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2014The Creation of Success

Gap Güneydoğu Tekstil

2014 Annual Report

Gap G

üneydoğu Tekstil 2014 Annual R

eport

Head OfficeKeresteciler Sitesi, Fatih Cad. Ladin Sok. No: 1734169 Merter, IstanbulT: +90 (212) 459 26 26 pbxF: +90 (212) 677 41 17www.calikdenim.com/tr

Factory Gap Güneydoğu Tekstil San. ve Tic. A.Ş.1. Organize Sanayi Bölgesi 2. Cadde No: 644900 Yeşilyurt, Malatya T: +90 (422) 237 54 18 F: +90 (422) 237 54 17

Contents

Gap Güneydoğu Tekstil in BriefKey Financial and Operational Indicators MilestonesOur Mission, Vision and Values Certifications

Message from the Chairman Board of DirectorsMessage from the General Manager Senior Management

ProductionSales & Marketing InvestmentsResearch & Development and Product Development

Human Resources Occupational Health & Safety The EnvironmentCorporate Social Responsibility & Society

Independent Audit Report, Financial Tables and Footnotes

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Gap Güneydoğu Tekstil at a Glance

Management

Operations

Sustainability

Financial Tables

Founded with the aim of introducing a new

approach to the textile sector, Tekstil Gap

Güneydoğu Tekstil is today proud to be one of the

manufacturers that shapes world fashion through

its brand Çalık Denim...

Setting ever more ambitious performance targets

thanks to its rich product range and innovative

operations, Gap Güneydoğu Tekstil adds a chic and

comfortable touch to the lives of millions as a supplier

to the world’s biggest fashion brands.

Management Operations Sustainability Financial Tables2 At a Glance

Gap Güneydoğu Tekstil in Brief

A Çalık Holding enterprise,

Gap Güneydoğu Tekstil was established in Malatya as an integrated yarn and weaving factory in 1987. Founded with an investment of USD 111 million, Gap Güneydoğu Tekstil is also the first Çalık Holding manufacturing related investment.

Gap Güneydoğu Tekstil completed building out its infrastructure in 1996 and started production of denim fabric, commissioning its ring spinning plant in 1997. In 2003, the Company added gabardine and velvet to its production portfolio and became a fully integrated manufacturing facility. Since that time, it has steadily expanded its customer portfolio with new export countries and brands.

After receiving R&D Center certification in 2011, Gap Güneydoğu Tekstil demonstrated that it does not simply manufacture products and fulfill customer orders; instead, the Company carries out R&D operations as a recognized scientific research center that capitalizes on its corporate know-how. Gap Güneydoğu Tekstil has set up the seventh largest R&D center in the Turkish textile industry.

Manufacturing a wide array of products in a 150,000 m2 facility with an annual production capacity of 40 million meters, Gap Güneydoğu Tekstil employs 1,414 personnel at its Malatya location and 67 staff at the Istanbul headquarters.

Manufacturing a wide array of products in a 150,000 m2 facility and boasting an annual production capacity of 40 million meters, Gap Güneydoğu Tekstil is a robust, dynamic and reliable supplier and solutions partner for leading global brands.

40 Million MetersAnnual Production Capacity

3For more information www.calikdenim.com

With an integrated factory in Malatya and Sales & Marketing Center in Istanbul, Gap Güneydoğu Tekstil is widely known as a leading global textile company. It is a robust, dynamic and reliable supplier of many global brands, including Diesel, Topshop, Benetton, Ann Taylor, G Star, Salsa, Next, Jack Jones, H&M, VF, Inditex, Ahlers, Mavi, Replay, Scotch & Soda, Calvin Klein, River Island, Hugo Boss, Gerry Weber and Zerres.

Gap Güneydoğu Tekstil markets its products to Italy, Germany, the USA, Netherlands, France, Scandinavia, Portugal, Tunisia, Morocco, Colombia, Canada as well as the Far East. Some 50% of the Company’s fabric sales revenue originates from exports. The Company plans to increase the number of its export markets in coming years with production capacity increases.

Gap Güneydoğu Tekstil leads the sector with unrivaled collections that include commercial as well as innovative, cutting-edge fabrics. Under the brand Çalık Denim, the Company offers a vast range of denim and gabardine fabric, including sustainable and organic denim. As such, the Company not only adds value to the domestic economy but also protects the environment. The Company holds the GOTS, GRS, OE100 and OE Blended certifications, all of which attest to its environmentally minded approach.

4

506TL million

Net Sales

From left to right: Serhan Meriçöz, Semra Ebret, Mehmet Akif Olgun, İsmail Meşe.

5

Gap Güneydoğu Tekstil achieved a capacity

increase of 45% in yarn and 15% in weaving in

2014; it also doubled its coating capacity with a

new capital investment in dye finishing. As a result,

the Company consistently continues its growth drive

and remains one of the world’s top ten denim

manufacturers.


Key Financial and Operational Indicators

Gap Güneydoğu Tekstil closed the year with a strong performance despite fluctuations in the economic environment.

383,6492013

506,2842014

Net Sales (TL thousand)

(TL thousand) 2014 2013

Net Sales 506,284 383,649

Gross Profit 99,472 74,160

Operating Profit 54,769 11,803

Profit Before Taxes 1,240 (17,793)

Net Profit 13,009 1,185

157,9732013

Exports (TL thousand)

176,4402014

13,0092014

Net Profit (TL thousand)

1,1852013


Consolidated TL Sales %Turkey 337,174,000 65.65

Italy 44,298,841 8.62

Tunisia 34,523,037 6.72

Portugal 22,229,794 4.33

Bangladesh 16,536,354 3.22

Germany 12,467,613 2.43

Morocco 7,414,492 1.44

Hong Kong 5,271,223 1.03

China 4,889,901 0.95

Indonesia 4,856,422 0.95

Poland 2,516,293 0.49

France 2,460,680 0.48

South Korea 2,376,840 0.46

UAE 1,893,631 0.37

Colombia 1,886,293 0.37

USA 1,825,915 0.36

Philippines 1,741,424 0.34

Finland 1,304,259 0.25

Netherlands 1,288,791 0.25

Egypt 1,270,611 0.25

India 1,162,413 0.23

Taiwan 814,364 0.16

Spain 589,078 0.11

Austria 524,285 0.10

Singapore 493,807 0.10

Serbia 484,683 0.09

UK 325,639 0.06

Belgium 308,990 0.06

Romania 226,442 0.04

Pakistan 152,882 0.03

Mexico 137,144 0.03

Israel 55,012 0.01

Australia 47,826 0.01

Vietnam 22,505 0.00

Estonia 16,958 0.00

Thailand 13,065 0.00

Sweden 11,136 0.00

Hungary 1,025 0.00

Japan 330 0.00

Total Sales 513,614,000 100.00%

Export Markets (Gross)


Milestones

1930 - Malatya

1981 - Malatya > Ortadoğu Tekstil established.

> Family company established.

1987 - Malatya

1993 - Turkmenistan > Gap Türkmen founded.

> Gap Güneydoğu Tekstil founded.

1995 - Malatya

1998 - Turkmenistan> Serdar Yarn Factory commissioned.

> Denim production started up.

Gap Güneydoğu Tekstil closely monitors technological advances and continues its production drive by undertaking new capital investments.


2001 - Turkmenistan 2005 - Turkmenistan > Balkan Weaving and Yarn Factory commissioned.

2004 - Malatya > Production of gabardine fabric initiated.

2007 - Egypt > Çalık Alexandria became operational.

> Ashgabat Textile Factory commissioned.

2011 - Malatya > Gap Güneydoğu Tekstil R&D Center opened.> Çalık Pamuk founded.

10

Innovation

From left to right: Ahmet Serhat Karaduman, Fatih Doğan, Hamit Yenici, Aysun Şengür Salmanlı.

11

In line with its strategy of product diversification, Gap Güneydoğu Tekstil

has made significant headway towards becoming a highly

commended and well-known world-class manufacturer. The

Company continues to reach its targets by

focusing on innovation.

12

Our Mission

We are a reliable, world-class solutions partner that weaves exceptional denims.

Our Vision

Becoming a denim solutions partner that immediately comes to mind with its customer focus and innovative force, and sells its products to the strategic customers it targets.

13

Our Values

• Passion for denim• Openness to innovation• Customer focus• Belief in strong and open communications• Adding value to employees and customers• High awareness of quality• Integrity and consistency• Teamwork culture• Respect for employee and customer rights• Socially responsible and respectful to the

environment

14

100%Quality

From left to right: Ahmet Serhat Karaduman, İbrahim Ethem Büyükpepe, Hamit Yenici, Mehmet Faruk Avcı.

15

Making a difference in the sector with its quality-focused

operations and investments, Gap Güneydoğu Tekstil

further demonstrates its world-class approach thanks to the international certifications it

holds.


Gap Güneydoğu Tekstil takes into account the environmental footprint of its manufacturing and sales operations and pays maximum attention to human health in general and employee health in particular. The many certifications held by the Company demonstrate this approach.

Gap Güneydoğu Tekstil has obtained the following certifications: • GOTS• OCS• OEKO-TEX STANDARD 100• GRS• ISO 9001• ISO 14001• BCI (Better Cotton Initiative)• OHSAS 18001 Occupational Health and Safety

Certifications

Management Operations Sustainability Financial TablesAt a Glance18

Message from the Chairman

The Group’s textile subsidiary Gap Güneydoğu Tekstil bolsters its market position among global textile giants thanks to an ever-rising business volume and production capacity. Gap Güneydoğu Tekstil ranks among the top ten companies worldwide that manufacture high quality denim. The Company exports its products to some 38 countries.


Message from the Chairman

Çalık Holding employs about 27 thousand personnel across three continents with its highly successful business models. The Holding continues to help move the Turkish economy forward with its operations in a diverse range of sectors, including energy, mining, construction, finance, textiles and telecoms.

Esteemed business partners and distinguished associates,

In 2014, the global economy demonstrated lower-than-expected growth while economic expansion in emerging markets also dramatically slowed. Sluggish growth and deflation in the Euro zone, the general deterioration of global financial conditions and geopolitical risks associated with conflicts in Syria and Russia-Ukraine created a challenging environment for the Turkish economy. Despite the loss of momentum in the world economy, Turkey achieved its macroeconomic targets and indicators to a large extent and preserved its economic stability.

Çalık Holding employs about 27 thousand personnel across three continents with its highly successful business models. The Holding continues to help move the Turkish economy forward with its operations in a diverse range of sectors, including energy, mining, construction, finance, textiles and telecoms.

The Group’s textile subsidiary Gap Güneydoğu Tekstil bolsters its market position among global textile giants thanks to an ever-rising rising business volume and production capacity. Gap Güneydoğu Tekstil ranks among the top ten companies worldwide that manufacture high quality denim. The Company exports its products to some 38 countries. Gap Güneydoğu Tekstil continues to develop and implement projects that add significant value to the Turkish economy, with innovative products geared towards future generations and business models that boost productivity, all under the brand Çalık Denim. In 2014, Gap Güneydoğu Tekstil was honored with the Export Stars Platinum Award granted by the Istanbul Textile and Apparel Exporters Associations (İTKİB) and the Export Achievement Bronze Award from the Uludağ Textile Exporters Association (UTİB).


Despite the slowdown in the global economy, Gap Güneydoğu Tekstil closed 2014 with solid success, bringing its turnover up to USD 130 million. Between 2012 and 2014, the Company made capital investments amounting to about USD 60 million, and it plans to invest a further USD 50 million by year-end 2017, to increase and upgrade its production capacity. Exporting 60% of its production to Italy, Portugal, Germany, Tunisia and the USA, Gap Güneydoğu Tekstil plans to increase its market share in the Los Angeles area and Japan. To this end, the Company will carry out a restructuring process in Los Angeles and Bangladesh, continuing its efforts to shape the world denim market along its vision of manufacturing high quality and innovative products.

Closely monitoring industry-related technological developments, Gap Güneydoğu Tekstil makes every effort to conduct all of its business operations, from raw material supply to manufacturing, in a sustainable manner and in close harmony with the natural environment. With a strong focus on R&D and innovation, the Company has set up the 99th largest R&D center in Turkey – and seventh largest in the textile industry – in order to coordinate efforts to design and develop innovative products and technologies that can be commercialized.

Boasting an annual fabric production capacity of 40 million meters, the Company goes from strength to strength as a robust, dynamic and reliable solutions partner for leading global brands with its integrated manufacturing facility and R&D Center in Malatya; sales and marketing group in Istanbul; and representatives and representative offices across the world.

Continuing to move forward in leaps and bounds guided by Çalık Holding’s strong corporate culture, the Company bolsters its market position day by day, by capitalizing on its experience, entrepreneurial spirit, boldness and skilled human capital in a world where the competitive environment changes rapidly. I would like to take this opportunity to extend my gratitude to our esteemed business partners, customers and associates who have perpetuated our track record of success and who continue to inspire us to become ever stronger.

Best regards,

Ahmet ÇalıkChairman


Ahmet Çalık ChairmanWith rich business experience gained as a member of the Çalık Family, which has been active in the textile industry since 1930, Ahmet Çalık founded his first enterprise in 1981. Today, Ahmet Çalık is the founder and Chairman of Çalık Holding, one of Turkey’s largest business conglomerates with nearly 27 thousand employees in 17 countries and operating in six different industries.

In 1987, Ahmet Çalık established Gap Güneydoğu Tekstil. The Company’s denim factory in Malatya stands out as one of the leading private sector investments in Turkey’s Eastern Anatolia region. Following the creation of the independent Turkic Republics in Central Asia, Ahmet Çalık set up industrial facilities in Turkmenistan and undertook investments in the region, becoming one of the very first Turkish investors to do so.

Entering the construction sector in the 1980s, Ahmet Çalık restructured Gap İnşaat (Gap Construction) in 1996. Today, Gap İnşaat ranks among the world’s largest contracting companies and specializes in infrastructure, superstructure, industry, energy and healthcare facilities and complexes.

Having made his first investments in the energy sector in late 1980s, Ahmet Çalık restructured Çalık Enerji (Çalık Energy) in 1998 to focus on power plant projects in challenging areas, such as Central Asia, the Middle East and Africa. Currently, Ahmet Çalık undertakes major energy sector projects via Çalık Enerji while also coming to play an effective role in electricity distribution by both acquiring companies and establishing strategic partnerships in Turkey and neighboring countries.

Ahmet Çalık set up Çalık Holding in 1997 to bring Group companies together under a single umbrella. With its ambitious investments and highly skilled workforce, Çalık Holding figures among the pioneering Turkish business groups, both domestically and abroad.

After entering the finance sector by establishing Çalık Bank in 1999, Çalık Holding renamed the entity Aktif Bank in 2008; since that time, it has become Turkey’s largest privately owned investment bank. In addition, Çalık Holding has expanded its financial investments to the international arena by acquiring BKT, one of Albania’s two largest banks.

Ahmet Çalık established Çalık Maden İşletmeleri (Çalık Mining Enterprises) in 2006 in order to tap into Turkey’s rich underground natural resources. Since 2010, the company has continued to operate under the name Lidya Madencilik (Lidya Mining) and has geared up its operations in gold and polymetal mining.

In 2007, Ahmet Çalık acquired Albania’s fixed line operator ALBtelecom and then established Eagle Mobile in 2008, becoming one of the biggest Turkish investors in the Balkans.

In order to expand his construction investments in Turkey into the areas of property development, modern urbanization and urban transformation, Ahmet Çalık set up Çalık Gayrimenkul (Çalık Real Estate) in 2007. Çalık

Gayrimenkul’s 2013 project “Tarlabaşı 360,” which was designed to create a more pleasant, safe and secure living environment worthy of central Istanbul, was designated as Europe’s best “Urban Renewal Project” at the European Property Awards.

One of the biggest supporters of the domestic economy and employment with his various Group companies, Ahmet Çalık has continuously raised the bar of success with his trustworthy yet risk-taking personality, focus on innovation and entrepreneurial spirit. Under the helm of Ahmet Çalık, who abides by the principle of serving people and society-at-large in both professional and social aspects, Çalık Holding continues to formulate pro-growth strategies and establish strong partnerships.

Awards and MedalsTurkmenistan State Medal (1997); Mahdum Guli Award (1997); Entrepreneur of the Year Award, Para Magazine (1997); Industrial Enterprise of the Year Award, GESİAD (1997); Distinguished Service Award, İpek Yolu Foundation (1998); Turkish Republic Distinguished Service Medal (1999); Turkmenistan “Gayrat” Medal (1999); Turkmenistan Golden Century Medal (2001); Turkish Ministry of Foreign Affairs Distinguished Service Medal (2002); Businessman of the Year Award, Turkish National Productivity Center (2004); Istanbul University, Faculty of Business Administration, Dünya Newspaper – Turkish Entrepreneur of the Year Award (2005); TGNA Distinguished Service Award (2006); Dünya Newspaper – Turkish Entrepreneur of the Year Award (2006); Turgut Özal Award for Economics (2008); Turkey in Europe – Franco Nobili (2010); Turkish Red Crescent Gold Medal (2012); Japan Matsumoto Dental University Honorary Ph.D. (2014); Ellis Island Honor Medal (2014); Albanian Ministry for Social Welfare and Youth Social Solidarity Award (2014); Tirana University Honorary Ph.D. (2014).

Board of Directors


Mehmet Ertuğrul GürlerDeputy ChairmanMehmet Ertuğrul Gürler was born in 1958, graduated from Marmara University, Faculty of Economics, and went on to build a 37-year career in business. Mr. Gürler worked from 1987 until 1994 at Dow Turkey holding various posts such as Finance Manager and Board Member. Between 1994 and 1998, he served as Deputy General Manager and Deputy Chairman at Total Oil Turkey; subsequently, he joined Çalık Holding in 1998 as General Manager. Mehmet Ertuğrul Gürler currently is Deputy Chairman at Çalık Holding, Banka Kombetare Tregtare and Gap Güneydoğu Tekstil; Board Member at Aktif Bank, ALBtelecom, Gap İnşaat and Gap Pazarlama; and Chairman at YEPAŞ.

Ender HıdıroğluAdvisor to the ChairmanEnder Hıdıroğlu is a graduate of Middle East Technical University, Department of Mechanical Engineering. He has held senior management positions in various companies, including GATEKS, UPISAS, SANKO, SASA, YURTAS, Paktaş and İSKO. In 1992, he joined Çalık Holding, and served as General Manager at Gap Pazarlama for three years. During the following ten years, Mr. Hıdıroğlu served as Board Member, General Manager and Project Manager at Gap İnşaat. Currently, he holds senior management and board membership posts at Çalık Holding companies, and serves as Advisor to the Chairman at Çalık Holding.

Ali CüreoğluBoard MemberAli Cüreoğlu was born in 1955 in Malatya and graduated from Middle East Technical University, Department of Geological Engineering. After serving as Manager at Tadal Gıda and Malatya Municipality’s Esenlik Construction Company, Mr. Cüreoğlu joined Gap Güneydoğu Tekstil in 1999. Since 2009, he has been a Board Member of the Company.


Message from the General Manager

Continuing its capital investments apace in 2014, Gap Güneydoğu Tekstil increased its yarn production capacity by 45% and weaving capacity by 15%. It also doubled its coating capacity with a new investment in dye finishing.


Message from the General Manager

Distinguished shareholders,

2014 marked a period in which we witnessed fluctuations in the world economic environment and in Turkey. The global economy closed the year with 3% growth while the US economy posted 2% growth, its fastest rate of expansion in 11 years, clearly demonstrating that it had rebounded from the financial crisis. The European recovery, on the other hand, continued at a slower-than-expected pace.

