Annual Report 2020

ANNUAL REPORT 2020 WE PROTECT all the values you produce with care With our innovative, sustainable, recyclable and customized solutions, we protect all the values you produce. Driving for Better Together! STRONG LEADERSHIP, STRONG COMMITMENTS

Aiming to be one of the most successful, sustainable and responsible companies in the world, International Paper strives to improve people’s lives, the planet and our company’s performance by transforming renewable resources into products people depend on every day.

OUR FACTORIES

Annual Report 2020 3 2013 MILESTONES 2010

2001 Purchased DS Smith Group’s Turkey International Paper acquired Hacı operations and Ömer Sabancı Holding’s shares 1998 expanded into new and became the majority owner. Acquisition of Kav Ambalaj Sanayi geographic areas with ve Ticaret (Kav Packaging Industry The company was renamed facilities in Çorlu and Olmuksan International Paper and Trade), adding their Bursa and Çorum. 1984 Hacı Ömer Sabancı Manisa Plants. Ambalaj Sanayi ve Ticaret Holding established (Olmuksan International Paper an equal partnership Packaging Industry and Trade). 1968 Acquired by Hacı Ömer joint venture with Sabancı Holding and International Paper. registered as Olmuksa Mukavva Sanayi ve Founded as Olmuk Ticaret (Olmuk Cardboard Mukavva Sanayi Industry and Trade). ve Ticaret (Olmuk Cardboard Industry and Trade).

The IP WAY We do the right things, in the right ways, for the right reasons, all of the time. We call this the IP Way.

THE IP WAY FORWARD is how we go beyond just doing the right things; it’s how we create value for all stakeholders. We do this by:

• Sustaining Forests • Investing in People • Improving the Planet • Creating Innovative Products • Delivering Inspired Performance

A reliable business partner At Olmuksan International Paper we turn paper into corrugated cardboard, and corrugated cardboard into packaging. Our distinguishing feature is our principled approach. We believe that the key to the success of Olmuksan International Paper, with its half century history, is its customer-focused approach. We will always continue to be a reliable business partner, produce to highest standards, maintain our growth targets, and develop innovative solutions that create value for our customers with more than 800 engaged employees.

THE IP WAY FORWARD is our strategic framework to pursue our vision to be among the most successful, sustainable and responsible companies in the world. We do this by:

Sustaining FORESTS

Our entire business depends upon the sustainability of forests. We will continue to lead the world in responsible forest stewardship to ensure healthy and productive forest ecosystems for generations to come.

Investing in PEOPLE

We make sustainable investments to protect and improve the lives of our employees and mobilize our people, products and resources to address critical needs in the communities where our employees live and work.

Improving our PLANET

We tackle the toughest issues in our value chain, reduce our environmental footprint and promote the long-term sustainability of natural capital.

Innovative PRODUCTS

We create innovative, sustainable and recyclable products that help our customers achieve their objectives.

Inspired PERFORMANCE

We deliver long-term value for all stakeholders by establishing advantaged positions in attractive, fi ber-based market segments with safe, effi cient manufacturing operations near sustainable fi ber sources.

IPWF Flyer A6lang final EN.indd 1 04.08.17 14:55 NORTH AMERICA $ 17 billion

ties ivi ct EUROPE, MIDDLE A EAST & AFRİCA Printing LATIN AMERICA Papers :15% $ 2.8 billion founded $ 0.8 billion 1898 Packaging: Global 73% Cellulose Fibers:12% GLOBAL NET SALES 2020 48,000 TOTAL: $ 20,6 BILLION employees

INTERNATIONAL PAPER IN BRIEF • With its history of well over a century, International Paper is a world leader in packaging and paper.

• Headquartered in Memphis, Tennessee, USA; serving more than 25.000 customers in 150 countries.

• One of Fortune Magazine’s Most Admired Companies list 18 times

• Chosen World’s Most Ethical Company for 15 consecutive years by the Ethisphere Institute.

• Awarded the Climate Leadership Award by the USA’s Environmental Protection Agency in 2011.

• We have reduced air emissions by 46 % and waste sent to landfill by 15 % compared with 2010.

• Planted approximately 10 billion trees and donated 1.5 million hectares of forestry land for conversation.

• 100% of its timber-based raw material is certified from lawful and monitored sources.

THE IP WAY FORWARD is our strategic framework • Reduced greenhouse gas emission by 73% in Europe since 1990. to pursue our vision to be among the most • Meets 71% of its global energy needs with renewable biomass. successful, sustainable and responsible companies in the world. We do this by:

Annual Report 2020 5 Sustaining FORESTS

Investing in PEOPLE

Improving our PLANET

We tackle the toughest issues in our value chain, reduce our environmental footprint and promote the long-term sustainability of natural capital.

Innovative PRODUCTS

We create innovative, sustainable and recyclable products that help our customers achieve their objectives.

Inspired PERFORMANCE

IPWF Flyer A6lang final EN.indd 1 04.08.17 14:55

THE AGENDA OF THE ORDINARY GENERAL ASSEMBLY

OLMUKSAN INTERNATIONAL PAPER AMBALAJ SANAYİ VE TİCARET ANONİM ŞİRKETİ AGENDA OF THE ORDINARY GENERAL ASSEMBLY MEETING FOR THE YEAR 2020 to be held on 29 March 2021

1. Commencement of the meeting and designation of the Presiding Board, 2. Authorising the Presiding Board to sign the minutes of the General Assembly meeting, 3. Reading and discussion of the activity report of the Board of Directors for the year 2020, 4. Reading of the report of the independent auditing firm for the year 2020, 5. Giving information to the shareholders about the amounts and beneficiaries of the donations and contributions made during the year 2020, 6. Reading, discussion and approval of the financial statements for the year 2020, 7. Discharge of the members of the Board of Directors from liability for their activities in the year 2020, 8. Determination of the use of the net profit and decision about distributing or not distributing a dividend for the year 2020, 9. Appointment of the members of the Board of Directors and determination of their terms of office, 10. Determination of the gross directorship fees of the members of the Board of Directors, 11. Determination of the upper limit for donations in the year 2021, 12. Approval of the proposal of the members of the Board of Directors regarding the designation of the independent auditing firm for auditing the 2021 financial statements and reports, 13. Giving permission to the chairman and the members of the Board of Directors for transactions as listed in Articles 395 and 396 of the Turkish Commercial Code in the year 2021; providing information to the shareholders regarding any such transactions that took place in the year 2020 in line with the Corporate Governance Communiqué issued by the Capital Markets Board, 14. Submission of information on the profit and benefits in returns of collaterals, liens, encumbrances and sureties granted in favor of third parties in the year 2020 in line with the regulations issued by the Capital Markets Board.

OLMUKSAN INTERNATIONAL PAPER AMBALAJ SANAYİ VE TİCARET ANONİM ŞİRKETİ

Annual Report 2020 7 Dear Shareholders,

The year 2020 was marked by the COVID-19 pandemic that heavily impacted economies, businesses and people around the globe. The Turkish economy however was among the few to grow in 2020, achieving a plus of 1.8% in GDP over the year due to industry investments and strong consumer spend. The year had started strong with an increase of 4.5% in Q1 before the first Covid-19 cases appeared in the country in March, followed by a drop of -9% in Q2 and Q3, ending with a strong finish of +5.9% in the final quarter. The Turkish Lira remained under pressure and very volatile seeing significant swings in foreign exchange rate vs. the USD from 5.96TL at the start of the year up to the historical peak of 8.48TL in November.

At Olmuksan IP, in 2020, despite the difficult circumstances, we were able to increase our sales volume by 12% and our sales revenues by 21% compared to 2019, resulting in a profitability improvement of 87%. Key drivers were strong and reliable operations along with our business development efforts specifically in the Marmara region, with exports, and in the HQP segment.

At all times, we continued to deliver corrugated packaging for our customers, therefore playing a key role in ensuring the continuity of the supply chains for critical goods in the country. We have taken and will continue to take all necessary measures to protect the health and safety of our employees, contractors and visitors.

Finally, in 2020 International Paper announced their intent to explore strategic options regarding their majority shareholding in Olmuksan IP, resulting in an agreement being reached in January 2021 between International Paper and the Mondi Group. This move reflects the International Paper strategy to focus on investments in the Packaging business in EMEA that enable the group to have an advantaged position serving attractive markets. It is expected that the transaction will be completed in Q2 2021, subject to certain closing conditions and regulatory approvals. Becoming part of the Mondi Group, already a well-established corrugated packaging operator in Turkey, would be good news for the Olmuksan team and customers. Mondi is one of the world’s leading packaging companies. They operate globally, employing around 26,000 people with some 100 production sites across more than 30 countries.

On behalf of the Board of Directors, I sincerely thank all of our employees for their efforts and loyalty to continuously improve the performance of Olmuksan International Paper, all our partners for their support, all our customers for their loyalty, and all our suppliers and other business partners for the reliable cooperation.

I sincerely believe that Olmuksan IP has very favorable years and continued success ahead of it.

Best regards.

Eric Gerard Michel Chartrain Chairman of the Board of Directors Dear Stakeholders,

The year 2020 will make history as a year when a very unusual order was built, and almost the entire world population was affected from healthcare, social, cultural and economic standpoint not only in Turkey but also in the entire world. Impacts of Covid-19 virus that broke out in the Far East in late 2019 jumped to the pother regions of the world, starting from early 2020, and turned into a pandemic. Thanks to Covid-19 committee we established for closely following latest developments and taking necessary measures before March when our country heard the news on the first positive case, we, Olmuksan IP, started acting with the awareness that looking out for health and safety of our employees is our most important responsibility and we’re still keeping an eye on this matter.

Throughout this process, we realized, once again, how important the corrugated cardboard box, our product, is as a link during the supply chain process for the sake of reaching basic materials such as healthcare products, hygiene and foodstuff which are required for sustainability of the community.

In this framework, 2020 was a year with lots of ups and downs during which we managed several uncertainties in general and we faced different fluctuations during every quarter. During the first quarter of the year, we started off with a really strong growth, recording an increase in our sales volume with 20% in terms of tonnage. During the second quarter, however, increased demand for basic necessities, driven by the pandemic, had a positive reflection, yet we suffered from a drastic demand shrinkage in machinery industry and sectors based on export. The tourism sector that almost came to a standstill, during the Q3, due to the pandemic, had a negative impact upon many sectors. In the last quarter of the year, recovery in our economy also had a positive reflection upon us, predominantly driven by loosening of restrictions across countries. In the meantime, fluctuations faced not only in Turkey but also on a global scale gave rise to raw material supply problems to a certain extent.

2020 was a year when we completed some investments initiated in the preceding year and we commissioned such investments. Our investments that helped increase the capacity and enabled us to improve our high quality printing capability were completed and we started taking a share from the market in the field of high quality printed product groups. Our processes in this regard are getting stronger and stronger and we’re broadening our range of products that may cater to our customers’ expectations.

We have set targets for us not only in domestic sales but also export. Our export department new structuring process of which we have just finished recorded a growth higher than the overall company growth with some limited customer contacts, despite travel and international trade restrictions introduced during the pandemic.

Thanks to self-sacrificing efforts of our employees in an environment filled with uncertainties, we, Olmuksan IP, completed the year 2020 with a growth by 12 % in sales volume by tonnage and by 21% in turnover when compared to the previous year. Strong cost management, portfolio structuring and pricing discipline we demonstrated helped us enter into the year 2021 with more confident steps.

I do believe that, in the days to come, we’ll be able to produce products adding value to our customers and further strengthen our existence in the market and we’ll record a profitable and sustainable growth, and I would like to thank all of our employees and stakeholders.

Best regards.

Yılmaz Selçuk General Director

Annual Report 2020 9 BOARD OF DIRECTORS

Eric Gerard Michel Chartrain Jean-Marc Henri Anne Servais Chairman Vice Chairman (March 2018-March 2021) (March 2018-March 2021)

Ariane Marie-Claire Jacqueline Goffin David John Higgins Member Member (July 2018-March 2021) (March 2018-March 2021)

Lale Ergin Ziya Engin Tunçay Member Member (March 2020-March 2021) (March 2018-March 2021) BOARD OF DIRECTORS

Eric Gerard Michel Chartrain Chairman of the Board Eric Gerard Michel Chartrain was born on 7 October 1963. He graduated from Paris School of Organic and Mineral Chemistry (ESCOM) in 1986 and has a master’s degree in France UTC Compigne from Process Engineering department. Chartrain joined International Paper in 1999 as the manager of the Saillat paper factory in France. Between 2001 and 2006, he worked in various manager positions in France and in Europe. Between 2006 and 2009, he carried out his duties as Vice President of Production and Technology in Europe, Middle East and Africa (EMEA) regions. Between 2006 and 2016, he performed as General Manager and Vice President of European Paper in the same region (EMEA). Since April 2016, Eric Chartrain has worked as the Vice President and the General Manager of International Paper’s corrugated packaging business in Europe, the Middle East and Africa (EMEA) region.

Jean-Marc Henri Anne Servais Vice President of the Board Jean-Marc Servais, born in 29 June 1968 has graduated from Economy faculty of Institut Catholique des Hautes Etudes Commerciales (Bruxelles, Belgium) in 1990 and holds a Bachelor’s Degree from Ecole Superieure des Sciences Fiscales (Bruselles, Belgium). Prior to joining International Paper in 2009 as Tax Director of Europe, the Middle East and Africa, he worked in various financial positions at Guardian Industries, RR Donnelly, FedEx, KPMG and Ernst & Young. Since November 2013, Jean-Marc Servais worked as Finance Director for the corrugated packaging business of International Paper in Europe , the Middle East and Africa and since September 2019, he has become the Director for Strategic Projects for EMEA.

Ariane Marie-Claire Jacqueline Goffin Board Member Ariane Goffin, born in 20 September 1978, has a Master’s Degree in Law from UCL and Gent University and English Commercial Law Diploma from a law school in London, England. Prior to joining International Paper, she worked as a lawyer for Ashurst LLP in Belgium and the United Kingdom, she was appointed to European Investment Bank for a year. Ariana Goffin is a registered lawyer before Brussels Bar and United Kingdom Lawyers Association and a member of IBJ (Belgian Consultants association). Since February 2008, Ariana Goffin works as Legal Advisor of International Paper in Europe, Middle East and Africa (EMEA) region. She started her position by working for European Papers; since 2012 she has been working for packaging department. David John Higgins Board Member David Higgins, born in 6 August 1970, graduated from university College Dublin, Ireland and has a Master’s degree from Strathclyde University Glasgow Scotland Great Britain. Prior to joining International Paper, Mr. Higgins undertook various roles in marketing, communications and public relations areas at Deloitte, PricewaterhouseCoopers and the European Commission. David Higgins has a Bachelor’s Degree from University College Dublin, Ireland and a Masters Degree in marketing from the Strathclyde University Glasgow, Scotland. Since October 2007, David Higgins has been working as Communications, Government Affairs, and Sustainability Director at International Paper in the EMEA region. In August 2009, he undertook the sustainability responsibilities of the Company in the region. In addition to all internal and external communication responsibilities in this region, he is also responsible for the official relations with the EU member countries.

Lale Ergin Independent Board Member After graduating from Middle East Technical University with an MS Business Administration degree in 1996, MsErgin completed the Executive MBA program at Koç University in 2001. In her 23 years of professional experience at the Borusan Group, she has established the strategy, business development, M&A and innovation functions groupwide and assumed the leadership role in all these functions for many years. Within this role, she was responsible from the preparation and management of the Group portfolio strategy, challenging the step growth investment feasibilities on behalf of the shareholder, managing the merger, acquisition, divestment and partnership projects of the whole Group companies and incubation of new innovative, disruptive business models. She has also co-led the digital transformation project among the Group. Ms Ergin has been appointed as one of the 3 Executive Committee members as of the beginning of 2018 and she has assumed direct responsibility of 4 Group subsidiaries, namely, Borusan Lojistik, Borusan EnBW Enerji, Supsan and Borusan Manheim being the Executive Board Member in all these companies. She was also a long-term board member in many of Borusan Group subsidiaries. Seeking for a new direction in her professional career, Ms Ergin has resigned from Borusan Holding as of end of June 2019. She is now working on an entrepreneurial business venture where she’ll be the co-founder and the managing director. Ms Ergin is a Member of the Advisory Board of Corporate Change Academy (CCA), also an active member in TÜSİAD and YPO mostly focusing on innovation and entrepreneurship work groups and initiatives. Ziya Engin Tunçay Independent Board Member Ziya Engin Tuncay was born in 1 January 1952. He was graduated from Department of Economy and Management of Ankara Economical and Commercial Sciences Academy. He has been the chariman of the board of AkçanSA A.Ş, ÇimSA A.Ş, SaSA A.Ş, BosSA A.Ş, YunSA A.Ş, ExSa A.Ş, ExSA UK Ltd, ExSA Americas, ExSA Israel, ExSA Spain, Advansa BV, Advansa GMBH, DFD Logistics A.Ş, Dlg Tekstile A.Ş, International Trading Team UK Ltd and a member of board of DupontSA BV, BriSA A.Ş, Esas Holding A.Ş. He was elected as an independent Board Member to our Company on 8 February 2017.

Annual Report 2020 11 EXECUTIVE BOARD

Yılmaz Selçuk Özden Erol Dündar Semih Çelebi Gözde İçhedef Erküçük General Manager Financial Director Supply Chain and Operations Human Resources Director Director

Mustafa Durukan Sibel Seğmen Erim Tamer Parla Duygu Özkurt Purchase and Logistics Director Corporate Development Sales Director BIM Manager of Strategic IT Director Projects and Turkey Operations

Hasan Tankut Özcan Mustafa Kemal Cirit Tamer Yüzüncü Selda Ercantan Aksoy Marmara Region General Adana Plant General Manager Bursa Plant Manager Gebze Plant General Manager Manager

Özay İleri Özdemir Hikmet Şakar Çorum Plant General Manager İzmir Plant General Manager EXECUTIVE BOARD

■ Yılmaz Selçuk - General Manager ■ Mustafa Durukan - Purchase and Logistics Director Born in 1973, he was graduated from the Boğaziçi University Born in 1972, he graduated from Çukurova University, Department of Mechanical Engineering. He has been Department of Mechanical Engineering and he has a Masters working in our company since 2000. He was appointed as Degree from Marmara University Management Sciences. the Production Manager in 2004 after carrying out the tasks He started his career at DupontSA as Purchase Expert in of planning engineering, quality assurance engineering and 1998, and then he became Department Chief and Materials production engineering in Bursa Factory. In 2011, he was Management Leader. He worked in AdvanSA in England for 1 appointed as Factory Manager to Gebze Factory. Between year and after returning Turkey, he continued his management 2011 and 2018, he continued to work as Gebze Factory position at the same company. Lastly, he worked as Supply General Manager and Bursa and Çorlu Factory General Chain Director in SASA Polyester A.Ş. Since 1 September Manager. After shutdown of Çorlu Factory, he had continued 2016, he has been working as Olmuksan International Paper to work as Bursa Factory General Manager and Anadolu Purchase and Logistic Director. Region and National Sales Genaral Manager between 2019 and 2020. He has been currently working as General Manager ■ Sibel Seğmen Erim - Corporate Development Director at Olmuksan International Paper since May,2020. Born in 1973 in Adana, Sibel Seğmen Erim graduated from ■ Özden Erol Dündar - Financial Director Istanbul University department of Management. She started her career at Arthur Andersen as an auditor in 1995 and After graduating from Boğaziçi University, Özden Erol Dündar, continued at Gate Gourmet and Diego. At Diego, she started who started her career as a Financial Analyst in Gillette working in 2000 as Financial Reporting, Resoultion Support in 1996, served as Financial Analysis Group Manager and and Inovation Manager, and then she continued as Strategic Corporate Finance Group Manager at P&G. Özden Erol Dündar Planning and Businness Development Manager. Between continued her career as a Finance Director in Ülker, and she 2007 and 2016, she worked in Microsoft for 9 years as was last working as a CFO in Bizim Wholesale Stores. She Business Controller first in MEA (Middle East & Africa) region joined the Company on 01.01.2020 as Finance Director. and then EMEA. Since February 2017, she has been working as Corporate Development Director at Olmuksan IP. ■ Semih Çelebi - Supply Chain and Operations Director ■ Tamer Parla - Sales Director Born in 1968, he is a graduate of the Department of Industrial Engineering at the Anadolu University, Faculty of Born in 1967 in Istanbul, Tamer Parla graduated from the Architecture-Engineering and he has been working in our Marmara University, International Marketing Field of Business company since 13 September 1993. He started his career as Administration Department, in 1990. He started his career in a part-time Systems Engineer at Eczacıbaşı Vitra Bozüyük 1991 as an Export Specialist in our company, continued as in 1989. In 1990, he worked as aVice General Manager in South Anatolia Sales Manager in 2003, as North Marmara Zimaş Trans. Chain Company. In 1992, he was appointed as Industry Sales Manager in 2007, as Sales Development a Strategic Planning Engineer at Koç Holding. Between 1993 Manager in 2009 and as North Marmara Sales Manager and 1999, he continued to work as Quality Engineering Chief, in 2011. From 2013 until 2017, he worked in Olmuksan Planning Engineering Chief, Production Engineering Chief and International Paper as Çorlu Factory General Manager. He Factory Manager at UnionCamp-Kav Ambalaj, respectively. has worked as İzmir Factory General Manager between 1 In 1999, he started his career as Bursa Factory Production October 2018 - 1 September 2020. He was appointed to Sales Manager in Olmuksan International Paper. He worked as Director position as effective 1 September 2020. Bursa Factory Sales Manager, Bursa Factory Group Manager, ■ Duygu Özkurt - BIM Manager of Strategic IT Projects and Marmara Regional Director and Technical Services Director, Turkey Operations Marmara - Central Anatolia Region Director and Technical Services Director. Since April 2012, he has been working in Graduating from Sabancı University with a Bachelor’s Degree Olmuksan International as the Paper Operations Director. on Manufacturing Systems Engineering in 2005, Duygu Özkurt started to work for Arete as Application Consultant ■ Gözde İçhedef Erküçük - Human Resources Director followed by Opet where she deepened her experience in Gözde İçhedef Erküçük graduated from Middle East Technical Business Systems Analysis working on diverse information University Mining Engineering Department and completed technology projects. From 2010 to 2012, she was the IS Boğaziçi University Master of Engineering and Technology Specialist employed by Eczacibasi Group with a focus on Management. He started his business life as HR MT at Business Intelligence Solutions and Project Management. DHL Express in 2003 and worked as an Organizational Duygu Özkurt joins us from Danone Turkey and Iran Regional Development and HR Business Partner in Human Resources Hub where she worked as Informations Systems Account at Enerjisa, Turkcell and Vodafone. Gözde İçhedef Erkukluk Manager. She was the Business Solutions Manager for South joined the Company as Marmara HR Business Partner in 2018 East Europe Hub at Danone.from 2012 to 2017. She joined and was appointed as Human Resources Director on October the company in 2018 as the System Development Manager. 1, 2019. Since May 1, 2020, she has been working as BIM Manager of Strategic IT Projects and Turkey Operations in Olmuksan International Paper.

