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ROYAL HALI İPLİK TEKSTİL MOBİLYA SANAYİ VE TİCARET ANONİM ŞİRKETİ AND ITS SUBSIDIARIES

CONSOLIDATED FINANCIAL STATEMENTS AND NOTES FOR THE PERİOD ENDED AT

31 MARCH 2015

CONTENTS PAGE

Consolidated Financial Statements……………………………………………………………………………………………………………………… 1-2

Consolidated Income Statements ………………………………………………………………………………………………………………………… 3

Consolidated Comprehensive Income Statements ………………………………………………….....................................................……................ 4

Consolidated Changes in Equity Statements …………………………………………………………………………………………………………… 5

Consolidated Cash Flows Statements …………………………………………………………………………………………………………………… 6

Notes to the Consolidated Financial Statements ……………………………………………………………………………………………………… 7-86

NOTE 1 Organization and Nature of Activities of Group …………………………………………………………………………………………… 7-9NOTE 2 Basis of The Consolidated Financial Statements …………………………………………………………………………………………… 9-29NOTE 3 Business Mergers …………………………………………………………………………………………………………………………… 29NOTE 4 Business Mergers Subject to Common Control…………………………………………………………………………………………… 29NOTE 5 Shares in Other Companies………………………………………………………………………………………………………………… 29-30NOTE 6 Segment Reporting ………………………………………………………………………………………………………………………… 31-33NOTE 7 Related Party Transactions ………………………………………………………………………………………………………………… 34-39NOTE 8 Cash and Cash Equivalents ………………………………………………………………………………………………………………… 40NOTE 9 Financial Borrowings ……………………………………………………………………………………………………………………… 40-42NOTE 10 Trade Receivables and Payables……………………………………………………………………………..........………………………… 43-45NOTE 11 Other Receivables and Payables …………………………………………………………………………………………………………… 46NOTE 12 Employee Benefit Liabilities ……………………………………………………………………………………………………………… 47NOTE 13 Inventories ………………………………………………………………………………………………………………………………… 47NOTE 14 Prepaid Expenses and Deferred Income …………………………………………………………………………………………………… 48NOTE 15 Tangible Fixed Assets ……………………………………………………………………………………………………………………… 49-50NOTE 16 Intangible Fixed Assets …………………………………………………………………………………………………………………… 50NOTE 17 Government Incentive and Grants ………………………………………………………………………………………………………… 51NOTE 18 Provisions, Contingent Assets and Liabilities ……………………………………………………………………………………………… 51-54NOTE 19 Commitments ……………………………………………………………………………………………………………………………… 55NOTE 20 Provisions For Employee Benefits ………………………………………………………………………………………………………… 56-57NOTE 21 Other Assets and Liabilities ………………………………………………………………………………………………………………… 57NOTE 22 Derivative Financial Instrument …………………………………………………………………………………………………………… 57NOTE 23 Shareholders' equity, Reserves and Other equity Components …………………………………………………………………………… 58-62NOTE 24 Sales and Cost of Sales …………………………………………………………………………………………………………………… 63-64NOTE 25 General Administrative Expenses, Marketing Expenses and Research and Development Expenses....................................................... 65NOTE 26 Expenses According to Qualifications ……………………………………………………………………………………………………… 65-66NOTE 27 Other Operating Income / (Expenses) .…………………………………………………………………………………………………… 67NOTE 28 Investment Activities Income / (Expenses) ….……………………………………….………….…........................................................... 68NOTE 29 Finance Income / (Expenses) ……………………………………………………………………………………………………………… 68-69NOTE 30 Non-Current Assets Held For Sale and Discontinued Operations ………………………………………………………………………… 69NOTE 31 Tax Assets and Liabilities ………………………………………………………………………………………………………………… 70-73NOTE 32 Earnings Per Share ………………………………………………………………………………………………………………………… 74NOTE 33 Exposure to Financial Risks Due to Financial Instruments ………………………………………………………………………………… 74-83

NOTE 34 Financial Instruments (Fair Value Disclosures and Hedge Accounting Disclosures)………………….………………….……………… 84-86NOTE 35 Post Balance Sheet Events ………………………………………………………………………………………………………………… 86

NOTE 36Other Issues Affecting the Consolidated Financial Statements Significantly or Required to be Disclosed for Clear, Understandable and Interpretable Presentation………………….….….….….….….….….….….............................................................. 86


CONSOLIDATED BALANCE SHEETS AS OF 31 MARCH 2015 AND 31 DECEMBER 2014

(Currency - Turkish Lira ‘TRY’ unless expressed otherwise.)

Current Period Non-reviewed

Prior Period Audited

Footnote References 31.03.2015 31.12.2014

ASSETS

Current Assets

249,668,787 230,421,036 Cash and Cash Equivalents 8 1,058,209 17,901,514 Trade Receivables 10 94,177,825 98,172,779 - Due from related parties

2,353,707 17,031,781

- Due from other parties

91,824,118 81,140,998 Other Receivables 11 9,900,367 17,900,375 - Due from related parties

- -


9,900,367 17,900,375 Derivative Financial Instruments 22 - 193,388 Inventories 13 69,701,953 68,638,216 Prepaid Expenses 14 68,088,763 19,888,303 - Prepaid expenses to related parties

56,295,424 9,657,732

- Prepaid expenses to other parties

11,793,339 10,230,571 Assets Relevant to Current Period Taxes 31 1,944,486 3,392,534 Other Current Assets 21 3,297,184 2,833,927 Non-Current Assets Classified Held For Sale 30 1,500,000 1,500,000 Non - Current Assets

171,566,010 178,494,734

Trade Receivables 10 1,996,361 680,492 - Due from related parties

- -


1,996,361 680,492 Other Receivables 11 2,737,757 7,689,710 - Due from related parties

- -


2,737,757 7,689,710 Tangible Fixed Assets 15 155,133,841 158,590,498 Intangible Fixed Assets 16 2,701,713 3,226,580 - Goodwill

- -

- Other intangible fixed assets

2,701,713 3,226,580 Prepaid Expenses 14 1,346,165 327,885 Deferred Tax Assets 31 7,650,173 7,979,569 TOTAL ASSETS 421,234,797 408,915,770

The accompanying notes are an integral part of these financial statements

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CONSOLIDATED BALANCE SHEETS AS OF 31 MARCH 2015 AND 31 DECEMBER 2014


Current Period Prior Period

Non-reviewed Audited

Footnote References 31.03.2015 31.12.2014

LIABILITIES

Current Liabilities

97,244,070 105,887,554

Financial Borrowings 9 8,893,506 17,530,881 Current Installment of Long Term Financial Borrowings 9 41,910,826 32,967,176 Trade Payables 10 29,163,514 24,204,155 - Due to related parties

78,241 19,911

- Due to other parties

29,085,273 24,184,244 Employee Benefit Liabilities 12 1,925,883 1,873,566 Other Payables 11 1,428,569 3,502,513 - Due to related parties

1,106,636 1,144,852

- Due to other parties

321,933 2,357,661 Deferred Incomes 14 12,521,062 23,404,089 Current Tax Liabilities 31 592,687 1,513,538 Provision for Short Term Payables

808,023 891,636

- Provision for employee benefits 20 50,357 133,970 - Provision for other short-term payables 18 757,666 757,666 Non-Current Liabilities

115,291,747 100,817,521

Financial Borrowings 9 104,908,317 89,788,704 Deferred Incomes 14 78,409 96,155 Long Term Borrowings

1,145,564 1,182,049

- Provision for employee benefits 20 1,145,564 1,182,049 -Other long-term provision

- -

Deferred Tax Liabilities 31 9,159,457 9,750,613 SHAREHOLDERS' EQUITY

208,698,980 202,210,695

Parent Company’s Equity

206,396,189 199,846,639 Paid In Capital 23.1 60,000,000 60,000,000 Inflation Adjustments of Shareholders' Equity 23.2 746,913 746,913 Share Premiums/Discounts 23.3 31,340,295 31,340,295

Accumulated Other Comprehensive Income or

Expenses

Not to Be Reclassified on Profit or Loss

- Defined Benefit Plans Re-measurement Gains / (Losses) 23.4 (310,340) (359,565)

- Revaluation of Tangible Fixed Assets 23.6 32,665,567 33,595,559 Effect of Business Mergers Subject to Common

23.5 (2,390,557) (2,390,557) Control Restricted Reserves 23.7 5,088,114 5,088,114 Retained Earnings / Losses

71,825,880 45,295,096

Net Profit / Loss For The Period

7,430,317 26,530,784 Minority Interests 23.9 2,302,791 2,364,056 TOTAL EQUITY 421,234,797 408,915,770

The accompanying notes are an integral part of these financial statements.

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CONSOLIDATED STATEMENTS OF INCOME FOR THE INTERIM PERIODS ENDED AT 31 MARCH 2015 AND 2014



Non-reviewed Non-reviewed

Footnote

References 01.01.-

31.03.2015 01.01.-

31.03.2014 OPERATING ACTIVITIES

Sales 24.1 66,685,496 82,800,830 Cost of Sales (-) 24.2 (48,072,864) (61,674,130) GROSS PROFIT / (LOSS)

18,612,632 21,126,700

General Administrative Expenses (-) 26.1 (2,298,213) (2,169,072) Marketing Expenses (-) 26.2 (11,354,701) (9,364,120) Research and Development Expenses(-) 26.3 (107,102) (99,258) Other Operating Incomes 27 9,254,957 5,448,503 Other Operating Expenses (-) 27 (8,222,882) (4,596,053) OPERATING PROFIT / (LOSS)

5,884,691 10,346,700

Investment Activities Incomes 28 2,638,408 2,584,274 Investment Activities Expenses (-) 28 (219,921) - OPERATING PROFIT / (LOSS) BEFORE FINANCE INCOME / (EXPENSE) 8,303,178 12,930,974 Financial Incomes 29 4,532,595 1,229,954 Financial Expenses(-) 29 (4,938,684) (2,675,665) OPERATING ACTIVITY PROFIT/ (LOSS) BEFORE TAXATION

7,897,089 11,485,263

Operating Activity Tax Income / (Expense)

(538,508) (2,032,218) Current Tax (Expense) / Income 31 (592,687) (2,032,888) Deferred Tax (Expense) / Income 31 54,179 670 OPERATING ACTIVITY PROFIT/ (LOSS) FOR THE PERIOD

7,358,581 9,453,045

NET PROFIT / (LOSS) FOR THE PERIOD

7,358,581 9,453,045 Distribution of Profit/(Loss) For The Period

Minority Interest 23.9 (71,736) 146,019 Parent Company's Share 32 7,430,317 9,307,026 Earnings Per Share 32 0.12 0.16


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CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME FOR THE INTERIM PERIODS ENDED AT 31 MARCH 2015 AND 2014


Current Period Prior Period Unreviewed Unreviewed

Footnote

References 01.01.-

31.03.2015 01.01.-

31.03.2014

PROFIT/(LOSS) FOR THE PERIOD 7,358,581 9,453,045

OTHER COMPREHENSIVE INCOMES / (LOSSES) Not to Be Reclassified on Profit or Loss (870,296) (1,016,058)

Changes in Revaluation of Tangible Fixed Assets Increase/Decrease 15 - 31 (1,152,497) (1,267,017) Defined Benefit Plans Re-measurement Gains / (Losses) 20 74,620 6,938 Taxes in Other Comprehensive Income Not to Be Reclassified on Profit or Loss - Period Tax Expense/Income - Deferred Tax Expense / Income 31 207,581 244,021

OTHER COMPREHENSIVE INCOMES / (LOSSES) (870,296) (1,016,058)

TOTAL COMPREHENSIVE INCOMES / (LOSSES) 6,488,285 8,436,987

Distribution of Total Comphrehensive Profit/(Loss) Minority Interests (61,265) 144,137

Parent Company’s Share 6,549,550 8,292,850


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STATEMENTS OF CHANGES IN EQUITY FOR THE INTERIM PERIODS ENDED AT 31 MARCH 2015 AND 2014

(Currency - Turkish Lira ‘TRY’ unless expressed otherwise)

Accumulated Other Comprehensive Income

Not to Be Reclassified on Profit or Loss

Accumulated Profit/ (Losses)

Footnote

References Paid in Capital

Inflation Adjustments of

Shareholders' Equity

Share Premiums/

Discounts

Defined Benefit Plans

Remeasurement Gains /

Losses)

Changes in Revaluation of Tangible

Fixed Assets

Effect of Business Mergers

Subject to Common

Control Restricted

Reserves

Retained Earnings /

(Losses)

Net Profit/ (Loss) For

The Period

Parent Company's

Equity Minority

Interest

Total Shareholders

’ Equity Balance at 31 December 2013 (Beginning of Period) 60,000,000 746,913 31,340,295 (542,267) 36,713,585 (2,390,557) 2,972,851 43,831,351 17,419,878 190,092,049 361,067 190,453,116

Transfer from retained profit - - - - - - - 17,419,878 (17,419,878) - - - Total comprehensive income / (expense) , net 32 - - - 7,434 (1,021,610) - - - 9,307,026 8,292,850 144,137 8,436,987

Balance at 31 March 2014 (End of Period) 60,000,000 746,913 31,340,295 (534,833) 35,691,975 (2,390,557) 2,972,851 61,251,229 9,307,026 198,384,899 505,204 198,890,103

Balance at 31 December 2014 (Beginning of Period) 60,000,000 746,913 31,340,295 (359,565) 33,595,559 (2,390,557) 5,088,114 45,295,096 26,530,784 199,846,639 2,364,056 202,210,695

Transfer from retained profit

- - - - - - - 26,530,784 (26,530,784) - - - Total comprehensive income / (expense) , net 32 - - - 49,225 (929,992) - - - 7,430,317 6,549,550 (61,265) 6,488,285

Balance at 31 March 2015 (End of Period) 60,000,000 746,913 31,340,295 (310,340) 32,665,567 (2,390,557) 5,088,114 71,825,880 7,430,317 206,396,189 2,302,791 208,698,980


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CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE PERIODS ENDED AT 31 MARCH 2015 AND 2014

(Currency - Turkish Lira (TRY) unless expressed otherwise.)


Unreviewed Unreviewed

Footnote

References 01.01.-

31.03.2015 01.01.-

31.03.2014

A. CASH FLOW FROM OPERATING ACTIVITIES (31,201,766) (4,143,908)

Profit / (Loss) of the period, net

7,358,581 9,453,045

Adjustments to Reconcile Net Profit / (Loss) for the Period Tangible Fixed Assets Amortization 15 3,239,397 2,447,025 Intangible Fixed Assets Depreciation 16 533,656 536,527 Adjustment to Retirement Pay Provision 20 12,740 46,372 Adjustment to Interest Accruals of Bank Borrowings 9 740,941 539,558 Unrealized Exchange Difference Incomes / (Expenses), net

(240,594) 684,590

Adjustment to Provision for Doubtful Receivables 10 - 26.1 35,148 61,960 Adjustment to Unearned Interest on Receivables 10 - 27 2,553,533 3,017,572 Adjustment to Unearned Interest on Notes Payables 10 - 27 (2,866,221) (2,873,936) Adjustment to Deferred Tax 31 (54,179) (670) Deffered Taxes Accounted For Under Equity 31 14,924 1,388

Changes in Operating Assets and Liabilities

Changes in Inventories 13 (1,063,737) (9,614,184) Changes in Trade Receivables 10 774,562 (25,837,619) Changes in Other Receivables 11 12,951,961 19,348,386 Changes in Other Current Assets 21 (46,113,985) 4,730,118 Changes in Trade Payables 10 6,792,857 18,789,194 Changes in Other Payables 11 (13,843,251) (25,334,867) Changes in Short Term Provisions 20 (83,613) 714 Changes in Other Liabilities 21 - (139,081) Cash Flow From Operating Activities

Taxes Paid 31 (1,944,486)

B.CASH FLOW FROM INVESTING ACTIVITIES (933,554) (10,142,348) Cash inflows from Purchases of Tangible and Intangible Non-Current Assets 15 - 16 1,796,509 1,066,121 Cash outflows from Sales of Tangible and Intangible Non-Current Assets 15 - 16 (2,740,534) (11,206,587) Effect of Business Mergers Subject to Common Control 23.9 10,471 (1,882) C.CASH FLOW FROM FINANCIAL ACTIVITIES 15,292,015 12,789,655 Cash Outflows Relating To Debt Payments 9 (17,374,706) (4,048,787) Cash Inflow From Borrowing 9 32,666,721 16,838,442

NET INCREASE/DECREASE OF CASH AND CASH EQUIVALENTS (A+B+C) (16,843,305) (1,496,601) D. CASH AND CASH EQUIVALENTS AT THE BEGINNING OF THE PERIOD

17,901,514 2,883,923

CASH AND CASH EQUIVALENT AT THE END OF THE PERIOD (A+B+C+D) 1,058,209 1,387,322


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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE INTERIM PERIOD ENDED AT 31 MARCH 2015

(Currency - Turkish Lira ‘TRY’ unless expressed otherwise.) NOTE 1 – ORGANIZATION AND NATURE OF ACTIVITIES OF GROUP For the purpose of the consolidated financial statements Royal Halı İplik Tekstil Mobilya Sanayi ve Ticaret Anonim Şirketi (“Parent Company”) and its subsidiaries are referred as “Group”. The summarized information of entities which are consolidated with “complete consolidation method” is comprised of the following; Royal Halı İplik Tekstil Mobilya Sanayi ve Ticaret Anonim Şirketi Royal Halı İplik Tekstil Mobilya Sanayi ve Ticaret Anonim Şirketi (“Parent Company” or “Company”) was established in the year of 2000 in Gaziantep, Turkey with the title of Naksan Kimya Sanayi ve Ticaret A.Ş. which was changed and registered to current name at 31 December 2007. The Company began its activities with production of fabric canvas, fabric irrigation hoses, polyester canvas, woven sacks, and lamination and veneering, then changed its area of activities to production of carpets (PP, acrylic, wool) and yarn with BCF technology in the year 2005 and in the same year, the Company started the investment to establish a new factory to produce machine carpet. The Company registered “Royal Halı” as a carpet trademark from Turkish Patent Institute and entered into the domestic and foreign market. As of 2007 Company obtained the rights to use trademark “Pierre Cardin” in carpet sector and started carpet production activities under this trade mark. In 2010, company rented Pierre Cardin’s trademark rights to use in the carpet industry for 10 years. In addition to these two brands, as of 31 December 2010, the Company acquired “Atlas Halı” brand. As of 31 March 2015 there are 18 main dealers of the Company, the majority of domestic carpet sales are realized through these dealers. Also, as of 31 December 2014, the Company has 9 showrooms, 5 located in Gaziantep, 2 located in Hatay, 1 located in Şanlıurfa and 1 in İkitelli/Istanbul, owned and operated by the Company itself. No dealer system exists in BCF yarn sale. For the period ended at 31 March 2015, the average personnel number of the Company is 776 (01 January - 31 December 2014: 783). The company is registered to the Capital Market Board (“CMB”) and on the date of 03 May 2013, whose shares are offered to the public at the Borsa İstanbul Anonim Şirketi, in the primary market. As of 31 March 2015, 28.75% of shares, which represent the company’s capital, are traded at the Borsa İstanbul Anonim Şirketi. (31 December 2014: 28.75%) As of 31 March 2015 and 31 December 2014, the company’s partnership structure, as was presented in Note 23.1. The company’s main shareholder is Naksan Holding A.Ş. and ultimate shareholders are Nakıboğlu family. As of report date, registered addresses of the Company are as follows;

Carpet Factory

4. Organize Sanayi Bölgesi 83402 No’lu Cadde No: 3

Başpınar / Gaziantep / Turkey

BCF Yarn Factory

1.Organize Sanayi Bölgesi 83118 No’lu Cadde No: 6 Başpınar / Gaziantep / Turkey

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(Currency - Turkish Lira ‘TRY’ unless expressed otherwise.) Atlas Halı Aksesuar ve Mobilya Sanayi Ticaret Anonim Şirketi Atlas Halı Aksesuar ve Mobilya Sanayi Ticaret Anonim Şirketi (“The Company” or “Atlas Halı”) was established on 14 September 2011 in Istanbul / Turkey. The Company is engaged in producing and selling of machine carpets. Atlas Halı makes its sales to final consumer by direct dealers channel without using regional dealers. For the period ended at 31 March 2015, the average personnel number of the Company is 35 (01 January - 31 December 2014: 31). As of 31 March 2015 and 31 December 2014, Company’s capital structure is as following; 31 March 2015 31 December 2014

Shareholders Ratio Amount

(TRY) Ratio Amount

(TRY) Royal Halı İplik Tekstil Mobilya Sanayi ve Ticaret Anonim Şirketi 51.00% 2,550,000 51.00% 2,550,000 Naksan Holding Anonim Şirketi 19.00% 950,000 19.00% 950,000 Cahit Nakıboğlu 11.40% 570,000 11.40% 570,000 Osman Nakıboğlu 10.80% 540,000 10.80% 540,000 Bahaeddin Nakıboğlu 3.60% 180,000 3.60% 180,000 Cihan Dağcı 2.50% 125,000 2.50% 125,000 Mehmet Hilmi Nakıboğlu 1.20% 60,000 1.20% 60,000 Taner Nakıboğlu 0.50% 25,000 0.50% 25,000 Total 100.00% 5,000,000 100.00% 5,000,000

Royal Halı İplik Tekstil Mobilya Sanayi ve Ticaret Anonim Şirketi has bought 51% of the shares of Atlas Halı Aksesuar ve Mobilya Sanayi Ticaret Anonim Şirketi from the company’s main partner Naksan Holding Anonim Şirketi in 29 January 2013. As of report date, registered address of the Company is as follows; Dünya Ticaret Merkezi A1 Blok 17.Kat Yeşilköy / İstanbul / Turkey

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Royal International Dış Ticaret Anonim Şirketi

Royal International Dış Ticaret Anonim Şirketi (“The Company” or “Royal International”) was established on 7 January 2015 in Gaziantep / Turkey. The Company is engaged in purchasing, selling, marketing, exporting and importing of all kinds of carpet, yarn and all kinds raw or textile products.