Developing economies are going through a rough patch, however, now that the Federal Reserve has ended its quantitative easing program. The de facto emerging market leader, China, reported its lowest growth rate in 24 years, expanding just 7% in 2014.

Due to these global developments, the crisis between Russia and Ukraine, and the Syrian civil war, the Turkish economy was destined to experience a slowdown: it closed the year with 2.9% growth. Measures to curb the current account deficit have suppressed domestic demand and exports became the country’s economic growth driver in 2014.

As for the textiles industry, the sharp devaluation of the ruble due to the Russian-Ukrainian conflict and the EU’s sanctions on Russia had a negative impact on the world’s apparel markets. Turkey’s USD 900 million of exports to Russia and Ukraine initially fell 30%. If this regional crisis worsens, exports to these two markets could plunge as much as 50% from pre-conflict levels.

The recession in Europe, the rise in the foreign exchange rate, and the expansion of the EU Free Trade Deal to include Pakistan and Vietnam have also had an unfavorable effect on the textile sector.

Meanwhile, high levels of cotton inventory compared to prior years, the anti-dumping measure applied to American cotton in Turkey, the appreciation of the US dollar and China’s announcement that it will reduce purchases have brought cotton prices down significantly, from USD 2.20/kg to USD 1.60/kg.

In our view, R&D investments constitute the most important investment area. We allocate about 2% of our turnover to the R&D Center, which is the seventh largest establishment of its kind in the Turkish textile industry. The products and methods developed in this center have provided us with an immense competitive edge in the industry.


Despite this challenging environment, Gap Güneydoğu Tekstil continues to bolster its market position among the giants of the world textile industry, thanks to a business volume that grows steadily day by day. Having executed a sustainable growth drive with its robust corporate structure, the Company increased sales by 32% in 2014 and ended the year with net profit of TL 13 million.

Forging ahead with innovation The main factors that have helped us figure among the top three in the Turkish denim sector and the top ten worldwide are a high quality and rich product range, and an innovative approach. While developing our fabrics, we take into account the needs of both customers and consumers to create our collections. This approach to our business has helped us become the solutions partner of the world’s leading brands. In addition, we also continue to contribute significantly to the Turkish economy with our strong success in exports.

We export to nearly 40 countriesWe export our high quality products to almost 40 countries, including Italy, Germany, USA, Netherlands, France, Scandinavia, Portugal, Tunisia, Morocco, Colombia, Canada and the Far East. In 2014, due to the strong export performance we achieved in the face of tough competition, Gap Güneydoğu Tekstil was honored with the Export Stars Platinum Award granted by the Istanbul Textile and Apparel Exporter Associations (İTKİB) and the Export Achievement Bronze Award from the Uludağ Textile Exporter Association (UTİB). However, we do not plan to rest on our laurels and remain content with these accomplishments. As a result, in 2014, we continued efforts to increase both the number of our export markets and our export volume. To this end, we initiated sales and marketing activities designed to increase our clout in Japan and Los Angeles, which we view as strategically important regions for us. We are fully confident that these efforts will bear fruit from 2015 onwards.

Our goal is to increase our production capacity to 60 million meters by the end of 2017.In parallel with our rising business volume, we are continually working to expand our production capacity. In 2014, our capital investment program continued without interruption. During the year, Gap Güneydoğu Tekstil increased its yarn production capacity by 45% and raised its weaving capacity by 15%. In addition, we doubled our coating capacity with a new investment in dye finishing.

With the total investments realized in 2010-2014 we increased our production capacity to over 40 million meters. Our target is to raise our production capacity to 60 million meters by 2017.

Making a difference through R&DIn our view, R&D investments constitute the most important investment area. We allocate about 2% of our turnover to the R&D Center, which is the seventh largest establishment of its kind in the Turkish textile industry. The products and methods developed in this center have provided us with an immense competitive edge in the industry. Our 70-strong R&D Center team continues to develop and introduce innovative approaches to the textile industry.

In 2014, the Company filed three project applications as part of the SAN-TEZ program, and two projects applications under the TÜBİTAK-TEYDEB 1505 program. Of these, two SAN-TEZ projects and one TÜBİTAK-TEYDEB 1505 project were deemed worthy of support and were implemented. Out of a total of 43 projects carried out at the center in 2014, 13 projects have been completed while 30 are ongoing.

Supporting people and societyOur high skilled workforce plays a crucial role in helping Gap Güneydoğu Tekstil to develop innovative solutions and meet customer needs and demands quickly and efficiently. Open to new ideas, creative and reliable, our employees allow the Company to move forward, from strength to strength.

Powered by our employees and our “people-first” approach, we continue add value to all personnel and society as a whole. Employing some 1,500 personnel in Malatya, Gap Güneydoğu Tekstil ranks among the top employers of that city. The Company not only supports the local community and economy, but also wins hearts and minds by carrying out social responsibility projects in the area of education.

Viewing social responsibility as an integral part of its corporate culture, Gap Güneydoğu Tekstil embraces eco-friendly methods in all operational processes, from raw material supply onwards. The Company’s respect for human health and the natural environment is reflected in its products, which include 100% GOTS organic fabric and between 5% to 95% OCS organic fabric.

In closing, I would like to extend my gratitude to the Çalık Holding management for their unwavering support during our journey to success, to our customers, suppliers, employees as well as all our other valued stakeholders.

Best regards,

Hamit YeniciGeneral Manager


Senior Management

Hamit YeniciGeneral ManagerHamit Yenici was born in 1969 in Bursa and graduated from Uludağ University, Department of Textile Engineering. He started his professional career in 1990 at İSKO as a Weaving Operations Engineer and ultimately became a Product Development Manager. In 2014, he transitioned to Çalık Holding and currently serves as General Manager at Gap Güneydoğu Tekstil.

Fatih DoğanDirector for Financial and Administrative Affairs Fatih Doğan was born in 1976 and graduated from İnönü University, Faculty of Economics and Administrative Sciences, Department of Economics; subsequently, he received a Master’s degree in Economics from the same institution. After a brief stint in academia, he entered the business world in 2000 as Accounting Specialist at Gap Güneydoğu Tekstil, and went on to hold senior positions at Gap Türkmen and Çalık Alexandria. Mr. Doğan was appointed to the position of Director for Financial Affairs at Gap Güneydoğu Tekstil in 2009.

Ahmet Serhat KaradumanFactory DirectorAhmet Serhat Karaduman was born in 1972 in Muş and graduated from Selçuk University, Department of Mechanical Engineering. He started his professional career in 1996 as Weaving Manager at Gap Güneydoğu Tekstil and held various posts at the Company until 2003. Between 2004 and 2013, Mr. Karaduman served as Weaving/Indigo/Product Development Manager at Çalık Turkmenistan’s facilities. Appointed in 2013 as R&D Manager, Mr. Karaduman became Factory Director in 2014.

Aysun Salmanlı ŞengürDirector for Financial AffairsAysun Salmanlı Şengür was born in 1975 in Istanbul and graduated from Istanbul University, Faculty of Science, Department of Mathematics. She started her professional career in 1997 at Yalova Elyaf ve İplik A.Ş. and joined Gap Güneydoğu Tekstil in 2001. After holding various posts at the Company, Ms. Şengür currently serves as Director for Financial Affairs.


From left to right: Fatih Doğan, Hamit Yenici, Ahmet Serhat Karaduman, Aysun Salmanlı Şengür.

30

40Million Meters

Production Capacity

From left to right: Abdullah Dağdelen, Mehmet Faruk Avcı, Ahmet Serhat Karaduman, İsmet Kalalı.

31

Employing about 1,500 personnel, and adding significant value to the nation’s economy, Gap

Güneydoğu Tekstil operates 368 weaving looms across

a total covered area of 150,000 m2. The Company

continues to expand its production capacity with eco-friendly technologies.


Production

At its integrated manufacturing facilities in Malatya, Gap Güneydoğu Tekstil operates across a total production area of 375,000 m2, of which 150,000 m2 is covered space. The Company boasts an annual production capacity of 40 million meters.

16 Million kg

375 Thousand m2

Annual Yarn Production Capacity

Total Production Area


Production

Gap Güneydoğu Tekstil,

figures among the world’s leading denim manufacturers that guide the sector. At its integrated manufacturing facilities in Malatya, Gap Güneydoğu Tekstil operates across a total production area of 375,000 m2, of which 150,000 m2 is covered space. The Company boasts an annual production capacity of 40 million meters.

Yarn FacilitiesGap Güneydoğu Tekstil has the capability to develop its own yarn and fabric, and implement production and finishing processes. In addition, thanks to ring spinning machines equipped with advanced features such as multi-twist, multi-count and “draw your slub,” the Company formulates original yarn designs.

At Gap Güneydoğu Tekstil’s manufacturing facilities, it is possible to produce yarns with a wide variety of folds and twists by utilizing open-end rotor, ring and indigo colored yarn. The Company also produces straight, core-spun, dual-core yarns and twisted yarns with a range between NE 6-30.

Gap Güneydoğu Tekstil typically uses cotton from Urfa (Turkey), the US and the Aegean region, as well as BCI (Better Cotton Initiative) and organic cotton.

Yarn 16,000,000 kg

Indigo Dyeing 40,000,000 m

Weaving 40,000,000 m

Finishing 44,000,000 m

Total Production Area 375,000 m2

Covered Area 150,000 m2

Annual Production Capacity


Indigo FacilitiesThe Company’s indigo facilities are capable of both rope dyeing and beam dyeing. The yarn dyeing lines consist of two rope dyeing and two beam dyeing lines. Warp dyeing operations can be conducted in a wide range, including indigo, reactive, pigment, sulfur, bottom and topping. After upgrades and modifications implemented in 2014, the capacity and work productivity have been boosted.

Weaving FacilitiesAt Gap Güneydoğu Tekstil’s weaving facilities, three types of looms are used: the Dornier, Sulzer and Picanol models. These facilities can produce a wide range of fabrics, including standards weaves, as well as more complex variations such as plain weave, scotch plaid, herringbone, piqué, skipping, double-layer and gabardine fabric.

Finishing FacilitiesThe Company’s finishing facilities perform three operations: pre-finishing, dyeing and finishing. In these sections, it is possible to perform on fabrics such operations as cauterization, desizing, mercerization, bleaching, dyeing, extension, sanforization, coating and calendaring, on demand.

Quality ControlDuring the production process, 100% of the fabrics undergo quality control. The fabrics are visually checked, scores are assigned for any deficiencies, and the fabrics are divided into quality categories. The pieces taken from the orders are washed according to either standard formulas or the formulas demanded by customers. Following color assessment, color classification, and testing and controls in physical laboratories, shipping approvals are given.

36

38Countries

Generating over 50% of the Company’s fabric revenue from exports, Gap Güneydoğu Tekstil sells its products to numerous markets, in particular Italy. The Company is taking ambitious steps to raise its production capacity in the coming years in order to increase the number of its export destinations and expand its export volume.

From left to right: Ümran Yazıcı, Elmas Özanlar, Emrah Gün, Mehmet Serdar Özcan, Selen Ergül, Aleks Başoğlu.


Sales & Marketing

Having sold some 30 million meters of fabric in 2014, Gap Güneydoğu Tekstil generates over 50% of its fabric revenue from exports.

34.35%

TL 506,284 Thousand

Share of Exports in Total Sales

Net Sales Revenue


Sales & Marketing

As one of Turkey’s top denim manufacturers, Gap Güneydoğu Tekstil is a strong, dynamic and reliable supplier for many global brands, including Diesel, Topshop, Benetton, Ann Taylor, G Star, Salsa, Next, Jack Jones, H&M, VF, Inditex, Ahlers, Mavi, Replay, Scotch & Soda, Calvin Klein, River Island, Hugo Boss, Gerry Weber and Zerres.

Having sold some 30 million meters of fabric in 2014, Gap Güneydoğu Tekstil generates over 50% of its fabric revenue from exports. The Company exports to 38 countries and its most important export markets include Italy, Germany, the USA, Netherlands, France, Scandinavia, Portugal, Tunisia, Morocco, Colombia, Canada and the Far East.

In 2014, Gap Güneydoğu Tekstil participated in nine international fairs, including those in Munich, Barcelona, Amsterdam, Medellin and Shanghai, and two additional fairs in Turkey. In addition, the Company strengthens its ties with customers via a number of different marketing activities and product launches. The Company also makes efficient use of social media channels and communicates with end-consumers via LinkedIn, Instagram, YouTube and other similar platforms.

TL Sales Share %

Europe 426,228,508 82.99%

Africa 43,208,141 8.41%

Asia 40,280,174 7.84%

North America 1,963,059 0.38%

South America 1,886,293 0.37%

Oceania 47,826 0.01%

Total 513,614,000 100.00%

Breakdown of Sales (%)


Gap Güneydoğu Tekstil also regularly places adverts in relevant international trade publications. In 2014, the Company significantly enhanced its brand image and reputation in the eyes of the target audience thanks to a major photo shoot. Gap Güneydoğu Tekstil has sponsored the Art Basel fair in the US and the Treviso Comic Book Festival in Italy. Additionally, it has provided support to fashion design undergraduates at Germany’s University of Hannover.

While designing its fabrics, the Company analyzes the needs of the market, customer and the end-consumer and develops its collections accordingly.

Moving towards becoming a solutions provider for the brands its works with, Gap Güneydoğu Tekstil always stands by its clients as a partner focused on innovation and effective solutions. The Company provides clients not only fabrics, but also know-how and value-added services, closely noting their demands and expectations during customer visits and responding to these quickly and efficiently.

In the face of ever intensifying market competition, Gap Güneydoğu Tekstil strives to become the company that first comes to mind for top-quality brands with its customer-focused, flexible approach, new generation products, wide product range, and reliable services.


Investments

Gap Güneydoğu Tekstil has increased its annual production capacity to 40 million meters with the investments realized from 2010 to 2014. The Company plans to undertake an additional investment by 2017 in order to raise its total production capacity to 60 million meters.

60 Million MetersTotal Production Capacity Target for 2017


Investments

A leading denim manufacturer that helps steer the global sector, Gap Güneydoğu Tekstil continues to undertake capital investments, upgrades and modernization initiatives to increase production capacity and quality. The Company closely monitors cutting edge technologies and industry developments, and makes needed investments to adapt to these changes and continually raise its product quality.

In line with investment plans, the Company increased the yarn department’s capacity by 45% and that of the weaving department by 15%. In addition, it doubled the coating capacity of the dye finishing department.

In 2014, the Company also initiated the Production Optimization Program, which served to make work processes faster and more accurate due to the Automatic Robotic Handling System.


Gap Güneydoğu Tekstil has increased its annual production capacity to 40 million meters with the investments realized from 2010 to 2014. The Company is keen to become the biggest supplier of the world’s denim and sportswear brands and export – directly or indirectly – 90% of its production to international brands. Gap Güneydoğu Tekstil plans to undertake an additional investment by 2017 in order to raise its total production capacity to 60 million meters as part of a three-stage investment program (30% + 30%+ 30%) spread across a five year period.

46

From left to right: Cem Ozan Sarı, Kerem Beyazıt, Müzeyyen Üngün, Münevver Ertek, İbrahim Ethem Büyükpepe.

47

60Million Meters

With a production capacity reaching 60 million meters, by the investments that will

be realized until the end of 2017, Gap Güneydoğu

Tekstil leads the pack with unique collections featuring

innovative fabrics. The Company continues to stand

apart from the competition thanks to its pioneering

solutions under the Çalık Denim brand.

Target


Research & Development and Product Development Having started up operations in 2011, Gap Güneydoğu Tekstil’s R&D Center is the 7th largest R&D facility in the Turkish textile industry. In textile-related research and development efforts, it is critical to develop products with a high visual appeal, as well as high added value and performance. The Company’s objective is to go beyond merely offering fabrics to clients; instead, it strives to ensure that each fabric it produces is a high quality, functional product supported with advanced technology.

65 Employees

6,683

Total R&D Personnel

Total R&D Investment (TL thousand)


Research & Development and Product Development Gap Güneydoğu Tekstil owes its achievements in the highly competitive international textile market to innovative products that stand out in the sector. As one of a handful of textile companies to boast an in-house R&D Center, Gap Güneydoğu Tekstil has capitalized on its extensive experience and know-how to implement numerous innovative projects and develop groundbreaking products and industry applications. The Company actively embraces cutting edge technology and rapidly responds to the evolving demands of the market, adding to its long list of pioneering achievements day by day.

Setting an example for the entire textile industry, Gap Güneydoğu Tekstil’s R&D Center is engaged in advanced research and analytical studies to ensure that Turkey’s economy can effectively compete on a global level. At the same time, the R&D Center strives to generate technological know-how and commercialize its efforts related to products and production processes in order to add value both to the Company and the nation’s economy as a whole.

The goals of Gap Güneydoğu Tekstil’s R&D Center include:• Developing innovative products, equipment and processes,

generating new information, analyzing this data on a scientific basis and designing scientific projects to resolve technological issues;

• Designing eco-friendly products that prioritize consumer demands, focus on current and future needs, comply with world standards and create a competitive edge;

• Generating data through our operations, protecting information and technologies that could be commercialized, and accordingly expanding our intellectual property portfolio with patents, models, registered products and the like;

• Anticipating advanced technologies and developments that could lead to shifts in the industry, and subsequently evaluating and implementing these;

• Participating in domestic and international conferences, congresses, fairs and seminars, and monitoring the latest developments and technologies in the sector.

Established in 2011, the Company’s R&D Center operates in a covered space of 1,830 m2 that includes offices, a library, a lab and hygiene areas.

Since its inception, the R&D Center has embarked on 96 projects, 61 of which have been completed. With a workforce of nearly 70 professionals, the Center has introduced innovative approaches to the Turkish textile industry and has become a pioneering force in the sector. It has also been honored with various “R&D” and “R&D Pioneers” awards.

In 2014, the R&D Center’s findings about denim fabric resulted in additional denim sales, corresponding to about a 7% uptick in overall sales.

The Center conducts joint projects with 13 universities across the country. These include Çukurova University, Dokuz Eylül University, Erciyes University, Gaziantep University, Gaziosmanpaşa University, Hacettepe University, İnönü University, Istanbul Technical University, Süleyman Demirel University, Sütçü İmam University, Tunceli University, Uludağ University and Fırat University. It also collaborates with various overseas R&D centers and universities.

The Company’s R&D Center strives to cooperate with not only Turkish universities but also overseas universities and other various R&D centers. The Company plans to work with institutions that function like R&D centers on a global scale to discuss projects that could be carried out jointly, and implement these in the coming periods. To this end, R&D Center staff members made on-site visits to various research centers and assessed their infrastructure work areas, capabilities and capacities.

Gap Güneydoğu Tekstil has also filed the necessary applications to protect its intellectual property rights. In addition, the Company has IP applications that are currently in the preparatory phase. Furthermore, certain of our file applications to the Turkish Patent Institute (TPE) are undergoing evaluation.


Gap Güneydoğu Tekstil is a major denim manufacturer that is widely known worldwide for its product quality and service philosophy. Diesel, Benetton, H&M, Calvin Klein, G-Star, Tommy Hilfiger, Ann Taylor, Marks & Spencer, Topshop, Jack & Jones and Zara are some of the leading global brands that Gap Güneydoğu Tekstil works with. The Company places a huge emphasis on various elements of its production, such as visual richness, design, technical performance and quality. Ensuring that all these elements coexist in its products, the Company continues to stand apart in the sector with its unrivaled collections.

While developing its fabrics, Gap Güneydoğu Tekstil takes into account the needs of the end-consumer. The Company designs its collections with a thorough analysis of the requirements of the market, customers and end-consumers.

