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(Convenience translation of a report and financial statements originally issued in Turkish)

Bossa Ticaret ve Sanayi İşletmeleri T.A.Ş.

Consolidated financial statements for the period between January 1 – December 31, 2016 together with independent auditors’ report

(Convenience translation of a report and financial statements originally issued in Turkish (See additional paragraph below for convenience translation and Note 2)) Table of contents Page

Independent auditors’ report on the consolidated financial statements 1 - 2

Consolidated statement of financial position 3 - 4

Consolidated statement of profit and loss and comprehensive income 5

Consolidated statement of changes in equity 6 - 7

Consolidated statement of cash flows 8

Consolidated disclosures related to financial statements 9 - 61

(Convenience translation into English of independent auditors’ report originally issued in Turkish) INDEPENDENT AUDITOR’S REPORT To the Board of Directors of Bossa Ticaret ve Sanayi İşletmeleri T.A.Ş. We have audited the accompanying balance sheet of Bossa Ticaret ve Sanayi İşletmeleri T.A.Ş. (the Company) and its subsidiary (all together referred to as “the Group”) as at December 31, 2016 and the related statement of profit or loss and other comprehensive income, statement of changes in equity and statement of cash flows for the year then ended and a summary of significant accounting policies and explanatory notes. Management's responsibility for the financial statements Company’s management is responsible for the preparation and fair presentation of financial statements in accordance with the Turkish Accounting Standards and for such internal controls as management determines is necessary to enable the preparation and fair presentation of financial statements that are free from material misstatement, whether due to error and/or fraud. Independent auditors’ responsibility Our responsibility is to express an opinion on these financial statements based on our audit. Our audit was conducted in accordance with standards on auditing issued by the Capital Markets Board of Turkey and standards on auditing issued by POA. Those standards require that ethical requirements are complied with and that the independent audit is planned and performed to obtain reasonable assurance whether the financial statements are free from material misstatement. Independent audit involves performing independent audit procedures to obtain independent audit evidence about the amounts and disclosures in the financial statements. The independent audit procedures selected depend on our professional judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to error and/or fraud. In making those risk assessments, the Company’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 independent audit procedures that are appropriate for the circumstances in order to identify the relation between the financial statements prepared by the Company and its internal control system. Our independent audit includes also evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the Company’s management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained during our independent audit is sufficient and appropriate to provide a basis for our audit opinion. Opinion In our opinion, the accompanying consolidated financial statements present fairly, in all material respects, the financial position of Bossa Ticaret ve Sanayi İşletmeleri T.A.Ş. and its subsidiary as at December 31, 2016 and their financial performance and cash flows for the year then ended in accordance with the Turkish Accounting Standards.

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Emphasis of matters a) We draw attention to the Company’s explanations in footnote 29 related to management’s

plans, estimates and assumptions intended to offset non trade receivables as of December 31, 2016 the Company has a non-trade receivables amounting to TL 245.307.848 from its 93,75% shareholder Akkardan Sanayi ve Ticaret A.Ş. whose operations were discontinued. Our opinion is not qualified in respect of this matter.

b) We draw attention to the Company’s explanations in footnote 18 related to evaluation of its

receivables amounting to TL 122.914.099 from Akkardan Sanayi ve Ticaret A.Ş, shareholder of the Company whose operations were discontinued, in scope of Article 74

of the Law numbered

6552 in order to benefit from given rights in 2014 and obtained the right to derecognize this amount by paying the related taxes; nevertheless, since performed transaction is related to the parent company, the Company management plans to carry the related amount of TL 122.914.099 separately in “Other funds” created under the equity account as of December 31, 2014 and to offset this amount through the other capital market instruments including the dividend payments to be made to the parent company in the future, share sales and merger transactions. Our opinion is not qualified in respect of this matter.

Report on Independent Auditor’s Responsibilities Arising from Other Regulatory Requirements 1) In accordance with subparagraph 4 of Article 398 of the Turkish Commercial Code (“TCC”)

6102, the Independent Auditor’s Report on the Early Identification of Risk System and Committee was submitted to the Board of Directors of the Company on February 17, 2017.

2) In accordance with Article 402 TCC, no significant matter has come to our attention that leads

us to believe that the Company’s bookkeeping activities for the period January 1 - December 31, 2016 is not in compliance with the code and provisions of the Company’s articles of association in relation to financial reporting.

3) In accordance with Article 402 of the TCC, the Board of Directors has provided us with the

required explanations and documents. Additional paragraph for convenience translation into English of financial statements originally issued in Turkish As at December 31, 2016, the accounting principles described in Note 2 (defined as Turkish Accounting Standards/Turkish Financial Reporting Standards) to the accompanying financial statements differ from International Financial Reporting Standards (“IFRS”) issued by the International Accounting Standards Board with respect to the application of inflation accounting, certain reclassifications and also for certain disclosures requirements of the POA. Accordingly, the accompanying financial statements are not intended to present the financial position and results of the operations in accordance with IFRS. Güney Bağımsız Denetim ve Serbest Muhasebeci Mali Müşavirlik Anonim Şirketi A member firm of Ernst&Young Global Limited Necati Tolga Kırelli, SMMM Partner 17 February 2017 Istanbul, Turkey

(Convenience translation of financial statements originally issued in Turkish (See Note 2)) Bossa Ticaret ve Sanayi İşletmeleri T.A.Ş. Consolidated statement of financial position as of December 31, 2016 (Amounts expressed in Turkish Lira (“TL”) unless otherwise stated)

The accompanying policies and explanatory notes form an integral part of these consolidated financial statements.

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Current period Prior period

(Audited) (Audited)

Notes 31 December 2016 31 December 2015

ASSETS

Current assets Cash and cash equivalents 3 18.796.254 12.895.814

Trade receivables

73.270.067 94.873.516 - Trade receivables, third parties 5 73.270.067 94.873.516 Other receivables

3.232.620 5.964.928

- Other receivables, third parties 6 2.792.620 5.964.928 - Other receivables, related party 29 440.000 -

Inventories 9 66.792.839 72.886.625 Prepaid expenses 7 1.743.469 - - Other receivables, third parties 1.743.469 -

Assets related to current period tax 25 2.070.425 - Other current assets 8 1.449.186 1.942.902 - Other receivables, third parties 1.449.186 1.942.902

SUBTOTAL 167.354.860 188.563.785

Asset held for sale 10 37.866.603 51.994.240

TOTAL CURRENT ASSETS

205.221.463 240.558.025

Non-current assets

Other receivables

245.307.848 228.177.995 - Other receivables, related parties 29 245.307.848 228.177.995

Investment Properties

87.228.000 - Tangible assets 11 168.123.794 210.529.372 Intangible assets 12 11.498.630 7.106.450

Prepaid Expenses 7 1.552.026 - - Prepaid expenses, third parties

1.552.026 -

TOTAL NON-CURRENT ASSETS

513.710.298 445.813.817

TOTAL ASSETS 718.931.761 686.371.842

(Convenience translation of financial statements originally issued in Turkish (See Note 2)) Bossa Ticaret ve Sanayi İşletmeleri T.A.Ş. Consolidated statement of financial position As of December 31, 2016 (Amounts expressed in Turkish Lira (“TL”) unless otherwise stated)


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(Audited) (Audited)

Notes 31 December 2016 31 December 2015

LIABILITIES

Short term liabilities:

Short term liabilities 130.266.284 86.952.822 Short term liabilities, third parties 130.266.284 86.952.822

- Bank loans 4 86.454.204 63.952.431 - Financial liabilities (leasing) 4 2.432.285 1.381.144 - Bonds issued 4 41.379.795 21.619.247 Trade payables

104.396.257 85.700.402

- Trade payables, third parties 5 104.396.257 85.700.402 Employee benefit obligations 14 7.083.214 6.221.829 Other payables

21.130 29.533

- Other payables, third parties 6 21.130 29.533 Deferred income 15 1.384.438 2.161.149 - Deferred income, third parties 15 1.384.438 2.161.149 Government incentives and grants 15 269.760 323.320 Provision for taxation on income 26 - 3.356.205 Short-term provisions 16,17 4.215.127 2.563.314 - Other short-term provisions 17 3.259.044 1.404.148

- Provisions for employee benefits 16 956.083 1.159.166 Other current liabilities 8 4.547.138 4.451.641

- Other current liabilities, third party 4.547.138 4.451.641

TOTAL CURRENT LIABILITIES

252.183.348 191.760.215

Non-current liabilities: Non- current liabilities 139.256.221 159.832.568

Long term liabilities, third parties 139.256.221 159.832.568 - Bank loans 4 136.454.946 136.407.550 - Financial liabilities (leasing) 4 2.801.275 3.252.612 - Bonds issued 4 - 20.172.406 Government incentives and grants 15 209.162 478.921 Long term provisions

11.138.546 10.602.701

- Long term provision for employee benefits 16 11.138.546 10.602.701 Deferred tax liabilities 26 14.895.682 15.907.748

Long Term Liabilities 7 2.980.304 - - Long term liabilities, third party 2.980.304 -

TOTAL NON-CURRENT LIABILITIES

168.479.915 186.821.938

Shareholders’ equity Shareholders’ equity

298.268.498 307.789.689 Paid-in share capital 18 108.000.000 108.000.000 Paid-in capital restatement difference 18 149.104.739 149.104.739 Share premium 18 3.435 3.435 Restricted reserves 18 41.022.230 39.316.910 - Legal reserves 31.489.253 29.783.933 - Gain on sale of real estate subsidiary surplus to capital 9.532.977 9.532.977 Other equity shares 18, 29 (122.914.099) (122.914.099) Other comprehensive income/loss not to be reclassified to profit or loss 18 129.599.668 110.113.955 - Revaluation funds 18 146.917.072 120.412.671 - Actuarial gain or loss arising from defined benefit plans 18 (17.317.404) (10.298.716) Retained earnings 18 2.115.102 2.361.676 Net (loss)/profit for the period 18 (8.662.577) 21.803.073

TOTAL EQUITY

298.268.498 307.789.689

TOTAL LIABILITIES AND EQUITY

718.931.761 686.371.842

(Convenience translation of financial statements originally issued in Turkish (See Note 2)) Bossa Ticaret ve Sanayi İşletmeleri T.A.Ş. Consolidated statement of profit and loss and comprehensive income for the year ended December 31, 2016 (Amounts expressed in Turkish Lira (“TL”) unless otherwise stated)


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(Audited) (Audited)

STATEMENT OF PROFIT AND LOSS AND OTHER COMPREHENSIVE INCOME Notes

1 January - 31 December

2016

1 January - 31 December

2015

PROFIT(LOSS)

Revenue 19 361.200.233 374.615.566 Cost of sales (-) 19 (282.410.665) (279.201.141)

GROSS PROFIT

78.789.568 95.414.425

Marketing expenses (-) 20 (33.523.056) (38.659.783) General administrative expenses 20 (28.042.156) (32.021.667) Other operating income 21 58.845.786 67.335.138 Other operating expenses (-) 21 (45.317.979) (44.502.850)

OPERATING PROFIT

30.752.163 47.565.263

Income from investment activities 24 3.916.004 4.437.534 Expense from investment activities (-) 25 (15.426.935) (316.498)

OPERATING PROFIT BEFORE FINANCIAL ACTIVITIES

19.241.232 51.686.299

Financial income 22 21.260.140 26.551.537 Financial expenses (-) 23 (50.208.141) (52.892.586)

PRE-TAX INCOME (LOSS) FROM CONTINUING OPERATIONS

(9.706.769) 25.345.250

Tax expense from continuing operations

1.044.192 (3.542.177) - Current tax expense (-) 26 (1.455.354) (4.301.859) - Deferred tax income/(expense) 26 2.499.546 759.682

İNCOME / (LOSS) FROM CONTINUING OPERATIONS

(8.662.577) 21.803.073

PROFIT / (LOSS) FOR THE PERIOD

(8.662.577) 21.803.073

OTHER COMPREHENSIVE INCOME/LOSS

21.594.586 45.238.035

Not to be reclassified to profit or loss 31.855.426 55.402.546 Actuarial loss arising from employee benefits 16 (8.773.360) (6.619.153) Income tax on comprehensive income or loss not to be reclassified to profit or loss

(1.487.480) (3.545.358)

Deferred tax effect

(1.487.480) (3.545.358)

TOTAL COMPREHENSIVE INCOME

12.932.009 67.041.108

Earnings per share

- Earnings per share from continuing operations 27 (0,0008) 0,0020

(Convenience translation of financial statements originally issued in Turkish (See Note 2)) Bossa Ticaret ve Sanayi İşletmeleri T. Anonim Şirketi Consolidated statement of changes in equity for the year ended December 31, 2016 (Currency –Turkish Lira (TL) unless otherwise indicated)

The accompanying policies and explanatory notes form an integral part of these financial statements.

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Accumulated other comprehensive income and expense that is not subject

to reclassification to income or loss

Gain or loses revaluation and

remeasurement

Accumulated profits

Prior Period

Paid-in share

capital

Paid-in capital

restatement difference

Share premium Revaluation funds

Actuarial gain or loss arising from

defined benefit plans

Restricted reserves

Other equity shares

Retained earnings

Net profit for the period Total equity

Opening balance, 1 January 2015 108.000.000 149.104.739 3.435 72.179.949 (5.003.393) 50.822.788 (122.914.099) 34.325.411 7.041.751 293.560.581

Transfers - - - (2.300.635) - 4.741.200 - 4.601.186 (7.041.751) - Dividend - - - - - (16.247.078) - (36.564.921) - (52.811.999)

Period income (loss) - - - - - - - - 21.803.073 21.803.073 Other comprehensive income (expense) - - - 50.533.357 (5.295.323) - - - - 45.238.034

Total comprehensive income (expense) - - - 50.533.357 (5.295.323) - - - 21.803.073 67.041.107

Closing balance, 31 December 2015 108.000.000 149.104.739 3.435 120.412.671 (10.298.716) 39.316.910 (122.914.099) 2.361.676 21.803.073 307.789.689

Opening balance, 1 January 2016 108.000.000 149.104.739 3.435 120.412.671 (10.298.716) 39.316.910 (122.914.099) 2.361.676 21.803.073 307.789.689

Transfers - - - (2.108.873) - 1.705.320 - 22.206.626 (21.803.073) - Dividend - - - - - - - (22.453.200) - (22.453.200)

Other comprehensive income (expense) - - - 28.613.274 (7.018.688) - - - - 21.594.586 Period income (loss) - - - - - - - - (8.662.577) (8.662.577)

Total comprehensive income (expense) - - - 28.613.274 (7.018.688) - - - (8.662.577) 12.932.009

Closing balance, 31 December 2016 108.000.000 149.104.739 3.435 146.917.072 (17.317.404) 41.022.230 (122.914.099) 2.115.102 (8.662.577) 298.268.498

(Convenience translation of financial statements originally issued in Turkish (See Note 2))

Bossa Ticaret ve Sanayi İşletmeleri T. Anonim Şirketi

Consolidated statements of cash flows for the year ended December 31, 2016 (Currency –Turkish Lira (TL) unless otherwise indicated)

The accompanying policies and explanatory notes form an integral part of these financial statements.

