Kerevitaş Annual Report 2019 Contents

KEREVİTAŞ AT A GLANCE 08 Operational Network 10 Highlights 12 Vision, Mission and Values 14 Our Business 16 Production Capacity 20 Key Indicators 23 Net Sales Breakdown by Product Category 24 Net Sales Breakdown by Sales Channels 26 Capital and Shareholding Structure 28 Success Story 31 Awards and Achievements

MANAGEMENT 32 Message from the Chairman of the Board and CEO 34 Board of Directors 35 Senior Management

2019 ACTIVITIES 36 Development of Frozen and Canned Food Sector and Edible Oil Sector in Turkey 40 Frozen and Canned Food Business Unit 40 Activities 40 Production 40 Sales and Marketing 41 Distribution 41 Export 41 Products 41 Retail 41 HORECA 41 Export 42 Edible Oil Business Unit 42 Activities 42 Production 42 Sales and Marketing 44 Distribution 45 Export 45 Products 45 Consumer Products 45 HORECA Products 45 Pastry and Catering Oils 45 Industrial Products 46 Investor Relations

SUSTAINABILITY 47 R&D Activities and Investments 48 Human Resources 52 Occupational Health and Safety 53 Environmental Practices 54 Good Agricultural Practices 55 Corporate Social Responsibility

CORPORATE GOVERNANCE 56 Corporate Governance Principles Compliance Report for 2019 64 Risk Management Policies 65 Profit Distribution Proposal 66 Other Issues

FINANCIAL STATEMENTS AND FOOTNOTES 67 Consolidated Financial Statements as of December 31, 2019 and Independent Auditor’s Report As the second largest Yıldız Holding- owned food company trading on the Borsa Istanbul, Kerevitaş has preserved its strong market leadership in both frozen food and margarine.

While our astute channel-category strategies brought along growing sales revenues, we continued to stand close to our consumers and customers to address their changing needs with high quality products. Support for development We undertake a major role for sustainable development towards a better future. We collaborate with farmers for the cultivation of crops across 53,174 hectares of contracted farmland, contributing to employment.

Significant results in water saving We support enhanced productivity in agricultural production and mitigation of the environmental impacts of cultivation. We have saved 5.4 million m3 of water through drip irrigation in agricultural land. Environmentally friendly production Our edible oil business, Besler, embarked on the “Zero-loss Journey through the Corporate Energy Movement,” helping us prevent carbon emissions equivalent to the absorption capacity of 260 thousand grown trees in a year.

8 Kerevitaş at a Glance

Operational Network

Exports to over 60 countries on 6 continents

EXPORT DESTINATIONS Africa: Algeria, Cameroon, Egypt, Ethiopia, Gabon, Ghana, Ivory Coast, Kenya, Libya, Madagascar, Mauritius, Mauritania, Nigeria, Sudan, Tanzania, Tunisia

Asia: Afghanistan, Azerbaijan, Bangladesh, Brunei, China, Georgia, Hong Kong, India, Iran, Iraq, Israel, Jordan, Kazakhstan, Kuwait, Lebanon, Oman, Pakistan, Palestine, Philippines, Qatar, Saudi Arabia, Syria, Taiwan, Tajikistan, Turkmenistan, United Arab Emirates, Uzbekistan

Europe: Germany, Albania, Austria, Belgium, Bosnia- Herzegovina, Bulgaria, Cyprus, Denmark, France, Greece, Hungary, Italy, Kosovo, Macedonia, Malta, Netherlands, Romania, Spain, Sweden, United Kingdom

South America: Brazil, Colombia

North America: Canada, United States of America

Oceania: Australia KEREVİTAŞ Annual Report 2019 9

FROZEN AND CANNED FOOD BUSINESS UNIT EDIBLE OIL BUSINESS

Product Categories Product Categories • Bakery Products: Pizza, Pastry (Börek), Puff • Retail - Margarine Pastry, Turkish Ravioli (Mantı), Flatbread (Pide), • HORECA Turkish Pizza (Lahmacun) - Pastry and Catering • Fruits and Vegetables - Industrial Oils • Meat Products: Meatballs, Burgers, Chicken • Edible Oil Products • Potatoes and Croquettes Brands • Canned Products: Tuna Fish, Sweet Corn, Bizim Yağ, Teremyağ, Luna, Sabah, Yayla, Vegetables Halk, Ona, Evet, Ustam, Akbis, Akao, • Desserts: Knafeh, Pistachio Pastry, Mosaic Cake Akrim, Arma, Mars, SPY • Seafood Products: Calamari, Shrimps

Brand • SuperFresh 10 Kerevitaş at a Glance

Highlights

Kerevitaş achieved successful operational results in 2019.

Steady and Profitable Growth

NET SALES (TL MILLION) GROSS PROFIT (TL MILLION)

Gross Profit Margin

2,406.2 2,422.0 2,492.9 613.4 562.9

413.7

24.6% 23.2%

17.2%

2017 2018 2019 2017 2018 2019

EBITDA(*) (TL MILLION)

EBITDA Margin

379.3 343.6

185.5 14.2% 15.2%

7.7%

2017 2018 2019

(*) Excluding other income and expenses from operating activities. KEREVİTAŞ Annual Report 2019 11

Exporting to more than 60 countries across 6 continents with over 1,730 employees, Kerevitaş consistently boosts its strength in domestic and export markets.

Leader of the Frozen Food and Margarine Market

Total Workforce Total Export 1,736 353.1 Employees TL Million

As the leading company in Turkey’s frozen food market, Kerevitaş maintains its steady growth, redoubling its energy Export Destinations Number of Factories through the cost savings and operational efficiencies and synergy generated by the >60 5 acquisition of Besler.

Exporting to more than 60 countries across 6 continents with over 1,730 employees, Kerevitaş continues to introduce innovations that deepen its market penetration and reinforce its leading status, thus consistently boosting its strength in both domestic and export markets. 12 Kerevitaş at a Glance

Vision, Mission and Values

Vision To be a reliable leader of food industry aiming to make all its stakeholders happy.

Mission To provide the most delicious, practical and innovative products in a healthy and reliable value chain as the number one solution partner in the kitchen. KEREVİTAŞ Annual Report 2019 13

Values

Consumer satisfaction Leadership in quality Innovation

• We always prioritize consumer • We provide consumers easily • We explore, support and needs and requests. and produce accessible high-quality products implement new ideas with our accordingly. and strong brands with best-in- entrepreneurial spirit, embracing • We always work passionately to class services. change and innovation. become the market leader and a • We aim to implement the best • We identify fresh opportunities preferred brand. practices in every aspect of our in the market and boost our • We consider consumer benefit operations. mobility by rapidly adapting to prior to each action we take. • We continually raise the quality change. • We take the initiative to achieve bar in production and at service • We pioneer change, create new consumer satisfaction and aim stages. markets and set the trends in the to anticipate needs before they industry. arise. • We embrace new and diverse opinions. • We monitor innovations and developments closely and aim for continuous improvement with our R&D centers’ studies.

Leadership in collaboration Competitiveness Result-oriented

• We value different perspectives • We always start compelling • We are always result-oriented and experiences, and benefit competition across all our and preserve our energy and from our wealth of diversity. operations. motivation. • We consult each other, learn • We aim to reach the top in every • We aim to achieve sustainable together and develop our skills. area where we operate. results that generate value for all We work together as a team • We are swift and agile; we work stakeholders. towards a common goal. hard and push the limits to • We put our hearts in our work • We welcome everyone’s success provide our customers the best with our industriousness and as the Company’s success. products first. drive to succeed, set challenging • We measure our performance targets and then achieve them. against our own record and our competitors, and then aim to do better each time. 14 Kerevitaş at a Glance

Our Business

Kerevitaş offers all-time delicious alternatives to consumers through quick and practical products.

Frozen and Canned Food

Kerevitaş has the widest product range In 2019, SuperFresh launched Şipşak Production is carried out in four in the frozen food market. The frozen Pizza (Instant Pizza), the first and only main categories: food category offers consumers bakery microwave pizza in Turkey. The product • Retail Products products, fruits and vegetables, potatoes serves the modern consumer with a • HORECA Products and croquettes, meat products, seafood quick, practical and delicious offering in • Export Products products and desserts. Canned food one-person portions. • Private Label Products category includes canned tuna fish, sweet corn and vegetables. Product Categories • Bakery Products - Pizza - Roll Pastry - Puff Pastry - Turkish Ravioli (Mantı) - Flatbread (Pide) - Turkish pizza (Lahmacun)

• Fruits and Vegetables

• Meat Products - Meatballs - Burgers - Chicken Products

• Potatoes and Croquettes

• Seafood Products - Calamari - Shrimps

• Canned Products - Tuna Fish - Sweet Corn - Vegetables

• Desserts - Knafeh - Pistachio Pastry - Mosaic Bars KEREVİTAŞ Annual Report 2019 15

The Edible Oil Business of Kerevitaş involves production and sales of 518 SKUs under 56 brands including Bizim Yağ, Teremyağ, Luna, Ona, Ustam and Evet.

Edible Oil

Following the acquisition of Besler, the market leader in Turkey’s edible oil production, operations of Kerevitaş under the Edible Oil Business involve the production and sales of 518 SKUs under 56 brands in total, including Bizim Yağ, Teremyağ, Luna, Ona, Ustam and Evet.

Edible Oil Products • Consumer Products - Bizim Yağ - Teremyağ - Luna - Sabah - Yayla - Halk - Ona - Evet

HORECA Products • Pastry and Catering Oils - Ustam - Proser - Teremyağ - Bizim Yağ

• Industrial Products - Akbis - Akrim - Arma - Mars - Akao - Spy 16 Kerevitaş at a Glance

Production Capacity

Kerevitaş offers high-quality frozen food and canned products manufactured in two plants to millions of people in Turkey and around the world.

Frozen and Canned Food

The Leader of the Frozen Food Market with an Annual Production Capacity of 130,000 Tons

Bursa Factory Afyon-Emirdağ Factory 131,000 m2 253,000 m2 Outdoor Space Outdoor Space 43,000 m2 33,000 m2 Indoor Space Indoor Space

6 2 Main Production Lines Main Production Lines

• Bakery products • Frozen potatoes and croquets • Frozen fruits and vegetables • Frozen vegetables • Canned tuna fish • Canned fruits and vegetables • Meat products • Coated products KEREVİTAŞ Annual Report 2019 17

Exports to 2 5 +20 Factories Continents Countries

Total Production Capacity 554 SKUs in 100% 130,000 Brand Recognition* Tons/Year 21 Categories

58 200 27,000 Distributors Distribution Vehicles Freezers

Product Availability at Reaching Tables of Leader with +36,000 20 Million 56% Points People Share in Branded Market**

* Source: Ipsos Brand Health Tracking Research 2019 ** Source: Turkey’s Total Fresh-Frozen Food Market Excluding Discounters, Nielsen, 2019 18 Kerevitaş at a Glance

Production Capacity

Kerevitaş, Turkey’s most powerful edible oil producer, reaches millions of tables in over 40 countries with high-quality edible oil products manufactured in three plants.

Edible Oil

Turkey’s Largest Edible Oil Production Capacity

Overseas/Brunei Istanbul Edible Oil Factory Adana Edible Oil Factory Edible Oil Factory

280,000 308,000 70,000 tons/year capacity tons/year capacity tons/year capacity

• The first and only factory with a fraction facility in Turkey Adana Edible Oil Factory KEREVİTAŞ Annual Report 2019 19

Exports to 3 5 +40 Factories Continents Countries

Total Production Capacity 518 658,000 SKUs under 99% Tons/Year Brand Recognition**** 3 Factories 56 brands

Leadership in both Access to %98 the retail block and margarine bowl Availability** 16.3 Million segments Households***

Product Availability at Reaching Tables of 66% +115,000 65.4 Million Edible Oil Business Unit Sales Points People Brand Leader with 66% Market Share*

* Source: AC Nielsen 2019 Tonnage Share ** Source: AC Nielsen 2019 Weighted Distribution *** Source: HTP December 2019 **** Source: Total Brand Recognition BHT December 2019 20 Kerevitaş at a Glance

Key Indicators

Kerevitaş increased net sales to TL 2,492.9 million in 2019.

Consolidated Financial Indicators

TOTAL ASSETS SHAREHOLDERS’ EQUITY NET FINANCIAL DEBT/EBITDA* (TL MILLION) (TL MILLION)

3,396.2 966.4 4.65 2,977.4 2,723.2 759.9 781.9

2.36

1.51

2017 2018 2019 2017 2018 2019 2017 2018 2019

NET SALES (TL MILLION) GROSS PROFIT (TL MILLION) EBITDA** (TL MILLION) Gross Profit Margin EBITDA Margin

2,406.2 2,422.0 2,492.9 613.4 379.3 562.9 343.6

413.7 23.2% 24.6% 185.5 15.2% 17.2% 14.2%

7.7%

2017 2018 2019 2017 2018 2019 2017 2018 2019

* Net financial debt is calculated by deducting cash and cash equivalents plus financial receivables from related parties from total financial debt. ** Excluding other income and expenses from operating activities. KEREVİTAŞ Annual Report 2019 21 22 Kerevitaş at a Glance

Key Indicators

Concluding the year successfully, the export revenues of Kerevitaş amounted to TL 353.1 million as of the end of 2019.