For the period, ended at 31 March 2015, the average personnel number of the Company is 2.

As of 31 March 2015, Company’s capital structure is as following;

31 March 2015 Shareholders Ratio Amount (TRY)

Royal Halı İplik Tekstil Mobilya Sanayi ve Ticaret Anonim Şirketi 100.00% 50,000

100.00% 50,000

As of report date, registered addresses of the Company are as follows;

4. Organize Sanayi Bölgesi83402 No’lu Cadde No: 3 Başpınar / Gaziantep / Turkey

NOTE 2 – BASIS OF THE CONSOLIDATED FINANCIAL STATEMENTS

2. a Basis of Presentation

Compatibility Statement

Consolidated companies prepare their statutory financial statements in accordance with the principles of, Turkish Commercial Code and Tax Legislation and the Uniform Chart of Accounts issued by the Ministry of Finance and presents in Turkish Liras (TRY). The financial statements of the Company have been prepared in accordance with Turkish Financial Reporting Standards/Turkish Accounting Standards (‘TFRS/TAS’) published by the Public Oversight Accounting and Auditing Standards Authority (“POA”), the necessary adjustments and reclassifications made for the fair presentation in accordance with Accounting Standards by CMB.

The Preparation of Financial Statements

The interim condensed consolidated financial statements and disclosures have been prepared in accordance with the communiqué numbered II-14.1 “Communiqué on the Principles of Financial Reporting In Capital Markets” announced by the Capital Markets Board on 13 June 2013 which is published on Official Gazette numbered 28676, in accordance with article fifth of the “Related Communiqué”, 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”).

Financial Statements Correction in High Inflation Period

The CMB has announced that, effective from 1 January 2005, the application of inflation accounting is no longer required for companies operating in Turkey and preparing their financial statements in accordance with CMB Accounting Standards. Therefore Group was abolished inflation accounting application for 1 January 2005.

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Currency

The financial statements and the prior period financial statements for comparison purpose, in the accompanying statements are prepared in terms of Turkish Lira (TRY).

Approval of Consolidated Financial Statements

Consolidated financial statements of the Group are approved by the Board of Directors and granted authority to publish at 11 May 2015. With no intention, the Board of Directors and some regulative agencies have the right to change the financial statements that were prepared according to legal regulations after they have been published.

Basis of Consolidation

The companies are subject to “Complete Consolidation Method” if directly or indirectly 50% or more than 50% of their shares or over 50% of their voting rights or the controlling rights regarding companies’ operations are belonging to the Parent Company. Parent Company has controlling rights if it is able to govern the financial and operating policies of an enterprise so as to benefit from its activities. The companies which have continuous relationship on management and power to govern Parent Company’s policies and/or which have direct or indirect capital and management relationship or which have voting share of Parent Company between the rates 20-50% are accounted by using equity pick-up method. According to equity method Group has not consolidated company.

Complete consolidation method

The principles of consolidation followed in the preparation of the accompanying financial statements are as follows:

- The financial statements of the consolidated subsidiaries have been equipped according to the accounting principles of the Parent Company.

- The share of the Parent Company in the shareholders equity of subsidiaries is eliminated from the financial of subsidiaries these are adjusted according to the accounting principles of financials of the Parent Company.

- All significant intercompany transactions and balances between the Parent Company and the subsidiaries have been comparatively eliminated.

- The minority part of shareholders’ equity including paid capital of the companies subject to consolidation is classified as “Minority Interest” in accompanying financial statement.

- The income statements of the Parent Company and the subsidiaries are consolidated a line by line basis and the transaction between companies are eliminated mutually.

The portion of the third parties other than consolidated companies in the net profit or losses of the subsidiaries are classified as “Minority Interest” in the income statements.

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(Currency - Turkish Lira ‘TRY’ unless expressed otherwise.) As of 31 March 2015, the company that are subject to “complete consolidation method” if directly or indirectly 50% or more than 50% of their shares or over 50% of their voting rights or the controlling rights regarding companies’ operations are belonging to the Parent Company are as below;

Ownership of the Parent Company through the

Subsidiary Minority

Interest

Subsidiaries (Direct) (Direct+ Indirect) Ratio

Atlas Halı Aksesuar ve Mobilya Sanayi Ticaret Anonim Şirketi 51.00% 51.00% 49.00% Royal International Dış Ticaret Anonim Şirketi (*) 100.00% 100.00% -

(*) Royal International Dış Ticaret Anonim Şirketi was established as of 07 January 2015. As of 31 December 2014, the company that are subject to “complete consolidation method” if directly or indirectly 50% or more than 50% of their shares or over 50% of their voting rights or the controlling rights regarding companies’ operations are belonging to the Parent Company are as below


Subsidiaries Minority

Interest

Subsidiary (Direct) (Direct+ Indirect) Ratio

Atlas Halı Aksesuar ve Mobilya Sanayi Ticaret Anonim Şirketi 51.00% 51.00% 49.00%

Adoption of New and Revised International Financing Reporting Standards Group has implemented the new and revised standards and interpretations effective from 1 January 2014 which are related to its main operations.

a) Standards, Amendments and IFRICs applicable to 31 March 2015 year ends; -Amendment to TAS 32, ‘Financial instruments: Presentation on offsetting financial assets and financial liabilities, effective from annual periods beginning on or after 1 January 2014. This amendment updates the application guidance in TAS 32, ‘Financial instruments: Presentation’, to clarify some of the requirements for offsetting financial assets and financial liabilities on the balance sheet. -Amendments to TAS 36, ‘Impairment of assets’, effective from annual periods beginning on or after 1 January 2014. These amendments address the disclosure of information about the recoverable amount of impaired assets if that amount is based on fair value less costs of disposal.

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(Currency - Turkish Lira ‘TRY’ unless expressed otherwise.) -Amendment to TAS 39 ‘Financial instruments: Recognition and measurement’, on novation of derivatives and hedge accounting, effective from annual periods beginning on or after 1 January 2014. These narrow-scope amendments allow hedge accounting to continue in a situation where a derivative, which has been designated as a hedging instrument, is novated to effect clearing with a central counterparty as a result of laws or regulation, if specific conditions are met. -IFRIC 21, ‘Levies’, effective from annual periods beginning on or after 1 January 2014. This interpretation is on TAS 37, ‘Provisions, contingent liabilities and contingent assets’. TAS 37 sets out criteria for the recognition of a liability, one of which is the requirement for the entity to have a present obligation as a result of a past event (known as an obligating event). The interpretation clarifies that the obligating event that gives rise to a liability to pay a levy is the activity described in the relevant legislation that triggers the payment of the levy. b) Standards and changings that released as of 31 March 2015 but yet become valid; - Annual improvements 2012: Effective from annual periods beginning on or after 1 July 2014. These amendments include changes from the 2010-2012 cycle of the annual improvements project that affect 7 standards: -TFRS 2, ‘Share-based payment’ -TFRS 3, ‘Business Mergers’ -TFRS 8, ‘Operating segments’ -TFRS 13, ‘Fair value measurement’ -TAS 16, ‘Property, plant and equipment’ and TAS 38,‘Intangible assets’ -TFRS 9, ‘Financial instruments’, TAS 37, ‘Provisions, contingent liabilities and contingent assets’, and -TAS 39, Financial instruments - Recognition and measurement’ -Annual improvements 2013: Effective from annual periods beginning on or after 1 July 2014. These amendments include changes from the 2011-12-13 cycle of the annual improvements project that affect 4 standards: -TFRS 1, ‘First time adoption’ -TFRS 3, ‘Business mergers’ -TFRS 13, ‘Fair value measurement’ and -TAS 40, ‘Investment property’ -Amendment to TAS 16, 'Tangible assets’ and TAS 38, 'Intangible assets', on depreciation and amortisation, effective from annual periods beginning on or after 1 January 2016. In this amendment, it has clarified that the use of revenue based methods to calculate the depreciation of an asset is not appropriate because revenue generated by an activity that includes the use of an asset generally reflects factors other than the consumption of the economic benefits embodied in the asset. It is also clarified that revenue is generally presumed to be an inappropriate basis for measuring the consumption of the economic benefits embodied in an intangible asset. -Amendments to TAS 27, ‘Separate financial statements’ on the equity method, effective from annual periods beginning on or after 1 January 2016. These amendments allow entities to use the equity method to account for investments in subsidiaries, joint ventures and associates in their separate financial statements.

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(Currency - Turkish Lira ‘TRY’ unless expressed otherwise.) -Amendments to TFRS 10, ‘Consolidated financial statements’ and IAS 28, ‘Investments in associates and joint ventures’, effective from annual periods beginning on or after 1 January 2016. These amendments address an inconsistency between the requirements in IFRS 10 and those in IAS 28 in dealing with the sale or contribution of assets between an investor and its associate or joint venture. The main consequence of the amendments is that a full gain or loss is recognised when a transaction involves a business (whether it is housed in a subsidiary or not). A partial gain or loss is recognised when a transaction involves assets that do not constitute a business, even if these assets are housed in a subsidiary. -TFRS 15 ‘Revenue from contracts with customers’, effective from annual periods beginning on or after 1 January 2017. TFRS 15, ‘Revenue from contracts with customers’ is a converged standard from the IASB and FASB on revenue recognition. The standard will improve the financial reporting of revenue and improve comparability of the top line in financial statements globally. -TFRS 9 ‘Financial instruments’, effective from annual periods beginning on or after 1 January 2018. This standard replaces the guidance in TAS 39. It includes requirements on the classification and measurement of financial assets and liabilities; it also includes an expected credit losses model that replaces the current incurred loss impairment model. -Amendment to TAS 19 regarding defined benefit plans, effective from annual periods beginning on or after 1 July 2014. These narrow scope amendments apply to contributions from employees or third parties to defined benefit plans. The objective of the amendments is to simplify the accounting for contributions that are independent of the number of years of employee service, for example, employee contributions that are calculated according to a fixed percentage of salary. -Annual improvements 2014: Effective from annual periods beginning on or after 1 January 2016. These set of amendments impacts 4 standards: -TFRS 5, ‘Non-current assets held for sale and discontinued operations’ regarding methods of disposal. -TFRS 7, ‘Financial instruments: Disclosures’, (with consequential amendments to TFRS 1) regarding servicing contracts. -TAS 19, ‘Employee benefits’ regarding discount rates. -TAS 34, ‘Interim financial reporting’ regarding disclosure of information. Offsetting Financial assets and liabilities are offset and the net amount is reported in the consolidated balance sheet when there is a legally enforceable right to set-off the recognized amounts and there is an intention to settle on a basis, or realize the asset and settle the liability simultaneously. Going Concern The accompanying consolidated financial statements prepared on the principle that the Group will be obtaining benefits from their assets and meet their liabilities within usual scales for the next year. Comparative Information and Previous Period Financial Statements Adjustments The condensed interim consolidated financial statements of the Group include comparative financial information to enable the determination of the financial position and performance. Comparative figures are reclassified, where necessary, to confirm to changes in presentation in the current period.

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(Currency - Turkish Lira ‘TRY’ unless expressed otherwise.) 2.b Changes in Accounting Policies A company only could change it s accounting policy under following circumstances; • If a standard or interpretation makes it necessary or • If the change make effect of operations or incidents on financial position and performance or cash flows more appropriate and reliable. Financial statements have to be comparable to see trends in financial position of companies, performance and cash flows for user of financial statements. This is why, if the change is not granting one of above conditions, each interim and fiscal periods has to be applied same accounting policy. Changes in Accounting Estimates and Errors The accompanying consolidated financial statements necessitate that some predictions about income and expenses regarding possible assets and liabilities in the financial statements prepared by the Group management to be compatible with statements required by Capital Market Board. Realized amounts can differ from the predictions. These predictions are observed regularly and reported periodically in income statements. Comments those would have significant effect on balances reflected in the consolidated financial statements and important expectations and valuations considering present or future expectation as of report date, are as following: Provision for doubtful receivables Provision for doubtful receivables reflects the future loss that the Company anticipates to incur from the trade receivables as of the balance sheet date which is subject to collection risk considering the current economical conditions. During the impairment test for the receivables, the debtors are assessed with their prior year performances, their credit risk in the current market, their performance after the balance sheet date up to the issuing date of the financial statements; and also the renegotiation conditions with these debtors are considered. The provision for doubtful receivables is presented in Note 10. Provision for the diminution in value of inventory During the assessment of the provision for the diminution in value of inventory the following are considered; analyzing the inventories physically and historically, considering the employment and usefulness of the inventories respecting to the technical personnel view. Sales prices listed, average discount rates given for sale and expected cost incurred to sell are used to determine the net realizable value of the inventories. As a result of this, the provision for inventories with the net realizable values below the costs and the slow moving inventories are presented. The provision for the diminution in value of inventory is presented in Note 13. Useful lifetime of tangible and intangible assets Group reserves provision for depreciation regarding to footnote 2.c that refers to useful lifetime on fixed assets. Information about useful lifetime is described in footnote 2.c.

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(Currency - Turkish Lira ‘TRY’ unless expressed otherwise.) Provision for lawsuits While setting provision for lawsuits, it has considered probability to lose lawsuit, then the consequences of loosing case by the legal advisor of the Group. Details of the lawsuits provisions are in Note 18 based on the estimation by utilizing information given by Group Management. Severance pay provision Severance Pay Provision is calculated with actuarial expectation based on assumptions like discount rates, salary increase in the future and probability to quit the job. This planning covers long term concerns. Hence assumptions involve vital uncertainty. Provisions for employee benefits are given in detail in Note 20. Deferred Tax The Group, recognizes deferred tax on the temporary timing differences between the carrying amounts of assets and liabilities in the financial statements prepared in accordance with IFRS and statutory financial statements which is used in the computation of taxable profit. The related differences are generally due to the timing difference of the tax base of some income and expense items between statutory and IFRS financial statements. The Group has deferred tax assets resulting from tax loss carry-forwards and deductible temporary differences, which could reduce taxable income in the future periods. All or partial amounts of the realizable deferred tax assets are estimated in current circumstances. The main factors which are considered include future earnings potential; cumulative losses in recent years; history of loss carry-forwards and other tax assets expiring, the carry-forward period associated with the deferred tax assets, future reversals of existing taxable temporary differences that would, if necessary, be implemented, and the nature of the income that can be used to realize the deferred tax asset. As a result of the revaluation, as of 31 March 2015, temporary differences due to tax incentives can be foreseen and the fraction falls in continuity of tax incentives within the context of tax legislations, can be benefited from and is to be tax assets and accounted. As of balance sheet date, the details regarding deferred tax calculations are stated in Note 31. 2. c Summary of Significant Accounting Policies Cash and Cash Equivalents Cash and cash equivalent values contain cash on hand, bank deposits and high liquidity investments. Cash and cash equivalents are showed with obtaining costs and the total of accrued interests. Financial Investments Initial measurements of financial asset and financial liabilities When a financial asset or financial liability is recognized initially, an entity shall measure it at its fair value plus, in the case of a financial asset or financial liability not at fair value through profit or loss, transaction costs that are directly attributable to the acquisition or issue of the financial asset or financial liability. When an entity uses settlement date accounting for an asset that is subsequently measured at cost or amortized cost, the asset is recognized initially at its fair value on the trade date.

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(Currency - Turkish Lira ‘TRY’ unless expressed otherwise.) Subsequent measurement of financial assets After initial recognition, an entity shall measure financial assets, including derivatives that are assets, at their fair values, without any deduction for transaction cost it may incur on sale or other disposal, except for the following financial assets: (a) Loan and receivables which shall be measured at amortized cost using the effective interest method, (b) Held-to-maturity investments which shall be measured at amortized cost using the effective interest

method, and (c) Investments in equity instruments that do not have a quoted market price in an active market and whose

fair value cannot be reliably measured and derivatives that is linked to and must be settled by delivery of such unquoted equity instruments which shall be measured at cost.

A financial asset of financial liability at fair value difference through profit or loss It is classified as tangible assets hold for future sale. A financial asset or financial liability is classified as tangible assets hold for future sale if it is: (a) Acquired or incurred principally for the purpose of selling or repurchasing it in the near term, (b) Part of a portfolio of identified financial instruments that are managed together and for which there is

evidence of a recent actual pattern of short-term profit making or (c) A derivative (except for a derivative that is a financial guarantee contract or a designated and effective

hedging instrument). Held-to maturity investments Non derivative financial assets with fixed or determinable payments and fixed maturity that an entity has the positive intention and ability to hold to maturity. (a) Those that the entity upon initial recognition designates as at fair value through profit or loss, (b) Those that the entity designates as available for sale, and (c) Those that meet the definition of loans and receivables. Available-for-sale financial assets

Non-derivative financial assets that are designated as available for sale or are not classified as loans and receivables, held-to-maturity investments or financial assets at fair value through profit or loss. Derivative financial assets and hedging instruments Derivative financial instruments of the group consist of the contracts of forward exchange, (that is forward and option). The Group’s, derivative transactions for the risk manage of foreign exchange, the fair value of derivatives for operations which is maturity date isn’t due yet, fair valuation of these operations based on fair market price and the fair value of operations shown in balance sheet as asset or liability. The Group, reflects fair value difference of derivative financial instruments its consolidated income statements.

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(Currency - Turkish Lira ‘TRY’ unless expressed otherwise.) Financial Borrowings Financial borrowings are recognized initially at the proceeds received, net of transaction costs incurred. Borrowings are subsequently stated at amortized cost using the effective yield method; any difference between proceeds, net of transaction costs, and the redemption value is recognized in the income statement over the borrowing period. Borrowing costs are charged to income statement when they incur and reclassed to bank loans. Trade Receivables and Payables The trade receivables and payables derived from providing services or selling goods by Group and purchasing goods or receiving services are clarified with deferred financial income and expense in the accompanying financial statements. Post clarification, trade receivables and trade payables are calculated from the values of following the record of the original invoice values, by rediscounting with effective interest rate method. Short term receivables without designated interest rate are reflected the invoice values in case the effective interest rate effect is insignificant. Provision for Doubtful Receivables Group sets provisions for doubtful receivable when it is realized uncollectible due to objective findings. Amount of this provision is the difference of registered and collectible amounts. All cash flow including the collectible sum amount from guarantee and assurance is discounted on the base of the effective interest rate of trade receivable occurred. In case of collecting doubtful receivable that is provided, the collected amount is deducted from the provision for doubtful receivable and in case of a remaining balance; the balance is added to other operating income. Inventories Inventories, valued at the lower of cost or net realizable value. Cost of inventories involves all of the purchasing cost, conversion cost and other cost for the inventories to make it present. Cost is determined by the weighted average cost method. Net realizable value is obtained, according to the subscription of estimated completion cost and estimated costs which are installed in order to realize the sale from estimated selling price, in ordinary trade activity. The net realizable value is an amount which is got with the reduction of total estimated necessary sales cost to sell and estimated complementation cost from estimated sales price which consist of usual commercial activity. The allowance for decrease in value of inventories degrade inventories to net realizable value and losses about the inventories are recognized as expense during the formation of degrade and losses. Allowance for decrease in value of inventories reversed because of the increase of realizable value, recognized to reduce the accrued selling cost in the reverse period. As of every financial statement period, net realizable value is reviewed once again. The provision for losses is reversed in the case of either the conditions causing to degrade the inventories’ net realizable value lose validity or changing economic conditions forming an increase in net realizable value is proved (reversed amount is limited with the previous impairment amount).