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(Audited) (Audited)

Notes

1 January - 1 January -

31 December 2016 31 December 2015

CASH FLOWS FROM OPERATING ACTIVITIES

21.260.002 (53.628.503)

Profit / Loss for the period

(8.662.577) 21.803.073 Profit / Loss from continuing operations

(8.662.577) 21.803.073

Adjustments related to net income/(loss) reconciliation

35.265.513 26.045.644

Depreciation and amortisation 11, 12 19.175.038 21.115.961 Adjustments related to provisions

4.903.622 3.565.846

- Adjustments related to provisions for employee benefits 16 2.940.928 3.081.223 - Adjustments related to provisions for litigation 17 1.962.694 484.623 Adjustments related to impairment

17.080.791 1.071.687 - Adjustments related to impairment on receivables 5 2.953.154 1.071.687 - Adjustments related to impairment on fixed assets held for sale 10 14.127.637 - Adjustments related to interest income and expense (2.233.040) 871.008 - Adjustments related to interest income 22 (18.925.560) (20.758.605) - Adjustments related to interest expense 23 17.316.303 21.856.150 Unearned financial income from forward sales 5 (511.970) (292.831) Deferred financial expense from forward purchases 5 (111.813) 66.294 Adjustments related to gain/losses from disposals of fixed assets

(2.616.706) (4.121.036)

Adjustments related to gain/losses from disposals of tangible fixed assets 24, 25 (2.616.706) (4.121.036) Adjustments related to tax income and expenses 26 (1.044.192) 3.542.177

Changes in working capital 10.240.973 (92.293.771)

Adjustments related to Increase/decrease in trade receivables

17.557.872 (10.079.643) - Increase/decrease in trade receivables from related parties

17.557.872 (10.079.643) Adjustments related to increase/decrease in other receivables related to operations

(35.446.711) (93.925.432)

- Increase/decrease in trade receivables from related parties

(38.619.019) (141.711.832) - Increase/decrease in trade receivables from other parties

3.172.308 47.786.400 Adjustments related to other increase/decrease in inventories 9 6.093.786 16.187.308 Increase/decrease in prepaid expenses

(3.295.495) 1.569.996

Adjustments related to Increase/decrease in trade payables

18.807.668 (12.355.846) - Increase/decrease in trade payables from other parties

18.807.668 (12.355.846) Increase/decrease in deferred income

(776.711) 2.161.149

Adjustments related to other increase/decrease in working capital

7.300.564 4.148.697 - Increase/decrease in other assets related to operations

493.717 (405.907) - Increase/decrease in other liabilities related to operations

6.806.847 4.554.604

Cash flows from operating activities 36.843.909 (44.445.054)

Taxes paid 26 (6.881.984) (1.944.353) Employment termination benefits paid 16 (10.198.518) (8.285.994) Other cash inflows / outflows 5 1.496.595 1.046.898

CASH FLOWS FROM INVESTING ACTIVITIES (34.240.828) 3.589.748

Cash inflows due to sales of tangible and intangible fixed assets

6.045.178 5.361.730 - Cash inflows due to sale of tangible fixed assets 11 6.045.178 5.361.730 Cash outflows due to purchase of tangible and intangible fixed assets

(39.962.687) (1.810.445) - Cash outflows due to purchase of tangible and intangible fixed assets 11, 12 (39.962.687) (1.810.445) Government grants and incentives 15 (323.319) 38.463

CASH FLOWS FROM FINANCIAL ACTIVITIES 18.880.449 48.295.813

Cash outflows due to loan repayments

(93.832.856) (226.898.340) Cash inflows due to borrowing

116.382.025 302.281.452

Cash inflows due to other financial liabilities

599.804 (344.780) Cash outflows arising from the repayment of bonds

(24.472.930) (45.842.557)

Cash inflows from bond issuance

20.000.000 23.500.000 Dividend payment 18 (1.404.034) (3.302.417) Interest received 22 18.600.333 20.815.060 Interest paid 23 (16.991.893) (21.912.605)

BEFORE THE EFFECT OF CHANGE IN FOREIGN EXCHANGE RATES NET INCREASE/DECREASE ON CASH AND CASH EQUIVALENTS 5.899.623 (1.742.942)

The effect of change in foreign exchange rates on cash and cash equivalents

- -

NET INCREASE/DECREASE IN CASH AND CASH EQUIVALENTS 5.899.623 (1.742.942)

CASH AND CASH EQUIVALENTS AT THE BEGINNING OF THE PERIOD 3 12.895.814 14.638.756

CASH AND CASH EQUIVALENTS AT THE END OF THE PERIOD 3 18.795.437 12.895.814



Notes to the financial statements as of December 31, 2016 (Currency –Turkish Lira (TL) unless otherwise indicated)

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1. Organisation and nature of operations Bossa Ticaret ve Sanayi İşletmeleri T.A.Ş. (“Bossa” or the “Company”) was established in 1951. The main operations of the Company is manufacturing, marketing and selling textile products. Bossa Ticaret ve Sanayi İşletmeleri T.A.Ş and its subsidiary (all together “Group”) consist of Bossa Ticaret ve Sanayi İşletmeleri T.A.Ş and a subsidiary of which shares and control belongs to Bossa. Akkardan Sanayi and Ticaret A.Ş. (“Akkardan”) whose activities are stopped, owns 93,75% of the shares of Bossa as of December 31,2016. (31 December 2015 93,75%). Akkardan’s paid in capital is 62.000.000 TL and all of the shares belong to Serap Kantül. Average number of personnel is 1.834 (December 31, 2015: 1.902).

The Company is registered in Turkey and the address of the registered office is Adana Hacı Sabancı

Organize Sanayi Bölgesi Turgut Özal Bulvarı No:2 Sarıçam – Adana (*).

(*)All the necessary procedures for this process was fulfilled and legislation related announcement was published in Turkey Trade Registry Gazette dated July 15, 2016. In the United States, in order to support marketing activities, a company titled as Bossa International Inc. with a US Dollar 200.000 (Two Hundred Thousand US Dollar) capital with 100% shareholding was established. Capital payment transaction has been completed on December 7, 2015. The name of the subsidiary of Bossa Ticaret ve Sanayi İşletmeleri T.A.Ş., its main activity and direct and indirect capital shares owned by Bossa as of December 31, 2016 are as follows: 31 December 2016 31 December 2015

Affiliated Company Main activity Direct

ownership rate (%)

Indirect ownership rate

(%)

Direct ownership rate (%)

Indirect ownership rate

(%) Bossa International Inc. Marketing Activities 100 100 100 100



Notes to the financial statements as of December 31, 2016 (continued) (Currency –Turkish Lira (TL) unless otherwise indicated)

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2. Basis of presentation of financial statements

2.1 Basis of presentation

The 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 June 13, 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”).

According to decision which was made by CMB on March 17, 2005, from the date of January 1, 2005 there is no need for inflation accounting application for the listed companies performing in Turkey. The Company has prepared the financial statements according to this decision. Functional and representative currency of the Company is TL. The financial statements are based on the statutory records, with adjustments and reclassifications for the purpose of fair presentation in accordance with the Accounting Standards of the POA. Main adjustments and reclassifications are deferred tax effects, income and expense accruals, and retirement benefit obligations in accordance with Turkish Accounting Standard (“TAS”) 19.

Basis of consolidation

Consolidated financial statements include accounts of parent company, Bossa, and its subsidiary (hereinafter referred to as “Group” as a whole). Financial statements of the subsidiary, mentioned in scope of consolidation, have been prepared in accordance with Turkish Financial Reporting Standards through making required adjustments and classifications taking accounting principles and implementations into consideration as of date of consolidated financial statements. The operating results of the affiliate have been included and excluded on expiry dates of transactions in question according to acquisition and disposal transactions. Going concern

The financial statements including the accounts have been prepared assuming that the Company will continue its operations.

Basis of preparation of financial statements The accompanying financial statements of the Company have been prepared in accordance 2016 TAS Taxonomy which is developed by POA based on (b) subparagraph of article 9 of Statutory Decree numbered 660 and approved by resolution of the Board dated 2/6/2016 and numbered 30. Approval of financial statements The consolidated financial statements have been approved for publication by the Company Management on February 15, 2017. The General Assembly has the power to make changes in the financial statements. 2.2 Amendments in accounting policies The new standards and interpretations The accounting policies adopted in preparation of the consolidated financial statements as at December 31, 2016 are consistent with those of the previous financial year, except for the adoption of new and amended TFRS and TFRIC interpretations effective as of January 1, 2016. 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 financial statements (continued) 2.2 Amendments in accounting policies The new standards and interpretations The accounting policies adopted in preparation of the consolidated financial statements as at December 31, 2016 are consistent with those of the previous financial year, except for the adoption of new and amended TFRS and TFRIC interpretations effective as of January 1, 2016. The effects of these standards and interpretations on the Group’s financial position and performance have been disclosed in the related paragraphs. i) The new standards, amendments and interpretations which are effective as at January 1, 2016 are as follows: TFRS 11 Acquisition of an Interest in a Joint Operation (Amendment) TFRS 11 is amended to provide guidance on the accounting for acquisitions of interests in joint operations in which the activity constitutes a business. This amendment requires the acquirer of an interest in a joint operation in which the activity constitutes a business, as defined in TFRS 3 Business Combinations, to apply all of the principles on business combinations accounting in TFRS 3 and other TFRSs except for those principles that conflict with the guidance in this TFRS. In addition, the acquirer shall disclose the information required by TFRS 3 and other TFRSs for business combinations. The amendments did not have an impact on the financial position or performance of the Group. TAS 16 and TAS 38 - Clarification of Acceptable Methods of Depreciation and Amortisation (Amendments to TAS 16 and TAS 38) The amendments to TAS 16 and TAS 38, have prohibited the use of revenue-based depreciation for property, plant and equipment and significantly limiting the use of revenue-based amortisation for intangible assets. The amendments did not have an impact on the financial position or performance of the Group. TAS 16 Property, Plant and Equipment and TAS 41 Agriculture (Amendment) – Bearer Plants TAS 16 is amended to provide guidance that bearer plants, such as grape vines, rubber trees and oil palms should be accounted for in the same way as property, plant and equipment in TAS 16. Once a bearer plant is mature, apart from bearing produce, its biological transformation is no longer significant in generating future economic benefits. The only significant future economic benefits it generates come from the agricultural produce that it creates. Because their operation is similar to that of manufacturing, either the cost model or revaluation model should be applied. The produce growing on bearer plants will remain within the scope of TAS 41, measured at fair value less costs to sell. The amendment is not applicable for the Group and did not have an impact on the financial position or performance of the Group.




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2. Basis of presentation of financial statements (continued) 2.2 Amendments in accounting policies (continued) TAS 27 Equity Method in Separate Financial Statements (Amendments to TAS 27) Public Oversight Accounting and Auditing Standards Authority (POA) of Turkey issued an amendment to TAS 27 to restore the option to use the equity method to account for investments in subsidiaries and associates in an entity’s separate financial statements. Therefore, an entity must account for these investments either: • At cost • In accordance with IFRS 9, Or • Using the equity method defined in TAS 28 The entity must apply the same accounting for each category of investments The amendment is not applicable for the Group and did not have an impact on the financial position or performance of the Group. TFRS 10 and TAS 28: Sale or Contribution of Assets between an Investor and its Associate or Joint Venture (Amendments) Amendments issued to TFRS 10 and TAS 28, to address the acknowledged inconsistency between the requirements in TFRS 10 and TAS 28 in dealing with the loss of control of a subsidiary that is contributed to an associate or a joint venture, to clarify that an investor recognises a full gain or loss on the sale or contribution of assets that constitute a business, as defined in TFRS 3, between an investor and its associate or joint venture. The gain or loss resulting from the re-measurement at fair value of an investment retained in a former subsidiary should be recognised only to the extent of unrelated investors’ interests in that former subsidiary. The amendment is not applicable for the Group and did not have an impact on the financial position or performance of the Group. TFRS 10, TFRS 12 and TAS 28: Investment Entities: Applying the Consolidation Exception (Amendments to IFRS 10 and IAS 28)

In February 2015, amendments issued to TFRS 10, TFRS 12 and TAS 28, to address the issues that have arisen in applying the investment entities exception under TFRS 10 Consolidated Financial Statements. The amendment is not applicable for the Group and did not have an impact on the financial position or performance of the Group. TAS 1: Disclosure Initiative (Amendments to TAS 1)

The amendments issued to TAS 1. Those amendments include narrow-focus improvements in the following five areas: Materiality, Disaggregation and subtotals, Notes structure, Disclosure of accounting policies, Presentation of items of other comprehensive income (OCI) arising from equity accounted investments. These amendments did not have significant impact on the notes to the interim condensed consolidated financial statements of the Group.




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2. Basis of presentation of financial statements (continued) 2.2 Amendments in accounting policies (continued)

Annual Improvements to TFRSs - 2012-2014 Cycle POA issued, Annual Improvements to TFRSs 2012-2014 Cycle. The document sets out five amendments to four standards, excluding those standards that are consequentially amended, and the related Basis for Conclusions. The standards affected and the subjects of the amendments are: - IFRS 5 Non-current Assets Held for Sale and Discontinued Operations – clarifies that changes

in methods of disposal (through sale or distribution to owners) would not be considered a new plan of disposal, rather it is a continuation of the original plan

- IFRS 7 Financial Instruments: Disclosures – clarifies that i) the assessment of servicing contracts that includes a fee for the continuing involvement of financial assets in accordance with IFRS 7; ii) the offsetting disclosure requirements do not apply to condensed interim financial statements, unless such disclosures provide a significant update to the information reported in the most recent annual report

- IAS 19 Employee Benefits – clarifies that market depth of high quality corporate bonds is assessed based on the currency in which the obligation is denominated, rather than the country where the obligation is located

- IAS 34 Interim Financial Reporting –clarifies that the required interim disclosures must either be in the interim financial statements or incorporated by cross-reference between the interim financial statements and wherever they are included within the interim financial report

The amendment did not have significant impact on the financial position or performance of the Group. ii) 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, when the new standards and interpretations become effective. TFRS 15 Revenue from Contracts with Customers In September 2016, POA issued TFRS 15 Revenue from Contracts with Customers. The new standard issued includes the clarifying amendments to IFRS 15 made by IASB in April 2016. The new five-step model in the standard provides the recognition and measurement requirements of revenue. The standard applies to revenue from contracts with customers and provides a model for the sale of some non-financial assets that are not an output of the entity’s ordinary activities (e.g., the sale of property, plant and equipment or intangibles). TFRS 15 effective date is January 1, 2018, with early adoption permitted. Entities will transition to the new standard following either a full retrospective approach or a modified retrospective approach. The modified retrospective approach would allow the standard to be applied beginning with the current period, with no restatement of the comparative periods, but additional disclosures are required. The Group is in the process of assessing the impact of the standard on financial position or performance of the Group.