In 2014, Gap Güneydoğu Tekstil’s outstanding collections included Thin Up, Skinflex and Extend Plus. In particular, very elastic products with a high recovery and soft touch designed for women were rapidly commercialized. In addition, the Company has rolled out products offering maximum comfort to men within its Extend Plus concept.

6,683

4,254

4,690

2014

2013

2012

R&D Investment (TL thousand)


Human Resources

A robust, dynamic and reliable supplier to global brands with its integrated production facilities and R&D Center in Malatya, Sales & Marketing Center in Istanbul, and offices around the globe, Gap Güneydoğu Tekstil employs nearly 1,500 personnel.

In addition to its sector leadership in terms of growth and adaptability, Gap Güneydoğu Tekstil also makes a point of monitoring and embracing the latest human resources practices.

Gap Güneydoğu Tekstil continually spends quality time and shares information with employees without ever compromising the Company’s ethical approach. As such, the Company inspires trust among and stands by its staff by pursuing a human resources policy based on creativity, reliability, empathy, and openness to new ideas to enrich its mission and vision.

In addition to its sector leadership in terms of growth and change, Gap Güneydoğu Tekstil also makes a point of monitoring and embracing the latest human resources practices.

1,481Total Number of Employees


The pillars of Gap Güneydoğu Tekstil’s human resources policy include:• Placing the right people in the right position with a customer-

oriented approach; • Making the best use of existing high potential human capital; • Measuring employee performance with the performance

management system; • Providing career planning with the right job appointments; • Establishing a long-term cooperation with personnel to ensure

the sustainability of the corporate culture.

Malatya Factory 1,414

Istanbul Head Office 67

Total 1,481

Number of Employees

Average Age 34.40

Average Tenure 5.10

Employee Breakdown/Istanbul Head Office

White Collar Blue Collar Average

Age 37 35 35

Tenure 8 7 7

Employee Breakdown/Malatya Factory


Occupational Health & Safety

In order to ensure its corporate sustainability in both economic and social terms, Gap Güneydoğu Tekstil places a priority on quality, people and the environment in all its business operations.

The Company devises internal policies, regulations and guidelines to minimize risk in occupational health and safety, and ensure the active participation of all employees in adhering to these regulations.

Successfully implementing effective policies and practices related to quality, the environment and OHS, the Company also expends efforts to obtain relevant certifications. Gap Güneydoğu Tekstil was granted OHSAS 18001 Occupational Health and Safety Certification in 2014 by SGS, an independent international company, in recognition of its efforts in this key area. This certification relates to measures in the following OHS areas:

• Monitoring risk assessment and measures;• OHS training activities;• Root cause analysis in occupational accidents and follow-up

for the measures to be taken in response;• OHS controls and follow-up;• Supervision and measurements in the work environment

related to noise, dust, gas, vibration and lighting;• Emergency plans and drills;• Health tests and checks upon recruitment and at certain

specified intervals;• Suggestions and near-miss reports;• Controlling the choice and use of the right personal protective

equipment for the right work at hand;• Periodic meetings of the OHS Committee;• OHS statistics and reporting;• Controlling subcontracting companies and visitors;• Tests and checks on lifting and transmission devices.

Gap Güneydoğu Tekstil was granted OHSAS 18001 Occupational Health and Safety Certification in 2014 by SGS, an independent international company, in recognition of its efforts in this key area.


100%Respect to the

Natural Environment and People

From left to right: Mehmet Akif Olgun, Cem Ozan Sarı, Elmas Özanlar


The Environment

Gap Güneydoğu Tekstil continually enhances its products that protect people and the natural environment, and prioritizes the protection of nature while pursuing its performance targets.

Gap Güneydoğu Tekstil’s goal is to minimize any negative environmental impact its business activities may have and to prevent any harm to employees, customers and society that may occur from its operations. The Company takes a wide perspective on its potential environmental impacts. Under this approach, Gap Güneydoğu Tekstil carries out and supports research and development, and system, process and product improvement efforts and investments in order to manage these risks efficiently and effectively.

Gap Güneydoğu Tekstil’s environmental policy includes:• Raising environmental awareness to keep the natural

environment clean;• Creating a healthy and safe work environment, and avoiding

occupational accidents and illnesses by taking necessary precautions;

• Being mindful of legal requirements, customer requirements, and Group requirements, protecting human health and safety, and using natural resources in the right way;

• Setting goals and targets to prevent pollution, to leave a green future to coming generations and to protect human health;

• Leading the way for and setting an example to other textile companies in Malatya with regard to protecting the environment and human health;

• Making no compromises in terms of environmental protection, and taking robust steps in order to reach our goals in preserving the quality of the air, water and soil;

• Creating the right work environment with the participation of all employees, minimizing OHS related risks, and improving our management system to attain sustainability;

• Reaching for the very best with the awareness that Environment = Quality = Human Health.

Continuing to ramp up its sustainability-focused efforts, Gap Güneydoğu Tekstil conducts all its business operations, from the collection of raw material to manufacturing, in line with international standards and certifications meant to minimize its environmental footprint.


Continuing to ramp up its sustainability-focused efforts, Gap Güneydoğu Tekstil conducts all its business operations, from the collection of raw material to manufacturing, in line with international standards and certifications meant to minimize its environmental footprint. The Company’s manufacturing facility has two sources of carbon emissions as well as units for physical, chemical, biological and slob-based treatment.

Holding both Recycle and Ekoteks certifications, the facility recycles waste such as paper, nylon, cardboard, wood, cuttings and metal by dispatching these to licensed firms. Gap Güneydoğu Tekstil has also received the following certifications: • GOTS• OCS• OEKO-TEX STANDARD 100• GRS• ISO 9001• ISO 14001• BCI (Better Cotton Initiative)• OHSAS 18001 Occupational Health and Safety

In order to minimize the consumption of natural resources, the Company has implemented numerous projects that include the following:• Recycling waste heat from the drying machinery;• Reducing the amount of salt used in the water softening

system;• Installing a recycling economizer for the waste chimney gas of

the coal fired boiler;• Minimizing electricity use in lighting;• Recycling caustic agents;• Recycling indigo dye;• Administering training programs on safeguarding the

environment and conserving water;• Separating and recycling waste paper in the Company’s offices;• Recycling waste machine oil and vegetable oil;• Eliminating the use of filter bags in the coal fired boiler.

Thanks to the “Eco-save” production method developed by the R&D Center, the Company’s manufacturing facilities now consume 65% less water and have cut waste volume by 70%.

Placing a great emphasis on the natural environment and human health, Gap Güneydoğu Tekstil also shapes its production with this approach by manufacturing 100% organic GOTS (Global Organic Textile Standard) and 5-95% OCS (Organic Cotton Standard) fabric.

Other eco-friendly products manufactured by the Company include:• Denim fabric produced with recycled cotton;• Denim fabric produced with recycled polyester;• “Paper Denim” fabrics produced via the transformation of

waste paper into yarn;• Denim/gabardine fabrics produced with raw materials

manufactured with fewer natural resources (e.g. CRAiLAR flax, linen, and the like) in line with our sustainability approach;

• Denim/gabardine fabrics produced with organic materials and BCI;

• Denim/gabardine fabrics produced with zero emissions and zero use of chemicals;

• Natural denim/gabardine fabrics produced exclusively from completely natural raw material.


Corporate Social Responsibility & the Society

The principle of creating added value for society forms the foundation of Gap Güneydoğu Tekstil’s approach to corporate social responsibility.

Well aware of the necessity to continuously improve its social and environmental performance to achieve sustainable success, Gap Güneydoğu Tekstil makes significant contributions to the society at large in order to help meet its needs. These activities and efforts are primarily in the area of education, and are supported with volunteer work by the Company’s employees.

Malatya Education Foundation Çalık Denim provides scholarships and support to students in need with the intermediation of the Malatya Education Foundation, which offers scholarship assistance to successful university students. Çalık Denim and all other Group companies make regular annual donations to the Foundation, which provides scholarships to students in need after performing an assessment.

As part of the “Hundred Percent Support to Education” initiative, Gap Güneydoğu Tekstil sponsored the construction of the Anadolu High School section of the Mahmut Çalık Educational Complex, which opened its doors in the 2012 academic year. Located in Malatya on a 40,000 m2 tract, the Mahmut Çalık Educational Complex will be completed in three stages. Planned to consist of a kindergarten, primary schools and a high school, the Complex will also feature dormitories for girls and boys, a gymnasium, housing for teachers, auxiliary social facilities and a conference hall.

The Company’s contributions to education were not limited to the Mahmut Çalık Educational Complex. In 2014, the Company covered the lunch expenses of the Turgut Özal Special Education School, Abdulkadir Eriş Special Education School and Ali Kuşçu Special Education Center for Autistic Children – a total of 425 students each day. In 2014, the Company also donated textile products to the Turkish Red Crescent, and contributed to the protection of the environment with a tree planting project conducted employee volunteers.

Gap Güneydoğu Tekstil Sanayi ve Ticaret Anonim Şirketi

and its Subsidiaries

Consolidated Financial Statements As at and for the Year Ended

31 December 2014With Independent Auditor’s Report

KPMG Akis Bağımsız Denetim ve Serbest Muhasebeci Mali Müşavirlik Anonim Şirketi 6 April 2015This report includes 1 pages of independent auditor’s report and 59 pages of consolidated financial statements together wtih their explanatory notes and 5 pages of supplementary information.

Gap Güneydoğu Tekstil Sanayi ve Ticaret Anonim Şirketi and its Subsidiaries

Table of Contents Page

Independent Auditor’s Report 63Consolidated Statement of Financial Position 64-66 Consolidated Statement of Profit or Loss and Other Comprehensive Income 67Consolidated Statement of Changes in Equity 68Consolidated Statement of Cash Flows 69Notes to the Consolidated Financial Statements 70-128

1 Reporting entity 70-71 2 Basis of prepration 71-723 Significant accounting policies 72-894 Related party disclosures 90-925 Cash and cash equivalents 926 Disposal group held for sale 937 Financial investments 93-948 Trade receivables and payables 959 Other receivables and other payables 9610 Inventories 9711 Prepayments and deferred revenue 9812 Investments in equity-accounted investees 9813 Property, plant and equipment 99-10014 Intangible assets 10115 Other assets and liabilities 10116 Loans and borrowings 10217 Payables related to employee benefits 10318 Provisions 103-10419 Commitments and contingencies 10520 Taxation 105-11021 Capital and reserves 110-11122 Revenue and cost of sales 11123 Administrative expenses, selling, marketing and distribution expenses and research and development expenses 112-11424 Other operating income and expenses 11425 Gain from investing activities 11526 Finance income/(costs) 11527 Financial instruments – Fair values and risk management 115-12328 Subsequent events 123Appendix: Supplementary information 124-128

INDEPENDENT AUDITOR’S REPORT

To the Board of Directors of Gap Güneydoğu Tekstil Sanayi ve Ticaret Anonim Şirketi

We have audited the accompanying consolidated financial statements of Gap Güneydoğu Tekstil Sanayi ve Ticaret Anonim Şirketi and its subsidiaries, which comprise the consolidated statement of financial position as at 31 December 2014, the consolidated statements of profit or loss and other comprehensive income, changes in equity and cash flows for the year then ended, and notes, comprising a summary of significant accounting policies and other explanatory information.

Management’s Responsibility for the Consolidated Financial Statements

Management is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with International Financial Reporting Standards, and for such internal control as management determines is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.

Auditors’ Responsibility

Our responsibility is to express an opinion on these consolidated financial statements based on our audit. We conducted our audit in accordance with International Standards on Auditing. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on our judgment, including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, we consider internal control relevant to the entity’s preparation and fair presentation of the consolidated financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.

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

Opinion

In our opinion, the consolidated financial statements give a true and fair view of the consolidated financial position of Gap Güneydoğu Tekstil Sanayi ve Ticaret Anonim Şirketi and its subsidiaries as at 31 December 2014, and of its consolidated financial performance and its consolidated cash flows for the year then ended in accordance with International Financial Reporting Standards.

Other matters

Without qualifying our opinion, we draw attention to the following matters:

Our audit was made for the purpose of forming an opinion on the consolidated financial statements taken as whole. The supplementary information included in Appendix is presented for the purposes of additional analysis and is not a required part of the basic consolidated financial statements. The US Dollar amounts presented in Appendix are solely for the convenience of the reader as additional analysis and have not been subjected to the audit procedures applied in the audit of the basic consolidated financial statements. Accordingly, we do not express an opinion on this supplementary information.

Akis Bağımsız Denetim ve Serbest Muhasebeci Mali Müşavirlik A.Ş.A member of KPMG International Cooperative

Hakan Ölekli, SMMMPartner 10 April 2015Istanbul, Turkey


Gap Güneydoğu Tekstil Sanayi ve Ticaret Anonim Şirketi and its SubsidiariesConsolidated Statement of Financial Position as at 31 December 2014 (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise stated.)

Notes 31 December 2014 31 December 2013ASSETSCurrent assetsCash and cash equivalents 5 14.529 2.793Trade receivables 8 110.650 187.727

Due from related parties 4 959 92.899Due from third parties 109.691 94.828

Other receivables 9 144.932 4.641Due from related parties 4 23.707 1.081Due from third parties 121.225 3.560

Inventories 10 133.102 105.484Derivatives 361 --Prepayments 11 35.145 60.050Current tax assets 20 2.857 1.645Other current assets 15 12.291 7.839Subtotal 453.867 370.179Assets held for sale 6 24.657 24.941Total current assets 478.524 395.120

Non- current assetsFinancial investments 7 20.765 21.245Property, plant and equipment 13 143.079 110.849Intangible assets 861 923

Other intangible assets 14 861 923Prepayments 11 1.970 443Deferred tax assets 20 38.016 24.981Total non-current assets 204.691 158.441

Total assets 683.215 553.561

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


Gap Güneydoğu Tekstil Sanayi ve Ticaret Anonim Şirketi and its SubsidiariesConsolidated Statement of Financial Position (Continued) as at 31 December 2014 (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise stated.)

Notes 31 December 2014 31 December 2013LIABILITIESCurrent liabilitiesShort term loans and borrowings 16 320.235 188.076Short term portion of long term loans and borrowings 16 14.048 53Trade payables 8 49.007 42.409

Due to related parties 4 50 --Due to third parties 48.957 42.409

Payables related to employee benefits 17 3.006 2.674Other payables 9 28.181 124.001

Due to related parties 4 27.601 123.467Due to third parties 580 534

Deferred revenue 11 3.004 4.281Current tax liabilities 20 64 67Short term provisions 18 2.726 1.719

Short term employee benefits 1.693 1.557Other short term provisions 1.033 162

Other short term liabilities 15 4.608 1.980Subtotal 424.879 365.260Liabilities held for sale 6 7.533 9.399Total current liabilities 432.412 374.659Non-current liabilitiesLong term loans and borrowings 16 48.798 --Long term provisions 12.110 11.841

Long term employee benefits 18 12.110 11.841Deferred tax liabilities 20 60 --Total non-current liabilities 60.968 11.841Total liabilities 493.380 386.500

EQUITYEquity attributable to the owners of the CompanyShare capital 21 164.740 164.740Legal reserves 21 23.094 22.899Other comprehensive income will never be reclassified to profit or loss (3) (757)Other comprehensive income that is or may be reclassified to profit or loss 9.759 9.556Accumulated losses (35.643) (36.436)Profit for the year 11.234 988Total equity attributable to the owners of the Company 173.181 160.990Total non-controlling interests 16.654 6.071Total equity 189.835 167.061Total equity and liabilities 683.215 553.561



Gap Güneydoğu Tekstil Sanayi ve Ticaret Anonim Şirketi and its SubsidiariesConsolidated Statement of Financial Position (Continued) as at 31 December 2014 (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise stated.)

Notes 2014 2013Revenue 22 506.284 383.649 Cost of sales 22 (406.812) (309.489)Gross profit 22 99.472 74.160

General and administrative expenses 23 (24.559) (20.536)Selling, marketing and distribution expenses 23 (35.003) (32.293)Research and development expenses 23 (6.619) (4.447)Other income 24 35.940 12.386 Other expenses 24 (15.205) (13.963)Operating profit 54.026 15.307

Gains from investing activities 25 3.434 1.208 Losses from investing activities (2.691) (208)Share of loss of equity accounted investees, net of taxes -- (4.504)Operating profit before finance costs 54.769 11.803

Finance income -- --Finance costs 26 (53.529) (29.596)Net finance costs (53.529) (29.596)Profit/(loss) before tax from continuing operations 1.240 (17.793)Current tax expense 20 (1.394) (423)Deferred tax benefit 20 13.163 19.401 Total tax benefit 11.769 18.978Profit for the year 13.009 1.185

Profit for the year attributable to:Owners of the Company 11.234 988 Non-controlling interests 1.775 197 Net profit for the year 13.009 1.185



Gap Güneydoğu Tekstil Sanayi ve Ticaret Anonim Şirketi and its SubsidiariesConsolidated Statement of Profit or Loss and Other Comprehensive Income (continued) for the Year Ended 31 December 2014(Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise stated.)

Notes 2014 2013Other comprehensive incomeItems that will never be reclassified to profit or loss

Defined benefit obligation actuarial differences 18 942 (1.086)Tax on defined benefit obligation actuarial differences 20 (188) 216

Items that are or may be reclassified to profit or lossForeign currency translation differences for foreign operations and reporting currency translation differences 11 817

Total other comprehensive income 765 (53)

Total comprehensive income 13.744 1.132

Total comprehensive income attributable to:Owners of the Company 12.191 935 Non-controlling interests 1.583 197 Total comprehensive income 13.774 1.132


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Gap Güneydoğu Tekstil Sanayi ve Ticaret Anonim Şirketi and its SubsidiariesConsolidated Statement of Cash Flows for the Year Ended 31 December 2014(Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise stated.)


Notes 2014 2013Profit for the period 13.009 1.185Adjustments for depreciation and amortization 13,14 13.566 14.490Adjustments for doubtful receivables 8 506 2.454Adjustments for inventory impairment, net 10 314 296Adjustments for provision for long term employee benefits 18 1.347 946Adjustments for lawsuit provisions, net 8 871 33Adjustments for vacation pay liability 18 136 1.557Adjustment for derivative financials (361) (980)Adjustments for share of (profit)/ loss of equity accounted investees -- 4.504Dividend income 25 (458) --Adjustments for interest expenses 26 27.925 16.955Rediscount interest losses, net 24 166 (17)Unrealized foreign currency (income)/loss (914) (213)Adjustments for tax benefit 20 (11.769) (18.978)Adjustments for the losses/(gains) on sales of property and equipment, net (2.537) 215Adjustments to reconcile cash flow generated from operating activities: 41.801 22.447Adjustments for change in inventories (27.932) (17.124)Adjustments for change in trade receivables 74.575 (85.063)Adjustments for change in other receivables (140.291) 87.609Adjustments for change in restricted cash and cash equivalents (1.726) --Adjustments for change in payables related to employee benefits 332 698Adjustments for change in assets held for sale (1.582) 1.805Adjustments for change in other assets (4.452) 10.674Adjustments for change in trade payables 6.598 (9.198)Adjustments for change in other payables (95.820) 120.612Adjustments for change in prepayments 23.378 (40.427)Adjustments for change in deferred income (1.277) (394)Adjustments for change in other liabilities related with operating activities 2.625 471Changes in working capital (123.771) 92.110Collection from doubtful receivables 8 1.830 --Employee termination benefit paid 18 (136) --Taxes paid 20 (2.609) (2.300)Cash flows from operating activities (915) (2.300)A.CASH FLOWS FROM OPERATING ACTIVITIES (124.686) 89.810Proceeds from sales of property and equipment and intangible assets 7.647 468Dividend received 458 980Dividend payment -- (17.930)Capital injection in financial investments -- (4.376)Share transfer in financial investments 480 30Capital injection in subsidiaries by non controlling interests 9.000 --Acquisition of property, plant and equipment 13 (50.817) (41.444)Acquisition of intangible assets 14 (16) (27)B. CASH FLOWS FROM INVESTING ACTIVITIES (33.248) (62.299) Interest paid (28.249) (13.205)Proceeds from/(repayment of ) short term loans and borrowings, net 149.815 (15.578)Proceeds from/(repayment of ) long term loans and borrowings, net 46.378 (3.565)C. CASH FLOWS FROM FINANCING ACTIVITIES 167.944 (32.348)D. NET INCREASE/DECREASE IN CASH AND CASH EQUIVALENTS (A+B+C) 10.010 (4.837)E. CASH AND CASH EQUIVALENTS AT THE BEGINING OF THE PERIOD 2.793 7.630CASH AND CASH EQUIVALENTS AT THE END OF THE PERIOD (A+B+C+E) 5 12.803 2.793

Gap Güneydoğu Tekstil Sanayi ve Ticaret Anonim Şirketi and its SubsidiariesNotes to Consolidated Financial Statements as at and for the Year Ended 31 December 2014(Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise stated.)


