruments (continued) Foreign exchange rate sensitivity analysis December 31, 2012 Profit/Loss Equity Appreciation of


foreign currency Appreciation of


foreign currency 10% change in USD rate: 1- USD net asset/liability (1.745.355) 1.745.355 - - 2- Hedged amount (-) - - - - 3- USD net effect (1+2) (1.745.355) 1.745.355 - - 10% change in Euro rate: 4- Euro net asset/liability (1.524.114) 1.524.114 - - 5- Hedged amount (-) - - - - 6- Euro net effect (4+5) (1.524.114) 1.524.114 - - 10% change in other rate: 4- Other net asset/liability - - - - 5- Hedged amount (-) - - - - 9- Other net effect (7+8) - - - - Total (3+6+9) (3.269.469) 3.269.469 ii) Interest rate risk The Group is exposed to interest rate risk through the impact of rate changes on interest bearing assets and liabilities. The interest rate risk of the Group mainly results from bank borrowings. The interest rate risk of bank borrowings with floating interest rates is partially offset by financial assets with floating rates. These exposures are managed by balancing interest rate sensitive assets and liabilities. Interest position table December 31, 2013 December 31, 2012 Financial instruments with fixed interest rate Time deposits 30.636.829 26.425.639 Financial liabilities 30.921.688 26.792.177 Financial instruments with floating interest rate Financial liabilities 18.786.796 30.416.221

According to the interest rate sensitivity analysis by the Group, as December 31, 2013, had the interest rate for borrowings with floating rates strengthened by 100 basis points, with all other variables held constant, net income for the period would be TL 187.868 lower (2012: TL 304.162) due to interest expenses arising from borrowings with floating rates.



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30. Nature and extent of risks arising from financial instruments (continued) iii) Price risk Group’s operational profitability and cash provided by operations are affected by paper prices which fluctuate due to competition in the paper sector and changes in raw material prices. Those prices are monitored by the Group management; and cost improvement precautions are taken in order to reduce the pressure of costs on prices. Existing risks are examined by the Group’s Audit Committee and Board of Directors. d) Capital risk management: The Group’s objectives when managing capital are safeguarding the Group’s ability to continue as a going concern in order to provide returns for shareholders and providing benefits for other stakeholders and maintaining an optimal capital structure to reduce the cost of capital. The Company may change the amount of dividend paid to shareholders, return the capital to shareholders, issue new shares and sell some assets to reduce indebtedness; in order to preserve or reshape the capital structure. The Group monitors capital on the basis of gearing ratio. This ratio is calculated as net debt divided by total capital. Net debt is calculated as total liabilities (including borrowings, trade, due to related parties and other payables, as shown in the balance sheet) less cash and cash equivalents. December 31, 2013 December 31, 2012 Total liabilities 84.743.004 86.951.088 Less: Cash and cash equivalents (Note 4) (31.527.379) (27.051.033) Net liability 53.215.625 59.900.055 Total equity 189.076.467 178.576.070 Liability/equity ratio %28 %34

31. Financial instruments Fair value is the amount at which a financial instrument could be exchanged in a current transaction between willing parties, other than in a forced sale or liquidation, and is best evidenced by a quoted market price, if one exists. The estimated fair values of financial instruments have been determined by the Group using available market information and appropriate valuation methodologies. However, judgment is necessarily required to interpret market data to estimate the fair value. Accordingly, the estimates presented herein are not necessarily indicative of the amounts the Group can realise in a current market exchange. The following methods and assumptions were used to estimate the fair value of the financial instruments for which it is practicable to estimate fair value:



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31. Financial instruments (continued) Financial assets The fair values of balances denominated in foreign currencies, which are translated at period-end exchange rates, are considered to approximate carrying values. Cash and cash equivalents are shown at their fair values. The carrying values of trade receivables are estimated to be their fair values. Fair value of assets that are not recorded at the stock exchange is estimated as their impairments (if any) deducted from costs. Financial liabilities Trade payables, due to related parties and other monetary liabilities carried at amortized cost are considered to approximate their fair values. Long term loans with floating interest rates are translated at year end exchange rates and are considered to approximate their fair values. 32. Subsequent events Group, 3 March 2014 received in the board of directors meeting, according to the March 29, 2013 at the General Meeting declared in, as owner of the company where the total 41,962,500 Lot Alkım Kağıt A.Ş. shares partially or completely in order to be sold, Business Investment Securities Joint Stock Company with 6 months of Sales Consulting and Sales Brokerage Agreement has been decided to conclude. 33. Other matters that may have a material effect on, or be explained for the clear

understanding of the consolidated financial statements None (2012 - None).

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