Annual Report 2020 13 EXECUTIVE BOARD

■ Hasan Tankut Özcan - Marmara Region General Manager ■ Selda Ercantan Aksoy - Gebze Plant General Manager

Born in Istanbul in 1972, Tankut Özcan is a graduate of Istanbul Born in 1970, Selda Ercantan Aksoy is a graduate of the University, Department of Economics. In 1998, he started his Bilkent University, Department of Management Engineering. career as the Sales Representative at Elf Total Oil. In 1999, She has a Masters Degree from the George Washington he worked as the Sales Supervisor at Coca Cola İçecek. In University in Washington, D.C. In 1994, she started to work as 2000, he worked as the Sales Manager of Major Customers, a budget and reporting specialist at Olmuksan International then worked as the Business Development Manager of Major Paper and she was appointed as the Budget Planning Customers in 2002. In 2005, he started working as the Sales Manager in 2000. In addition to her duty as a Budget Planning Manager of the National Major Customers in Fritolay. In 2008, Manager, she also worked as the IT Manager between 2004 he started to work in the position of Sales Director of Italian and 2005. Selda Ercantan Aksoy who served as the Finance Bialetti Industries SPA and in 2009 he became the Trade Director at Olmuksan International Paper between 2005- Director of the same firm. In 2011, he has worked as the Trade 2020, was appointed as the General Manager of Gebze Plant Director of Tukaş Yiyecek. In 2013, he joined the Company as as of January 1, 2020. Sales Director and worked as the Trade Director between 2014 and 2017, between 2017-2019, had been served as ■ Özay İleri Özdemir - Çorum Plant General Manager Gebze Factory General Manager. He has been currently working as Marmara Region General Manager at Olmuksan Born in Afyonkarahisar in 1970, Özay İleri Özdemir has International Paper since August,2019. graduated from the Department of Management Engineering at the ITU Faculty of Business Administration with first rank ■ Mustafa Kemal Cirit - Adana Plant General Manager in 1991 and received a Masters Degree in Economy from the Bogazici University Institute of Social Sciences in 1995. Born in Mersin in 1970, Mustafa Kemal Cirit has graduated Between the years of 1991 and 1995, he worked as a Research from the Department of Business Administration at Assistant in the Department of Business Engineering at the the Dokuz Eylül University, Faculty of Economics and Istanbul Technical University. Between 1995 and 1996, he Administrative Sciences in 1991. He started his career in worked as an English Teacher at the Işıklar Military High 1994 in Marsa Kraft Jacobs Suchard Sabancı Gıda San.A.Ş. School as an Infantary Lieutenant. In 1996, he has started as a Purchasing Specialist in Packaging Materials. Since his private sector career as a Financial Responsible Ortadoğu 1998, he has continued to work as Purchasing Chief at the Kimya San. ve Tic. A.Ş., that takes place in Yaşar Holding-Sun same firm. He made domestic and overseas purchases and Chemical Partnership. Since 2000, he has been working as purchases responsible from contract manufacturing. She a Controller in Olmuksan International Paper Izmir Factory. was transferred to Olmuksan International Paper as a Sales In 2002, he worked as İzmir Control Manager and in addition Specialist on 02.05.2003. In 2006, he was appointed as the to this, he worked as Adana Control Manager in 2009. Since South Anatolia Region Sales Manager in the same company. 2013 he has been working as Çorum Factory General Manager Since 2013 he has been working as the Adana Factory General of Olmuksan International Paper. Manager in Olmuksan International Paper. ■ Hikmet Şakar - İzmir Plant General Manager ■ Tamer Yüzüncü - Bursa Plant Manager Born in 1966, Hikmet Şakar was graduated from the Anadolu Tamer Yüzüncü was born in Adana in 1972 and graduated University, Department of Communication Arts in 1987. In from Middle East Technical University (Campus of Gaziantep) 1989, he completed his Masters Degree at the Department of at Mechanical Engineering Department in 1997. He started Communication Arts (Advertisement and Public Relations) of in 1997 as a Maintenance Engineer at the Adana factory of the Anadolu University. After working for a while at Pars/MC our company. He was a Production engineer in 2003 and he Cann-Erickson advertising company for a while, he started to was acted as the Production Manager in 2007. He worked at work as a Sales Representative in 1991 in the packaging factory Central Technical Services in 2009. He returned to the Adana of KAV Orman Sanayi, which operates within Koç Holding. factory and worked being a Production Manager. He served as As a result of Sabancı Holding’s share purchase in 1999, he the Bursa Production Manager in 2018. He is working being continued as the Sales Specialist at Olmuksan International a Bursa Plant Manager since 2019. He is a member of ASME Paper, and in 2007, he was promoted as the South Marmara (American Mechanical Engineers Association) and MMO. Region Sales Manager. He continued as Bursa Plant General Manager between 2013-2017 and National Sales Director between 2017-2019. He has worked as Marmara Regional Sales Director at Olmuksan International Paper between August,2019 and September,2020. He was appointed to İzmir Plant General Manager position as effective September,2020. INTRODUCTION

1) Period of the report 5) Changes in the Company’s capital within the period January 1, 2020 - December 31, 2020

There was no change in the capital. 2) Title of The Company • Dividends distributed per share for the last three years: Olmuksan International Paper No dividend was distributed for the last three years. Ambalaj Sanayi ve Ticaret A.Ş. • Shareholders with a share of more than 10% out of the 3) Board of Directors issued capital : I.P. Container Holdings (Spain), S.L. (%90,38) • Eric Gerard Michel Chartrain - Chairman of the Board Duty Period (March 2018- March 2021) 6) Securities issued within the period • Jean-Marc Henri Anne Servais - Vice Chairman Duty Period (March 2018- March 2021) No securities were issued within the period.

• Ariane Marie-Claire Jacqueline Goffin - Member Duty Period (July 2018- March 2021) 7) The sector and the position within the sector • David John Higgins - Member Duty Period (March 2018- March 2021) The company, operating in the sector of corrugated since 1968, boxes in its Gebze, İzmir, Adana, Çorum and Bursa • Ziya Engin Tunçay - Independent Member Plants and sells them to a wide range of customers in food, Duty Period (March 2018- March 2021) agriculture and other industrial sectors.

• Lale Ergin – Independent Member The capacity of the company is approx. 300.000 tons/year Duty Period – (March 2020 – March 2021) The company succeeds in quickly transferring the changes and developments experienced in technology and in the market to Authority Limits : its customers, and it also cares at the same time the way it does business. Being part of International Paper, one of the largest Empowered with the authorities determined by the transactions paper and packaging producers in the world, consolidates the listed in the Article XIII of the Company’s Articles of Association. Company’s position in the market and strengthens the level of service to its customers in different segments.

4) Amendmends made to the Articles of Association

None

Annual Report 2020 15

THE PLANTS

GEBZE PLANT ÇORUM PLANT

The Gebze Plant started to operate in 1968 and Çorum Box Plant, which started production in 1976, has successfully serves the domestic and international a covered area of 19.000 m2. producing ACB (Triple wall), markets by converting corrugated board into corrugated CB (Double wall), C B and E flute. Confection machinery packaging. The plant was renovated in 1977, 1983, to meet the needs of each type of box is equipped with 1987, 1994, 2005, 2012 and 2015. This plant, the advanced technology. In addition to Automotive, white first corrugated board and box factory of Olmuksan Goods, electronics, durable goods and food sector, International Paper, is located on a total area of heavy duty packaging, provides customers with both 2 2 59.196 m with 21.500 m of covered area. Gebze Plant cost and environmental contribution. produces (E), (B),(A) and (C) flute and combinations of double wall and triple wall corrugated by making use oftoday’s newest technology. The plant is well with produce standard boxes and speciality corrugated BURSA PLANT boxes through the use of specialized cutting dies. The plant produces a spectrum of products ranging from The Bursa Plant established in 1995 as “Kav Ambalaj flexographic printed boxes to offset printed luxury Sanayi ve Ticaret A.Ş.” is located in Inegöl Industrial packing boxes with varnish, lacquer and cellophane. Zone. It joined our organization on December 28, 2001. The plant is situated on a total area of 72.789 m2, with a covered area of 27.787 m2. (B), (A), (C), (E) flute and double wall corrugated boards were manufactured IZMIR PLANT in the facility. After the fire at Bursa plant on August 6, 2006 Bursa plant was rebuilt and the production The Izmir Plant was introduced in 1985 with a total activities started again with modern machinery and area of 49.100 m2 and 14.500 m2 of covered area. Izmir equipments in 2007. The plant is modernized and in manufactures (B), (C) flute and combinations of double addition to its existing capacity, all kinds of products wall corrugated to meet the demands of domestic are manufactured from high quality color flexo printed and foreign markets, specialized corrugated board products to standard, die-cut and luxury packaging in applications (ie: impregnating) and coating and double 2019. flute corrugated used in the packing of fresh fruit and vegetables. In the plant standard boxes and die-cut special packages are produced wtih great care. The plant was modernized in 2008.

ADANA PLANT

The Adana Plant was established in 1992 to serve the customers in Central Anatolia, South-Eastern Anatolia and the Mediterranean regions. The flexographic printed multicolor packages manufactured in this modern plant are of the highest quality, which is especially important in this geographical region where citrus boxes are gaining importance. Established on covered area of 14.000 m2 and a total area of 45.000 m2, the plant is equipped with the most sophisticated technological facilities and serves both domestic and international markets with corrugated products ranging from standard boxes to fresh fruit and vegetable boxes.

Annual Report 2020 17 INVESTMENTS

52 investment projects were performed in the year 2020 in our facilities in the fields of strategic forecasts, maintenance- modification, cost reduction and improvement, work safety and environment.

New machinery investments have been performed in order to increase standard box capacity in Çorum, Adana and Facility Capacities: İzmir Plants. Converting capacity, approx. 300.000 tons/year

ACTIVITIES

Measures Taken Under Covid

How communication, information and motivation were provided;

■ We explained the Covid-19 Measures with EHS Experts,

■ We explained the financial, psychological and nutritional support line MY-Care and its areas of use,

■ We provided information about the contents of the Life Insurance that we put into use with the Covid -19 Pandemic agenda for operations employees.

■ We held regular informative sessions with e-mail, sms, team meetings and posters,

■ While returning to the offices, we held an ‘Online Session with the Country General Manager’ in order to give information about the measures taken and to answer the questions of the employees.

■ In order to prevent contamination caused by close contact at home, we prepared messages and posters with the theme of family and loved ones explaining the masks, distance and hygiene rules,

■ We prepared brochures containing Covid measures and My-Care Employee Assistance Program applications for all our employees,

■ We applied Pulse survey to get the opinions of our employees.

■ We have prepared letters to inform the families of the employees about COVID measures and anti-virus recommendations.

Annual Report 2020 19 RESEARCH & DEVELOPMENT WORKING

OLMUKSAN IP SHORT, MEDIUM AND LONG-TERM R&D STRATEGIES

• To play an active role in the growth of corrugated board market by focusing on customer needs, to increase supply position and product variety. • Developing a competitive position in the market by developing innovative solutions and techniques that will create added value in line with growth targets and sector trends. • To create products and solutions that can substitute for new products, processes, channels and other packaging materials. • Promote the importance of a circular economy through sustainable projects • Increase profitability by developing innovative products to create new markets for heavy industry packaging • To improve the collaboration with universities and other R&D centers for scientific studies CORPORATE GOVERNANCE PRINCIPLES COMPLIANCE REPORT

OLMUKSAN INTERNATIONAL PAPER AMBALAJ SAN. TİC. A.Ş. CORPORATE GOVERNANCE PRINCIPLES COMPLIANCE REPORT

1. Corporate Governance Principles Compliance 3. Exercise of the Shareholders’ Right to Obtain Statement Information (cont’d) Olmuksan International Paper Ambalaj Sanayi ve Ticaret A.Ş. Announcements regarding the shareholders’ exercise of their (hereinafter referred to as the “Company”) complies with and rights are made in the Turkish Trade Registry Gazette and on exercises the Capital Markets Board’s Corporate Governance the web site www.olmuksan-ipaper.com by the mediation of the Public Disclosure Platform in accordance with the respective Principles set forth in the “Corporate Governance Communiqué” Capital Market regulations. with serial number II-17.1 published by the Capital Markets Board of Turkey (“CMB”). Non-compliance with certain principles The Company is audited by an independent audit company. The Articles of Association of the Company do not include the right only concerns non-compulsory principles and creates no to request appointment of a special auditor. No demand was discrimination among stakeholders of the Company. received from the shareholders in 2020. Link is established with the Information Society Services on the PART I - SHAREHOLDERS web site of the Company in compliance with Clause 1 of Article 1524 of Turkish Commercial Law No.6102. 2. Investor Relations Department 4. General Assembly Information The Company has an Investor Relations Department that maintains communication and contact with the investors and During fiscal year, in accordance with the Internal Directive Regarding the Working Principles and Procedures of the renders service to the Company and investors in relation thereto. General Assembly, prepared by the Board of Directors, the For being the person in charge of the duties and responsibilities General Assembly of the Company held an ordinary meeting on as stipulated under the Corporate Communiqué (II-17.1.) of the September 17, 2020. Quorum at the said ordinary meeting was CMB, Reyhan Altınay (+90 212 371 10 20, reyhan.altinay@ipaper. 94,15%. For the purpose of convening that ordinary meeting, com), being the Internal Control and Special Projects Manager, an announcement has been published on the Public Disclosure Manager of the Investor Relations Unit of the Company, has Platform (“PDP”) on August 26, 2020. The meeting started at been assigned also as the Investor Relations Department the same time physically and electronically. Agenda items were Manager and Corporate Governance Committee Member. Ferhat discussed and agreed unanimously. Shareholders have used their rights to ask questions and the questions were answered Oğuzhan (+90 212 371 10 20, [email protected]) is during the General Assembly. Questions asked at the assembly commissioned as the Investor Relations Department Specialist. meeting, and answers given thereto were disclosed to the public The Investor Relations Department ensures compliance on the web site of the Company. No proposals besides the agenda items were brought forward. with shareholding rights and communication between the shareholders and the Board of Directors. The Investor Relations The minutes of the General Assembly Meetings were shared Department reports to the Board of Directors. Main duties with the Public Disclosure Platform (“PDP”) and Electronic General Assembly System and all announcements, documents carried out during the relevant term are as follows: and documents related to the General Assembly were presented The Investor Relations Department: ensured the efficient, to the shareholders. secure and up-to-date recordkeeping of the correspondences All stakeholders on the company website. General Assembly between the investors and the Company as well as other documents can be accessed at www.kap.gov.tr and on the information and documents; coordinated the transactions company website. No Extraordinary General Assembly Meeting with the Central Registry Agency; replied to the information was held in 2020. requests within the relevant term either in person or through No Extraordinary General Assembly Meeting was held in communication means, except for trade secrets or information between the dates of January 1st – December 31st, 2020. that is not publicly disclosed in accordance with the Company’s The Articles of Association do not include any provision Information Policy; procured that the Ordinary General Assembly authorizing the General Assembly to take decisions on major Meeting is held in conformity with the applicable legislation, transactions as selling, buying or renting material assets. the Company’s Articles of Association and other internal Since the Board of Directors represents the will of the General rules; prepared the informative documents for the benefit of Assembly, there was no requirement for such a regulation. shareholders and updated the web-site of the Company so as Minutes of the General Assembly are presented to the interest to enable the shareholders to obtain uninterrupted and clear of shareholders by publishing them in the Trade Register Gazette information. and in the Company’s web site www.olmuksan-ipaper.com. The Investor Relations Department replied to the written 5. Voting Rights and Minority Rights and oral information requests from shareholders without any discrimination whatsoever and in a way to avoid any inequality Articles of Association of the Company do not grant any of information. privileges on voting rights. Articles of Association of the Company do not allow 3. Exercise of the Shareholders’ Right to Obtain Information cumulative voting procedure. The method of cumulative voting Information requests from shareholders are responded either procedure for the current partnership structure was excluded verbally, or via e-mail. on the grounds that it might disturb the present harmonious management structure.

Annual Report 2020 21 CORPORATE GOVERNANCE PRINCIPLES COMPLIANCE REPORT

6. Dividend Payment Policy 12. Public Disclosure of the Persons Who Can Have Insider Information (cont’d) Pursuant to the Dividend Distribution Policy of the Company, the Company will distribute no annual dividend and no advance Those persons were notified in writing not to disclose the said insider dividend. This policy can be reviewed by the Board of Directors at information to any outsider persons or businesses. Furthermore, they any time for any reason as the Board will deem appropriate, such entered into a confidentiality agreement with the Company. In this as but not limited to the national and global economic conditions, regard, the ethical rules approved and announced by the Board of the investment projects and the Company’s financial funds. Directors, are applicable. 7. Transfer of Shares 13. Activity Report I.P. Container Holdings (Spain), S.L. controls the Company since The activity report is prepared in sufficient detail to enable December 11, 2013. Transfer of the shares of other shareholders the public to get acquainted with the true and correct information is not subject to any restriction. about the activities of the Company and to include the information set forth by the CMB Corporate Governance Principles. PART II – PUBLIC DISCLOSURE AND TRANSPARENCY PART III – STAKEHOLDERS 8. Information Policy of the Company 14. Company Information Policy Regarding Stakeholders The Company discloses its 1.Half and 2.Half (which require independent audit) and 1Q and 3Q (which do not require independent Personnel: Open and honest communication is supported audit) financial statements and footnotes to the public through the among all employees of the Company. Written, oral and electronic ISE and the CMB. communication platforms were set up to enable the personnel of the Company to share information. The General Manager and the Finance Director are responsible for making the disclosures to the PDP and the CMB. Communication channels are as follows: top management meetings, department meetings, information sharing Names and titles of the authorized personnel were notified to ISE. meetings, e-mail system, notice boards, personnel satisfaction 9. Disclosures of Special Events questionnaire, personnel manual, company bulletin, open door policy, etc. Eighty-nine disclosures of special events were made within 2020 under the CMB regulations and notified to the PDP. The CMB and the ISE did not Customers: Information about the products and services demand any further explanation on the respective statements. supplied by the Company (i.e. offers, quotations, quality report, etc.) is sent to customers upon their demand. In case of customer The shares of the Company are not listed in a foreign securities complains about a product or service, it will be settled pursuant to exchange. the ISO 9001 rules and through the relevant procedures. Besides, 10. The Company’s Website and Content a web page was composed for receiving the feedbacks via such web page, and a customer satisfaction survey was made thereon. The Company keeps a web site, located at www.olmuksan-ipaper. com. The web site address is also announced on the letterheads of Suppliers: Goods and services are purchased from suppliers the Company. with or without a contract in accordance with the relevant The required information about the company is provided in details specifications of the Company and the applicable laws (i.e. Social in the web site. Security, Taxation, Safety regulations). Meetings are held with suppliers for goods and services purchased at regular intervals Annual Report of the Company can be obtained in hard copy and also to inform them about the Company’s relevant policies and be accessed in our web site. procedures and to enter into annual contracts with suppliers. The In addition, the information about the Company’s registration with said contracts are executed in such a manner to protect the rights the Trade Registry, the shareholding and management structure, and interests of both the Company and its suppliers. the preferential shares, disclosures of special events, the agenda and minutes of general assembly meetings are provided in the web In case of an inconvenience (in terms of delivery method, quality, site. The Company website also includes information listed in Article expiry, etc.) the Company’s procedures developed in accordance 1.11.5, Section 2 of the CMB’s Corporate Governance Communiqué. with the ISO 9001 will become applicable. Approved suppliers Most of the information provided in the web-site is also available in are included in the List of Approved Suppliers, and assessed and English. inspected at regular intervals. 11. Disclosure of the Company’s Ultimate Controlling 15. Stakeholders’ Participation in the Company Individual Shareholder or Shareholders Management There are no ultimate real person controlling shareholder(s) of the Data collected about the personnel through the information Company. sharing meetings and personnel satisfaction questionnaire is reviewed at meetings held by the Executive Board. 12. Public Disclosure of the Persons Who Can Have Insider Information Data collected about the customers through customer satisfaction List of the personnel who can potentially possess insider information questionnaire and field surveys is reviewed at meetings held by about the Company has been given under the heading “Members of the the Executive Board. Board of Directors and management executives “in the annual report Approved suppliers’ assessments made according to the “Goods and disclosed to the public through the annual report. and Services Purchasing Procedure”, along with the data collected about them through field surveys are reviewed at meetings held by the Executive Board. CORPORATE GOVERNANCE PRINCIPLES COMPLIANCE REPORT