1 Reporting entity

Gap Güneydoğu Tekstil Sanayi ve Ticaret A.Ş. (the “Company” or “Gap Tekstil”) was established in 1987 in Turkey. Gap Tekstil has a branch, namely Gap Güneydoğu Mersin Free Zone and it is engaged in the importation and exportation of textile products.

Gap Tekstil’s registered address is as follows:

Keresteciler Sitesi Fatih Caddesi Ladin Sokak No:17 Merterİstanbul/Turkey.

As at 31 December 2014, Gap Tekstil has 5 (31 December 2013: 5) subsidiaries (“the Subsidiaries”), and 1 (31 December 2013:1) associate (‘’the Associate’’) (reffered to as ‘’the Group’’herein and after). The consolidated financial statements of the Group as at and for the years ended 31 December 2014 and 2013 comprise Gap Tekstil, its subsidiaries and the Group’s interest in its associate.

As at 31 December 2014, the number of employees of the Group is 1.507 (31 December 2013: 1.541).

As at 31 December 2014 and 2013, the subsidiaries and the associate included in the consolidation scope of Gap Tekstil, their country of incorporation and the nature of businesses and ownership rates are as follows:

Company Name Type of partnership Country Ownership rate%2014 2013

Çalık Alexandria For Readymade Garments Subsidiary Egypt 94,00 94,00Çalık Korea Inc. Subsidiary Korea 100,00 100,00Çalık Pamuk Doğal ve Sentetik Elyaf Ticaret A.Ş. Subsidiary Turkey 55,00 55,00Çalık USA Subsidiary USA 100,00 100,00Gap Güneydoğu FZE Jebel Ali Free Zone Subsidiary UAE– Dubai 100,00 100,00Gap Türkmen-Türkmenbaşı Jeans Kompleksi Associate Turkmenistan 34,80 34,80

Çalık Alexandria For Readymade Garments (“Çalık Alexandria”)

Çalık Alexandria was established in 2006 in Egypt for the purpose of engaging in the business of manufacturing and marketing ready wear, yarn and textures.

Çalık Korea Inc.

Çalık Korea Inc. was established in 2007 for the purpose of importing and exporting textile and ready wear, and also distribution and transportation services.

Gap Güneydoğu FZE Jebel Ali Free Zone (“Gap Güneydoğu FZE”)

Gap Güneydoğu FZE is engaged in the trading of textile products in Dubai.

Çalık Pamuk Doğal ve Sentetik Elyaf Ticaret A.Ş. (“Çalık Pamuk”)

Çalık Pamuk was founded in 2011 for the purpose of conducting international cotton trade activities and rendering consultancy services in all matters related to cotton.

Çalık USA

Çalık USA is engaged in the trading of textile products in the USA.

Gap Türkmen -Türkmenbaşı Jeans Kompleksi (“TJK”)

TJK has been established as a joint venture of Gap Tekstil and the Ministry of Textiles Industry of Turkmenistan in 1995 within the frame of Turkmenistan regulations for the purpose of yarn and denim fabric production and marketing. TJK has a denim fabric and jean factory and makes domestic and foreign sales to USA and European countries.



1 Reporting entity (continued)

Group reclassified assets and liabilities of foreign subsidiaries located in Egypt, Korea, and USA as “Disposal group held for sale” based on the decision made by the management and all assets and liabilities of these entities except the cash and cash equivalents have been classified as “assets held for sale” and “liabilities held for sale” in the consolidated financial statements, respectively.

2 Basis of preparation

a) Statement of compliance

Group entities operating in Turkey maintain their books of account and prepare their statutory financial statements in Turkish Lira (“TL”) in accordance with the accounting principles per Turkish Uniform Chart of Accounts, Turkish Commercial Code and Tax Legislation.

Group’s foreign entities maintain their books of accounts and prepare their statutory financial statements in accordance with the generally accepted accounting principles and the related legislations applicable in the countries they operate.

The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (“IFRS”).

The consolidated financial statements were approved by the Company management for the submission of the approval of General Assembly on 10 April 2015. Gap Tekstil’s General Assembly and the other regulatory bodies have the power to amend the statutory financial statements which after their issue.

b) Basis of measurement

The consolidated financial statements have been prepared on the historical cost basis and for the Turkish entities as adjusted for the effects of inflation that lasted by 31 December 2005, except for derivative instruments.

The methods used to measure the fair values are discussed further in Note 27.

c) Functional and presentation currency

The accompanying consolidated financial statements are presented in TL which is Gap Tekstil’s functional currency. Except as otherwise indicated, financial information presented in TL has been rounded to the nearest thousand.

The table below summarizes the functional currencies of the entities:

Company Name Functional currency

Çalık Alexandria For Readymade Garments USDÇalık Korea Inc. USDÇalık Pamuk Doğal ve Sentetik Elyaf Ticaret A.Ş. TLÇalık USA USDGap Güneydoğu FZE Jebel Ali Free Zone USDGap Türkmen-Türkmenbaşı Jeans Kompleksi USD



2 Basis of preparation (continued)

d) Use of estimates and judgements

The preparation of the consolidated financial statements in conformity with IFRSs requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates.

Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised and in any future periods affected.

Information about significant areas at estimation uncertainty and critical judgment in applying accounting policies that have the most significant effect on the amounts recognised in the consolidated financial statements are described in the following notes:

• Note 3 (f) and (g) – Useful lives of property and equipment and intangible assets • Note 18 – Provisions• Note 20 – Taxation • Note 27 – Financial instruments – Fair values and risk management• Note 10 – Impairment in value of inventories• Note 8 – Allowance for doubtful receivables

e) Reclassifications

The Group has made certain reclassifications between cost of sales and other expenses. As a result of these reclassifications cost of sales increased by TL 11.067 and other expense decreased by TL 11.067 as at 31 December 2013.

3 Significant accounting policies

The accounting policies set out below have been applied consistently to all periods presented in these consolidated financial statements, and have been applied consistently by Group entities.

a) Basis of consolidation

The accompanying consolidated financial statements include the accounts of the parent company, Gap Tekstil, its subsidiaries and its associate on the basis set out in sections below. The financial statements of the entities included in the consolidation have been prepared as at the date of the consolidated financial statements.

i) Business combinations

Business combinations are accounted for using the acquisition method as at the acquisition date, which is the date on which control is transferred to the Group. The Group has control over an entity when the group has power over the entity, exposure, or rights, to variable returns from its involvement with the entity and the ability to use its power over the entity to affect the amount of the Group’s returns. In assessing control, the Group takes into consideration potential voting rights that are currently exercisable.

The Group measures goodwill at the acquisition date as:

• the fair value of the consideration transferred; plus • the recognised amount of any non-controlling interests in the acquiree; plus• if the business combination is achieved in stages, the fair value of the pre-existing equity interest in the acquiree; less

When the excess is negative, a bargain purchase gain is recognised immediately in profit or loss.



3 Significant accounting policies (continued)

a) Basis of consolidation (continued)

i) Business combinations (continued)

The consideration transferred does not include amounts related to the settlement of pre-existing relationships. Such amounts generally are recognised in profit or loss.

Transactions costs, other than those associated with the issue of debt or equity securities, that the Group incurs in connection with a business combination are expensed as incurred.

Any contingent consideration payable is measured at fair value at the acquisition date. If the contingent consideration is classified as equity, it is not remeasured and settlement is accounted for within equity. Otherwise, subsequent changes to the fair value of the contingent consideration are recognised in profit or loss.

ii) Non-controlling interests

The Group measures non-controlling interests at their proportionate share of the subsidiary’s net assets.

Changes in the Group’s interest in a subsidiary that do not result in a loss of control are accounted for as transactions with owners in their capacity as owners. Adjustments to non-controlling interests are based on a proportionate amount of the net assets of the subsidiary. No adjustments are made to goodwill and no gain or loss is recognised in profit or loss.

iii) Subsidiaries

Subsidiaries are entities controlled by the Group. The financial statements of subsidiaries are included in the consolidated financial statements from the date that control commences until the date that control ceases.

The accounting policies of subsidiaries have been changed when necessary to align them with the policies adopted by the Group.




a) Basis of consolidation (continued)

iv) Loss of control

On the loss of control, the Group derecognises the assets and liabilities of the subsidiary, any non-controlling interests and the other components of equity related to the subsidiary. Any surplus or deficit arising on the loss of control is recognised in profit or loss. If the Group retains any interest in the previous subsidiary, then such interest is measured at fair value at the date that control is lost. Subsequently it is accounted for as an equity-accounted investee or as an available-for-sale financial asset depending on the level of influence retained.

v) Associates (Equity-accounted investees)

Associates are those entities in which the Group has significant influence, but not control, over the financial and operating policies. Significant influence is presumed to exist when the Group holds between 20% and 50% of the voting power of another entity. Investments in associates are accounted for using the equity method and are initially recognised at cost. The cost of investments includes transaction costs.

The consolidated financial statements include the Group’s share of profit and loss and other comprehensive income of associates, after adjustments to align the accounting policies with those of the Group, from the date that significant influence commences until the date that significant influence ceases.

When the Group’s share of losses exceeds its interest in an associates, the carrying amount of that interest, including any long-term interests that form part thereof, is reduced to zero, and the recognition of further losses is discontinued except to the extent that the Group has an obligation or has made payments on behalf of the investee.

vi) Transactions eliminated on consolidation

Intra-group balances and transactions, and any unrealised income and expenses arising from intra-group transactions, are eliminated in preparing the consolidated financial statements. Unrealised gains arising from transactions with equity accounted investees are eliminated against the investment to the extent of Group’s interest in the investee.

Unrealised losses are eliminated in the same way as unrealised gains, but only to the extent that there is no evidence of impairment. Carrying value of shares owned by the Group and dividends arising from these shares has been eliminated in equity and profit or loss accounts.

In consolidation of operating results and financial positions of subsidiaries whose functional currency is other than TL, main consolidation transactions are made such as elimination of related party balances and transactions. But, a monetary asset (or liability) of related parties regardless of short-term or long-term (except for monetary items which are part of net investment of the Group in its subsidiaries whose functional currency is different than TL) cannot be eliminated with related party liability (or related party asset) without presenting results of fluctuation of foreign currencies in consolidated financial statements. Because, a monetary item provides obligation of translation of any currency to other currency and makes the Group exposed to gain or losses arising from fluctuation of foreign currencies. Correspondingly, these kind of foreign exchange differences are recognized in profit or loss of consolidated financial statements of the Group.



3 Significant accounting policies(continued)

b) Foreign currency

i) Foreign currency transactions

Transactions in foreign currencies are translated to the respective functional currencies of Group entities at exchange rates at the dates of the transactions. Monetary assets and liabilities denominated in foreign currencies at the reporting date are retranslated to the functional currency at the exchange rate at that date. The foreign currency gain or loss on monetary items is the difference between the amortised cost in the functional currency at the beginning of the year, adjusted for effective interest and payments during the year, and the amortised cost in foreign currency translated at the exchange rate at the end of the year.

Non-monetary assets and liabilities denominated in foreign currencies that are measured at fair value are retranslated to the functional currency at the exchange rate at the date that the fair value was determined. Non-monetary items in a foreign currency that are measured in terms of historical cost are translated using the exchange rate at the date of the transaction. Foreign currency differences arising on retranslation are recognised in profit or loss, except for differences arising on the retranslation of available-for-sale equity instruments (except on impairment in which case foreign currency differences that have been recognised in other comprehensive income are reclassified to profit or loss), a financial liability designated as a hedge of the net investment in a foreign operation to the extent that the hedge is effective; or qualifying cash flow hedges to the extent the hedge is effective.

As at 31 December 2014 and 2013, foreign exchange rates are as follows:

31 December 2014 31 December 2013Euro/TL 2,8207 2,9365USD/TL 2,3189 2,1343




b) Foreign currency (continued)

ii) Foreign operations

The assets and liabilities of foreign operations, including goodwill and fair value adjustments arising on acquisition, are translated to TL at exchange rates at the reporting date. The income and expenses of foreign operations are translated to TL at average exchange rates at the dates of the transactions.

Foreign currency differences are recognised in other comprehensive income, and presented in the foreign currency translation reserve (translation reserve) in equity. However, if the foreign operation is a non-wholly-owned subsidiary, then the relevant proportion of the translation difference is allocated to the non-controlling interests. When a foreign operation is disposed of such that control, significant influence or joint control is lost, the cumulative amount in the translation reserve related to that foreign operation is reclassified to profit or loss as part of the gain or loss on disposal. When the Group disposes of only part of its interest in a subsidiary that includes a foreign operation while retaining control, the relevant proportion of the cumulative amount is reattributed to non-controlling interests.

When the Group disposes of only part of its investment in an associate or joint venture that includes a foreign operation while retaining significant influence or joint control, the relevant proportion of the cumulative amount is reclassified to profit or loss.

When the settlement of a monetary item receivable from or payable to a foreign operations is neither planned nor likely in the foreseeable future, foreign exchange gains and losses arising from such a monetary item are considered to form part of a net investment in a foreign operation and are recognised in other comprehensive income, and presented within equity in the translation reserve.

c) Financial instruments

i) Non-derivative financial assets

The Group initially recognises loans and receivables and deposits on the date that they are originated. All other financial assets are recognised initially on the trade date at which the Group becomes a party to the contractual provisions of the instrument.

The Group derecognises a financial asset when the contractual rights to the cash flows from the asset expire, or it transfers the rights to receive the contractual cash flows on the financial asset in a transaction in which substantially all the risks and rewards of ownership of the financial asset are transferred. Any interest in such transferred financial assets that is created or retained by the Group is recognised as a separate asset or liability.

Financial assets and liabilities are offset and the net amount is presented in the consolidated statement of financial position when, and only when, the Group has a legal right to offset the amounts and intends either to settle on a net basis or to realise the asset and settle the liability simultaneously.

The Group classifies non-derivative financial assets into the following categories: loans and receivables, and available-for-sale financial assets.

Loans and receivables

Loans and receivables are financial assets with fixed or determinable payments that are not quoted in an active market. Such assets are recognised initially at fair value plus any directly attributable transaction costs. Subsequent to initial recognition loans and receivables are measured at amortised cost using the effective interest method, less any impairment losses. Loans and receivables comprise trade receivables and other receivables.




c) Financial instruments (continued)

i) Non-derivative financial assets (continued)

Cash and cash equivalents

Cash and cash equivalents comprise cash balances, bank deposits and other liquid assets with original maturities of three months or less from the acquisition date that are subject to an insignificant risk of changes in their fair value.

Available-for-sale financial assets

Available-for-sale financial assets are non-derivative financial assets that are designated as available-for-sale and that are not classified in loans and receivables, at fair value through profit or loss and held to maturity of financial assets. The Group’s investments in equity instruments are classified as available-for-sale financial assets. Subsequent to initial recognition, they are measured at fair value and changes therein, other than impairment losses and foreign currency differences on available-for-sale equity instruments, are recognised in other comprehensive income and presented within equity in the fair value reserve, except that any instrument that does not have a quoted market price in an active market and whose fair value cannot be reliably measured is stated at cost. When an instrument is derecognised, the cumulative gain or loss in other comprehensive income is transferred to profit or loss.

ii) Non-derivative financial liabilities

The Group initially recognises non-derivative financial liabilities on the date that they are originated.

All other financial liabilities are recognised initially on the trade date, which is the date that the Group becomes a party to the contractual provisions of the instrument.

The Group derecognises a financial liability when its contractual obligations are discharged or cancelled, or expire.

Financial assets and liabilities are offset and the net amount is presented in the consolidated statement of financial position when, and only when, the Group has a legal right to offset the amounts and intends either to settle on a net basis or to realise the asset and settle the liability simultaneously.

The Group classifies non-derivative financial liabilities into other financial liabilities which mainly are comprise loans and borrowings, trade and other payables and due to related parties.

Such financial liabilities are recognised initially at fair value less any directly attributable transaction costs. Subsequent to initial recognition these financial liabilities are measured at amortised cost using the effective interest method.

iii) Derivative financial instruments

The Company enters into commodity future contracts for the purpose of avoiding price risk which is resulting from fluctuations in the price of commodities required for the final sale. This contracts are recognized as derivative instruments in the statement of financial position.

The Group does not designate the derivative transaction as a hedging instrument. For that reason derivative financial instruments are measured at fair value than changes in fair value are recognized immediately in profit or loss as incurred.




c) Financial instruments (continued)

iv) Share capital

Ordinary shares

Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of ordinary shares are recognised as a deduction from equity, net of any tax effects.

d) Property, plant and equipment

i) Recognition and measurement

The costs of items of property, plant and equipment of Group’s Turkish entities purchased before 31 December 2005 are restated for the effects of inflation in TL units current at 31 December 2005 pursuant to IAS 29. Property, plant and equipment purchased after this date are recorded at their historical cost. Accordingly, property, plant and equipment of the Group are carried at costs, less accumulated depreciation and impairment losses, if any.

Cost includes expenditures that are directly attributable to the acquisition of the asset. The cost of self-constructed assets includes the following:

• cost of materials and direct labor; • any other costs directly attributable to bringing the asset to a working condition for its intended use;• when the Company has an obligation to remove the assets or restore the site, an estimate of the costs of dismantling and removing the

items and restoring the site on which they are located; and• capitalised borrowing costs.

When parts of an item of property, plant and equipment have different useful lives, they are accounted for as separate items (major components) of property, plant and equipment.

An item of property, plant and equipment is derecognised upon disposal or when no future economic benefits are expected from its use or disposal. Any gain or loss arising on derecognition of an item of property, plant and equipment (calculated as the difference between the net proceeds from disposal and the carrying amount of the asset) is recognised in “Gains from investing activities” or “Losses from investing activities” under profit or loss.

ii) Subsequent costs

Subsequent expenditure is capitalised only when it is probable that the future economic benefits associated with the expenditure will flow to the Group. Ongoing repairs and maintenance is expensed as incurred.




d) Property, plant and equipment (continued)

iii) Depreciation

Items of property, plant and equipment are depreciated from the date that they are available for use or, in respect of self-constructed assets, from the date that the asset is completed and ready for use.

Depreciation is calculated to write off the cost of items of property, plant and equipment using the straight-line basis over their estimated useful lives. Depreciation is generally recognised in profit or loss, unless the amount is included in the carrying amount of another asset. Leased assets are depreciated over the shorter of the lease term and their useful lives unless it is reasonably certain that the Group will obtain ownership by the end of the lease term. Land is not depreciated.