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2. Basis of presentation of financial statements (continued) 2.2 Amendments in accounting policies (continued) TFRS 9 Financial Instruments In January 2017, POA issued the final version of TFRS 9 Financial Instruments. The final version of TFRS 9 brings together all three aspects of the accounting for financial instruments project: classification and measurement, impairment and hedge accounting. TFRS 9 is built on a logical, single classification and measurement approach for financial assets that reflects the business model in which they are managed and their cash flow characteristics. Built upon this is a forward-looking expected credit loss model that will result in more timely recognition of loan losses and is a single model that is applicable to all financial instruments subject to impairment accounting. In addition, TFRS 9 addresses the so-called ‘own credit’ issue, whereby banks and others book gains through profit or loss as a result of the value of their own debt falling due to a decrease in credit worthiness when they have elected to measure that debt at fair value. The Standard also includes an improved hedge accounting model to better link the economics of risk management with its accounting treatment. TFRS 9 is effective for annual periods beginning on or after 1 January 2018, with early application permitted by applying all requirements of the standard. Alternatively, entities may elect to early apply only the requirements for the presentation of gains and losses on financial liabilities designated as FVTPL without applying the other requirements in the standard. The Group is in the process of assessing the impact of the standard on financial position or performance of the Group iii) The new standards, amendments and interpretations that are issued by the International

Accounting Standards Board (IASB) but not issued by Public Oversight Authority (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 and IAS 28: Sale or Contribution of Assets between an Investor and its Associate or Joint Venture (Amendments) In December 2015, the IASB postponed the effective date of this amendment indefinitely pending the outcome of its research project on the equity method of accounting. Early application of the amendments is still permitted. Annual Improvements – 2010–2012 Cycle 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.




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2. Basis of presentation of financial statements (continued) 2.2 Amendments in accounting policies (continued) Annual Improvements – 2011–2013 Cycle IFRS 16 Leases The IASB has published a new standard, IFRS 16 'Leases'. The new standard brings most leases on-balance sheet for lessees under a single model, eliminating the distinction between operating and finance leases. Lessor accounting however remains largely unchanged and the distinction between operating and finance leases is retained. IFRS 16 supersedes IAS 17 'Leases' and related interpretations and is effective for periods beginning on or after January 1, 2019, with earlier adoption permitted if IFRS 15 'Revenue from Contracts with Customers' has also been applied. The Group is in the process of assessing the impact of the standard on financial position or performance of the Group. IAS 12 Income Taxes: Recognition of Deferred Tax Assets for Unrealised Losses (Amendments) The IASB issued amendments to IAS 12 Income Taxes. The amendments clarify how to account for deferred tax assets related to debt instruments measured at fair value. The amendments clarify the requirements on recognition of deferred tax assets for unrealised losses, to address diversity in practice. These amendments are to be retrospectively applied for annual periods beginning on or after January 1, 2017 with earlier application permitted. However, on initial application of the amendment, the change in the opening equity of the earliest comparative period may be recognised in opening retained earnings (or in another component of equity, as appropriate), without allocating the change between opening retained earnings and other components of equity. If the Group applies this relief, it shall disclose that fact. The Group is in the process of assessing the impact of the amendments on financial position or performance of the Group. IAS 7 Statement of Cash Flows (Amendments) The IASB issued amendments to IAS 7 'Statement of Cash Flows'. The amendments are intended to clarify IAS 7 to improve information provided to users of financial statements about an entity's financing activities. The improvements to disclosures require companies to provide information about changes in their financing liabilities. These amendments are to be applied for annual periods beginning on or after January 1, 2017 with earlier application permitted. When the Group first applies those amendments, it is not required to provide comparative information for preceding periods. The Group is in the process of assessing the impact of the amendments on financial position or performance of the Group.




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2. Basis of presentation of financial statements (continued) 2.2 Amendments in accounting policies (continued) IFRS 2 Classification and Measurement of Share-based Payment Transactions (Amendments) The IASB issued amendments to IFRS 2 Share-based Payment, clarifying how to account for certain types of share-based payment transactions. The amendments, provide requirements on the accounting for: a. the effects of vesting and non-vesting conditions on the measurement of cash-settled share-based payments; b. share-based payment transactions with a net settlement feature for withholding tax obligations; and c. a modification to the terms and conditions of a share-based payment that changes the classification of the transaction from cash-settled to equity-settled. These amendments are to be applied for annual periods beginning on or after 1 January 2018. Earlier application is permitted. The amendment are not applicable for the Group and will not have an impact on the financial position or performance of the Group. IFRS 4 Insurance Contracts (Amendments)

In September 2016, the IASB issued amendments to IFRS 4 Insurance Contracts. The amendments introduce two approaches: an overlay approach and a deferral approach. The amended Standard will: - give all companies that issue insurance contracts the option to recognise in other comprehensive income, rather than profit or loss, the volatility that could arise when IFRS 9 Financial instruments is applied before the new insurance contracts Standard is issued; and - give companies whose activities are predominantly connected with insurance an optional temporary exemption from applying IFRS 9 Financial instruments until 2021. The entities that defer the application of IFRS 9 Financial instruments will continue to apply the existing financial instruments Standard—IAS 39. These amendments are to be applied for annual periods beginning on or after 1 January 2018. Earlier application is permitted. The amendment are not applicable for the Group and will not have an impact on the financial position or performance of the Group. IAS 40 Investment Property: Transfers of Investment Property (Amendments)

The IASB issued amendments to IAS 40 'Investment Property '. The amendments state that a change in use occurs when the property meets, or ceases to meet, the definition of investment property and there is evidence of the change in use. These amendments are to be applied for annual periods beginning on or after 1 January 2018. Earlier application is permitted. The Group is in the process of assessing the impact of the amendments on financial position or performance of the Group.

http://www.ifrs.org/Current-Projects/IASB-Projects/Investment-Property-under-construct-invetory-investment-change-in-use/Pages/home.aspx




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2. Basis of presentation of financial statements (continued) 2.2 Amendments in accounting policies (continued) IFRIC 22 Foreign Currency Transactions and Advance Consideration The interpretation clarifies the accounting for transactions that include the receipt or payment of advance consideration in a foreign currency. The Interpretation states that the date of the transaction for the purpose of determining the exchange rate to use on initial recognition of the related asset, expense or income is the date on which an entity initially recognises the non-monetary asset or non-monetary liability arising from the payment or receipt of advance consideration. An entity is not required to apply this Interpretation to income taxes; or insurance contracts (including reinsurance contracts) it issues or reinsurance contracts that it holds. The interpretation is effective for annual reporting periods beginning on or after 1 January 2018. Earlier application is permitted. The Group is in the process of assessing the impact of the amendments on financial position or performance of the Group.

Annual Improvements to IFRSs - 2014-2016 Cycle The IASB issued Annual Improvements to IFRS Standards 2014–2016 Cycle, amending the following standards: - IFRS 1 First-time Adoption of International Financial Reporting Standards: This amendment

deletes the short-term exemptions about some IFRS 7 disclosures, IAS 19 transition provisions and IFRS 10 Investment Entities. These amendments are to be applied for annual periods beginning on or after 1 January 2018.

- IFRS 12 Disclosure of Interests in Other Entities: This amendment clarifies that an entity is not

required to disclose summarised financial information for interests in subsidiaries, associates or joint ventures that is classified, or included in a disposal group that is classified, as held for sale in accordance with IFRS 5 Non-current Assets Held for Sale and Discontinued Operations. These amendments are to be applied for annual periods beginning on or after 1 January 2017.

- IAS 28 Investments in Associates and Joint Ventures: This amendment clarifies that the election

to measure an investment in an associate or a joint venture held by, or indirectly through, a venture capital organisation or other qualifying entity at fair value through profit or loss applying IFRS 9 Financial Instruments is available for each associate or joint venture, at the initial recognition of the associate or joint venture. These amendments are to be applied for annual periods beginning on or after 1 January 2018. Earlier application is permitted.

The Group is in the process of assessing the impact of the amendments on financial position or performance of the Group.

http://www.iasplus.com/en/standards/ifrs/ifrs1

http://www.iasplus.com/en/standards/ifrs/ifrs12

http://www.iasplus.com/en/standards/ias/ias28-2011




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2. Basis of presentation of financial statements (continued) 2.3 Summary of significant accounting policies Offsetting Financial assets and liabilities are offset and the net amount reported in the balance sheet when there is a legally enforceable right to set off the recognized amounts and there is an intention to settle on a net basis, or realize the asset and settle the liability simultaneously. Assets used in operational leasing In the case of the operating lease the economic ownership of the object of the lease remains with the lessor. Assets used in operational lease, which consist of chemical tankers, are carried at cost less straight-line depreciation. Depreciation is calculated on a pro rata basis at rates based on the fair value (30 years) of assets after deducting the residual value (15%) of the assets. The depreciable amount of an asset used in operational lease is the cost of the asset less its residual value, which is determined as the expected market value at the end of the leasing period. The residual value represents the net amount which the enterprise expects to obtain from an asset at the end of its useful life after deducting the expected costs of disposal. Residual values are initially recorded based on appraisals and estimates. Realisation of the residual values is dependent on the Group’s future ability to market the vehicles under the prevailing market conditions. Management reviews residual values periodically to determine that recorded amounts are appropriate and if expectations differ from previous estimates, the change is accounted for as a change in accounting estimate. Cash and cash equivalents Cash and cash equivalents comprise cash on hand and demand deposits and other short-term highly liquid investments which their maturities are three months or less from date of acquisition and readily convertible to a known amount of cash and are subject to an insignificant risk of changes in value. If the amount of impairment decreases subsequent to a write-down, the amount of impairment reversal is reflected in other income in the current period. Inventories Inventories are stated at the lower of cost and net realizable value. Expenses incurred to bring the inventories to their present conditions are recognized in accordance with the following method. Raw materials and supplies - The cost of raw materials and supplies, is determined by the weighted average method. Finished and semi-finished products - Direct material and labour costs, variable and fixed production overheads in certain proportions (considering normal operating capacity) were included. Inventory valuation is determined using the weighted average method. Net realizable value is the estimated via determination of selling price in the ordinary course of business, less the estimated costs of completion and estimated costs necessary to make the sale.




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2. Basis of presentation of financial statements (continued) 2.3 Summary of significant accounting policies Tangible assets Except for the land and buildings held for use, property, plant and equipment are carried at cost deducted by accumulated depreciation. The Company recognized land and buildings in the financial statements according to their fair values determined by the CMB approved real estate valuation experts. Increases resulting from the revaluation of assets held for use held at carrying values are classified under "revaluation funds” in shareholders' equity, impairments of the same assets’ value following the increase in value in prior years due to revaluation are netted off from revaluation funds and any other remaining decreases in value are reflected to the income statement. For each reporting period, the difference between depreciation expense calculated over restated value of assets and the depreciation expense calculated over the assets’ value prior to revaluation (charged to the income statement), is transferred from revaluation fund to retained earnings. Depreciation is recognized, either, over the adjusted costs of property, plant and equipment or restated balances on a straight-line basis over the economic useful lives. The estimated economic useful lives for property, plant and equipment are as follows: Years Land improvements 10-30 Buildings 10-50 Machinery and equipment 3-20 Vehicles 4-10 Fixture and furnitures 3-19 In the event of circumstances indicating that impairment has occurred in the tangible assets, an inspection is performed with the purpose of determining a possible impairment, and if the registered value of the tangible asset is higher than its recoverable value, the registered value is reduced to its recoverable value by reserving a provision. Gains/loss due to disposal of tangible assets are accounted in income statement in the event of revalued property disposal, the balance booked under “revaluation fund” is transferred to retained earnings account.(Note 11). Non-current assets held for sale Tangible assets or group of assets, meeting the criteria to be classified as held for sale, are measured at the lower of cost or fair value less costs to sell.Non current assets held for sale are not depreciated. Intangible assets Intangible assets comprise acquired intellectual property and computer software. They are recorded at acquisition cost and amortized on a straight-line basis over their estimated economic lives for a period not exceeding 5 years from the date of acquisition. Where an indication of impairment exists, the carrying amount of any intangible asset is assessed and written down immediately to its recoverable amount (Note 12).




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2. Basis of presentation of financial statements (continued) 2.3 Summary of significant accounting policies Research and development expenses Research expenses are recognized in comprehensive income statement in the period they are incurred. Intangible assets resulting from development activities (or within the development of a project within the group as a by-product) are recognized in the financial statements, only if all of the following criteria are met.

• It is technically possible for the fixed asset to be finalized and made ready for sale.

• There is an intention of completing, utilizing and disposing the fixed asset • Whether the fixed asset is usable and merchantable.

• It is foreseeable that fixed asset is capable of providing a possible future gross economic benefit.

• There is a technical, financial and other resource that is suitable fort the completion, usage and trade of the fixed asset

• Whether the development cost is properly measurable during the development phase. Other development costs are recognized as expenses as they occur. Development costs that are recognized as expense within the prior period cannot be capitalised within the following year.

Financial assets Investments intended to be held for an indefinite period of time and which may be sold in response to needs for liquidity or changes in interest rates are classified as available-for-sale. These are included in non-current assets unless management has the expressed intention of holding the investments for less than 12 months from the balance sheet date or unless they will need to be sold to raise operating capital, in which case they are included in current assets. Management reviews the classification of these financial assets on a regular basis. All financial assets are initially carried at cost including acquisition costs related with investments. Financial assets are initially measured at cost values including the acquisition costs related to investment, which is the fair value of the cost. Financial instruments classified as assets held for sale after their recognition in the financial statements and have been valued at fair value as long as their fair value could be calculated reliably. Borrowings Fixed or determinable payments, which are not traded loans, are classified in this category. Loans are measured at amortized cost using the effective interest method, less any impairment losses.