16. Human Resources 17. Industrial Relations (cont’d) International Paper is one the largest group in the world, • Vehicle and dining allowances in the form of aids in kind yet our assets are beyond our greatness. We value character as • Maternity and marriage benefits, and child and education much as talent. We never forget our commitment to the people, allowances in addition to the aforesaid clients or professional perfection. • Social reliefs, In looking beyond just doing the right things and how we can • Sickness and funeral allowances, create value for all our stakeholders, we recently introduced • Annual right of leave is determined in the Collective Labor the IP Way Forward which is comprised of 5 major elements: Agreement as longer than the legal right of leave, • Wage equivalence of overtime, weekend holiday, national investing in people, sustaining forests, improving the planet, holiday, and general holiday is determined. creating innovative products and inspired performance 18. Information about the Relations with Customers and Performance and Career Management Suppliers IP Roadmap is the expression which stands for both Sales representatives visit the customers at regular intervals, performance management and self-improvement in International and then the results of the said visits are discussed at regional Paper. Olmuksan International Paper implements the IP Roadmap level. Data collected through regular customer satisfaction system in order to reveal the success and potentials of the surveys are used as a basis to develop and implement employees; to fairly reward and enable the career developments improvement plans. A Sales and Marketing Meeting is held once of the same. IP Roadmap begins with the diffusion of the goals set a year to gather all sales and marketing teams, to determine the by IP Global to all the employees and reaching to the individual customers’ needs and expectations, and to develop the necessary targets of the employees. improvement plans. Problems reported by customers at after- sale stage are assessed and solved by applying the “Customer Annual goals are set to include five main branches which are and Supplier Complaint Procedure”. Applied under the Quality occupational safety, employee, client, operation and financial; Management System, the said procedure defines the measures and such goals are transmitted to all our employees. The to be taken to ensure customer and supplier satisfaction. support and monitoring of the knowledge, skill and competence required for the realization of our annual goals are planned with 19. Corporate Codes of Ethics and Conduct the cooperation of the management and employees; and support Corporate codes of ethics and conduct, which are the same, is provided in line with the regular feedbacks within the same and applicable International Paper-wide, have been determined year for the highest performance. With the IP Roadmap system, in order to declare the main values and standards, on the basis an institutional culture to support the frequency and the quality of which our business is being operated. They further constitute of feedbacks along with the relations between work results guidance, which is helpful for us to find our way successfully in and individual performance is targeted. We believe that we can the face of ethical challenges. Codes of ethics of our Company achieve the individual improvement through the implementation constitute the basis of the type of behavior we have adopted not of IP Roadmap system and the establishment of feedback culture only among each other, but also before our customers, investors, in the company. Via the Human Resources Planning process, key and suppliers. and critical positions are backed-up for the sustainable success of our company and Individual Improvement Plans are prepared for the career developments of our employees. The Human The Environmental and Occupational Health and Safety Resources Planning process also enables the preparation and Policy of the Company: improvement of the employees for career opportunities that may emerge within International Paper. The core values of our main strategies are to produce our products in a healthy and safe working environment, to use 17. Industrial Relations our natural resources wisely, to continuously improve our performance in environmental protection and in reducing Our Company acts in conformity and respect with the environmental impact. We have adopted the following principles applicable laws and regulations, and within the framework of IP to achieve these goals in all our processes in our operations: Codes of Conduct and the ethics of the firm. Our Company is attentive to maintain the peaceful atmosphere in the enterprise •Compliance with all the legal and other requirements within the framework of the mutual trust between its employees, (compliance obligations) related to occupational health and and the trade unions thereof, and by way of acting in accordance safety and the environment, with the requirements of the applicable regulations and the •Preventing accidents, injuries and health losses for everyone collective labor agreement. we work with, identifying the risks and environmental impacts, Within the framework of the Industrial Relations Policy of the reducing them to acceptable levels, Company, trade unions are regarded not as the “counterparties”, •Preventing environmental pollution, adopting the principle but as the “social partners”, and the relations being established of sustainability in resource utilization, protecting environment with them are therefore configured on the basis of the benefits of and the ecosystem, the employees. It is also another one of the goals of the Company to cause the social stakeholders work in better conditions. •To ensure the occupational safety management system consultation and participation of our employees. Social benefits applicable within the scope of the collective labor agreement to the employees in the Company are as follows: •Working in harmony with all of our stakeholders within the framework of our environment, occupational health and safety • Bonus of 4 wages, policy. • Increase for working in night shift,

Annual Report 2020 23 CORPORATE GOVERNANCE PRINCIPLES COMPLIANCE REPORT

19. Corporate Codes of Ethics and Conduct (cont’d) The General Assembly has authorized the members of the Board of Directors to perform the activities and transactions Our company has ISO 9001 Quality, ISO 14001 Environment, ISO described in Sections 395 and 396 of the Turkish Commercial Law. 45001 Occupational Health and Safety Management System certificates. Furthermore, our Gebze, Adana and Bursa factories The Internal Directive of Board of Directors defines the have BRC Global Packaging and Packaging Materials Standard working principles and procedures of the Board of Directors of the Certificate and in line with our sustainability targets, Adana, Company to be compliant with the laws, related regulations and Bursa, Çorum, Gebze and İzmir plants have FSC Coc and PEFC the Company’s Articles of Association. Responsible Forest Management System certificates. Our box plants are members of SEDEX and also have UN Certificate 21. Requirements for the Members of the Board of Directors (ADR/RID/IMDG: Carriage of Dangerous Goods) The members of the Board of Directors comply with the qualifications described in Part 4 of the Corporate Management PART IV – BOARD OF DIRECTORS Principles. The Company’s Articles of Association do not contain any rules on this topic. 20. Structure and Formation of the Board of Directors 22. Mission, Vision and Strategic Targets of the Company and Independent Members Vision and mission of the Company was determined, and was In accordance with the provisions of the Turkish Commercial announced to the public through the annual reports. Code and the Company’s Articles of Association, the Company’s Board of Directors consists of six members elected at the 2017 Our Vision: Ordinary General Assembly Meeting held on March 28, 2018, until To be among the most successful, sustainable and the Ordinary General Assembly Meeting to be held in 2021. responsible companies in the world. The ’’Independence Statements’’ of the Independent Members of the Board of Directors are included in the Information Document Our Mission: of the 2017 Ordinary General Assembly and 2020 Ordinary General To improve the people’s lives, the planet and our company’s Assembly Meeting dated 23 February 2018 and 26 August 2020. performance by transforming renewable resources into products Board members are non-executive and two of them are people depend on every day. independent. CV’s of the board members and the Independence Statements of the independent members are available in the 23. Risk Management and Internal Control System annual report. Internal audit activities of the Company are performed by The distribution of task of the Board of Directors are as follows: International Paper through direct reports to the Audit Committee. Eric Gerard Michel Chartrain The tasks of reviewing the risk management, internal control Chairman, Non-Executive and audit findings action plans are assigned to the Finance Director. Early Detection of Risk Committee Duty and Operating

Jean-Marc Henri Anne Servais Procedures have been issued in order to establish the Early Vice Chairman, Non-Executive Detection of Risk Committee’s duty and operating procedures, to determine the financial, operational, strategic etc. risks and opportunities that can affect the Company’s activities in this Ariane Marie-Claire Jacqueline Goffin scope, to position, monitor and/or review them by calculating Member, Non-Executive their impacts, to manage, direct and report potential risks and David John Higgins opportunities in parallel with the Company’s policies, and to make Member, Non-Executive recommendations to the Board of Directors of the Company.

Ziya Engin Tunçay 24. Duties and Responsibilities of the Board of Directors Independent Member, Non-Executive and Executives

Lale Ergin* The duties of the members of the Board of Directors have been defined in the Articles of Association. Authority and Independent Member, Non-Executive responsibility of the management executives have not been specifically defined in the Articles of Association, but defined in *Instead of Metin ÜNLÜ, a member of the Independent Board the signature authorization document issued by the Board of of Directors whose term of office expired, Lale ERGİN has been Directors to the management executives. elected as a Independent Member of the Board of Directors as of 24 March 2020. It was decided to appoint Lale Ergin as the 25. Principles of the Activities of the Board of Directors chairman of the Corporate Governance Committee, as the The Board of Directors of the Company approved 21 resolutions member of the Audit Committee and as the chairman of the Early within 2020, 2 of which at face-to-face meetings, 2 at conference Detection of Risk Committee and this election was submitted to meetings, the remaining 17 by obtaining written approvals from the approval of the General Assembly at the General Assembly the members in accordance with the Turkish Commercial Law Meeting dated 17 September 2020, in accordance with Article 363 and the Articles of Association. The agenda of each Board of of the TCC. Directors meeting is prepared by the Chairman of the Board in consultation with the members. CORPORATE GOVERNANCE PRINCIPLES COMPLIANCE REPORT

25. Principles of the Activities of the Board of Directors 27. Number, Structure and Independence of Committees (cont’d) Established by the Board of Directors (cont’d) In order to ensure the members to have sufficient time to review Corporate Governance Committee was assembled 2 times, and to be prepared for the issues set forth in each meeting and the results of the meetings were submitted to the Board agenda, the Secretary of the Board of Directors distributes of Directors written copies of the agenda to the members one week before the meeting. Early Detection of Risk Committee was assembled 5 times, and the report consisted of its activities was submitted to the The working principles and procedures are designated by the Board of Directors. Internal Directive of the Board of Directors in line with the applicable legislation and the Articles of Association. No conflict of interest has been observed in any ofthe operations conducted by the Committees. 26. Prohibition to Transact with the Company and Competition 28. Remuneration of the Board of Directors None of the members of the Board of Directors made None of the members of the Board of Directors except the business as an individual with the Company or competed as an independent members are paid by the Company. The Company did not lend money, issue loans, extend the terms of existing individual with the Company in the same business field. loans and credits, improve the conditions of thereof, issue 27. Number, Structure and Independence of Committees loans through a third person or provide any warranties, to a member of the Board in 2020. Established by the Board of Directors Committee members of the Company have been elected among the independent members of the Board. The independent members of the Board can be the members of more than one committee.

Corporate Governance Committee Members: Lale Ergin, Independent Member of the Board of Directors Ziya Engin Tunçay, Independent Member of the Board of Directors Reyhan Altınay, Manager of the Investor Relations Unit

Audit Committee Members: Ziya Engin Tunçay, Independent Member of the Board of Directors Lale Ergin, Independent Member of the Board of Directors

Early Detection of Risk Committee Members: Lale Ergin, Independent Member of the Board of Directors Ziya Engin Tunçay, Independent Member of the Board of Directors

Audit Committee was assembled 5 times, had the minutes of the meetings written down, and submitted the resolutions passed thereat to the Board of Directors.

Annual Report 2020 25 SUSTAINABILITY

SUSTAINABILITY

We continue on our way with the goal of becoming one of the most sustainable and responsible companies in the world!

While producing recyclable products that reduce our carbon footprint, we use renewable resources, thus fulfilling our responsibility towards both our business and the world we live in.

We also support this with our Main Goals within the scope of the Vision 2030 created in this context.

HEALTHY & THRIVING PEOPLE SUSTAINABLE RENEWABLE ABUNDANT & COMMUNITIES OPERATIONS SOLUTIONS FORESTS Promote employee well- Improve our climate impact Accelerate the transition to a being by providing safe, and advance water lower-carbon economy Lead forest stewardship caring and inclusive stewardship through innovative fiber- effortts globaly workplaces and strengthen based products the resilience of our communities

TARGETS: Conserve and restore TARGETS: Improve the lives of TARGETS: TARGET: injuries for of products reusable, recyclable 400,000 employees and MILLION 100 or compostable, while hectares of forestland 100% ZERO contractors people in our communities 35% 25% advancing circular solutions of fiber sustainably reduction in greenhouse water use reduction 100% throughout our value chain gas emissions, using best- and context-based water sourced or recovered • 50% women in salaried positions available climate science management plans • Regional diversity plans, 30% including 25% minorities in women in U.S. salaried positions our workforce INDEPENDENT AUDITOR’S REPORT

OLMUKSAN INTERNATIONAL PAPERAMBALAJ SANAYİ VE TİCARET A.Ş. VE AND ITS SUBSIDIARY CONSOLIDATED FINANCIAL STATEMENTS FOR THE ACCOUNTING PERIOD ENDED 31 DECEMBER 2020 AND INDEPENDENT AUDITOR’S REPORT (CONVENIENCE TRANSLATION OF INDEPENDENT AUDITOR’S REPORT AND THE CONSOLIDATED FINANCIAL STATEMENTS ORIGINALLY ISSUED IN TURKISH)

BAĞIMSIZ DENETÇİ RAPORU

To the General Assembly of

Olmuksan International Paper Ambalaj Sanayi ve Ticaret A.Ş.

İstanbul

A) Report on the Audit of the Consolidated Financial Statements

1) Opinion We have audited the consolidated financial statements of Olmuksan International Paper Ambalaj Sanayi ve Ticaret A.Ş. (the “Company”) and its subsidiaries (the “Group”), which comprise the consolidated statement of financial position as at 31 December 2020 and the consolidated statement of profit or loss and other comprehensive income, consolidated statement of changes in equity and consolidated statement of cash flows for the year then ended and notes to the consolidated financial statements, including a summary of significant accounting policies. In our opinion, the accompanying consolidated financial statements present fairly, in all material respects, the consolidated financial position of the Group as at 31 December 2020 and its consolidated financial performance and its consolidated cash flows for the year then ended in accordance with Turkish Financial Reporting Standards (“TFRSs”).

2) Basis for Opinion We conducted our audit in accordance with the standards on auditing issued by Capital Markets Board and the Standards on Independent Auditing (“SIA”) which is a part of Turkish Auditing Standards published by the Public Oversight Accounting and Auditing Standards Authority (“POA”). Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Consolidated Financial Statements section of our report. We are independent of the Company in accordance with the Code of Ethics for Independent Auditors (“Code of Ethics”) published by the POA, together with the ethical requirements that are relevant to our audit of the consolidated financial statements, and we have fulfilled our other ethical responsibilities in accordance with these requirements and the Code of Ethics. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

3) Key Audit Matters Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the financial statements of the current period. These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.

Annual Report 2020 27 INDEPENDENT AUDITOR’S REPORT

3) Key Audit Matters (cont’d) - The sales transactions realized by the Group during the period were tested by means of sampling. Revenue recognition The Group had a sales revenue amounting to TL 1.240.247.037 - Periodicity tests were applied in order to test whether the during the period 1 January 2020 – 31 December 2020, as management recognized the revenue from sales in the financial disclosed in the Note 19. As stated in the summary of Note 2.6 statements in the accurate period. “Significant Accounting Policies”; sales revenues consist of the - In the substantive tests we conducted for the revenue, it was consideration expected to be earned in return for the transfer of evaluated whether the rights and responsibilities regarding the the undertaken goods to the customer. invoiced products were transferred to the customer. Existence of The Group determines each undertaking made to the customer trade receivables and revenues and accuracy of balances were to transfer the goods undertaken in the contracts or order forms tested with external confirmation verification letters directly it has signed with its customers, as a performance obligation. provided for customers we selected by sample selection. The Group recognizes the revenue in the consolidated financial - Substantive procedures were applied to the returns realized statements when it fulfills its performance obligation by after the reporting period, and it was tested whether the revenue transferring the undertaken goods to its customers. was properly recognized during the period. Although revenue represents the most important amount in the - The level of revenue for the period has been analyzed and the Group’s statement of profit or loss, it contains an important issue sufficiency of the explanations made in Note 19 in the financial in terms of our audit procedures, as it has a primary effect on the statements was evaluated. Group’s key performance indicators. - The compliance of the accounting policies applied with TFRSs In this context, determining whether the terms of the recognition and whether they are applied consistently regarding periods were of sales as revenue are realized, as well as whether the revenue examined. is reflected in the financial statements in the accurate period requires significant management judgment, therefore this issue How the matter was addressed in the audit has been identified as one of the key audit matters. Our audit procedures included evaluation of the appropriateness Expected loss provision of the expected credit losses recorded against trade receivable The Group has significant trade receivable balance amounting to balances considered doubtful and the appropriateness of TL 478.108.933 and the expected loss provision amounting to TL the Group’s provisioning policy, with reference to the aging of 44.543.413. The Group Management uses certain judgments to customer balances, economic conditions, the concentration of measure of expected credit losses regarding the trade receivables counterparty risk, past history of recovery and any securities and assess level of provision required. The Group’s credit risk policy held. We compared the methodologies and assumptions used in requires analysis of individual receivable account balances, taking calculating the doubtful provision to those used in prior years; as into account receivables that are undue, past due and any securities part of this we considered whether we would expect a change to held. Accordingly, the provisions for expected loss are considered the methodologies and assumptions used. We tested the aging as a key audit matter due to the significance of the balance to the data of the Group, discussed the significant aged receivables consolidated financial statements as a whole, combined with the with the Group Management, analysed and compared with the judgment associated with determining the provision amount (Refer guarantees obtained and insurance amounts and controlled the to Note 2 Basis of Preparation of the Financial Statements for sufficiency of the notes under TFRS. accounting policy, and Note 6 for the disclosures).

How the matter was addressed in the audit The audit procedures applied in this matter include the followings:

- The design and application of the internal controls established by the management regarding the revenue process were evaluated. INDEPENDENT AUDITOR’S REPORT

4) Responsibilities of Management and Those Charged with 5) Auditor’s Responsibilities for the Audit of the Consolidated Governance of the Consolidated Financial Statements Financial Statements (cont’d)

The Group Management is responsible for the preparation intentional omissions, misrepresentations, or the override of and fair presentation of the consolidated financial statements internal control). in accordance with TFRS, and for such internal control as management determines is necessary to enable the preparation • Obtain an understanding of internal control relevant to the audit of consolidated financial statements that are free from material in order to design audit procedures that are appropriate in the misstatement, whether due to fraud or error. circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Group’s internal control. In preparing the consolidated financial statements, the Group Management is responsible for assessing the Group’s ability to • Evaluate the appropriateness of accounting policies used continue as a going concern, disclosing, as applicable, matters and the reasonableness of accounting estimates and related related to going concern and using the going concern basis of disclosures made by the Group Management. accounting unless management either intends to liquidate the Group or to cease operations, or has no realistic alternative but • Conclude on the appropriateness of the Group Management’s to do so. use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists Those charged with governance are responsible for overseeing related to events or conditions that may cast significant doubt the Group’s financial reporting process. on the Group’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to 5) Auditor’s Responsibilities for the Audit of the Consolidated draw attention in our auditor’s report to the related disclosures Financial Statements in the consolidated financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based Responsibilities of independent auditors in an independent audit on the audit evidence obtained up to the date of our auditor’s are as follows: report. However, future events or conditions may cause the Group Our objectives are to obtain reasonable assurance about whether to cease to continue as a going concern. the consolidated financial statements as a whole are free from • Evaluate the overall presentation, structure and content of the material misstatement, whether due to fraud or error, and to consolidated financial statements, including the disclosures and issue an auditor’s report that includes our opinion. Reasonable whether the consolidated financial statements represent the assurance is a high level of assurance, but is not a guarantee that underlying transactions and events in a manner that achieves fair an audit conducted in accordance with the standards on auditing presentation. issued by Capital Markets Board and SIA will always detect a material misstatement when it exists. Misstatements can arise • Obtain sufficient appropriate audit evidence regarding the from fraud or error and are considered material if, individually or financial information of the entities or business activities within in the aggregate, they could reasonably be expected to influence the Group to express an opinion on the consolidated financial the economic decisions of users taken on the basis of these statements. We are responsible for the direction, supervision and consolidated financial statements. performance of the Group audit. We remain solely responsible for our audit opinion. As part of an audit in accordance with the standards on auditing issued by Capital Markets Board and SIA, we exercise professional We communicate with those charged with governance regarding, judgment and maintain professional scepticism throughout the among other matters, the planned scope and timing of the audit audit. We also: and significant audit findings, including any significant deficiencies in internal control that we identify during our audit. • Identify and assess the risks of “material misstatement” of the consolidated financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion (The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery,

Annual Report 2020 29 INDEPENDENT AUDITOR’S REPORT

5) Auditor’s Responsibilities for the Audit of the Consolidated Financial Statements (cont’d)

We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.

From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the consolidated financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditor’s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.

B) Report on Other Legal and Regulatory Requirements

In accordance with paragraph four of the Article 398 of the Turkish Commercial Code No. 6102 (“TCC”), the auditor’s report on the system and the committee of early detection of risk has been submitted to the Board of Directors of the Company on 3 March 2021.