Operational Indicators

NET SALES (TL MILLION) EXPORT REVENUES (TL MILLION)

2,406.2 2,422.0 2,492.9 386.9 353.1 315.9

2017 2018 2019 2017 2018 2019

Global Footprint

Africa Europe 4% 21% 16 Countries 20 Countries

Other Asia 2% 74% 5 Countries 27 Countries Exports by Continents KEREVİTAŞ Annual Report 2019 23

Net Sales Breakdown by Product Category

HORECA Edible Oil 55.4% 5.4%

Other Edible Oil Business Unit Total Turnover 2.0%

Retail - Liquid 1,760.6 Retail - Margarine 0.4% TL Million 36.8%

Frozen and Canned Food 29.4% Kerevitaş Consolidated Turnover

Edible Oil 2,492.9 70.6% TL Million

Tuna Fish 12.0%

Frozen and Canned Canned Fruits and Vegetables Frozen Food Food Business Unit 74.2% Total Turnover 4.3% 732.3 Other TL Million 9.5%

CONSOLIDATED TURNOVER (TL MILLION) 2018 2019 Edible Oil Business Unit 1,713.8 1,760.6 Frozen and Canned Food Business Unit 708.2 732.3 Consolidated Turnover 2,422.0 2,492.9 24 Kerevitaş at a Glance

Net Sales Breakdown by Sales Channels

Direct Sales 33.9% Private Label Products

Export 4.0% Edible Oil Business 13.5% Other Unit Total Turnover 1,760.6 2.0% Indirect Sales TL Million 46.6%

Frozen and Canned Food 29.4% Kerevitaş Consolidated Turnover

Edible Oil 2,492.9 70.6% TL Million

Export 13.9% Private Label Products

17.6% Indirect Sales Frozen and Canned Food Business 17.5% Total Turnover

Direct Sales 732.3 Other 45.2% TL Million 5.8% KEREVİTAŞ Annual Report 2019 25 26 Kerevitaş at a Glance

Capital and Shareholding Structure

Kerevitaş, owned by Yıldız Holding, and Turkey’s second largest BIST-listed food company, delivers consistent growth driven by the support and strength of its shareholders.

31 December 2019 31 December 2018 Name of Shareholder Ratio (%) Amount (TL) Ratio (%) Amount (TL) Yıldız Holding A.Ş. 54.27 359,245,941 46.14 305,450,547 Ufuk Yatırım Yönetim ve Gayr. A.Ş. 10.34 68,429,804 10.34 68,429,804 Murat Ülker 9.98 66,079,898 9.98 66,079,898 Ahsen Özokur - - 8.13 53,795,394 Trade Türk Gıda Yatırım A.Ş. 5.42 35,845,529 7.23 47,834,418 Other 20.00 132,398,828 18.19 120,409,939 Total 100.00 662,000,000 100.00 662,000,000

Other Trade Türk Gıda Yatırım A.Ş. 20.00% 5.42%

Ufuk Yatırım Yönetim ve Gayr. A.Ş.

10.34% Murat Ülker 2019 Shareholding Structure 9.98% Yıldız Holding A.Ş. 54.27% KEREVİTAŞ Annual Report 2019 27 28 Kerevitaş at a Glance

Success Story

Standing out with delicious, high-quality products for five decades, Kerevitaş serves millions of consumers via leading brands.

Frozen and Canned Food Business Unit

1969 2013 Export of live crayfish has begun under Emirdağ Factory was established. a cooperative society organization. 5 2017 1978 Besler (owner of Marsa) was acquired. Factories “Kerevitaş” was established in Akçalar village, Bursa. Kerevitaş becomes the second largest food company trading on Borsa Istanbul. 1980 Frozen fruit and vegetable production The first R&D center in the frozen food Edible Oil Production Capacity commences. sector was established.

1989 2018 658,000 Production of bakery products has been Turquality brand support scheme begins. Tons/Year started [pizza, puff pastry, Turkish ravioli (mantı)]. 2019 The Company is included in 1990 the Sustainability Index. Launch of ‘’SuperFresh’’ brand. Frozen and Canned Food Production Capacity 1993 Canned tuna fish production starts. 130,000 2008 Tons/Year Kerevitaş was acquired by Yıldız Holding.

Edible Oil Business Unit 99% Brand Recognition KEREVİTAŞ Annual Report 2019 29

Edible Oil Business Unit

1992 Yıldız Holding launched its first non- confectionery business with “edible oil” range.

1994 Liquid and industrial oil production was started.

1995 Production of packaged margarine and packaged industrial oil started.

1996 Production of bowl margarine started.

Exports to 1999 First time production of buttery taste 6 margarine in Turkey. Continents +60 Countries 2002 Turkey’s first and only fraction factory was installed.

2012 Edible Oil Business Unit AIB (American Institute of Baking) Food +1,730 Brand Leader with Safety Certification obtained. Employees 66% 2013 Acquisition of Marsa by Besler. Market Share

2015 Turquality brand support scheme begins.

2016 Product Availability at SuperFresh Brand Leader with Besler Food R&D Center certified by the Ministry of Industry.

+115,000 56% Ona brand was admitted to the Turquality Sales Points Market Share incentive program.

2017 Brunei Factory has been opened. First liquid margarine produced. Frozen and Canned Food Business Unit 2019 Margarine with real butter content, TL 2,492.9 produced as a first in Turkey. 100% Total Consolidated Turnover Brand Recognition 30 Kerevitaş at a Glance KEREVİTAŞ Annual Report 2019 31

Awards and Achievements

SuperFresh was listed as the Golden Brand in the 2019 Economic Benefit Index of the Turkey Reputation Academy.

From Farm to Table In 2019, “Zero Food Loss from Farm to Table” was selected from numerous projects and presented to the United Nations by Naci Ağbal, the Head of the Strategy and Budget Office under the Presidency.

Golden Brand SuperFresh was listed as the Golden Brand in the 2019 Economic Benefit Index of the Turkey Reputation Academy.

Ranking Among the Top 10 Most Reputable Brands According to the Reputation Index survey by the Turkey Reputation Academy, SuperFresh ranks among the top ten most reputable brands in the processed foods sector. 32 Management

Message from the Chairman of the Board and CEO

We are delighted to be included in BIST’s Sustainability Index, which measures companies traded on Borsa Istanbul in terms of their corporate sustainability performance.

Dear Shareholders, Exporting to more than 60 countries In the meantime, our edible oil business, on six continents, Kerevitaş achieved Besler, embarked on the “Zero-Loss As Turkey’s leading company in the TL 353.1 million in export revenues in Journey through the Corporate Energy frozen food and edible oil markets, 2019. Our teams expanded our brand Movement,” helping us prevent carbon Kerevitaş attained solid growth and presence in our existing markets and emissions equivalent to the absorption concluded the year with a turnover of made major strides in entering new capacity of 260 thousand grown trees TL 2.5 billion. markets. Thanks to these developments, in a year. Yıldız Holding’s sustainability we aim to sustain the momentum approach is the tenet of our strategy In 2019, our Frozen Food and Canned achieved in exports each passing year, at Kerevitaş. We seek to “Make People Business Unit posted EBITDA of TL 138.3 and to boost the positive impact on our Happy and Be Happy” as part of our million, marking a 26.1% year-on-year profitability. sustainability strategy, and will thus increase, and the Edible Oil Business Unit continue to develop innovative projects achieved EBITDA of TL 240 million with a Kerevitaş continues taking exemplary aimed at leaving a habitable and happy 2.6% increase. According to these figures, steps towards sustainability; as such, the world for future generations. the Company’s total EBITDA reached Company is now on BIST’s Sustainability TL 379.3 million, marking a 10.4% growth Index, where Borsa Istanbul-traded Focusing on consumer needs, Kerevitaş compared to the previous year. companies are measured in terms of their will continue to lead the fresh frozen corporate sustainability performance. food and edible oil markets and expand Thanks to astute management of cost We have saved 5.4 million liters of water, the presence of its brands in both Turkey and price balance in the sales channel thanks to the drip irrigation system and export markets through new product and product portfolio in 2019, the growth deployed in agricultural lands as part of launches. in operating profit and profit margin our sustainability efforts. was achieved at levels above our sales Yours sincerely, revenue growth. The system has helped our farmers achieve energy savings up to TL 706 Mehmet Tütüncü The innovations we introduced in the thousand and derive 308 kg more crops Chairman of the Board of Directors edible oil segment, as well as in the on a per unit area basis, equaling a total and CEO frozen food and canned business, were of TL 4.1 million in earnings. Furthermore, appreciated by our customers, extending we provide our farmers with one-on-one our household penetration and thus technical support and certified seeds, in reinforcing the leading position of our line with the appropriate planting period, SuperFresh, Bizim Yağ and Teremyağ the region and the soil type. The ratio of brands. At Kerevitaş, we concluded 2019 our contracted farmers reached 85%, up as a strong-branded market leader with from 82% in 2018. a 56% share in frozen foods and 66% in edible oils. KEREVİTAŞ Annual Report 2019 33 34 Management

Board of Directors

FoodDrinkEurope Liaison Committee. Oğuz Aldemir Name Surname Duty Speaking English, Tütüncü received an Board Member Mehmet Tütüncü Chairman IRI scholarship for a six-month program Mr. Oğuz Aldemir graduated from Ankara Ali Ülker Member on Production, Quality Control and University, Faculty of Political Sciences, Oğuz Aldemir Member Maintenance Practices in Italy, attended Department of Business Administration Vehbi Merzeci Member Business Management Training Program and studied his Executive MBA from Hüseyin Avni Metinkale Member at Boğaziçi University and received University of Chicago, Graduate School Independent education on Marketing Techniques, of Business, London Campus in 2007. Ahmet Murat Yalnızoğlu Member International Marketing, Factory Starting his professional career in 1993 Independent Organization and Management as well as at Procter & Gamble in the sales and Ceyda Aydede Member studying Strategic Marketing at Harvard marketing departments, Oğuz Aldemir Business School, and attending various joined Coca-Cola in 1997. Over the next Mehmet Tütüncü courses at IMD/Switzerland and Insead/ 12 years at Coca-Cola, he served as Chain Chairman of the Board of Directors Singapore. Married with three children, Stores Manager, Commercial Director Mr. Tütüncü obtained his BSc in Tütüncü enjoys travelling, reading books for Ukraine Operations, Sales Director of Mechanical Engineering from and articles, spending time with animals Turkey, General Manager of Azerbaijan Gazi University and his MA from and in nature, and collecting small hand- and Regional Director of Central Asia, the Department of Industrial and crafted boxes and objects. respectively. In 2009, Mr. Aldemir joined Organizational Psychology, Maltepe Mey İçki as Executive Board Member University. His professional career began Ali Ülker and Director of Sales and Distribution; as a Local Industry Expert at the Ministry Board Member he played an active role in the sale of of Industry and Commerce. He then Ali Ülker was appointed as Chairman the company from TPG to Diageo in joined Best Rothmans Entegre Sigara of Ülker Corporate Group (biscuit, 2011. Oğuz Aldemir joined Yıldız Holding ve Tütün Sanayi A.Ş. where he served as chocolate, confectionary) in 2005. He as Vice President of the Food, Frozen Production Manager, Operations Manager began his professional career in 1985 as a Products and Personal Care Group in and General Manager for most of the trainee in the Quality Control Department 2013. He continues to serve as Group next decade. Mr. Tütüncü joined Ülker of Ülker Gıda A.Ş. Between 1986 and President of the Frozen Food, Edible Oil, Gıda A.Ş as the Business Coordinator in 1998, he worked at the company’s Processed Meat and Personal Care Group 1996. He served as General Director of chocolate production factories and at the to this day. Oğuz Aldemir is married with Ülker Biscuit and Chocolate Factories, company’s marketing subsidiary Atlas one child. Ülker Group Deputy Chairman, Chairman Gıda Pazarlama A.Ş. as a trainee, sales of Food and Beverages Group, Chairman executive, sales coordinator, product Vehbi Merzeci of Food Group and Chairman of Ülker group coordinator and product group Board Member International Group. In 2016, he was manager, respectively. Mr. Ülker was Vehbi Merzeci was born in Istanbul appointed as the Regional CEO for appointed as General Manager of Atlas in 1975, and graduated from Uludağ Turkey, the Middle East, North Africa and Gıda Pazarlama A.Ş. in 1998, Deputy University, Faculty of Economics and Central Asia of pladis Global, founded Chairman of the Consumer Group in Administrative Sciences, Department under Yıldız Holding. In 2017, he also charge of Marketing and Chain Stores in of Business Administration. He speaks assumed responsibilities of South Asia 2000, and General Manager of Merkez English. He served as Committee and Latin America regions together with Gıda Pazarlama A.Ş. in 2001. He was Chairman and Member of the Assembly pladis Global Information Systems and appointed as Deputy Chairman of the at Istanbul Chamber of Commerce and Business Models Transformation as well Organized Retail Food Group in 2002. Vice Chairman of the Board of Directors as continuing his work as pladis Deputy Ali Ülker graduated from Boğaziçi at Water Products Promotion Group CEO. In October 2018, he was elected as University, Faculty of Economics and (STG). At present, Mr. Merzeci serves Vice Chairman of the Board of Directors Administrative Sciences, Economics and as Deputy Chairman of the Board at Yıldız Holding and was also appointed Business Administration Departments. of Directors at Istanbul Exporters’ as Yıldız Holding CEO. Alongside his Mr. Ülker also attended various academic Association of Fisheries and Animal duties at Yıldız Holding, Mr. Tütüncü programs at IMD, Harvard University and Products; Member of the Board of the serves as the Chair or Member of the Wharton School of Business. He worked Sectors Council; and Member of TİM Board at several other companies. He is a on the Internal Kaizen Projects at De (Turkish Exporters Assembly). Vehbi Member of the Board of TUGIS (Turkish Boccard & Yorke Consultancy (1992) and Merzeci is also a Congress Member of Food&Beverage Industry Employers on IESC Sales System Development and Fenerbahçe Sports Club. Association), and holds memberships in Internal Organization Projects (1997). Ali several industrial organizations in Turkey Ülker was born in 1969 and is married and abroad. He also serves on the Board with three children. He speaks English of Directors of FoodDrinkEurope and and German. KEREVİTAŞ Annual Report 2019 35