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(Currency - Turkish Lira ‘TRY’ unless expressed otherwise.) Tangible Fixed Assets Tangible fixed assets (except lands, buildings, machineries, plants and equipments) are carried at cost, restated by deduction of the yearly accumulated depreciation. Depreciation is provided on the acquired values of property, plant and equipment on a straight-line method starting from the acquirement date. Land is considered as limitless useful life, so it is not subject to depreciation. As of 31 December 2012, lands, buildings and machineries, plants and equipments of the Group are revalued at fair value and reflected in the consolidated financial statements according to the Expert Appraisal Reports which are prepared by Elit Gayrimenkul Değerleme A.Ş. that is approved by the Capital Market Board. As of 31 March 2015, there is not a new Expert Appraisal Report for Group’s lands, buildings and machineries, plants and equipment. For this reason, lands, buildings and machineries, plants and equipments mentioned in the Expert Appraisal Report are shown in the accompanying consolidated financial statements by reducing impairment between balance sheet date and appraisal report date. Impairment was calculated with consideration of mentioned fixed asset’s remaining useful life. The revaluation frequency depends on the differences of the realistic values of tangible fixed assets. If a net book value of an asset increases during the revaluation, this increase will be recognized at other comprehensive income and allocated under revaluation value increase directly in the owners' equity account. However a revaluation value increase can only be recognized as the same amount of value decrease occurred from profit or loss for the same asset. If a net book value of an asset decreases during the revaluation, this decrease recognized as expense. However this decrease can only be recognized as much as all kinds of credit balance about this asset in the revaluation surplus. The subjected decrease recognized in other comprehensive income, decreases the amount accumulated in owners’ equity under revaluation surplus.

The depreciation rates for tangible fixed assets, which approximate the useful economic lives of these assets, are as follows: Useful life Infrastructure and land improvements 25 year Buildings 50 year Machinery, plants and equipments 12 year Motor vehicles 6 year Furniture and fixtures 10 year Leasehold improvements Rent period Maintenance and repair expenses are recorded in the income statement in the period in which they are incurred. Costs related to the primary renewals are added to this cost of assets in the expected condition that providing economical profit with the better performance than the situation before renewals. Expenses which were made after the activation added to the cost of assets are put to amortization pursuant to economical lifetime of related assets. The Group, value of the part that was changed in the range of expenses which was made after activation removes from income statement regardless to put the amortization independently to the other part.

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(Currency - Turkish Lira ‘TRY’ unless expressed otherwise.) Intangible Fixed Assets Intangible fixed assets comprise of rights and they are recorded at acquisition cost. Intangible fixed assets are amortized on a straight-line method with prorate basis over period of maximum 10 years from the date of acquisition. Financial Leases Group acquired assets under finance lease agreements and capitalized at the inception of the lease starting from acquired date. Payables to lease are pursued under financial leasing liability in balance sheet (It was included in the related tangible fixed assets in the financial statements). Calculation of minimum leasing payment is to find out current market value as the valid proportion is calculated practically in financial leasing process then it is, otherwise proportion of interest rate of loan is used as discount factor. Expenses of asset acquisition through financial leasing are included in costs. The liability from financial leasing is decomposed into interest rate and the main loan. Expenses of interest rate are calculated with the fixed interest rate and are issued in related periods. Assets Held for Sale The Group measures assets held for sale at the lower of its carrying amount and fair value less costs to sell. Assets held for sale are not depreciated. Just before the first classification of related asset (or the group of assets held for sale) as asset held for sale, the book value of the asset is measured within the context of related TFRS. The Group classifies a non-current asset (or the group of assets held for sale) as held for sale if its carrying amount will be recovered principally through a sale transaction rather than through continuing use. For this to be the case, the asset (or the group of assets held for sale) must be available for immediate sale in its present condition subject only to terms that are usual and customary for sales of such assets and its sale must be highly probable. For the sale to be highly probable management must be committed to a plan to sell the asset (or the group of assets held for sale) and an active program to locate a buyer and complete the plan must have been initiated. Furthermore, the asset (or the group of assets held for sale) must be actively marketed for sale at a price that is reasonable in relation to its fair value. In addition, the sale should be expected to qualify for recognition as a completed sale within one year from the date of classification and actions required to complete the plan should indicate that it is unlikely that significant changes to the plan will be made or that the plan will be withdrawn. Impairment of assets At each reporting date, the Group assesses whether there is an impairment indication for the assets, except for the deferred income tax asset that are stated at revalued amounts as of reporting date. When an indication of impairment exists, the Group estimates the recoverable amounts of such assets. An impairment loss is recognised for the amount by which the carrying amount of the asset or any cash generating unit of that asset exceeds its recoverable amount which is the higher of an asset’s net selling price and value in use.All impairment losses are accounted for in the statement of comprehensive income. Impairment losses can be reversed to the extent that increased carrying amount of an asset shall not exceed the carrying amount that would have been determined had no impairment loss been recognized for the asset in prior years provided that increases in the recoverable amount of the asset can be associated with events that occur subsequent to the period in which the impairment loss was recognised.

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(Currency - Turkish Lira ‘TRY’ unless expressed otherwise.) The criteria that the group uses to determine that there is objective evidence of an impairment loss include; - Significant financial difficulty of the issuer or obligor, - A breach of contract, such as a default or delinquency in interest or principal payments, - For economic or legal reasons relating to the borrower’s financial difficulty, granting to the borrower a concession that the lender would not otherwise consider, - It becomes probable that the borrower will enter bankruptcy or other financial reorganisation, - Observable data indicating that there is a measurable decrease in the estimated future cash flows from a portfolio of financial assets. Determination of Fair Values Fair values have been determined for measurement and/or disclosure purposes based on the following methods. When applicable, further information about the assumptions made in determining fair values is disclosed in the notes specific to that asset or liability. Fair value, according to valuation techniques used are classified into the following levels: Level 1: For identical assets or liabilities in active markets (unadjusted) prices; Level 2: 1st place other than quoted prices and asset or liability, either directly (as prices) or indirectly (ie derived from prices ) observable data; Level 3: Asset or liability is not based on observable market data in relation to the data (nonobservable data). Borrowing Cost Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, which are assets that necessarily take a substantial period of time to get ready for their intended use or sale, are added to the cost of those assets, until such time as the assets are substantially ready for their intended use or sale. Investment income earned on the temporary investment of specific borrowings pending their expenditure on qualifying assets is deducted from the borrowing costs eligible for capitalization. All of the other borrowing costs are recorded in the income statement in the period in which they are incurred. For the period ended at 31 March 2015 there is no capitalized borrowing cost on tangible assets (01 January – 31 December 2014: TRY 363,817). Effects of Change in Currency Rate Assets and liabilities in foreign currency and purchase and sale commitments create exchange risk. Foreign exchange risk stemming from depreciation or appreciation of Turkish Lira managed by top management by following the currency position of Group and taking position according to approved limits.

Taxes on Income

Taxes on income for the period comprise current tax and the change in the deferred taxes.

Current tax provision

The charge for current tax is based on the results for the period as adjusted for items which are non-assessable or disallowed. Taxable profit differs from profit as reported in the income statement because it excludes teems of income or expense that taxable or deductible in other years and it further excludes items that are never taxable or deductible.

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Deferred tax

Deferred tax is recognized on differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases use in the computation of taxable profit, and are accounted for using the balance sheet liability method. Deferred tax liabilities are generally recognized for all taxable temporary differences and deferred tax assets are recognized for all deductable temporary differences to the extent that it is probable that taxable profits will be available against which those deductible temporary differences can be utilized. Such assets and liabilities are not recognized if the temporary differences arisen from goodwill or from the initial recognition (other than in a business combination) of other assets and liabilities in a transaction that affects neither the taxable profit not the accounting profit.

Deferred tax liabilities are recognized for taxable temporary differences associates with investments in subsidiaries and associates and interests in joint ventures, except where the group is able to control the reversal of the temporary differences and it is probable that the temporary differences associated with such investments and interests are only recognized to the extent that it is probable That there will be sufficient taxable profits against which to utilize the benefits of the temporary differences and they are expected to reverse in the foreseeable future.

The carrying amounts of deferred tax assets is reviewed at each balance sheet date and reduce to extent that is no longer probable that sufficient taxable profits will be available to allow all part of the assets to be recovered.

Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the period in which the liability is settled or the asset realized, based on tax rates (and the tax laws) that have been enacted or substantively enacted by the balance sheet date. The measurement of deferred tax liabilities and assets reflects the tax consequences that would follow from the manner in which the Group expects, at the reporting date, to recover or settle the carrying amount of its assets and liabilities.

Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax liabilities and when they relate to income taxes levied by the same taxation authority and the Group intends to settle its current tax assets and liabilities on a net basis.

Current and deferred tax are recognized as an expense or income in profit or loss, except when they relate to items credited or debited directly to equity, in which case the tax is also recognized directly in equity, or where they arise from the initial accounting for a business combination. In the case of a business combination, the tax affect is taken into account in calculating goodwill or determining the excess of the acquirer’s interest in the net fair value of the acquirer’s identifiable assets liabilities and contingent liabilities over cost.

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(Currency - Turkish Lira ‘TRY’ unless expressed otherwise.) Business Mergers Subject to Common Control Business mergers including joint ventures or joint control means all ventures or businesses, before and after the merge, being controlled by the same person or group and their control is not temporary. Business mergers subject to common control should be recognized using the pooling of interest method, and thus goodwill should not be included in the financial statements. While using the pooling of interest method, the financial statements should be prepared as if the combination has taken place as of the beginning of the reporting period in which the common control occurs and should be presented comparatively from the beginning of the reporting period in which the common control occurred. It’s admissible to look at the business mergers subject to common control from parent company’s point of view, from beginning of the consolidation date and after Group’s parent company obtained the common control, accounting of combined financial statements regulated in regard of the IAS standards as if the financial statements prepared with IAS standards. To fix the inconsistency between assets – liabilities, as a result of the business mergers subject to common control, “Effect of the Mergers Subject to Common Control” account classified under equity is used. Provisions, Contingent Liabilities and Assets Provisions Provisions are recognized when an enterprise has a present obligation (legal or constructive) as a result of a past event and it is probable that an outflow of resources will be required to settle the obligation, and a reliable estimate can be made of the amount of the obligation. Provisions are reviewed at each balance sheet date and adjusted to reflect the current best estimate. Contingent Liabilities and Assets Transactions that may give rise to contingencies and commitments are those where the outcome and the performance of which will be ultimately confirmed only on the occurrence or non occurrence of certain future events, unless the expected performance is not very likely. Accordingly, contingent losses are recognized in the financial statements of Group if a reasonable estimate of the amount of the resulting loss can be made. Contingent gains are reflected only if it is probable that the gain will be realized.

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(Currency - Turkish Lira ‘TRY’ unless expressed otherwise.) Renting Transactions Group – As renter Financial Leasing Group acquired assets under finance lease agreements and capitalized at the inception of the lease starting from acquired date. Payables to lease are pursued under financial leasing liability in balance sheet. Calculation of minimum leasing payment is to find out current market value as the valid proportion is calculated practically in financial leasing process then it is, otherwise proportion of interest rate of loan is used as discount factor. Expenses of asset acquisition through financial leasing are included in costs. The liability from financial leasing is decomposed into interest rate and the main loan. Expenses of interest rate are calculated with the fixed interest rate and are issued in related periods. Operating Leases Leases where a significant portion of the risks and rewards of ownership a retained by the lesser a classified as operating leases. Payments made under operating leases are charged to the income statement on a straight-line basis over the period of lease. Income Accruals

Revenue is recognized on the accrual basis at the time deliveries are made, at the invoiced values. Net sales reflect gross sales, net of sales discounts and returns. Related Parties In the presence of one of the following criteria, parties are considered as related to Group, a) Directly, or indirectly through one or more intermediaries, the party, (i) Controls, is controlled by, or is under common control with, Group (this includes parents, subsidiaries and fellow subsidiaries); (ii) Has an interest in Group that gives it significant influence over the Company; or (iii) Has joint control over Group; (b) The party is an associate of Group, (c) The party is a joint venture, in which Group is a venture, (d) The party is member of the key management personnel of Group or its parent, (e) The party is a close member of the family of any individual referred to in (a) or (d), (f) The party is an entity that is controlled, jointly controlled or significantly influenced by, or for which significant voting power in such entity resides with, directly or indirectly, any individual referred to in (d) or (e) (g) The party has a defined benefit plan for the employees of the Company or a related party of the Company. Transactions with related parties are transfer of resources or obligations between related parties, regardless of whether a price is charged. Group, interacts with its related parties within the frame of ordinary business activities (Note 7).

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(Currency - Turkish Lira ‘TRY’ unless expressed otherwise.) Summarized info about related parties of Group is as follows:

Naksan Holding A.Ş.: Naksan Holding Anonim Şirketi (“The Company” or “Naksan Holding”) was established in Gaziantep, Turkey in 2007 and moved to its’ head office to Istanbul, Turkey in the year of 2009. Naksan Holding was established as a corporation taking part in the management and auditing of the companies operating in production of plastic, packaging, carpets, production plant of electricity, building mining concerns and other sectors and providing consultancy about financing, investment, organization, marketing and selling.

Naksan Plastik Sanayi ve Ticaret A.Ş.: Naksan Plastik Sanayi ve Ticaret Anonim Şirketi (“The Company” or “Naksan Plastik”) was established in 1980 in Gaziantep and it is mainly engaged with production of plastic packaging materials such as Shrink films, stretch films, plastic bags, carrier bags, garbage bags, refuse sacks, plain PP films, PE bubble films and also printed flexible packaging products.

Adularya Enerji Elektrik Üretimi ve Madencilik A.Ş.: Adularya Enerji Elektrik Üretimi ve Madencilik Anonim Şirketi (“The Company” or “Adularya Enerji”) was established in 2007 in Ankara and it is mainly engaged with establishing production plant of electricity, building mining concerns, searching for subsurface and surface mines and selling and marketing of these goods.

Naksan Kollektif Şti.: Naksan Kollektif Şirketi (“The Company” or “Naksan Kollektif”) was incorporated on 30 May 2000 in Gaziantep free trade zone and engages in trading of raw materials to the Company.

Cahit ve Osman Nakıboğlu: It is an ordinary partnership and engages in sales and marketing on behalf of Company.

Bilim Plastik Kimya Nakliyat Turizm Sanayi Ticaret Anonim Şirketi: Bilim Plastik Kimya Nakliyat Turizm Sanayi Ticaret Anonim Şirketi (“The Company” or “Bilim Plastik”) was incorporated in Aliağa, Izmir in 1997 and engages in chemical and transportation.

Akkoza Mensucat Sanayi ve Ticaret A.Ş.: Akkoza Mensucat Sanayi ve Ticaret A.Ş (“The Company” or “Akkoza Mensucat”) was incorporated in 1973 in Gaziantep and engages in production of yarn.

Naksan Elektrik Enerjisi Toptan Satış A.Ş.: Naksan Elektrik Enerjisi Toptan Satış A.Ş (“The Company” or “Naksan Elektrik”) was established on 23 July 2010 in Gaziantep, Turkey. The activities of the Company are primarily concentrated on wholesale activity of the electrical energy to the direct consumers.

Naksan Enerji Elektrik Üretimi A.Ş.: Naksan Enerji Elektrik Üretimi A.Ş. (“The Company” or “Naksan Enerji”) was established on 23 July 2010 in Gaziantep, Turkey. The Company engages in constructing production facility of electrical energy, processing of the facility and producing the electrical energy.

Naksan Teknoloji ve İletişim Sistemleri Sanayi ve Ticaret A.Ş.: Naksan Teknoloji ve İletişim Sistemleri Sanayi ve Ticaret A.Ş. (“The Company” or “Naksan Teknoloji”) was established on 25 June 1988 with the title of Naksan Sigorta Aracılık Hizmetleri Ltd. Şti. The name of the Company was changed and registered to the current name on 21 July 2010. The activities of the Company are primarily concentrated on production and marketing of the computer equipments.

Bakım Elektrik Plastik Tekstil Sanayi ve Ticaret A.Ş: Bakım Elektrik Plastik Tekstil Sanayi ve Ticaret A.Ş (“The Company” or “Bakım Elektrik”) was originally incorporated on 9 May 2006 in Gaziantep.The Company primarily engages in production and repairing activities of the electrical equipments. The Company also concentrated on converting plastic raw materials to the semi-finished goods and trading these goods.

Naksan Gıda ve Tarımsal İşletmeleri Sanayi ve Ticaret A.Ş.: Naksan Gıda ve Tarımsal İşletmeleri Sanayi ve Ticaret A.Ş. (“The Company” or “Naksan Gıda”) was established on 13 September 2004 with the title of Naksan Kimya Sanayi ve Ticaret Ltd. Şti. The name of the Company was changed and registered to the current name on 29 December 2010. The activities of the Company are primarily concentrated on producing and trading of the agricultural goods.

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(Currency - Turkish Lira ‘TRY’ unless expressed otherwise.) Gülnak Elektrik Üretim A.Ş.: Gülnak Elektrik Üretim A.Ş. (“The Company” or “Gülnak”) was established in 2011 in Ankara, Turkey. It is engaged in building of electricity production plant from natural gas. The Company is in liquidation.

Gaziantep Basketbol ve Spor A.Ş.: Gaziantep Basketbol ve Spor A.Ş.(“The Company” or “Gaziantep Basketbol”) was established in 2013 in Gaziantep, Turkey. The Company's basketball team has been inherited from the Gaziantep Metropolitan Municipality, with the name of the basketball team “Royal Halı Gaziantep Basketbol" is struggling in the Beko Basketball League.

Al-Anis Plastic Industry Ltd.: Al-Anis Plastik Industry Ltd. (“The Company” or “Al-Anis”) was established in 2012 in Bağdat, Irak. The company is producing plastic packaging materials and sells.

Paralel Gayrimenkul İnşaat Yapı Taahhüt Sanayi ve Ticaret A.Ş.: Paralel Gayrimenkul İnşaat Yapı Taahhüt Sanayi ve Ticaret Anonim Şirketi (“The Company” or “Paralel Gayrimenkul”) was established in 2007 in Gaziantep. The company does all kinds of building construction and fixed assets buy and sale deals. Company started its house project named “Antepia” in 2010.

Naksan Dış Ticaret Anonim Şirketi: Naksan Dış Ticaret Anonim Şirketi (“The Company” or “Naksan Dış Ticaret”) was established on 18 September 2014 in Gaziantep / Turkey. The Company’s main activity is to trade primarily polyethylene, polypropylene and all kinds of plastic raw materials and finished or semi-finished products produced from this raw material, and of yarns and carpet, woven or non-woven textile products produced from yarn in domestic and international markets, to perform export and import, provide custom clearance and transportation, to grant franchises and distributorship, to provide consultancy and support services.

Foreign Currency Assets and Liabilities

Foreign currency transactions are entered in the accounts with current rates in transaction date. Foreign currency assets and liabilities in the balance sheet are converted to the TL as the rates in the balance sheet date. Foreign exchange profit and loss are reflected to the income statements. Foreign currency rates that are used at the end of the periods are as follows:

31.03.2015 31.12.2014 USD 2.6102 2.3189 EUR 2.8309 2.8207 GBP 3.8611 3.5961 CHF 2.7003 2.3397

Segment Reporting of Operation Results

A business segment is distinguishable component of an enterprise that is engaged in providing an individual product or service or a group of related products or services and that is subject to risks and returns that are different from those of other business segments. A geographical segment is a distinguishable component of an enterprise that is engaged in providing products or services within a particular economic environment and that is subject to risks and returns that are different from those of components operating in other economic environments.