In accordance with paragraph four of the Article 402 of TCC, nothing has come to our attention that may cause us to believe that the Group’s set of accounts and financial statements prepared for the period 1 January - 31 December 2020 does not comply with TCC and the provisions of the Company’s articles of association in relation to financial reporting.

In accordance with paragraph four of the Article 402 of TCC, the Board of Directors provided us all the required information and documentation with respect to our audit.

The engagement partner on the audit resulting in this independent auditor’s report is Cem Tovil.

DRT BAĞIMSIZ DENETİM VE SERBEST MUHASEBECİ MALİ MÜŞAVİRLİK A.Ş.

Member of DELOITTE TOUCHE TOHMATSU LIMITED

Cem Tovil, SMMM

Partner

İstanbul, 3 March 2021 INDEPENDENT AUDITOR’S REPORT

INDEX PAGE

INDEX PAGE CONSOLIDATED STATEMENT OF FINANCIAL POSITION ...... 33-34 CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME ...... 35 CONSOLIDATED STATEMENT OF CHANGES IN EQUITY ...... 36 CONSOLIDATED STATEMENT OF CASH FLOWS...... 37 NOTES ...... 38-68 NOTE 1 ORGANISATION AND OPERATIONS OF THE GROUP ...... 38 NOTE 2 BASIS OF PRESENTATION OF THE FINANCIAL STATEMENTS ...... 38-47 NOTE 3 SEGMENT REPORTING ...... 47 NOTE 4 CASH AND CASH EQUIVALENTS ...... 49 NOTE 5 RELATED PARTY DISCLOSURES ...... 49-50 NOTE 6 TRADE RECEIVABLES AND PAYABLES ...... 50-51 NOTE 7 OTHER RECEIVABLES AND PAYABLES ...... 51 NOTE 8 INVENTORIES ...... 52 NOTE 9 PREPAID EXPENSES AND DEFERRED INCOME ...... 52 NOTE 10 INVESTMENT PROPERTIES ...... 52 NOTE 11 PROPERTY, PLANT AND EQUIPMENT...... 53 NOTE 12 INTANGIBLE ASSETS ...... 54 NOTE 13 BORROWINGS AND BORROWING COSTS ...... 54 NOTE 14 PROVISIONS, CONTINGENT ASSETS AND LIABILITIES ...... 55 NOTE 15 EMPLOYEE BENEFITS ...... 55-56 NOTE 16 OTHER CURRENT ASSETS ...... 56 NOTE 17 LEASES ...... 57 NOTE 18 SHARE CAPITAL, RESERVES AND OTHER EQUITY ITEMS ...... 58 NOTE 19 REVENUE AND COST OF SALES...... 59 NOTE 20 GENERAL ADMINISTRATIVE EXPENSES, MARKETING EXPENSES ...... 59 NOTE 21 OTHER INCOME AND EXPENSES FROM OPERATING ACTIVITIES ...... 59 NOTE 22 INCOME AND EXPENSES FROM INVESTING ACTIVITES ...... 59 NOTE 23 EXPENSES CLASSIFIED BY TYPE ...... 59 NOTE 24 EXPENSES BY NATURE ...... 60 NOTE 25 FINANCE EXPENSES ...... 60

Annual Report 2020 31 INDEPENDENT AUDITOR’S REPORT

INDEX PAGE

NOTE 26 ANALYSIS OF OTHER COMPREHENSIVE INCOME ITEMS ...... 60 NOTE 27 INCOME TAXES (INCLUDING DEFERRED TAX ASSETS AND LIABILITIES) ...... 61 NOTE 28 LOSS PER SHARE ...... 62 NOTE 29 THE EFFECTS OF CHANGES IN FOREIGN EXCHANGE RATES ...... 62 NOTE 30 FINANCIAL INSTRUMENTS ...... 62 NOTE 31 NATURE AND LEVEL OF RISK ARISING FROM FINANCIAL INSTRUMENTS...... 63-67 NOTE 32 FINANCIAL INSTRUMENTS (FAIR VALUE DISLOSURES AND EXPLANATIONS ON HEDGE ACCOUNTING) ...... 67-68 NOTE 33 EVENTS AFTER THE REPORTING PERIOD ...... 68 NOTE 34 NOTES ON THE STATEMENT OF CASH FLOW ...... 68 INDEPENDENT AUDITOR’S REPORT

OLMUKSAN INTERNATIONAL PAPER AMBALAJ SANAYİ VE TİCARET A.Ş. VE AND ITS SUBSIDIARY

CONSOLIDATED STATEMENT OF FINANCIAL POSITION AS AT 31 DECEMBER 2020 (Amounts expressed in Turkish Lira (“TL”) unless otherwise indicated.)

Audited Audited Current Period Prior Period ASSETS Notes 31 December 2020 31 December 2019

Current Assets 702.529.304 504.772.808 Cash and cash equivalents 4 14.075.850 8.532.804 Trade receivables 478.108.933 327.199.163 - Due from related parties 5 253.398 5.020.549 - Due from third parties 6 477.855.535 322.178.614 Other receivables 1.689.969 38.333 - Due from third parties 7 1.689.969 38.333 Inventories 8 195.973.526 149.242.258 Prepaid expenses 9 2.333.925 6.625.692 Other current assets 16 10.347.101 13.134.558

Non-Current Assets 275.391.056 293.059.296 Investment properties 10 22.453.269 22.453.269 Property, plant and equipment 11 209.471.484 212.402.944 Right-of-use assets 17 14.826.049 19.969.098 Intangible assets 12 1.409.856 1.892.968 Prepaid expenses 9 277.222 10.070.135 Deferred tax assets 27 26.953.176 26.270.882

TOTAL ASSETS 977.920.360 797.832.104

The consolidated financial statements as of 1 January - 31 December 2020 have been approved by the Board of Directors of Olmuksan International Paper Ambalaj Sanayi ve Ticaret A.Ş. on 3 March 2021.

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

Annual Report 2020 33 INDEPENDENT AUDITOR’S REPORT

OLMUKSAN INTERNATIONAL PAPER AMBALAJ SANAYİ VE TİCARET A.Ş. VE AND ITS SUBSIDIARY

CONSOLIDATED STATEMENT OF FINANCIAL POSITION AS AT 31 DECEMBER 2020 (Amounts expressed in Turkish Lira (“TL”) unless otherwise indicated.)

Audited Audited Current Period Prior Period LIABILITIES Notes 31 December 2020 31 December 2019

Current liabilities 562.633.256 535.133.701 Short-term financial liabilities 13 128.021.070 183.932.738 Trade payables 6 386.516.996 313.103.169 -Due to related parties 5 136.786.118 153.700.514 -Due to third parties 249.730.878 159.402.655 Other payables 9.270.030 6.018.127 -Due to third parties 7 9.270.030 6.018.127 Lease liabilities 17 8.821.278 7.168.740 Derivative instruments 32 - 5.545.574 Deferred income 9 259.343 2.661.485 Short-term provisions 29.744.539 16.703.868 -Short-term provision for 15 15.791.569 5.880.006 -Other short-term provisions 14 13.952.970 10.823.862 Liabilities 40.242.066 36.558.215 Long-term provisions 24.357.777 18.056.000 - Long-term provision for employment termination benefits 15 24.357.777 18.056.000 Lease liabilities 17 10.436.251 12.829.332 Deferred tax liabilities 27 5.448.038 5.672.883

TOTAL LIABILITIES 602.875.322 571.691.916 EQUITY 375.045.038 226.140.188

Share capital 18 247.102.500 82.102.500 Adjustment to share capital 90.762.717 90.609.827 Restricted reserves appropriated from profit 18 14.624.344 14.624.344 Other comprehensive income and expenses not to be reclassified to profit or loss (8.305.600) (5.014.400) - Loss on remeasurement of defined benefit plans (8.305.600) (5.014.400) Prior years' profits 43.817.917 135.942.339 Net loss for the period (12.956.840) (92.124.422)

TOTAL LIABILITIES AND EQUITY 977.920.360 797.832.104

The accompanying notes form an integral part of these consolidated financial statements. INDEPENDENT AUDITOR’S REPORT

OLMUKSAN INTERNATIONAL PAPER AMBALAJ SANAYİ VE TİCARET A.Ş. VE AND ITS SUBSIDIARY

CONSOLIDATED STATEMENT PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME FOR THE PERIOD 1 JANUARY - 31 DECEMBER 2020 (Amounts expressed in Turkish Lira (“TL”) unless otherwise indicated.)

Audited Audited Current Current Period Period 1 January- 1 January- Notes 31 December 2020 31 December 2019

Revenue 19 1.240.247.037 1.027.962.156 Cost of sales (-) 19 (1.025.433.873) (915.557.861)

GROSS PROFIT 214.813.164 112.404.295 General administrative expenses (-) 20 (106.271.716) (99.703.189) Marketing expenses (-) 20 (63.641.257) (49.393.833) Research and development expenses (-) 20 (4.042.288) (3.285.867) Other income from operating activities 21 27.759.042 33.241.237 Other expenses from operating activities (-) 21 (72.609.354) (80.085.674)

OPERATING LOSS (3.992.409) (86.823.031) Income from investing activities 22 2.335.190 721.363 Expenses from investing activities (-) 22 (354.715) (407.608) OPERATING LOSS BEFORE FINANCING (2.011.934) (86.509.276) EXPENSES Financial income 25 3.098.779 1.777.770 Financial expenses (-) 25 (14.128.024) (30.996.975)

LOSS BEFORE TAX (13.041.179) (115.728.481) - Current tax expense (-) - - - Deferred tax income 27 84.339 23.604.059

NET LOSS FOR THE PERIOD (12.956.840) (92.124.422) Earnings per share 28 (0,0608) (1,1221)

OTHER COMPREHENSIVE EXPENSE Items That Will not to Be Reclassified Subsequently to Profit or Loss - Loss on remeasurement of defined benefit plans 26 (4.114.000) (3.351.000) - Income tax relating to items that will not be reclassified subsequently to profit or loss 26 822.800 670.200

OTHER COMPREHENSIVE EXPENSE (3.291.200) (2.680.800)

TOTAL COMPREHENSIVE EXPENSE (16.248.040) (94.805.222)

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

Annual Report 2020 35 INDEPENDENT AUDITOR’S REPORT

OLMUKSAN INTERNATIONAL PAPER AMBALAJ SANAYİ VE TİCARET A.Ş. VE AND ITS SUBSIDIARY

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE PERIOD 1 JANUARY - 31 DECEMBER 2020 (Amounts expressed in Turkish Lira (“TL”) unless otherwise indicated.)

Accumulated Other Comprehensive Income and Expenses That Will Be Birikmiş Re classifie d to Profit or Loss Kartlar

Restricted Remeasurement Reserves Loss on Share Adjustments Appropriated Defined Prior Years’ Net Loss Capital on capital from Profit Benefit Profits for the Period Total PRIOR PERIOD

Balances as of 1 January 2019 (opening) 82.102.500 90.609.827 14.624.344 (2.333.600) 121.747.848 14.194.491 320.945.410 Transfers - - - - 14.194.491 (14.194.491) - Total comprehensive expense - - - (2.680.800) - (92.124.422) (94.805.222)

Balances as of 31 December 2019 (closing) 82.102.500 90.609.827 14.624.344 (5.014.400) 135.942.339 (92.124.422) 226.140.188

CURRENT PERIOD Balances as of 1 January 2020 (opening) 82.102.500 90.609.827 14.624.344 (5.014.400) 135.942.339 (92.124.422) 226.140.188 Capital increase (*) 165.000.000 152.890 - - - - 165.152.890 Transfers - - - - (92.124.422) 92.124.422 - Total comprehensive expense - - - (3.291.200) - (12.956.840) (16.248.040)

Balances as of 31 December 2020 (closing) 247.102.500 90.762.717 14.624.344 (8.305.600) 43.817.917 (12.956.840) 375.045.038

(*) Cash capital was increased by TL 165.152.890 on 16 March 2020.

The accompanying notes from an integral part of these consolidated financial statements. INDEPENDENT AUDITOR’S REPORT

OLMUKSAN INTERNATIONAL PAPER AMBALAJ SANAYİ VE TİCARET A.Ş. VE AND ITS SUBSIDIARY

CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE PERIOD 1 JANUARY - 31 DECEMBER 2020 (Amounts expressed in Turkish Lira (“TL”) unless otherwise indicated.)

Audited Audited Current Period Prior Period 1 January- 1 January- Notes 31 December 2020 31 December 2019

A. CASH FLOWS FROM OPERATING ACTIVITIES: Loss for the Period (12.956.840) (92.124.422) Adjustments to reconcile net profit for the period: Adjustments Related to Depreciation and Amortization 11-12-17 25.844.862 19.755.879 Adjustments Related to Impairment (Reversal) on Receivables 6 9.523.160 12.392.552 Adjustments Related to Impairment (Reversal) on Inventory 8 844.774 (638.550) Adjustments Related to Provisions (Reversal) for Employee Benefits 15 5.540.777 10.231.000 Adjustments Related to Other Provisions (Reversals) 14-15 13.252.671 7.591.526 Adjustments Related to Interest Income 25 (3.098.779) (1.777.770) Adjustments Related to Interest Expenses 25 14.128.024 30.996.975 Adjustments Related to Unrealised Foreign Exchance Differences 17 3.615.347 1.018.486 Adjustments Related to Fair Value Losses (Gains) of Derivative Financial Instruments 32 (5.545.574) (1.690.811) Adjustments Related to Tax (Income)/ Expenses 27 (84.339) (23.604.059) Adjustments Related to Losses (Gains) from Disposal of Property, Plant and 22 (1.980.475) (313.755) Changes in working capital: Adjustments Related to Increase in Trade Receivables (160.432.930) 102.880.283 Adjustments Related to Decrease (Increase) in Inventories (47.576.042) 183.542.411 Adjustments Related to Increase (Decrease) in Trade Payables 73.413.827 (161.273.011) Adjustments related to Increase (Decrease) in Payables under Employee Benefits - (1.200) Adjustments Related to Increase (Decrease) in Other Payables Related to Operations 849.761 3.893.548 Adjustments Related to Decrease (Increase) in Other Assets Related to Operations 6.353.143 19.000.758 Adjustments Related to Increase (Decrease) in Other Liabilities Related to Operations (212.000) (258.000) Cash flows from operating activities: Interest Paid (11.120.689) (30.266.771) Interest Received 3.098.779 1.777.770 Payments under Employee Benefits 15 (3.353.000) (8.163.000) Tax Returns (Payments) - (2.738.268) Net cash generated from / (used in) operating activities (89.895.543) 70.231.571

B. CASH FLOWS FROM INVESTING ACTIVITIES: Cash Inflows from Sale of Property, Plant and Equipment and Intangible Assets 4.519.315 1.343.553 Cash Outflows from Purchase of Property, Plant and Equipment 11 (17.692.513) (102.828.538) Cash Outflows from Purchase of Intangible Assets 12 - (104.500) Other Advances Given and Repayments of Borrowings 9.792.913 6.885.599 Net cash generated from/(used in) investing activities (3.380.285) (94.703.886) C. CASH FLOWS FROM FINANCING ACTIVITIES: Cash Outflows Related to Repayments of Borrowings 13 (162.367.948) (180.800.000) Cash Inflows from Loans 13 105.000.000 206.863.098 Cash Inflows from Capital Share Issuance 165.152.890 - Cash Outflows Related to Repayment of Borrowings from Lease Contracts 17 (8.966.068) (6.394.338) Net cash generated from financing activities 98.818.874 19.668.760 Increase/(decrease) in cash and cash equivalents 5.543.046 (4.803.555) Cash and cash equivalents at the beginning of the period 4 8.532.804 13.336.359

Cash and cash equivalents at the end of the period 4 14.075.850 8.532.804

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

Annual Report 2020 37 INDEPENDENT AUDITOR’S REPORT

OLMUKSAN INTERNATIONAL PAPER AMBALAJ SANAYİ VE TİCARET A.Ş. AND ITS SUBSIDIARY NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE PERIOD 1 JANUARY - 31 DECEMBER 2020 (Amounts expressed in Turkish Lira (“TL”) unless otherwise indicated.) NOTE 1 - ORGANISATION AND OPERATIONS OF THE NOTE 2 - BASIS OF PRESENTATION OF THE GROUP FINANCIAL STATEMENTS Olmuksan International Paper Ambalaj Sanayi ve Ticaret A.Ş. (the 2.1 Basis of Preparation Statement of Compliance to “Company’’) was established on 13 August 1958 with the name of TFRS Cam Soda Sanayi A.Ş. and the name of the Company was changed in 1963 with the new business corporation. The Group produces The accompanying consolidated financial statements are prepared and sells various types of corrugated boxes since 1968. Company’s in accordance with Communiqué Serial II, No: 14.1, “Principles name changed into Olmuksan International Paper Ambalaj Sanayi of Financial Reporting in Capital Markets” (the “Communiqué”) ve Ticaret Anonim Şirketi as of 26 March 2013, which change published in the Official Gazette numbered 28676 on 13 June 2013. was published in the Turkish Commercial Registry Gazette under According to Article 5 of the Communiqué, financial statements number 8290 on 1 April 2013. are prepared in accordance with the Turkish Financial Reporting Standards (“TFRS”) issued by Public Oversight Accounting and Gebze, İzmir, Adana, Bursa, Çorlu, Çorum and Manisa facilities Auditing Standards Authority (“POA”). TFRS contains Turkish produce various types and sizes of corrugated boxes and sold to Accounting Standards, Turkish Financial Reporting Standards and a broad customer portfolio operating in different sectors, ranging its addendum and interpretations. from food to industry. The consolidated financial statements and disclosures have The Company’s legal center address is Esentepe Mahallesi Harman been prepared in accordance with the “Announcement on TFRS 1 Sokak Nidakule Levent Apartmanı No: 7/9/54 343941 Şişli, Taxonomy” and the resolution of CMB about the Illustrations of Istanbul. As of 31 December 2020, the Group has 813 employees Financial Statements and Application Guidance published on 15 (31 December 2019: 833). Shares of the Group have been listed on April 2019. Borsa İstanbul (“BIAS”) since 1986. In accordance with the CMB resolution issued on 17 March 2005, The joint venture, Dönkasan Dönen Kağıt Hammaddeleri Sanayi ve listed companies operating in Turkey are not subject to inflation Ticaret Anonim Şirketi (“Dönkasan”), of the Company and Kartonsan accounting effective from 1 January 2005. Therefore, the financial Karton Sanayi ve Ticaret Anonim Şirketi (“Kartonsan”) was subject statements of the Group have been prepared accordingly. to division on 10 June 2015. As a result of the division Dönkasan has ended and Company’s wholly owned, subsidiary Doğal Kağıt The Company and its subsidiary maintain their books of accounts Hammaddeleri Sanayi ve Ticaret Limited Şirketi (“Doğal Kağıt”), and prepare their statutory financial statements in accordance has been established with the assets and liabilities of Kartal and with the Turkish Commercial Code (“TCC”), tax legislation, the Adana factories transferred to the Company after the division. Uniform Chart of Accounts issued by the Ministry of Finance and principles issued by CMB. The consolidated financial statements The consolidated financial statements for the period 1 January - are based on the statutory records, which are maintained under 31 December 2020 have been approved by the Board of Directors historical cost conventions, with the required adjustments and of Olmuksan International Paper Ambalaj Sanayi ve Ticaret A.Ş. reclassifications reflected for the purpose of fair presentation in on 3 March 2021. The shareholders of the Group have the right to accordance with TFRS. change financial statements and financial statements are subject to approval by shareholders at the annual general meeting. The consolidated financial statements have been prepared on the historical cost basis except for financial instruments that are The Group’s controlling party is I. P. Container Holdings (Spain), measured at fair values. Historical cost is generally based on the S.L. and the Group’s main shareholder and ultimate party is fair value of the consideration given in exchange for assets. International Paper. Currency Used Details of Company’s subsidiary are as follows: The individual financial statements of each Group entity are Nature of Shareholding Shareholding presented in the currency of the primary economic environment in Rate Rate which the entity operates (its functional currency). The results and Subsidiary Business 2020 2019 % % financial position of each entity are expressed in TL, which is the Doğal Kağıt Paper functional currency of the Company, and the presentation currency Hammaddeleri Sanayi ve for the consolidated financial statements. Ticaret Limited Şirketi Collection and 100 100 Decomposition

In accordance with the decision made by the Company’s Board of Directors on 26 April 2019, in the light of the findings in the technical and commercial evaluation report, the production activities at the Çorlu Branch of the Company at Türkgücü OSB Mahallesi, 110. Sokak N5 Çorlu, Tekirdağ, were stopped and the factory was closed. INDEPENDENT AUDITOR’S REPORT

Amendments to TFRS 9, TAS 39 and TFRS 7 Interest Rate Amendments to TFRS 4 Extension of the Temporary Exemption from Benchmark Reform Applying TFRS 9 The amendments clarify that entities would continue to apply Amendments to TFRS 9, Interest Rate Benchmark Reform — Phase 2 certain hedge accounting requirements assuming that the interest TAS 39, TFRS 7, rate benchmark on which the hedged cash flows and cash flows TFRS 4 and TFRS 16 from the hedging instrument are based will not be altered as a result of interest rate benchmark reform. Amendment to TFRS 16 COVID-19 Related Rent Concessions The changes in COVID-19 Related Rent Concessions (Amendment to TFRS 16) brings practical expedient which allows a lessee to elect not to assess whether a COVID-19-related rent concession is a lease modification. The practical expedient applies only to rent concessions occurring as a direct consequence of COVID-19 and only if all of the following conditions are met: • the change in lease payments results in revised consideration for the lease that is substantially the same as, or less than, the consideration for the lease immediately preceding the change; • any reduction in lease payments affects only payments originally due on or before 30 June 2021 (a rent concession would meet this condition if it results in reduced lease payments on or before 30 June 2021 and increased lease payments that extend beyond 30 June 2021).