Hüseyin Avni Metinkale joined Arthur Andersen and Andersen Ceyda Aydede Board Member Consulting as Management Consultant Board Member (Independent) Hüseyin Avni Metinkale was born in 1963 specializing in information technologies. Ceyda Aydede graduated from Industrial and graduated from Istanbul Technical Mr. Yalnızoğlu went on to work at Engineering and started her professional University, Department of Business Coopers & Lybrand and AR-GE career at Arthur Andersen. She later Engineering. He started his professional Consultancy as Senior Executive, served in various positions at Migros. career in 1985 as Project Manager at Founder and Partner, delivering various Combining her business experience Albaraka Türk Participation Bank, and strategic and organizational development in various sectors with a professional then worked as Managing Partner at consultancy projects for some of Turkey’s approach to public relations, Ceyda Pripack Ambalaj A.Ş. Since 2001, leading companies. Since 2006, his focus Aydede established Global Tanıtım in Mr. Metinkale has held various executive has been creating effective corporate 1989 and has executed major PR projects positions at Yıldız Holding, including structures particularly for large, multi- for more than 25 years. These projects Committee Chairman, Member of the business conglomerates. Mr. Yalnızoğlu earned many national and international Executive Committee and Director of conducted numerous studies to boost awards to Global Tanıtım while also the Packaging Group. Since 2008, he effectiveness of board of directors’ bringing a high degree of recognition has been the General Manager of Yıldız activities, and achieve substantial through prestigious awards for Ms. Holding. Mr. Metinkale became General improvements by structuring the Aydede. In 2000, Dünya Newspaper Secretary for Yıldız Holding’s Boards of institutions “from the top.” In addition named her the “Most Successful Directors in 2010. He is married with four to his work as management consultant, Businesswoman in the Public Relations children and speaks English. he also serves as a member of the Sector,” and in 2001 she was named the board of directors at several companies. “Best Professional Representative of Ahmet Murat Yalnızoğlu Mr. Yalnızoğlu contributes to propagating the Sector” by Ankara Public Relations Board Member (Independent) the benefits of good management by Association and Ankara Chamber of Murat Yalnızoğlu was born in 1957 and sharing his experiences in management Commerce. Ms. Aydede, who teaches graduated from Istanbul High School. with civil society, professional public relations at the graduate level at He obtained his Bachelor’s degree from organizations and universities, at various Yeditepe University, is also a published Boğaziçi University and Master’s degree seminars and conferences, and on social author of books on public relations. from University of Florida in Industrial media. and Systems Engineering. Mr. Yalnızoğlu began his professional career in 1982 as an entrepreneur in information systems and software development. In 1989, he

Senior Management

Duty Business Unit Mehmet Tütüncü CEO Yıldız Holding Şükrü Çin Vice Chairman Edible Oil Business Unit, Frozen and Canned Food Business Unit Sadettin Atilla Vice Chairman Supply Chain & Production Edible Oil Business Unit, Kerevitaş Adnan Özşahin Group Director Export Edible Oil Business Unit, Frozen and Canned Food Business Unit Verda Duysak Group Director Marketing Edible Oil Business Unit, Frozen and Canned Food Business Unit Ufuk Kasar Director, Financial Affairs Frozen and Canned Food Business Unit Adnan Kaplan Director, Financial Affairs Edible Oil Business Unit Levent Çiftçi Group Director Turkey Sales and Commercial Marketing, Frozen and Canned Food Business Unit Uğur Tendik Director, Sales Marsa Hatice İçeli Director R&D & Business Development Edible Oil Ali Kemal Kapıcıoğlu Senior Manager Commercial Marketing and Sales, Besler Murat Turan Senior Manager Human Resources, Edible Oils, Frozen and Canned Foods Information Technologies Edible Oil Business Unit, Frozen and Canned Foods Cihan Eker Manager Business Unit 36 2019 Activities

Development of Frozen and Canned Food Sector and Edible Oil Sector in Turkey

Frozen foods prove a healthy choice in terms of quality, taste, smell and nutritional value.

Constituting one of the core business lines for Kerevitaş, the frozen food sector is a major branch of the food industry. The sector involves providing appropriate raw materials for freezing (seed selection, production, procurement); transporting raw materials to facilities under proper conditions; selecting, washing, sizing and processing the raw materials with techniques specific to the product without delay; deep freezing and packaging the materials appropriately; using the correct technology for their storage, loading, transport, distribution and consumption; and monitoring viability of microorganisms which lead individually frozen at -40° C rapidly customer feedback. to spoilage. Freezing also minimizes within 5-8 minutes by applying the chemical and biochemical changes to “Individual Quick Freezing (IQF)” process. The Turkish Food Codex defines quick preserve foodstuff at their most natural The process freezes the water contained frozen foodstuffs as those that have state. within the products so that the foodstuffs undergone quick-freezing where the maintain long life without recourse to zone of maximum crystallization is Maintaining temperature at -18°C in all additives. crossed as rapidly as possible, depending links of the chain - from production to on the type of product. The resulting shipment and the point of sale - is of Freezing foodstuff through the IQF temperature of the product after thermal vital importance. Consumers who buy method thus involves freezing the cellular stabilization is continuously maintained products stored in -18° C display cases at juice in the food with the rest of the at a level of -18° C or lower at all points. points of sale are advised to take these fibers and content without rupturing the These items are marketed in such a way products to their freezers or cook them cell membranes. As products are picked as to indicate that they possess this within two hours at most. in-season and frozen at its freshest state characteristic. and at very low temperatures, they retain At present, frozen food factories employ their freshness and nutritional values to Freezing is the best food preservation the IQF (Individual Quick Freezing) the point of consumption. method to maintain the quality, taste, technique to flash-freeze fruits and smell and nutritional value of foods. vegetables individually. Under this Flash-freezing the food at -40° C method, raw materials obtained at the transforms the water within to ice source and in-season are cleaned and through crystallization, averting KEREVİTAŞ Annual Report 2019 37

The retail fresh- frozen food market reached a market value of TL 1.2 billion* in 2019.

While frozen food investments in Turkey began in the early 1970s for export purposes, the local frozen food market began to grow in 1990 when Kerevitaş first introduced its products domestically. Currently, frozen foods are a major segment worth about TL 2.7 billion in Turkey. The segment includes pizza, roll pastry, puff pastry, Turkish ravioli (mantı), flatbread, fruits and vegetables, potatoes and croquets, meat products, seafood products and desserts offered via both retail and HORECA channels.

Posting an above-the-average growth of 17.2% in the total FMCG sector, the Retail Fresh-Frozen Food Market reached a market value of TL 1.2 billion* in 2019.

The world’s first frozen products to be Frozen foods, however, are delivered Most of the raw and auxiliary materials offered for sale were frozen seafood to the consumer after undergoing used in the production of frozen fruits which started being produced during detailed quality control testing and are and vegetables in Turkey are supplied the 1930s in the United States, replacing preserved subject to cold chain rules. No locally. Kerevitaş harvests vegetables canning and other earlier food storage preservatives or chemicals are used in grown through the joint efforts of methods. Since then, this ever-expanding the freezing process. For this reason, as contracted farmers and agricultural market reached approximately long as they are defrosted and cooked in engineers automatically with its own USD 290 billion market value worldwide, accordance with the instructions for use, harvesting machinery and delivers them with annual per capita consumption the flavors, vitamins, minerals or other to the factory in 2-3 hours. Vegetables in countries such as the US, UK, and valuable nutrients of frozen foods are not that are cleaned, sorted and washed Germany standing at more than 20 kg. diminished by the freezing process. under hygienic conditions are then flash- With consumption standing at 1 kg per frozen at -40° C degrees to retain their capita/per annum in the Turkish market, Furthermore, thanks to the frozen food freshness and nutritional elements as in there is a clear scope for growth. technology, it is possible to get certain that instant. seasonal products in every season with Frozen food technology was developed the same quality. Supply of raw materials is one of the as a result of long-running research, most crucial considerations at Kerevitaş and hygiene and production standards Frozen foods also offer economic and factories. Using high quality raw materials were established methodically. Analyses practical advantages. It provides water is an essential requirement to produce confirm that frozen foods are better and time saving for the consumer since high quality frozen products. As a than fresh ones in terms of vitamins and the food was packaged after it was result, the process at Kerevitaş begins nutritional value. Products considered to already cleaned and prepared for use. with seed selection of the produce be fresh produce are actually not as fresh Redundant parts such as leaves, stems, to be grown. Kerevitaş’s agricultural as perceived due to the time elapsed and seeds are removed and only the edible engineers plant from seeds that are the storage conditions faced in transit bits are packed. Therefore, the sum paid certified, of high-yield, and are compliant until reaching the market. As a result, so- for frozen food purchases involves only with taste, appearance, and other key called fresh produce ends up losing some the edible net amount. criteria. Planting takes place under the of its nutritional elements. supervision of the Company’s agricultural engineers in areas with suitable soil structure during the appropriate planting season. Specific soil quality,

* Source: Turkey’s Total Fresh-Frozen Food Market Report, 2019, Nielsen 38 2019 Activities

Development of Frozen and Canned Food Sector and Edible Oil Sector in Turkey

The crops to be used in the production of frozen fruits and vegetables must be grown in-season, must maintain their natural smell and taste, and meet certain standards.

water, moisture balance and climate conditions are required to cultivate each vegetable and fruit type. Starting with seed selection, the field of the vegetable to be grown is controlled at every step. It is crucial that the soil is analyzed to determine suitability for cultivation. The land is appropriately prepared for planting, including: its depth, structure and texture; the position of the plot and the suitability of the production of the land; its compliance with appropriate sowing and planting norms; the evenness of spacing; and the absence of weeds in the field. The field is monitored to ensure that it is adequately watered and fertilized. Pest management against diseases is performed effectively. After sowing, the crops are grown under the supervision of agricultural engineers until the harvest of the fruits and vegetables.

Since the ultimate aim is to protect the freshness and purity of harvested fruits and vegetables, the crops to be used in the production of frozen fruits and vegetables must be grown in-season, must maintain their natural smell and taste, and meet certain standards. Post- harvest, the crops are stacked under appropriate conditions and shipped to Kerevitaş factories without losing their freshness. KEREVİTAŞ Annual Report 2019 39

Every vehicle arriving at the factory first • Selection: Removal of foreign Workflows for other products processed undergoes raw material analyses by the substances, spoiled items, peels, shells outside the Frozen Fruit and Vegetable Quality Control unit. Checks are made and rogue plants production factory (e.g. Bakery Products, against the quality criteria determined Coated Products, Meatball Group, et al.) for each crop; only the appropriate raw • Washing: Removal of mud, dust and are drawn in accordance with the process material is admitted into the factory other substances that might be carried specifications. under the supervision of food engineers. along the raw material by cleaning with Input controls for other processes water At the next stage, the product is air- outside the premises of frozen fruit blasted at -40° C and flash frozen via and vegetable production (e.g. Bakery • Boiling (applied only to vegetables; the IQF method, bringing the product’s Products, Coated Products, Meatball fruits are not boiled): Entails immersing core temperature to -18° C. Products Group, et al.) are also conducted in the vegetables in boiling water for a few thus frozen are transferred to cold line with relevant specifications; only minutes to halt the activity of certain storage warehouses at temperatures of ingredients suitable for production are enzymes that cause it to go dark and -20° C in order to avoid disruption of admitted to the factory. rancid the cold chain. There, the products are stored in refrigerated units until they are Depending on the type of crop, fruits • Precooling: Applied prior to the transported in refrigerated vehicles for and vegetables undergo the following freezing process, precooling ensures that sale in the target markets. production processes; the produce is quickly and fully frozen by reducing the core temperature and For the canned food sector, the process • Sorting: Categorization of fruits and dispels any foreign substances that may begins with providing suitable raw vegetables based on their size, diameter remain on the surface from the final rinse materials (seed selection, cultivation, and similar properties procurement) and entails the stages of transporting raw material to the factories under appropriate conditions; selecting, washing, sorting and processing of the raw material through product-specific techniques; sterilizing, incubating and packaging of the product in appropriate form; storing, loading, transporting, distributing in accordance with the technique; and monitoring customer results after consumption.

With Turkey’s natural resources, 80 of the nearly 150 types of canned fruits and vegetables available worldwide are produced economically within the country; 50 of these are exported. Almost all raw materials required are supplied domestically.

The size of Turkey’s edible oil market averages around 1,6 million tons. Consumer products account for 45% of the market and the HORECA Channel makes up 55%.

Palm, soy, rapeseed and sunflower are the primary crops for vegetable oil extraction worldwide. In Turkey, however, sunflower dominates most of the seed oil and factory oil production. Cottonseed, soybean, rapeseed, safflower, corn and olive are among the other main crops for oil extraction.

Turkey’s retail edible oil market achieved 18% growth in 2019 to reach TL 10 billion in value. Household consumption of margarine, which is the best oil category for branding impact, increased by 24% in turnover. 40 2019 Activities

Frozen and Canned Food Business Unit

SuperFresh is the fresh-frozen food market leader by far with a 56% share among branded products.