A reportable segment is business segment or a geographical segment identified based on the foregoing definitions for which segment information is required to be disclosed. A business segment or geographical segment should be identified as a reportable segment if a majority of its revenue is earned from sales to external customers and its revenue from sales to external customers and from transactions with other segments is 10% or more of the total revenue, external and internal, of all segments; or its segment result, whether profit or loss, is 10% or more of the combined result of all segments in profit or the combined result of all segments in loss, whichever is the greater in absolute amount; or its assets are 10% or more of the total assets of all segments.

Group operates in same geographical area and operates in yarn and carpet sector. Because of this reason, segment reporting of yarn and carpet are described in Note 6.

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(Currency - Turkish Lira ‘TRY’ unless expressed otherwise.) Employee Benefits / Severance Pay Provision

Severance Pay Under Turkish Labor Law, Group is required to pay termination benefits to each employee who has completed one year of service and whose employment is terminated without due cause, or who retires in accordance with social insurance regulations or is called up for military service or dies. As of 31 March 2015 payments are calculated on the basis of 30 days’ pay limited to a maximum of TRY 3,541 (31 December 2014: TRY 3,438) per year of employment at the rate of pay applicable at the date of retirement. Group calculates provisions for severance pay in the attached consolidated financial statements in consideration of previous years experiences on deserving severance pay and also, discount rate generated from effective interest rate and inflation on balance sheet period was included in calculations. All of profits and losses except calculated actuarial profit / (loss) was shown in consolidated statements of income, actuarial profit / (loss) was shown in consolidated statements of changes in equity. The rates of basic assumptions used at balance sheet date are as follows: 31 March 2015 31 December 2014 Rediscount rate 11.90% 9.25% Inflation rate 7.61% 6.77% Real discount rate 3.99% 2.32%

Social Insurance Premium

Group pays social security contribution to social security organization compulsorily. So long as Group pays these premiums, it has no liability. These premiums are reflected as personnel expenses in the period in which they are paid. Dividends Dividends receivable are recognized as income in the period when they are declared and dividends payables are recognized as an appropriation of profit in the period in which they are declared. Paid in Capital Common stocks are classified to equity. Costs related to new shares and option issued, are shown in equity by deducting the collected amounts whose tax effect was deducted. Share Premiums / Discounts Share premium represents differences resulting from the sale of the Group’s subsidiaries and associates’ shares at a price exceeding the face value of those shares and differences between the face value and fair value of shares issued for acquired Companies.

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(Currency - Turkish Lira ‘TRY’ unless expressed otherwise.) Government Incentive and Grants

It is a procedure to assist the companies that are unable to achieve certain businesses. It is to stimulate the businesses with the incentives. Government incentives, including those followed at their fair values will be included in the financial statements only if there is reasonable assurance that the Company will fulfill all required conditions and acquire the incentive. Government incentives, including non-monetary grants at fair value, are included in the financial statements only if there is reasonable assurance that the Company will fulfill all required conditions and acquire the incentive. Post Balance Sheet Events Although post balance sheet events arise after the explanation of the financial information to the public or any announcement related to profitability, it encloses all the events with balance sheet date and authorization date for the diffusion of the balance sheet. Group adjusts the amounts in the consolidated financial statements if there exists any events necessitates adjustment. Subsequent events are stated in the consolidated notes to financial statements, if they do not need adjustments. Earnings Per Share

Earnings per share in the consolidated income statements are calculated by dividing the net profit for the year by the weighted average number of ordinary shares outstanding during the year.

In Turkey, companies can increase their share capital by making distribution of “bonus shares” to existing shareholders from inflation adjustment difference in shareholder’s equity. For the purpose of the earnings per share computations, the weighted average number of shares outstanding during the year has been adjusted in respect of “bonus shares” issued without corresponding change in resources by giving them retroactive effect for the period in which they were issued and each earlier period.

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(Currency - Turkish Lira ‘TRY’ unless expressed otherwise.) Revenue Revenues are recognized on an accrual basis at the time deliveries or acceptances are made, the amount of the revenue can be measured reliably and it is probable that the economic benefits associated with the transaction will flow to Group, at the fair value of consideration received or receivable. Net sales represent the invoiced value of goods shipped less sales returns, commission and sales taxes. The Group’s sales are comprised of machine carpet, BCF yarn and other sales of merchandises.Group’s detailed information about carpet and bcf sales policies presented in Note 1. Sales of goods Revenue from sales of coal is recognized when all the following conditions are satisfied: - Company has transferred to the buyer the significant risks and rewards of ownership of the goods, - Company retains neither continuing managerial involvement to the degree usually associated with ownership

nor effective control over the goods sold, - The amount of revenue can be measured reliably, - It is probable that the economic benefits associated with the transaction will flow to the entity, - The costs incurred or to be incurred in respect of the transaction can be measured reliably Rendering of services When the outcome of a transaction of transportation incomes and license fee involving the rendering of services can be estimated reliably, revenue associated with the transaction shall be recognized by reference to the stage of completion of the transaction at the balance sheet date. The outcome of a transaction can be estimated reliably when all the following conditions are satisfied: - The amount of revenue can be measured reliably; - It is probable that the economic benefits associated with the transaction will flow to the company; - The stage of completion of the transaction at the balance sheet date can be measured reliably; and - The costs incurred for the transaction and the costs to complete the transaction can be measured reliably. Interest income Interest income is accrued in proportion as effective interest rate which reduces estimated cash addition to recorded value of the asset in corresponding period. Dividend and other incomes

Dividend income which obtained from share investments, is recorded when shareholders’ have the right to get dividend. Other incomes are recorded with the possibility of having the worth giving service or accrual of the facts related with income, making the transfer of risk and benefit, determination of income amount and enrollment of economic benefits related with the procedure.

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(Currency - Turkish Lira ‘TRY’ unless expressed otherwise.) Cash Flow Statement

The Group prepares statement of cash flows to inform users of financial statements about changes in net assets and ability to direct financial structure, amounts and timing of cash flows according to changing situations. In the statement of cash flows, current period cash flows are grouped according to operating, financing, and investing activities. Operating cash flows is resulting from activities in scope of Group's main operating scope. Cash flows related to investing activities are cash flows resulting from investing activities (fixed investments and financial investments) of the company. Cash flows related to financing activities comprise of funds used in financing activities of the Group and their repayments. 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 that are readily convertible to a known amount of cash and are subject to an insignificant change in value.

NOTE 3 – BUSINESS MERGERS

For the period ended at 31 March 2015 details of business merger is as follows; Royal Halı İplik Tekstil Mobilya Sanayi ve Ticaret Anonim Şirketi has acquired 100% of shares of Royal International Dış Ticaret Anonim Şirketi as a co-founder in 7 January 2015. Because of purchasing share from establishment of the company as a co-founder, there was no goodwill occured for Royal Halı İplik Tekstil Mobilya Sanayi ve Ticaret Anonim Şirketi.

For the period ended 31 December 2014, there are no any business mergers. NOTE 4 – BUSINESS MERGERS SUBJECT TO COMMON CONTROL None (31 December 2014 - None). NOTE 5 – SHARES IN OTHER COMPANIES As of 31 March 2015, the detail of Parent Company’s direct or indirect shares in other companies and datas of these companies is as follows;


Subsidiary Minority

Interest

Subsidiaries (Direct) (Direct+ Indirect) Ratio

Atlas Halı Aksesuar ve Mobilya Sanayi Ticaret Anonim Şirketi 51.00% 51.00% 49.00% Royal International Dış Ticaret Anonim Şirketi (*) 100.00% 100.00% -

(*)Royal International Dış Ticaret Anonim Şirketi was established as of 07 January 2015.

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(Currency - Turkish Lira ‘TRY’ unless expressed otherwise.) As of 31 December 2014, the detail of Parent Company’s direct or indirect shares in other companies and datas of these companies is as follows;


Subsidiary Minority

Interest

Subsidiary (Direct) (Direct+ Indirect) Ratio

Atlas Halı Aksesuar ve Mobilya Sanayi Ticaret Anonim Şirketi 51.00% 51.00% 49.00%

For the period ended at 31 March 2015, summaries of financial information about Parent Company’s subsidiary are as follows;

Subsidiaries Nature of Activities

Total Assets

Total equity

Revenue, net

Period profit /

(loss) Atlas Halı Carpet sector 15,667,125 4,699,573 3,444,138 (146,401) Royal International Carpet sector 20,041,124 (115,491) 16,901,090 (127,991) For the period ended at 31 December 2014, summaries of financial information about Parent Company’s subsidiary are as follows;

Subsidiary Nature of Activities

Total Assets

Total equity

Revenue, net

Period profit /

(loss) Atlas Halı Carpet sector 16,865,525 4,824,603 19,550,712 4,110,650 Detailed information about subsidiary is presented in Note 1.

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(Currency - Turkish Lira ‘TRY’ unless expressed otherwise.) NOTE 6 – SEGMENT REPORTING

Group operates in same geographical area and operates in yarn and carpet sector. For this reason, segment reporting is based on the yarn and carpet sectors. As of 31 March 2015 and 31 December 2014, segment reporting of balance sheet is as following;

31 March 2015 Carpet Sector Yarn Sector Other (*) Total

Trade receivables 90,931,397 5,242,789 - 96,174,186 Inventories 51,833,030 17,868,923 - 69,701,953 Tangible fixed assets 94,527,683 60,606,158 - 155,133,841 Intangible fixed assets 2,670,750 30,963 - 2,701,713 Other assets 97,523,104 Total assets 421,234,797 Trade payables 23,615,067 5,548,447 - 29,163,514 Other payables and liabilities

183,372,303

Total liabilities 212,535,817

31 December 2014 Carpet Sector Yarn Sector Other (*) Total

Trade receivables 77,775,369 4,831,621 16,246,281 98,853,271 Inventories 50,839,347 16,887,996 910,873 68,638,216 Tangible fixed assets 98,018,909 60,571,589 - 158,590,498 Intangible fixed assets 3,195,044 31,536 - 3,226,580 Other assets 79,607,205 Total assets 408,915,770 Trade payables 19,520,499 4,683,656 - 24,204,155 Other payables and liabilities

182,500,920

Total liabilities 206,705,075 (*) Related amounts consist of operations excluding carpet and yarn operations. As of 31 March 2015 and 31 December 2014, segment reporting of provision for doubtful receivables is as following;

31 March 2015 Carpet Sector Yarn Sector Total Provision for doubtful trade receivables 1,717,643 21,920,189 23,637,832 Total 23,637,832

31 December 2014 Carpet Sector Yarn Sector Total Provision for doubtful trade receivables 1,744,625 21,920,189 23,664,814 Total 23,664,814

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(Currency - Turkish Lira ‘TRY’ unless expressed otherwise.) For the periods ended at 31 March 2015 and 2014, segment reporting of consolidated income statement is as follows; 01 January - 31 March 2015 Carpet Sector Yarn Sector Other (*) Total

Sales 32,394,260 33,339,887 951,349 66,685,496 Cost of sales (20,496,299) (26,665,693) (910,872) (48,072,864) General administrative expenses (1,873,059) (425,154) - (2,298,213) Marketing expenses (9,884,026) (1,457,280) (13,395) (11,354,701) Research and development expenses (107,102) - - (107,102) Other operating income / (expenses), net

1,032,075

Investment activities income / (expenses), net

2,418,487 Financial income / (expenses), net

(406,089)

Tax expenses for the period

(592,687) Deferred tax income / (expense)

54,179

Profit / (loss) for the period, net 7,358,581 01 January - 31 March 2014 Carpet Sector Yarn Sector Other (*) Total

Sales 39,225,971 34,182,384 9,392,475 82,800,830 Cost of sales (25,482,380) (27,054,740) (9,137,010) (61,674,130) General administrative expenses (1,814,194) (354,878) - (2,169,072) Marketing expenses (9,144,666) (163,258) (56,196) (9,364,120) Research and development expenses (99,258) - - (99,258) Other operating income / (expenses), net

852,450

Investment activities income / (expenses), net

2,584,274 Financial income / (expenses), net

(1,445,711)

Tax expenses for the period

(2,032,888) Deferred tax income / (expense)

670

Profit / (loss) for the period, net 9,453,045 (*) Related amounts consist of operations excluding carpet and yarn operations.

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(Currency - Turkish Lira ‘TRY’ unless expressed otherwise.) The distribution of depreciation of tangible fixed assets and amortization of intangible fixed assets by segments for the periods ended at 31 March 2015 and 2014 are as below, 01 January - 31 March 2015 Carpet Sector Yarn Sector Total Depreciation of tangible fixed assets 1,800,656 1,438,741 3,239,397 Amortization of intangible fixed assets 527,990 5,666 533,656 Total 2,328,646 1,444,407 3,773,053 01 January - 31 March 2014 Carpet Sector Yarn Sector Total Depreciation of tangible fixed assets 1,541,880 905,145 2,447,025 Amortization of intangible fixed assets 530,861 5,666 536,527 Total 2,072,741 910,811 2,983,552 Concentration risk related to sales Regarding parent company's sales and customers, a customer have high share in sales so this situation creates concentration risk riskGroup not considered concentration risk significantly due to that related company sales to overseas customers..According to standard TFRS 8 Operating Segments; If a revenue which is obtained from a single external customer is 10 percent or more than 10 percent of the company’s revenue, the company explains this case the total amount which is obtained from similar to this case and which parts explain that reports the revenue. At the period of the ended 31 March 2015 and 31 December 2014, company costumers and rates that constitute, 10% or more than 10% of the Groups revenue is as follows;

01 January - 31 March 2015 01 January - 31 December 2014 Customer The share of revenue Customer The share of revenue A 31.28% A 37.60%

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(Currency - Turkish Lira ‘TRY’ unless expressed otherwise.) NOTE 7 – RELATED PARTY TRANSACTIONS

i) Due from/to related parties: a) Due from related parties mentioned below is classified under trade receivables account are as following (Note 10):

31.03.2015 31.12.2014 Naksan Dış Ticaret 1,827,981 - Paralel Gayrimenkul 352,253 320,458 Elmacı Pazarı 173,473 402,265 Naksan Plastik (*) - 16,246,281 Al-Anis - 38,527 Adularya Enerji - 22,200 Verimli Plastik - 2,050 2,353,707 17,031,781

(*)This amount is composed of BCF yarn and carpet sales to the Company. b) Due to related parties mentioned below is classified under trade payables account are as following (Note 10):

31.03.2015 31.12.2014 Naksan Elektrik 75,800 726 Naksan Teknoloji 2,441 2,867 Zirve Üniversitesi - 16,318 78,241 19,911 c) The amount paid to related parties mentioned below is classified under prepaid expenses is as follows (Note 14):

31.03.2015 31.12.2014 Naksan Plastik (**) 55,096,350 9,275,600 Gaziantep Basketbol 1,199,074 382,132 56,295,424 9,657,732 (**)This amount is composed of advances given for the purchase of carpet and yarn inventory.

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(Currency - Turkish Lira ‘TRY’ unless expressed otherwise.) d) Due to shareholders mentioned below is classified under other short term payables are as follows (Note 11): 31.03.2015 31.12.2014 Naksan Holding 1,106,636 1,144,852 1,106,636 1,144,852 ii) Sales, purchases and operations to related parties:

a) Net sales to related parties classified under sales revenue is as following:

01.01.-

31.03.2015 01.01.-

31.03.2014 Naksan Plastik (*) 14,132,623 31,294,762 Naksan Dış Ticaret A.Ş.(**) 1,922,802 - Al-Anis Plastic 81,412 - Paralel Gayrimenkul A.Ş. 29,440 - Gaziantep Basketbol ve Spor A.Ş. - 6,037 Verimli Plastik Film ve Enerji Sanayi A.Ş. - 1,950 16,166,277 31,302,749 (*)This amount is composed of BCF yarn and carpet sales to the Company. (**)This amount is composed of BCF yarn and carpet sales to the Company.

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(Currency - Turkish Lira ‘TRY’ unless expressed otherwise.) b) Purchases from related parties classified under cost of sales are as follows:

01.01.-

31.03.2015 01.01.-

31.03.2014 Naksan Plastik (*) 4,603,352 16,803,460 Naksan Elektrik Toptan 64,144 - Naksan Teknoloji - 37,380 Elmacı Pazarı - 22,248 Zirve Üniversitesi - 1,851 4,667,496 16,864,939 (*)For the period ended at 31 March 2015 and 2014 details of purchases from the Group companies under cost of sales are as follows;

01.01.-31.03.2015

Raw material

purchases Merchandise

purchases Energy

purchases Rent

expenses Other

purchases Total Naksan Plastik 739,718 - 3,152,361 167,400 543,873 4,603,352 739,718 - 3,152,361 167,400 543,873 4,603,352

01.01.-31.03.2014

Raw material

purchases Merchandise

purchases Energy

purchases Rent

expenses Other

purchases Total Naksan Plastik 5,009,193 9,081,500 2,418,401 77,685 216,681 16,803,460 5,009,193 9,081,500 2,418,401 77,685 216,681 16,803,460 c) Purchases from related parties classified under marketing, selling and distribution expenses are as follows:

01.01.-

31.03.2015 01.01.-

31.03.2014 Gaziantep Basketbol 562,500 447,826 Naksan Plastik 18,499 18,885 Naksan Holding 2,660 11,610 Naksan Elektrik 377 1,507 Naksan Teknoloji 54 - Adularya Enerji - 385 Al-Anis Plastic - 34 584,090 480,247

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(Currency - Turkish Lira ‘TRY’ unless expressed otherwise.) d) Purchases from related parties classified under general administrative expenses are as follows:

01.01.-

31.03.2015 01.01.-

31.03.2014 Naksan Holding 68,861 62,098 Naksan Teknoloji 4,737 - Naksan Plastik 1,116 - Naksan Elektrik 914 - Elmacı Pazarı - 5562 75,628 67,660

e) Purchases from related parties classified under research and development expenses are as follows:

01.01.-

31.03.2015 01.01.-

31.03.2014 Zirve Üniversitesi - 4,500 - 4,500

f) Rent and other income from related parties under other operating incomes are as follows;

01.01.-

31.03.2015 01.01.-

31.03.2014 Naksan Holding - 5,286 Naksan Plastik - 4 - 5,290

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http://tureng.com/search/research%20and%20development



(Currency - Turkish Lira ‘TRY’ unless expressed otherwise.) g) Foreign exchange gains from related parties classified under other operating incomes are as follows:

01.01.-

31.03.2015 01.01.-

31.03.2014 Naksan Plastik 2,855,229 29,110 Naksan Dış ticaret 26,892 - 2,882,121 29,110 h) Foreign exchange losses from related parties classified under operating expenses are as follows:

01.01.-

31.03.2015 01.01.-

31.03.2014 Naksan Plastik 1,073,384 - 1,073,384 - ı) Interest incomes from related parties classified under investment activities incomes are as follows:

01.01.-

31.03.2015 01.01.-

31.03.2014 Naksan Holding 11,572 209,732 11,572 209,732 j) Financing expenses from related parties classified under financial expenses are as follows:

01.01.-

31.03.2015 01.01.-

31.03.2014 Naksan Holding 84,115 - 84,115 -

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(Currency - Turkish Lira ‘TRY’ unless expressed otherwise.) k) Foreign exchange gains from related parties classified under financial incomes are as follows:

01.01.-

31.03.2015 01.01.-

31.03.2014 Naksan Holding 151,328 408,068 151,328 408,068

l) Purchases tangible and intangible fixed assets from related parties are as follows;

01.01.-

31.03.2015 01.01.-

31.03.2014 Elmacı Pazarı - 2,330 - 2,330 m) Wage and benefits provided for the board members and managers are as follows;

01.01.-

31.03.2015 01.01.-

31.03.2014 Short term employee benefits 664,947 496,169 Benefits provided after leaving - - Other long term benefits - - Benefits provided due to termination - - Share based payments - - 664,947 496,169

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(Currency - Turkish Lira ‘TRY’ unless expressed otherwise.) NOTE 8 – CASH AND CASH EQUIVALENTS As of 31 March 2015 and 31 December 2014, the details of cash and cash equivalents are as follows; 31.03.2015 31.12.2014

Cash 118,499 96,918 Banks 655,646 17,360,386 Other liquid assets 284,064 444,210

1,058,209 17,901,514 As of 31 March 2015 and 31 December 2014, Group’s bank deposits are composed of demand deposits and there are no blockages over the demand deposits. Other liquid assets are composed of the receivables from banks relating to sales by credit cards. NOTE 9 – FINANCIAL BORROWINGS As of 31 March 2015 and 31 December 2014, the details of short and long term financial borrowings are as follows; 31.03.2015 31.12.2014

Short term bank borrowings 8,152,565 16,048,425 Short term lease payables, net 8,624,180 8,547,298 Current installments of long term bank borrowings 33,286,646 24,419,878 Accrued interest of bank borrowings and financial leases 740,941 1,482,456

Total short term financial payables 50,804,332 50,498,057

Long term bank borrowings 82,584,310 65,388,083 Long term lease payables, net 22,324,007 24,400,621

Total long term financial borrowings 104,908,317 89,788,704

Total financial payables 155,712,649 140,286,761 As of 31 March 2015, the average effective interest rates of USD, EUR and TRY bank borrowings are 2.24%, 3.24% and 11.90%. (31 December 2014: USD - 2.35%, EUR - 3.38%, TRY - 9.25%).