Annual Report 2020 39 INDEPENDENT AUDITOR’S REPORT

NOTE 2 - BASIS OF PRESENTATION OF THE FINANCIAL NOTE 2 - BASIS OF PRESENTATION OF THE FINANCIAL STATEMENTS (cont’d) STATEMENTS (cont’d) 2.2. New and Revised Turkish Financial Reporting 2.2. New and Revised Turkish Financial Reporting Standards Effective as of 2020 (cont’d) Standards Effective as of 2020 (cont’d) b) New and revised TFRSs in issue but not yet effective b) New and revised TFRSs in issue but not yet effective (cont’d) (cont’d) TFRS 17 Insurance Contracts Annual Improvements to TFRS Standards 2018-2020 Cycle TFRS 17 requires insurance liabilities to be measured at a current fulfillment value and provides a more uniform measurement Amendments to TFRS 1 First time adoption of International and presentation approach for all insurance contracts. These Financial Reporting Standards requirements are designed to achieve the goal of a consistent, The amendment permits a subsidiary that applies paragraph principle-based accounting for insurance contracts. TFRS 17 D16(a) of TFRS 1 to measure cumulative translation differences supersedes TFRS 4 Insurance Contracts as of 1 January 2021. using the amounts reported by its parent, based on the parent’s Amendments to TAS 1 Classification of Liabilities as date of transition to TFRSs.TFRS 9 Current or Non-Current Amendments to TFRS 9 Financial Instruments The amendments aim to promote consistency in applying the The amendment clarifies which fees an entity includes in assessing requirements by helping companies determine whether, in the whether to derecognize a financial liability. An entity includes only statement of financial position, debt and other liabilities with an fees paid or received between the entity (the borrower) and the uncertain settlement date should be classified as current (due or lender, including fees paid or received by either the entity or the potentially due to be settled within one year) or non-current. lender on the other’s behalf. Amendment defers the effective date by one year. Amendments Amendments to TAS 41 Agriculture to TAS 1 are effective for annual reporting periods beginning on or after 1 January 2023 and earlier application is permitted. The amendment removes the requirement in paragraph 22 of TAS 41 for entities to exclude taxation cash flows when measuring the Amendments to TFRS 3 Reference to the Conceptual fair value of a biological asset using a present value technique. Framework This will ensure consistency with the requirements in TFRS The amendments update an outdated reference to the Conceptual 13.TFRS 4 (Değişiklikler) TFRS 9’un Uygulanmasına İlişkin Geçici Framework in TFRS 3 without significantly changing the Muafiyet Süresinin Uzatılması requirements in the standard. The amendments to TFRS 1, TFRS 9, and TAS 41 are all The amendments are effective for annual periods beginning on or effective for annual periods beginning on or after 1 January 2022. after 1 January 2022. Early application is permitted if an entity Early application is permitted. also applies all other updated references (published together with the updated Conceptual Framework) at the same time or Amendments to TFRS 4 Extension of the Temporary earlier. Exemption from Applying TFRS 9 Amendments to TAS 16 Property, Plant and Equipment - The amendment changes the fixed expiry date for the Proceeds before Intended Use temporary exemption in TFRS 4 Insurance Contracts from applying TFRS 9 Financial Instruments, so that entities would be The amendments prohibit deducting from the cost of an item of required to apply TFRS 9 for annual periods beginning on or after property, plant and equipment any proceeds from selling items 1 January 2023. produced while bringing that asset to the location and condition necessary for it to be capable of operating in the manner intended Amendments to TFRS 9, TAS 39, TFRS 7, TFRS 4 and by management. Instead, an entity recognizes the proceeds from TFRS 16 Interest Rate Benchmark Reform — Phase 2 selling such items, and the cost of producing those items, in profit The amendments in Interest Rate Benchmark Reform — Phase 2 or loss. (Amendments to TFRS 9, TAS 39, TFRS 7, TFRS 4 and TFRS 16) The amendments are effective for annual periods beginning on or introduce a practical expedient for modifications required by the after 1 January 2022. Early application is permitted. reform, clarify that hedge accounting is not discontinued solely because of the IBOR reform, and introduce disclosures that Amendments to TAS 37 Onerous Contracts – Cost of allow users to understand the nature and extent of risks arising Fulfilling a Contract from the IBOR reform to which the entity is exposed to and how The amendments specify that the ‘cost of fulfilling’ a contract the entity manages those risks as well as the entity’s progress comprises the ‘costs that relate directly to the contract’. Costs in transitioning from IBORs to alternative benchmark rates, and that relate directly to a contract can either be incremental costs how the entity is managing this transition. of fulfilling that contract or an allocation of other costs that relate directly to fulfilling contracts. The amendments to TFRS 9, TAS 39, TFRS 7, TFRS 4 and TFRS 16 are all effective for annual periods beginning on or after 1 The amendments published today are effective for annual January 2021. Early application is permitted. periods beginning on or after 1 January 2022. Early application is permitted. INDEPENDENT AUDITOR’S REPORT

NOTE 2 - BASIS OF PRESENTATION OF THE FINANCIAL NOTE 2 - BASIS OF PRESENTATION OF THE FINANCIAL STATEMENTS (cont’d) STATEMENTS (cont’d) 2.3. Significant Accounting Judgements, Estimates and 2.5. Important Changes Regarding the Current Period Assumptions The Company has taken the necessary measures from the first day In preparing the consolidated financial statements, the Group to protect the health and safety of its employees, their families management has made estimates and assumptions on the and business partners in relation to the Covid-19 outbreak that amounts recognized in the financial statements during the has affected the whole world. It continues to maintain all these application of accounting policies. Actual results may differ from measures, personal hygiene, social distance, site cleanliness, and these estimates. the measures recommended by the World Health Organization (WHO), Centers for Disease Control and Prevention (CDC) and Expected credit losses on trade receivables are calculated based other national Health Authorities. on revenue from previous years until 1 January 2020, while expected credit losses in subsequent periods are based on third In addition, due to the epidemic, financial markets of Turkey parties trade receivables. were also affected, like all global markets. In this process, the necessary actions were taken by the Company management in Most of trade receivables are secured and doubtful receivable order to minimize the impact of Covid-19 on company activities provision for the remaining portion of trade receivables, which are and financial status. During this period, there was no significant not in the scope of insurance, are determined by evaluating the delay in both payments to suppliers and collection of receivables. past experience and maturities. Our factories, which constitute a very critical part of the supply Inventories are valued at the lower of cost or net realizable value. chain in the production and logistics of products with critical Net realizable value is the estimated selling price in the ordinary importance such as food, hygiene, medicine and urgent needs, course of business, less estimated costs of completion and continue their production and sales activities without interruption. estimated cost necessary to make the sale. Although it could not be predicted how long the Covid-19 effect Deferred tax assets and liabilities are recorded using substantially will last all over the world, while preparing the consolidated enacted tax rates for the effect of temporary differences between financial statements dated 31 December 2020 the possible effects book and tax bases of assets and liabilities. of the Covid-19 outbreak were evaluated and the estimates and Tax rates enacted as of the reporting date are used to determine assumptions used in the preparation of the financial statements deferred income tax in accordance with the current tax legislation. were reviewed and within this scope, the interim period dated 31 Deferred tax liabilities are recognized for all taxable temporary December 2020, the possible impairment of the financial assets, differences, whereas deferred tax assets resulting from deductible stocks, property, plant and equipment included in the financial temporary differences are recognized to the extent that it is statements have been reviewed and no impairment has been probable that future taxable profit will be available against which detected. the deductible temporary difference can be utilized (Note 27). 2.6.Summary of Significant Accounting Policies 2.4 Comparative Information and Reclassification of The significant accounting policies applied in the preparation of Prior Period Financial Statements and Accounting Policies, the financial statements are summarized below: Changes in Accounting Estimates and Errors Revenue Financial statements of the Company have been prepared comparatively with the prior year in order to give information Sales revenue consists of the amounts expected to be about financial position and performance trends. Comparative data earned in return for the transfer of the undertaken goods to the are reclassified whenever required and material differences are customer. The Group determines each commitment it makes to disclosed in order to comply with the presentation of the current the customer to transfer the goods promised in the contracts or period financial statements. order forms it has signed with the customer, as a performance obligation. The Group recognizes the revenue in the consolidated Changes in accounting policies or accounting errors noted are financial statements when it fulfills its performance obligation by applied retrospectively and prior period financial statements are transferring the undertaken goods to its customers. restated. If changes in accounting estimates are for only one period, changes are applied on the current year but if the estimated The Group recognizes the revenue amounts arising from the changes are for the following periods, changes are applied both on following main products in its consolidated financial statements: the current and following years prospectively. • Fresh fruit and vegetable packaging Fixed assets amounting to TL 779,695 presented under property, plant and equipment in the previous period’s statement of financial • Transport packaging position were classified under intangible fixed assets in the current • Shelf-ready packaging and display products period. • Heavy-duty packaging Accruals amounting to TL 2,747,504 presented under other short- term provisions in the previous period’s statement of financial • High quality print position were classified under trade payables in the current period. • Packaging installation services These classifications have no impact on the statement of profit or loss.

Annual Report 2020 41 INDEPENDENT AUDITOR’S REPORT

Inventories The expected useful lives are stated below: Inventories are stated at the lower of cost and net realizable Maddi Duran Varlıklar (Devamı) value. Costs, including an appropriate portion of fixed and variable Yıl overhead expenses, are assigned to inventories held by the method most appropriate to the particular class of inventory, Buildings 40 with the majority being valued on a first-in-first out basis. Net Land Improvements 10-20 realizable value represents the estimated selling price less all estimated costs of completion and costs necessary to make Machinery, plant and equipment 9-15 the sale. When the net realizable value of inventory is less than Motor Vehicles 4-5 cost, the inventory is written down to the net realizable value and the expense is included in statement of profit or loss or Furniture and fixtures 8-10 other comprehensive income in the period the write-down or loss Intangible assets occurred. Intangible assets comprise rights and other intangible asset. When the circumstances that previously caused inventories Intangible assets are carried at cost less accumulated to be written down below cost no longer exist or when there is amortisation. Amortisation is calculated using the straight- line clear evidence of an increase in net realizable value because of method over a period not exceeding five years. Where an indication the changes in economic circumstances, the amount of the write- of impairment exists, the carrying amount of any intangible asset down is reversed. The reversal amount is limited to the amount is assessed and written down immediately to its recoverable of the initial write-down. amount. The recoverable amount is considered to be the higher Property, Plant and Equipment of asset’s net selling price or value in use. Assets in the course of construction for rental or administrative Impairment of Assets purposes, or for purposes not yet determined, are carried at cost, The carrying amounts of the Group’s assets other than less any recognized impairment loss. Cost includes professional deferred tax assets are reviewed at each reporting date to fees. As it is for the other fixed assets, such assets are depreciated determine whether there is any indication of impairment. If any when the assets are ready for their intended use. such indication exists, then the asset’s recoverable amount is Depreciation is charged so as to write off the cost or valuation estimated. In property, plant and equipment that are not ready of assets, other than land and properties under construction, for use, recoverable amount is estimated on each statement of over their estimated useful lives, using the straight-line method. financial position date. The recoverable amount of an asset is the Estimated useful lives, residual value and depreciation method greater of its value in use and its fair value less costs to sell. are reviewed at each year-end, with the effect of any changes in Assets are allocated to cash generating units for the purpose estimate accounted for on a prospective basis. of impairment testing, which is undertaken on the lowest level. Assets held under finance leases are depreciated over their An impairment loss is recognized for the amount by which the expected useful lives on the same basis as owned assets. carrying amount of the asset or any cash-generating unit of However, when there is no reasonable certainty that ownership that asset exceeds its recoverable amount, which is the higher will be obtained by the end of the lease term, assets are of an asset’s net selling price or value in use. Impairment losses depreciated over the shorter of the lease term and their useful are accounted for in the statement of profit or loss and other lives. comprehensive income. Impairment losses can be reversed to the extent that increased carrying amount of an asset shall not Gains or losses on disposals of property, plant and equipment exceed the carrying amount that would have been determined are determined by comparing proceeds with their restated had no impairment loss been recognized for the asset in prior carrying amounts and are included in the statement of profit or years provided that increases in the recoverable amount of the loss or other comprehensive income. asset can be associated with events that occur subsequent to the period in which the impairment loss was recognized. Depreciation is calculated over of the cost of property and equipment using the straight-line method based on expected Borrowing Costs useful lives. All borrowing costs are recognized in profit or loss and other comprehensive income in the period in which they are incurred. INDEPENDENT AUDITOR’S REPORT

NOTE 2 - BASIS OF PRESENTATION OF THE FINANCIAL NOTE 2 - BASIS OF PRESENTATION OF THE FINANCIAL STATEMENTS (cont’d) STATEMENTS (cont’d) 2.6.Summary of Significant Accounting Policies (cont’d) 2.6.Summary of Significant Accounting Policies (cont’d) Business Combinations Changes in the fair value of the contingent consideration that qualify as measurement period adjustments are adjusted The acquisition of subsidiaries and businesses are accounted retrospectively, with corresponding adjustments against for using the acquisition method. The consideration transferred goodwill. Measurement period adjustments are adjustments in a business combination is measured at fair value, which is that arise from additional information obtained during the calculated as the sum of the acquisition- date fair values of ‘measurement period’ (which cannot exceed one year from the the assets transferred by the Group, liabilities incurred by the acquisition date) about facts and circumstances that existed at Company to the former owners of the acquiree and the equity the acquisition date. interests issued by the Group in exchange for control of the acquiree. Acquisition- related costs are generally recognized in The subsequent accounting for changes in the fair value of profit or loss as incurred. the contingent consideration that do not qualify as measurement period adjustments depends on how the contingent consideration At the acquisition date, the identifiable assets acquired and is classified. Contingent consideration that is classified as equity the liabilities assumed are recognized at their fair value at the is not premeasured at subsequent reporting dates and its acquisition date, except that: subsequent settlement is accounted for within equity. Contingent - Deferred tax assets or liabilities and liabilities or assets consideration that is classified as an asset or a liability is related to employee benefit arrangements are recognized and remeasured at subsequent reporting dates in accordance measured in accordance with TAS 12 Income Taxes and TAS 19 with TAS 39, or TAS 37 Provisions, Contingent Liabilities and Employee Benefits respectively; Contingent Assets, as appropriate, with the corresponding gain or loss being recognized in profit or loss. Those that are not within - Liabilities or equity instruments related to share-based the scope of TAS 39 / TFRS 9 are recognized in accordance with payment arrangements of the acquire or share- based payment TAS 37 Provisions, Contingent Liabilities and Contingent Assets arrangements of the Group entered into to replace share-based or other TFRSs. payment arrangements of the acquire are measured in accordance with TFRS 2 Share-based Payment at the acquisition date. When a business combination is achieved in stages, the Group’s previously held equity interest in the acquireee is - Assets (or disposal groups) that are classified as held premeasured to fair value at the acquisition date (i.e. the date for sale in accordance with TFRS 5 Non -current Assets Held for when the Company obtains control) and the resulting gain or Sale and Discounted Operations are measured in accordance with loss, if any, is recognized in profit or loss. Amounts arising from that Standard. interests in the acquiree prior to the acquisition date that have Goodwill is measured as the excess of the sum of the previously been recognized in other comprehensive income are consideration transferred, the amount of any non-controlling reclassified to profit or loss where such treatment would be appropriate if that interest were disposed of. interests in the acquiree, and the fair value of the acquirer’s previously held equity interest in the acquire (if any) over the net of If the initial accounting for a business combination is the acquisition-date amounts of the identifiable assets acquired incomplete by the end of the reporting period in which the and the liabilities assumed. If, after reassessment, the net of combination occurs, the Group reports provisional amounts the acquisition-date amounts of the identifiable assets acquired for the items for which the accounting is incomplete. Those and liabilities assumed exceeds the sum of the consideration provisional amounts are adjusted during the measurement period transferred, the amount of any non-controlling interests in the (see above), or additional assets or liabilities are recognized, to acquire and the fair value of the acquirer’s previously held interest reflect new information obtained about facts and circumstances in the acquire (if any), the excess is recognized immediately in that existed at the acquisition date that, if known, would have profit or loss as a bargain purchase gain. affected the amounts recognized at that date. Non-controlling interests that are present ownership Foreign Currency Transactions interests and entitle their holders to a proportionate share In the statutory accounts of the Group, transactions in foreign of the entity’s net assets in the event of liquidation may be currencies (currencies other than Turkish Lira) are translated into initially measured either at fair value or at the non- controlling Turkish Lira at the rates of exchange ruling at the transaction interests’ proportionate share of the recognized amounts of the dates. Assets and liabilities denominated in foreign currencies acquiree’s identifiable net assets. The choice of measurement are translated at the exchange rate ruling at the reporting date. basis is made on a transaction-by-transaction basis. Other types Non-monetary items carried at fair value that are denominated in of non-controlling interests are measured at fair value or, when foreign currencies are retranslated at the rates prevailing on the applicable, on the basis specified in another TFRS. date when the fair value was determined. Non-monetary items When the consideration transferred by the Company in a that are measured in terms of historical cost in a foreign currency business combination includes assets or liabilities resulting are not retranslated. from a contingent consideration arrangement, the contingent Exchange differences are recognized in the statement of profit consideration is measured at its acquisition-date fair value and or loss for the period in that they occur. included as part of the consideration transferred in a business combination.

Annual Report 2020 43 INDEPENDENT AUDITOR’S REPORT

NOTE 2 - BASIS OF PRESENTATION OF THE FINANCIAL NOTE 2 - BASIS OF PRESENTATION OF THE FINANCIAL STATEMENTS (cont’d) STATEMENTS (cont’d) 2.6.Summary of Significant Accounting Policies (cont’d) 2.6. Summary of Significant Accounting Policies (cont’d) Earnings per Share Related Parties (cont’d) The Group’s earnings per share disclosed in the consolidated Related Parties statement of comprehensive income are determined by dividing A related party is a person or entity that is related to the net earnings by the weighted average number of shares that have entity (reporting entity) that is preparing its financial statements been outstanding during the related period. (Note 6). In Turkey, companies can increase their share capital by a) A person or a close member of that person’s family is distributing “bonus shares” to shareholders from retained related to a reporting entity if that person, earnings. In computing earnings per share, such “bonus share” distributions are assessed as issued shares. Accordingly, the (i) has control or joint control over the reporting entity, retrospective effect for those share distributions is taken into (ii) has significant influence over the reporting entity; or, consideration in determining the weighted-average number of shares outstanding used in this computation. (iii) is a member of the key management personnel of the reporting entity or of a parent of the reporting entity. Events after the Reporting Period b) An entity is related to a reporting entity if any of the Events after the reporting period are those events that occur following conditions applies: between the balance sheet date and the date when the financial statements are authorized for issue, even if they occur after (i) The entity and the reporting entity are members of the an announcement related with the profit for the year or public same group (which means that each parent, subsidiary and fellow disclosure of other selected financial information. subsidiary is related to the others). The Group adjusts the amounts recognized in its financial (ii) One entity is an associate or joint venture of the other statements if adjusting events occur after the balance sheet date. entity (or an associate or joint venture of a member of a group of which the other entity is a member). Provision, Contingent Assets and Contingent Liabilities (iii) Both entities are joint ventures of the same third party. Provision are recognized when the Group has a present (iv) One entity is a joint venture of a third entity and the obligation as a result of a past event, and it is probable that the other entity is an associate of the third entity. Group will be required to settle that obligation, and a reliable estimate can be made of the amount of the obligation. (v) The entity is a post-employment benefit plan for the benefit of employees of either the reporting entity or an entity The amount recognized as a provision is the best estimate of related to the reporting entity. If the reporting entity is itself such the consideration required to the settle the present obligation at a plan, the sponsoring employers are also related to the reporting the reporting date, taking into accounts the risks and uncertainties entity. surrounding the obligation. (vi) The entity is controlled or jointly controlled by a person Where a provision is measured using the cash flows estimated identified in (a). to settle the present obligation, its carrying amount is the present (vii) A person identified in (a) (i) has significant influence over value of those cash flows. the entity or is a member of the key management personnel of When some or all of the economic benefits required to settle the entity (or of a parent of the entity). a provision are expected to be recovered from a third party; A related party transaction is a transfer of resources, services receivable is recognized as an asset if it is virtually certain that or obligations between a reporting entity and a related party, reimbursement will be received and the amount of receivable can regardless of whether a price is charged. be measured reliably. Income Taxes Turkish Tax Legislation does not permit a parent company and its subsidiary to file a consolidated tax return. Therefore, provisions for taxes, as reflected in the accompanying consolidated financial statements, have been calculated on a separate-entity basis. Income tax expense represents the sum of the tax currently payable and deferred tax. INDEPENDENT AUDITOR’S REPORT