Activities

Production Sales and Marketing Operating under the brand name Kerevitaş has a powerful sales and SuperFresh in frozen and canned food, marketing network with 200 distribution Kerevitaş boasts an advanced production vehicles and 27,000 freezer display infrastructure in this business line. The cases, ensuring product availability at Company’s products in this area include more than 36,000 locations across the bakery products, fruit and vegetable domestic market. The Company boasts a products, potato and croquet products, sustainable sales and marketing network meat products, seafood products and owing to its solid bond with 58 dealers desserts. Canned food category includes across the domestic market. Backed by canned tuna fish, sweet corn and the high international brand recognition vegetables. of its parent company Yıldız Holding, Kerevitaş steadily strengthens its sales Kerevitaş conducts production and marketing organization in overseas operations at two main factories. The markets, rapidly reaching new markets factory located near Akçalar, Bursa across the globe. comprises six main production facilities spread across premises totaling 131,000 Kerevitaş is the only company that has m2 of outdoor area and 43,000 m2 of products across all categories in the indoor space. The factory located near domestic frozen and canned food market Emirdağ in Afyon is built across 253,000 under its SuperFresh brand. m2 of outdoor area with 33,000 m2 of indoor space. Products produced by SuperFresh is the fresh-frozen food In 2019, SuperFresh launched “Şipşak means of high-tech processes are stored market leader by far, with a 56% share Pizza (Instant Pizza),” Turkey’s first and in high capacity cold and dry storage among branded products. SuperFresh only microwave pizza, remaining the warehouses at the Bursa and Afyon today enjoys 100% brand recognition. pioneer of innovation in the sector. factories. Kerevitaş continually develops It also boasts the broadest household its production infrastructure in line with penetration in Turkey, compared to other customer needs and expectations. branded products. SuperFresh products reach the tables of 20 million people. KEREVİTAŞ Annual Report 2019 41

The brand had an active TV presence Company manages sales and distribution during Ramadan and in the first quarter operations with strong and experienced Products of 2019, featuring a cooking show exclusive distributors. Kerevitaş stands designed to respond to the most pressing out from the competition with a strong Retail question for those women who spend logistics chain in frozen and canned Kerevitaş offers a diverse product range most of the day in the kitchen – what to food and the diversity of its product in the Retail Products group under frozen cook today. In the show, all the products range. With a keen understanding that and canned food business unit. The in the SuperFresh portfolio were used, proper positioning of products is the Company’s products in this group range while “practicality” and “taste” were most crucial feature of success in the from fruit and vegetable products to highlighted as the key functional benefits frozen food sector, the Company has bakery products, potatoes and croquet for the consumer. The show became the bolstered its reach to consumers via products. For more information about second most-watched show among TV bespoke frozen food cabinet display the Company’s products in this category, programs airing in the same time slot. case investments under the Kerevitaş please visit: www.kerevitas.com.tr/ brand since 1990. These freezer cabinet urunler/perakende-urunler In Q4 2019, SuperFresh launched a new display cases are delivered to the sales consumer communication campaign points which exceed a certain turnover HORECA for its main category pizza with the threshold under a loan agreement. The Kerevitaş’s frozen and canned food motto “When Hungry, the Taste You’re special frozen food cabinet display cases range aimed at HORECA includes a wide Looking for is Ready with SuperFresh.” feature only Kerevitaş products and are selection of products – from Turkish The campaign aired on TV and had radio periodically inspected by Kerevitaş staff. ravioli (mantı) to pizza and pastries. For coverage with an impressive jingle. more information about the products in Export this category, please visit: www.kerevitas. SuperFresh has an active profile in Kerevitaş offers a wide range of products com.tr/tr/urunler/ev-disi-tuketim-urunleri the field with in-store tastings and globally by its frozen and canned food promotional activities. The brand business unit under the SuperFresh Export also expanded its presence on the brand. In addition to its diverse product The products in the exports category e-commerce channel, which is gaining range and full compliance approach with of Kerevitaş’s frozen and canned food widespread use among consumers, international quality standards, Kerevitaş business unit comprises the Company’s through product listings, special exports to more than 20 countries across entire product portfolio. For more promotions and special product five continents under its frozen and information about the products in this packaging. canned food business unit. With these category, please visit: www.kerevitas.com. figures, Kerevitaş achieved Turkey’s tr/tr/urunler/ihracat-urunleri Distribution highest export in frozen and canned Enjoying a robust domestic distribution foods. infrastructure in frozen and canned food under the Kerevitaş brand, the 42 2019 Activities

Edible Oil Business Unit

Kerevitaş is the indisputable leader of the retail margarine market, with its pioneering brands Bizimyağ, Teremyağ and Luna representing 66% in turnover share.

Activities

Production of Baking) in 2012 and ISO 22000 in of the packaged oil market with 38% After the acquisition of Besler Gıda, 2013, Kerevitaş maintained its pioneering turnover share in 2019. Bizim Yağ Kerevitaş commenced its operations position with respect to quality reinforces successful business results in edible oil sector. Kerevitaş now runs assurance. In 2014, the Company was with continuous and high-impact its liquid oil and margarine production awarded ISO 50001 Energy Management communications, and also maintained operations at three factories located in System Certification, becoming a leading intensive communication campaigns Adana, Istanbul and Brunei. Reaching a enterprise in the industry regarding in 2019. The TV show, “What to Cook total capacity of 61.000 tons/year across energy management and sustainable Today with Eyüp Kemal Sevinç,” covered these three factories, the Company’s operations. the SuperFresh brand and Bizim Yağ in Marsa Adana Factory has Turkey’s recipes presented taking the needs of largest capacity for a factory on a single Sales and Marketing the target group into account. The show site. Kerevitaş produces liquid oil and Kerevitaş is the indisputable leader of became the second most-watched show margarine and conducts the sales and the market with six brands in the retail among programs airing in the same time marketing operations of these products margarine category, representing a total slot. in domestic and overseas markets. At its 66% share in turnover and tonnage in three factories operating at international the edible oil business. The product Carrying its successful profile on quality standards, the Company portfolio includes offerings in packaging, traditional channels onto digital manufactures a total of 518 SKUs bowl and liquid forms for varied uses platforms, Bizim Yağ maintained active under 56 brands, including Bizim Yağ, and requirements, such as cooking, communication with consumers through Teremyağ, Luna, Ona, Ustam and Evet pastry, buttery taste and breakfast. The social media and YouTube, where across the Retail, HORECA and Industrial Company is the market leader with Bizim consumers spend significant time. As categories. Yağ and enjoys significant competitive the leader of the market, the brand advantages with the Teremyağ, Luna, embraced pastry – the target group’s first Serving as a model for the edible oil Sabah, Yayla and Halk brands. Sales choice in the category – and launched a industry since it commenced production, processes of the Edible Oil Business YouTube Channel called “Pastry is Our Kerevitaş decided in 1999 to establish Unit are primarily performed by Yıldız Business.” The channel reached 150,000 an Integrated Management System Holding’s distribution subsidiaries. subscribers in 2019, up by 50 thousand (ISO-9001, ISO-14001 and OHSAS-18001). compared to 2018, and received both The Company became the first enterprise Boasting the highest rates of the MIXX Silver Award and the YouTube to receive all three certifications, consumption, the broadest household Silver Award. On Instagram, the brand setting a benchmark for other industrial penetration, and the most loyal reached 236 thousand followers in 2019 enterprises. By obtaining the Food Safety consumers, Ülker Bizim Yağ cemented and maintained its position as the most Certificates of AIB (American Institute its dominant position as the leader interactive brand in the field of food. KEREVİTAŞ Annual Report 2019 43 44 2019 Activities

Edible Oil Business Unit

Teremyağ expanded its clear lead in the margarine bowl segment further with a 6-point year-on-year increase, reaching 47% turnover share and thereby reinforcing its superior position in the market.

Teremyağ expanded its clear lead in The most innovative brand of the of Ustam products, Turkey’s leading the margarine bowl segment further category in terms of products and pastry chefs, along with demo chefs with a 6-point year-on-year increase, communication, Teremyağ also stood for the brand, appeared in these reaching 47% turnover share and thereby out from the competition in 2019. “The communications. In 2019, digital reinforcing its superior position in the Sultans of the Kitchen with Teremyağ” communication, with a focus on the market. was launched as a digital campaign that target group, helped double the reached 18 million people and helped interaction, which stood at 5% in 2018. In a market where the competition create 20 thousand Iftar menus with Industry-specific trainings constitute lost household penetration, Teremyağ Teremyağ during Ramadan, the most another key marketing activity for the accessed new households and increased important period for the category. Ustam brand. In line with Ustam’s vision household penetration by three points to be “the brand that nurtures future with a 13% boost in average consumption Luna is the brand of “firsts” in the pastry chefs,” vocational training is per household. Embraced by consumers category and has enriched its portfolio of offered to students in the gastronomy as the equivalent of butter in terms of both conventional and olive oil products and cookery departments of vocational taste, Teremyağ preserved its category with Luna Tereyağlı, launched in 2019 high schools and universities across leadership in the image score with the as the first and only product with real Turkey. In 2019, Ustam Academy proposition “the best butter taste.” butter content in the market. As for the delivered Basic Pastry Cooking courses affordable brands category, the Sabah to 550 students in 16 schools. Brand Offered as a product with cream brand has packaged margarine offerings communication efforts are further content by the market’s most innovative in its portfolio, while the Halk and reinforced through advertisements brand, Teremyağ, Teremyağ Gurme Yayla brands offer packaged and bowl published in trade magazines (e.g. Kaymaklı holds the Superior Taste Award margarine products. FoodinLife, Gastronomi, Patisserie by presented by the International Taste and FoodinLife), and participation in Turkey’s Quality Institute (iTQi) in recognition Besler’s subsidiary, Marsa, is the leading major food exhibitions such as Worldfood of foods and beverages with superior brand in the pastry oils category of Istanbul and Ibatech. taste and quality. Teremyağ Yemek & HORECA with “Ustam Pastry Oils.” Hamurişi, a first of its kind with its liquid A new digital communication strategy Distribution form, maintained its growth momentum was developed throughout 2019 to carry Kerevitaş’s domestic sales of retail in 2019. This growth was bolstered Ustam’s leading and visionary profile in products in the edible oil business through TV commercials with the slogan HORECA to digital platforms, as well unit are conducted by market-specific “The Secret to Unforgettable Rice” in Q1. as to boost brand loyalty, and reach sales companies operating under Yıldız Television communications guaranteed out to new consumers. Communication Holding: Horizon for the conventional higher household penetration, and a activities were conducted on Ustam’s channel, Pasifik for the contemporary 3-point boost for Teremyağ. Facebook and Instagram accounts, channel and Teközel for the private label targeted to pastry chefs. As users (PL) channel. The Company’s retail edible KEREVİTAŞ Annual Report 2019 45

oil products thus reach a total of 115,000 Pastry and Catering Oils points of sale. Industrial, pastry and Products The Group produces the Teremyağ, Bizim catering sales are distributed by Eksper Yağ, Ustam and Usta brands under the Gıda, another Yıldız Holding subsidiary, Consumer Products Pastry and Catering Oils category. For in collaboration with the Company’s The Group produces the Bizim Yağ, more information about the Company’s corporate sales and distribution Teremyağ, Luna, Sabah, Yayla and Halk products in this category, please visit: department. Exports are shipped to more brands under the Retail category. For https://www.ustam.com.tr/?lang=eng and than 40 countries through the Company’s more information about the Company’s www.besler.com.tr own sales organization. products in this category, please visit: www.besler.com.tr/tr/urunler/tuketici- Industrial Products Export urunleri To receive further information about As of the end of 2019, Kerevitaş exported the Industrial Oils category, under which its edible oil products to more than 40 HORECA Products the Group produces several brands, countries in five continents. As of year- The Group produces the Ustam, Akbis, please visit: www.marsa.com.tr and end 2019, the Company exported 44,996 Akao, Akrim, Bizim Yağ brands under the www.besler.com.tr tons, seven brands accounting for 79% HORECA category. For more information of this figure. In 2019, the Ona brand about the Company’s products in this received support under the “Turquality” category, please visit: www.marsa.com.tr brand support program introduced by and www.besler.com.tr the Ministry of Economy to cultivate and promote the “Made in Turkey” concept in international markets, and additional brand investments were made in target countries. 46 2019 Activities

Investor Relations

Investor Relations Department informs shareholders on the operations and activities of Kerevitaş.

Kerevitaş’s investor relations activities • Monitoring and communicating to the Investor Relations are conducted by the Investor Relations relevant departments any amendments Department Department formed within the structure in the legislation, of the Head Office. The Department is • Performing the activities related to the conducts all managed by Serkan Yandı, who has a Public Disclosure Platform and Central Capital Market Activities Level 3 License, Registry Agency procedures, as well as processes and as well as a Corporate Governance Rating the Corporate Governance Principles as transactions License. stipulated by the Capital Markets Board. concerning The Investor Relations Department’s The Shareholder Relations Unit conducts primary activities include the following: communications to promote the Company shareholders. to individual and institutional investors • Informing shareholders about the in Turkey and abroad, as well as sends Company’s operations and activities, notifications to shareholders and potential • Responding to the questions of investors via telephone, fax and e-mail shareholders about the Company and ([email protected]). exercising of partnership rights, • Communicating all material disclosures Shareholder Relations Unit to investors via Borsa Istanbul, Capital Serkan YANDI – Investor Relations Manager Markets Board and Public Disclosure Ufuk KASAR – Financial Affairs Director Platform (KAP), pursuant to the CMB’s Communiqué on material events, Contact Details for the Shareholder • Conducting the preparations of Relations Unit the General Assembly, including Phone: +90 (216) 524 23 92 - 0850 209 18 31 delivery of the required documents to E-mail: [email protected] shareholders and organization of the General Assembly meeting, KEREVİTAŞ Annual Report 2019 47

R&D Activities and Investments

The R&D Center completed 13 projects and is currently working on 8 projects involving advanced technology and know-how.

In 2019, Kerevitaş made total investment Project application efforts are ongoing part time basis. The Center undertakes amounting to TL 3.5 million in the frozen for the 1509 - TÜBİTAK International original projects involving cutting edge food business. These expenditures Industrial R&D Projects Support Program. technology. The main objective of the included sales display case and vehicle TEYDEB projects currently underway is purchases as well as machinery and Furthermore, an article on “The developing high added value products upgrade investments in the bakery Determination of Peroxidase Enzyme that are currently imported due to lack of products, fruits and vegetables and Inactivation Parameters in Vegetables” local production in Turkey. auxiliary factories. Kerevitaş Frozen was published in the January 2018 Food Group R&D Center has 17 full edition of World Food Journal (Dünya Regarding national and international time employees and seven part time Gıda). The Center also delivered a projects sponsored by the public sector, employees with significant qualifications poster presentation on “Investigation the Company is involved in: in their respective fields. The R&D Center, of The Fermentation Activity of • the TAGEM project, financed by the which has significant capabilities in Different Commercial Yeasts on Dough Ministry of Agriculture as a first in the product development, completed 13 Development in Bakery Industry” at the sector (Besler is the project lead in the projects and is currently working on 8 Second International University-Industry four-party consortium) projects involving advanced technology Business Association R&D and Innovation • The first EU-Euripides project, as and know-how. Congress organized by Manisa Celal part of the consortium consisting of Bayar University on November 14, 2018. national and foreign partners (Besler Enjoying robust links to Turkey’s product is the project lead for the smart and development ecosystem, Kerevitaş Placing great emphasis on R&D activities active packaging project). Frozen Food Group R&D Center in the Edible Oil Business, Kerevitaş submitted a project application on established Turkey’s first R&D Center A total of seven vegetable oil and ‘Developing Technology for the Detection in the vegetable oil and margarine margarine projects, including the projects of Foreign Matter in the Dough Processes sector. As the largest R&D Center in described above, are approved and of Bakery Products to Ensure Food the vegetable oil and margarine sector financed by national and international Safety’ under TÜBİTAK 1501 - Industrial in Turkey, the Middle East and the organizations. Three have been finalized, R&D Projects Support Program. However, Balkans, Besler RDC employs more than and the other four are currently ongoing. it did not receive the funding required 20 staff with relevant qualifications from TÜBİTAK. Regarding EU-backed in their respective fields on a full and project initiatives, approval was granted by EUROPIDES for the ‘Smart Agriculture Fields in the European Region’ project. 48 Sustainability

Human Resources

All Kerevitaş employees are protected against any form of discrimination or mistreatment.