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2. Basis of presentation of financial statements (continued) 2.3 Summary of significant accounting policies Trade Receivables Trade receivables are recognized at invoice value and, subsequently, at amortized cost, with the deduction of provision for doubtful receivables, if present, determined by the effective interest rate method. Notes and checks that are classified under trade receivables are discounted using the effective interest rate method and carried at amortized cost. Provision for doubtful receivables is accounted, if there is a concrete indication that overdue receivables cannot be collected. The provision is the amount reserved which the Company’s management considers that it covers the risk due to economic conditions forecasted or possible future losses due to the nature of account. Collection of receivables that are determined to be completely impossible is completely written off from the records. Impairments in financial assets Financial asset are assessed, at each balance sheet date, to determine if there is any objective evidence that a financial asset or a group of financial assets is impaired. A financial asset or a group of financial assets is deemed to be impaired, if, and only if, there is objective evidence of impairment as a result of one or more events that had occurred after the initial recognition of the asset and that loss event has an impact on the estimated future cash flows of the financial asset or the group of financial assets that can be reliably estimated. For loans and receivables, impairment loss is measured as the difference between present value calculated via the discount of possible future cash flows using the financial asset’s effective rate of interest and the asset’s carrying amount. The Company monitors its receivables individually. In case, if it is realised that financial asset is uncollectable, the amount corresponding is written off as it is written of from the allowances, simultaneously. Changes in provisions are recognized in income statement. In case the fair value of available for sale financial assets are decreased beyond the cost value due to market fluctuations. While the Company considers whether there is an impairment of financial assets that should be related to the corresponding financial period’s results, it also considers whether impairments are substantial, permanent or not possible to be reverted in the long term and the performance of similar financial assets in the market. According to the accounting estimates and policies of the Company, in order for the financial assets’ impairments to be considered permanent or not possible to be reverted in the long term, a year must be past following the decrease of the market value of financial asset beyond the cost value. Trade and settlement date accounting All regular way financial asset purchase and sales are recognized at the date of the transaction, in other terms, the date the Company committed to purchase or sell. The mentioned purchases or sales are transactions which require the delivery of the financial assets within the time interval identified with the established practices and regulations in the market.




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2. Basis of presentation of financial statements (continued) 2.3 Summary of significant accounting policies Financial liabilities Financial liabilities are recognized initially at fair value less their transaction costs and subsequently measured at their amortized cost determined via the interest expense calculated using effective interest rate. Effective interest rate method is the determination of amortized cost of financial liabilities and allocation of related interest expenses to corresponding period. Effective interest rate is the rate reducing the long term, or short term if conditions allow, expected cash payments to present value of the current financial liability within an expected life of the financial instrument.

Borrowings

Short and long term bank loans are stated at the value computed through addition of the principal amount and the interest expenses accrued as of the balance sheet date. Borrowings are recognized initially at proceeds received, net of transaction costs incurred. Borrowings are subsequently stated at amortized cost using the effective yield method; any difference between the proceeds and redemption value is recognized in the comprehensive income statement over the period of the borrowings. Borrowing costs arising from bank loans are charged to the comprehensive income statement when they are incurred unless they are incurred for acquisition of a qualifying asset.

Trade payables

Trade payables are recognized initially at fair value of and subsequently measured at amortized cost using the effective interest method. Financial lease operations

Lease – Company as Lessor

Leases which a significant portion of the risk and rewards of ownership belongs to the lessee are classified as financial leases but other leases are classified as operating leases. Financial lease receivables are recorded under the Company’s net investment item. Financial lease income is distributed to accounting periods as providing a fixed interest rate of return on the Company’s net financial leases investment. Operating leases incomes are recorded the income statement to use straight-line basis during the lease period. Initial direct costs that are incurred on realization and negotiation of leasing are included the cost of leased asset and they are amortized to use straight-line basis during the lease term. Lease – Company as Tenant

Leases which a significant portion of the risk and rewards of ownership belongs to the lessee are classified as financial leases but other leases are classified as operating leases Assets acquired by financial lease are capitalized using the fair value of asset at the date of lease or the lower of the present value of the minimum lease payments. The liability to the lessor, which is the same amount as it is capitalized before is showed as financial lease liability in the balance sheet. Financial lease payments are seperated as financial expense and principal payment providing the decrease in financial lease obligation so the calculation of interest is made by using the fixed interest rate through the rest of principal balance.




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2. Basis of presentation of financial statements (continued) 2.3 Summary of significant accounting policies Financial expenses are recorded in the income statement in accordance with the Group’s general policy on borrowing. Operating lease payments (incentive received or to be received to occur the lease process from tenant is recorded in the income statement using straight-line basis during the term of lease.) are recorded in the income statement on straight-line basis during the period of lease. Recognition and derecognition of financial assets and liabilities The 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. The Group derecognizes a financial asset or a portion of it only when the control on rights under the contract is discharged. The Group derecognizes a financial liability when the obligation under the liability is discharged or cancelled or expires.

Tax calculated on the basis of the Group’s earnings Tax provision is the aggregate amount of current period and deferred tax of tax reserves included in the determination of net profit or loss.

Deferred tax is recognized taking into account balance sheet liability method and tax impacts arising from temporary differences between values of assets and liabilities reflected in financial reporting and their bases included in legal tax calculation. Deferred tax liability is calculated over all taxable temporary differences.

Deferred income tax assets are recognised for all deductible temporary differences and unused tax losses, to the extent that it is probable that taxable profit will be available against which the deductible temporary differences can be utilized. The carrying amount of deferred income tax assets is reviewed by the Group at each balance sheet date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred income tax asset to be utilized.

Tax rates, anticipated to occur in periods in which the asset in question shall be realized and the liability shall be met, is calculated based on valid tax rates as of balance sheet date during the calculation of deferred tax assets and liabilities. Current Tax Current tax liability is calculated on taxable current period income .Taxable profit and profit in the income statement is different because of taxable profit excludes tax deductible items and taxable items in other years and items can not be deducted from taxes. The Group’s current tax liability has been calculated by using legalized or considerably legalized tax rate as of balance sheet date.

As of January 1, 2006, therefore, in Turkey, the corporation tax rate is 20% as of 2016 (2015: 20%). Corporate tax rate is applied to tax base, which shall be determined as a result of addition of expenses not deducted according to lax laws to commercial income of entities and deduction of exceptions (affiliation privilege, investment discount exception etc.) and discounts (e.g. R & D discount) included in related tax laws. Dividends paid to the resident institutions and the institutions working through local offices or representatives are not subject to withholding tax. Withholding tax rate on the dividend payments other than the ones paid to the non-resident institutions generating income in Turkey through their operations or permanent representatives and the resident institutions is 15%. Appropriation of the retained earnings to capital is not considered as profit distribution and therefore is not subject to withholding tax.




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2. Basis of presentation of financial statements (continued) 2.3 Summary of significant accounting policies Long-term employee benefits

(a) Provision for employee termination benefits

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.

Provisions for employee benefits are recognized as a separate item under long-term liabilities in the balance sheet. (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.

Foreign currency transactions Transactions denominated in foreign currencies have been translated into TL at the exchange rate of the date of the transaction. Foreign currency denominated assets and liabilities are valued at the exchange rate of the date of balance sheet and its translation difference arising are recognized the related income and expense accounts. The exchange rates used in the end of periods are as follows:

Date TL / US Dollar TL / Euro 31 December 2016 3,5192 3,7099 31 December 2015 2,9076 3,1776 Revenue recognition

Revenue is recorded when the amount of revenue can be measured reliably and it is probable that the economic benefits will flow to the company. Revenues are stated as net after deduction of discounts and value-added tax. The following criteria must be fulfilled to occur the revenue. Sales Income is recognised when the risk and benefit of sales of goods are transferred to the buyer and the amount of income is measured reliably. Net sales consist of the invoiced amount of sales after deduction of discounts, value-added tax and commissions.

Interest

Interest income is recognised using the effective interest rate until maturity.

Dividend

Income is recognised as shareholders have right to receive dividend.




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2. Basis of presentation of financial statements (continued) 2.3 Summary of significant accounting policies Provisions, contingent liabilities and assets

Provisions

Provisions are recognized when the Group has a present obligation (legal or constructive) as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. The provision is reflected as present value of expenses which is likely to be in the future at the balance sheet date in case of the significant depreciation in money in time. The increase in the provision is recorded as interest expense when the present value is used. Contingent liabilities and assets

Contingent liabilities are disclosed in notes rather than being included in financial statements. On the other hand, contingent assets are not included in financial statements and disclosed in notes if there is a strong probability to generate an economic return. Government grants and incentives

Government grants are recognized where there is reasonable assurance that the grant will be received and all attaching conditions will be complied with. When the grant relates to an expense item, it is recognized as income over the period necessary to match the grant on a systemic basis to the costs that it is intended to compensate. The Government grants relates to intangible assets are recognized as deferred income under the short and long term liabilities and the intangible assets’ depreciations are recognized by using straight-line method of depreciation in income statement during useful economic life. Restricted reserves

Restricted reserves are reserved set aside from the profit of the prior period for certain purposes (such as acquiring tax advantage from sale of associates) except dividend distribution and due to obligations arising from the laws or contracts. These reserves are shown on their statutory amounts. (Note 17). Earnings per share

Basic earnings per share are calculated by dividing the net profit by the weighted average number of ordinary shares outstanding during the year. The companies can increase their share capital by making a pro-rata distribution of shares (“Bonus Shares”) to existing shareholders in Turkey. For the purpose of the earnings per share calculation such Bonus Share issues are regarded as stock dividends. Accordingly, the weighted average number of shares used in earnings per share calculation is derived by giving retroactive effect to the issue of such shares. There was no difference in basis and relative earnings per share any period. Subsequent events Subsequent events comprise all events occurred between the date of authorization of the financial statements for issuance and the balance sheet date. The subsequent events that does not require amendment are disclosed in notes based on materiality level.




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2. Basis of presentation of financial statements (continued) 2.3 Summary of significant accounting policies Impairment of financial assets At each reporting date, the Company assesses whether there is any indication that carrying value of assets except financial assets and deferred tax assets is impaired or not. When an indicator of impairment exists, the Company estimates the recoverable values of such assets. When individual recoverable value of assets cannot be measured, recoverable value of cash generating unit of that asset is measured. Recoverable amount is the higher of net selling price or value in use. The value in use is discounted to its present value using future cash flows and discount rate before tax that has risk about asset. The main assumptions used are inflation expectations of following years, expected increase in sales and costs and expected growth rate of country. When recoverable amount of an asset (or a cash generating unit) is lower than its carrying value, the asset’s carrying value is reduced to its recoverable amount. An impairment loss is recognized immediately in the comprehensive income statement. An impairment loss recognized in prior periods for an asset is reversed if the subsequent increase in the asset’s recoverable amount is caused by a specific event since the last impairment loss was recognized. Such a reversal amount cannot be higher than the previously recognized impairment and is recognized as income in the financial statements. Related parties 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) Entity and the Company are the members of 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, (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).




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2. Basis of presentation of financial statements (continued) 2.3 Summary of significant accounting policies (continued)

Financial instruments A financial instrument is any contract that gives rise to both a financial asset of one enterprise and a financial liability or equity instrument of another enterprise. A financial asset is any asset that is:

cash, a contractual right to receive cash or another financial asset from another enterprise,

a contractual right to exchange financial instruments from another enterprise under conditions that are potentially favourable, or;

an equity instrument of another enterprise.

A financial liability that is a contractual obligation:

to deliver cash or another financial asset to another enterprise, or

to exchange financial instruments with another enterprise under conditions those are potentially

unfavourable.

When a financial asset or financial liability is recognized initially, it is measured at its cost, which is the fair value of the consideration given (in the case of an asset) or received (in case of a liability) for it. Transaction costs are included (deducted for financial liabilities) in the initial measurement of all financial assets and liabilities. Investment Property

Lands and buildings, which are held to gain rental income or appreciation or for both of them instead of being used in production of goods and services or sold for administrative purposes or during the ordinary course of business, are classified as investment properties and are stated of fair value. Profit or loss, resulting from a change in fair value of investment properties, is recognized in profit or loss and other comprehensive income statement. Derecognizing of investment properties is realized through being sold or an investment property to be discarded from use and provided that no future benefit is expected for the disposal of investment property in question. Profit or loss resulting from disposal of investment properties is recognized under related income and expense accounts during the period in which the disposal transaction is made. Transfers, which are made to investment properties, are only possible when the use of immovable property is ceased by the property owner, it is rented to another party in the framework of operating lease or ceasing of investment studies and a change occurs in usage purposes of the property. Transfers, which are made from investment properties, is realized when the property is started to be used by the property owner or investment studies towards sales of property is commenced.




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2. Basis of presentation of financial statements (continued) 2.4 Significant accounting judgments and estimates

Preparation of financial statements requires the usage of estimations and assumptions by the Group’s management which may affect the reported amounts of assets and liabilities as of the balance sheet date, disclosure of contingent assets and liabilities and reported amounts of income and expenses during the reporting period. The actual results may differ from the estimations and assumptions. These estimations and assumptions are reviewed regularly and the necessary adjustments are reflected on the operating results of the related reporting period.

Interpretations which may have a material impact on the amounts presented in the financial statements and significant assumptions and assessments made taking into account the main sources of estimations which existed on the balance sheet date or which may occur in the future are as follows:

a) The Group uses certain assumptions including discount rate, turnover of employees, future change in salaries/limits in the calculation of retirement pay liability. The effect of the changes in these assumptions are recognized in the current period income statement. These assumptions are disclosed in Note 16.

b) The Group has made certain important assumptions based on experiences of technical personnel in determining useful economic life of buildings and machinery and equipment. The assumptions used for the determination of fair values of buildings and lands are disclosed in Notes 11.

c) In determining of provision for litigations, the Group considers the probability of legal cases to be resulted against the Group and the Group management books a provision in accordance with their best estimates (Note 17).

d) Provision is recorded to expense accounts for doubtful receivables. The allowance for doubtful receivables is an estimated amount that management believes to be adequate to absorb possible future losses on existing receivables that may become uncollectible due to current economic conditions and inherent risks in the receivables. Receivables which can not be collected are written off from assets.(Note 5)

e) Many transaction and calculation that has indefinite effects of final tax amount recognized

during normal work flow and this situation requies the use of significant judgement during to determine the corporation income tax provision. The Group are recording the tax obligation that consist of additional taxes estimated payment as a result of tax issues and the defferred tax assets that will be realized through future taxable income (Note 26). The differences may affect the income tax and deferret tax income/expense in the periods that determining in case of the final tax consequences that occur about this issues are different from amounts that were initially recorded.

f) The Group has made classification of tangible assets classified as held for sale to investment

properties as follows: The Group has classified the “Eski Dış Giyim Fabrikası” located in Adana, Yüreğir District,

Cumhuriyet Mahallesi 2402 Ada, Parcel 2 with a total area of 232.875 m2 under non-current

asset for sale in accordance with TFRS 5 “Non current asset held for sale and discontinued operations” in September 30,2016 financial statements. Related property was decided to be kept for capital appreciaton and reevaluated in mid term based on market conditions and accordingly was reclassified as investment property in accordance with TAS 40 “Investment properties”.