NOTE 2 - BASIS OF PRESENTATION OF THE FINANCIAL NOTE 2 - BASIS OF PRESENTATION OF THE FINANCIAL STATEMENTS (cont’d) STATEMENTS (cont’d) 2.6. Summary of Significant Accounting Policies (cont’d) 2.6. Statements of Cash Flows (cont’d) Income Taxes (cont’d) Income Taxes (cont’d) Current tax Employee Benefits / Severance Pays The tax currently payable is based on taxable profit for the Under Turkish law and union agreements, lump sum payments year. Taxable profit differs from ‘profit before tax’ as reported in the are made to employees retiring or involuntarily leaving the consolidated statement of profit or loss and other comprehensive Company. Such payments are considered as being part of defined income because of items of income or expense that are taxable retirement benefit plan as per International Accounting Standard or deductible in other years and it excludes items that are never No. 19 (revised) “Employee Benefits” (“TAS 19”). taxable or deductible. The Group’s current tax is calculated using tax rates that have been enacted or substantively enacted by the The retirement benefit obligation recognized in the statement end of the reporting period. of financial position represents the present value of the defined benefit obligation as adjusted for unrecognized actuarial gains Deferred tax and losses. The actuarial gains and losses are recognized in other Deferred tax is recognized on temporary differences between comprehensive income. the carrying amounts of assets and liabilities in the financial Statements of Cash Flows statements and the corresponding tax bases, which are used in the computation of taxable profit. Deferred tax liabilities are In statement of cash flow, cash flows are classified according generally recognized for all taxable temporary differences. to operating, investment and finance activities. Cash flows from Deferred tax assets are recognized for all deductible temporary operating activities reflect cash flows generated from petroleum differences to the extent that it is probable that taxable profits products sales of the Group. will be available against which those deductible temporary Cash flows from investment activities express cash used differences can be utilized. Such deferred tax assets and liabilities in investment activities (direct investments and financial are not recognized if the temporary difference arises from investments) and cash flows generated from investment activities goodwill or from the initial recognition (other than in a business of the Group. combination) of other assets and liabilities in a transaction that affects neither the taxable profit nor the accounting profit. Cash flows relating to finance activities express sources of financial activities and payment schedules of the Group. Deferred tax liabilities are recognized for taxable temporary differences associated with investments in subsidiaries and Cash and cash equivalents comprise cash on hand and demand associates, and interests in joint ventures, except where the Group deposits and other short-term highly liquid investments, which is able to control the reversal of the temporary difference and it their maturities are three months or less from date of acquisition is probable that the temporary difference will not reverse in the and that, are readily convertible to a known amount of cash and foreseeable future. Deferred tax assets arising from deductible are subject to an insignificant risk of changes in value. temporary differences associated with such investments and Share Capital and Dividends interests are only recognized to the extent that it is probable that there will be sufficient taxable profits against which to utilize the Common shares are classified as equity. Dividends on common benefits of the temporary differences and they are expected to shares are recognized in equity in the period in which they are reverse in the foreseeable future. approved and declared. Deferred tax assets and liabilities are measured at the tax Investment Properties rates that are expected to apply in the period in which the liability Investment properties are properties held to earn rentals is settled or the asset realized, based on tax rates (and tax laws) and/or valuation surplus and are measured at cost value less that have been enacted or substantively enacted by the end of accumulated depreciation and accumulated impairments, if any. the reporting period. The measurement of deferred tax liabilities and assets reflects the tax consequences that would follow from An investment property is derecognized upon disposal or the manner in which the Group expects, at the reporting date, to when the investment property is permanently withdrawn from use recover or settle the carrying amount of its assets and liabilities. and no future economic benefits are expected from disposal. Any gain or loss arising on derecognition of the property is included in Deferred tax assets and liabilities are offset when there is profit or loss in the period in which the property is derecognized. a legally enforceable right to set off current tax assets against current tax liabilities and when they relate to income taxes levied by the same taxation authority and the Group intends to settle its current tax assets and liabilities on a net basis. Current and deferred tax for the period Current and deferred tax are recognized as in profit or loss, except when they relate to items that are recognized in other comprehensive income or directly in equity, in which case, the current and deferred tax are also recognized directly in equity respectively.

Annual Report 2020 45 INDEPENDENT AUDITOR’S REPORT

NOTE 2 - BASIS OF PRESENTATION OF THE FINANCIAL NOTE 2 - BASIS OF PRESENTATION OF THE FINANCIAL STATEMENTS (cont’d) STATEMENTS (cont’d) 2.6. Statements of Cash Flows (cont’d) 2.6. Statements of Cash Flows (cont’d) Investment Properties (cont’d) Financial Instruments (cont’d) Transfers are made to or from investment property only when The lease liability is presented as a separate line in the there is a change in use. For a transfer from investment property consolidated statement of financial position. The lease liability that is measured at fair value to owner occupied property, the is subsequently measured by increasing the carrying amount to deemed cost for subsequent accounting is the fair value at the reflect interest on the lease liability (using the effective interest date of change in use. If owner occupied property becomes an method) and by reducing the carrying amount to reflect the lease investment property that is measured at fair value, the Group payments made. The Group remeasures the lease liability (and accounts for such property in accordance with the policy stated makes a corresponding adjustment to the related right-of-use under “Property, Plant and Equipment” up to the date of change asset) whenever: in use. • The lease term has changed or there is a change in the Properties leased under operating leases is not classified as assessment of exercise of a purchase option, in which case the investment property. lease liability is remeasured by discounting the revised lease payments using a revised discount rate. Leases • The lease payments change due to changes in an index The Group as Lessee or rate or a change in expected payment under a guaranteed The Group assesses whether a contract is or contains a lease, residual value, in which cases the lease liability is remeasured by at inception of the contract. The Group recognises a right-of- discounting the revised lease payments using the initial discount use asset and a corresponding lease liability with respect to all rate (unless the lease payments change is due to a change in lease arrangements in which it is the lessee, except for short- a floating interest rate, in which case a revised discount rate is term leases (defined as leases with a lease term of 12 months used). or less) and leases of low value assets. For these leases, the The terms of the contracts are for 3 to 4 years. Useful lives Group recognises the lease payments as an operating expense of the right-of-use assets have been determined based on their on a straight-line basis over the term of the lease unless another contract terms. systematic basis is more representative of the time pattern in which economic benefits from the leased assets are consumed. Financial Instruments Financial assets The lease liability is initially measured at the present value of the lease payments that are not paid at the commencement The Group classifies its financial assets based on the business date, discounted by using the rate implicit in the lease. If this rate model and features of contractual cash flows of the financial cannot be readily determined, the Group uses its incremental asset at amortized cost for subsequent recognition, at fair value borrowing rate. through other comprehensive income or at fair value through profit or loss. When the Group changes only the business model Lease payments included in the measurement of the lease it uses for the management of financial assets, it reclassifies all liability comprise: financial assets affected by this change. The reclassification of • fixed lease payments (including in-substance fixed financial assets is applied prospectively from the reclassification payments), less any lease incentives; date. In such cases, no adjustments are made to the gain or losses (including impairment gain or loss) previously recognized • variable lease payments that depend on an index or rate, in financial statements. initially measured using the index or rate at the commencement date; Amortised cost and effective interest method Interest income on financial assets carried at amortized cost • the amount expected to be payable by the lessee under residual value guarantees; is calculated using the effective interest method. The effective interest method is a method of calculating the amortised cost • the exercise price of purchase options, if the lessee is of a debt instrument and of allocating interest income over the reasonably certain to exercise the options; and relevant period. This income is calculated by applying the effective • payments of penalties for terminating the lease, if the lease interest rate to the gross carrying amount of the financial asset: term reflects the exercise of an option to terminate the lease. a) Credit-impaired financial assets when purchased or generated: For such financial assets, the Company applies the effective interest rate on the amortized cost of a financial asset based on the loan from the date of the recognition in the financial statements. INDEPENDENT AUDITOR’S REPORT

NOTE 2 - BASIS OF PRESENTATION OF THE FINANCIAL NOTE 2 - BASIS OF PRESENTATION OF THE FINANCIAL STATEMENTS (cont’d) STATEMENTS (cont’d) 2.6. Statements of Cash Flows (cont’d) 2.6. Statements of Cash Flows (cont’d) Financial Instruments (cont’d) Financial liabilities (cont’d) b) Non-financial assets that are impaired at the time of acquisition Other financial liabilities are subsequently measured at or generation but subsequently become a financial asset that has amortized cost using the effective interest method, with interest been impaired: For such financial assets, the Group applies the expense recognized on an effective yield basis. effective interest rate to the amortized cost of the asset in the Other financial liabilities subsequent reporting periods. Other financial liabilities, including borrowings, are initially Recognition and measurement of expected credit loss measured at fair value, net of transaction costs. Measurement of expected credit losses is the probability of The effective interest method is a method of calculating the default, loss in case of default (e.g. the size of loss if any default) amortized cost of a financial liability and of allocating interest and a function of the amount at risk in case of default. The expense over the relevant period. The effective interest rate is probability of default and the loss in case of default is based on the rate that exactly discounts estimated future cash payments historical data corrected with forward-looking information. through the expected life of the financial liability, or, where The expected credit losses are calculated by multiplying appropriate, a shorter period. the remaining amount after deducting the specific provisions 2.7. Offsetting allocated on a customer basis from the trade receivables included in accordance with the provisions of the Tax Procedure Law, by When the nature of transactions and events necessitate the loan loss ratio. The loan loss ratio is calculated by dividing the offsetting, presentation of these transactions and events over 5-year average bad debt expense by the 5-year average revenue. their net amounts or recognition of the assets after deducting The expected credit loss rate adjusted for risk due to Covid-19 the related impairment are not considered as a violation of the is 1.225%. The amount reflected in the financial statements rule of offsetting. As a result of the transactions in the normal dated 31 December 2020 is TL 5,668,148 (31 December 2019: TL course of business, revenue except for the revenue identified in 4,071,019). “Revenue” section above are presented as net if the nature of the transaction or the event qualify for offsetting. Recognition and derecognition of financial assets NOTE 3 – SEGMENT REPORTING The Group derecognizes a financial asset when the contractual rights for cash flows derived from the financial asset have expired Lines of activities of the Group, which is incorporated in Turkey, are or when the Group has substantially transferred its financial production of various types of corrugated boxes and other custom assets and all risks and rewards arising from the ownership of manufacturing goods. Scope of business, specifications and the financial asset to another entity. economics of the goods, production process, and classification of customers according to their riskiness and method of distribution When a financial asset measured at amortized cost is are similar. Moreover, organizational structure of the Group derecognised, the carrying amount of the asset and the difference has created as focusing on only one line of activity other than between the collected fee and the fee to be collected is recognized conducting different activities. As a result, it is accepted that in profit or loss. In addition, total gain and loss previously there is only one line of business of the Group and results of the accumulated in the revaluation fund of the related instrument is operations are evaluated as determination of resources allocated reclassified in profit or loss when derecognising a debt instrument to line of operations and inquiry of performance of these activities. of which fair value is reflected in other comprehensive income. In the event that an equity instrument that the Group choses to measure at fair value through other comprehensive income has been derecognised, the total gain or loss accumulated in the revaluation fund is not accounted for in profit or loss and transferred directly to retained earnings. Financial liabilities Financial liabilities and equity instruments issued by the Group are classified according to the substance of the contractual arrangements entered into and the definitions of a financial liability and an equity instrument. An equity instrument is any contract that evidences a residual interest in the assets of the Group after deducting all of its liabilities. The accounting policies adopted for specific financial liabilities and equity instruments are set out below. Financial liabilities are classified as either financial liabilities at fair value through profit or loss or other financial liabilities.

Annual Report 2020 47

INDEPENDENT AUDITOR’S REPORT

NOTE 4 - CASH AND CASH EQUIVALENTS 31 December 2020 31 December 2019 Bank deposits -Demand deposits 9.872.180 1.676.334 -Time deposits 4.200.000 6.850.000 Cash 3.670 6.470 Total 14.075.850 8.532.804

As of 31 December 2020, details of time deposits are as below:

Currency type Original Balance TL Equivalent Interest Rate TL 2.200.000 2.200.000 %17,00 TL 1.500.000 1.500.000 %16,00 TL 500.000 500.000 %17,00 Total 4.200.000 4.200.000

As of 31 December 2019, details of time deposits are as below:

Currency type Original Balance TL Equivalent Interest Rate TL 4.050.000 4.050.000 %10,50 TL 2.800.000 2.800.000 %10,50 Total 6.850.000 6.850.000

Maturity of time deposits is 1 day (31 December 2019: 1 day). As of 31 December 2020, the Group has no blocked bank deposits (31 December 2019: None). The fair value of cash and cash equivalents approximates to carrying value as of statement of financial position date, which includes accrued interest.

NOTE 5 – RELATED PARTY DISCLOSURES 31 December 2020 31 December 2019 i.) Trade receivables from related parties:

International Paper Group Companies 253.398 5.020.549 Total 253.398 5.020.549

31 December 31 December 2020 2019 ii.) Trade payables to related parties:

International Paper Group Companies 136.786.118 153.700.514 Total 136.786.118 153.700.514

The payable due to related parties arise mainly from inventory purchase transactions. As at 31 December 2020, the standard maturity 270 days, which may vary on a transaction basis. The receivables are unsecured in nature and bear no interest.

Annual Report 2020 49 INDEPENDENT AUDITOR’S REPORT

NOTE 5 - RELATED PARTY DISCLOSURES (cont’d) iii.) Transactions with related parties: Service Service Sales 1 January - 31 December 2020 Inventory Purchases Sales of Goods Purchases (*) (**) International Paper - USA (200.118.543) 125.402 (1.624.534) 941.469 International Paper - Belgium - - (17.738.882) 2.966.321 International Paper - Poland - - (9.249.386) 436.291 International Paper - France (7.404) - - - International Paper - Spain (8.070.536) - - - International Paper - Italy 14.129 - - - International Paper - Morocco (265.938) - - - Total (208.448.292) 125.402 (28.612.802) 4.344.081

1 January - 31 December 2019 Inventory Purchases Sales Service Purchase Service Sales International Paper - USA (124.867.253) - - - International Paper - Belgium - - (17.853.658) 1.483.947 International Paper - Poland - - (7.317.233) 199.700 International Paper - Spain (6.262.107) - - 279.774 Total (131.129.360) - (25.170.891) 1.963.421

(*) The Group receives services related to general administration and information processing services regarding the service contracts made with IP Belgian Service Company and International Paper Polska Sp, which is a group company. Within this context, the Group receives the necessary services for the financial, tax, law, human resources, internal audit, credit and global procurement services provided by the International Paper Belgian Service Company to provide a commercial or economic value that will strengthen the commercial position of the Company. (**) On the other hand, the Group charges some personnel salaries, law, consultancy, training and travel expenses to its related companies under the service sales heading. The Group has determined key management personnel as members of executive board. Benefits to key management include benefits such as fees, bonuses, health assurances, transportation etc. Key management compensation amounts have been classified as below at 31 December 2020 and 2019: 1 January- 1 January- 31 December 2020 31 December 2019 Short-term benefits 8.447.357 9.171.096 Other long-term benefits 2.053.409 3.447.881 Total 10.500.766 12.618.977

NOTE 6 - TRADE RECEIVABLES AND PAYABLES Trade receivables from third parties As of 31 December 2020 and 31 December 2019, details of trade receivables from third parties are as below: 31 December 2020 31 December 2019 Buyers 377.734.314 283.807.439 Notes receivable 144.664.634 78.491.549 Total 522.398.948 362.298.988

Deduction: Provision for expected loss a doubtful receivable (44.543.413) (40.120.374)

Total 477.855.535 322.178.614

Average due date is 120 days for the trade receivables from third parties (31 December 2019: 120 days). As of 31 December 2020, the Group has TL 97.322.014 overdue trade receivables from third parties (31 December 2019: TL 102.712.308). As of 31 December 2020, the Group set allowance for doubtful receivables amounting to TL 44.543.413 (31 December 2019: TL 40.120.374). Expected credit losses on trade receivables are calculated based on revenue from previous years until 1 January 2020, while expected credit losses in subsequent periods are based on third parties trade receivables. INDEPENDENT AUDITOR’S REPORT

NOTE 6 - TRADE RECEIVABLES AND PAYABLES (cont’d)

A Trade receivables according to TPL 475.163.262 B Provisions for receivables not in litigation process (-) 11.004.812 C Expected credit loss rate 1,225% (A-B)*C General doubtful receivable provision 5.688.148

*The amount recognized in the financial statements dated 31 December 2020 is TL 5.668.148 (31 December 2019: TL 4.071.019 TL). *In 2020, the general doubtful receivable provision calculation method was changed and the rate was started to be calculated on trade receivables instead of revenue. With the new method, the expected credit receivable loss is calculated by multiplying the remaining amount after deducting the specific provisions made on customer basis and not entering the litigation process from the commercial receivables included in accordance with the provisions of the Tax Procedure Law by the loan loss ratio. The loan loss ratio is calculated by dividing the 5-year average bad debt expense by the 5-year average revenue. The expected credit loss rate adjusted for risk due to Covid-19 is 1.225%.

NOTE 6 - TRADE RECEIVABLES AND PAYABLES (cont’d) NOTE 7 - OTHER RECEIVABLES AND PAYABLES As of 31 December 2020 and 31 December 2019, aging of receivables that are past due but not impaired are as follows: a) Other Receivables from Third Parties

31 December 2020 31 December 2019 31 December 31 December 2020 2019 Up to 3 months 49.141.371 53.599.000 Other receivables 1.689.969 38.333 3 to 6 months 2.745.348 1.051.584 Total 1.689.969 38.333 Over 6 months 891.882 7.941.350 Total 52.778.601 62.591.934 b) Other Payables to Third Parties Movements of provision for doubtful receivables and expected loss are as below: 31 December 31 December 2020 2019 2020 2019 Taxes, duties and other deductions 1 January (40.120.374) (28.306.800) payable 4.450.293 3.560.883 Provisions made during the period (9.523.160) (12.392.552) Social security premiums payable 3.006.478 1.452.144 Collections made during the period 5.100.121 578.978 Other payables 1.813.259 1.005.100 Total 9.270.030 6.018.127 31 December (44.543.413) (40.120.374)

Trade payables The details of trade payables to third parties as of 31 December 2020 and 31 December 2019 are as follows:

Trade payables 31 December 2020 31 December 2019 Trade payables to related 136.786.118 153.700.514 parties Trade payables to third parties 249.730.878 159.402.655 Total trade payables 386.516.996 313.103.169

Average due date is 155 days (December 2019: 155 days) for trade payables of the Group, and there is no interest rate applied.

Annual Report 2020 51 INDEPENDENT AUDITOR’S REPORT

NOTE 8 - INVENTORIES NOTE 10 - INVESTMENT PROPERTIES 31 December 31 December 2020 2019 Land Improvements Land Buildings Total Cost Raw material 138.759.504 119.750.204 Opening balance as of Work in process 3.939.130 2.236.354 21.707.970 3.793 741.506 22.453.269 1 January 2020 Finished goods 341.753 96.731 Net Book Value 21.707.970 3.793 741.506 22.453.269 Trade goods 493.370 516.120 Other inventory 57.321.311 30.679.617 Cost Allowance for impairment on inventory (4.881.542) (4.036.768) Opening balance as of 1 January 2019 407.870 - - 407.870 Total 195.973.526 149.242.258 Transfer (*) 21.300.100 3.793 741.506 22.045.399

Net Book Value 21.707.970 3.793 741.506 22.453.269 Movements of impairment on inventory provision for the year 31 December 2020 and 2019 are as below: (*) Land and building of Doğal Kağıt Kartal plant has been 2020 2019 classified from Non-current Assets Held for Sale to Investment Properties. Opening balance, 1 January (4.036.768) (4.675.318) Fair value measurement of the Group’s investment (Loss for the period)/reversed provision (844.774) 638.550 properties 31 December (4.881.542) (4.036.768) As of 31 December 2020, the fair value of the Group’s investment Expenses from provision for impairment on inventory are all properties is determined by TSKB, by appraisal reports obtained referred to cost of goods sold. in the 3rd quarter of 2019. TSKB is authorized by the CMB, and it provides real estate appraisal services in accordance with NOTE 9 - PREPAID EXPENSES AND DEFERRED INCOME the capital market legislation and has sufficient experience and qualification to measure the fair value of real estate in the a) Short-term prepaid expenses relevant regions. The fair value of owned land is determined based on market comparable approach that reflects the current 31 December 31 December transacion prices for similar real estate. 2020 2019

Fair value level as of the reporting date Prepaid expenses 1.875.737 3.391.019

Advances given to sellers 458.188 3.234.673 Level 1 Level 2 Level 3 31 December 2020 31 December 2019 Total 2.333.925 6.625.692 TL TL TL

Edirne 3.765.000 3.765.000 - 3.765.000 -

b) Long-term prepaid expenses Kartal 30.920.000 30.920.000 - 30.920.000 - 34.685.000 34.685.000 - 34.685.000 Order advances given for property, plant and equipment 277.222 10.070.135 Total 277.222 10.070.135

c) Deferred income

Order advances received 259.343 2.661.485 Total 259.343 2.661.485 INDEPENDENT AUDITOR’S REPORT

NOTE 11 - PROPERTY, PLANT AND EQUIPMENT

Transfer from 1 January constructions in 31 December 2020 Additions Disposals progress 2020

Cost Land 15.453.256 - - - 15.453.256 Land improvements 3.514.735 480.783 (27.210) 286.000 4.254.308 Buildings 59.211.625 314.361 (1.697.343) 4.515.829 62.344.472 Machinery, plant and equipment 310.535.186 1.022.657 (5.374.092) 9.340.880 315.524.631 Motor vehicles 557.436 7.243 (16.200) - 548.479 Furniture and fixtures 15.328.433 2.338.390 (459.567) 3.282.663 20.489.919 Constructions in progress 6.672.303 13.529.079 - (17.491.622) 2.709.760 Total 411.272.974 17.692.513 (7.574.412) (66.250) 421.324.825

Accumulated Depreciation - Land improvements (2.248.635) (242.893) 27.210 - (2.464.318) Buildings (20.261.411) (1.499.012) 192.887 - (21.567.536) Machinery, plant and equipment (167.995.834) (14.691.395) 4.624.489 - (178.062.740) Motor vehicles (340.218) (41.295) 16.200 - (365.313) Furniture and fixtures (8.023.932) (1.563.427) 193.925 - (9.393.434) Total (198.870.030) (18.038.022) 5.054.711 - (211.853.341) Net Book Value 212.402.944 (345.509) (2.519.701) (66.250) 209.471.484

As of 31 December 2020, there is no mortgage on lands, buildings and machinery, plant and equipment of the Group (31 December 2019: None). All borrowing costs are recognized in the statement of income in the period in which they are incurred.