Kerevitaş conducts its business processes Performance and Career Kerevitaş evaluates for recruitment, career planning, Management the business results development and training within the The business results of Kerevitaş staff framework of its Human Resources are evaluated within the framework of a of its staff within Policy and Staff Directive. All Company performance management system based employees’ rights are guaranteed to on targets and competencies. According the framework of ensure that they are free from any to this system, employees are evaluated discrimination and mistreatment, in terms of goals, competencies and a performance Kerevitaş did not receive any complaints potentials by the management. Personnel management or grievances of discrimination in 2019. are then referred to Career Development Programs based on the feedback they system based The Company’s Human Resources Policy receive in their evaluations. encompasses the following: on targets and • Measuring the performance of all The Performance and Career competencies. employees and ensuring that success Management System is designed to criteria are managed in accordance contribute to both individual and with these measurements, organizational development; provide • Implementing transparent employees with tools to develop and management, direct their careers; offer training and • Providing easy access to Company development opportunities for their executives, career advancement. The system is also • Ensuring the staff are comfortable with structured to ensure that its performance, expressing their thoughts, career, succession, talent management • Emphasizing business discipline, and training/development processes • Encouraging employees to work function in an integrated manner. together with a team spirit, • Delivering equal opportunities to Kerevitaş places great importance on successful staff in terms of training, the career expectations, professional remuneration and career development, and personal development of its • Promoting social activities. employees. The Company provides its staff with the appropriate environment KEREVİTAŞ Annual Report 2019 49 50 Sustainability

Human Resources

Kerevitaş defines the main objective of the recruitment process as selecting people who embrace the values adopted by the organization, who have the core competencies sought in an employee, and who possess the specific functional competencies required by the particular business line.

to develop their skills and manage their also different. The primary aim of the A sales premium system, which is careers. Furthermore, ad hoc project Company in this process is to use the designed to encourage high performance, teams are set up and staff rotations correct methodology for monitoring the is available for sales staff as and when are organized across departments and technical and behavioral requirements of required. Group companies. This effort aims to help the job, using appropriate methods and employees gain a better understanding placing the most suitable candidates who Training and Development of the Company; enhance employee best fit the open positions. Kerevitaş offers employees various communication and synergy by bringing specialization programs, professional together diverse perspectives and Remuneration and Benefits and personal development trainings varied competencies; and contribute to Kerevitaş’s remuneration system is and leadership development programs. the development of the employees. In governed by a common tier structure and These efforts ensure that personnel can addition, staff are expected to be actively based on job content. Under this system, plan for their personal development and engaged in projects. jobs are assessed through a specified professional career advancement. job evaluation method that is designed Recruitment to create a fair, competitive and market Executive preparation, executive Kerevitaş defines the main objective of compatible wage policy. Annual market development and leadership the recruitment process as selecting wage surveys are also consulted to development programs are offered people who embrace the values adopted determine the Company’s remuneration to staff based on the needs and by the organization, who have the core practices. expectations of the Company and the competencies sought in an employee, workforce. and who possess the specific functional A market rate and performance-based competencies required by the particular remuneration policy is applied across Kerevitaş’s learning and development business line. Kerevitaş with a view toward supporting tools include the following: the Company’s strategy and competitive The methods employed by the Company advantages. • Learning and Development Catalogue/ in the selection and placement processes Leadership Development Programs, depend on the candidate profile. Performance-Based Remuneration • Mentoring and Coaching, Processes employ one or several of the The Company’s white-collar employees • Professional Expertise Programs, recruitment tools, or in certain cases, are evaluated within the framework • Foreign Language Training/Conference all of them, as well as the following of a target and competency-based and Summit Attendance, testing and inventory applications. performance management system at • Standard Trainings, Competency-based interviews and case the end of the year. These personnel are • Electronic Libraries and Online studies conducted with experienced rewarded with an annual performance Development Tools, candidates and fresh graduates are premium. • Orientation Program. KEREVİTAŞ Annual Report 2019 51

Human Resources Profile

20 years and more 20 years and more 8% 15-20 years 7% 15-20 years 4% 9%

10-15 years 10-15 years

Blue Collar 15% White Collar 15% Seniority Seniority 1-5 years 1-5 years 5-10 years 5-10 years 51% 23% 42% 27%

Undergraduate High school degree and higher and lower 1% Undergraduate 15% High school Associate degree and and lower degree higher Associate degree 89% Blue Collar 10% 78% White Collar Education Status Education Status 7%

45 and over Male 22% 66%

Between 31-44 30 and under Employee Gender Female 61% Age Distribution 17% Distribution 34% 52 Sustainability

Occupational Health and Safety

The total duration of occupational health and safety courses provided per person in 2019 reached 10,348 hours.

As one of Turkey’s largest food • Internal Communication: Establishing Kerevitaş embraces manufacturers, Kerevitaş places great internal communication channels to a sustainable emphasis on occupational health and enhance occupational health and safety. Aiming for full compliance with safety. occupational legal and regulatory requirements and achievement of a “Zero Accident” risk • Safe Workplace: Providing the health and safety approach, the Company embraces a technical infrastructure at international sustainable occupational health and standards to ensure a sustainable culture across the safety culture across the organization occupational safety culture. organization thanks thanks to its conscious employees. Compared to the previous period, • Risk Management and Process Design: to its conscious the Company reduced the Lost Time Outlining the Risk Management Frequency Rate (LTFR) and Accident Overview through the Occupational employees. Severity Rate (ASR) by 37.73% and Safety Committee established with the 64.33% respectively, thanks to the involvement of the Leadership Team. sustainable safety approach. The risk score was also reduced by 83.42% Further efforts are underway to ensure through the improvements made as a that the corporate health and safety result of line-based risk analyses. culture is embraced by all employees. OHS field tours, virtual reality trainings, Kerevitaş’s sustainable occupational visual trainings to highlight erroneous safety culture is based on the following behavior and job-specific trainings are core concepts: organized with the active involvement of senior managers. • Leadership and Engagement: Actively supporting employee trainings In 2019, a total of 10,348 hours per person to achieve common occupational were delivered in OHS training. safety goals at executive levels.

• Training and Development: Providing periodic occupational health and safety trainings for employees and continuous improvement in line with common goals. KEREVİTAŞ Annual Report 2019 53

Environmental Practices

In 2019, Kerevitaş was accepted for listing on Borsa Istanbul’s Sustainability Index.

Kerevitaş released its 2018 Sustainability Farmers employing the drip irrigation Combating Climate Change Report this year. In an attempt to method were supported with subsidies. Kerevitaş conducted all its production preserve biodiversity, the Company The average yield in drip irrigation processes during the fiscal year 2019 in partnered with the Hatay Environmental fields corresponded to 1,553 kg/decares line with its goal of combating climate Protection Foundation and commenced (24,405 tons of crops), while the average change. The Company implements the “Ecological Research Project on the yield for sprinkling irrigation stood at numerous projects related to the efficient Eurasian Otter (Lutra Lutra) Population 1,245 kg/decares (6,343 tons of crops). use of resources, particularly agricultural in the Uluabat and İznik Lakes.” This Drip irrigation helped farmers save some resources; effective water and waste pilot project is aimed at determining the 4,648 tons in water and TL 706,725 management; and conservation of energy. streams, lakes and ponds that are vital for in energy. Reaching 308 kg crops per With these efforts, the Company is the survival and conservation of Eurasian decare with drip irrigation, farmers gained steadily reducing its energy consumption Otters, classified as “near threatened” by 4,837,140 kg more in yield compared to per unit ton produced at its Bursa the International Union for Conservation sprinkling irrigation. Factory, which manufactures frozen and of Nature (IUCN). The species’ population, canned food. Kerevitaş aims to expand distribution and habitat, their food As an enterprise operating in the these energy conservation efforts at the sources, social behavior and interaction food industry, Kerevitaş is focused on Bursa Factory, which minimize carbon with humans, and the threats facing mitigating the environmental impact of emissions from its operations, to its other them, as well as the necessary measures its operations. Operating in line with the production facilities in the coming period. for conservation of the species, will be HACCP Quality Management System, identified as part of the project. Kerevitaş the Company observes international Drip Irrigation in Contracted also pays utmost attention to protecting environmental standards in all its business Agricultural Land the ecological balance of soil in all its processes – from raw material supply to Kerevitaş encourages drip irrigation production activities. The Company waste management. on agricultural land that supplies the preserves water sources through drip Company with raw materials on a irrigation, while contributing to the Conducting its business activities in full contract basis. This practice significantly ecological balance of agricultural lands compliance with applicable environmental reduces the use of natural resources, through practices that reduce the use of legal and regulatory requirements, while also boosting production efficiency. pesticides. Kerevitaş takes all necessary measures to avoid environmental pollution at Kerevitaş encourages drip irrigation for its production facilities. As a result, agricultural land. In 2019, drip irrigation the Company faced no complaints or was used on 15,705 hectares, and grievances in this area in 2019. sprinkling irrigation applied on 5,089 hectares, on a total of 2,080 hectares While providing its employees customized of agricultural land for sweet corn. training in environmental sustainability, the Company focuses particularly on mitigating the environmental impact of its production factories. 54 Sustainability

Good Agricultural Practices

Conducting all its business processes within the framework of sustainability, Kerevitaş supports good agricultural practices in order to provide healthy products to customers and execute production processes effectively and quickly.

RATIO OF CONTRACTED FARMERS Conducting all its business processes While contracted farmers received within the framework of sustainability, training support in these key areas, the Kerevitaş supports good agricultural raw materials obtained were dispatched 86% 82% 85.5% practices (GAPs) in order to provide for testing by the Quality Department healthy products to customers and for pesticide residue, GMO and heavy execute production processes effectively metal analysis. Test results validated the and quickly. absence of pesticide residues, heavy metals and GMOs in the raw materials. Viewing its support of agricultural production and farmers among its Farmers cultivating a total of 2,081 core strategic priorities, the Company hectares of farmland for sweet corn produced potatoes, sweet corn, peas, production were informed of benefits green beans, spinach, broccoli and and encouraged to adopt drip irrigation. 2017 2018 2019 cauliflower across 5,3174 hectares Sweet corn was also introduced as a of contracted farmland in 2019. second crop after the pea harvest across Supplying certified seeds, fertilizers and 189,7 hectares. agrochemicals to contracted farmers, Kerevitaş also produced 5,136 tons of RATIO OF CONTRACTED RAW certified potato seeds during the year. MATERIAL SUPPLY Committed to conscious production, Kerevitaş supports sustainable farming 89% practices by providing fertilization, 83% 85% pesticide and spraying training to farmers.

2017 2018 2019 KEREVİTAŞ Annual Report 2019 55

Corporate Social Responsibility

Seeing the Company’s social investments as critically important as its industrial investments, Kerevitaş supports cultural, artistic, sports and educational projects that promote social development.

Kerevitaş conducts its corporate In addition to leading the way for the In addition to social responsibility activities under development of the food sector, Kerevitaş leading the way for the umbrella of its parent company, also places emphasis on projects that will Yıldız Holding. The Company considers create social benefit. Working tirelessly the development corporate social responsibility activities to fulfill its duty to build a happier as an obligation arising from its role as society, Kerevitaş delivers projects and of the food sector, a producer. By creating a wide range of undertakes various sponsorships in choices for the individual food needs sports, arts and education through its Kerevitaş also of the community, making the food parent company, Yıldız Holding. places emphasis offerings accessible and affordable, and executing an open and responsible on projects that communications strategy, the Company encourages healthy nutrition and physical will create social activity. benefit. Kerevitaş conducts all its business operations by considering the community’s health as its top priority. Seeing the Company’s social investments as critically important as its industrial investments, Kerevitaş supports cultural, artistic, sports and educational projects that promote social development. 56 Corporate Governance

Corporate Governance Principles Compliance Report for 2019

PART I – STATEMENT OF are not made individually but collectively using the templates called Corporate COMPLIANCE WITH CORPORATE as benefits extended to the Board of Governance Compliance Report (URF) GOVERNANCE PRINCIPLES Directors and senior management. and Corporate Governance Information Pursuant to the Capital Markets Board Form (KYBF). The related reporting (CMB) Communiqué and Article 6362 There is no explicit provision in the can be seen at: https://www.kap.org.tr/ of Capital Markets Law No: 6362, Articles of Association granting tr/sirket-bilgileri/ozet/1002-kerevitas- dated 06.12.2012, and II-17.1 “Corporate shareholders the right to call for a gida-sanayi-ve-ticaret-a-s. The below Governance Communiqué” announced “private audit” at the General Assembly. mentioned Corporate Governance on January 3, 2014, issuance of a Regarding the assignment of a special Principles Compliance Report is in the Corporate Governance Compliance auditor, our opinion is that the related public domain, at the addresses https:// Report and compliance with specified regulations of the TCC and CMB are www.kerevitas.com.tr/en and http://www. Corporate Governance Principles became sufficient. Pursuant to the provisions of kerevitas.com.tr/tr/yatirimci-iliskileri/ mandatory for companies trading on the Turkish Code of Commerce No. 6102, kurumsal/kurumsal-yonetim-ilkeleri- Borsa Istanbul (BIST). Accordingly, which came into force on 01.07.2012, the uyum-raporu Kerevitaş resolved to closely adhere to Company is aware of the right of every the mandatory requirements imposed shareholder to request a private audit. PART II – SHAREHOLDERS by the CMB. Further efforts to ensure compliance with the non-mandatory Although the non-mandatory principles 2.1 Investor Relations Department principles in the Communiqué are yet to be implemented have caused no Kerevitaş’s investor relations activities currently underway. conflicts of interest among stakeholders are conducted by the Investor Relations to date, the Company nevertheless aims Department based at the Company The reasons relating to the non-compliant to implement the rest of the Corporate headquarters. The Department is sections of the Corporate Governance Governance Principles in due time. managed by Serkan Yandı, who holds a Principles are as follows: Capital Markets Activities Level 3 License, Even though the ultimate aim is to as well as a Corporate Governance Rating No model or mechanism was created fully comply with the non-mandatory License. for stakeholders to participate in the Corporate Governance Principles, full Company’s management. However, the compliance has not been achieved as The Investor Relations Department’s Independent Members of the Board of of yet due to the difficulties faced in primary activities include the following: Directors ensure that all stakeholders as implementation of certain principles. well as the Company and shareholders In addition, some of the principles do • Informing shareholders about the are duly represented in the management. not correspond to the current structure Company’s operations and activities, Kerevitaş takes into consideration the of the market and the Company. Work • Responding to the questions of advice, suggestions and opinions of is underway regarding adoption of shareholders about the Company and employees, suppliers, various non- the principles that have not yet been exercising of partnership rights, governmental organizations and all other implemented. These principles will • Communicating all material disclosures stakeholders. be adopted following completion of to investors via Borsa Istanbul, Capital the relevant administrative, legal, and Markets Board and Public Disclosure Some members of the Board of Directors technical infrastructure procedures Platform (KAP), pursuant to the CMB’s assume duties on multiple committees. that will contribute to the effective Communiqué on material events. management of the Company. • Conducting the preparations of Pursuant to Article 4.6.5 of the the General Assembly, including “Corporate Governance Principles,” the Pursuant to the Resolution of the Capital delivery of the required documents to remuneration of members of the Board Markets Board dated 10.01.2019 and shareholders and organization of the of Directors and senior managers, as well numbered 2/49, Corporate Governance General Assembly meeting, as all other benefits granted to these Compliance Reporting as per the • Monitoring and communicating to the parties, are publicly disclosed in the Communiqué No. II-17.1 shall be uploaded relevant departments any amendments Annual Report. However, the disclosures to the Public Disclosure Platform (KAP), in the legislation, KEREVİTAŞ Annual Report 2019 57