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(Currency - Turkish Lira ‘TRY’ unless expressed otherwise.) As of 31 March 2015 and 31 December 2014, maturity analysis of bank borrowings (except accrued interest on borrowings) is as follows: 31.03.2015 31.12.2014 Due in 0 - 1 years 41,439,211 40,468,303 Due in 1 - 2 years 23,014,474 17,207,380 Due in 2 - 3 years 21,425,461 15,962,954 Due in 3 - 4 years 20,800,998 14,718,528 Due in 4 - 5 years 14,810,498 14,718,528 Due in 5 - 6 years 2,532,879 2,780,693 124,023,521 105,856,386

As of 31 March 2015, the details of the bank borrowings (except accrued interest on borrowings) based on currency are as follows: Currency Amount Currency rate TRY Equivalent

TRY 795,486 1.0000 795,486 USD 5,197,543 2.6102 13,566,627 EUR 38,737,295 2.8309 109,661,408

124,023,521

As of 31 December 2014, the details of the bank borrowings (except accrued interest on borrowings) based on currency are as follows: Currency Amount Currency rate TRY Equivalent TRY 602,522 1.0000 602,522 USD 6,219,915 2.3189 14,423,360 EUR 32,201,406 2.8207 90,830,504 105,856,386

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(Currency - Turkish Lira ‘TRY’ unless expressed otherwise.) As of 31 March 2015 and 31 December 2014, maturity analysis of financial lease payables (except accrued interest) is as below: 31.03.2015 31.12.2014 Due in 0 - 1 years 8,624,180 8,547,298 Due in 1 - 2 years 8,887,799 8,763,555 Due in 2 - 3 years 8,662,767 8,899,843 Due in 3 - 4 years 4,164,326 5,533,724 Due in 4 - 5 years 609,115 1,203,499 30,948,187 32,947,919

As of 31 March 2015, the details of financial lease payables (except accrued interest) based on currency are as below: Currency Amount Currency rate TRY Equivalent

EUR 10,932,278 2.8309 30,948,186

30,948,186

As of 31 December 2014, the details of financial lease payables (except accrued interest) based on currency are as below: Currency Amount Currency rate TRY Equivalent EUR 11,680,760 2.8207 32,947,920 32,947,920

As of 31 March 2015, the Group has amounting to TRY 110,496,719 export commitments to the banks (31 December 2014: TRY 89,712,391) and gave letter of guarantees to Türkiye İhracat Kredi Bankası with the amount of TRY 119,249,964 (31 December 2014: TRY 59,433,718). Furthermore, bank borrowings are guaranteed by related parties and shareholders (Note 18 and 19).

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(Currency - Turkish Lira ‘TRY’ unless expressed otherwise.) NOTE 10 – TRADE RECEIVABLES AND PAYABLES As of 31 March 2015 and 31 December 2014, the details of trade receivables are as follows; Short term trade receivables 31.03.2015 31.12.2014

Trade receivables 37,311,235 15,655,068 Notes receivables 52,930,001 64,296,351 Unearned interest on trade receivables (-) (2,033,882) (2,427,185) Trade receivables from related parties (Note 7) 2,353,707 17,031,781 Doubtful trade receivables 27,254,596 27,281,578 Provision for doubtful trade receivables (-) (23,637,832) (23,664,814)

94,177,825 98,172,779 As of 31 March 2015, average maturity of trade receivables is 79 days (31 December 2014: 88 days). As of 31 March 2015 and 31 December 2014, maturity schedule of notes receivables is as follows: 31.03.2015 31.12.2014 Overdue 1,172,831 1,101,804 1-30 days 7,166,864 7,794,752 31-60 days 7,018,367 6,791,366 61-90 days 6,470,326 7,049,808 91-120 days 7,291,901 6,630,684 121-150 days 6,210,438 7,055,648 151-180 days 4,975,106 6,292,601 181-210 days 4,448,024 6,418,456 211-240 days 3,595,891 5,602,913 241-270 days 2,289,775 4,053,908 271-300 days 996,190 2,891,064 301-330 days 724,288 1,642,239 331-360 days 570,000 971,108 52,930,001 64,296,351

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(Currency - Turkish Lira ‘TRY’ unless expressed otherwise.) As of 31 March 2015 and 31 December 2014, aging of overdue receivables that are not impaired are as following; 31.03.2015 31.12.2014 Within 30 days 1,172,831 1,101,804 1,172,831 1,101,804

The management of Group do not estimate a collection risk for these receivables as the significant portion of these receivables is due from significant customers where sales are made regularly and maturity period of overdue receivables is at a reasonable level (Note 33 Credit Risk). For the periods ended at 31 March 2015 and 31 December 2014, the movement schedule of provision for doubtful receivables is as follows:

01.01.-

31.03.2015 01.01.-

31.12.2014

Opening balance 23,664,814 23,135,859 Collections (66,630) (43,096) Provisions for the period 39,648 572,051

Closing balance 23,637,832 23,664,814 Long term trade receivables 31.03.2015 31.12.2014

Notes receivables 2,224,882 753,583 Unearned interest on notes receivables (-) (228,521) (73,091)

1,996,361 680,492 Maturities of long term notes receivables are between one and two years. As of 31 March 2015, Group has received mortgages amounting to TRY 9,790,000 security bonds amounting 9,740,000 and letters at guarantees amounting to TRY 8,150,000 (Note 18) (31 December 2014: TRY 9,840,000 letters of guarantee, TRY 9,490,000 mortgages and TRY 8,150,000 security bonds) from the customers for the short and long term trade receivables. As of 31 March 2015, Group’s trade receivables amounting to TRY 981,117 are insured by the finance and insurance companies (31 December 2014: TRY 3,278,404).

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(Currency - Turkish Lira ‘TRY’ unless expressed otherwise.) As of 31 March 2015 and 31 December, the details of trade payables are as follows; Short term trade payables

31.03.2015 31.12.2014

Trade payables 22,654,768 17,322,061 Due to related parties (Note 7) 78,241 19,911 Accrued expenses in accordance with agreements 1,192,003 262,481 Notes payables 5,601,206 6,888,264 Unearned interest on payables (-) (362,704) (288,562)

29,163,514 24,204,155

As of 31 March 2015, average maturity of trade payables is 72 days. (31 December 2014: 84 days). Maturity schedule of notes payables as of 31 March 2015 and 31 December 2014, are as following: 31.03.2015 31.12.2014 1 - 30 days 250,904 3,253,505 31 - 60 days 175,311 80,160 61 - 90 days 2,726,451 169,759 91 - 120 days - 1,692,420 151 - 180 days 2,448,540 - 331 - 360 days - 1,692,420 5,601,206 6,888,264

Long term trade payables None (31 December 2014 – None).

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(Currency - Turkish Lira ‘TRY’ unless expressed otherwise.) NOTE 11 – OTHER RECEIVABLES AND PAYABLES As of 31 March 2015 and 31 December 2014 the details of other receivables are as follows; Other current receivables 31.03.2015 31.12.2014

Deposits and guarantees given 21,722 81,253 Due from personnel 5,078 4,378 Due from fixed-asset sales - 1,410,000 Notes receivables which are received as advance 6,360,601 12,373,594 VAT receivables from the tax office (*) 3,512,966 4,031,150

9,900,367 17,900,375 (*)VAT receivables, consist of VAT receivables from exports and VAT receivables from reduced VAT rates. Other non-current receivables

31.03.2015 31.12.2014

Deposits and guarantees given 873,639 681,393 Notes receivables which are received as advance 1,864,118 7,008,317

2,737,757 7,689,710 As of 31 March 2015 and 31 December 2014, the details of other payables are as follows; Other current payables

31.03.2015 31.12.2014

Taxes and funds payable 316,931 432,240 Notes payables which are given as advance - 1,920,212 Due to shareholders (Note 7) 1,106,636 1,144,852 Other payables 5,002 5,209

1,428,569 3,502,513 Other non-current payables None (31 December 2014 – None).

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(Currency - Turkish Lira ‘TRY’ unless expressed otherwise.) NOT 12 –EMPLOYEE BENEFIT LIABILITIES As of 31 March 2015 and 31 December 2014, payables from employee benefits are as follow; 31.03.2015 31.12.2014

Social security premiums payable 583,839 616,849 Due to personnel 1,342,044 1,256,717

1,925,883 1,873,566 NOTE 13 – INVENTORIES As of 31 March 2015 and 31 December 2014, the details of inventories are as follows; 31.03.2015 31.12.2014

Raw materials 45,618,664 44,713,272 Finished goods 20,728,738 19,769,044 Merchandises 613,424 1,412,477 Other inventories 2,748,860 2,751,156 Provision for diminution in value of inventories (-) (7,733) (7,733)

69,701,953 68,638,216 As of 31 March 2015, the insurance on inventories is amounting to TRY 113,797,431. For the periods ended at 31 March 2015 and 31 December 2014, the movement schedule of diminution in value of inventories is as follows

01.01.-

31.03.2015 01.01-

31.12.2014

Beginning balance 7,733 65 Reversal of prior period provision (-) - (65) Provision set within the period - 7,733

7,733 7,733 As of 31 March 2015 and 31 December 2014, provision for diminution in value of inventories based on inventory type is as follows; 31.03.2015 31.12.2014 Merchandises 7,733 7,733 7,733 7,733

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(Currency - Turkish Lira ‘TRY’ unless expressed otherwise.) NOTE 14 – PREPAID EXPENSES AND DEFERRED INCOME As of 31 March 2015 and 31 December 2014, the details of prepaid expenses are as follows; Prepaid expenses short term 31.03.2015 31.12.2014

Order advances given (**) 62,254,659 17,635,305 Prepaid expenses - short term (*) 5,622,897 2,044,099 Advances given for business purposes 211,207 208,899

68,088,763 19,888,303 (*) As of 31 March 2015, the amount of TRY 1,199,074 prepaid expenses consists of amount which is given to Gaziantep Basketbol Spor A.Ş (31 December 2014: TRY 382,132 ) (Note 7).

(**) As of 31 March 2015, the amount of TRY 55,096,350 order advances given consists of amount which is given to Naksan Plastik Sanayi ve Ticaret A.Ş. (31 December 2014: 9,275,600) (Note 7). Prepaid expenses long term

31.03.2015 31.12.2014

Advances given for purchases of tangible fixed assets 956,673 325,719 Advances given for puchases of financial fixed assests 389,942 - Prepaid expenses - long term - 2,166

1,346,615 327,885

As of 31 March 2015 and 31 December 2014, the details of deferred income are as following; Deferred income short term

31.03.2015 31.12.2014

Advances received (***) 12,449,094 23,332,121 Deferred income 71,968 71,968

12,521,062 23,404,089 (***)As of 31 March 2015, amounting to TRY 8,224,719 of advance received consist of notes receivables qualified as sale advance (31 December 2014: TRY 19,381,911). Deferred income long term

31.03.2015 31.12.2014

Deferred income 78,409 96,155

78,409 96,155

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NOTE 15 – TANGIBLE FIXED ASSETS

Movements of tangible fixed assets for the periods ended at the date of 31 March 2015 and 31 December 2014 are as follows

Costs 31 December

2013 Addition Disposal Revaluation

funds(*) Transfer (**) 31 December

2014 Addition Disposal Revaluation

funds(*) 31 March 2015 Land 17,081,950 - - - - 17,081,950 - - - 17,081,950 Land improvements 518,881 - - - - 518,881 - - - 518,881 Buildings 18,495,004 120,155 - - 10,431,135 29,046,294 817,119 - - 29,863,413 Plants, machinery and equipment 113,914,694 46,908,817 (6,502,685) (939,054) - 153,381,772 973,834 (4,777,986) (386,362) 149,191,258 Vehicles 143,123 81,248 (30,320) - - 194,051 - - - 194,051 Fixtures and fittings 11,635,691 4,034,225 (4,590) - - 15,665,326 940,792 (1,990) - 16,604,128 Leasehold improvements 1,533,959 38,757 (104,019) - - 1,468,697 - - - 1,468,697 Fixed assets under construction 536,467 9,894,668 - - (10,431,135) - - - - -

Total 163,859,769 61,077,870 (6,641,614) (939,054) - 217,356,971 2,731,745 (4,779,976) (386,362) 214,922,378

Accumulated Depreciation (-) Land improvements 60,674 2,301 - 19,010 - 81,985 575 - 4,753 87,313

Buildings 1,561,594 243,408 - 194,181 - 1,999,183 104,117 - 48,545 2,151,845 Plants, machinery and equipment 43,038,087 9,062,920 (4,309,706) 2,705,314 - 50,496,615 2,649,255 (2,983,268) 712,837 50,875,439 Vehicles 35,008 27,576 (5,306) - - 57,278 7,277 - - 64,555 Fixtures and fittings 3,806,280 1,467,653 (1,117) - - 5,272,816 419,527 (199) - 5,692,144 Leasehold improvements 719,009 243,606 (104,019) - - 858,596 58,645 - - 917,241

Total 49,220,652 11,047,464 (4,420,148) 2,918,505 - 58,766,473 3,239,396 (2,983,467) 766,135 59,788,537

Net Book Value 114,639,117

158,590,498

155,133,841

(*) Related amounts represent disposal of the fund increased value that belongs to the fixed assets sold. (**) As of period ended in 31 December 2014, the Group has completed Bcf Yarn Factory which is investment started in 2013 in Gaziantep 4. Organize Sanayi Bölgesi and the factory has started production.

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(Currency - Turkish Lira ‘TRY’ unless expressed otherwise.) As of 31 March 2015, the total amount of insurance on tangible fixed assets is amounting to TRY 188,140,285.

As of 31 December 2012, lands, buildings and machineries, plants and equipments of the Group are revalued at fair value and reflected in the consolidated financial statements according to the Expert Appraisal Reports which are prepared by Elit Gayrimenkul Değerleme A.Ş. that is approved by the Capital Market Board. As of 31 March 2015, there is not a new Expert Appraisal Report for Group’s lands, buildings and machineries, plants and equipment. For this reason, lands, buildings and machineries, plants and equipments mentioned in the Expert Appraisal Report are shown in the accompanying consolidated financial statements by reducing impairment between balance sheet date and appraisal report date. Impairment was calculated with consideration of mentioned fixed asset’s remaining useful life. As of 31 December 2012 between investment properties which has been subjected to Group’s appraisement valuation and fair value hierarchy of the related asset is in 2nd level. As of current period, there has not been crossing between 1st level and 2nd level. As of 31 March 2015 there is a mortgage amounting to EUR 41,250,000 in favor of Türkiye Vakıflar Bankası T.A.O. over Group’s lands located in Gaziantep/Turkey against the borrowings of the Naksan Holding Anonim Şirketi which is the shareholder of Group (Note 18) (31 December 2014: EUR 41,250,000).

As of 31 March 2015, amounting to TRY 41,728,155 of plants, machineries and devices of the Group are acquired with financial leasing method and as of 31 March 2015, net book value of leased fixed assets is TRY 37,565,103 (31 December 2014: acquired to TRY 41,728,155 – Net book value: TRY 38,399,666). For the periods ended at 31 March 2015 and 2014, details of fixed asset purchases from related parties are stated in Note 7.

NOTE 16 – INTANGIBLE FIXED ASSETS

Movements of intangible fixed assets for the period ended at the date of 31 March 2015 and 31 December 2014 are as follows:

Cost 31 December

2013 Addition Disposal 31 December

2014 Addition 31 March 2015

Rights (*) 11,356,278 159,605 (30,000) 11,485,883 8,789 11,494,672

Other tangible fixed assets 1,911,807 - - 1,911,807 - 1,911,807

Total 13,268,085 159,605 (30,000) 13,397,690 8,789 13,406,479 Accumulated Depreciation(-)

Rights 7,144,950 2,031,800 (6,000) 9,170,750 510,609 9,681,359

Other tangible fixed assets 894,517 105,843 - 1,000,360 23,047 1,023,407 Total 8,039,467 2,137,643 (6,000) 10,171,110 533,656 10,704,766 Net Book Value 5,228,618 3,226,580 2,701,713

(*) In the year of 2010, Group has made an agreement with Pls Marka Pazarlama Ticaret Ltd.Şti. for usage rights of “Pierre Cardin” trademark for ten years and the amount of first five years is TRY 10,592,805 (exclude VAT). As of 31 March 2015, amounting to TRY 2,878,881 (exclude VAT) is classified in notes payables (Note 10) (31 December 2014: TRY 3,800,712). Remaining balances paid as cash.

As of 31 March 2015, there is no internally created tangible and intangible fixed assets within Group (31 December 2014: None).

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(Currency - Turkish Lira ‘TRY’ unless expressed otherwise.) NOTE 17 – GOVERNMENT INCENTIVE AND GRANTS Parent Company made investment valued at TRY 39,203,485 in between 01 January 2010 - 31 March 2015. According to the incentive from Turkish Ministry of Economy, Parent Company was exempted from value-added tax on investment made. In addition, it has exemption of corporation tax in proportion 40% and %30 of related investment amounts. In addition, Group’s required by law social security institution 4857 and 5510 for the period ended 31 March 2015 amounting to TRY 295,361 has received incentive income. (1 January-31 December 2014: TRY 994,227). NOTE 18 – PROVISIONS, CONTINGENT ASSETS AND LIABILITIES As of 31 March 2015 and 31 December 2014 provisions, commitments and contingent liabilities are as follows; Short term provisions 31.03.2015 31.12.2014

Provision for the lawsuits 757,666 757,666

757,666 757,666 For the periods ended at 31 March 2015 and 31 December 2014, movement schedule of provision for the lawsuits are as follows;

01.01.-

31.03.2015 01.01.-

31.12.2014

Opening balance 757,666 753,448 Provision for the period - 77,450 Payments done in the period - (73,232)

Closing balance 757,666 757,666 Long term provisions None (31 December 2014 - None). Contingent Assets Contingent assets of Group are as follows; Letters of guarantee - As of 31 March 2015, Group has received letters of guarantee amounting to TRY 9,790,000 for its long and short term trade receivables from customers (Note 10) (31 December 2014: TRY 9,840,000). The details of the letters of guarantee based on currency are as below;

Currency Currency Amount

TRY Equivalent

Letters of guarantees TRY 9,790,000 9,790,000 9,790,000

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(Currency - Turkish Lira ‘TRY’ unless expressed otherwise.) Mortgages - As of 31 March 2015, Group has received mortgages amounting to TRY 9,740,000 from the customers for the short and long term trade receivables (Note 10) (31 December 2014 : TRY 9,490,000). The details of the mortgages based on currency are as following;

Currency

Type Currency Amount

TRY Equivalent

Mortgages TRY 9,740,000 9,740,000 9,740,000

Security bonds - As of 31 March 2015, the Group has received security bonds amounting to TRY 8,150,000 from the customers for the short and long term trade receivables (Note 10) (31 December 2014: TRY 8,150,000 ). The details of the security bonds based on currency are as following

Currency Type

Currency Amount

TRY Equivalent

Security bonds TRY 8,150,000 8,150,000 8,150,000

Contingent Liabilities As of 31 March 2015 and 31 December 2014, guarantee / security / mortgage (“GSM”) of the Parent Company are as follows: Given GSM (Guarantee-Security-Mortgage) by Parent Company 31.03.2015 31.12.2014 A. Total Amount of Gsm Given on Behalf of Legal Entity 120,636,907 60,571,803 B. Total Amount of Gsm Given for Partnerships Which are Included in Full Consolidation None None

C. Total Amount of Gsm Given for the Purpose of Guaranteeing Third Party Loans to Carry The Regular Trade Activities None None D. Total Amount of Other Gsm Given 25,350,000 25,350,000 i. Total Amount of Gsm Given or the Parent Company 25,350,000 25,350,000 ii. Total Amount of Gsm Given for Other Group Companies Not included in B And C Clauses None None iii. Total Amount of Gsm Given for Third Parties Not Included in C Clause None None 145,986,907 85,921,803

Ratio of other GSM given by the Parent Company to Shareholders’ Equity as of 31 March 2015 is 12% (31 December 2014: 13%).