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2. Basis of presentation of financial statements (continued)

2.4 Significant accounting judgments and estimates (continued) g) The Group has made classification of tangible assets classified as held for use to tangible

assets classified as held for sale as follows: The Group has decided to sell production facilities, which was classified in scope of TAS 16

“Tangible Fixed Assets” in financial statements dated December 31, 2015 and included in Gömleklik Production Unit having a total area of 140.000m2 and located at Adana, Seyhan, Zeytinli District, 12067 Map section and parcel 1 since the related property shall remain idle after their transfer to Denim Production Units and classified as Tangible Asset Held for Sale in scope of TFRS 5- “Tangible assets held for sales and discontinued operations” standard.

h) The Group has reflected values formed with cost approach method to financial statements

during the fair value calculation of investment properties. Fair value of investment properties are determined by companies included in list of “Real Estate Valuation Firms” approved by CMB. Valuation company has determined the cost calculation based on “normal construction cost considerations for square meter of the building which shall be applied in 2016 which are principal to real estate tax and Real Estate Tax Law General Communique numbered 66 published in Official Gazette dated August 26, 2015 and numbered 29457 through discounting depreciation in line with physical wearout on buildings located on the parcel.

2.5. Changes in accounting policies and estimates and errors To allow for the identification of financial position and performance trends, The Group prepares its financial statements comparatively with the prior period. The comparative information is reclassified when considered necessary in order to ensure compliance with the presentation of current period financial statements. Reclassifications in December 31, 2015 financial statements Group made the following reclassifications for comply with TAS issued by POA as of December 31, 2015: Consoliated financial statement

Previous Period 31 December

2015 Reclassification 31 December

2015

Current Assets Held for sale current assets - 51.994.240 51.994.240 TOTAL CURRENT ASSETS 188.563.785 51.994.240 240.558.025 Non- current Assets Held for sale non-current assets 51.994.240 (51.994.240) - TOTAL NON- CURRENT ASSETS 497.808.057 (51.994.240) 445.813.817 Current Liabilities

Deferred income: - 2.161.149 2.161.149 - Deferred income from third parties - 2.161.149 2.161.149 Other current liabilities 6.612.790 (2.161.149) 4.451.641 TOTAL SHORT TERM LIABILITIES 191.760.215 191.760.215




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3. Cash and cash equivalents 31 December 2016 31 December 2015 Cash on hand 9.708 6.061 Bank - demand deposits 1.080.641 1.956.145 - time deposits 17.705.905 10.933.608 Total 18.796.254 12.895.814 Less: accrued interest (817) -

Total for cash flow 18.795.437 12.895.814

Average term of time deposits is less than three months as of December 31, 2016 and December 31, 2015. As of December 31, 2016, time deposits denominated in US Dollars, Euro and TL interest rates are 0,40%, 0,40% and 8,00% respectively. (December 31, 2015: EUR, US Dollars and TL interest rates are 0,4%, 0,4 8,00%’ respectively). Cash and cash equivalents denominated in foreign currencies as of December 31, 2016 and December 31, 2015 are as follows: 31 December 2016 31 December 2015

Original balance

TL equivalent

Original balance

TL equivalent

Time Deposit

TL 3.000.656 3.000.656 3.600.000 3.600.000 EUR 3.350.037 12.428.302 2.070.000 6.577.632 US Dollars 647.007 2.276.947 260.000 755.976

Demand deposit TL 612.222 612.222 1.240.672 1.240.672 EUR 111.755 414.600 8.990 28.566 US Dollars 15.237 53.623 203.232 590.875 GBP 29 126 22.329 96.032 Other 20 70 - -

Total deposit 18.786.546 12.889.753




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4. Financial liabilities


Short-term borrowings Annual effective

interest rate % Amount in

TL Annual effective

interest rate % Amount in TL

EUR 3,64% 85.614.878 4,49% 62.807.432 TL 7,50% 168.828 7,47% 174.270

Total short term bank loans 85.783.706 62.981.702

TL 659.299 970.729 EUR 11.199 -

Total accrued interest 670.498 970.729

Total short term bank loans 86.454.204 63.952.431

Short-term financial leasing 2.432.285 1.381.144

Total short term borrowings 88.886.489 65.333.575


Long-term borrowings Annual effective

interest rate % Amount in

TL Annual effective

interest rate % Amount in TL

EUR 4,25% 135.066.614 4,28% 136.037.517 TL 7,81% 201.205 7,67% 370.033

Total long term bank loans 135.267.819 136.407.550

EUR 1.127.493 - TL 59.634 -

Total accrued interest 1.187.127 - Total long term bank loans 136.454.946 136.407.550 Long-term financial leasing 2.801.275 3.252.612

Total long-term borrowings 139.256.221 139.660.162

The Group has performed credit refinancing transaction in Türkiye İş Bankası A.Ş. for all bank loans which are restructured with 8 years maturity on March 16, 2015. A real estate property mortgage is given to the aforementioned bank amounting to EUR 65.000.000 and TL 40.000.000. The Group has a financial ratio liability in accordance with the contracts concluded related to long term credits used for refinancing purposes. However, the related finance company stated that it has waived the abovementioned liability for 12 months as of December 31, 2016 with the waiver letter submitted on December 31, 2016. Therefore, there is no risk related to financial ratio liability for the 12 months period as of December 31, 2016.




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4. Financial liabilities (continued) Principal repayment plans of long term bank loans and bonds issued are as follows:

Year Credit repayment

(Euro) Bond issued

repayment (TL)

İn 1 year 6.665.682 40.700.000 In 2 year 6.665.682 - In 3 year 6.665.682 - In 4 year 6.665.682 - In 5 year 6.665.682 - In 6 year 6.665.682 - In 7 year 3.332.841 -

Total 43.326.933 40.700.000

As of December 31, 2016 and December 31, 2015 the bond details are as below:


Short Term Bond Bond issued 41.379.795 21.619.247

Total short-term bond issued 41.379.795 21.619.247


Long Term Bond Bond issued - 20.172.406

Total long-term bond issued - 20.172.406

The details of the capital market instruments issued are as follows: The Group has made a bond issuance in accordance with the applicable principles of Material Events Communique of the Capital Market Board to qualified investors as at May 16 and 17, 2016 in nominal value of TL 20.000.000 with of maturity of 546 days, government securities index + 3,66% interest rate, quarterly interest payment and principal payment at maturity and as at May 26 and 27, 2016 in nominal value of TL 20.700.000 with of maturity of 728 days, government securities index + 3,57% interest rate, quarterly interest payment and principal payment at maturity. The principal of the bond repayment date is May 25, 2017 and November 15, 2017, respectively.




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5. Trade receivables and payables

a) Short-term trade receivables:

Short-term trade receivables: 31 December 2016 31 December 2015

Trade receivables 60.244.883 75.543.391 Notes receivables 17.805.252 23.273.402

Total 78.050.135 98.816.793

Unearned credit finance income (-) (121.687) (633.657) Provision for doubtful receivables (-) (4.658.381) (3.309.620)

Trade receivables, net 73.270.067 94.873.516

The Group determines credit limits for its customers (excluding related parties) by using receivable insurance, letter of guarantee, mortgage and other guarantees. As of December 31, 2016 and December 31, 2015 letter of guarantees received and mortgages received are as follows:


Letter of guarantees received 5.580.908 8.372.170 Mortgages received 718.750 868.750

Total 6.299.658 9.240.920

As of December 31, 2016, trade receivables are discounted by using the interest rates for EUR, US Dollar, GBP, and TL by 0,75%, 1,75%, 1,12% and 14,50%, respectively. (December 31, 2015: 8,30%, 7,40%, 8.30% and 10,84% for Euro, US Dollar, GBP and TL denominated trade receivables respectively) Average term of trade receivables is less than three months as of December 31, 2016 and December 31, 2015. The analysis of overdue and doubtful receivables which have provision reserved is as follows:


More than 1 year 4.658.381 3.309.620

Total 4.658.381 3.309.620

The movements of the provision for doubtful receivables for the period ended as of December 31, 2016 and 2015 are as follows;

2016 2015 Opening balance, January 1 3.309.620 3.284.831 Current period charge 2.953.154 1.071.687

Collections during the period (1.604.393) (1.046.898) Closing balance, December 31 4.658.381 3.309.620




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5. Trade receivables and payables (continued) As of December 31, 2016 and December 31, 2015, the analysis of overdue trade receivables is as follows;


Overdue but not impaired 5.866.664 10.496.830 Up to one month 23.922.756 23.740.389 Between 1-3 months 35.010.790 48.711.697 Between 3-12 months 8.469.857 11.924.600

Total 73.270.067 94.873.516

The management does not expect problems in the collection of overdue and not impaired receivables. b) Trade payables


Trade payables 104.523.291 85.715.623

Total 104.523.291 85.715.623

Unaccrued financial expenses (-) (127.034) (15.221)

Total payables, net 104.396.257 85.700.402

As of December 31, 2016 trade payables are discounted with the interest rates of 0,75%,1,75% and 14,50% (December 31, 2015: 4,00%, 4,70% and 15,00%) for Euro, US Dollar and TL denominated trade payables, respectively. As of December 31, 2016, average turnover is less than four months. (December 31, 2015: less than three months). 6. Other receivables and other payables a) Short-term other receivables


Advance given to suppliers 1.406.074 1.990.602 Textile Employer Union’s and Turquality support premium receivables 1.413.417 3.087.189 Subsistence allowance 257.552 664.529 Deposits given 30.859 22.877 Personnel advances 124.718 14.217 Other - 185.514

Total 3.232.620 5.964.928




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6. Other receivables and other payables (continued)

b) Short-term other payables


Deposits and guarantees received 21.130 29.533

Total 21.130 29.533

7. Prepaid expenses

a) Short term prepaid expenses

31 December 2016 31 December 2015 Prepaid insurance expense 1.501.713 - Prepaid rent expense 45.026 - Prepaid other expense 196.730 -

Total 1.743.469 -

b) Long term prepaid expenses

31 December 2016 31 December 2015 Prepaid rent expense 437.165 - Prepaid other expense 1.114.861 -

Total 1.552.026 -

8. Other assets and liabilities

a) Other current and non-current assets


VAT receivables 1.447.921 1.766.171 Transferred VAT - 175.723 Other current assets 1.265 1.008

Total 1.449.186 1.942.902

b) Other short-term liabilities 31 December 2016 31 December 2015

Deferred or instalment taxes(*) 2.362.439 - Taxes and funds payable 1.816.558 4.262.999

Other liabilities 368.141 188.642

Total 4.547.138 4.451.641

(*) Deferred or installment taxes are the instalments of the Group’s corporate tax and withholding

tax witholdings.




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8. Other assets and liabilities (continued)

c) Other long term liabilities


Deferred tax or tax installments (*) 2.980.304 -

Total 2.980.304 -

(*) Deferred tax or tax installments is related to the Group’s corporate income tax and witholding

tax payments. 9. Inventories


Raw materials 21.524.412 18.164.280 Semi-finished goods 18.048.429 30.789.501 Finished goods 26.806.998 21.551.073 Other inventories (*) 95.473 2.263.821 Goods in transit 317.527 117.950 Total 66.792.839 72.886.625

(*) Other inventories consist of raw materials, semi-finished goods and finished goods sent to outsource production.

The total amount of inventory expensed and included in the cost of goods sold for the period ended December 31, 2016 is TL 150.852.221 (January 1 - December 31, 2015: TL 147.980.593).

The movement of allowance for decrease in value of inventories is as follows:

2016 2015

Opening balance, January 1 - 6.023.106 Current period increase - (6.023.106)

Closing balance, December 31 - -




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10. Non-current assets held for sale Movements of the Group's non current assets classified as held for sale as of 31 December 2016 and 2015 are as follows:

1 January 2016

Transfers for sale

Transfers to investments

property Provisions for

losses (**) 31 December

2016

Cost: Land and Parcels 26.830.603 38.476.374 (38.476.374) - 26.830.603 Land improvements 2.679.569 5.635.208 (5.635.208) (519.577) 2.159.992 Buildings 52.683.265 43.531.424 (43.531.424) (13.608.060) 39.075.205

Total 82.193.437 87.643.006 (87.643.006) (14.127.637) 68.065.800

Accumulated depreciation: Land improvements (1.394.992) (3.496.310) 3.496.310 - (1.394.992) Buildings (28.804.205) (23.885.678) 23.885.678 - (28.804.205)

Total (30.199.197) (27.381.988) 27.381.988 - (30.199.197)

Net book value 51.994.240 60.261.018 (60.261.018) (14.127.637) 37.866.603

1 January 2015

Transfers for sale

Transfers to investments

property Provisions for

losses (**) 31 December

2015

Cost: Land and Parcels - 26.830.603 - - 26.830.603 Land improvements - 2.679.569 - - 2.679.569 Buildings - 52.683.265 - - 52.683.265

Total - 82.193.437 - - 82.193.437

Accumulated depreciation: Land improvements - (1.394.992) - - (1.394.992) Buildings - (28.804.205) - - (28.804.205)

Total - (30.199.197) - - (30.199.197)

Net book value - 51.994.240 - - 51.994.240

(*) The Group has classified the “Eski Dış Giyim Fabrikası located in Adana, Yüreğir District, Cumhuriyet

Mahallesi 2402 Ada, Parcel 2 with a total area of 232.875 m2 under non-current asset for sale in accordance with TFRS 5 “Non current asset held for sale and discontinued operations” in September 30,2016 financial statements. Related property was decided to be kept for capital appreciaton and reevaluated in mid term based on market conditions and accordingly was reclassified as investment property in accordance with TAS 40 “Investment properties”.Details of investment properties are disclosed in Note 13.

(**) Impairment at an amount of TL 14.127.637 related to fixed assets which are classified as held for sale is

recognized in “Expenses from Investment activities” under profit or loss statement as of December 31, 2016.




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10. Non-current assets held for sale (continued) The Group recognized properties related to shirt facilities located at Seyhan, Adana as non-current assets held for sale as of December 31, 2016.

31 December 2016 31 December 2015 Cost: 68.065.800 82.193.437 Accumulated depreciation: (30.199.197) (30.199.197) Net book value 37.866.603 51.994.240

Information on assets held for sale is as follows:

Name of the property

City / State

Street Land

Number Parcel

Number Total Area

31 December 2016 Net Book Value

Eski Gömleklik Fabrikası

Adana Seyhan

Zeytinli 12067 1 140.266 m2 37.866.603

Non-current assets held for sale consist of land and buildings. Fair value of non-current assets held for sale are determined through cost method mentioned in Property Valuation Report dated December 31, 2016 issued by Harmoni Gayrimenkul Değerleme ve Danışmanlık A.Ş.