• Performing the activities related to the 2.3 General Assembly Meetings The Company does not grant any Public Disclosure Platform and Central Pursuant to Article 1527 of Turkish privileges to share groups or shares. Registry Agency procedures, as well as Commercial Code (TCC) No. 6102, There is no cross-shareholding between the Corporate Governance Principles dated January 13, 2011 stipulating that the Company and any of its shareholders. as stipulated by the Capital Markets online participation in general assembly The Company does not practice Board. meetings, making proposals and cumulative voting. statements online, and online voting The Shareholder Relations Unit conducts shall have the same legal force in all The Articles of Association does not communications to promote the aspects as participating and voting contain any provision prohibiting Company to individual and institutional in any general assembly meeting in proxy voting by persons who are not investors in Turkey and abroad, as well as person; and that all companies trading themselves shareholders of the Company. sends notifications to shareholders and on the Stock Exchange are obliged to prospective investors via telephone, fax set up and maintain a system allowing 2.5 Dividend Rights and e-mail ([email protected]). online participation in general assembly The Company has a clear and consistent meetings and voting; the electronic Profit Distribution Policy determined Shareholder Relations Unit general assembly convenes on the same in accordance with the Turkish Serkan YANDI – Investor Relations date running in parallel with the physical Commercial Code, Capital Markets Law, Manager Ufuk KASAR – Financial Affairs general assembly. tax laws, other relevant laws, rules and Director regulations, and the Company’s Articles One General Assembly meeting was of Association. This Policy was submitted Contact Details for the Shareholder organized in 2019, being the Ordinary for the approval of shareholders at the Relations Unit General Assembly meeting for the year General Assembly, detailed in the annual Phone: 0216 524 23 92 / 0850 209 18 31 2018, which was held on March 27, 2019. report and disclosed to the general public E-mail: [email protected] via the corporate website. 2.4 Voting and Minority Rights 2.2 Shareholders’ Right to According to the Articles of Association, The Company’s Profit Distribution Policy Information each share of the Company has one vote. is determined in accordance with the Except for information that is considered provisions of the Turkish Commercial to be either trade secret or insider Any shareholder who is entitled to attend Code, Capital Markets Law, Tax Law, information, all written or verbal General Assembly meetings may attend other relevant laws, rules and regulations requests received from shareholders for the meetings online in accordance with and the article related to profit information during the reporting period Article 1527 of the Turkish Commercial distribution in the Company’s Articles are met. We provided shareholders with Code. Pursuant to the Regulation on of Association, while taking into due all the information required to exercise the General Assemblies of Joint Stock consideration the Company’s strategies, their shareholder rights robustly via the Companies to Be Held via Electronic operational performance, financial annual report, material disclosures, and Means, the Company may set up an situation and market developments. replies to individual inquiries. Auditing electronic General Assembly system or principles and procedures are outlined procure any system developed for this Subject to approval of the General in Article 16 of the Company’s Articles purpose to ensure that shareholders Assembly upon the proposal of the of Association. No requests for private are able to attend, express their views, Board of Directors, and any amendments auditor were raised by the shareholders make suggestions, and cast their votes thereof, and also subject to the legislation during the fiscal year 2019. via electronic communication means. in force in Turkey, Kerevitaş resolves to Pursuant to the relevant provision in the distribute dividends corresponding to at Articles of Association, shareholders least 10% of the net distributable period and their proxies are allowed to profit as cash dividends and/or as bonus exercise their respective rights at any shares, on condition that the cash flow General Assembly meeting, under requirements the Company are taken into aforementioned regulations via the consideration. electronic system set up for this purpose. 58 Corporate Governance

Corporate Governance Principles Compliance Report for 2019

The profit distribution proposal of the 3.2 Company Website and Its PART IV – STAKEHOLDERS Board of Directors, consisting of the Contents Company’s Profit Distribution Policy, The Company website can be accessed 4.1 Information of Stakeholders Capital Markets Board regulations and at www.kerevitas.com.tr and the In cases where there is no regulatory the details set forth in the Corporate Company’s investor relations website or contractual framework governing Governance Principles, is included in the is located at http://www.kerevitas.com. the rights of stakeholders, Kerevitaş annual report and communicated to the tr/tr/yatirimci-iliskileri The following endeavors to protect stakeholder rights public via the Public Disclosure Platform information is available on the website in good faith and within means available and the website of the Company. for the purposes of informing the to the Company with due consideration shareholders: to the reputation of the Company. The Policy is reviewed annually by the Board of Directors in view of domestic • About the Company Furthermore, Kerevitaş employees and global economic conditions and any • Ethical Principles have access to the circulars and possible setbacks, the circumstances • Information about the Board of announcements through the Company’s of ongoing projects, and the financial Directors and Senior Management internal portal, and important resources of the Company. • Committees announcements are conveyed promptly • Company’s Shareholding Structure to all employees via e-mail. The Profit Distribution Policy adopts a • Organizational Chart balanced approach between the interests • Trade Registry Information and There are no restrictions that obstruct of shareholders and the interests of Company Profile or inhibit stakeholders from contacting the Company. Under the Company’s • Articles of Association the Corporate Governance Committee Profit Distribution Policy, dividends are • Financial Statements and Footnotes or the Audit Committee about any distributed equally to all existing shares • Annual Reports Company transactions they deem either as of the date of distribution, with no • Material Disclosures unethical or in breach of applicable privileges. The Company does not issue • Corporate Governance Principles regulations. All stakeholders may contact advance dividends. Compliance Report these committees via any means of • Information on the General Assembly communication they prefer. 2.6 Share Transfers (Notice, Agenda, Minutes, List of There are no provisions in the Company’s Attendance, Proxy Voting Form 4.2 Stakeholder Participation in Articles of Association that bar or restrict Template, and General Assembly Management the shareholders from freely transferring Information Document) According to the Articles of Association, their shares. • Corporate Information Policy the Board of Directors has a minimum • Policies of five and maximum of seven members PART III – PUBLIC DISCLOSURE • Investor Presentations who are elected by the General AND TRANSPARENCY • Frequently Asked Questions Assembly upon nomination by various shareholders as prescribed by the 3.1 Information Policy 3.3 Annual Report Articles of Association. The current Kerevitaş outlined an Information Policy The Company’s Annual Report is Board of Directors is comprised of seven based on transparency and accuracy compiled in compliance with CMB’s II-17.1 members, two of whom are independent to ensure that each shareholder and “Corporate Governance Communiqué,” members. The Company does not have stakeholder has equal and impartial Corporate Governance Principles, and any practices related to stakeholder access to follow company developments other clauses specified in the relevant participation in management. and public disclosures. The Information legislation to ensure full and accurate Policy is disclosed to the public at access of shareholders and the public www.kerevitas.com.tr/en to information related to the Company’s business activities. KEREVİTAŞ Annual Report 2019 59

4.3 Human Resources Policy Company takes all necessary measures Both executive and non-executive Kerevitaş has established and effectively to mitigate environmental pollution members are present at the Board of implemented a Human Resources Policy. that may arise from its production Directors. The majority of the Board Issues within this framework such as activities. The Company also established Members are non-executive members. recruitment policies, career planning, treatment facilities as stipulated by Non-executive Members also include employee development and training law. No complaints in this area were Independent Members, satisfying all of policies are outlined within the Staff received by the Company during the the criteria set out in the Capital Markets Directive. The rights of all Company reporting period. Prompted by a keen Law, who have the capabilities to perform employees are secured in a way that awareness that the industry it operates their duties with impartiality, and who they are free from any discrimination in requires well-qualified, highly can dedicate sufficient time and effort to or mistreatment. The Company did not skilled human resources in the face of monitor the functions of the Company face any complaints or grievances of supply challenges due to the nature and fulfill all the responsibilities vested to discrimination. of the national education system, the them as independent members. Company aims to cater to requests for The Company’s Human Resources policy internship placements from secondary Approval is sought from the General encompasses the following: and higher education institutions to Assembly for the Chairman and Members • Measuring the performance of all the maximum extent possible. While of the Board of Directors regarding employees and ensuring that success the Code of Conduct adopted by Yıldız their involvement in or association criteria are managed in accordance Holding is generally applied across with companies operating in the same with these measurements, all its subsidiaries including Kerevitaş, business area of the Company, in • Implementing transparent the details of the Code of Conduct person or on behalf of others in line management, are disclosed to the shareholders on with the relevant articles of the Turkish • Providing easy access to Company the Company’s website as part of the Commercial Code (TCC). executives, Information Policy. • Ensuring the staff are comfortable with Details of the Company’s Board of expressing their thoughts, PART V – BOARD OF DIRECTORS Directors are as follows. • Emphasizing business discipline, • Encouraging employees to work 5.1 Structure and Organization of Name Surname Duty together with a team spirit, the Board of Directors Mehmet Tütüncü Chairman • Delivering equal opportunities to The Company’s Board of Directors Ali Ülker Member successful staff in terms of training, consists of seven members. Subsequent Oğuz Aldemir Member remuneration and career development, to the General Assembly meetings where Vehbi Merzeci Member • Promoting social activities. the Members of the Board of Directors Hüseyin Avni Metinkale Member are elected, a Chairman and Deputy Ahmet Murat Yalnızoğlu Independent are appointed with a resolution on the 4.4 Code of Conduct and Social Member Responsibility division of duties and responsibilities. Ceyda Aydede Independent Guided by its sense of responsibility, Member recognition of duty and depth of expertise arising from operating in the food industry, Kerevitaş aims to generate added value that meets society’s needs in the most efficient manner and at the highest quality level. Therefore, the 60 Corporate Governance

Corporate Governance Principles Compliance Report for 2019

STATEMENT OF INDEPENDENCE

The Statements of Independence submitted by the Independent Members of the Board of Directors are presented below:

STATEMENT OF INDEPENDENCE

I am a candidate to serve as an “Independent Member” for the Board of Directors of Kerevitaş Gıda Sanayi ve Ticaret A.Ş. (Company), as part of the criteria stated by the regulations, the Articles of Association and the Corporate Governance Principles specified by the Capital Markets Board.

Within the last five years, neither me, nor my wife and my blood relatives and relatives by marriage up to the second degree; have entered into a significant relationship with the Company, or with the entities that are in relationship with the Company, or with legal persons which are in a management or shareholding relationship with the shareholders of the Company which hold a share of 5% or above directly or indirectly. This significant relationship means an employment relationship of important duties and responsibilities, a shareholding relationship, or an otherwise significant relationship, directly or indirectly.

In the last five years, I am not or have not been employed by or have not been a board member of an entity that conducted all or part of the Company’s activities or organizations on the basis of a contractual relationship including particularly audit, rating or consultancy services.

In the last five years, I have not been a partner, employee or board member at an entity providing goods or services to the Company significantly.

I do not hold more than 1% share in the Company’s capital and that these shares are not privileged, I have professional skills, knowledge and experience to fulfill my duties as an Independent Board Member.

I am not in full-time employment at a government organization or other public institution at present, and according to the Income Tax Law, I am deemed a tax resident in Turkey.

I have robust ethical standards, professional reputation and experience to ensure I make positive contributions to the Company’s business activities, maintain my impartiality in conflicts of interest between the Company and its shareholders, and freely take decisions by considering the rights of stakeholders.

I will dedicate sufficient time to follow the progress of the Company’s business activities and to duly fulfill the requirements of responsibilities I undertake.

I hereby declare the aforementioned with the purpose to inform the Board of Directors, shareholders and all interested parties.

Yours sincerely,

Ahmet Murat Yalnızoğlu KEREVİTAŞ Annual Report 2019 61

STATEMENT OF INDEPENDENCE

I am a candidate to serve as an “Independent Member” for the Board of Directors of Kerevitaş Gıda Sanayi ve Ticaret A.Ş. (Company), as part of the criteria stated by the regulations, the Articles of Association and the Corporate Governance Principles specified by the Capital Markets Board.

Within the last five years, neither me, nor my wife and my blood relatives and relatives by marriage up to the second degree; have entered into a significant relationship with the Company, or with the entities that are in relationship with the Company, or with legal persons which are in a management or shareholding relationship with the shareholders of the Company which hold a share of 5% or above directly or indirectly. This significant relationship means an employment relationship of important duties and responsibilities, a shareholding relationship, or an otherwise significant relationship, directly or indirectly.

In the last five years, I am not or have not been employed by or have not been a board member of an entity that conducted all or part of the Company’s activities or organizations on the basis of a contractual relationship including particularly audit, rating or consultancy services.