Transfer from 1 January constructions in 31 December 2019 Additions Disposals Transfers progress 2019

Cost Land 15.453.256 - - - - 15.453.256 Land improvements 4.706.683 41.465 (49.220) (1.762.966) 578.773 3.514.735 Buildings 44.009.762 337.211 (5.742) 1.696.367 13.174.027 59.211.625 Machinery, plant and equipmen 239.777.843 2.418.954 (14.248.669) (4.757.658) 87.344.716 310.535.186 Motor vehicles 1.259.838 - - (702.402) - 557.436 Furniture and fixtures 16.631.649 2.510.928 (4.665.246) 687.370 163.732 15.328.433 Constructions in progress 10.413.571 97.519.980 - - (101.261.248) 6.672.303 Total 332.252.602 102.828.538 (18.968.877) (4.839.289) - 411.272.974

Accumulated Depreciation Land improvements (3.547.469) (153.131) 49.220 1.402.745 - (2.248.635) Buildings (18.481.507) (1.112.091) 3.120 (670.933) - (20.261.411) Machinery, plant and equipmen (174.310.638) (11.090.714) 13.786.094 3.619.424 - (167.995.834) Motor vehicles (414.160) (376) - 74.318 - (340.218) Furniture and fixtures (11.092.384) (1.096.500) 4.530.912 (365.960) - (8.023.932) Total (207.846.158) (13.452.812) 18.369.346 4.059.594 - (198.870.030) Net Book Value 124.406.444 89.375.726 (599.531) (779.695) - 212.402.944

Annual Report 2020 53 INDEPENDENT AUDITOR’S REPORT

NOTE 12 - INTANGIBLE ASSETS

31 December 2020 31 December 2019 As of 1 January:

Cost 7.983.712 8.220.364 Accumulated amortization (6.090.744) (6.017.275) Opening net book value 1.892.968 2.203.089

Additions - 104.500 Disposals (382.736) (1.120.847) Transfers (*) 66.250 779.695 Amortization for the current year (530.223) (764.049) Disposal of accumulated amortization disposal 363.597 690.580

Closing net book value (483.112) (310.121)

As of 31 December:

Cost 7.667.226 7.983.712 Accumulated amortization (6.257.370) (6.090.744) Net book value 1.409.856 1.892.968

(*) TL 66.250 which used to be under property, plant and equipment, has been transferred to intangible assets.

NOTE 13 - BORROWINGS AND BORROWING COSTS

As of 31 December 2020 and 31 December 2019, details of bank loans are as below:

31 December 2020 31 December 2019 Interest Interest rate (%) Amount TL Amount TL Tutar TL rate (%) Short-term bank loans: TL 7,43 105.000.000 10,00 153.000.000 TL - 10,65 12.000.000 Other (*) 23.021.070 18.932.738 Total 128.021.070 183.932.738

(*) Other financial liabilities consist of loans received by the Group in order to finance purchases made by its suppliers.

Financing cash 31 December 1 January 2020 flows Other 2020 Bank loans 183.932.738 (57.367.948) 1.456.280 128.021.070 183.932.738 (57.367.948) 1.456.280 128.021.070

Financing cash 31 December Bank loans 1 January 2019 flows Other 2019 157.930.801 26.063.098 (61.161) 183.932.738 157.930.801 26.063.098 (61.161) 183.932.738 INDEPENDENT AUDITOR’S REPORT

NOTE 14 - PROVISIONS, CONTINGENT ASSETS AND NOTE 14 - PROVISIONS, CONTINGENT ASSETS AND LIABILITIES LIABILITIES (cont’d) The amounts of collaterals, pledges and mortgages (“CPM”) of a) Other short-term provisions the Group as of 31 December 2020 and 31 December 2019 are as follows: Details of short-term provisions are shown below: 31 December 31 December 2020 2019 31 December 2020 31 December 2019 A. CPM’s given for companies own legal Provision for legal cases 2.068.975 1.133.000 personality (*) 8.657.445 8.350.809 Provision for other taxes (*) 11.883.995 9.690.862 - - B. CPM’s given on behalf of Total 13.952.970 10.823.862 fully consolidated companies

(*) It is the provision for uncertain taxes of the prior period C. CPM’s given for continuation of its economic activities on behalf on third in accordance with the communiqué on the prevention of unfair parties competition in imports. - - Movements of provisions for legal cases for interim periods D. Other CPM’s given - - ended 31 December 2020 and 2019 are as follows: Total 8.657.445 8.350.809

2020 2019 (*) Letters of guarantee in TL that are given to suppliers. 1 January 1.133.000 892.000 As of 31 December 2020, the ratio of the other CPMs given by the Current period additions 1.147.975 499.000 Group to the Group’s equity is 0%. Paid in current period (212.000) (258.000)

31 December 2.068.975 1.133.000 NOTE 15 - EMPLOYEE BENEFITS a) Short-term provisions for employee benefits The total of the law cases opened 31 December 31 December against the Group amounts to TL 4.282.000 2020 2019 Provision for unused vacation 6.618.848 3.080.837 (31 December 2019: TL 2.976.500). Legal advisors of the Group reviewed the law cases against the Group and provision Other provisions 9.172.721 2.799.169 amounting to TL 2.068.975 (31 December 2019: TL 1.133.000) is Total 15.791.569 5.880.006 recognized for the expected law cases cash outflow. b) Long-term provisions for employee benefits b) Commitments Provision for employment As of 31 December 2020 and 31 December 2019, details of termination benefit 24.357.777 18.056.000 contingent liabilities and assets are shown below: Total 24.357.777 18.056.000 Employee termination benefit provision is recorded according to Guarantees given the following descriptions. There has been no retirement plan 31 December 2020 31 December 2019 except the legal requirement explained below. Guarantee letters given 8.657.445 8.350.809 Under the Turkish Labour Law, the Group is required to pay termination benefits to each employee who has completed certain Total 8.657.445 8.350.809 years of service and whose employment is terminated without due cause, who is called up for military service, dies or retires after Guarantees received completing 25 years of service (20 years for women) and reaches 31 December 31 December the retirement age (58 for women and 60 for men). 2020 2019 The amount payable consists of one month’s salary limited to a Guarantee notes/cheques received 20.189.828 20.349.872 maximum of TL 6,379.86 (31 December 2019: TL 6,017.60) for each Guarantee letters received 7.944.327 10.275.502 year of service at 31 December 2020. Mortgage received 1.407.000 1.407.000 Provision for employee termination benefits is not subject to any Total 29.541.155 32.032.374 funding and also there is no any funding requirements. Provision for employee termination benefit defines the current value of total expected provision for the liabilities due to retirement of the employees. According to the Turkish labour law and legislations that are applied in Turkey, the group is obliged to pay severance payment to the employees who has work for the group at least 1 year, goes because of the military duty and decedent but except the firing due to inappropriate behaviour. The provision, which is about the current value of defined benefit payment, is calculated by using anticipated liability method. All actuarial profit and loss are recorded to financial statements by associating with other comprehensive income statement.

Annual Report 2020 55 INDEPENDENT AUDITOR’S REPORT

NOTE 15 - EMPLOYEE BENEFITS (cont’d) NOTE 16 – OTHER CURRENT ASSETS b) Long-term provisions for employee benefits (cont’d) 31 December 31 December Turkish Accounting Standards require actuarial valuation 2020 2019 methods to be developed to estimate the retirement pay Business advances - 12.467 provision. Accordingly, the following actuarial assumptions have Deferred VAT 7.895.388 12.380.796 been used in the calculation of the total liability: Other VAT 2.035.033 - 2020 2019 Other 416.680 741.295 Discount rate (%) 3,99 3,99 Total 10.347.101 13.134.558 Turnover rate for the retirement probability estimate (%) 96,0 96,0 The principal assumption is that the maximum liability for each year of service will increase in line with inflation. Thus, the discount rate applied represents the expected real rate after adjusting for the anticipated effects of future inflation. As the maximum liability is revised once every six months, the maximum amount of TL 7.638.96 effective from 1 January 2020 (1 January 2019: TL 6.379.86) has been taken into consideration in calculating the reserve for employment termination benefit of the Group. Movements in the provision for employment termination benefits are as below:

2020 2019 Opening balance - 1 January 18.056.000 12.637.000 Service cost 3.542.777 8.415.000 Interest cost 1.998.000 1.816.000 Employment termination benefit paid (3.353.000) (8.163.000) Actuarial loss (Note 26) 4.114.000 3.351.000

Closing balance - 31 December 24.357.777 18.056.000 INDEPENDENT AUDITOR’S REPORT

DİPNOT 17 – LEASES

Machinery and Right-of-use assets Buildings equipment Motor vehicles Total

Cost 1 January 2020 4.624.316 15.322.389 5.561.412 25.508.117 Additions and disposals (net) (766.864) 1.644.436 1.255.996 2.133.568 Total 3.857.452 16.966.825 6.817.408 27.641.685

Accumulated depreciation 1 January 2020 (879.905) (3.743.553) (915.561) (5.539.019) Charge for the period (1.074.366) (4.010.467) (2.191.784) (7.276.617) Total (1.954.271) (7.754.020) (3.107.345) (12.815.636) Net Book Value 1.903.181 9.212.805 3.710.063 14.826.049

Machinery and Right-of-use assets Buildings equipment Motor vehicles Total

Cost 1 January 2019 - - - Adjustments within the scope of TFRS 16 - 6.162.959 3.435.519 9.598.478 Additions 4.624.316 9.159.430 2.125.893 15.909.639 Total 4.624.316 15.322.389 5.561.412 25.508.117

Accumulated depreciation 1 January 2019 - - - - Charge for the period (879.905) (3.743.553) (915.561) (5.539.019) Total (879.905) (3.743.553) (915.561) (5.539.019) Net Book Value 3.744.411 11.578.836 4.645.851 19.969.098

Breakdown of lease liabilities 31 December 2020 31 December 2019 Long-term 10.436.251 12.829.332 Short-term 8.821.278 7.168.740

Currency 1 January difference New 2020 Cash flows movements leases 31 December 2020 Obligations under finance leases 19.998.072 (8.966.068) 3.615.347 4.610.178 19.257.529 19.998.072 (8.966.068) 3.615.347 4.610.178 19.257.529

Currency Obligations under finance leases 1 January difference 31 December 2019 Cash flows movements New leases 2019 9.598.478 (6.394.338) 1.018.486 15.775.446 19.998.072 9.598.478 (6.394.338) 1.018.486 15.775.446 19.998.072

Annual Report 2020 57 INDEPENDENT AUDITOR’S REPORT

NOTE 18 - SHARE CAPITAL, RESERVES AND OTHER EQUITY ITEMS The Group has adopted the registered share capital system applicable to companies registered on the CMB and set a limit on its registered share capital representing type of registered shares with a nominal value of TL 0,01 Historical, authorized and issued capital of the Group as of 31 December 2020 and 31 December 2019 is presented below:

31 December 2020 31 December 2019 Limit on registered share capital 410.512.500 410.512.500 Issued share capital 247.102.500 82.102.500

At 31 December 2020 and 31 December 2019, the shareholder structure of the Group is stated below:

31 December 2020 31 December 2019 Amount Share (%) Amount Share (%)

I.P. Container Holdings (Spain), S.L 223.343.592 90,38 76.327.372 92,97 Other (publicly held) 23.758.908 9,62 5.775.128 7,03 Total 247.102.500 100,00 82.102.500 100,00

As of 31 December 2020, the Group’s share capital comprises 247.102.500.000 shares (2019: 8.102.500,000 shares). The nominal value of each share amounts to TL 0.01 (2019: per share TL 0.01). The Group does not have any privileged shares.

On 16 March 2020, a cash capital increase of TL 165.152.890 was made, and the portion amounting to TL 152.890 was recorded in the differences on capital adjustment account as emission premium.

Restricted reserves from appropriated profit

The legal reserves consist of first and second reserves, appropriated in accordance with the Turkish Commercial Code. The Turkish Commercial Code stipulates that the first legal reserve is appropriated out of statutory profits at the rate of 5% per annum, until the total reserve reaches 20% of the Group’s paid-in share capital. The second legal reserve is appropriated at the rate of 10% per annum of all cash distributions in excess of 5% of the paid-in share capital. Under the Turkish Commercial Code, the legal reserves can only be used to offset losses and are not available for any other usage unless they exceed 50% of paid-in share capital.

The aforementioned amounts shall be classified in “Restricted Reserves Appropriated from Profit” in accordance with CMB Financial Reporting Standards. Restricted reserves appropriated from profit of the Group amounts to TL 14.624.344 as of 31 December 2020 (31 December 2019: TL 14.624.344).

Dividend payment

Companies whose shares are quoted on the stock market are subject to profit distribution rules of CMB as ollows:f

Pursuant to CMB Decision Serial IV, No. 27, regarding profit distribution obligation, it has been made possible that shares, issued in cash or through the addition of dividend to the capital upon the decision of the Company’s general assembly, can be distributed to the shareholders free of charge or that the distribution can be partly made in cash and partly through the free distribution of shares. It has been further made possible that initial dividend amount be left to the partnership without distribution, if such amount is lower than the 5% of the existing paid-up/issued capital amount.

Moreover, in accordance with the CMB regulations, in the event that the entire profit distribution amount calculated pursuant the minimum profit distribution amount calculated over the net distributable profit found in accordance with CMB regulations can be covered by the distributable profit in the statutory records, it shall be distributed completely, and if the relevant amount cannot be covered by that amount, all of the net distributable profit in the statutory records shall be distributed. In the event that there is any period loss in financial statements prepared in accordance with the CMB regulations or statutory records, no profit shall be distributed.

In accordance with the Resolution numbered 2948 issued in the Official Gazette dated 18 September 2020 and numbered 31248, the application period of the profit distribution restriction is extended from 30 September 2020 to 31 December 2020. INDEPENDENT AUDITOR’S REPORT

NOTE 19 – REVENUE AND COST OF SALES NOTE 21 - OTHER INCOME AND EXPENSES FROM 1 January- 1 January- OPERATING ACTIVITIES 31 December 2020 31 December 2019 1 January- 1 January- Domestic sales 1.191.176.320 999.367.363 31 December 2020 31 December 2019 Foreign sales 54.653.643 32.897.919 a) Other income from operating Sales discount (5.582.926) (4.303.126) activities: Net sales 1.240.247.037 1.027.962.156 Reeskont finansman gelirleri 24.688.709 30.087.760 Social security disability allowance 541.795 409.768 Raw materials expenses (815.875.870) (741.090.812) Other income and profits 2.528.538 2.743.709 Production overheads (90.716.112) (77.108.765) Total 27.759.042 33.241.237 Direct labour expenses (76.033.540) (68.316.890) Depreciation expenses (20.775.151) (14.556.393) Change in work in progress (1.702.776) 869.802 Change in finished goods (245.022) 1.950.217 1 January- 1 January- 31 December 2020 31 December 2019 Cost of goods sold (1.005.348.471) (898.252.841) b) Other expenses from operating Cost of trade goods sold (20.085.402) (17.305.020) activities: Cost of sales (1.025.433.873) (915.557.861) Gross profit 214.813.164 112.404.295 Foreign exchange loss (64,790,027) (60.116.741) Donation expenses (67,500) (53.287) NOTE 20 - GENERAL ADMINISTRATIVE EXPENSES, MARKETING Other tax provision expenses (Note 14) (2,193,133) (9.690.862) EXPENSES, RESEARCH AND DEVELOPMENT EXPENSES Other expenses and losses (5.558.694) (10.224.784) 1 January - 1 January - Total (72.609.354) (80.085.674) 31 December 31 December 2020 2019 NOTE 22 - INCOME AND EXPENSES FROM INVESTING General Administrative Expenses ACTIVITES Personnel expenses (45.262.667) (34.689.986) Service, consultancy and other 1 January- 1 January- expenses (29.758.152) (30.711.474) a) Income from investing activities: 31 December 2020 31 December 2019 Insurance expenses (6.389.605) (7.734.060) Doubtful receivables expense (Note 6) (4.423.039) (11.813.574) Gain on sale of property, plant and equipment 2.335.190 721.363 Information technology expenses (3.093.865) (1.966.972) Depreciation and amortization expenses Total 2.335.190 721.363 (Note 23) (5.043.774) (5.164.144)

Travel expenses (1.126.008) (2.138.864) Maintenance and repair expenses (1.066.884) (1.009.942) b) Expense from investing activities: Stationery expenses (381.406) (389.438) Communication expenses (467.948) (452.703) Loss on sale of property, plant and equipment (354.715) (407.608) Other expenses (9.258.368) (3.632.032) Total (354.715) (407.608) Total (106.271.716) (99.703.189) NOTE 23 EXPENSES CLASSIFIED BY TYPE 1 January - 1 January- 31 December 31 December 1 January- 1 January- 2020 2019 31 December 2020 31 December 2019 Marketing Expenses Depreciation and Amortization

Shipping expenses (44.183.293) (32.808.342) Expenses: Personnel expenses (16.621.606) (10.498.041) Cost of sales (20.775.151) (14.556.393) Travel expenses (245.508) (639.776) General administrative expenses (5.043.774) (5.164.144) Export expenses (456.976) (239.033) Research and development expenses (25.937) (35.342) Communication expenses (180.733) (144.593) Total (Note 11-12-17) (25.844.862) (19.755.879) Stationery expenses (80.827) (57.819) Insurance expenses (123.278) (103.836) Personnel Expenses: Other (1.749.036) (4.902.393) Total (63.641.257) (49.393.833) General administrative expenses (45.262.667) (34.689.986) Marketing expenses 1 January- 1 January- (16.621.606) (10.498.041) Research and Development 31 December 31 December Cost of sales (76.033.540) (68.316.890) Expenses 2020 2019 Research and development expenses (3.369.522) (2.655.318) Raw materials, finished goods and trade goods (14.907) (20.537) Total (Note 19-20) (141.287.335) (116.160.235) Maintenance and repair expenses (11.477) (42.673) Personnel expenses (3.369.522) (2.655.318) Other (601.956) (451.729) Information technology services (17.525) (65.160) Travel expenses (964) (15.108) Depreciation expenses (Note 23) (25.937) (35.342) Total (4.042.288) (3.285.867)

Annual Report 2020 59 INDEPENDENT AUDITOR’S REPORT

NOTE 24 – EXPENSES BY NATURE

1 January- 1 January- 31 December 2020 31 December 2019 Raw materials, finished goods and trade goods (837.923.977) (755.596.350) General production overhead (90.716.112) (77.108.765) Personnel expenses (137.749.324) (116.160.235) Transportation expenses (44.183.293) (32.808.342) Services and consultancy expenses (29.758.152) (30.711.474) Depreciation and amortization (Note 11,12,17) (25.844.862) (19.755.879) Insurance expenses (6.512.883) (7.837.896) Travel expense (1.372.480) (2.778.640) Doubtful receivables expense (Note 6) (4.423.039) (11.813.574) Information technology services (3.111.390) (2.032.132) Maintenance and repair expenses (1.078.361) (1.052.615) Communication expenses (648.681) (597.296) Export expenses (456.976) (239.033) Other expenses (15.609.604) (9.448.519) Total (1.199.389.134) (1.067.940.750)

Expenses by nature include cost of sales, research and development expenses, marketing expenses and general administrative expenses.