The estimated useful lives for the current and comparative years of significant items of property, plant and equipment are as follows:

Description YearLand, land improvements and building 5-50Machinery and equipments 3-40Vehicles 4-6Furniture and fixtures 2-15Leasehold improvements 5-10Other tangible assets 3-5

Leasehold improvements are depreciated over the shorter of the lease term and their useful lives, also on a straight-line basis.

Depreciation methods and useful lives are reviewed at each reporting date and adjusted if appropriate.




e) Intangible assets

Intangible assets of the Group mainly consist of rights and computer software acquired by the Group, which have finite useful lives, and are measured at cost less accumulated amortisation and any accumulated impairment losses, if any.

Subsequent expenditure is capitalised only when it increases the future economic benefits embodied in the specific asset to which it relates. All other expenditure, including expenditure on internally generated goodwill and brands is recognised in profit or loss as incurred.

Intangible assets are amortised on a straight-line basis in profit or loss over their estimated useful lives (3-5 years), from the date that they are available for use.

Amortisation methods, useful lives and residual values are reviewed at each reporting date and adjusted if appropriate.

f) Inventories

Inventories are measured at the lower of cost and net realisable value. The cost of inventories is mainly based on the weighted average, and includes expenditure incurred in acquiring the inventories, production or conversion costs and other costs incurred in bringing them to their existing location and condition. In case of manufactured inventories and works in progress, cost includes an appropriate share of production overheads based on normal operating capacity.

Net realisable value is the estimated selling price in the ordinary course of business, less the estimated costs of completion and estimated costs necessary to make the sale.

The provision for impairment in value of inventories was provided for slow moving and obsolete inventories with respect to sales forcasts and net realizable value estimations.

g) Impairment

i) Non-derivative financial assets

A financial asset not classified as at fair value through profit or loss is assessed at each reporting date to determine whether there is objective evidence that it is impaired. A financial asset is impaired if objective evidence of impairment as a result of one or more events that occurred after the initial recognition of the asset, and that the loss event(s) had an impact on the estimated future cash flows of that asset that can be estimated reliably. Objective evidence that financial assets are impaired can include default or delinquency by a debtor, restructuring of an amount due to the Group on terms that the Group would not consider otherwise, indications that a debtor or issuer will enter bankruptcy, adverse changes in the payment status of borrowers or issuers in the Group, economic conditions that correlate with defaults or the disappearance of an active market for a security. In addition, for an investment in an equity security, a significant or prolonged decline in its fair value below its cost is objective evidence of impairment.




g) Impairment (continued)

i) Non-derivative financial assets (continued)

Available-for sale financial assets

Impairment losses on available-for-sale investment securities are recognised by reclassifying the cumulative loss that has been recognised in other comprehensive income, and presented in the fair value reserve in equity, to profit or loss. The cumulative loss that is reclassified from other comprehensive income and recognised in profit or loss is the difference between the acquisition cost, net of any principal repayment and amortisation, and the current fair value, less any impairment loss previously recognised in profit or loss. Changes in cumulative impairment losses attributable to application of the effective interest method are reflected as a component of interest income.

If, in a subsequent period, the fair value of an impaired available-for-sale debt security increases and the increase can be related objectively to an event occurring after the impairment loss was recognised, then the impairment loss is reversed, by the amount of the reversal recognised in profit or loss. However, any subsequent recovery in the fair value of an impaired available-for-sale equity security is recognised in other comprehensive income.

For an investment in unquoted equity instruments carried at cost because their fair value cannot be measured reliably, impairment losses is not reversed.

Financial assets measured at amortised cost

The Group considers evidence of impairment for these assets at both an individual asset and a collective level. All individually significant assets are individually assessed for impairment. Those found not to be impaired are then collectively assessed for any impairment that has been incurred but not yet individually identified. Assets that are not individually significant are collectively assessed for impairment. Collective assessment is carried out by grouping together assets with similar risk characteristics. In assessing collective impairment, the Group uses historical information on the timing of recoveries and the amount of loss incurred, and makes an adjustment if current economic and credit conditions are such that the actual losses are likely to be greater or lesser than suggested by historical trends.

An impairment loss is calculated as the difference between an asset’s carrying amount and the present value of the estimated future cash flows discounted at the asset’s original effective interest rate. Losses are recognised in profit or loss and reflected in an allowance account. When the Group considers that there are no realistic prospects of recovery of the asset, the relevant amounts are written off. If the amount of impairment loss subsequently decreases and the decrease can be related objectively to an event occurring after the impairment was recognised, then the previously recognised impairment loss is reversed through profit or loss.

Equity-accounted investees

An impairment loss in respect of an equity-accounted investee is measured by comparing the recoverable amount of the investment with its carrying amount. An impairment loss is recognised in profit or loss, and is reversed if there has been a favourable change in the estimates used to determine the recoverable amount.

ii) Non-financial assets

The carrying amounts of the Group’s non-financial assets, other than inventories and deferred tax assets, are reviewed at each reporting date to determine whether there is any indication of impairment. If any such indication exists, then the asset’s recoverable amount is estimated. An impairment loss is recognised if the carrying amount of an asset or its related cash-generating unit (“CGU”) exceeds its recoverable amount.




g) Impairment (continued)

ii) Non-financial assets (continued)

The recoverable amount of an asset or CGU is the greater of its value in use and its fair value less costs to sell. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset or CGU. For the purpose of impairment testing, assets are grouped together into the smallest group of assets that generates cash inflows from continuing use that are largely independent of the cash inflows of other assets or CGUs. Subject to an operating segment ceiling test, CGUs to which goodwill has been allocated are aggregated so that the level at which impairment testing is performed reflects the lowest level at which goodwill is monitored for internal reporting purposes. Goodwill acquired in a business combination is allocated to groups of CGUs that are expected to benefit from the synergies of the combination.

Impairment losses are recognised in profit or loss. For the other assets, impairment losses recognised in respect of CGUs are allocated first to reduce the carrying amount of any goodwill allocated to the CGU (group of CGUs), and then to reduce the carrying amounts of the other assets in the CGU (group of CGUs) on a pro rata basis.

An impairment loss in respect of goodwill is not reversed. Impairment loss is reversed when there is a change in the estimates used in the calculation of recoverable amount. For other assets, an impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortisation, if no impairment loss had been recognised.

h) Employee benefits

i) Reserve for employee severance indemnity

Reserve for employee severance indemnity represents the present value of the estimated future probable obligation of the Group arising from the retirement of the employees of the Group’s entities operating in Turkey and calculated in accordance with the Turkish Labour Law. It is computed and reflected in the consolidated financial statements on an accrual basis as it is earned by serving employees. The computation of the liabilities is based upon the retirement pay ceiling announced by the Government. The ceiling amounts applicable for each year of employment were TL 3,43and TL 3,25 at 31 December 2014 and 2013, respectively.

IFRSs require actuarial valuation methods to be developed to estimate the entity’s obligation under defined benefit plans. The total liability for employee severance benefit was calculated by an independent actuary based on past service cost methodology using the observerable statistical market data such as mortality, inflation and interest rates or retirement pay ceilings applicable to the relevant periods and assumptions derived from the specific historic date of the Group such as retention and employee turnover rates or salary increase rates.

Actuarial gains/losses are comprised of adjustment of difference between actuarial assumptions and realised and change in actuarial assumptions. As a result of the adoption of IAS 19 (2011), all actuarial differences are recognised in other comprehensive income.

Reserve for employee severance indemnity is not subject to any statutory funding.

ii) Vacation pay liability

Short-term employee benefit obligations are consisting of reserve for the vacation pay liability due to the earned and unused vacation rights of its employees of the Group’s Turkish entities, and measured on an undiscounted basis and are recognised in profit or loss as the related service is provided.




i) Revenue

Revenue from the sale of goods in the course of ordinary activities is measured at the fair value of the consideration received or receivable, net of returns and allowances and trade discounts. Revenue is recognised when persuasive evidence exists, usually in the form of an executed sales agreement, that the significant risks and rewards of ownership have been transferred to the buyer, recovery of the consideration is probable, the associated costs and possible return of goods can be estimated reliably, and there is no continuing management involvement with the goods and the amount of revenue can be measured reliably. If it is probable that discounts will be granted and the amount can be measured reliably, then the discount is recognised as a reduction of revenue as the sale is recognised.

Transfers of risks and rewards vary depending on the individual terms of the contract of sale but usually take place when the goods are delivered to the customers.

j) Assets held for sale or distribution

Non-current assets, or disposal groups comprising assets and liabilities, that are expected to be recovered primarily through sale or distribution rather than through continuing use, are classified as held for sale or distribution.

Immediately before classification as held for sale or distribution, the assets, or components of a disposal group, are remeasured in accordance with the Group’s accounting policies. Thereafter generally the assets, or disposal group, are measured at the lower of their carrying amount and fair value less costs to sell. Any impairment loss on a disposal group is allocated first to goodwill, and then to the remaining assets and liabilities on pro rata basis, except that no loss is allocated to inventories, financial assets and deferred tax assets, which continue to be measured in accordance with the Group’s accounting policies. Impairment losses on initial classification as held for sale or distribution and subsequent gains and losses on remeasurement are recognised in profit or loss. Gains are not recognised in excess of any cumulative impairment loss.

Intangible assets and property, plant and equipment once classified as held for sale or distribution are not amortised or depreciated. In addition, equity accounted investee is no longer equity accounted.

k) Leases

i) Leased assets

Leases in terms of which the Group assumes substantially all the risks and rewards of ownership are classified as finance leases. On initial recognition, the leased asset is measured at an amount equal to the lower of its fair value and the present value of the minimum lease payments. Subsequent to initial recognition, the asset is accounted for in accordance with the accounting policy applicable to that asset.

Other leases are operating leases are not recognised on the Group’s consolidated statement of financial position.

ii) Lease payments

Payments made under operating leases are recognised in profit or loss on a straight-line basis over the term of the lease. Lease incentives received are recognised as an integral part of the total lease expense, over the term of the lease.

Minimum lease payments made under finance leases are apportioned between the finance expense and the reduction of the outstanding liability. The finance expense is allocated to each period during the lease term so as to produce a constant periodic rate of interest on the remaining balance of the liability.




k) Leases (continued)

iii) Determining whether an arrangement contains a lease

At inception of an arrangement, the Group determines whether such an arrangement is or contains a lease. The following two criteria must be met for a “lease”:

• the fulfillment of the arrangement is dependent on the use of a specific asset or assets; and • the arrangement contains a right to use the asset(s).

At inception or upon reassessment of the arrangement, the Group separates payments and other consideration required by such an arrangement into those for the lease and those for other elements on the basis of their relative fair values. If the Group concludes for a finance lease that it is impracticable to separate the payments reliably, an asset and a liability are recognised at an amount equal to the fair value of the underlying asset. Subsequently the liability is reduced as payments are made and an imputed finance charge on the liability is recognised using the Group’s incremental borrowing rate.

l) Finance income and finance costs

Finance costs comprise interest expense on borrowings and foreign currency losses (excluding those on trade receivables and payables). Borrowing costs that are not directly attributable to the acquisition, construction or production of a qualifying asset are recognised in profit or loss using the effective interest method.

Foreign currency gains and losses are reported on a net basis as either finance income or finance cost depending on whether foreign currency movements are in a net gain or net loss position by each entity of the Group.

m) Income tax

Income tax expense comprises current and deferred tax. Current tax and deferred tax are recognised in profit or loss except to the extent that it relates to a business combination, or items recognised directly in equity or in other comprehensive income.

Current tax

Current tax is the expected tax payable or receivable on the taxable income or loss for the year, using tax rates enacted or substantively enacted at the reporting date, and any adjustment to tax payable in respect of previous years.

Deferred tax

Deferred tax is recognised in respect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. Deferred tax is not recognised for the following temporary differences: the initial recognition of assets or liabilities in a transaction that is not a business combination and that affects neither accounting nor taxable profit or loss, and differences relating to investments in subsidiaries, joint ventures and associates to the extent that it is probable that they will not reverse in the foreseeable future. In addition, deferred tax is not recognised for taxable temporary differences arising on the initial recognition of goodwill.




m) Income tax (continued)

Deferred tax (continued)

Deferred tax is measured at the tax rates that are expected to be applied to temporary differences when they reverse, using tax rates enacted or substantively enacted by the reporting date.

Deferred tax assets and liabilities are offset if there is a legally enforceable right to offset current tax liabilities and assets, and they relate to income taxes levied by the same tax authority on the same taxable entity.

A deferred tax asset is recognised for unused tax losses, tax credits and deductable temporary differences, to the extent that it is probable that future taxable profits will be available against which the temporary difference can be utilised. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefit will be realised.

Tax exposures

In determining the amount of current and deferred tax the Group takes into account the impact of uncertain tax positions and whether additional taxes and interest may be due. The Group believes that its accruals for tax liabilities are adequate for all open tax years based on its assessment of many factors, including interpretations of tax law and prior experience. This assessment relies on estimates and assumptions and may involve a series of judgements about future events. New information may become available that causes the Group to change its judgement regarding the adequacy of existing tax liabilities; such changes to tax liabilities will impact tax expense in the period that such a determination is made.

n) Subsequent events

Subsequent events represents the events after reporting date comprising any event between the reporting date and the date of authorisation for the consolidated financial statements’ issue to the benefit or loss of the entity. Conditions of subsequent events are as follows:

• to have new evidences of subsequent events as of reporting date (adjusting events after reporting date); and• to have evidences of related subsequent events occurred after reporting date (non adjusting events after reporting date).

The Group adjusts its consolidated financial statements according to the new condition if adjusting subsequent events arise subsequent to the reporting date. If it is not necessary to adjust the consolidated financial statements according to subsequent events, these subsequent events must be disclosed in the notes to the consolidated financial statements.




o) Statement of cash flows

Cash flows during the period are classified and reported by operating, investing and financing activities in the cash flow statements.

Cash flows from operating activities reflect cash flows mainly generated from main operations of the Group. The Group presents the cash flows from operating activities by using the indirect method such as adjusting the accruals for cash inflows and outflows from gross profit/loss, other non-cash transactions, prior and future transactions or deferrals.

Cash flows from investment activities express cash used in investment activities (direct investments and financial investments) and cash flows generated from investment activities of the Group.

Cash flows relating to financing activities express sources of financial activities and payment schedules of the Group.

Cash and cash equivalents comprise cash on hand and demand deposits and other bank deposits which their maturities are three months or less from date of acquisition.

p) Related parties

Parties are considered related to the Group if:

(a) Directly, or indirectly through one or more intermediaries, the party:(i) controls, is controlled by, or is under common control with the Group (this includes parent, subsidiaries and fellow subsidiaries);(ii) has an interest in the Group that gives it significant influence over the Group; or(iii) has joint control over the Group;

(b) the party is an associate of the Group;(c) the party is a joint venture/operation in which the Group is a venturer;(d) the party is member of the key management personnel of the Group and 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 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 is a post-employment benefit plan for the benefit of employees of the Group, or of any entity that is a related party of the Group.

A related party transaction is a transfer of resources, services or obligations between related parties, regardless of whether a price is charged.

A number of transactions are entered into with related parties in the normal course of business.




r) New standards and interpretations not yet adopted

A number of new standards, amendments to standards and interpretations are not yet effective for the year ended 31 December 2014, and have not been applied in preparing these consolidated financial statements.

IFRS 9 Financial Instruments – Classification and measurement

As amended in December 2012, the new standard is effective for annual periods beginning on or after 1 January 2015. Phase 1 of this new IFRS 9 introduces new requirements for classifying and measuring financial assets and liabilities. The amendments made to IFRS 9 will mainly affect the classification and measurement of financial assets and measurement of fair value option (FVO) liabilities and requires that the change in fair value of a FVO financial liability attributable to credit risk is presented under other comprehensive income. Early adoption is permitted. The Group is in the process of assessing the impact of the standard on the consolidated financial position or performance of the Group.

IAS 16 and IAS 38 – Clarification of acceptable methods of depreciation and amortisation

The amendments to IAS 16 Property, Plant and Equipment explicitly state that revenue-based methods of depreciation cannot be used for property, plant and equipment. The amendments to IAS 38 Intangible Assets introduce a rebuttable presumption that the use of revenue-based amortisation methods for intangible assets is inappropriate. The amendments are effective for annual periods beginning on after 1 January 2016, and are to be applied prospectively. Early adoption is permitted. The Group does not expect that these amendments will have significant impact on the consolidated financial position or performance of the Group.

IFRS 9 Financial Instruments – Hedge Accounting and amendments to IFRS 9, IFRS 7 and IAS 39-(2013)

In November 2013, the IASB issued a new version of IFRS 9, which includes the new hedge accounting requirements and some related amendments to IAS 39 and IFRS 7. Entities may make an accounting policy choice to continue to apply the hedge accounting requirements of IAS 39 for all of their hedging transactions. Further, the new standard removes the 1 January 2015 effective date of IFRS 9. The new version of IFRS 9 issued after IFRS 9 (2014) introduces the mandatory effective date of 1 January 2018 for IFRS 9, with early adoption permitted. The Group is in the process of assessing the impact of the standard on the consolidated financial position or performance of the Group.

IFRS 9 Financial Instruments (2014)

IFRS 9, published in July 2014, replaces the existing guidance in IAS 39 “Financial Instruments Recognition and Measurement”. IFRS 9 includes revised guidance on the classification and measurement of financial instruments including a new expected credit loss model for calculating impairment on financial assets, and the new general hedge accounting requirements. It also carries forward the guidance on recognition and de-recognition of financial instruments from IAS 39. IFRS 9 is effective for annual reporting periods beginning on or after 1 January 2018, with early adoption permitted. The Group is in the process of assessing the impact of the standard on the consolidated financial position or performance of the Group.




r) New standards and interpretations not yet adopted (continued)

IFRS 14 Regulatory Deferral Accounts

IASB has started a comprehensive project for Rate Regulated Activities in 2012. As part of the project, IASB published an interim standard to ease the transition to IFRS for rate regulated entities. The standard permits first time adopters of IFRS to continue using previous GAAP to account for regulatory deferral account balances. The interim standard is effective for financial reporting periods beginning on or after 1 January 2016, although early adoption is permitted. The Group does not expect that these amendments will have significant impact on the consolidated financial position or performance of the Group.

IFRS 15 Revenue from Contracts with customers

The standard replaces existing IFRS and US GAAP guidance and introduces a new control-based revenue recognition model for contracts with customers. In the new standard, total consideration measured will be the amount to which the Group expects to be entitled, rather than fair value and new guidance have been introduced on separating goods and services in a contract and recognising revenue over time. The standard is effective for annual periods beginning on or after 1 January 2017, with early adoption permitted under IFRS. The Group is in the process of assessing the impact of the amendment on the consolidated financial position or performance of the Group.

Sale or contribution of assets between an investor and its associate or joint venture (Amendments to IFRS 10 and IAS 28)

The amendments address the conflict between the existing guidance on consolidation and equity accounting. The amendments require the full gain to be recognized when the assets transferred meet the definition of a “business” under IFRS 3 Business Combinations. The amendments apply prospectively for annual periods beginning on or after 1 January 2016. Early adoption is permitted. The Group does not expect that these amendments will have significant impact on the consolidated financial position or performance of the Group.

Equity method in separate financial statements (Amendments to IAS 27)

The amendments allow the use of the equity method in separate financial statements, and apply to the accounting not only for associates and joint ventures, but also for subsidiaries. The amendments apply retrospectively for annual periods beginning on or after 1 January 2016. Early adoption is permitted. The Group does not expect that these amendments will have significant impact on the consolidated financial position or performance of the Group.