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11. Property, plant and equipment The table below summarizes the movement of property, plant and equipments for the year ended December 31, 2016:

The depreciation charges incurred for the year ended December 31, 2016 was included under following accounts, TL 14. 606.725 in cost of goods sold, TL 537.238 in marketing, selling and distribution expenses, TL 870.845 in general administrative expenses.

1 December 2016 Addition Valuation Disposal Transfers

Transfer to non current assets held

for sale 31 December 2016

Cost: Land 68.992.747 - 3.445.930 - - (38.476.374) 33.962.302

Land Improvements 9.366.166 - 781.174 - 448.364 (5.635.208) 4.960.496

Buildings 93.833.656 6.235 661.340 - 29.930.949 (43.531.424) 80.900.756

Machinery and equipment 483.775.015 - - (101.161.324) 7.635.522 - 390.249.214

Vehicles 1.540.721 - - (137.840) 44.068 - 1.446.949

Furniture and fixtures 10.919.454 1.989 - (4.369.657) 512.903 - 7.064.689

Other tangible assets 234.439 - - - (234.439) - -

Leasehold Improvements 14.875.392 40.176.615 - - (46.121.565) - 8.930.442

Total 683.537.590 40.184.839 4.888.444 (105.668.821) (7.784.198) (87.643.006) 527.514.848

Accumulated depreciation: Land Improvements (4.833.441) (876.365) - - - 3.496.310 (2.213.496)

Buildings (46.194.554) (3.368.790) - - - 23.885.678 (25.677.666)

Machinery and equipment (410.815.223) (11.430.473) - 97.782.826 (185.367) - (324.648.237)

Vehicles (1.155.730) (111.605) - 94.408 1.749 (1.171.178)

Furniture and fixtures (9.813.251) (227.575) - 4.363.110 (2.761) - (5.680.477)

Other tangible assets (196.019) - - - 196.019 - -

Total (473.008.218) (16.014.808) - 102.240.344 9.640 27.381.988 (359.391.054)

Net book value 210.529.372 168.123.794




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11. Property, plant and equipment (continued) The table below summarizes the movement of property, plant and equipments for the year ended December 31, 2015:

The depreciation charges incurred for the year ended December 31, 2015 was included under following accounts, TL 15.454.202 in cost of goods sold and redemption, TL 606.152 in marketing, selling and distribution expenses, TL 1.328.780 in general administrative expenses.

1 December

2015 Addition Valuation Disposal Transfers

Transfer to non-current asset held

for sale 31 December 2015

Cost: Land 54.414.552 - 41.408.798 - - (26.830.603) 68.992.747 Land Improvements 11.011.866 - 1.018.364 - 15.505 (2.679.569) 9.366.166 Buildings 130.851.207 - 12.975.383 - 2.690.331 (52.683.265) 93.833.656 Machinery and equipment 542.555.488 33.127 - (62.585.799) 3.772.199 - 483.775.015 Vehicles 2.200.931 - - (836.905) 176.695 - 1.540.721 Furniture and fixtures 13.628.026 17.917 - (2.903.498) 177.009 - 10.919.454 Other tangible assets 404.615 - - (170.176) - - 234.439 Leasehold Improvements 5.359.777 16.752.986 - - (7.237.371) - 14.875.392

Total 760.426.462 16.804.030 55.402.545 (66.496.378) (405.632) (82.193.437) 683.537.590

Accumulated depreciation: Land Improvements (5.737.821) (490.612) - - - 1.394.992 (4.833.441) Buildings (70.479.408) (4.519.351) - - - 28.804.205 (46.194.554) Machinery and equipment (460.343.250) (12.009.127) - 61.537.154 - - (410.815.223) Vehicles (1.652.675) (148.781) - 645.726 - - (1.155.730) Furniture and fixtures (12.494.726) (221.153) - 2.902.628 - - (9.813.251) Other tangible assets (366.087) (110) - 170.178 - - (196.019)

-

Total (551.073.967) (17.389.134) - 65.255.686 - 30.199.197 (473.008.218)

Net book value 209.352.495 210.529.372




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12. Intangible assets

1 January

2016 Additions Disposals Transfers 31 December

2016

Cost: Rights 1.334.815 - (8.365) 7.002.694 8.329.144 Leasehold improvements 556.649 - - - 556.649 Research and development expenses 16.036.580 - - - 16.036.580 Software 6.489.345 - (30.785) 549.717 7.008.277 Total 24.417.389 - (39.150) 7.552.411 31.930.650 Accumulated amortization Rights (1.038.779) (55.805) 8.364 - (1.086.220) Leasehold improvements (556.649) - - - (556.649) Research and development expenses (10.491.958) (2.383.365) - - (12.875.323) Software (5.223.553) (721.060) 30.785 - (5.913.828) Total (17.310.939) (3.160.230) 39.149 - (20.432.020)

Net book value 7.106.450 11.498.630

The redemption incurred for the end of the period as of December 31, 2016 was included under following accounts, TL 2.005.561 in cost of goods sold, TL 317.480 in marketing, selling and distribution expenses, TL 837.189 in general administrative expenses.

1 January

2015 Additions Disposals Transfers 31 December

2015

Cost: Rights 1.052.103 - (13.324) 296.036 1.334.815 Leasehold improvements 556.649 - - - 556.649 Research and development expenses 16.036.580 - - - 16.036.580 Software 6.379.750 - - 109.595 6.489.345 Total 24.025.082 - (13.324) 405.631 24.417.389

Accumulated amortization Rights (1.052.103) - 13.324 - (1.038.779) Leasehold improvements (556.649) - - - (556.649) Research and development expenses (7.387.446) (3.104.512) - - (10.491.958) Software (4.601.236) (622.317) - - (5.223.553) Total (13.597.434) (3.726.829) 13.324 - (17.310.939)

Net book value 10.427.648 7.106.450

The amortization charge for year ended December 31, 2015 was included under following accounts, TL 2.619.450 in cost of goods sold, TL 339.916 in marketing, selling and distribution expenses, TL 767.463 in general administrative expenses.




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13. Investment Property The movements in investment properties for the periods ended 31 December 2016 and 2015 are as follows:

31 December 2016 31 December 2015 Cost: 114.609.987 - Accumulated depreciation: (27.381.987) - Net book value 87.228.000 -

1 December

2016

Transfers from non-current assets held for

sale(*) Revaluation

(**) 31 December

2016

Eski Dış Giyim Fabrikası - 60.261.018 26.966.982 87.228.000

Total - 60.261.018 26.966.982 87.228.000

(*) The Group has classified the “Eski Dış Giyim Fabrikası located in Adana, Yüreğir District, Cumhuriyet

Mahallesi 2402 Ada, Parcel 2 with a total area of 232.875 m2 under non-current asset for sale in accordance with TFRS 5 “Non current asset held for sale and discontinued operations” in September 30,2016 financial statements. Related property was decided to be kept for capital appreciaton and reevaluated in mid term based on market conditions and accordingly was reclassified as investment property in accordance with TAS 40 “Investment properties”.

(**) As of December 31, 2016 increase in the revaluation of investment property is recognized in “Revaluation Funds under equity.

Eski Dış Giyim Fabrikası Yüreğir/Adana

Name of the property

City / State

Street Land

Number Parcel

Number Total Area

31 December 2016 Net Booked Value

Eski Dış Giyim Fabrikası

Adana Yüreğir

Cumhuriyet 2402 2 232.875 m2 87.228.000

Fair value of investment properties is determined through cost approach formation method mentioned in real estate valuation report prepared by Harmoni Gayrimenkul Değerleme ve Danışmanlık A.Ş. dated December 31, 2016.




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14. Employee benefit obligations

31 December 2016 31 December 2015 Payables to personnel 4.111.716 4.564.154 Tax and duties payable (*) 2.971.498 1.657.675

Total 7.083.214 6.221.829

(*) This account contains SGK and withholding payables. 15. Deferred income and government incentives and grants a) Deferred income

31 December 2016 31 December 2015 Advances taken 1.384.438 2.161.149

Total 1.384.438 2.161.149

b) Government incentives and grants

31 December 2016 31 December 2015 Short-term government incentives income (*) 269.760 323.320 Long-term government incentives income (*) 209.162 478.921

Total 478.922 802.241

(*) Government grants received regarding the investments within the scope of Research-

Development projects are accounted for as deferred income in the balance sheet and credited to consolidated income statement on a straight-line basis over the expected lives of related assets. The incentives, grants and support received from Scientific and Technological Research council of Turkey regarding the research and development expenditures of the Group are recognized as income in 5 years with the average economic life of the related capitalized assets.




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16. Long term provision for employment termination benefits a) Vacation pay liability

31 December 2016 31 December 2015 Provision for vacation pay liability 956.083 1.159.166

Total 956.083 1.159.166

The movement of allowance for unused vacation 31 December 2016 and 2015 is as follows:

Provision for vacation pay liability 2016 2015

Opening balance, January 1 1.159.166 1.606.035 Increase during the period 979.925 1.192.208 Decrease during the period (1.183.008) (1.639.077)

Closing balance, December 31 956.083 1.159.166

b) Reserve for retirement pay The movement of retirement pay provisions for 31 December 2016 and 2015 is as follows:

Provision for retirement pay liability 2016 2015

January 1 10.602.701 10.380.527 Increase during the period (*) 1.961.003 1.889.015 Payments during the period (10.198.518) (8.285.994) Actuarial (loss)/gain 8.773.360 6.619.153

31 December 11.138.546 10.602.701

Under the 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, is called up for military service, dies or who retires after completing 25 years of service (20 years for women) and achieves the retirement age (58 for women and 60 for men). Since the legislation was changed on May 23, 2002, there are certain transitional provisions relating to length of service prior to retirement. The amount payable consists of one month’s salary limited to a maximum of TL 4.297,21) for each year of service as at June 30, 2016. 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 Company arising from the retirement of the employees. TAS 19 requires that actuarial valuation methods to be developed to estimate the Group’s employment termination benefit provision. The following actuarial assumptions have been used in the calculation of the total provision:

31 December 2016 31 December 2015 Discount rate (%) 3,81% 3,81% Turnover rate to estimate probability of retirement (%) 95,5% 95,5%




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17. Provisions, contingent assets and liabilities a) Provisions – short term

31 December 2016 31 December 2015 Provision for legal cases 3.259.044 1.404.148 Total 3.259.044 1.404.148

The movement of legal case provisions for 31 December 2016 and 2015 is as follows:

2016 2015

Opening balance,January 1 1.404.148 919.525 Increase during the period 1.962.694 484.623 Cancelled provisions during the period (-) (107.798) -

Closing balance, December 31 3.259.044 1.404.148

b) Given letters of guarantee and letters of credit

31 December 2016 31 December 2015 Letter of guarantees given 3.746.478 7.948.128 Mortgage and deposit pledges given (*) 281.547.580 246.980.080

Bonds given 30.422.107 14.439.014

Total 315.716.165 269.367.222

(*) The Group has performed credit refinancing transaction in Türkiye İş Bankası A.Ş. for all bank

loans which are restructured with 8 years maturity on March 16, 2015. A real estate property mortgage is given to the aforementioned bank amounting to EUR 65.000.000 and TL 40.000.000.


Letters of guarantees taken 5.580.908 8.372.170 Mortgages taken 718.750 868.750

Total 6.299.658 9.240.920




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17. Provisions, contingent assets and liabilities (continued)

c) Collaterals pledges mortgages (CPM):

31 December 2016:

TL

Equivalent TL EURO USD A. Total amount of collaterals, pledges and mortgages given in the name of legal entity 315.716.165 44.150.558 73.200.250 - B. Total amount of collaterals, pledges and mortgages given in favour

of the parties which are included in the scope of full consolidation. - - - - C. Total amount of guarantees, pledges and mortgages given to third

parties for their liabilities in the purpose of conducting the ordinary operations. - - - -

D. Total amount of other guarantees, pledges and mortgages - i. Total amount of CPM given on behalf of the majority shareholder - ii. Total amount of CPM given to on behalf of other group

companies which are not in scope of B and C - - - - iii. Total amount of CPM given on behalf of third parties which are

not in scope of C - - - -

Total 315.716.165 44.150.558 73.200.250 -

31 December 2015:

TL

Equivalent TL EURO USD A. Total amount of collaterals, pledges and mortgages given in the name of legal entity 269.367.222 48.384.208 69.544.000 - B. Total amount of collaterals, pledges and mortgages given in favour

of the parties which are included in the scope of full consolidation. - - - - C. Total amount of guarantees, pledges and mortgages given to third

parties for their liabilities in the purpose of conducting the ordinary operations. - - - -

D. Total amount of other guarantees, pledges and mortgages - - i. Total amount of CPM given on behalf of the majority shareholder - - ii. Total amount of CPM given to on behalf of other group

companies which are not in scope of B and C - - - - iii. Total amount of CPM given on behalf of third parties which are

not in scope of C - - - - Total 269.367.222 48.384.208 69.544.000 -

18. Equity

The details of the Group’s shareholders equity and composition of shares as at December 31, 2016 and December 31, 2015 are as follows:


Shareholders Share (%) TL Share (%) TL

Akkardan Sanayi ve Ticaret A.Ş. 93,75% 101.246.592 93,75% 101.246.592 Publicly owned 6,25% 6.753.408 6,25% 6.753.408

Equity 100% 108.000.000 100% 108.000.000

Adjustment to share capital 149.104.739 149.104.739

Total 257.104.739 257.104.739




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18. Equity (continued) The legal reserve consists of first and second legal reserves, allocated in accordance with the Turkish Commercial Code. The first legal reserve is allocated out of last period’s statutory profits at the rate of 5% per annum until the total reserve reaches 20% of the paid-in share capital (not indexed to the inflation). The second legal reserve is allocated after the first legal reserve and dividends, at the rate of 10% per annum of all cash dividend distributions. The first and the second legal reserves are not available for distribution unless they exceed 50% of the share capital, but may use to absorb losses in the event that the general reserve is exhausted. As at December 31, 2016 and December 31, 2015, the details of equity is as follows: 31 December 2016 31 December 2015

Paid-in capital 108.000.000 108.000.000 Paid-in capital restatement difference 149.104.739 149.104.739 Share premium 3.435 3.435 Restricted reserves 41.022.230 39.316.910 - Legal reserves 31.489.253 29.783.933 - Gains from property or subsidiary sales 9.532.977 9.532.977 Other equity shares (*) (122.914.099) (122.914.099) Other comprehensive income/loss not to be reclassified to profit or loss 129.599.668 110.113.955 - Revaluation funds 146.917.072 120.412.671 - Actuarial gain or loss arising from defined benefit plans (17.317.404) (10.298.716) Retained earnings 2.115.102 2.361.676 Net profit / loss for the period (8.662.577) 21.803.073 Total Equity 298.268.498 307.789.689

(*) In 2014, in order to benefit from Article 74 of the Law numbered 6552, the Group evaluated its receivables amounting to TL 122.914.099 from Akkardan Sanayi ve Ticaret A.Ş, which is parent of the Group but whose operations were discontinued, and obtained the right to derecognize this amount by paying the related taxes. However, since performed transaction is related to the parent company, the Group management carries the related amount of TL 122.914.099 separately in “Other equity shares” created under the equity account as of December 31, 2014 and to write off this amount through the dividend payments to be made to the parent company in the future.