In the last five years, I have not been a partner, employee or board member at an entity providing goods or services to the Company significantly.

I do not hold more than 1% share in the Company’s capital and that these shares are not privileged, I have professional skills, knowledge and experience to fulfill my duties as an Independent Board Member.

I am not in full-time employment at a government organization or other public institution at present, and according to the Income Tax Law, I am deemed a tax resident in Turkey.

I have robust ethical standards, professional reputation and experience to ensure I make positive contributions to the Company’s business activities, maintain my impartiality in conflicts of interest between the Company and its shareholders, and freely take decisions by considering the rights of stakeholders.

I will dedicate sufficient time to follow the progress of the Company’s business activities and to duly fulfill the requirements of responsibilities I undertake.

I hereby declare the aforementioned with the purpose to inform the Board of Directors, shareholders and all interested parties.

Yours sincerely,

Ceyda Aydede 62 Corporate Governance

Corporate Governance Principles Compliance Report for 2019

5.2 Code of Conduct of the Board issue shall be discussed again at the Committee; instead, the Board charged of Directors next meeting. If there is a tie again at the Corporate Governance Committee The Board of Directors shall perform and the second meeting, the proposal is with fulfilling the duties of these execute the duties assigned to it by the deemed to have been rejected. During committees. The Corporate Governance provisions of the Turkish Commercial the meetings held in the 2019 accounting Committee convenes at least four times Code, Capital Markets Board, other period, Board Members have not a year, and in 2019 it convened 4 (four) relevant laws, rules and regulations, as expressed any opposing opinion to the times. Chairperson of the Corporate well as the Articles of Association and Board Resolutions. Governance Committee is Ceyda resolutions adopted by the General AYDEDE, and Members of the Committee Assembly in this regard. All businesses 5.3 Number, Structure, and are Ahmet Murat YALNIZOĞLU and and transactions not stipulating a General Independence of Committees under Serkan YANDI. Assembly resolution according to laws the Board of Directors and the Articles of Association are 5.3.3 Early Detection of Risk Committee conducted by the Board of Directors. As 5.3.1 Audit Committee Pursuant to the relevant clause of the it performs the duties and responsibilities The Audit Committee is responsible for Capital Markets Board’s Corporate assigned to it, the Board of Directors may ensuring that the Company’s financial Governance Principles Communiqué, the delegate these in part to the committees and operational activities are performed Company established an Early Detection established within the Company and/or in a robust manner. Operating under of Risk Committee to operate under to Company executives, provided that the Board of Directors, the Committee the Board of Directors. The Committee this delegation does not absolve the is charged with overseeing the is charged with the early detection of Board of its responsibilities. Company’s accounting system, audit risks that may jeopardize the existence, and disclosure of financial information, development and continuity of the The Board of Directors made 48 (forty and the functioning and effectiveness Company; adoption and implementation eight) resolutions during the meetings it of the internal audit system. The of necessary measures to mitigate these held between January 1 and December Audit Committee is comprised of two risks; and the execution of other risk 31, 2019. The Board of Directors meets Independent Board Members. The management efforts. The Committee as regularly and as often as necessary Committee convenes at least four times meets at least once every three months to effectively conduct its business and a year, and in 2019 it convened 4 (four) and presents the results of its meeting to affairs. The Chairman of the Board times. Chairman of the Audit Committee the Board of Directors. In 2019, the Early of Directors sets the agenda of the is Ahmet Murat YALNIZOĞLU, and Detection of Risk Committee met 6 (six) board meetings in consultation with Member of the Audit Committee is Ceyda times. the other members of the Board and AYDEDE. the Company’s Chief Executive Officer/ Chairman of the Early Detection of Risk General Manager. 5.3.2 Corporate Governance Committee Committee is Ahmet Murat YALNIZOĞLU, The Corporate Governance Committee and Member of the Committee is Hüseyin The Board of Directors shall meet with was established in line with the Capital Avni METINKALE. a quorum of at least more than one-half Markets Board’s Corporate Governance of the number of members and resolve Principles Communiqué. The Committee The members of the Committee are by a majority of members present at monitors the Company’s business and elected from among the members of the meeting. In the event of a tie, the governance processes in accordance with the Board of Directors within the current the Corporate Governance Principles structure of the Board. of the CMB. Due to its organizational structure, the Board of Directors did not institute a separate Nomination Committee and Remuneration KEREVİTAŞ Annual Report 2019 63

5.4 Risk Management and Internal are mandatory. Employees in all units 5.6 Remuneration of the Board of Audit Committee and levels across the organization must Directors The Company’s risk management work in accordance with the Quality/ The guidelines for remuneration of related activities are carried out by the HACCP Management System. The senior executives of the Company were Early Detection of Risk Committee. The Company’s objective is to work diligently laid out in writing. These guidelines Company is also audited regularly by the at every stage of its operations – from were presented to the shareholders audit departments of its parent company sourcing the raw materials to delivering under a separate agenda item at the (Yıldız Holding A.Ş.) and an independent the products to their final destination. Ordinary General Assembly Meeting audit firm. The findings of these audits The top priority for the Company is to held on April 11, 2018 and published in are communicated to the members of strive to generate added value for the the Company’s annual report and on the the Audit Committee and the Board of stakeholders across the entire production corporate website. No other benefits are Directors. The work flows and procedures process, which extends from the seed to provided to the Chairman and Members of the Company, in addition to the duties the table. of the Board of Directors except for and responsibilities of employees are the remuneration and attendance fee monitored within the framework of risk The Company aims to implement digital determined by the General Assembly. management and are subject to ongoing transformation projects in order to be a Wages of the Board Members are audits and inspections. trailblazer in terms of digitalization and determined by the General Assembly business methods in the industry; achieve considering the financial situation of the 5.5 Strategic Objectives of the sustainable growth and success; develop Company, separately for each member. Company consistently; implement fresh business At the Ordinary General Assembly Kerevitaş’s first and foremost strategic strategies in the most efficient and agile Meeting held on April 11, 2018, it was objective is to stand out as a company way; conduct business operations at decided that only independent members that respects its customers; engages lower costs but with higher productivity; are paid wages, and the amount to employees at every level of the and improve the lives of, add value be monthly net TL 5,000. During the organization to participate in the to and, hence, win the hearts of its reporting period, no loans were extended management of the Company; embraces stakeholders, customers, consumers and to Board Members or senior managers; in continuous and non-formal learning; employees. addition, no guarantees such as sureties strives to continuously enhance the were granted and no credit facilities were quality/HACCP Management System Kerevitaş sets long-term goals, develops provided as a personal loan through a without compromising on the quality and three-year strategic plans and prepares third party to the Board members or safety of food under any circumstances; annual budgets in line with these goals. senior managers. closely follows the technological At the end of each operating period, the advancements in the industry; remains Company’s performance is evaluated innovative and entrepreneurial; respects against the specified targets. the environment and the laws; and above all, values people. The Company aims to effectively identify customers’ needs and expectations and to respond to them in full, in order to maintain its pioneering position in the industry. The policies and targets set for this purpose 64 Corporate Governance

Risk Management Policies

Corporate risk management efforts The Company’s risk management at Kerevitaş consist of a systematic activities are overseen by the Risk process implemented across the entire Committee. The Company is also audited organizational structure of the Company. regularly by the audit departments of its The entire risk management process parent company (Yıldız Holding A.Ş.) and is influenced by the Company’s Board an independent audit firm. The findings of Directors, senior management as of these audits are communicated to well as the entire workforce. The aim is the members of the Audit Committee to determine strategies for identifying and the Board of Directors. The work potential incidents that may affect flows and procedures of the Company, Kerevitaş, manage risks and provide an and duties and responsibilities of acceptable level of assurance for the employees, are monitored within the Company to achieve its goals. framework of corporate risk management and are subject to ongoing audits and inspections. KEREVİTAŞ Annual Report 2019 65

Profit Distribution Proposal

The Company’s Profit Distribution Policy The profit distribution proposal of the is determined in accordance with the Board of Directors, consisting of the provisions of the Turkish Commercial Company’s Profit Distribution Policy, Code, Capital Markets Law, Tax Law, Capital Markets Board regulations and other relevant laws, rules and regulations the details set forth in the Corporate and the article related to profit Governance Principles is included in the distribution in the Company’s Articles annual report and communicated to the of Association, while taking into due public on the website of the Company consideration the Company’s strategies, and on the Public Disclosure Platform operational performance, financial within the statutory periods. situation and market developments. The Policy is reviewed annually by the Subject to approval of the General Board of Directors in view of domestic Assembly upon the proposal of the and global economic conditions and any Board of Directors, and any amendments possible setbacks, the circumstances thereof, and also subject to the legislation of ongoing projects, and the financial in force in Turkey, Kerevitaş resolves to resources of the Company. The Profit distribute dividends corresponding to at Distribution Policy adopts a balanced least 10% of the net distributable period approach between the interests of profit as cash dividends and/or as bonus shareholders and the interests of the shares, on condition that the cash flow Company. Under the Company’s Profit requirements the Company are taken into Distribution Policy, dividends are consideration. distributed equally to all existing shares as of the date of distribution, with no privileges. The Company does not issue advance dividends. 66 Corporate Governance

Other Issues

Number, Structure and Rights Provided to Board Members and Independence of Committees Senior Managers Established under the Board of The guidelines for remuneration of senior Directors executives of the Company were laid out in writing. These guidelines were Audit Committee presented to the shareholders under a The Audit Committee is responsible for separate agenda item at the Ordinary ensuring that the Company’s financial General Assembly Meeting held on April and operational activities are performed 11, 2018 and published in the Company’s in a robust manner. The Audit Committee annual report and on the corporate is comprised of two Independent Board website. Members. The Committee convenes at least four times a year, and in 2019 it No other benefits are provided to the convened 4 (four) times. Chairman and Members of the Board of Directors except for the remuneration Corporate Governance Committee and attendance fee determined by the The Corporate Governance Committee General Assembly. Wages of the Board was established in line with the Capital Members are determined by the General Markets Board’s Corporate Governance Assembly considering the financial Principles Communiqué. The Committee situation of the Company, separately monitors the Company’s business and for each member. At the Ordinary governance processes in accordance with General Assembly Meeting held on the Corporate Governance Principles April 11, 2018, it was decided that only of the CMB. The Corporate Governance Independent Members are paid wages, Committee convenes at least four times and the amount to be monthly net a year, and in 2019 it convened 4 (four) TL 5,000. During the reporting period, no times. loans were extended to Board Members or senior managers; in addition, no Early Detection of Risk Committee guarantees such as sureties were granted The Early Detection of Risk Committee and no credit facilities were provided as a was established to operate under the personal loan through a third party to the Board of Directors. The Committee is Board members or senior managers. charged with the early detection of risks that may jeopardize the existence, Material Events after the Reporting development and continuity of the Period Company; adoption and implementation On February 5, 2020, Kerpe Gıda of necessary measures to mitigate San. ve Tic. A.Ş. was registered and these risks; and the execution of other establishment procedures completed as risk management efforts in line with a fully-owned company of Kerevitaş Gıda the provisions of the Capital Markets Sanayi ve Ticaret A.Ş. with a capital of Board’s Corporate Governance Principles TL 50,000 to be engaged in the Communiqué. The Committee meets production, trade, marketing and export at least once every three months and of any kind of agricultural and animal presents the results of its meeting to products. the Board of Directors. In 2019, the Early Detection of Risk Committee met 6 (six) times. KEREVİTAŞ GIDA SANAYİ VE TİCARET A.Ş. AND ITS SUBSIDIARIES

CONSOLIDATED FINANCIAL STATEMENTS AS OF AND FOR THE YEAR ENDED 31 DECEMBER 2019 TOGETHER WITH INDEPENDENT AUDITORS’ REPORT

(CONVENIENCE TRANSLATION INTO ENGLISH OF THE INDEPENDENT AUDITORS’ REPORT AND THE CONSOLIDATED FINANCIAL STATEMENTS ORIGINALLY ISSUED IN TURKISH)

KEREVİTAŞ Annual Report 2019 69 70 Financial Statements and Footnotes KEREVİTAŞ Annual Report 2019 71 72 Financial Statements and Footnotes KEREVİTAŞ Annual Report 2019 73

CONTENTS PAGE

CONSOLIDATED STATEMENT OF FINANCIAL POSITION...... 1-274-75

CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME ...... 3 76

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY ...... 4 77

CONSOLIDATED STATEMENT OF CASH FLOWS ...... 5 78

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS ...... 6-7379-146

NOTE 1 GROUP’S ORGANIZATION AND NATURE OF OPERATIONS ...... 6-779-80 NOTE 2 BASIS OF PRESENTATION OF CONSOLIDATED FINANCIAL STATEMENTS ...... 8-3481-107 NOTE 3 SEGMENT REPORTING...... 35-36108-109 NOTE 4 RELATED PARTY DISCLOSURES ...... 37-39110-112 NOTE 5 TRADE RECEIVABLES AND PAYABLES ...... 40113 NOTE 6 OTHER RECEIVABLES AND PAYABLES ...... 41114 NOTE 7 INVENTORIES ...... 41114 NOTE 8 PREPAID EXPENSES AND DEFERRED REVENUE ...... 42115 NOTE 9 INVESTMENT PROPERTIES ...... 42-43115-116 NOTE 10 PROPERTY, PLANT AND EQUIPMENT ...... 44-46117-119 NOTE 11 RIGHT OF USE ASSETS...... 47120 NOTE 12 INTANGIBLE ASSETS ...... 47-48120-121 NOTE 13 GOVERMENT GRANTS AND INCENTIVES ...... 48121 NOTE 14 PROVISIONS, CONTINGENT ASSETS AND LIABILITIES ...... 49122 NOTE 15 COMMITMENTS AND CONTINGENCIES ...... 50123 NOTE 16 PAYABLES RELATED TO EMPLOYEE BENEFITS ...... 51-52124-125 NOTE 17 OTHER ASSETS AND LIABILITIES ...... 53126 NOTE 18 CAPITAL, RESERVES AND OTHER EQUITY ITEMS ...... 54127 NOTE 19 REVENUE AND COST OF SALES ...... 55128 NOTE 20 GENERAL ADMINISTRATIVE EXPENSES, MARKETING EXPENSES, RESEARCH AND DEVELOPMENT EXPENSES ...... 55-56128-129 NOTE 21 OTHER INCOME AND EXPENSES FROM OPERATING ACTIVITIES ...... 56-57129-130 NOTE 22 INCOME AND EXPENSES FROM INVESTMENT ACTIVITIES ...... 57130 NOTE 23 FINANCIAL INCOME AND EXPENSES...... 57130 NOTE 24 INCOME TAXES (INCLUDING DEFERRED TAX ASSETS AND LIABILITIES) ...... 58-60131-133 NOTE 25 EARNING PER SHARE / (LOSS) ...... 61134 NOTE 26 FINANCIAL INSTRUMENTS ...... 61134 NOTE 27 BORROWINGS ...... 61-62134-135 NOTE 28 NATURE AND LEVEL OF RISKS DERIVED FROM FINANCIAL INSTRUMENTS ...... 63-72136-145 NOTE 29 CASH AND CASH EQUIVALENTS ...... 72145 NOTE 30 DISCLOSURE OF INTEREST IN OTHER ENTITIES ...... 73146 NOTE 31 SUBSEQUENT EVENTS...... 73146 CONVENIENCE TRANSLATION INTO ENGLISH OF THE CONSOLIDATED FINANCIAL STATEMENTS ORIGINALLY ISSUED IN TURKISH (NOTE 2.7) 74 Financial Statements and Footnotes KEREVİTAŞ GIDA SANAYİ VE TİCARET A.Ş. AND ITS SUBSIDIARIES