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(Currency - Turkish Lira ‘TRY’ unless expressed otherwise.) The details of the Group’s contingent liabilities are as follows; Letters of guarantees – As of 31 March 2015, Group has given letters of guarantee amounting to TRY 120,636,907 to various parties (31 December 2014: TRY 60,571,803). The details of the letter of guarantees are as follows; 31.03.2015 31.12.2014 Türkiye İhracat Kredi Bankası A.Ş. 106,745,312 59,433,718 Custom authorities 1,113,928 991,657 Other corporations 273,016 146,428 108,132,256 60,571,803

As of 31 March 2015, the details of the letter of guarantees based on banks and currencies are as follows;

Letter of guarantees on banks Currency Currency Amount

Currency Rate

TRY Equivalent

Akbank T.A.Ş. EUR 4,417,200 2.8309 12,504,651 T. İş Bankası A.Ş. EUR 17,325 2.8309 49,045 FibaBanka A.Ş. EUR 1,250,000.00 2.8309 3,538,625 Yapı ve Kredi Bankası A.Ş. EUR 15,210,000 2.8309 43,057,989 Kuveytürk Katılım Bankası A.Ş. TRY 306,757 1.0000 306,757 T.C. Ziraat Bankası A.Ş. TRY 276,954 1.0000 276,954 T. Halk Bankası A.Ş TRY 48,286 1.0000 48,286 Yapı ve Kredi Bankası A.Ş. TRY 468,522 1.0000 468,522 T.Garanti Bankası A.Ş. EUR 5,000,000 2.8309 14,154,500 Alternatif bank A.Ş. EUR 26,639 2.8309 75,412 Alternatifbank A.Ş. TRY 144,938 1.0000 144,938 Finansbank A.Ş. EUR 5,000,000 2.8309 14,154,500 Türk Ekonomi Bankası A.Ş. EUR 1,415,000 2.8309 4,005,724 Türk Ekonomi Bankası A.Ş. TRY 17,031 1.0000 17,031 Türkiye Finans Katılım Bankası A.Ş. EUR 4,000,000 2.8309 11,323,599 108,132,256

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(Currency - Turkish Lira ‘TRY’ unless expressed otherwise.) As of 31 December 2014, the details of the letter of guarantees based on banks and currencies are as follows;

Letter of Guarantees on Banks Currency Currency Amount

Currency Rate

TRY Equivalent

Akbank T.A.Ş. EUR 4,417,200 2.8207 12,459,596 T. İş Bankası A.Ş. EUR 17,325 2.8207 48,869 FibaBanka A.Ş. EUR 1,250,000 2.8207 3,525,875 Yapı ve Kredi Bankası A.Ş. EUR 1,210,000 2.8207 3,413,047 Kuveytürk Katılım Bankası A.Ş. TRY 306,757 1.0000 306,757 T.C. Ziraat Bankası A.Ş. TRY 276,954 1.0000 276,954 T. Halk Bankası A.Ş TRY 48,286 1.0000 48,286 Yapı ve Kredi Bankası A.Ş. TRY 27,451,419 1.0000 27,451,419 T.Garanti Bankası A.Ş. TRY 13,041,000 1.0000 13,041,000 60,571,803 Mortgages – As of 31 March 2015, there is mortgage over Group’s lands in Gaziantep/Turkey in amount of EUR 41,250,000, which is shown at the consolidated financial statement with the amount of TRY 25,350,000, against the borrowings of the Naksan Holding Anonim Şirketi which is the main shareholder of Group (Note 18) (31 December 2014: EUR 41,250,000). The detail of the mortgages is as follows;

Mortgage given to Location of

land Degree EUR Türkiye Vakıflar Bankası T.A.O. Gaziantep 1/0 41,250,000

41,250,000

Indorsed notes receivables – As of 31 March 2015, note receivables which are received from customers are indorsed to various suppliers with the amount of TRY 2,073,680 and to Naksan Holding Anonim Şirketi; who is a shareholder of Group with the amount of TRY 26,747,638 (31 December 2014: Naksan Plastik ve Enerji Sanayi ve Ticaret Anonim Şirketi: TRY 23,171,979 and various companies: TRY 1,867,320; in total: TRY 25,039,299). Litigations – Group, from time to time is defendant in law suits related business issues. As of 31 March 2015, all the lawsuits brought against Group are about personnel. Related risks have been analyzed as to likelihood of occurrence. As a result of these analyses, as of 31 March 2015, Group management had provision for cases amounting to TRY 757,666 (31 December 2014: TRY 757,666).

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(Currency - Turkish Lira ‘TRY’ unless expressed otherwise.) NOTE 19 – COMMITMENTS Commitments of Group are as follows; Export Commitments - As of 31 March 2015, Group has amounting to TRY 110,496,719 export commitments to the banks for the export borrowings (Note 9).

Bank name Maturity of commitments

Currency type

Currency Amount TRY Equivalent

T.C. Ziraat Bankası A.Ş. In the year of 2015 USD 320,018 835,310 Türkiye İş Bankası A.Ş. In the year of 2015 EUR 500,000 1,415,453 Türk Ekonomi Bankası A.Ş. In the year of 2015 EUR 2,000,000 5,661,800 Türkiye İş Bankası A.Ş. In the year of 2017 EUR 1,985,294 5,620,169 Türkiye İhracat Kredi Bankası A.Ş. In the year of 2019 EUR 19,045,000 53,914,491 Türkiye İhracat Kredi Bankası A.Ş. In the year of 2020 EUR 14,102,000 39,921,352 Türkiye İhracat Kredi Bankası A.Ş. In the year of 2022 EUR 1,105,000 3,128,144 110,496,719

As of 31 December 2014, Group has amounting to TRY 89,712,391 export commitments to the banks for the export borrowings.

Bank name Maturity of commitments

Currency type

Currency Amount TRY Equivalent

Türk Ekonomi Bankası A.Ş. In the year of 2015 EUR 4,632,127 13,065,842 Türkiye İş Bankası A.Ş. In the year of 2015 EUR 500,000 1,410,350 Türkiye İş Bankası A.Ş. In the year of 2017 EUR 2,205,882 6,222,132 Türkiye İhracat Kredi Bankası A.Ş. In the year of 2019 EUR 19,045,000 53,720,232 Türkiye İhracat Kredi Bankası A.Ş. In the year of 2020 EUR 5,422,000 15,293,835 89,712,391

Derivative Agreements – As of 31 March 2015, The Group's has not sales commitment from the derivative agreements. As of 31 December 2014, The Group has sales commitment with EUR /USD parity of EUR 3,357,169 purchasing from bank with the, whose purchasing maturity between 1-3 months and which consist of derivative agreements (Note 22).

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(Currency - Turkish Lira ‘TRY’ unless expressed otherwise.) NOTE 20 – PROVISIONS FOR EMPLOYEE BENEFITS

As of 31 March 2015 and 31 December 2014, the short and long-term provisions for employee benefits are as follows; Short term provisions for employee benefits As of 31 March 2015 and 31 December 2014, the Group has been recognized for the employees who have earned as of the date of the balance sheet but have not used it yet for the annual permits in the accompanying consolidated financial statements. 31.03.2015 31.12.2014

Provision for unused annual vacation 28,575 37,861 Severance pay provision – Short term 21,782 96,109

Total 50,357 133,970 Long term provisions for employee benefits

The severance pay provision has been calculated as expressed in Note 2. As of 31 March 2015, the liability is calculated on a thirty day wage base with a maximum of TRY 3,541 for each year of service, utilizing the rates on date of retirement or departure (31 December 2014: TRY 3,438). For the period ended at 31 March 2015 and 31 December 2014, based on mentioned principles above, Group reflected severance pay liabilities which were reduced to the date of balance sheet by the using expected inflation rate and real discount rate to consolidated financial statements. All gain and losses other than calculated actuarial gain / (losses) in the consolidated income statement, Actuarial gain / (losses) are shown in the consolidated statement of changes in equity.

31.03.2015 31.12.2014 Discount rate 11.90% 9.25% Inflation rate 7.61% 6.77% Real discount rate 3.99% 2.32%

Group does not provide any other employee benefit other than the reserve for retirement pay described above. As of 31 March 2015 and 31 December 2014, the details of severance pay provision are as follows; 31.03.2015 31.12.2014

Severance pay provision – Long term 1,145,564 1,182,049

Total 1,145,564 1,182,049

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(Currency - Turkish Lira ‘TRY’ unless expressed otherwise.) As of 31 March 2015 and 31 December 2014, the movement schedule of long-term and short-term severance pay provision is as follows:

01.01.-

31.03.2015 01.01.-

31.12.2014 Balance of 01 January 1,278,158 1,324,287 Severance pay paid in the period (159,191) (364,798) Cost of services 73,743 308,838 Interest cost 49,256 224,172 Actuarial profit / (loss) (74,620) (214,341) Closing Balance 1,167,346 1,278,158

NOTE 21 – OTHER ASSETS AND LIABILITIES As of 31 March 2015 and 31 December 2014, the details of other assets are as follows; Other Current Assets 31.03.2015 31.12.2014

VAT carried forward 3,297,184 2,833,927

3,297,184 2,833,927 NOTE 22 – DERIVATIVE FINANCIAL INSTRUMENT As of 31 March 2015, there are not any agreements on the Group’s derivative financials instruments. As of 31 December 2014, foreign currency purchase / sale agreement details are given below;

Foreign

exchange range

The amount of foreign

currency which will be

taken from the bank (EUR)

TRY equivalent as of the balance sheet date

of foreign currency which will be taken

from the bank

According to the contract , TRY

equivalent for the foreign currency

which will be taken from the

bank

Fair Value Difference

(TRY) EUR – USD Parity 1 - 3 months 1.2412 - 1.2413 3,357,169 9,469,567 9,662,955 193,388

As of 31 December 2014, foreign exchange income with the amount of TRY 193,388 which was consisting of the related future contract is accounted in the consolidated income statements.

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(Currency - Turkish Lira ‘TRY’ unless expressed otherwise.) NOTE 23 – SHAREHOLDERS’EQUITY, RESERVES AND OTHEREQUITY COMPONENTS 23.1 Paid in Capital As of 31 March 2015 and 31 December 2014, Parent Company’s share capital consists of 60,000,000 unit shares each valued at TRY 1. As of 31 March 2015 and 31 December 2014, the capital structure is as follows: 31 March 2015 31 December 2014

Shareholders Ratio Amount

(TRY) Ratio Amount

(TRY) Naksan Holding Anonim Şirketi 46.25% 27,750,000 46.25% 27,750,000 Shares Offered to the Public 28.75% 17,250,000 28.75% 17,250,000 Osman Nakıboğlu 9.00% 5,400,000 9.00% 5,400,000 Cahit Nakıboğlu 6.25% 3,750,000 6.25% 3,750,000 Bahaeddin Nakıboğlu 3.00% 1,800,000 3.00% 1,800,000 Cihan Dağcı 2.08% 1,250,000 2.08% 1,250,000 Emre Nakıboğlu 2.00% 1,200,000 2.00% 1,200,000 Ferhan Nakıboğlu 1.25% 750,000 1.25% 750,000 Mehmet Hilmi Nakıboğlu 1.00% 600,000 1.00% 600,000 Taner Nakıboğlu 0.42% 250,000 0.42% 250,000 Total 100.00% 60,000,000 100.00% 60,000,000

The Parent Company, the Capital Markets Board dated 19 March 2013 and in 2758 was with the permission of the registered capital system. The Parent Company's registered capital ceiling of TRY 200,000,000, TRY 60,000,000 of the Company's issued share capital is fully paid share capital committed by the shareholders.

Naksan Holding A.Ş and Nakıboğlu family who owned Group A shares a nominal value of TRY 5,000,000 have a privilege to determine members of the boards of directors and use the group’s voting rights under the 8 and 11 of the articles of association. Group B shares offered to the public, does not have a privilege. According to the 8 of the articles of Association that Board of Directors consist of six members and three members elected by the General Assembly from among the candidates nominated by Group shareholders. According to the 11 of the articles of Association in the Ordinary and Extraordinary General Assemblies of the Company, each Group A shareholders has 15 (fifteen) and each group B shareholders has 1(one) voting rights. However, according to the Turkish Commercial Law numbered 6102 479/3 of the articles, Privilege right does not use to make decisions in the General Assembly regarding to file acquaintance and obligation cases with the change of the articles of association.

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(Currency - Turkish Lira ‘TRY’ unless expressed otherwise.) 23.2 Inflation Adjustment of Shareholders’ Equity

As of 31 March 2015 and 31 December 2014, the details of inflation adjustment to shareholders’ equity are as follows; 31.03.2015 31.12.2014 Inflation Adjustment of Shareholders’ Equity 746,913 746,913 746,913 746,913

23.3 Share Premiums / Discounts Share premiums account, which express to be obtained by cash inflow as a result of sale of Parent Company’s shares within market prices These premiums are shown under equity. As of 31 December 2013 The Parent Company comprised premium related to the shares with the amounting to TRY 34,500,000 by selling 10.000.000 shares, one of whose has the TRY 1 value, with the unit price of TRY 4.45 in the Borsa İstanbul A.Ş. by providing capital increase. TRY 3,100,029 which is The Parent Company’s total cost of public offerings, are accounted for the condition of reduction on share premium amount related to the shares. The detail related to the account is as follows; 31.03.2015 31.12.2014 Premiums from the sale of shares in Borsa İstanbul A.Ş. 34,500,000 34,500,000 Expenses relevant to the public offering process (4,270,067) (4,270,067) Part of the amount of reflected to shareholders which expenses relevant to the public offering process 1,110,362 1,110,362 31,340,295 31,340,295

23.4 Defined Benefit Plans Re-measurement Gains / (Losses) The Group, for the period ended at 31 March 2015 and 2014, reflected severance pay liabilities which was calculated by reducing financial statements date and using expected inflation rate which details relying on basis explained in Note 20 to consolidated financial statement. All of profits and losses except calculated actuarial profit / (loss) was shown in consolidated statements of income, actuarial profit / (loss) was shown in consolidated statements of changes in equity. 31.03.2015 31.12.2014 Defined Benefit Plans Re-measurement Gains / (Losses) (310,340) (359,565) (310,340) (359,565)

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(Currency - Turkish Lira ‘TRY’ unless expressed otherwise.) 23.5 Effect of Business Mergers Subject to Common Control As of 31 March 2015 and 31 December 2014, the details of relevant account are as following;

31.03.2015 31.12.2014 Effect of business mergers subject to common control (2,390,557) (2,390,557) (2,390,557) (2,390,557)

Royal Halı İplik Tekstil Mobilya Sanayi ve Ticaret Anonim Şirketi (“Royal Halı”) acquired 51.00% of shares of Atlas Halı Aksesuar ve Mobilya Sanayi Ticaret Anonim Şirketi with the amount of TRY 2,550,000 in 29 January 2013. The acquisition value of acquired company was accounted as a separate item in consolidated financial statements within equity since the related amount is more than TRY 2,390,557 from the fair value of the company’s share of identifiable assets, liabilities and contingent liabilities. 23.6 Revaluation Funds Revaluation funds are comprised from the buildings, lands, facilities, devices and machineries over indexed value and the deferred tax calculated from the value exceeding indexed value. Buildings, lands and machineries are stated in the financial statements at expertise value determined by Elit Gayrimenkul Değerleme Anonim Şirketi, which is accredited by Capital Market Board as of 31 December 2012. As of 31 March 2015, there is not a new Expert Appraisal Report for Group’s lands, buildings and machineries, plants and equipment. For this reason, lands, buildings and machineries, plants and equipments mentioned in the Expert Appraisal Report are shown in the accompanying consolidated financial statements by reducing impairment between statement date and appraisal report date. Impairment was calculated with consideration of mentioned fixed asset’s remaining useful life. The details of the revaluation funds are as following: 31.03.2015 31.12.2014 Expertise values over indexed value 36,317,320 37,469,817 Deferred tax liabilities (3,651,753) (3,874,258) Total revaluation fund 32,665,567 33,595,559

23.7 Restricted Reserves

In the legal book, the accumulated profits can be distributed except the claim related legal reserves stated below.

According to the Turkish Commercial Code, legal reserves consist of first and second legal reserves. The first legal reserve is appropriated out of the statutory profits at the rate of 5%, until the total reserve reaches a maximum of 20% of the Company’s share capital. The second legal reserve is appropriated at the rate of 10% of all distributions in excess of 5% of the Company’s share capital. The first and second legal reserves are not available for distribution unless they exceed 50% of the share capital, but may be used to absorb losses in the event that the general reserve is exhausted. The statutory accumulated profits and statutory current year profit are available for distribution, subject to the reserve requirements referred to above.

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(Currency - Turkish Lira ‘TRY’ unless expressed otherwise.) As of 31 March 2015 and 31 December 2014, the details of restricted reserves are as following; 31.03.2015 31.12.2014 Restricted Reserves 5,088,114 5,088,114 5,088,114 5,088,114

23.8 Retained Earnings / Losses Listed companies shall distribute their profit in accordance with the Capital Market Board’s Communiqué on Dividends II-19.1 which is effective from February 1, 2014. Regulations and explanations in Profit Share Declaration and Profit Share Guide are summed up below. Profit sharing is allocated with general assembly resolution according to the dividend policy determined by board of directors. When dividend policy is determined, it is decided to whether pay dividend or not. In this context, profit sharing is discretionary. CMB is determined different essentials related to dividend policy according to the qualifications of companies. In the dividend policy of shareholders, the topics in below are regulated: - If dividends are paid or not - Dividend ratio and the accounts to which ratios applied - Payment methods and time - If dividends paid in cash or as bonus share distribution (for publicly-traded companies) - If advance dividends are distributed or not The upper limit of dividends to be distributed is equal to the related resources’ distributable profit amount in legal records. Profit share is divided equally to current shares as the date of distribution. Dates of acquisition and issuance of the shares are not taken into account. According to Turkish Commercial Code, it cannot be decided to allocate another reserve fund and transfer the profit to the next year if the reserve fund required allocating and profit share that is foreseen in master contract and dividend policy are not distributed. On condition that taking place in the articles of association, profit share can be given to privileged shareholders or redeemed shareholders, member of board of directors, employees and other persons who are not shareholders. However, it cannot be paid dividend to privileged shareholders, redeemed shareholders, member of board of directors, employees and other persons unless profit share is paid in cash to shareholders. If there are no principles about the amount of profit share paid to other persons apart from the shareholders in policy, the amount to be distributed to others should be maximum ¼ of profit share distributed to shareholders (excluding privileged shares). New Capital Market Law and new notification give shareholders opportunity to make donation. However, there should be adjudication in the main contract about the denotation. Although general assembly determines the amount of denotations, CMB can determine an upper limit for denotations.