Dividend payment: As per the resolution of the Company dated 2 June 2016 during the Ordinary General Council Assembly for the fiscal year 2015; a total amount of TL 22.453.200 dividend was distributed as dividend on 8 June 2016. On this date, the dividend share of Akkardan Sanayi ve Ticaret A.Ş. of TL 21.049.166 was not paid in cash, but deducted from the receivables from related parties account in the balance sheet. The composition of restricted reserves at December 31, 2016 and 2015 are as follows:

Restricted reserves: 31 December 2016 31 December 2015

Gain on sale of marketable securities 9.532.977 9.532.977 First legal reserves 12.847.440 12.847.440 Second legal reserves 18.641.813 16.936.493 Total 41.022.230 39.316.910




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19. Sales and cost of sales

1 January – 31 December 2016


Sales (Net) Domestic sales 200.219.091 199.325.285 Foreign sales 160.981.142 175.290.281

Total 361.200.233 374.615.566



Cost of sales Cost of domestic sales (172.820.226) (162.484.070) Cost of foreign sales (109.590.439) (116.717.071)

Total (282.410.665) (279.201.141)

The details of cost of sales are as follows:

1 January –

31 December 2016 1 January –

31 December 2015

Raw material (141.226.049) (134.427.993) Labour costs (43.578.625) (35.674.078) General production expense (*) (88.187.232) (98.173.192) Change in inventories (9.418.759) (10.925.878)

Total cost of sales (282.410.665) (279.201.141)

(*) General administrative expenses include indirect labour expenses.

20. Operating expenses

1 January –


31 December 2015

General administrative expenses Personnel costs (17.117.770) (19.274.295) Consultancy expense (2.707.292) (2.601.895) Depreciation expense (1.708.034) (2.096.243) Maintenance service (770.794) (1.116.717) Data processing expense (1.345.042) (1.112.890) Share of auxiliary departments (907.006) (832.818) Travel expense (499.743) (658.264) Insurance expense (675.292) (605.748) Rent expenses (612.530) (984.979) Electric, water and gas expenses (556.714) (515.056) Office expenses (101.207) (217.269) Taxes and duties (71.056) (87.779) Other expenses (969.676) (1.917.714)

Total (28.042.156) (32.021.667)




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20. Operating expenses (continued)



Selling, marketing and distribution expenses Export expense (10.683.713) (12.333.845) Personnel costs (8.763.748) (9.062.479) Advertisement expense (3.407.282) (4.358.413) Share of auxiliary departments (1.075.297) (1.657.679) Consultancy expense (1.006.899) (1.595.374) Transportation expense (1.300.671) (1.892.230) Domestic sales commission (2.354.583) (2.362.304) Communication and cargo expense (715.024) (982.277) Construction expense (753.059) (785.451) Depreciation expense (854.718) (946.068) Travel expense (676.768) (826.812) Rent expense (453.423) (378.208) Other (1.477.871) (1.478.643)

Total (33.523.056) (38.659.783)

The functional breakdown of depreciation and amortization and personnel expenses is as follows:

1 January –


31 December 2015

Depreciation and amortization

Cost of sales 16.612.286 18.073.652

Selling, marketing and distribution expenses 854.718 946.068 General administrative expenses 1.708.034 2.096.243

Total 19.175.038 21.115.963

21. Other operating income/ (expenses)



Foreign exchange gains (customer-vendor) 36.570.538 42.751.295 Miscellaneous sales (*) 8.163.518 7.285.550 Financial income from credit sales 1.945.871 3.997.260 Sample sales income 2.187.624 3.624.305 Textile employer union support income 1.725.057 2.742.729 Turquality support income 383.409 344.460 Delay interest income 35.673 68.624 Rent income 3.559 10.759 Other 7.830.537 6.510.156

Other operating income 58.845.786 67.335.138

(*) It consists of sales of raw materials, auxiliary materials and other purchased materials.




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21. Other operating income/ (expenses) (continued)

1 January –


31 December 2015 Foreign exchange losses (customer-vendor) (21.135.725) (27.884.935) Cost of miscellaneous sales (*) (5.938.110) (5.609.441) Sample expense (1.530.894) (2.398.258) Taxes and duties (6.332.341) (2.089.914) Delay interest expense (857.929) (1.093.146) Rest yarn cost (2.411.066) (1.167.219) Provision expenses (3.099.226) (1.620.240) Indemnity and penalty expenses (857.557) (26.951)

Unused fixed asset depreciation and maintenance expenses - (10.227) Expense related with import (56.109) (15.878) Other (3.099.022) (2.586.641) Other operating expense (45.317.979) (44.502.850)

(*) It consists of cost of sales of raw materials, auxiliary materials and other purchased materials. 22. Financial income

1 January –


31 December 2015

Interest income 18.600.333 20.815.060 Foreign exchange gain 2.659.807 5.736.477

Total financial income 21.260.140 26.551.537

23. Financial expense



Interest expenses (17.254.551) (20.061.881) Foreign exchange loss (32.953.590) (32.830.705)

Total financial expense (50.208.141) (52.892.586)

24. Income from investing activities



Gain on sale of fixed assets 3.916.004 4.437.534

Income from investing activities 3.916.004 4.437.534




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25. Loss from investing activities

1 January – 31 December

2016


2015

Loss on sale of fixed assets (1.299.298) (316.498) Provision for impairment in non current asset held for sale (14.127.637) - Loss from investing activities (15.426.935) (316.498)

26. Tax assets and liabilities

As of December 31, 2016 and 2015, tax amounts reflected to income statement as follows;

31 December

2016 31 December

2015

Current year tax (1.455.354) (4.301.859) Deferred tax income 2.499.546 759.682

Tax income / loss on income for the period 1.044.192 (3.542.177)

As of December 31, 2016 and 2015, tax liabilities are summarized as follows;

31 December

2016 31 December

2015

Income tax payable 1.455.354 4.301.859 Prepaid tax (-) (3.525.779) (945.654) Tax asset / liability (2.070.425) 3.356.205

The Corporate Tax Law has been amended with the law dated June 13, 2006 and numbered 5520. A great deal of provisions of aforementioned new Corporate Tax Law has entered into force being effective as of January 1, 2006. Therefore, in Turkey, the corporation tax rate is 20% as of 2016 (2015: 20%). Corporate tax rate is applied to tax base, which shall be determined as a result of addition of expenses not deducted according to lax laws to commercial income of entities and deduction of exceptions (affiliation privilege, investment discount exception etc.) and discounts (e.g. R & D discount) included in related tax laws.

Dividends paid to the resident institutions and the institutions working through local offices or representatives are not subject to withholding tax. Withholding tax rate on the dividend payments other than the ones paid to the non-resident institutions generating income in Turkey through their operations or permanent representatives and the resident institutions is 15%. Appropriation of the retained earnings to capital is not considered as profit distribution and therefore is not subject to withholding tax. The entities calculates temporary tax at a ratio of 20% based on their quarterly financial gains and declare the related amount until the 14

th day of second months following the related period and make

a payment until the end of 17th day. The temporary tax paid during the period belongs to period in

question and deducted from corporate tax which shall be calculated based on corporate tax declaration submitted in subsequent year.




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26. Tax assets and liabilities (continued) In Turkey, there is no such implementation offering a negotiation with tax authority with regard to taxes which shall be paid. Corporate tax returns are required to be filed until the twenty-fifth of the fourth month following the balance sheet date and paid in one instalment until the end of the fourth month. The tax authorities can inspect tax returns and the related accounting records for a retrospective maximum period of five years and the tax amount can change because of tax assessment made occurring as a result of incorrect transaction. Corporate tax losses can be carried forward for a maximum period of five years following the year in which the losses were incurred in accordance with Turkish legislation. But financial losses cannot be deducted from retained earnings. There are many exceptions towards companies in Corporate Tax Law.

The following exceptions related to the Group are explained below:

Dividend income exemption:

Dividend income of the companies obtained from another company which is subject to full tax payment (except profits obtained from mutual fund shares and capital stocks of mutual funds) are excepted from corporate tax. Therefore, dividend income is taken into account in the calculation of corporate income tax. Besides abovementioned exceptions, in the determination of corporate tax base, discounts specified in the Articles 8, 9 and 10 of Corporate Income Tax Law and Article 40 of the Income Tax Law. The Group recognizes deferred tax assets and liabilities based upon temporary differences arising between its financial statements as reported in accordance with TFRS and its statutory tax financial statements. These differences usually result in the recognition of revenue and expenses in different reporting periods for TFRS and tax purposes and they are given below. The effective tax rate used for the calculation of deferred tax is 20%. As of December 31, 2016 and December 31, 2015, the breakdown of deferred tax bases and deferred tax liability computed using the current effective tax rates are as follows:

Cumulative temporary differences Deferred tax assets/(liability)

31 December

2016 31 December

2015 31 December

2016 31 December

2015

Net difference between the carrying amount and tax

base of property, plant and equipment and intangible assets 170.864.671 159.734.950 (17.030.569) (17.933.559)

Gain on fixed asset sale 3.212.907 - (642.581) - Provision for employment termination benefits (11.138.546) (10.602.701) 2.227.709 2.120.540

Provision for unused vacation (956.083) (1.159.166) 191.217 231.833 Internal rate of return on financial borrowings 1.617.670 2.381.909 (323.534) (476.382) Other, net (3.410.382) (749.093) 682.076 149.820

Deferred tax liabilities 160.190.236 149.605.899 (14.895.682) (15.907.748)

The movement table of deferred tax assets and liabilities is as follows:

2016 2015 January 1 (15.907.748) (13.122.071)

Deferred tax income/ expense on income statement 2.499.546 759.682 Tax income / expense on other comprehensive gains 1.754.672 1.323.832 Tax income / expense on other comprehensive gains (Valuation) (3.242.152) (4.869.190) Net balance (14.895.682) (15.907.748)




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26. Tax assets and liabilities (continued)

Reconciliation between corporate tax expense determined through applying legal tax rate to pre-tax profit and corporate tax expense recognized in statement of income of periods ending on December 31, 2016 and 2015:


2016


2015 Profit / Loss before tax (9.706.769) 25.345.250 The effective statutory income tax rate of 20% tax 1.941.354 (5.069.050) The impact of non-deductible expenses (1.307.867) (449.045)

Deductions and exemptions 977.638 - Other (566.933) 1.975.918 Tax expense in the income statement 1.044.192 (3.542.177)

27. Earnings per share Earnings per share are calculated by dividing net profit by the weighted average number of shares belongs to shareholders.

31 December 2016

31 December 2015

Net income / loss for the period (8.662.577) 21.803.073

The weighted average number of shares outstanding during

the year (per ) (1 TL face value) 10.800.000.000 10.800.000.000 Earnings / loss per ordinary share (0,0008) 0,0020 28. Financial risk management and policies Financial risk management

Financial risk factors

The Group’s activities expose it to a variety of financial risks that including the market risk (foreign currency risk, interest rate risk), credit risk, liquidity risk and funding risk. The Group’s overall risk management program focuses on the unpredictability of financial markets and seeks to minimize potential adverse effects on the financial performance of the Group.

Risk management is carried out by top management under policies approved by the Board of Directors. The management cooperates with other business units and performs the determination and the evaluation of financial risks.

Market risk

Foreign currency risk The Group is exposed to the foreign exchange risk through the impact of rate changes at the translation of foreign currency denominated liabilities and assets to local currency. These risks are monitored and limited by the analysis of foreign currency position.




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28. The nature and extent of risks arising from financial instruments (continued)

The Group’s foreign currencies denominated assets and liabilities at December 31, 2016 and December 31, 2015 are as follows:

31 December 2016

31 December 2015

Assets 204.530.000 221.727.078 Liabilities (315.155.705) (267.555.429) Net foreign currency position (110.625.705) (45.828.351)

Foreign currency analysis

Assets and liabilities denominated in foreign currencies at December 31, 2016 and December 31, 2015 are as follows:

31 December 2016 TL Equivalent US Dollar Euro GBP Other

Trade receivable 69.955.238 589.077 18.224.434 62.824 -

Monetary financial assets 15.173.507 662.237 3.461.755 29 20

Other 119.401.255 - 32.184.494 - -

Total assets 204.530.000 1.251.314 53.870.683 62.853 20

Trade payables (86.083.486) (3.028.515) (20.155.397) 475 (189.551) Financial liabilities (229.072.219) - (61.746.198) - -

Total liabilities (315.155.705) (3.028.515) (81.901.595) 475 (189.551)

Net foreign currency position (110.625.705) (1.777.201) (28.030.912) 63.328 (189.531)

Export 160.981.142 5.288.640 42.474.822 497.488 -

Import 84.967.762 5.916.083 17.135.840 - 232.472

31 December 2015 TL Equivalent US Dollar Euro GBP Other

Trade receivable 95.674.786 3.433.123 26.686.759 207.592 - Monetary financial assets 8.049.082 463.218 2.078.990 22.329 - Other 118.003.210 - 37.135.955 - -

Total assets 221.727.078 3.896.341 65.901.704 229.921 -

Trade payables (61.467.842) (6.957.831) (12.568.477) (15.378) (421.549) Financial liabilities (206.087.587) - (64.856.365) - -

Total liabilities (267.555.429) (6.957.831) (77.424.842) (15.378) (421.549)

Net foreign currency position (45.828.351) (3.061.490) (11.523.138) 214.543 (421.549)

Export 175.290.282 11.405.606 46.691.252 941.702 - Import 65.175.256 14.633.562 7.046.881 2.996 2.784.479




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Foreign currency sensitivity analysis:

Profit / Loss

31 December 2016 Appreciation of

Foreign currency Depreciation of foreign

currency

10% change in US Dollar/TL Parity: US Dollar net liability (625.432) 625.432 US Dollar net hedged amount

US Dollar net risk (625.432) 625.432

10% change in EUR/TL Parity: Eur net asset (10.399.188) 10.399.188 Eur net hedged amount

Eur net risk (10.399.188) 10.399.188

10% change in other currencies/TL Parity: Other currencies net asset/(liability) 27.350 (27.350) Other currencies net hedged amount

Other currencies net gain/(loss) 27.350 (27.350)

Total (10.997.270) 10.997.270

Profit / Loss

31 December 2015 Appreciation of

Foreign currency Depreciation of foreign

currency 10% change in US Dollar/TL Parity: (890.159) 890.159 US Dollar net liability

US Dollar net hedged amount (890.159) 890.159

US Dollar net risk 10% change in EUR/TL Parity: (3.661.593) 3.661.593 Eur net asset

Eur net hedged amount (3.661.593) 3.661.593

Eur net risk 10% change in other currencies/TL Parity: Other currencies net asset/(liability) 92.269 (92.269) Other currencies net hedged amount

Other currencies net gain/(loss) 92.269 (92.269)

Total (4.459.483) 4.459.483

Interest rate risk The Group is exposed to interest rate risk through the impact of rate changes on interest bearing liabilities and assets. The Group manages its not used cash on hand by time deposits. Income, other than not used cash on hand, and cash flows from operations are considerably free from market interest rate changes. The interest risk of the company arises from fixed rate short term borrowings. To keep this exposure at a minimum level, the Group tries to borrow at the most suitable rates.