Disclosure Initiative (Amendments to IAS 1)

The narrow-focus amendments to IAS 1 Presentation of Financial Statements clarify, rather than significantly change, existing IAS 1 requirements. In most cases the amendments respond to overly prescriptive interpretations of the wording in IAS 1. The amendments relate to the following: materiality, order of the notes, subtotals, accounting policies and disaggregation. The amendments apply for annual periods beginning on or after 1 January 2016. Early adoption is permitted. The Group does not expect that these amendments will have significant impact on the consolidated financial position or performance of the Group.

Improvements to IFRSs

The IASB issued Annual Improvements to IFRSs-2012–2014 Cycle. The amendments are effective as of 1 January 2016. Earlier application is permitted. The Group does not expect that these amendments will have significant impact on the consolidated financial position or performance of the Group.




r) New standards and interpretations not yet adopted (continued)

Annual Improvements to IFRSs – 2012–2014 Cycle

IFRS 5 Non-current Assets Held for Sale and Discontinued Operations

The amendments clarify the requirements of IFRS 5 when an entity changes the method of disposal of an asset (or disposal group) and no longer meets the criteria to be classified as held-for-distribution.

IFRS 7 Financial Instruments: Disclosures

IFRS 7 is amended to clarify when servicing arrangement are in the scope of its disclosure requirements on continuing involvement in transferred financial assets in cases when they are derecognized in their entirety. IFRS 7 is also amended to clarify that the additional disclosures required by Disclosures: Offsetting Financial Assets and Financial Liabilities (Amendments to IFRS 7).

IAS 19 Employee Benefits

IAS 19 has been amended to clarify that high-quality corporate bonds or government bonds used in determining the discount rate should be issued in the same currency in which the benefits are to be paid.

IAS 34 Interim Financial Reporting

IAS 34 has been amended to clarify that certain disclosure, if they are not included in the notes to interim financial statements, may be disclosed “elsewhere in the interim financial report” – i.e. incorporated by cross-reference from the interim financial statements to another part of the interim financial report (e.g. management commentary or risk report).



4 Related party disclosures

Related party balances

As at 31 December, the Group had the following balances outstanding from its related parties:

31 December 2014 31 December 2013Trade receivablesTaçyıldız Örme ve Teks. San. Tic. A.Ş. 506 481Akbulut Tekstil Ticaret ve Sanayi A.Ş. 317 --Ontk Tekstil San. ve Tic. A.Ş. 136 --Anateks Anadolu Tekstil Fabrikası A.Ş.(*) -- 91.930Other -- 488Total 959 92.899Other receivablesÇalık Holding A.Ş.(**) 22.177 --Mahmut Can Çalık 752 --Gap İnşaat Dubai FZE 403 311Çalık Enerji Dubai FZE 240 166Aktif Bank Yatırım Bankası A.Ş. 110 64Gap Pazarlama Dubai FZE 25 96Akbulut Tekstil Ticaret ve San. A.Ş. -- 81Ontk Tekstil San. ve Tic. A.Ş. -- 143Other -- 220Total 23.707 1.081

(*) Anateks Anadolu Tekstil Fabrikası A.Ş. sells the yarn which is produced by processing the cotton purchased from the Group to the other companies in the textile sector in addition to the Group Companies. As at 31 December 2014, since Anateks Anadolu Tekstil Fabrikası A.Ş. is no longer a releted party of the Group, the Group classified as other receivables third parties as at 31 December 2014.(**) As at 31 December 2014, there is no spesific maturity for the receivables due from Çalık Holding A.Ş. and the Group charges the interest to Çalık Holding A.Ş. monthly with an annual interest rate of 18%.



4 Related party disclosures (continued)

Related party balances (continued)

31 December 2014 31 December 2013Trade payablesGap Pazarlama A.S. 27 --Albtelecom 23 --Total 50 --Other payablesÇalık Holding A.Ş. (***) 25.991 121.525Çalık Hava Taşımacılık 1.577 207Albtelecom 23 200Mahmut Can Çalık -- 768Other 10 767Total 27.601 123.467Loans and borrowingsAktifbank Yatırım Bankası A.Ş. 238.421 77.340 238.421 77.340

(***) As at 31 December 2014, there is no spesific maturity for the payables due to Çalık Holding and the Çalık Holding charges the interest to the Group monthly with the annual interest rate of 18% (2013: 17%).

No impairment losses have been recognised against balances outstanding as at 31 December 2014 (31 December 2013:None) and no allowance has been made for impairment losses on balances with the related parties.

Related party transactions

For the year ended 31 December, relared party transactions comprised the following:

2014 2013 Income Expense Income ExpenseAnateks Anadolu Tekstil Fabrikaları A.Ş. 24.608 3.259 -- --Çalık Holding A.Ş. (*) 4.951 16.593 9.322 9.190Çalik Enerji Sanayi ve Ticaret A.Ş. 513 -- 85 9Gap Pazarlama A.Ş. 362 309 202 921Gap Pazarlama Dubai FZE 91 208 70 143Gap İnşaat Dubai FZE 91 29 68 9Çalık Enerji Dubai FZE 93 29 68 65Atayurt Insaat A.S. -- -- 1 --Aktifbank Yatırım Bankası A.Ş. -- 21.940 -- 6.882Çalik Enerji TRM Branch -- -- -- 7Çalık Hava Tasimacilik -- 64 -- 68GAP Insaat Yatırım ve Dış Ticaret A.S. -- -- -- 18Lidya Madencilik Sanayi ve Ticaret A.S. -- -- -- 2Other -- 23 1 2 30.709 42.454 9.817 17.316



4 Related party disclosures (continued)

Related party transactions (continued)

(*) For the year ended 31 December 2014, the transactions with Calık Holding comprised of interest expense amounting to TL 8.934 and foreign exchange income amouting to TL 4.479, and charges of share of holding general administrative expenses amounting to TL 6.558, charges of share of holding marketing and selling expenses amounting to TL 1.101.(**) Anateks(***) Aktifbank

Transactions with key management personnel

On a consolidated basis, key management costs included in general and administrative expenses for the year ended 31 December 2014 amounted to TL 2.034 (2013: TL 1.173).

5 Cash and cash equivalents

At 31 December, cash and cash equivalents comprised the following:

31 December 2014 31 December 2013Cash on hand 110 131Cash at banks 12.693 2.662- Demand deposits 12.693 2.662Other 1.726 --Cash and cash equivalents 14.529 2.793Restricted balances(*) 1.726 --Cash and cash equivalents in cash flow statement 12.803 2.793

(*) Restricted balances of the Group consists of balances deposited against cotton future transactions.

The Group’s exposure to currency risks related to cash and cash equivalents are disclosed in Note 27.



6 Disposal group held for sale

The Group has reclassified assets and liabilities of Çalık Alexandria, Çalık Korea and Çalık USA as “Disposal group held for sale” as the Group plans to sell its production and retail facilities of these subsidiaries. All assets and liabilities of these entities except the cash and cash equivalents have been classified as “Assets held for sale” and “Liabilities held for sale” in the financial statements, respectively.

As at 31 December 2014, assets held for sale and liabilities held for sale are TL 24.657 and TL 7.532 (31 December 2013: TL 24.941 and TL 9.399), respectively, and details are as follows:

Assets held for sale 31 December 2014 31 December 2013Property, plant and equipment 22.373 22.171Inventories 1.592 1.529Other current assets 593 1.160Intangible assets 46 48Prepaid expenses 36 6Other non-current assets 17 16Other receivables -- 11

24.657 24.941

Liabilities held for saleTrade and other payables 7.329 1.003Loans and borrwings 70 8.291Other current liabilities 134 105

7.533 9.399

As at 31 December 2014, the provisions for impairment in value of property, plant and equipment amouting to TL 4.239 (31 December 2013: TL 3.902) and in value of inventories amounting to TL 3.714 (31 December 2013: TL 3.567) were provided.

7 Financial investments

At 31 December, financial investments comprised the following:

Non-current assets 31 December 2014 31 December 2013Available-for-sale financial investments 20.765 21.245 20.765 21.245

Available-for-sale financial investments

As at 31 December, available-for-sale financial investments comprised the following:

31 December 2014 31 December 2013Equity securities not traded in an active market 20.765 21.245 20.765 21.245



7 Financial investments (continued)

The equity securities that are not traded in an active market comprised following:

31 December 2014 31 December 2013 Ownership rate (%) Carrying amount Ownership rate (%) Carriyng amountÇalık Turizm Kültür İnşaat Sanayi ve Ticaret A.Ş. 6,35 17.320 6,35 17.320Aktif Yatırım Bankası A.Ş. 0,30 2.874 0,30 2.874Ataks Tekstil Dış Ticaret A.Ş. 3,10 200 3,10 200Malatya Teknokent Teknoloji Gelişme Bölgesi A.Ş. 5,00 125 5,00 125Çalık Enerji Dağıtım Sanayi ve Ticaret A.Ş. 0,20 9 0,20 172Ayas Rafineri ve Petrokimya A.Ş. -- -- 0,20 125Telemed Telekom A.Ş. -- -- 0,20 108Other -- 237 -- 321 20.765 21.245

Carriying amount of the available-for-sale equity instruments that does not have a quoted market price in an active market and whose fair value cannot be reliably measured is stated at cost after deducting impairment losses, if any.

The movements in financial investments during the years ended 31 December 2014 and 2013 were as follows:

2014 2013As at 1 January 21.245 16.899Additions through capital increases -- 4.376Disposals (sale and redemption) (480) (30)As at 31 December 20.765 21.245



8 Trade receivables and payables

Short-term trade receivables

As at 31 December, short-term trade receivables comprised the following:

31 December 2014 31 December 2013Due from third parties 109.691 94.828Due from related parties(Note 4) 959 92.899Total 110.650 187.727

As at 31 December, short-term trade receivables comprised the following:

31 December 2014 31 December 2013Accounts receivables 74.156 70.039Notes receivables 20.606 11.742Cheques receivables 15.269 13.220Doubtful receivables 1.130 2.454

111.161 97.455Allowances for doubtful trade receivables (-) (1.130) (2.454)Discount on trade receivables (-) (340) (173)Total 109.691 94.828

Movements of allowance for doubtful receivables for the years ended at 31 December were as follows:

31 December 2014 31 December 2013Balance at 1 January 2.454 2.832Allowance for the period(Note 24) 506 560Recoveries of amounts previously impaired (-)(Note 24) (1.830) (815)Foreign currency translation difference -- (123)Total 1.130 2.454

Short-term trade payables

As at 31 December, short-term trade payables comprised the following:

31 December 2014 31 December 2013Due to third parties 48.957 42.409Due to related parties (Note 4) 50 --Total 49.007 42.409

As at 31 December, due to third parties comprised the following:

31 December 2014 31 December 2013Accounts payables 48.957 41.792Notes payable -- 617Total 48.957 42.409

The Group’s exposure to credit and currency risks related to trade receivables and payables and liquidity and currency risks of trade payables are disclosed in Note 27.



9 Other receivables and other payables

Other short term receivables

As at 31 December, other short-term receivables comprised the following:

31 December 2014 31 December 2013Due from related parties (Note 4) 23.707 1.081 Receivables from tax authorities 3.554 3.381Deposits and guarantees given 222 165Other receivables(*) 117.449 14Total 144.932 4.641

(*) The Group has receivables from Anateks Anadolu Tekstil Fabrikası A.Ş., a former related party of the Group, amounting to TL 116.692 as at 31 December 2014 (31 December 2013: trade receivable amounting to TL 91.930)

Other short term payables

As at 31 December, other short-term payables comprised the following:

31 December 2014 31 December 2013Due to related parties (Note 4) 27.601 123.467Deposits and guarantees received 580 534Total 28.181 124.001



10 Inventories

As at 31 December, inventories comprised the following:

31 December 2014 31 December 2013Raw materials 69.060 55.989Finished goods 33.148 32.042Trading goods 20.298 10.266Semi finished goods 12.937 9.229Other inventories 80 65Allowance for impairment in value of inventories (2.421) (2.107)Total 133.102 105.484

As at 31 December 2014, total insurance coverage on inventories is TL 107.884 (31 December 2013: TL 88.095).

As at 31 December 2014, there is no pledges or mortgages on inventories (31 December 2013: none).

Movements of impairment in value of inventories for the years ended at 31 December were as follows:

2014 2013Beginning balance 2.107 1.811Current year provision 314 296Closing balance 2.421 2.107

For the year ended 31 December 2014, a provision for impairment in value of inventories amounting to TL 314 were provided considering the evaluation of obsolete inventories and net reliazable value (31 December 2013: TL 296). Furthermore, included the assets held for sale, there is an impairment of inventories of Çalık Alendria amounting to TL 3.714 as at 31 December 2014 (31 December 2013: TL 3.567).



11 Prepayments and deferred revenue

Current prepayments

As at 31 December, current portion of prepayments comprised the following:

31 December 2014 31 December 2013Advances given 33.209 59.478Prepaid expenses 1.485 257Work advances 451 315Total 35.145 60.050

Non-current prepayments

As at 31 December, non-current prepayments comprised the following:

31 December 2014 31 December 2013Advances given 1.374 --Prepaid expenses 596 443Total 1.970 443

Short-term deferred revenue

As at 31 December, short-term portion of deferred revenue comprised the following:

Short term deferred revenue 31 December 2014 31 December 2013Advances received 3.004 4.281Total 3.004 4.281

12 Investments in equity-accounted investees

Associates

Group holds 34,8% ownership in TJK. Since the equity of equity accounted investee remains uncovered due to recurring losses, the Group’s interests in the equity accounted investees are reduced to nil. Due to the fact that the Group does not have any commitment for the equity accounted investee, incremental losses over the Group’s interests are not recognized. In case of income generation subsequent to the reporting date, excess portion of income over accumulated losses, which were not recognized, are to be accounted in the consolidated financial statements as monitored per each period-end. The Group recognized TL 4.504 losses from its investments in TJK for the year ended 31 December 2013.

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14 Intangible assets

Movements of intangible assets and related accumulated amortisation during the years ended 31 December 2014 and 2013 were as follows:

Rigths Other intangibles TotalCostBalance at 1 January 2013 1.662 3.275 4.937Additions 14 13 27Balance at 31 December 2013 1.676 3.288 4.964

Balance at 1 January 2014 1.676 3.288 4.964Additions 16 -- 16Write off of items that are fully depreciated (55) (130) (185)Disposal -- (22) (22)Balance at 31 December 2014 1.637 3.136 4.773

Accumulated amortisationBalance at 1 January 2013 742 3.185 3.927Current year amortisation 79 35 114Balance at 31 December 2013 821 3.220 4.041

Balance at 1 January 2014 821 3.220 4.041Current year amortisation 39 37 76Write off of items that are fully depreciated (55) (130) (185)Disposals -- (20) (20)Balance at 31 December 2014 805 3.107 3.912Net carrying value at 1 January 2013 920 90 1.010Net book value at 31 December 2013 855 68 923Net book value at 31 December 2014 832 29 861

There is no pledge of mortgage on intangible assets (31 December 2013: none).

15 Other assets and liabilities

Other current assets

31 December 2014 31 December 2013Value Added Tax (“VAT”) receivables 11.761 7.806Advances given to personnel 530 3Income accruals -- 30 12.291 7.839

Other short term liabilities

31 December 2014 31 December 2013Taxes and funds payable 4.576 1.781Other current liabilities 32 199 4.608 1.980



16 Loans and borrowings

As at 31 December, loans and borrowings comprised the following:

Short term loans and borrowings 31 December 2014 31 December 2013Short term bank borrowings 295.182 185.228Current portion of long term loans and borrowings 14.048 53Factoring payables 25.053 2.848Total 334.283 188.129

Long term loans and borrowings 31 December 2014 31 December 2013Long term bank borrowings 48.798 --Total 48.798 --

As at 31 December 2014, the terms and conditions of outstanding loans and borrowings comprised the following:

31 December 2014

CurrencyNominal

interest rate (%) Year of Maturity Face valueCarrying amount

Secured bank borrowings(*) USD 3,00-10,00 2015-2016 213.172 213.827Secured bank borrowings(*) EUR 8,00 2015 46.654 46.654Secured bank borrowings(*) TL 13,00-17,00 2015 79.227 79.005Unsecured bank borrowings USD 4,40-8,00 2015 13.566 13.587Unsecured bank borrowings TL 13,00-14,00 2015 4.903 4.956Factoring payables TL 14,47 2015 25.052 25.052

382.574 383.081

As at 31 December 2013, the terms and conditions of outstanding loans and borrowings were as follows:

31 December 2013

CurrencyNominal

interest rate (%) Year of maturity Face ValueCarrying Amount

Secured bank borrowings(*) USD 4,00-8,00 2014 104.038 105.318Secured bank borrowings (*) EUR 7,00 2014 55.794 55.803Unsecured bank borrowings(*) EUR 8,00-17,95 2014 21.579 22.033Unsecured bank borrowings TL 3,85 2014 2.134 2.138Faktoring payables TL -- 2014 2.837 2.837

186.382 188.129

(*) There is personal suretyship of Ahmet Çalık for bank borrowings.

The repayment terms of the bank borrowings and issued bonds are as follows:

31 December 2014 31 December 20130-3 months 160.584 95.6123-12 months 173.699 89.6691-5 years 48.798 --Total 383.081 185.281



17 Payables related to employee benefits

As at 31 December, payables related to employee benefits comprised the following:

31 December 2014 31 December 2013Due to personnel 1.932 1.777Social security premiums payable 1.074 897 3.006 2.674

18 Provisions

As at 31 December, provisions comprised the following items:

31 December 2014 31 December 2013Short term provisions Short term employee benefits 1.693 1.557Other short term provisions 1.033 162Total short term provisions 2.726 1.719Long term provisionsLong term employee benefits 12.110 11.841Total long term provisions 12.110 11.841Total provisions 14.836 13.560

As at 31 December, short-term and long-term employee benefits comprised the following items:

31 December 2014 31 December 2013Short-termVacation pay liability 1.693 1.557

1.693 1.557Long termEmployee termination benefits 12.110 11.841

12.110 11.841

As at 31 December, other provisions comprised the following items:

Short-term 31 December 2014 31 December 2013Provision for litigations 1.033 162

1.033 162

Reserve for employee severance indemnity

In accordance with the existing labour law in Turkey, the Group entities operating in Turkey are required to make lump-sum payments to employees who have completed one year of service and whose employment is terminated without cause or who retire (age of 58 for women, age of 60 for men) or completed service years of 20 for women or 25 for men, are called up for military service or die. According to change of regulation, dated 8 September 1999, there are additional liabilities for the integration articles.



18 Provisions (continued)

Reserve for employee severance indemnity(continued)

For the years ended 31 December, the movements in the reserve for employee severance indemnity were as follows:

2014 2013Balance at the beginning of the year 11.841 10.025 Interest cost 977 746 Cost of services 370 1.552 Paid during the year (136) (1.568)Actuarial difference (942) 1.086 Balance at the end of the year 12.110 11.841

The reserve has been calculated by estimating the present value of future probable obligation of the Group arising from the retirement of the employees.

Actuarial valuation methods were developed to estimate the Group’s obligation under defined benefit plans. Accordingly, the following actuarial assumptions were used in the calculation of the total liability:

2014 2013Expected rate of salary/limit increase %7,50 %6,74Interest rate %8,89 %7,96

The computation of the liability is predicated upon retirement pay ceiling announced by the Government. As at 31 December 2014, the ceiling amount was TL 3,43 thousand (31 December 2013: TL 3,25 thousand).

Litigation and claims

As at 31 December 2014, the expected cash outflow amount for the pending claims filed against to the Group is TL 1.033 (31 December 2013: TL 162). As at 31 December 2014, the provision for litigation and claims are mainly related to the labor cases against the Group.