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(Currency - Turkish Lira ‘TRY’ unless expressed otherwise.) Publicly-traded companies release these:

- Suggestion of board of directors related to profit - Or the decision of board of directors about advance of pay dividend - Pay dividend table and advance of pay dividend table

issues to public. Profit distribution table must be disclosed to the public at least in the date that ordinary general assembly agenda is published. The Parent Company will pay TRY 12,815,951 of dividend on 29 June 2015 as a result of decision taken during the General Meeting dated 15 April 2015. The Parent Company has paid TRY 13,840,870 of dividend in the year of 2014. 23.9 Minority Interest As of 31 March 2015 and 31 December 2014 details of minority interests are as follows; 31.03.2015 31.12.2014 Capital 2,450,000 2,450,000 Retained earnings / (losses) (75,473) (2,100,163) Profit / (loss) for the period, net 71,736 2,014,219 2,302,791 2,364,056

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NOTE 24 – SALES AND COST OF SALES 24.1 Sales revenue Details of sales for the periods ended at 31 March 2015 and 2014 are as follows;

01.01.-31.03.2015

01.01.-31.03.2014 Domestic sales

BCF yarn sales 1,131,888 1,655,662 Machine carpet sales 32,477,980 32,967,860 Raw material sales (PP and Yarn) 81,283 326,853 Merchandise sales 4,027,815 3,799,791 Other sales(*) 349,623 118,350

38,068,589 38,868,516

Export sales

BCF yarn sales 27,924,504 28,732,581 Machine carpet sales 3,552,004 8,440,469 Merchandise sales 951,349 9,397,746

32,427,857 46,570,796

Sales returns and discounts (3,810,950) (2,638,482) 66,685,496 82,800,830

For the periods ended at 31 March 2015 and 2014, the details of amount of sales are as following; 01.01. - 31.03.2015 01.01. - 31.03.2014 Type of product Unit Amount Unit Amount

Machine Carpet Sqm 519,159 Sqm 730,456 Commercial Carpet Sqm 652 Sqm 2,293 BCF Yarn Kg 4,992,891 Kg 4,421,004

For the period ended at 31 March 2015, amounting to TRY 10,774,755 of export registered sales is classified to export sales (01 January – 31 March 2014: TRY 30,462,435TL).

(*)For the period ended at 31 March 2015 amount of services income TRY 67,815, that be located in other sales 01 January – 31 March 2014: TRY 100,976). Sales to related parties which are classified under sales account are indicated in Note 7.

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(Currency - Turkish Lira ‘TRY’ unless expressed otherwise.) 24.2 Cost of Sales Details of cost of sales for the periods ended at 31 March 2015 and 2014 are as follows;

01.01.-

31.03.2015 01.01.-

31.03.2014

Direct material expenses 28,523,061 41,628,786 Direct labor expenses 4,188,404 3,943,048 General production overheads expenses 6,183,271 6,755,801 Depreciation and amortization expenses 3,258,451 2,611,924 Cost of finished goods produced 42,153,187 54,939,559

Changes in finished goods inventory 1. Beginning inventory (+) 21,515,936 13,466,527 2. Ending inventory (-) (20,728,738) (19,973,294) Cost of finished goods sold 42,940,385 48,432,792

Cost of merchandise 1. Beginning merchandise inventory (+) 1,412,477 1,220,836

2. Purchases during the period (+ ) 4,333,426 13,797,371 3. Ending merchandise inventory (- ) (613,424) (1,776,869) Cost of merchandise sold 5,132,479 13,241,338

Cost of sales, net 48,072,864 61,674,130 For the periods ended at 31 March 2015 and 2014, the details of amount of production are as following;

01.01. - 31.03.2015 01.01. - 31.03.2014 Type of product Unit Amount Unit Amount

Machine Carpet Sqm 468,200 Sqm 934,308 BCF Yarn kg 5,416,997 kg 4,699,523

Purchases from related parties which are classified under cost of sales account indicated in Note 7.

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(Currency - Turkish Lira ‘TRY’ unless expressed otherwise.) NOTE 25 – GENERAL ADMINISTRATIVE EXPENSES, MARKETING EXPENSES AND RESEARCH AND DEVELOPMENT EXPENSES For the periods ended at 31 March 2015 and 2014, marketing, general administrative and research and development expenses are mentioned below;

01.01.-

31.03.2015 01.01.-

31.03.2014

General administrative expenses 2,298,213 2,169,072 Marketing expenses 11,354,701 9,364,120 Research and development expenses 107,102 99,258

13,760,016 11,632,450 NOTE 26 – EXPENSES ACCORDING TO QUALIFICATIONS 26.1 General administrative expenses Details of general administrative expenses for the periods ended at 31 March 2015 and 2014 are as following;

01.01.-

31.03.2015 01.01.-

31.03.2014

Representation and accommodation expenses 27,021 24,334 Personnel expenses 1,639,093 1,485,441 Communication expenses 10,394 14,752 Travel expenses 47,301 74,018 Depreciation and amortization expenses 73,110 45,579 Provision for doubtful expenses 35,148 61,960 Provision for severance pay 19,743 72,035 Consultancy expenses 87,256 85,269 Donation expenses 849 120,876 Taxes, duties and charges 32,774 7,401 Other expenses 325,524 177,407

2,298,213 2,169,072 Details of expenses from related parties classify in general administrative expenses account for the periods ended at 31 March 2015 and 2014 indicated in Note 7.

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(Currency - Turkish Lira ‘TRY’ unless expressed otherwise.) 26.2 Marketing expenses

For the periods ended at 31 March 2015 and 2014, the details of marketing expenses are as following;

01.01.-

31.03.2015 01.01.-

31.03.2014

Sales premium expenses 4,014,539 4,311,258 Advertising expenses 1,871,919 1,279,440 Transportation expenses 1,240,684 712,177 Personnel expenses 962,637 807,100 Fair expenses 362,741 71,009 Insurance expenses 368,697 294,211 Export and custom expenses 202,594 219,862 Depreciation and amortization expenses 412,990 309,663 Travel expenses 177,893 98,046 Representation and accommodation expenses 414,728 440,680 Rent expenses 312,730 363,648 Taxes, and funds 310,066 5,004 Other expenses 702,483 452,022

11,354,701 9,364,120 Details of expenses from related parties classifies in marketing expenses account for the periods ended at 31 March 2015 and 2014 indicated in Note 7. 26.3 Research and development expenses For the periods ended at 31 March 2015 and 2014, the details of research and development expenses are as follows;

01.01.-

31.03.2015 01.01.-

31.03.2014

Personnel expenses 1,990 72,749 Travel expenses - 817 Analysis – Laboratory expenses 76,610 4,769 Depreciation and amortization expenses 28,502 16,386 Other expenses - 4,537

107,102 99,258 Details of expenses from related parties classify in research and development expenses account for the periods ended at 31 March 2015 and 2014 indicated in Note 7.

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(Currency - Turkish Lira ‘TRY’ unless expressed otherwise.) NOTE 27 –OTHER OPERATING INCOME / (EXPENSES) Details of other operating income for the periods ended at 31 March 2015 and 2014, are as following;

01.01.-

31.03.2015 01.01.-

31.03.2014

Foreign exchange incomes from commercial operations 6,105,419 2,018,840 Rediscount incomes 2,866,221 2,873,936 Due date differences incomes from trade receivables 5,118 11,755 Insurance incomes 129,048 468,007 Other incomes 149,151 75,965

9,254,957 5,448,503 Details of other operating expenses for the periods ended at 31 March 2015 and 2014 is as following;

01.01.-

31.03.2015 01.01.-

31.03.2014

Rediscount expenses 2,553,533 3,017,572 Foreign exchange expenses from commercial operations 5,632,712 1,552,970 Other expenses 36,637 25,511

8,222,882 4,596,053 Details of (incomes) / (expenses) from related parties classifies in other operating income / (expenses) account for the periods ended at 31 March 2015 and 2014 indicated in Note 7.

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(Currency - Turkish Lira ‘TRY’ unless expressed otherwise.) NOTE 28 - INVESTMENT ACTIVITIES INCOME / (EXPENSES) Details of investment activities income for the periods ended at 31 March 2015 and 2014 are as following;

01.01.-

31.03.2015 01.01.-

31.03.2014

Profit on sale of fixed assets 2,626,836 2,374,542 Interest income from other receivables 11,572 209,732

2,638,408 2,584,274 Details of investment activities expense for the periods ended at 31 March 2015 and 2014 are as following;

01.01.-

31.03.2015 01.01.-

31.03.2014

Loss on fixed assets sale 219,921 -

219,921 - Details of incomes / (expenses) from related parties in investing activities incomes / (expenses) account for the periods ended at 31 March 2015 and 2014 indicated in Note 7. NOTE 29 – FINANCE INCOME / (EXPENSES) For the periods ended at 31 March 2015 and 2014 finance incomes are as follows

01.01.-

31.03.2015 01.01.-

31.03.2014

Foreign exchange incomes 4,532,595 1,101,734 Foreign exchange income from forward exchange - 128,220

4,532,595 1,229,954

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(Currency - Turkish Lira ‘TRY’ unless expressed otherwise.) For the periods ended at 31 March 2015 and 2014 finance expenses are as follows;

01.01.-

31.03.2015 01.01.-

31.03.2014

Interest paid on loans 1,331,060 381,650 Foreign exchange losses 3,158,741 1,978,280 Forward foreign exchange losses on foreign currency transactions - 219,069 Letter of guarantees commission expenses 302,922 33,219 Other financing expenses 145,961 63,447

4,938,684 2,675,665 For the periods ended at 31 March 2015 and 2014 the details of finance expenses to related parties are indicated in Note 7. NOTE 30 – NON-CURRENT ASSETS HELD FOR SALE AND DISCONTINUED OPERATIONS For the period ended at 31 December 2013 The Parent Company acquired two lands for the trade receivables from its customer with the amount of TRY 3,296,250. The Group has not calculated provision for impairment for the lands, because the fair value of the lands, which is calculated by TSKB Gayrimenkul Değerleme A.Ş. that is approved by CMB, are higher than the cost amounts of the lands. As of period ended in 31 December 2014, The Parent Company had sold land whose values TRY 1,796,250, and the other land whose values TRY 1,500,000, continue to classify as non-current asset held for sale.

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(Currency - Turkish Lira ‘TRY’ unless expressed otherwise.) NOTE 31 –TAX ASSETS AND LIABILITIES

Deferred Taxes

The potential deferred tax assets / (liabilities) of the Company represents the tax effects of temporary differences, arising between the financial statements reported for TFRS purposes and the statutory tax financial statements. Such differences arise due to the different treatment of certain items of income and expense included in the TFRS financial statements compared to the local tax return, in accordance with applicable tax laws.

As of balance sheet date, accrued temporary differences and deferred tax assets and liabilities prepared by using current tax rates are as following: 31 March 2015 31 December 2014

Total temporary

differences

Deferred tax assets /

(liabilities)

Total temporary

differences

Deferred tax assets /

(liabilities)

Deferred Tax Assets:

Tax incentive 22,250,277 4,450,055 23,742,416 4,748,483

Taxable losses 294,723 58,944 - -

Severance pay provision 1,195,927 239,185 1,300,323 260,065

Reversal of capitalized financial expenses 3,149,765 629,953 3,150,547 630,109

Unearned interests on receivables 239,586 47,917 149,942 29,988

Provision for doubtful receivables 7,106,110 1,421,222 7,180,291 1,436,058

Interest accruals 19,859 3,972 26,200 5,240

Provision for lawsuit 757,666 151,533 757,666 151,533

Expense accruals 329,095 65,819 940,293 188,059

Reversal of capitalized research expenses 847,765 169,553 771,155 154,231

Foreign exchange losses 1,818,556 363,711 1,710,886 342,177

Other 241,543 48,309 168,123 33,626

Deferred tax assets 7,650,173 7,979,569

Deferred tax liabilities:

Capitalization expenses (250,040) (50,008) (285,356) (57,071)

Depreciation and indexation differences of lands and buildings (372,897) (18,645) (364,628) (18,231) Depreciation and indexation differences of tangible and intangible fixed assets (Except land, land improvements and buildings) (26,486,384) (5,297,276) (28,053,933) (5,610,787)

Unearned interest on payables (378,436) (75,688) (571,350) (114,270)

Fair value adjustment for lands and buildings (24,078,074) (1,203,904) (24,131,372) (1,206,569)

Fair value adjustment for machinery and plants (12,239,246) (2,447,849) (13,338,445) (2,667,689)

Foreign exchange gains (330,430) (66,087) (186,580) (37,318)

Income accruals - - (193,388) (38,678)

Deferred tax liabilities (9,159,457) (9,750,613)

Deferred tax assets / (liabilities), net (1,509,284) (1,771,044)

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(Currency - Turkish Lira ‘TRY’ unless expressed otherwise.) For the periods ended at 31 March 2015 and 2014 tax income / (expense) on income statement are as follows;

01.01.-

31.03.2015 01.01.-

31.03.2014 Income / (Expense) for the Period (592,687) (2,032,888) Deferred Tax Income / (Expense) 54,179 670 Tax income / (expense), net (538,508) (2,032,218)

As of 31 March 2015 and 2014, the movements of deferred tax assets and liabilities are as follows:

01.01.-

31.03.2015 01.01.-

31.03.2014 Opening balance 1,771,044 2,076,516 Deferred tax recognized in equity (207,581) (244,021) Deferred tax assets / (liabilities), net (1,509,284) (1,831,825) Deferred tax income / (expense), net 54,179 670

Tax provision reconciliation shown in Group’s income statement is as follows;

01.01.-

31.03.2015 01.01.-

31.03.2014 Unaudited profit / (loss) before tax (*) 9,980,017 11,410,472 Total additions and deductions to tax base 110,463 186,512 Total deduction from tax base 387,245 Discounted corporate tax base 10,090,480 1,332,566 Unaudited financial profit / (loss) 10,090,480 11,209,739 Corporate tax rate 20% 20% Corporate tax provision in the income statement 592,687 2,032,888

(*) Companies covered by the full consolidation calculated on the basis of the tax provision. For the companies that tax for the period do not occur, reconciliation of the tax provision is not presented. As of 31 March 2015 and 31 December 2014, Group’s assets relevant current period tax is as following; 31.03.2015 31.12.2014

Prepaid Taxes 1,944,486 3,392,534

1,944,486 3,392,534

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(Currency - Turkish Lira ‘TRY’ unless expressed otherwise.) Corporation Tax Company is liable to corporation tax valid in Turkey. The necessary provisions are made on the attached financial statements for expected tax liabilities related to the Company’s current period activity results. Corporation tax rate that will be accrued over corporation tax base is calculated over the tax base that remains after adding expenses recorded as expense in determination of commercial earnings that are nondeductible from tax base and subtracting tax-exempt profit, tax- free income and other deductions (if there are losses from previous years and used investment allowances if preferred). The applied effective interest rate in 2015 is 20% (2014: 20%). Permanent tax is calculated and accrued quarterly in Turkey. As of temporary tax periods, the effective corporation tax rate is 20% in 2015 (2014: %20). There is no absolute and certain confirmation procedure related to tax evaluation in Turkey. Companies prepare their tax return between 1-25 April coming after the related year’s balancing period (for the companies having special account period, between 1st and 25th of fourth month following the closing of period). These tax returns and related accounting records may be inspected and changed by tax department in five years. There are some exceptions on Corporation Tax Law. These exceptions that company will possibly utilize are explained as below; Taxable losses According to Turkish Tax Legislation, deduction of financial losses which are decelerated on financial statements, are possible to deduct from profit of the company with the condition not exceeding 5 years. However, financial losses are not possible to be set-off from previous year profits. Issue Premium Exception The Premium income provided by the disposing of stocks, formed whiles the establishments of Incorporated Companies or while increasing their capital, below their nominal values is an exemption from Corporation tax.

The Real Estate and Subsidiary Share Sales Gain Exemption The 75 % of income of corporations composed of subsidiary shares, real estates, privilege, and promoter’s stock and perpetual bonds are exemptions of Corporation tax. In order to benefit from exemption, the questioned income should be kept in a fund account in liabilities and should not be removed of operation during 5 years. The sale price should be received at the end of the following 2nd calendar year. Corporations getting income from the sale of such kind of values they own, like Stocks and bonds and real estate trading and renting are beyond the scope of exemption. Investment Allowance Exemptions Post abolishment of the law numbered 5479, temporary 69th article is added to Income Tax Legislation related investment allowance.

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(Currency - Turkish Lira ‘TRY’ unless expressed otherwise.) According to this execution, Income and Corporation Tax payers; a. As of 31 December 2005, its existence is subject and the investment allowance amount that was not able to be deducted from 2005 earnings, b. In the extent of investment incentive certificate which were issued and based on the application before 24 April 2003, ante abolishment of Income Tax Legislation numbered 193 and dated 09 April 2003 and law numbered 4842, in the extent of certificate the commenced investment projects relying on 1, 2, 3, 4, 5 and 6th the article of appendix and the ones commenced after 01 January 2006, c. In the extent of abolished 19th article of Income Tax Legislation numbered 193, they started investments prior to 01 January 2006, in terms of economical and technical completeness the ones started post the date, In terms of regulatory provisions effective on 31 December 2005, calculated amounts of exemptions from investment allowances, again in the extent of legal provisions valid on 31 December 2005 (including tax rate related legal provisions) was deducted merely from earnings of 2006, 2007 and 2008. However, with the decision numbered 2006/95, which was taken during the meeting of the Constitutional Court on 15 October 2009, the phrase “ ... only related to the years 2006, 2007 and 2008…” which was a part of the Temporary Article 69 of the Income Tax Law was cancelled and the cancellation became effective from the date the decision has been published in the Official Gazette on 8 January.2010. According to the decision, the investment incentive amount outstanding that cannot be deducted from 2008 taxable income previously will be deducted from taxable income of the subsequent profitable years. Regarding the cancellation decision taken by the Constitutional Court, an amendment was made in the 69th article in Income Tax Regulation using the regulation numbered 6009 and dated 23/07/2010. Consequently, in compliance with the cancellation decision of the Constitutional Court, the year limitation has been abolished and investment allowance has been limited to 25% of the profit. Corporate tax ratio of 30% in the previous regulation for the ones who benefit from investment allowance has been decreased to the effective corporate tax with the amendment made. Within the frame of the Communiqué “Decision regarding Government Incentive Assistance in Investment” dated 16 July 2009 and numbered 2009/01, newly investing companies are held subject to investment incentives based on the some regions.

Investment incentives and grants are; discount in corporation and income taxes (differs from region to region), provision for the investment, interest support. Royal Halı İplik Tekstil ve Mobilya Sanayi ve Ticaret Anonim Şirketi is qualified for the investment incentives stated above due to the current and future investment expenditures. The investment area is within the 3rd Region according to the communiqué numbered 2009/01; so the Company is qualified for 80% discount on corporation tax rate, which reduces corporation tax rate to 4% in accordance with Communiqué, 40% of total investment expenditures will be deducted from accrued corporation tax amount in the coming periods. Withholding Tax

In addition to Corporation tax, it is required to calculate withholding tax from the dividends distributed by full pledge taxpayer enterprise and include in its income tax base and except dividends distributed by foreign companies to its subsidiary in Turkey. As of 23 July 2006 income tax stoppage rate was altered to 15%. Dividends that are added to capital without distribution are not subject to income tax stoppage. It is necessary to make tax withholding at 19.8% over investment allowance balance utilized based on investment incentive certificate received prior to 24 April 2003. 40% or 30% of company activities directly related to production investment certificate. Investment expenses made after this date can be deducted. Tax withholding cannot be made on investment expenses without incentive certificate

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(Currency - Turkish Lira ‘TRY’ unless expressed otherwise.) NOTE 32 - EARNINGS PER SHARE For the periods ended at 31 March 2015 and 2014 profit / (loss) per share whose nominal value is TRY 1 is as follows;

01.01.-

31.03.2015 01.01.-

31.03.2014 Net profit / (loss) for the period 7,358,581 9,453,045 Net Profit/(loss) relevant to minority interests 71,736 (146,019) Net profit (loss) relevant to parent company 7,430,317 9,307,026 Number of weighted average shares 60,000,000 60,000,000 Profit/ (loss) per share (TRY ) 0.12 0.16

NOTE 33 – EXPOSURE TO FINANCIAL RISKS DUE TO FINANCIAL INSTRUMENTS Financial Instruments Credit Risk The company is subject to credit risk arising from trade receivables related to credit sales and deposits at banks. These risks are managed by limiting the aggregate risk from any individual counterparty and obtaining sufficient collateral where necessary and making only cash based sales to customer considered as having a higher risk. Collect ability of trade receivables are evaluated by management depending on their past experiences and current economic condition, and presented in the financial statements net of adequate doubtful provision.