Cost of sales (1.025.433.873) (915.557.861) Marketing expenses (63.641.257) (49.393.833) General administrative expenses (106.271.716) (99.703.189) Research and development expenses (4.042.288) (3.285.867) Total (1.199.389.134) (1.067.940.750)

NOTE 25 – FINANCE EXPENSES

1 January- 1 January- 31 December 2020 31 December 2019 Interest income 3.098.779 1.777.770 Total financial income 3.098.779 1.777.770

Interest expense (14.128.024) (30.996.975) Total financial expense (14.128.024) (30.996.975)

NOTE 26 - ANALYSIS OF OTHER COMPREHENSIVE INCOME ITEMS As of 31 December 2020 and 2019, details of other comprehensive income are as below:

1 January- 1 January- 31 December 2020 31 December 2019 Items that will not be Reclassified to Profit or Loss - Loss on remeasurement of defined benefit plans (Note 15) (4.114.000) (3.351.000) - Taxes related to other comprehensive income not to be reclassified to profit or loss 822.800 670.200 Other comprehensive (expense)/income (3.291.200) (2.680.800) INDEPENDENT AUDITOR’S REPORT

NOTE 27 - INCOME TAXES (INCLUDING DEFERRED TAX ASSETS AND LIABILITIES) Tax (expense) / income consists of: 1 January- 1 January- 31 December 2020 31 December 2019 Current tax expense - - Deferred tax income 84.339 23.604.059 31 December 84.339 23.604.059

Corporate tax The Group is subject to Turkish corporate taxes. Provision is made in the accompanying financial statements for the estimated charge based on the Group’s results for the years and periods. Turkish tax legislation does not permit a parent company and its subsidiary to file a consolidated tax return. Therefore, provisions for taxes, as reflected in the accompanying consolidated financial statements, have been calculated on a separate-entity basis. Corporate tax is applied on taxable corporate income, which is calculated from die statutory accounting profit by adding back non- deductible expenses, and by deducting dividends received from resident companies, other exempt income and investment incentives utilized (prior years’ losses, if any, and investment incentives, if preferred).

Deferred tax The Group recognizes deferred income tax assets and liabilities based upon temporary differences arising between its financial statements and its statutory tax financial statements. The tax rate used in the calculation of deferred tax assets and liabilities based on the liability method over the temporary differences that will occur in the following periods is 20% over the expected temporary timing differences. Tax (income)/expense reconciliation is as below: 1 January-31 December 2020 1 January-31 December 2019 Profit / (loss) before tax (13.041.179) (115.728.481) Tax calculated using effective tax rate 2.608.236 25.460.266 Non-deductible expenses and other additions (2.299.013) (1.718.953) Other (224.884) (137.254) Tax provision charged to profit or loss 84.339 23.604.059 The breakdown of cumulative temporary differences and deferred income tax assets and liabilities provided using enacted tax rates as of 31 December 2020 and 31 December 2019 are as below:

Taxable temporary Deferred tax accumulated differences assets / (liabilities) 2020 2019 2020 2019 Valuation and depreciation differences of property, plant equipment and intangible assets (62.011.364) (65.217.056) (12.073.734) (12.714.892) Provision for employment termination benefits 24.357.777 18.056.000 4.871.555 3.611.200 Provisions for payables 38.183.756 18.050.255 7.636.751 3.863.235 Prior years’ losses 85.326.213 98.590.258 17.065.243 20.351.507 Other 20.026.608 24.987.850 4.005.323 5.486.949 Deferred tax asset/(liabilities)-net 21.505.138 20.597.999

(*) The related amount consists of the losses in 2019 and the period of use will terminate in 2024.

2020 2019 Subsidiary tax liability (net) (5.448.038) (5.672.883) The Company deferred tax asset (net) 26.953.176 26.270.882 Deferred tax asset/(liability) - net 21.505.138 20.597.999

2020 2019 1 January 20.597.999 (3.676.260) Ertelenmiş vergi gideri 84.339 23.604.059 Diğer kapsamlı gelirde muhasebeleştirilen 822.800 670.200 31 December 21.505.138 20.597.999

Annual Report 2020 61 INDEPENDENT AUDITOR’S REPORT

NOTE 28 – LOSS PER SHARE Loss per share are determined by dividing the net income by the weighted average number of shares that have been outstanding during the year. The Group’s loss per share calculation are as below:

1 January- 1 January- 31 December 2020 31 December 2019 Weighted average number of shares (equivalent of TL 1) 212.944.030 82.102.500 Net loss (12.956.840) (92.124.422) Earnings loss per share (equivalent of TL 1) (0,0608) (1,1221) (*) The capital of the Company was increased from TL 82.102.500 to TL 247.102.500 on 16 March 2020. The weighted average number of shares has been calculated by considering the related capital increase.

NOTE 29 - THE EFFECTS OF CHANGES IN FOREIGN EXCHANGE RATES Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year- end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognized in the statement of profit or loss and other comprehensive income within other operating income and expense from main activities and finance expense, except when deferred in equity as qualifying cash flow hedges and qualifying net investment hedges. Foreign currency risk analysis of the Group is presented in Note 31.

NOTE 30 - FINANCIAL INSTRUMENTS The Group’s categories of financial instruments as of 31 December 2020 is as follows:

Categories and fair values of financial institutions

Group management considers that the carrying values of financial instruments approximate their fair values.

Financial Financial Fair value through assets at liabilities at 31 December 2020 profit or loss amortise d cost amortise d cost Carrying value Note Financial assets 14.075.850 4 Cash and cash equivalents - 14.075.850 - 477.855.535 6 Trade receivables - 477.855.535 - 253.398 5 Due from related parties - 253.398 -

Financial liabilities Borrowings - - 128.021.070 128.021.070 13 Trade payables - - 249.730.878 249.730.878 6 Due to related parties - - 136.786.118 136.786.118 5 Derivative financial instruments - - 19.257.529 19.257.529 17

Financial Financial liabilities at 31 December 2019 Fair value through assets at amortise d cost Carrying value Note Financial assets profit or loss amortise d cost

Cash and cash equivalents - 8.532.804 - 8.532.804 4 Trade receivables - 322.178.614 - 322.178.614 6 Due from related parties - 5.020.549 - 5.020.549 5 Financial liabilities Borrowings - - 183.932.738 183.932.738 13 Trade payables - - 159.402.655 159.402.655 6 Due to related parties - - 153.700.514 153.700.514 5 Lease payables - - 19.998.072 19.998.072 17 Derivative financial 5.545.574 - - 5.545.574 32 INDEPENDENT AUDITOR’S REPORT

NOTE 31 - NATURE AND LEVEL OF RISK ARISING FROM DİPNOT 31 - FİNANSAL ARAÇLARDAN KAYNAKLANAN FINANCIAL INSTRUMENTS RİSKLERİN NİTELİĞİ VE DÜZEYİ (devamı) a) Capital risk management b) Financial risk exposed by the Group

The main risks arising from the Group’s financial instruments are The Group manages its capital to ensure that the Group will be interest rate risk, foreign currency risk and credit risk. In addition, able to continue as a going concern while maximizing the return the Group has credit risk that one party to a financial instrument to stakeholders through the optimization of the debt and the will fail to discharge an obligation and cause the other party to equity balance. incur a financial loss.

The capital structure of the Group consists of debt including the Financial risks are assessed based on sensitivity analysis. The borrowings, cash and cash equivalents and equity. Group’s risk assessment methods are not changed compared to the prior year. The Management of the Group analyses the cost of capital and the risks associated with each class of capital, and present the ones c) Foreign currency risk management that require the decision of Board of Directors. The Management of the Group and Board of Directors aim to balance its overall The Group undertakes transactions denominated in foreign capital structure through the payment of dividends, new share currencies; consequently, exposures to exchange rate fluctuations issues as well as issue of new debt or the redemption of existing arise. debt. The Group is exposed to exchange risk due to the changes in the exchange rates used in the translation of assets and liabilities The Group controls its capital using the net debt/ total capital denominated in foreign currencies into Turkish Lira. Exchange risk ratio. This ratio is calculated by dividing net debt by the total arises due to the difference between the future transactions and capital amount. Net debt is calculated as total liability amount the assets and liabilities recorded. (comprises of financial liabilities, trade payables and payables to related parties as presented in the statement of financial position) As of 31 December 2020 and 31 December 2019, the Group’s less cash and cash equivalents. Total capital is calculated as foreign currency position table denominated in Turkish Lira is as equity plus the net debt amount as presented in the statement below: of financial position.

The general strategy of the Company which is about equity does 31 December 2020 31 December 2019 not have any difference from the previous period.

Assets 21.891.077 10.686.313 The company has no speculative financial instrument (including Liabilities (46.901.066) (172.468.870) derivative financial instrument) and there has been no purchase and sales of derivative financial instrument during the period. Net balance sheet position of foreign currency (25.009.989) (161.782.557) Net debt / (capital equity + net debt) as of 31 December 2020 and Foreign currency risk of the Group is mainly related with USD and 31 December 2019 are as follows: EURO balances.

31 December 31 December 2020 2019

Total liabilities 602.875.322 571.691.916 Cash and cash equivalents (14.075.850) (8.532.804)

Net debt 588.799.472 563.159.112 Equity 375.045.038 226.140.188

Equity+net debt 963.844.510 789.299.300 Net debt/ ( Equity + net debt) ratio %61 %71

Annual Report 2020 63 INDEPENDENT AUDITOR’S REPORT

NOTE 31 - NATURE AND LEVEL OF RISK ARISING FROM FINANCIAL INSTRUMENTS (cont’d) c) Foreign currency risk management (cont’d)

Profit/ (loss) 31 December 2020 Appreciation Depreciation

Appreciation of USD against TL by 10%

1- US Dollars net asset / liability (283.717) 283.717 2- USD risk hedged amount (-) - - 3- USD net effect (1 +2) (283.717) 283.717

Appreciation of EURO against TL by 10%

4- Euro net asset / liability (2.338.396) 2.338.396 5- Euro risk hedged amount (-) - - 6- Euro net effect (4+5) (2.338.396) 2.338.396

Appreciation of other currencies against TL by 10%

7- Other net asset / liability 121.114 (121.114) 8- Other risk hedged amount (-) - - 9- Other net effect (7+8) 121.114 (121.114) Total (2.500.999) 2.500.999

Profit/ (loss) 31 December 2019 Appreciation Depreciation

Appreciation of USD against TL by 10%

1- US Dollars net asset / liability (12.696.012) 12.696.012 2- USD risk hedged amount (-) - - 3- USD net effect (1 +2) (12.696.012) 12.696.012

Appreciation of EURO against TL by 10%

4- Euro net asset / liability (3.577.047) 3.577.047 5- Euro risk hedged amount (-) - - 6- Euro net effect (4+5) (3.577.047) 3.577.047

Appreciation of other currencies against TL by 10%

7- Other net asset / liability 94.803 (94.803) 8- Other risk hedged amount (-) - - 9- Other net effect (7+8) 94.803 (94.803) Total (16.178.256) 16.178.256 INDEPENDENT AUDITOR’S REPORT

NOTE 31 - NATURE AND LEVEL OF RISK ARISING FROM FINANCIAL INSTRUMENTS (cont’d)

c) Foreign currency risk management (cont’d) Table summarizes the Company’s foreign currency risk. The breakdowns of the Group’s monetary assets and liabilities denominated in foreign currencies are as follows:

31 December 2020 31 December 2019 TL equivalent USD EUR GBP NOK TL equivalent USD EUR GBP NOK

1. Trade Receivables 13.538.340 1.180.166 406.775 106.167 182.035 9.871.694 971.046 474.462 106.167 182.035 2a. Monetary Financial Assets 8.352.737 541.760 485.790 - - 814.619 22.205 102.655 - - 2b. Non-Monetary Financial Assets ------3. Other ------4. Total Current Asset (1+2+3) 21.891.077 1.721.926 892.565 106.167 182.035 10.686.313 993.251 577.117 106.167 182.035 5. Trade Receivables ------6a. Monetary Financial Assets ------6b. Non-Monetary Financial Assets ------7. Other ------8. Total Non-Current Asset (5+6+7) ------9. Total Assets (4+8) 21.891.077 1.721.926 892.565 106.167 182.035 10.686.313 993.251 577.117 106.167 182.035 10. Trade Payables 32.361.220 1.569.853 2.313.271 - - 156.795.975 21.632.977 4.254.017 - - 11. Financial Liabilities 14.308.427 534.150 1.153.155 - - 15.199.706 696.950 1.662.961 - - 12a. Other Monetary Liabilities 231.419 4.432 22.079 - - 473.189 36.363 38.671 - - 12b. Other Non-monetary Liabilities ------13. Total Current Liabilities (10+11+12) 46.901.066 2.108.435 3.488.505 - - 172.468.870 22.366.290 5.955.649 - - 14. Trade Payables ------15. Financial Liabilities ------16a. Other Monetary Liabilities ------16b. Other Non-monetary Liabilities ------17. Total Non-Current Liabilities (14+15+16) ------18. Total Liabilities (13+17) 46.901.066 2.108.435 3.488.505 - - 172.468.870 22.366.290 5.955.649 - - 19. Net Asset/(Liability) Position Of Off -Balance Sheet Derivatives (19a-19b) ------19a. Total Hedged Asset Amount ------

19b. Total Hedged Liability Amount ------20. Net Foreign Currency Asset / Liability Position (9-18+19) (25.009.989) (386.509) (2.595.940) 106.167 182.035 (161.782.557) (21.373.039) (5.378.532) 106.167 182.035 21. Net Foreign Currency Asset / Liability Position for Monetary Items (1+2a+3+5+6a-10-11-12a-14-15-16a) (25.009.989) (386.509) (2.595.940) 106.167 182.035 (161.782.557) (21.373.039) (5.378.532) 106.167 182.035 22. Fair Value of Foreign Currency Hedged Financial Assets

23. Hedged Foreign Currency Assets ------24. Hedged Foreign Currency Liabilities ------25. Export 54.653.643 4.534.648 1.403.070 - - 32.850.832 3.334.331 928.567 - - 26. Import 400.065.710 12.621.801 23.859.032 - - 345.277.819 25.609.326 28.105.465 - -

d) Interest rate risk management Group’s financial liabilities include fixed rate bank borrowings as of 31 December 2020 and 31 December 2019. The Group is not exposed to interest risk since it has no floating interest rate borrowing. e) Credit risk management Financial instruments that are held comprise the risk that the counterparty fails performing the requirements of the contract. The collection risk of the Group arises mainly from trade receivables. Trade receivables are evaluated based on the Company’s policies and procedures, and are presented in financial statements net of provision for doubtful receivables. Group’s sales mostly consist of domestic sales and by dealer and whole sales channels. Cost of raw materials depends on general price level in Turkey. 96% of sales are domestic and while setting the price of goods the currency exchange rates and raw material prices are considered. Collection of receivables is made with dealer cheques. In general, cheques are issued by the final customers, which lead to distribution and decreasing of the credit risk. Thanks to this system, there is not any significant risk regarding to receivables.

Annual Report 2020 65 INDEPENDENT AUDITOR’S REPORT

NOTE 31 - NATURE AND LEVEL OF RISK ARISING FROM FINANCIAL INSTRUMENTS (cont’d)

e) Credit risk management (cont’d)

Trade Receivables (*) Other Receivables Deposits 31 December 2020 Related Party Other Related Party Other at Bank

Maximum credit risk as of balance sheet date 253.398 477.855.535 - 1.689.969 14.072.180

- Secured portion of maximum risk by collaterals etc.(*) - 29.541.155 - - - A. Net book value of financial assets that are neither past due nor impaired 253.398 425.076.934 - 1.689.969 14.072.180 B. Net book value of financial assets that are renegotiated, otherwise that will be considered as past due or impaired - - - - - C. Net book value of financial assets that are past due but not impaired - 52.778.601 - - - - Expected credit losses - 5.688.148 - - - - Provision for expected credit loss (-) - (5.688.148) - - - - Secured portion of maximum risk by collaterals etc. - 29.541.155 - - - D. Net book value of impaired assets ------Past due (gross carrying amount) - 38.855.265 ------Impairment (-) - (38.855.265) - - - - Secured portion of maximum risk by collaterals etc. ------Not past due (gross carrying amount) ------Impairment (-) ------The part of net value under guarantee with collateral - - - - - E. Off balance sheet items with credit risk - - - - -

(*) More than 70% of domestic customers are insured and secured between the minimum and maximum trade receivable amount in the policies.

Trade Receivables (*) Other Receivables Deposits 31 December 2019 Related Party Other Related Party Other at Bank

Maximum credit risk as of balance sheet date 5.020.549 322.178.614 - 38.333 8.526.334

- Secured portion of maximum risk by collaterals etc.(*) - 32.032.374 - - - A. Net book value of financial assets that are neither past due nor impaired 5.020.549 259.586.680 - 38.333 8.526.334 B. Net book value of financial assets that are renegotiated, otherwise that will be considered as past due or impaired - - - - - C. Net book value of financial assets that are past due but not impaired - 62.591.934 - - - - Expected credit losses - 4.071.019 - - - - Provision for expected credit loss (-) - (4.071.019) - - - - Secured portion of maximum risk by collaterals etc. - 32.032.374 - - - D. Net book value of impaired assets ------Past due (gross carrying amount) 36.049.355 - Impairment (-) - (36.049.355) - - - - Secured portion of maximum risk by collaterals etc. ------Not past due (gross carrying amount) - - - - - Impairment (-) - - The part of net value under guarantee with collateral - - - - -

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

(*) More than 70% of domestic customers are insured and secured between the minimum and maximum trade receivable amount in the policies. INDEPENDENT AUDITOR’S REPORT

NOTE 31 - NATURE AND LEVEL OF RISK ARISING FROM FINANCIAL INSTRUMENTS (cont’d) f) Liquidity risk and management The Group follows the cash flows regularly and tries to manage the liquidity risk by maintaining sufficient funds and borrowing reserves through matching the maturity of financial assets and liabilities.

Liquidity risk statements Prudent liquidity risk management implies maintaining sufficient cash, the availability of funding through an adequate amount of credit transactions, and the ability to close out market positions. The funding risk of the current and future debt requirements is managed through rendering the availability of the qualified lenders. The maturity analysis of the Group’s derivative and non-derivative financial liabilities in terms of TL is stated below:

Carrying Total Less than 3-12 Over 5 31 December 2020 1-5 value cash outflow 3 months months years years Financial liabilities 128.021.070 129.477.350 129.477.350 - - - Trade payables 386.516.996 249.730.878 249.730.878 136.786.118 - - Lease payables 19.257.529 20.808.584 25.673 9.506.095 11.276.816 - Total liabilities 533.795.595 536.802.930 379.233.901 146.292.213 11.276.816 -

Carrying Total cash Less than 3-12 1-5 Over 5 31 December 2019 value outflow 3 months months years years Financial liabilities 183.932.738 188.323.681 188.323.681 - - - Trade payables 313.103.169 313.103.169 159.402.655 153.700.514 - - Lease payables 19.998.072 21.652.158 - 7.586.623 14.065.535 - Derivative instruments 5.545.574 5.545.574 - 5.545.574 - - Total liabilities 522.579.553 528.624.582 347.726.336 166.832.711 14.065.535 -

NOTE 32 - FINANCIAL INSTRUMENTS (FAIR VALUE NOTE 32 - FINANCIAL INSTRUMENTS (FAIR VALUE DISLOSURES AND EXPLANATIONS ON HEDGE DISLOSURES AND EXPLANATIONS ON HEDGE ACCOUNTING) ACCOUNTING)

Fair value of financial instruments Fair value of financial instruments (cont’d)

The estimated fair values of financial instruments have been Financial liabilities determined by the Group, using available market information The fair values of short-term borrowings and trade payables and appropriate valuation methodologies. However, judgment are assumed to approximate to their carrying values due to is required to interpret market data to estimate the fair their short-term nature. The estimated fair values of long- value. Accordingly, the estimates presented herein are not term financial liabilities are determined by calculating the necessarily indicative of the amounts the Group could realize discounted cash flows, using the current market interest rates in a current market exchange. for the fixed interest loans. The following methods and assumptions are used to estimate Group’s classification of financial assets and liabilities the fair value of the financial instruments: measured according to fair value method is shown as below: Financial assets Level 1: Financial assets and financial liabilities with standard terms and conditions and traded on active liquid markets The carrying values of significant portion of cash and cash are determined with reference to quoted market prices (not equivalents are assumed to approximate to their fair value due adjusted). to their short-term nature. Level 2: Inputs other than quoted prices included within level 1, The carrying values of trade receivables are assumed to observable inputs either directly (in price) or indirectly (derived approximate to their fair value. from prices) for assets and liabilities. Level 3: Inputs for assets and liabilities that cannot be determined based on an observable market data (unobserved inputs).

Annual Report 2020 67 INDEPENDENT AUDITOR’S REPORT

NOTE 32 - FINANCIAL INSTRUMENTS (FAIR VALUE DISLOSURES AND EXPLANATIONS ON HEDGE ACCOUNTING) (cont’d) As of 31 December 2020, the Group’s assets and liabilities measured at fair value are as follows:

Fair value Valuation Financial Assets/ Financial Liabilities Fair value level Method 31 December 2020 31 December 2019

Forward Exchange Contracts - (5.545.574) Level 2 Quatation

NOTE 33 – EVENTS AFTER THE REPORTING PERIOD On 4 January 2021, a share purchase and sale agreement has been signed with Mondi Corrugated B.V. related to the transfer of shares corresponding 90.38 % of the Company capital with a nominal value amounting to TL 0,01 per share and paid capital amounting to TL 247.102.500. Transfer of shares depends on the permission of the Competition Board and the fulfillment of other preconditions stipulated in the share purchase and sale agreement. The transfer of shares is expected to take place in the first half of 2021.

The Group’s negotiations with regard to the 5th Period Collective Labour Agreement with the Turkish Employers’ Association of Cellulose, Paper and Paper Products continues.

NOTE 34 - NOTES ON THE STATEMENT OF CASH FLOW As of 31 December 2020 and 31 December 2019, there are no cash and cash equivalents that cannot be used by the Group (Note 4).