Pending tax audits

In Turkey, the tax and other government authorities (Social Security Institution) have the right to inspect the Group’s tax returns and accounting records for the past five fiscal years. The Group has not recognised a provision for any additional taxes for the fiscal years that remained unaudited, as the amount cannot be estimated with any degree of uncertainty. The Group’s management believes that no material assessment will arise from any future inspection for unaudited fiscal years.



19 Commitments and contingencies

Guarantee, pledge and mortgages (“GPM”) in respect of commitment and contingencies realised in the ordinary course of business were given as at 31 December 2014 are as follows:

31 December 2014 Original currency TL EquivalentUSD Euro TL Total

A Total amount of GPMs given in the name of its own legal personality 148 500 1.651 3.404B Total amount of GPMs given in the name of the consolidated subsidiaries and joint ventures -- -- -- --- Total amount of GPMs given in the name of the consolidated subsidiaries -- -- -- --C Total amount of GPMs given to be able to conduct ordinary business transactions to secure payables of third parties -- -- -- --D Other GPMs given -- -- -- --Total 148 500 1.651 3.404

GPMs in respect of commitment and contingencies realised in the ordinary course of business were given as at 31 December 2013 are as follows:

31 December 2013Original currency TL Equivalent

USD Euro TL TotalA Total amount of GPMs given in the name of its own legal personality 1.148 525 316 4.307B Total amount of GPMs given in the name of the consolidated subsidiaries and joint ventures -- -- -- --Total amount of GPMs given in the name of the consolidated subsidiaries -- -- -- --C Total amount of GPMs given to be able to conduct ordinary business transactions to secure payables of third parties -- -- -- --D Other GPMs given -- -- -- --Total 1.148 525 316 4.307

20 Taxation

Turkey

Corporate income tax is levied on the statutory corporate income tax base, which is determined by modifying income for certain tax exclusions and allowances.

Corporate income tax is levied at the rate of 20% (2013: 20%) and advance tax returns are filed on a quarterly basis.

According to the new Corporate Tax Law, 75% (2013: 75%) of the capital gains arising from the sale of properties and investments owned for at least two years are exempted from corporate tax on the condition that such gains are kept under equity as restricted funds within five years from the date of the sale. The remaining 25% of such capital gains are subject to corporate tax.



20 Taxation (continued)

There is also a withholding tax on the dividends paid and is accrued only at the time of such payments. According to the amendments in the tax legislations, which became effective from

24 April 2003, dividends that are paid to the shareholders from the profits of the years between 1999 and 2002 are immune from the withholding tax, if such profits are exempted from corporation tax bases of the companies. As per the decision no.2006/10731 of the Council of Ministers published in the Official Gazette no.26237 dated 23 July 2006, certain duty rates included in the articles no.15 and 30 of the new Corporate Tax Law no:5520 revised. Accordingly, the withholding tax rate on the dividend payments other than the ones paid to the non resident institutions generating income in Turkey through their operations or permanent representatives and the resident institutions, was increased from 10% to 15%. In applying the withholding tax rates on dividend payments to the non resident institutions and the individuals the withholding tax rates covered in the related Double Tax Treaty Agreements are taken into account.

In Turkey, the tax legislation does not permit a parent company and its subsidiaries to file a consolidated tax return. Therefore, provision for taxes shown in the consolidated financial statements reflects the total amount of taxes calculated on each entity that are included in the consolidation.

Under the Turkish taxation system, tax losses can be carried forward to be offset against future taxable income for up to five years. Tax losses cannot be carried back.

In Turkey, there is no procedure for a final and definitive agreement on tax assessments. Companies file their tax returns within four months following the close of the accounting year to which they relate. Tax returns are open for five years from the beginning of the year that follows the date of filing during which time the tax authorities have the right to audit tax returns, and the related accounting records on which they are based, and may issue reassessments based on their findings.

Transfer pricing regulations

In Turkey, the transfer pricing provisions have been stated under the Article 13 of Corporate Tax Law with the heading of “disguised profit distribution via transfer pricing”. The General Communiqué on disguised profit distribution via Transfer Pricing, dated 18 November 2007 sets details about implementation.

If a tax payer enters into transactions regarding sale or purchase of goods and services with related parties, where the prices are not set in accordance with arm’s length principle, then related profits are considered to be distributed in a disguised manner through transfer pricing. Such disguised profit distributions through transfer pricing are not accepted as tax deductible for corporate income tax purposes.

Tax applications for foreign subsidiaries and associate of the Group

Arab Republic of Egypt

The applicable corporate tax rate for the subsidiaries operating in Egypt is 20% (31 December 2013: 20%). Since the Group is operating in free trade zone of Egypt, the Group is not subject to corporate tax.

United Arab Emirates

As at 31 December 2014, the Group has one subsidiary in the United Arab Emirates located in Dubai. There is no federal corporate tax in United Arab Emirates. However, certain taxes are implemented in different sectors in different emirates. As at 31 December 2014, the Group’s subsidiary operating in Dubai is not subject to corporate tax.




Regional government grants

The Company has obtained regional investment incentive certificate for the capacity increase and modernizations at the yarn production facilities at 19 July 2012 and denim production facilities at 2 January 2013 in Malatya.

According to these investments incentive certificates 55% of the investment is going to be compensated by the government. The government is not going to pay this balance in cash, but the tax rate applied to the income generated from this investment is going to be lower (2% instead of 20%). Since the corporate tax discount rate of the investment incentives is 90%, corporate tax rate is going to be 2%, (20% (20%*90%=2%).

Hereunder, the discounted tax rate is going to be applied and the Company is going to make tax savings until the income generated from these investments reach to 55% of the investment. When the uncollected tax amount reach to the government contribution, the standart tax rate will be applied.

As described at the related articles of the Announcement Regarding to the Applications of Arbitraments Concerning Government Grants at Investments (Announcement No: 2009/1) and the special terms on the investment incentive certificates, for acceptance of the inception of the investment, the Company has to invest at least 10% of the total investment amount defined at the certificate and has to apply to the Undersecretariat of Treasury and register the investment amount to the investment incentive certificate. The Company has realized the special terms of investment incentive certificate for the capacity increase and modernizations of the clothing, yarn and denim production facilities in Malatya.

As at 31 December 2014, total amount of investments of the Company within the context of those investment incentive certificates is TL 67.573 with 90% investment contribution rate (31 December 2013: TL 45.439). Unused portion of the government grant amounting to TL 37.165 with 55% incentive rate has been recognised as deferred tax assets (31 December 2013: TL 24.991).

Deduction of research and development

The research and development deduction regulated in Income and Corporation Tax Law, the regulations are introduced under the Law no. 5746. Within the context of this law, in technology centers, research and development centers, public institutions and bodies and research and development and innovation projects supported by foundations established by law or international funds, in pre-competition cooperation projects; all innovation and research and development expenditures made by beneficiaries of technopreneurship capital support and in research and development centers which employ full time equivalent of 500 or more research and development personnel, and also half of the increase in current year’s research and development and innovation expenditures compared to previous years, are deemed as matters of allowance in the identification of public body earnings as per article 10 of the Cooperation Tax Law.

Tax recognised in profit or loss

Income tax expense/benefit for the years ended 31 December comprised the following items:

2014 2013Corporate tax expense (1.394) (423)Deferred tax benefit 13.163 19.401Tax benefit recognised in profit or loss 11.769 18.978Deferred tax benefit/(expense) recognised in other comphrensive income (188) 216Total tax benefit 11.581 19.194




Reconciliation of effective tax rate

The reported income tax benefit for the years ended 31 December are different than the amounts computed by applying statutory tax rate to profit before tax as shown in the following reconciliation:

2014 2013 Amount % Amount %Reported profit/(loss) before taxation 1.240 (17.793)Taxes on reported profit per statutory tax rate of the Company (248) (20) 3.559 (20)Permanent differences: Disallowable expenses (348) (28) (575) (3)Tax exempt income 1.158 93 1.159 7Investment incentives effect 12.174 981 17.061 50Consolidation adjusments -- -- (13) --Effect of different tax rates in foreign jurisdictions (797) (64) (2.024) (11)Effect of share of profit of equity-accounted investees -- -- (901) (5)Others, net (170) (14) 712 4Tax benefit 11.769 948 18.978 60

Current tax assets/liabilities

As at 31 December, current tax assets and liabilities comprised the following:

2014 2013Taxes on income (1.394) (423)Corporation taxes paid in advance 4.187 2.001Current tax assets/(liabilities), net 2.793 1.578

As at 31 December 2014, current tax liabilities on income amounting to TL 64 (31 December 2013: TL 67) is not offset with prepaid taxes amounting to TL 2.857 (31 December 2013: 1.645) since they are related to different tax jurisdictions.

Deferred tax assets and liabilities

Deferred tax is provided in respect of taxable temporary differences arising between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes, except for the differences relating to goodwill not deductible for tax purposes and the initial recognition of assets and liabilities which affect neither accounting nor taxable profit.

Unrecognised deferred tax assets and liabilities

As at 31 December 2014, there is no unregnised deferred tax assets of the Group (31 December 2013:none).




Deferred tax assets and liabilities (continued)

Recognised deferred tax assets and liabilities

Deferred tax assets and deferred tax liabilities at 31 December are attributable to the items detailed in the table below:

2014 2013 Asset Liability Asset LiabilityTrade and other receivables 170 -- 409 --Inventories 507 -- 283 --Property, plant and equipment and intangible asset -- (2.659) -- (3.646)Employee severance indemnity 2.382 -- 2.525 --Provisions 545 -- 62 --Investment incentives 37.165 -- 24.991 --IAS 39 effect on loans and borrowings -- (95) 344 --Other temporary differences -- (59) 13 --Total deferred tax assets/(liabilities) 40.769 (2.813) 28.627 (3.646)Set off of tax (2.753) 2.753 (3.646) 3.646Deferred tax assets/(liabilities) net 38.016 (60) 24.981 --

Movements in deferred tax balances during the year 2014 were as follow:

1 January 2014Recognised

in profit or lossRecognised in other

comprehensive income 31 December 2014 Trade and other receivables 409 (239) -- 170Inventories 283 224 -- 507Property, plant and equipment and intangible asset (3.646) 987 -- (2.659)Employee severance indemnity 2.525 45 (188) 2.382Provisions 62 483 -- 545Investment incentives 24.991 12.174 -- 37.165IAS 39 effect on loans and borrowings 344 (439) -- (95)Other temporary differences 13 (72) -- (59)Total deferred tax assets/(liabilities) 24.981 13.163 (188) 37.956




Deferred tax assets and liabilities (continued)

Movements in deferred tax balances during the year 2013 were as follow:

1 January 2013Recognised

in profit or lossRecognised in other

comprehensive income 31 December 2013 Trade and other receivables 358 51 -- 409Inventories 362 (79) -- 283Property, plant and equipment (4.784) 408 -- (4.376)Intangible assets -- 730 -- 730Employee severance indemnity 1.204 1.105 216 2.525Prepaid expenses 95 (95) -- --Provisions 26 36 -- 62Investment incentives 7.930 17.061 -- 24.991Trade and other receivables (16) 16 -- --IAS 39 effect on loans and borrowings 52 292 -- 344Other temporary differences 137 (124) -- 13Total deferred tax assets/(liabilities) 5.364 19.401 216 24.981

21 Capital and reserves

Paid in capital

As at 31 December 2014, the Company’s statutory nominal value of authorised and paid-in share capital is TL 164.740 (31 December 2013: TL 164.740) comprising of 164.740.000 registered shares (31 December 2013: 164.740.000) having par value of full TL 1 (31 December 2013: full TL 1) each.

As at 31 December, the shareholder structure of the Company based on the number of shares is presented below:

2014 2013TL % TL %

Çalık Holding A.Ş. 82.751 50,23 82.751 50,23Gap İnşaat Yatırım ve Dış Ticaret A.Ş. 42.786 25,97 42.786 25,97Çalık Enerji Sanayi ve Ticaret A.Ş. 37.850 22,98 37.850 22,98Ahmet Çalık 1.313 0,82 1.313 0,82Diğer 40 -- 40 --Total 164.740 100 164.740 100

Legal reserves

The legal reserves are established by annual appropriations amounting to 5% of income disclosed in the Group’s Turkish entities’ statutory accounts until it reaches 20% of paid-in share capital (first legal reserve). Without limit, a further 10% of dividend distributions in excess of 5% of share capital is to be appropriated to increase legal reserves (second legal reserve). The first legal reserve is restricted and is not available for distribution as dividend unless it exceeds 50% of share capital. In the accompanying consolidated financial statements, the total of the legal reserves amounted to TL 23.094 as at 31 December 2014 (31 December 2013: TL 22.899).



21 Capital and reserves(continued)

Translation reserve

The translation reserve comprises all foreign exchange differences arising from the translation of the financial statements of foreign operations.

22 Revenue and cost of sales

For the years ended 31 December, revenue comprised the following:

2014 2013Domestic sales 337.174 222.239Export sales 176.440 157.973Other sales 1.583 7.979Sales discounts (-) (2.662) (1.711)Sales returns(-) (6.251) (2.831)Subtotal 506.284 383.649Cost of sales (-) (406.812) (309.489)Gross profit 99.472 74.160

For the years ended 31 December, cost of sales comprised the following:

2014 2013Changes in raw materials trading goods and auxiliary expenses 328.357 225.966Personnel expenses 33.589 30.905Lighting, gas and water expenses 19.381 20.905Depreciation and amortisation expenses 12.072 13.055Office expenses 3.374 3.030Maintenance and repair expenses 2.226 1.366Insurance expenses 1.061 686Travel and accommodation expenses 164 221Cleaning expenses 111 143Communication and information expenses 104 132Consultancy expenses 83 100Rent expenses 82 49Representation expenses 28 41Taxes, duties and fees other than on income 16 29Other 6.164 12.861

406.812 309.489



23 General and administrative expenses, selling, marketing and distribution expenses, and research and development expenses

For the years ended 31 December, general and administrative expenses comprised the following:

2014 2013Personnel expenses 8.679 7.647Charges from Çalık Holding A.Ş. for participation to expenses 6.558 5.246Taxes, duties and fees other than on income 1.753 136Depreciation and amortisation expenses 1.020 940Consultancy expenses 851 1.161Rent expenses 751 457Travel and accommodation expenses 730 529Insurance expenses 379 279Maintenance and repair expenses 274 212Cleaning expenses 226 176Office expenses 221 123Communication and information expenses 180 131Representation expenses -- 344Other 2.937 3.155

24.559 20.536

For the years ended 31 December, selling, marketing and distribution expenses comprised the following:

2014 2013Personnel expenses 6.428 6.829Advertising and promotion expenses 6.302 4.458Transportation expenses 4.686 3.183Commission expenses 4.345 4.854Travel and accommodation expenses 1.923 1.890Consultancy expenses 1.731 990Office expenses 1.303 973Rent expenses 1.246 580Fair expenses 1.208 1.255Charges from Çalık Holding A.Ş. for participation to expenses 1.101 854Depreciation and amortisation expenses 407 449Representation expenses 396 511Insurance expenses 296 253Cleaning expenses 268 197Communication and information expenses 184 230Maintenance and repair expenses 84 --Other 3.095 4.787 35.003 32.293



23 General and administrative expenses, selling, marketing and distribution expenses, and research and development expenses (continued)

For the years ended 31 December, research and development expenses comprised the following:

2014 2013Personnel expenses 4.360 3.600Travel and accommodation expenses 802 271Consultancy expenses 189 101Representation expenses 133 52Rent expenses 125 5Depreciation and amortisation expenses 67 46Communication and information expenses 28 14Maintenance and repair expenses 15 --Office expenses 5 --Cleaning expenses 3 --Other 892 358 6.619 4.447

For the years ended 31 December, expenses by nature comprised the following:

2014 2013Raw materials and auxiliary expenses ve changes in trading goods 328.357 225.966Personnel expenses 53.056 48.981Lightning, gas and water expenses 19.381 20.905Depreciation and amortisation expenses 13.566 14.490Charges from Çalık Holding A.Ş. for participation to expenses 7.659 6.100Advertising and promotion expenses 6.302 4.458Transportation expenses 4.686 3.183Commission expenses 4.345 4.854Travel and accommodation expenses 3.619 2.911Office expenses 4.903 4.126Maintenance and repair expenses 2.599 1.578Rent expenses 2.204 1.091Consultancy expenses 2.854 2.352Taxes, duties and fees other than on income 1.769 165Insurance expenses 1.736 1.218Fair expenses 1.208 1.255Communication and information expenses 496 507Represantation expenses 557 948Donations -- 1.857Other 13.696 19.820 472.993 366.765



23 General and administrative expenses, selling, marketing and distribution expenses, and research and development expenses (continued)

For the years ended 31 December, personnel expenses comprised the following:

2014 2013Wages and salaries 42.790 36.410Social security expenses 5.221 4.676Severance expenses 1.368 1.568Premiums 1.045 4.274Provision for vacation pay liability 136 1.557Other personnel expenses 2.496 496 53.056 48.981

For the years ended 31 December, depreciation and amortisation expenses comprised the following:

2014 2013Cost of sales 12.072 13.055General and administrative expense 1.020 940Selling, marketing and distribution expense 407 449Research and development expense 67 46 13.566 14.490

24 Other income and expenses

For the years ended 31 December, other income comprised the following:

2014 2013

Interest income from related parties 22.400 6.827Foreign exchange gains, net 7.570 --Catering income 2.868 4.224Collection from doubtful receivables 1.830 815Insurance claim income 194 146Other income from operating activities 1.078 374 35.940 12.386

For the year ended 31 December, other operating expenses comprised the following

2014 2013Interest expense to related parties 10.652 2.989Cost of catering services 2.768 3.998Lawsuit provision expenses 871 33Provision for doubtful receivables 506 560Rediscount interest expense 166 85Foreign exchange losses,net -- 6.280Other expense from operating activities 242 18 15.205 13.963



25 Gains from investing activities

For the years ended 31 December, gains from investing activities comprised the following:

2014 2013Gain on sale of property, plant and equipment 2.930 215Dividend income 458 980Other 46 13 3.434 1.208

26 Finance income and finance costs

For the years ended 31 December, finance costs comprised the following:

2014 2013Interest expense on borrowings 27.925 16.955Foreign exchange losses on borrowings, net 22.195 6.856Factoring expenses 654 3.566Other finance costs 2.755 2.219Total 53.529 29.596

27 Financial instruments – Fair values and risk management

Financial risk management

Overview

The Group has exposure to the following risks from its use of financial instruments:

• credit risk• liquidity risk• market risk

This note presents information about the Group’s exposure to each of the above risks, the Group’s objectives, policies and processes for measuring and managing risks, and the Group’s management of capital. Further quantitative disclosures are included throughout these consolidated financial statements.

Risk management framework

Risk management activities are conducted by a realistic organizational structure and it is fully supported with the commitment of top level management.

Group acts proactively in terms of risk management in order to ensure that its business operations in different industries and regions are not adversely affected as a result of market, operational, liquidity and counterparty risks. Risk Management and internal audit departments within Çalık Holding A.Ş. and at the Group level provide and maintain awareness for different types of risks, including emerging risks, and ensure that appropriate risk management mechanisms are in place.



27 Financial instruments – Fair values and risk management (continued)

Credit risk:

Credit risk is the risk of financial loss to the Group if a customer or counterparty to a financial instrument fails to meet its contractual obligations, and arises principally from the Group’s receivables from customers and investment securities.

The Group’s principal financial assets are cash and cash equivalents, financial investments, trade receivables and other receivables. The Group requires a certain amount of collateral in respect of its account receivable. Credit evaluations are performed on all customers requiring credit over a certain amount on individual level.

At reporting date, there were no significant concentrations of credit risk. The maximum exposure to credit risk is represented by the carrying amount of each financial asset in the consolidated statement of financial position.