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28. The nature and extent of risks arising from financial instruments (continued) The table demonstrating financial instruments of the Group which are sensitive to interest rate is as follows:

31 December

2016 31 December

2015

Financial Instruments with Fixed Interest

Financial assets 17.705.905 10.933.608 Financial liabilities 37.137.743 32.505.419

Financial Instruments with Variable Interest Financial liabilities 232.384.762 214.279.971 The Group is exposed to interest risk depending upon interest changes of borrowing instruments which are classified as fair value through profit or loss financial asset in the balance sheet. If there is a decrease/increase in interest rates at a ratio of 1% and all the other variables are pegged: If the interest rate of TL currency were 1% higher there would be pre-tax loss amounting to 396.433 while if the interest rate were 1% lower, there would be a pre-tax profit amounting to 400.975 when all the other variables are accepted as fixed on December 31, 2016.




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28. The nature and extent of risks arising from financial instruments (continued) Credit risk Credit risk arises from cash and cash equivalents and deposits with banks, as well as credit exposures to customers, including outstanding receivables and committed transactions. Ownership of financial assets involves the risk that counter parties may be unable to meet the terms of their agreements. These risks are monitored by credit ratings and limiting the aggregate risk from any individual counter party (excluding related parties). 31 December 2016

Trade Receivables Other Receivables

Cash, cash equivalents and financial investments

Related Party Third Party Related Party Third Party Related Party Third Party

Maximum exposure to credit risk at the reporting date (A+B+C+D+E) - 68.611.686 245.307.848 3.232.620 - 18.786.546

- The part of maximum risk guarantee with colleteral or etc - 4.936.658 - - - - A.Net book value of financial assets that are neither past due nor impaired the net book value - 67.403.403 245.307.848 3.232.620 - 18.786.546

B Having renegotiated conditions otherwise due to the carrying amount of financial assets accepted as past due or impaired

C. Net book value of financial assets that are past due but not impaired the net book value - 5.866.664 - - - -

- The part of net values under guarantee with collateral. - - - - - -

- (4.658.381) - - - - D. Net book value of financial assets that are impaired the net book value - - - - - - - Past due (gross carrying amount) - - - - - - - Impairment (-) - (4.658.381) - - - - - The part of net values under guarantee with collateral - Not past due (gross carrying amount) - - - - - - - Impairment (-) - - - - - - - The part of net values under guarantee with collateral. - - - - - -

E. Off-balance sheet items with credit risk - - - - - -




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28. The nature and extent of risks arising from financial instruments (continued))

31 December 2015

Trade Receivables Other Receivables

Cash, cash equivalents and financial investments

Related Party Third Party Related Party Third Party Related Party Third Party

Maximum exposure to credit risk at the reporting date (A+B+C+D+E) - 91.563.896 228.177.995 5.964.928 - 12.889.753

- The part of maximum risk guarantee with colleteral or etc - 7.966.920 - - - - A.Net book value of financial assets that are neither past due nor impaired the net book value - 84.376.686 228.177.995 5.964.928 - 12.889.753

B Having renegotiated conditions otherwise due to the carrying amount of financial assets accepted as past due or impaired

C. Net book value of financial assets that are past due but not impaired the net book value - 10.496.830 - - - -

- The part of net values under guarantee with collateral. - - - - - -

- (3.309.620) - - - - D. Net book value of financial assets that are impaired the net book value - - - - - - - Past due (gross carrying amount) - - - - - - - Impairment (-) - (3.309.620) - - - - - The part of net values under guarantee with collateral - Not past due (gross carrying amount) - - - - - - - Impairment (-) - - - - - - - The part of net values under guarantee with collateral. - - - - - -

E. Off-balance sheet items with credit risk - - - - - -




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28. The nature and extent of risks arising from financial instruments (continued) Funding risk The ability to fund existing and prospective debt requirements is managed by maintaining the availability of adequate committed funding lines from high quality lenders. Capital Risk Management The Company’s objectives when managing capital are to safeguard the Company’s ability to continue as a going concern in order to provide returns for shareholders and benefits for other stakeholders and to maintain an optimal capital structure to reduce the cost of capital. In order to maintain or adjust the capital structure, the Company may adjust the amount of dividends paid to shareholders, return capital to shareholders, issue new shares or sell assets to reduce debt. The Company monitors its capital like the other companies in the same sector on the basis of net liability/invested capital ratio. This ratio is calculated by dividing total net liability to invested capital. Net liability is calculated as the total liability less cash and cash equivalents (including borrowings, trade payables and other payables). Total invested capital is calculated as the sum of the total of equity and net liability. As at December 31, 2016 and December 31, 2015, the liability/equity ratio is as follows:


Total liability 267.970.480 246.785.390 Cash and cash equivalents (18.796.254) (12.895.814)

Net liability 249.174.226 233.889.576

Total equity 298.268.498 307.789.689

Net liability/invested capital 84 76

Liquidity risk Prudent liquidity risk management implies maintaining sufficient cash and marketable securities, the availability of funding through an adequate amount of committed credit facilities and the ability to close out market positions. Due to the dynamic nature of the underlying business the Group aims at maintaining flexibility in funding by keeping committed credit lines available.

31 December 2016

Book Value

Cash outflows under contract

Up to 3 months

Between 3 months and

1 year Between 1 year

and 5 year

Between 5 year and 10

year Undated

- Bank Loan 222.909.150 247.023.430 43.990.059 49.198.825 115.149.952 38.684.594 - - Debts from financial leases 5.233.560 5.571.600 627.510 1.882.531 3.061.559 - - - Exported debts instruments 41.379.795 42.222.320 1.522.320 40.700.000 - - - Trade Payables 104.396.257 104.523.291 87.592.600 16.930.691 - - - -Other party 104.396.257 104.523.291 87.592.600 16.930.691 - - - Other Payables 21.130 21.130 21.130 - - - -

Total credits 373.939.892 399.361.771 133.753.619 108.712.047 118.211.511 38.684.594 -




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31 December 2015

Book Value

Cash outflows under contract

Up to 3 months

Between 3 months and 1

year Between 1 year

and 5 year

Between 5 year and 10

year Undated

- Bank Loan 200.359.981 260.266.526 33.584.941 41.251.070 119.596.495 65.834.020 - - Debts from financial leases 4.633.756 5.064.194 345.286 1.035.858 3.683.050 - - - Exported debts instruments 41.791.653 42.210.320 778.320 732.000 40.700.000 - - Trade Payables 85.700.402 85.715.623 73.408.408 12.307.215 - - - -Other party 85.700.402 85.715.623 73.408.408 12.307.215 - - - Other Payables 29.533 29.533 29.533 - - - -

332.515.325 393.286.196 108.146.488 55.326.143 163.979.545 65.834.020 -

Fair value of financial assets and liabilities Fair value is the amount at which a financial asset or liability 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 assets and liabilities have been determined by the Group using available market information and appropriate valuation methodologies. Accordingly, the estimates presented herein are not necessarily indicative of the amounts the Group can realize 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: Monetary assets

The fair values of balances denominated in foreign currencies, which are translated at year end exchange rates, are considered to approximate carrying values. The carrying values of certain financial assets carried at cost, including cash and amounts due from banks, are considered to approximate their respective fair values due to their short-term nature. The carrying values of trade receivables along with the related allowances for uncollectability are estimated to be their fair values. Monetary liabilities Trading liabilities have been estimated at their fair values. Bank loans and other monetary loans are considered to approximate their respective fair values due to their short-term nature. Foreign currency long-term loans has been translated into TL at the exchange rate at the balance sheet date, the fair values approximate their carrying values.




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29. Related party disclosures a) Due from related parties: 31 December 2016 31 December 2015 Akkardan Sanayi ve Ticaret A.Ş.

(1) 245.307.848 228.177.995

Total 245.307.848 228.177.995

(1) Shareholders

The Company has been the guarantor for needed financial loan to acquire the shares of Bossa of its main shareholder, Akkardan Sanayi ve Ticaret A.Ş, whose activities was ceased, from Sabancı Group in 2008. The Company has fulfilled the loan repayment obligation as a result of non-loan repayment by Akkardan Sanayi ve Ticaret A.Ş. The main shareholder which is Akkardan Sanayi ve Ticaret A.Ş. has no financial debt including the loan since the beginning of 2015 and the Company’s bail which was given to Akkardan Sanayi ve Ticaret A.Ş. was also terminated. The Company will carry the receivable which has non-commercial nature from the main shareholder which is Akkardan Sanayi ve Ticaret A.Ş. because of the aforementioned reason. The Company reflects the financing costs which are related to the receivable to the main shareholder. The Company has a receivable amounting to TL 245.307.848 from Akkardan Sanayi ve Ticaret A.Ş as which is the main shareholder of the Company but having its activity terminated, as of December 31, 2016. (31 December 2015: TL 228.177.995) TL 122.914.099 of these receivables, which is declared in scope of Law numbered 6552, is presented as debit amount in Other Equity Shares under shareholders equity. Interest and foreign exchange differences are calculated over the part which is recorded in assets of the receivable from Akkardan Sanayi ve Ticaret A.Ş. in accordance with legal legislation however these calculations are not performed over the part of the receivables which is recorded in Other Fund under the Shareholders Equity. It is being planned to reduce our total receivables from Akkardan Sanayi ve Ticaret A.Ş. through deduction of dividend distributions, without bringing any cost to minority shareholders which is only 6,25%. During the dividend distribution, minority shareholders will receive cash dividend, while Akkardan Sanayi ve Ticaret A.Ş. will not receive any cash dividend, and related amount will be deducted from receivables. There is an agreement between the Company and Akkardan Sanayi ve Ticaret A.Ş. stipulating that related receivables will be closed in an 8 years period by dividend deduction and/or utilizing other capital market instruments which is limited by a maximum of 8 years. As per the resolution of the Company dated 2 June 2016 during the Ordinary General Council Assembly for the fiscal year 2015; a total amount of TL 22.453.200 was distributed as dividend on 08.06.2016. On this date, the dividend share of Akkardan Sanayi ve Ticaret A.Ş. of TL 21.049.166 was not paid in cash, but deducted from the receivables from related parties account in the assets of the balance sheet. The Company has not made any fund transfers to Akkardan Sanayi ve Ticaret A.Ş. in 2016 and increase in balance of related party sources from exchange rate difference and interest amount. A project has been executed by the Company to merge production facilities that are spread at different locations into one single location in order save production and operation costs and create a synergy and production facilities operating in Yüreğir and Seyhan have been moved to facility in Adana Hacı Sabancı Organized Industrial Zone. A saving shall be made on all expenses, mainly on energy expenses, through unifying production facilities in a single location. Research is being made to either sell and/or develop projects related to immovable assets, which shall become vacant upon merge of the production facilities, for the highest possible profit to be generated.




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29. Related party disclosures (continued) The sales profit to be generated from this shall be held for dividend distribution, and the related party receivables from Akkardan Sanayi ve Ticaret A.Ş. will be decreased by deduction. The Company, first of all, aims to increase its operating profit to maximum levels in order to offer the best possible benefits to non-controlling shareholders and at the same time to close the related party receivables from Akkardan Sanayi ve Ticaret A.Ş. as soon as possible. Moreover, in order to offer the best possible benefits to non-controlling shareholders, in accordance with the "Communiqué on Mergers and Division", the merging of the Company with Akkardan Sanayi ve Ticaret A.Ş. within the scope of Bossa is also being considered. b) Other short term receivables


Advance given, business

(3) 320.000 -

Advanve given, personnel (3)

120.000 -

Total 440.000 -

(3) Company personnel

c) Material, service and fixed asset purchases from related parties:



Filiz Denizcilik A.Ş.

(2) (*) - 505.698

Anadolu Kompozit Mam. Sanayi ve Ticaret A.Ş.(2) (**)

- 453.212

Total - 958.910

d) Material and service sales to related parties:

1 January –


31 December 2015

Anadolu Kompozit Mam. Sanayi ve Ticaret A.Ş.

(2) (**) - 452.932

Total - 452.932

e) Interest income:

1 January –


31 December 2015

Akkardan Sanayi ve Ticaret A.Ş.

(1) 18.188.941 20.654.059

Total 18.188.941 20.654.059

(1) Shareholders

(2) The companies controlled by shareholders




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29. Related party disclosures (continued) f) Foreign exchange gains / (losses):

1 January –


31 December 2015

Akkardan Sanayi ve Ticaret A.Ş.

(1) 17.635.370 19.121.122

Total 17.635.370 19.121.122

g) Dividend payments:

1 January –


31 December 2015

Akkardan Sanayi ve Ticaret A.Ş. (by offsetting)

(1) 21.049.166 49.509.583

Total 21.049.166 49.509.583

(1) Shareholders

(2) The companies controlled by shareholders

(*) Filiz Denizcilik A.Ş.’s liquidation was registered on June 24, 2016.

(**) Anadolu Kompozit Mam. Sanayi ve Ticaret AS has been transferred to a third party on October 12, 2015.

h) Compensation to key management personnel: The Group defines the executive management personnel as board of directors, general managers and general manager deputies The benefit provided to executive management consists of salaries, premiums, Social Security Foundation employer premium and unemployment employer premium and attendance fee paid to board of directors. The benefits provided to executive management for the period ended as of December 31, 2016 and 2015 is as follows:

31 December 2016

31 December 2015

Short term benefits to executive management 2.774.244 3.960.756

Total 2.774.244 3.960.756

(*) Short term benefits to executive management mostly consist of salary and premium paid to key

management. There are no payments made due to release of top managers from the company in 2016 (2015: TL 193.468). 30. Subsequent events None.

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