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(Currency - Turkish Lira ‘TRY’ unless expressed otherwise.) As of 31 March 2015 and 2014, credit risk of Company in terms of financial instruments is as follows:

31 March 2015

Trade receivables Other receivables

Related party

Other Party

Related party

Other Party

Bank Deposit

Maximum net credit risk as of balance sheet date (A+B+C+D+E) (*) 2,353,707 93,820,479 - 12,638,124 655,646 284,064 The part of maximum risk under guarantee with collateral - 28,661,117 - - - - A. Net book value of financial assets that are neither overdue nor impaired 2,353,707 89,030,884 - 12,638,124 655,646 284,064 B. Net book values of financial assets that are renegotiated, if not that will be accepted as overdue or impaired - - - - - - C. Book value of financial assets that are overdue but not impaired (**) - 1,172,831 - - - - - The part under guarantee with collateral etc - - - - - - D. Net book value of impaired assets - 3,616,764 - - - - - Overdue (gross book value amount) - 27,254,596 - - - - - Impairment (-) - (23,637,832) - - - - - The part of net value under guarantee with collateral etc - - - - - - - Non overdue (gross book value amount) - - - - - - - Impairment (-) - - - - - - - The part of net value under guarantee with collateral - - - - - - E. Factors including off-balance sheet risk - - - - - -

(*) This line represents the total of the rows A, B, C, D and E. Factors mitigating credit risk such as guarantees received have not been taken into consideration.

(**) As of 31 March 2015 explanations related to the aging of overdue but not impaired receivables are as follows;

Receivables Bank deposit Other Trade receivables Other receivables

Overdue 1-30 days 1,172,831 - - - Overdue 1-3 months - - - - Overdue 3-12 months - - - - Overdue 1-5 year - - - -

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31 December 2014

Trade receivables Other receivables

Related party

Other Party

Related party

Other Party

Bank Deposit

Derivative Financial

Instrument Other Maximum net credit risk as of balance sheet date (A+B+C+D+E) (*) 17,031,781 81,821,490 - 25,590,085 17,360,386 9,469,567 444,210 The part of maximum risk under guarantee with collateral - 30,758,404 - - - - - A. Net book value of financial assets that are neither overdue nor impaired 17,031,781 77,102,922 - 25,590,085 17,360,386 9,469,567 444,210 B. Net book values of financial assets that are renegotiated, if not that will be accepted as overdue or impaired - - - - - - - C. Book value of financial assets that are overdue but not impaired (**) - 1,101,804 - - - - - - The part under guarantee with collateral etc - - - - - - - D. Net book value of impaired assets - 3,616,764 - - - - - - Overdue (gross book value amount) - 27,056,434 - - - - - - Impairment (-) - (23,439,670) - - - - - - The part of net value under guarantee with collateral etc - - - - - - - - Non overdue (gross book value amount) - - - - - - - - Impairment (-) - - - - - - - - The part of net value under guarantee with collateral - - - - - - - E. Factors including off-balance sheet risk - - - - - - -

(*) This line represents the total of the rows A, B, C, D and E. Factors mitigating credit risk such as guarantees received have not been taken into consideration.

(**) As of 31 December 2014 explanations related to the aging of overdue but not impaired receivables are as follows;

Receivables Bank deposit Other Trade receivables Other receivables

Overdue 1-30 days 1,101,804 - - - Overdue 1-3 months - - - - Overdue 3-12 months - - - - Overdue 1-5 year - - - -

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(Currency - Turkish Lira ‘TRY’ unless expressed otherwise.) Derivative financial instrument

Forward Exchange

The Group's activities, mainly due to changes in foreign exchange rates and interest rates, which is exposed to financial risks. Group, which is used derivative financial instruments (primarily foreign currency forward contracts) for the purposes of avoiding fair value risk.

Derivative financial instruments which is calculated with the fair value on the agreement date, is calculated again with the fair value on the financial statements date. When changes in fair value of derivative financial instruments occur, they are accounted for income statement.

As of 31 March 2015, there are not any agreements on the Group’s derivative financials instruments. As of 31 December 2014, foreign currency purchase / sale agreement details are Note 22. Interest rate risk

The value of a financial instrument will fluctuate as a result of changes in market prices whether those changes are caused by factors specific to the individual security or its issuer or factors affecting all securities traded in the market. The Group’s interest rate risk is primarily attributable to its borrowings.

Although interest rates of financial borrowings with interest may change, financial assets with interest have fixed interest rate and cash flows in future do not change with the extent of these assets. Risk exposure to changing market interest rate of the Group, is mostly based on the borrowing liabilities with variable interest rate of the Group. The policy of the Group is managing interest cost by using borrowings with fixed and variable interest. Interest Rate Sensitivity If the interest rates of variable interest-bearing USD and EUR denominated borrowings were 100 basis points (1%) higher / lower with all other variables held constant, profit before tax for the year would have been lower/higher by TRY 1,094,197 at 31 March 2015, due to higher / lower interest expense (01 January-31 December 2014: TRY 831,818). Interest position statement of the Company is as follows; 31.03.2015 31.12.2014 Fixed rate financial instruments

Financial assets Assets of at fair value through profit or loss - - Available for sale financial assets - -

Financial liabilities 46,292,905 57,105,003 Variable rate finance instruments

Financial assets - - Financial liabilities 109,419,744 83,181,758

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(Currency - Turkish Lira ‘TRY’ unless expressed otherwise.) Liquidity risk Fair 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. The Group management manages liquidity risk by distributing the funds and by keeping sufficient cash and cash equivalents resources to cover the current and possible liabilities. As of 31 March 2015 is liquidity risk table of the Group is as following;

Maturity according to the contract Book value

Cash outflow according to

agreement (=I+II+III+IV)

Less than 3 months (I)

Between 3-12 months

(II) Between 1- 5

years (III)

More than 5 years

(IV) Non-derivative financial liabilities Bank Loans 124,764,462 131,361,350 15,260,716 29,373,428 84,113,326 2,613,880 Leasing liabilities 30,948,187 30,948,187 2,133,529 6,490,651 22,324,007 - 155,712,649 162,309,537 17,394,245 35,864,079 106,437,333 2,613,880

Expected maturity Book value


expected maturities

(=I+II+III+ IV)

Less than 3 months (I)

Between 3-12 months

(II) Between 1- 5

years (III)

More than 5 years

(IV) Non-derivative financial liabilities Trade payables 29,163,514 29,526,217 11,074,953 18,451,264 - - Other payables 3,354,452 3,354,449 900,769 2,453,680 - - 32,517,966 32,880,666 11,975,722 20,904,944 - -

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As of 31 December 2014 is liquidity risk table of the Group is as following;

Maturity according to contract Book value


agreement (=I+II+III+IV)

Less than 3 months

(I)

Between 3-12

months (II)

Between 1- 5 years

(III)

More than 5 years

(IV) Non-derivative financial liabilities Bank Loans 107,338,842 114,720,290 15,107,996 29,307,799 67,063,116 3,241,379 Leasing liabilities 32,947,919 36,100,954 2,502,798 7,442,104 26,156,052 - 140,286,761 150,821,244 17,610,794 36,749,903 93,219,168 3,241,379

Expected maturity Book value


expected maturities

(=I+II+III+ IV)

Less than 3 months

(I)

Between 3-12

months (II)

Between 1- 5 years

(III)

More than 5 years

(IV) Non-derivative financial liabilities Trade payables 24,204,155 24,492,717 10,254,050 14,238,667 - - Other payables 5,376,079 5,376,079 2,969,303 2,406,776 - - 29,580,234 29,868,796 13,223,353 16,645,443 - -

Derivative Financial Instrument Book value

Cash flow according to

agreement

Less than 3 months

(I)

Between 3-12

months (II)

Between 1- 5 years

(III)

More than 5 years

(IV) Derivative cash inflow - 9,662,955 9,662,955 - - - Derivative cash outflow - (9,469,567) (9,469,567) - - - Derivative financial ınstrument, net - 193,388 193,388 - - -

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(Currency - Turkish Lira ‘TRY’ unless expressed otherwise.) Foreign Currency Risk

The effects occurring from exchange rate fluctuation, in case of having foreign currency assets, liabilities, off-balance sheet liabilities, are foreign currency risk. Transactions in foreign currencies during the year have been translated at the exchange rate prevailing at dates of the transactions. Monetary assets and liabilities denominated in foreign currencies are translated at the exchange rates prevailing at the balance sheet dates. Foreign exchange gains or losses arising from the settlement of such transactions and from the translation of monetary assets and liabilities are recognized in the statement of profit/loss. Monetary liabilities of the Company exceed monetary assets of the Group; in case of exchange rate rise, the Group is exposed to foreign currency risk. As of 31 March 2015 and 31 December 2014 exchange rates are as following; 31.03.2015 31.12.2014 USD 2.6102 2.3189 EUR 2.8309 2.8207 GBP 3.8611 3.5961 CHF 2.7003 2.3397

Foreign Currency Risk Sensitivity Analysis

As of 31 March 2015, if TRY evaluates / devaluates against foreign currency by 10% and all other variables remains the same, profit before tax which occurs as a result of the foreign exchange loss / gain arising from net foreign exchange exposure would have been 13,082,368 more / less.

FX Sensitivity Analysis For the Period 01.01. – 31.03.2015

Profit / (Loss) Shareholders equity

Appreciation of foreign currency

Depreciation of foreign currency



In case of appreciation / depreciation of USD against TRY by 10% 1-USD net asset / liability (1,709,947) 1,709,947 (1,709,947) 1,709,947 2- Hedged amount against USD risk (-) - - - - 3-USD net effect (1+2) (1,709,947) 1,709,947 (1,709,947) 1,709,947 In case of appreciation / depreciation of EUR against TRY by 10% 4- EUR net asset / liability (11,372,810) 11,372,810 (11,372,810) 11,372,810 5- Hedged amount against EUR risk (-) - - - - 6- EUR net effect (4+5) (11,372,810) 11,372,810 (11,372,810) 11,372,810 In case of appreciation / depreciation of GBP against TRY by 10% 7- GBP net asset / liability 268 (268) 268 (268) 8- Hedged amount against GBP risk (-) - - - - 9- GBP net effect (7+8) 268 (268) 268 (268) In case of appreciation / depreciation of CHF against TRY by 10% 10- CHF net asset / liability 121 (121) 121 (121) 11- Hedged amount against CHF risk (-) - - - - 12- CHF net effect (10+11) 121 (121) 121 (121) TOTAL (3+6+9+12) (13,082,368) 13,082,368 (13,082,368) 13,082,368

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(Currency - Turkish Lira ‘TRY’ unless expressed otherwise.) As of 31 December 2014, if TRY evaluates / devaluates against foreign currency by 10% and all other variables remains the same, profit before tax which occurs as a result of the foreign exchange loss / gain arising from net foreign exchange exposure would have been TRY 10,004,947 more / less.

FX Sensitivity Analysis For the Period 01.01. - 31.12.2014

Profit / (Loss) Shareholders equity





In case of appreciation / depreciation of USD against TRY by 10% 1-USD net asset / liability 219,912 (219,912) 219,912 (219,912) 2- Hedged amount against USD risk (-) - - - - 3-USD net effect (1+2) 219,912 (219,912) 219,912 (219,912) In case of appreciation / depreciation of EUR against TRY by 10% 4- EUR net asset / liability (10,228,117) 10,228,117 (10,228,117) 10,228,117 5- Hedged amount against EUR risk (-) - - - - 6- EUR net effect (4+5) (10,228,117) 10,228,117 (10,228,117) 10,228,117 In case of appreciation / depreciation of GBP against TRY by 10% 7- GBP net asset / liability 3,153 (3,153) 3,153 (3,153) 8- Hedged amount against GBP risk (-) - - - - 9- GBP net effect (7+8) 3,153 (3,153) 3,153 (3,153) In case of appreciation / depreciation of CHF against TRY by 10% 10- CHF net asset / liability 105 (105) 105 (105) 11- Hedged amount against CHF risk (-) - - - - 12- CHF net effect (10+11) 105 (105) 105 (105) TOTAL (3+6+9+12) (10,004,947) 10,004,947 (10,004,947) 10,004,947

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As of 31 March 2015 and 31December 2014 amounts of assets and liabilities of the Group in foreign currency are as follows:

31 March 2015 31 December 2014

TRY equivalent functional

currency USD EUR GBP CHF

TRY equivalent functional

currency USD EUR GBP CHF

Doları

1. Trade Receivables 43,093,501 3,295,216 12,184,227 - - 31,311,980 4,744,017 7,189,732 8,621 - 2a.Monetary Financial Assets (including cash, banks) 201,132 61,408 13,053 695 448 472,096 159,317 34,666 1,064 448 2b.Non-monetary financial assets - - - - - - - - - - 3. Other 63,871,009 6,022,802 17,008,828 - - 17,634,312 7,573,617 25,473 - - 4. Current Assets (1+2+3) 107,165,642 9,379,426 29,206,108 695 448 49,418,388 12,476,951 7,249,871 9,685 448 5. Trade Receivables - - - - - - - - - - 6a.Monetary Financial Assets - - - - - - - - - - 6b.Non-monetary financial assets - - - - - - - - - - 7. Other - - - - - 380,137 - 134,767 - - 8. Non-Current Assets (5+6+7) - - - - - 380,137 - 134,767 - - 9. Total Assets (4+8) 107,165,642 9,379,426 29,206,108 695 448 49,798,525 12,476,951 7,384,638 9,685 448 10. Trade Payables 19,692,477 4,696,598 2,625,814 - - 15,506,596 4,374,024 1,900,370 917

11. Financial Liabilities 49,287,769 5,197,545 12,618,297 - - 49,850,892 6,349,356 12,453,423 - 12a. Other monetary liabilities 229,749 13,500 68,710 - - 4,171,376 805,225 816,868 - 12b. Other non-monetary

liabilities - - - - - - - - - 13. Current Liabilities

(10+11+12) 69,209,995 9,907,643 15,312,821 - - 69,528,864 11,528,605 15,170,661 917 14. Trade Payables - - - - - - - - - -

15. Financial Liabilities 104,908,317 - 37,058,291 - - 89,788,704 - 31,832,065 - - 16a.Other monetary liabilities - - - - - - - - - - 16b. Other non-monetary liabilities - - - - - - - - - - 17. Non-Current Liabilities (14+15+16) 104,908,317 - 37,058,291 - - 89,788,704 - 31,832,065 - - 18. Total Liabilities 174,118,312 9,907,643 52,371,112 - - 159,317,568 11,528,605 47,002,726 917 - 19. Net asset / liability position of off- balance sheet derivative instruments (19a-19b) - - - - - 9,469,567 - 3,357,169 - - 19a. Hedged amount of assets - - - - - 9,469,567 - 3,357,169 - - 19b. Hedged amount of liabilities - - - - - - - - - 20. Net foreign currency position asset / liabilities (9-18+19) (66,952,670) (528,217) (23,165,004) 695 448 (100,049,476) 948,346 (36,260,919) 8,768 448 21. Net foreign currency asset / liability position of monetary items (IFRS 7.B23) (=1+2a+5+6a-10-11-12a-14-15-16a) (130,823,679) (6,551,019) (40,173,832) 695 448 (127,533,492) (6,625,271) (39,778,328) 8,768 448 22. Fair value of derivative instruments used in foreign currency hedge - - - - - - - - - - 23. Hedged part of amount foreign asset - - - - - - - - - - 24. Hedged part of amount of foreign liabilities - - - - - - - - - -

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(Currency - Turkish Lira ‘TRY’ unless expressed otherwise.) As 31 March 2015 and 31 December 2014 the details of import and export figure based on currency are as below; 31 March 2015 31 December 2014

Import Export Import Export

USD 6,904,387 1,004,781 38,363,491 20,653,949 EUR 8,468 6,219,133 6,864,106 3,519,321 GBP 2,878 25,860 834 277,992 TRY equivalent functional currency 18,056,914 20,328,271 108,325,680 58,821,078 Capital risk management

In capital management, the Group’s aims at enhancing profitability while keeping a reasonable leverage, on the other hand rendering sustainability in its operations. The Group follows capital by using debt to equity ratio. This rate is found by dividing net debt to total equity. Net debt is calculated by deducting cash and cash equivalents from total payable amount (as shown in balance sheet, trade and other payables and loans). Total capital, as shown in balance sheet, is calculated by adding up equity and net debt. As of 31 March 2015 and 31 December 2014 net debt / total equity ratio is as follows;

31.03.2015 31.12.2014

Total debts 212,535,817 206,705,075 Less: Liquid assets 1,058,209 17,901,514 Net debt 211,477,608 188,803,561

Total equity 208,698,980 202,210,695 Total capital 420,176,588 391,014,256 Net Debt/Total Equity ratio 50% 48%

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(Currency - Turkish Lira ‘TRY’ unless expressed otherwise.) NOTE 34 – FINANCIAL INSTRUMENTS (FAIR VALUE DISCLOSURES AND HEDGE ACCOUNTING DISCLOSURES)

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

The following methods and assumptions are utilized for the current values of financial instruments which are predictable in practice: Financial Assets

Monetary assets for which fair value approximates carrying value:

- Balances denominated in foreign currencies are converted at period exchange rates. -The fair value of certain financial assets carried at cost, including cash and cash equivalents are considered to approximate their respective carrying amounts in the financial statements. -The carrying value of trade receivables, net of allowances for possible non-recovery of uncollectible are considered to approximate their fair values.

Financial Liabilities

Monetary liabilities for which fair value approximates carrying value: -The fair value of short-term bank loans and other monetary liabilities are considered to approximate their respective carrying values due to their short-term nature. -The fair values of long-term bank borrowings, which are denominated in foreign currencies and converted at period exchange rates, are considered to approximate their carrying values. -The carrying amount of accounts payable and accrued expenses reported in the financial statements for estimated third party payer settlements approximates its fair values. Fair value hierarchy The Group classifies the fair value measurement of each class of financial instruments that are measured at fair value on the balance sheet, according to the source, using three-level hierarchy, as follows: Level 1: identical assets or liabilities in active markets (unadjusted) Level 2: 1st place other than quoted prices and asset or liability, either directly (as prices) or indirectly (i.e. derived from prices ) observable data. Level 3: Asset or liability is not based on observable market data in relation to the data (no observable data).

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(Currency - Turkish Lira ‘TRY’ unless expressed otherwise.) In the statement of financial position, derivative financial instruments are the only item that is recognized at fair value. The fair value of derivative financial instrument is determined by using valuation technique, which can be regarded as Level 2, Apart from that, for disclosure purposes, the borrowings carried at the amortized cost at the balance sheet are presented with their values. The fair value of borrowings for disclosure purposes is estimated by discounting the future contractual cash flows at the current market interest rate that is available to the Company for similar financial instruments that can be classified as level 2. The carrying value less impairment provision of trade receivables and payables are assumed to approximate their fair values due to the short-term nature of trade receivables and payables. 31 December 2014 Level 1 Level 2 Level 3 Derivative financial instrument - 193,388 -

For the periods ended at 31 December 2014, Group has not made any transfer between first level and second level or from third. As of 31 March 2015, classifications and fair values of financial assets as are follows;

Loans and receivables

(Including cash and cash

equivalents)

Financial liabilities showed by

amortized value

Financial assets as at fair value

through profit or loss Book Value Note

Financial assets Cash and cash equivalents 1,058,209 - - 1,058,209 8 Trade receivables 94,177,825 - - 94,177,825 10 Financial liabilities Financial liabilities - 155,712,649 - 155,712,649 9 Trade payables - 29,163,514 - 29,163,514 10

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(Currency - Turkish Lira ‘TRY’ unless expressed otherwise.) As of 31 December 2014, classifications and fair values of financial assets as are follows;

Loans and receivables

(Including cash and cash

equivalents)

Financial liabilities showed by

amortized value

Financial assets as at fair value

through profit or loss Book Value Note

Financial assets Cash and cash equivalents 17,901,514 - - 17,901,514 8 Trade receivables 98,853,271 - - 98,853,271 10 Derivative financial instrument - - 193,388 193,388 22 Financial liabilities Financial liabilities - 140,286,761 - 140,286,761 9 Trade payables - 24,204,155 - 24,204,155 10 NOTE 35 – POST BALANCE SHEET EVENTS Occurring after the date of the 31 March 2015 important considerations are as follows : The Company’s General Assembly meeting was made on 15 April 2014 and following decisions are adopted;

- 50% of the net distributable profit which added donation with the amount of TRY 25,601,902, TRY 12,815,951 will be distributed to shareholders as a first dividend,

- Separation of the TRY 2,077,907 as a general legal capital reserves, - Separation of the TRY 11,636,926 as a extraordinary reserves, - It was decided that the date of profit distribution will be 29 June 2015.

NOTE 36 – OTHER ISSUES AFFECTING THE CONSOLIDATED FINANCIAL STATEMENTS SIGNIFICANTLY OR REQUIRED TO BE DISCLOSED FOR CLEAR, UNDERSTANDABLE AND INTERPRETABLE PRESENTATION None (31 December 2014 - None).

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