31 Aralık 2014 ReceivablesTrade receivables Other receivables

Related party Third party Related party Third party Cash at banks DerivativesMaximum credit risk exposure at reporting date (A+B+C+D) 959 109.691 23.707 121.225 14.689 361Portion of maximum risk covered by guarantees -- -- -- -- -- --A. Carrying value of financial assets that are neither past due nor impaired 959 107.648 23.707 4.533 14.689 361B.Carrying value of financial assets that are past due but not impaired -- 2.043 -- 116.692 -- --C. Carrying value of impaired assets -- -- -- -- -- --Past due (gross carrying amount) -- 1.130 -- -- -- --Impairment (-) -- (1.130) -- -- -- --The part of net value under guarantee with collateral etc -- -- -- -- -- --Not past due (gross carrying amount) -- -- -- -- -- --Impairment (-) -- -- -- -- -- --D. Elements including credit risk on off satatment of financial position -- -- -- -- -- --

31 Aralık 2013 ReceivablesTrade receivables Other receivables

Related party Third party Related party Third party Cash at banks DerivativesMaximum credit risk exposure at reporting date (A+B+C+D) 92.899 94.828 1.081 3.560 2.662 --Portion of maximum risk covered by guarantees -- -- -- -- -- --A. Carrying value of financial assets that are neither past due nor impaired 92.899 94.828 1.081 3.560 2.662 --B.Carrying value of financial assets that are past due but not impaired -- -- -- -- -- --C. Carrying value of impaired assets -- -- -- -- -- --Past due (gross carrying amount) -- 2.454 -- -- -- --Impairment (-) -- (2.454) -- -- -- --The part of net value under guarantee with collateral etc -- -- -- -- -- --Not past due (gross carrying amount) -- -- -- -- -- --Impairment (-) -- -- -- -- -- --D. Elements including credit risk on off satatment of financial position -- -- -- -- -- --




Credit risk (continued)

Impairment losses

The aging of trade receivables at the reporting date was:

2014 2013Gross Impairment Gross Impairment

Not past due 108.607 -- 197.727 --Past due 0-30 days -- -- -- --Past due 31-120 days -- -- -- --Past due 121-365 days 2.043 -- -- --More than one year 1.130 (1.130) 2.454 (2.454)Total 111.780 (1.130) 190.181 (2.454)

Liquidity risk

Liquidity risk arises in the general funding of the Group’s activities and in the management of positions. It includes both risk of being unable to fund assets at appropriate maturities and rates and risk of being unable to liquidate an asset at a reasonable price and in an appropriate time frame. The Group has access to funding sources from banks and keeps certain level assets as cash and cash equivalents. The Group continuously assesses liquidity risk by identifying and monitoring changes in funding required in meeting business goals and targets set in terms of the overall Group strategy.




Liquidity risk (continued)

As at 31 December, the followings are carrying amounts, contractual cash flows and the contractual maturities of financial liabilities are as follows:

2014Carrying

amountContractual

cash flows3 months

or less 3-12 Months 1-5 YearsMore than

five yearNon-derivative financial liabilitiesLoans and borrowings 383.081 393.206 179.007 159.420 54.779 --Trade payables-due to related parties 50 50 50 -- -- --Trade payables-due to third parties 48.957 48.957 48.957 -- -- --Other payable-due to related parties 27.601 27.601 27.601 -- -- --Other payable-due to third parties 580 580 580 -- -- -- 460.269 470.394 256.195 159.420 54.779 --

2013Carrying

amountContractual

cash flows3 months

or less 3-12 Months 1-5 YearsMore than

five yearNon-derivative financial liabilitiesLoans and borrowings 185.281 189.605 117.694 71.911 -- --Factoring payables 2.848 2.848 2.848 -- -- --Trade payables-due to related parties -- -- -- -- -- --Trade payables-due to third parties 42.409 42.409 42.409 -- -- --Other payable-due to related parties 123.467 123.467 123.467 -- -- --Other payable-due to third parties 534 534 534 -- -- -- 354.539 358.863 286.952 71.911 -- --

Market risk

Market risk is the risk that changes in market prices, such as foreign exchange rates, interest rates and equity prices, will affect the Group’s income or the value of its holdings of financial instruments. The objective of market risk management is to manage and control market risk exposures within acceptable parameters, while optimising the return.

Currency risk

The Group is exposed to currency risk through the impact of rate changes on the translation of foreign currency denominated payables and bank borrowings from financial institutions. The currencies in which these transactions primarily are denominated are Euro and USD. Such risk is monitored by the Board of Directors and limited through taking positions within approved limits as well as using derivative instruments where necessary.

In respect of other monetary assets and liabilities denominated in foreign currencies, the Group ensures that its net exposure is kept to an acceptable level by buying or selling foreign currencies at spot rates when necessary to address short-term imbalances.

To minimise risk arising from foreign currency denominated statement of financial position items, the Group sometimes utilises derivative instruments as well as keeping a part of its idle cash in foreign currencies.




Currency risk (continued)

31 December 2014

TL Equivalent USD EUROther

CurrenciesCash and cash equivalents 12.211 1.365 3.206 --Trade receivables 66.842 13.495 12.603 --Other receivables 22.903 9.862 12 --Total foreign currency monetary assets 101.956 24.722 15.821 --Borrowings 274.068 98.070 16.540 --Trade payables 34.612 12.168 2.267 --Other payables 7.046 872 1.781 --Total foreign currency liabilities 315.726 111.110 20.588 --Net statement of financial position (213.770) (86.388) (4.767) --Off balance sheet derivative assets denominated in foreign currency 14.471 6.240 -- --Off balance sheet derivative liabilities denominated in foreign currency (1.698) (732) -- --Net off statement of financial position 12.773 5.508 -- --Net foreign currency position (200.997) (80.880) (4.767) --

31 December 2013

TL Equivalent USD EUROther

CurrenciesCash and cash equivalents 1.991 235 507 --Trade receivables 64.366 10.267 14.458 --Other receivables 849 388 7 --Total foreign currency monetary assets 67.206 10.890 14.972 --Borrowings 163.259 50.347 19.003 --Trade payables 22.160 2.772 5.531 1Other payables 81.655 46.354 (5.884) --Total foreign currency liabilities 267.074 99.473 18.650 1Net position (199.868) (88.583) (3.678) (1)




Sensitivity analysis

A 10% strengthening/weakening of the TL against the other currencies below would have increased/ (decreased) the comprehensive income and profit/loss (excluding the tax effect) as of 31 December 2014 and 2013 as follows

31 December 2014 Profit/(Loss)Weakening of TL Strengthening of TL

Increase/(decrease) 10% of US Dollar parity1-US Dollar net asset/liability (18.755) 18.7552-Hedged portion of US Dollar amounts(-) -- --3-Net effect of US Dollar (1+2) (18.755) 18.755

Increase/(decrease) 10% of EUR parity 4-EUR net asset/liability (1.345) 1.3455-Hedged portion of EUR amounts(-) -- --6-Net effect of EUR (4+5) (1.345) 1.345

Increase/(decrease) 10% of other parities7-Other foreign currency net asset/liability -- --8-Hedged portion of other foreign currency amounts(-) -- --9-Net effect of other foreign currencies (7+8) -- --

TOTAL (3+6+9) (20.100) 20.100

31 December 2013- Profit/(Loss)Weakening of TL Strengthening of TL

Increase/(decrease) 10% of US Dollar parity1-US Dollar net asset/liability (18.906) 18.9062-Hedged portion of US Dollar amounts(-) -- --3-Net effect of US Dollar (1+2) (18.906) 18.906

Increase/(decrease) 10% of EUR parity 4-EUR net asset/liability (1.080) 1.0805-Hedged portion of EUR amounts(-) -- --6-Net effect of EUR (4+5) (1.080) 1.080

Increase/(decrease) 10% of other parities7-Other foreign currency net asset/liability -- --8-Hedged portion of other foreign currency amounts(-) -- --9-Net effect of other foreign currencies (7+8) -- --

TOTAL (3+6+9) (19.986) 19.986




Interest rate risk

The Group’s operations are subject to the risk of interest rate fluctuations to the extent that interest-earning assets and interest-bearing liabilities mature or reprise at different times or in differing amounts. In the case of floating rate assets and liabilities the Group is also exposed to basis risk, which is the difference in reprising characteristics of the various floating rate indices, such as six months Libor and different types of interest. Risk management activities are aimed at optimizing net interest income, given market interest rate levels consistent with the Group’s business strategies.

Profile

As at 31 December, the interest rate profile of the Group’s interest-bearing financial instruments was as follows:

2014 2013Fixed rate instrumentsFinancial assets 138.768 121.525Financial liabilities 409.072 188.129

Fair value sensitivity analysis for fixed rate instruments

The Group does not account for any fixed rate financial assets and liabilities at fair value through profit or loss and the Group does not designate derivatives (interest rate swaps) as hedging instruments under fair value hedge accounting model. Therefore, a change in interest rate as of the reporting date would not affect profit or loss and equity.

Capital management

The Group’s objectives when managing capital include:

• to comply with the capital requirements required by the regulators of the financial markets where the Group operates;• to safeguard the Group’s ability to continue as a going concern so that it can continue to provide returns for shareholders and benefits

for other stakeholders; and• to provide an adequate return to shareholders.

The Group’s debt to equity ratio at the end of year was as follows:

2014 2013Total liabilities 493.380 386.500Less: cash and cash equivalents 14.529 2.793Less: deferred revenue 3.004 4.281Net debt 475.847 379.426

Equity 189.835 167.061Debt to equity ratio at 31 December 2,51 2,27




Fair value information

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date in the principal or in its absence, the most advantageous market to which the Group has access at that date.

When available, the Group measures the fair value of an instrument using the quoted price in an active market for that instrument. A market is regarded as active if transactions for the asset or liability take place with sufficient frequency and volume to provide pricing information on an ongoing basis. If there is no quoted market price in an active market, then the Group uses valuation techniques that maximise the use of relevant observable inputs and minimise the use of unobservable inputs.

31 December 2014 31 December 2013 Carrying amount Fair value Carrying amount Fair valueLoans and receivablesCash and cash equivalents 14.529 14.529 2.793 2.793Trade receivables 110.650 110.650 187.727 187.727Derivatives 361 361 -- --Other receivables 144.932 144.932 4.641 4.641Total assets 270.472 270.472 195.161 195.161

Financial liabilitiesBorrowings 383.081 383.081 188.129 188.129Trade payables 49.007 49.007 42.409 42.409Other payables 28.181 28.181 124.001 124.001Total liabilities 460.269 460.269 354.539 354.539

The Group estimated that the carrying values of financial assets and liabilities approximate their fair values due to their short-term nature.

Fair value hierarchy

The fair value hierarchy consists of three levels, depending upon whether fair values are determined based on quoted prices in an active market (Level 1), valuation techniques with observable inputs (Level 2) or valuation techniques that incorporate inputs which are unobservable and which have significant impact on the fair value of the instrument (Level 3):

The Group measures fair values using the following fair value hierarchy, which reflects the significance of the inputs used in making the measurements.

• Level 1: This category includes inputs that are quoted market prices (unadjusted) in active markets for identical instruments. These are instruments where the fair value can be determined directly from prices which are quoted in active, liquid markets and where the instrument observed in the market is representative of that being priced in the Group’s portfolio.




Fair value information (continued)

Fair value hierarchy (continued)

• Level 2: This category includes inputs other than quoted prices included within Level 1 that are observable either directly (i.e. as prices) or indirectly (i.e. derived from prices). This category includes instruments valued using: quoted market prices in active markets for similar instruments; quoted prices for identical or similar instruments in markets that are considered less than active; or other valuation techniques in which all significant inputs are directly or indirectly observable from market data.

• Level 3: This category includes all instruments where the valuation technique uses inputs based on unobservable data, which could have a significant effect on the instrument’s valuation. This category includes instruments that are valued based on quoted prices for similar instruments where significant, unobservable adjustments or assumptions are required to reflect differences between instruments. Unobservable in this context means that there is little or no current market data available from which the price at which an arm’s length transaction would be likely to occur can be derived.

Financial instruments measured at fair value

The table below analyses financial instruments measured at fair value, by the level in the fair value hierarchy into which the fair value measurement is categorised. The amounts are based on the values recognised in the consolidated statement of financial position.

31 December 2014 Level 1 Level 2 Level 3 TotalFinancial assets Derivatives -- 361 -- --

-- 361 -- --

28 Subsequent events

None.


Gap Güneydoğu Tekstil Sanayi ve Ticaret Anonim Şirketi and its SubsidiariesSupplementary Information Convenience Translation to USD31 December 2014

Appendix: Supplementary information

The USD amounts shown in the consolidated statement of financial position and consolidated statement of profit or loss and other comprehensive income on the following pages have been included solely for the convenience of the reader. For the current period’s consolidated financial statements, USD amounts are translated from TL consolidated financial statements using the official TL exchange rate of 2,3189 TL/USD prevailing on 31 December 2014 and TL consolidated statement of profit or loss and other comprehensive income using TL average exchange rate of 2,1863 TL/USD prevailing on for the year ended 31 December 2014. For the prior year’s financial statements, USD amounts are translated from TL financial statements using the official TL exchange rate of 2,1343 TL/USD prevailing on 31 December 2013 and TL consolidated statement of profit or loss and other comprehensive income using TL average exchange rate of 1,9033 TL/USD prevailing on for the year ended 31 December 2013.

Such translation should not be construed as a representation that the TL amounts have been converted into USD pursuant to the requirements of IFRSs or Generally Accepted Accounting Principles in the United States of America or in any other country.


Gap Güneydoğu Tekstil Sanayi ve Ticaret Anonim Şirketi and its SubsidiariesConsolidated Statement of Financial Position As at 31 December 2014 (Amounts expressed in thousands of USD unless otherwise stated.)

Appendix: Supplementary information (continued)

ASSETS 31 December 2014 31 December 2013Current assetsCash and cash equivalents 6.265 1.309 Trade receivables 47.717 87.957

Due from related parties 414 43.527 Due from third parties 47.303 44.430

Other receivables 62.500 2.174 Due from related parties 10.223 506 Due from third parties 52.277 1.668

Inventories 57.399 49.423 Derivative 156 --Prepayments 15.156 28.136 Current tax assets 1.232 771 Other current assets 5.300 3.673 Subtotal 195.725 173.443Assets held for sale 10.633 11.686 Total current assets 206.358 185.129

Non- current assetsFinancial investments 8.955 9.954 Investments in equity-accounted investees -- --Property, plant and equipment 61.701 51.937 Intangible assets 371 432

Other intangible assets 371 432 Prepayments 850 208 Deferred tax assets 16.394 11.705 Total non-current assets 88.271 74.236

Total assets 294.629 259.365


Gap Güneydoğu Tekstil Sanayi ve Ticaret Anonim Şirketi and its SubsidiariesConsolidated Statement of Financial Position (continued) As at 31 December 2014 (Amounts expressed in thousands of USD unless otherwise stated.)


LIABILITIES 31 December 2014 31 December 2013Short term liabilitiesShort term loans and borrowings 138.098 88.121Short term portion of long term loans and borrowings 6.058 25Trade payables 21.134 19.870

Due to related parties 22 --Due to third parties 21.112 19.870

Employee benefit liabilities 1.296 1.253Other payables 12.153 58.099

Due to related parties 11.903 57.849Due to third parties 250 250

Deferred revenue 1.296 2.006Current tax liabilities 28 31Short term provisions 1.176 806

Short term employee benefits 730 730Other short term provisions 446 76

Other short term liabilities 1.991 927Subtotal 183.230 171.138Liabilities held for sale 3.248 4.404Total short term liabilities 186.478 175.542Long term liabilitiesLong term loans and borrowings 21.043 --Long term provisions 5.222 5.548

Long term employee benefits 5.222 5.548Deferred tax liabilities 26 --Total long term liabilities 26.291 5.548Total liabilities 212.769 181.090EQUITYEquity attributable to the owners of the CompanyShare capital 92.415 92.415Legal reserves 10.818 10.729Other comprehensive income will never be reclassified to profit or loss (175) (520)Other comprehensive income that is or may be reclassified to profit or loss (17.379) (10.640)Accumulated losses (16.642) (17.072)Profit for the year 5.138 519Total equity attributable to the owners of the Company 74.175 75.431Total non-controlling interests 7.685 2.844Total equity 81.860 78.275Total equity and liabilities 294.629 259.365


Gap Güneydoğu Tekstil Sanayi ve Ticaret Anonim Şirketi and its SubsidiariesConsolidated Statement of Profit or Loss and Other Comprehensive Income For the Year Ended 31 December 2014 (Amounts expressed in thousands of USD unless otherwise stated.)


2014 2013Revenue 231.571 201.570 Cost of sales (186.073) (162.607)Gross profit 45.498 38.963

General and administrative expenses (11.233) (10.790)Selling, marketing and distribution expenses (16.010) (16.967)Research and development expenses (3.027) (2.336)Other income 16.439 6.508 Other expenses (6.955) (7.336)Operating profit 24,712 8.042

Gains from investing activities 1.571 635 Losses from investing activities (1.231) (109)Share of loss of equity accounted investees, net of taxes -- (2.366)Operating profit before finance costs 25.052 6.202

Finance income -- --Finance costs (24.483) (15.550)Net finance costs (24.483) (15.550)Profit/(loss) before tax from continuing operations 569 (9.348)Current tax expense (639) (222)Deferred tax benefit/(expense) 6.020 10.193 Total tax benefit 5.381 9.971 Profit for the year 5.950 623

Total profit attributable to:Owners of the Company 5.138 519 Non-controlling interests 812 104 Net profit for the year 5.950 623


Gap Güneydoğu Tekstil Sanayi ve Ticaret Anonim Şirketi and its SubsidiariesConsolidated Statement of Profit or Loss and Other Comprehensive Income For the Year Ended 31 December 2014 (Amounts expressed in thousands of USD unless otherwise stated.)


2014 2013

Other comprehensive income

Items that will never be reclassified to profit or lossDefined benefit obligation actuarial differences 431 (569)Tax on defined benefit obligation actuarial differences (86) 112

Items that are or may be reclassified to profit or lossForeign currency translation differences for foreign operations and reporting currency translation differences (6.734) 3.464

Total other comprehensive income (6.389) 3.007

Total comprehensive income (439) 3.630

Total comprehensive income attributable to:Owners of the Company (1.251) 3.526 Non-controlling interests 812 104 Total comprehensive income (439) 3.630

Contents

Gap Güneydoğu Tekstil in BriefKey Financial and Operational Indicators MilestonesOur Mission, Vision and Values Certifications

Message from the Chairman Board of DirectorsMessage from the General Manager Senior Management

ProductionSales & Marketing InvestmentsResearch & Development and Product Development

Human Resources Occupational Health & Safety The EnvironmentCorporate Social Responsibility & Society

Independent Audit Report, Financial Tables and Footnotes

0206081216

18222428

52545658

61

32384248

Gap Güneydoğu Tekstil at a Glance

Management

Operations

Sustainability

Financial Tables

2014The Creation of Success

Gap Güneydoğu Tekstil

2014 Annual Report

Gap G

üneydoğu Tekstil 2014 Annual R

eport

Head OfficeKeresteciler Sitesi, Fatih Cad. Ladin Sok. No: 1734169 Merter, IstanbulT: +90 (212) 459 26 26 pbxF: +90 (212) 677 41 17www.calikdenim.com/tr

Factory Gap Güneydoğu Tekstil San. ve Tic. A.Ş.1. Organize Sanayi Bölgesi 2. Cadde No: 644900 Yeşilyurt, Malatya T: +90 (422) 237 54 18 F: +90 (422) 237 54 17

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