CONSOLIDATED STATEMENT OF FINANCIAL POSITION ASCONVENIENCE AT AND FOR THETRANSLATION YEAR ENDED INTO 31 DECEMBER ENGLISH OF 2019 THE AND CONSOLIDATED 2018 FINANCIAL STATEMENTS (Amounts expressed in ORIGINALLY Turkish Lira (“TL” unlessISSUED otherwise IN TURKISHstated.) (NOTE 2.7)

KEREVİTAŞ GIDA SANAYİ VE TİCARET A.Ş. AND ITS SUBSIDIARIESAudited Audited Current Year Prior Year CONSOLIDATED STATEMENT OF FINANCIAL POSITION 31 December 31 December Notes 2019 2018 AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2019 AND 2018 (AmountsASSETS expressed in Turkish Lira (“TL” unless otherwise stated.) Current Assets 1.533.120.810 1.795.523.526 Cash and cash equivalents 29 13.208.215Audited 19.448.273Audited Trade receivables 5 Current447.038.978 Year 509.398.900Prior Year - Trade receivables from related parties 4 31269.099.666 December 31337.686.279 December Notes 2019 2018 - Trade receivables from third parties 5 177.939.312 171.712.621 ASSETS Other receivables 6 638.071.763 858.314.676 Current Assets - Other receivables from related parties 4 1.533.120.810632.699.658 1.795.523.526853.122.409 Cash and cash equivalents - Other receivables from third parties 296 13.208.2155.372.105 19.448.2735.192.267 Trade receivables Inventories 75 417.527.030447.038.978 363.038.616509.398.900 - Trade receivables from related parties Prepaid expenses 84 269.099.66610.733.554 337.686.27920.397.419 - Trade receivables from third parties Current income tax assets 245 177.939.31215.473 171.712.6214.867.349 Other receivables Other current assets 176 638.071.7636.525.797 858.314.67620.058.293 - Other receivables from related parties 4 632.699.658 853.122.409 Non-Current Assets 1.190.054.386 1.181.848.860 - Other receivables from third parties 6 5.372.105 5.192.267 Other receivables 6 1.466.589 5.487.505 Inventories - Other receivables from third parties 67 417.527.0301.466.589 363.038.6165.487.505 Prepaid expenses 8 10.733.554 20.397.419 Financial investments 26 1.394.933 1.420.594 Current income tax assets 24 15.473 4.867.349 Investment properties 9 219.842.001 212.107.001 Other current assets 17 6.525.797 20.058.293 Property, plant and equipment 10 865.150.925 874.144.623 Non-Current Assets Right of use assets 11 1.190.054.3864.245.452 1.181.848.860- Other receivables Intangible assets 126 15.045.7871.466.589 11.167.3245.487.505 - Other receivables from third parties Prepaid expenses 86 8.069.5521.466.589 4.177.5785.487.505 Financial investments Deferred tax assets 2426 74.839.1471.394.933 59.951.1241.420.594 Investment properties Other non-current assets 179 219.842.001- 212.107.00113.393.111 Property, plant and equipment 10 865.150.925 874.144.623 TOTAL ASSETS 2.723.175.196 2.977.372.386 Right of use assets 11 4.245.452 - Intangible assets 12 15.045.787 11.167.324 Prepaid expenses 8 8.069.552 4.177.578 Deferred tax assets 24 74.839.147 59.951.124 Other non-current assets 17 - 13.393.111 TOTAL ASSETS 2.723.175.196 2.977.372.386

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

1

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

1 CONVENIENCE TRANSLATION INTO ENGLISH OF THE CONSOLIDATED FINANCIAL KEREVİTAŞSTATEMENTS Annual Report ORIGINALLY 2019 ISSUED IN TURKISH (NOTE 2.7) 75

KEREVİTAŞ GIDA SANAYİ VE TİCARET A.Ş. AND ITS SUBSIDIARIES

CONSOLIDATED STATEMENT OF FINANCIAL POSITION AS AT CONVENIENCEAND FOR THE TRANSLATIONYEAR ENDED INTO31 DECEMBER ENGLISH OF 2019 THE AND CONSOLIDATED 2018 FINANCIAL (AmountsSTATEMENTS expressed in Turkish ORIGINALLY Lira (“TL” unless ISSUED otherwise IN stated.) TURKISH (NOTE 2.7) KEREVİTAŞ GIDA SANAYİ VE TİCARET A.Ş. AND ITS SUBSIDIARIES Audited Audited CONSOLIDATED STATEMENT OF FINANCIAL POSITION Current Year Prior Year AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2019 AND 201831 December 31 December (Amounts expressed in Turkish Lira (“TL” unless otherwise stated.) Notes 2019 2018 ASSETS Current Assets 1.533.120.810Audited 1.795.523.526Audited Current Year Prior Year Cash and cash equivalents 29 31 December13.208.21531 December19.448.273 Trade receivables Notes5 447.038.9782019 509.398.9002018 - TradeLIABILITIES receivables from related parties 4 269.099.666 337.686.279 Current Liabilities 620.562.397 735.713.313 - Trade receivables from third parties Short-term borrowings 275 71.353.171177.939.312 317.984.874171.712.621 Other receivables - Bank loans 276 70.057.502638.071.763 317.984.874858.314.676 - Other receivables- Lease liabilities from related parties 274 632.699.6581.295.669 853.122.409- - Other Tradereceivables payables from third parties 56 385.132.3475.372.105 367.605.6405.192.267 - Trade payables to related parties 4 50.952.499 46.417.101 Inventories - Trade payables to third parties 57 334.179.848417.527.030 321.188.539363.038.616 Prepaid Otherexpenses payables 68 111.081.30710.733.554 2.699.32120.397.419 Current income- Other payables tax assets to related parties 244 111.081.30715.473 2.351.5074.867.349 - Other payables to third parties 6 - 347.814 Other current assets 17 6.525.797 20.058.293 Payables related to employee benefits 16 12.020.130 11.559.769 Non-CurrentDeferred Assets income 8 1.190.054.3864.492.874 1.181.848.8602.928.650 Other receivablesCurrent income tax liabilities 246 16.460.7981.466.589 14.384.1655.487.505 - Other Short-termreceivables provisions from third parties 6 15.027.9561.466.589 11.355.2825.487.505 - Short-term provisions for employee benefits 16 11.458.762 10.111.477 Financial - Otherinvestments short-term provisions 1426 3.569.1941.394.933 1.243.8051.420.594 InvestmentOther properties current liabilities 179 219.842.0014.993.814 7.195.612212.107.001 Property,Non-Current plant and equipment Liabilities 10 1.136.232.930865.150.925 1.459.677.628874.144.623 Right ofLong-term use assets borrowings 2711 2.878.4234.245.452 - - Lease liabilities 27 2.878.423 - IntangibleOther assets payables 126 1.031.988.89715.045.7871.364.244.00511.167.324 Prepaid expenses- Other payables to related parties 48 1.031.988.8978.069.5521.364.244.0054.177.578 DeferredLong-term tax assets provisions 24 33.225.07474.839.147 30.305.48759.951.124 - Long-term provisions for employee benefits Other non-current assets 16 33.225.074 30.305.487 Deferred tax liabilities 1724 68.140.536 - 65.128.13613.393.111 TOTALTotal ASSETS Liabilities 1.756.795.327 2.723.175.196 2.195.390.941 2.977.372.386 EQUITY Paid in capital 18 662.000.000 662.000.000 Other comprehensive income or expenses not be reclassified to profit or loss 313.272.561 313.720.126 - Gains on revaluation of plant, property and equipment 314.411.591 314.411.591 - Losses on remeasurement of defined benefit plans (10.340.254) (9.892.689) - Gains on revaluation of investment properties 9.201.224 9.201.224 Other comprehensive income or expenses to be reclassified to profit or loss 102.626.699 84.400.388 - Currency translation differences 102.626.699 84.400.388 Share premium 702.050 702.050 Restricted reserves 18 36.192.002 36.192.002 Effect of business combinations under common control (895.717.515) (895.717.515) Retained earnings 399.294.136 433.864.245 Net profit/loss for the year 137.831.653 (34.570.109) Equity holders of the parent 756.201.586 600.591.187 Non-controlling interests 210.178.283 181.390.258 Total Equity 966.379.869 781.981.445 TOTAL LIABILITIES AND EQUITY 2.723.175.196 2.977.372.386 The accompanyingThe accompanying notes notes form form an anintegral integral part part of of these these consolidated financial financial statements. statements.

2 1 CONVENIENCE TRANSLATION INTO ENGLISH OF THE CONSOLIDATED FINANCIAL STATEMENTS ORIGINALLY ISSUED IN TURKISH (NOTE 2.7) 76 Financial Statements and Footnotes KEREVİTAŞ GIDA SANAYİ VE TİCARET A.Ş. AND ITS SUBSIDIARIES

CONSOLIDATED STATEMENT OF FINANCIAL POSITION AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2019 AND 2018 (AmountsCONVENIENCE expressed in Turkish TRANSLATION Lira (“TL” unless otherwiseINTO ENGLISH stated.) OF THE CONSOLIDATED FINANCIAL STATEMENTS ORIGINALLY ISSUED IN TURKISH (NOTE 2.7) Audited Audited KEREVİTAŞ GIDA SANAYİ VE TİCARET A.Ş. AND ITS SUBSIDIARIESCurrent Year Prior Year 31 December 31 December CONSOLIDATED STATEMENT OF PROFIT OR LOSSNotes 2019 2018 ASSETSAS AT AND FOR THE YEAR ENDED 31 DECEMBER 2019 AND 2018 (Amounts expressed in Turkish Lira (“TL” unless otherwise stated.) Current Assets 1.533.120.810 1.795.523.526 Cash and cash equivalents 29 13.208.215 19.448.273 Trade receivables 5 447.038.978Audited 509.398.900Audited - Trade receivables from related parties 4 269.099.666Current Year 337.686.279Prior Year - Trade receivables from third parties 5 177.939.3121 January - 171.712.6211 January - Other receivables 31 December 31 December 6 Notes 638.071.7632019 858.314.6762018 - RevenueOther receivables from related parties 4 19 632.699.6582.492.865.759 853.122.4092.422.035.082 - CostOther of receivables sales (-) from third parties 6 19 (1.879.435.873)5.372.105 (1.859.089.302)5.192.267 InventoriesGross profit 7 417.527.030613.429.886 363.038.616562.945.780 General administrative expenses (-) 20 (59.295.803) (52.804.351) Prepaid expenses Marketing expenses (-) 8 20 10.733.554(220.546.434) 20.397.419(208.124.491) CurrentResearch income and development tax assets expenses (-) 24 20 (3.930.240)15.473 4.867.349(3.137.542) OtherOther current income assets from operating activities 17 21 6.525.79746.714.455 20.058.29366.165.579 Non-CurrentOther expenses Assets from operating activities (-) 21 (63.926.322) (114.442.085) OPERATING PROFIT 1.190.054.386312.445.542 1.181.848.860250.602.890 Other receivables 6 1.466.589 5.487.505 - IncomeOther receivables from investment from activities third parties 6 22 1.466.589130.825.599 5.487.50597.364.001 FinancialExpenses investments from investment activities (-) 26 22 1.394.933(13.499.824) 1.420.594(25.063.173) OPERATING PROFIT/LOSS BEFORE FINANCIAL INCOME / (EXPENSE) 429.771.317 322.903.718 Investment properties 9 219.842.001 212.107.001 Property,Financial plant expenses and equipment(-) 10 23 865.150.925(224.254.342) 874.144.623(364.915.670) RightPROFIT/LOSS of use assets BEFORE TAX FROM CONTINUING OPERATIONS11 4.245.452205.516.975 (42.011.952)- Tax expense/income from continuing operations (46.593.957) 8.520.795 Intangible assets - Current tax expense 12 24 15.045.787(57.388.020) 11.167.324(14.384.165) Prepaid- Deferred expenses tax income/expense 8 24 8.069.55210.794.063 4.177.57822.904.960 DeferredPROFIT/(LOSS) tax assets FOR THE YEAR 24 74.839.147158.923.018 59.951.124(33.491.157) OtherProfit/loss non-current for the assets year attributable to: 17 - 13.393.111 Non-controlling interests 21.091.365 1.078.952 TOTALEquity holdersASSETS of the parent 2.723.175.196137.831.653 2.977.372.386(34.570.109)

OTHER COMPREHENSIVE INCOME: Items to not be reclassified subsequently to profit or loss (561.987) 7.245.342 - Gain on revaluation of property, plant and equipment - 9.514.578 - Actuarial loss on defined benefit plans (724.331) (1.330.973) - Other comprehensive income not to be reclassified to profit or (loss), tax effect 162.344 (938.263)

Items to be reclassified subsequently to profit or loss 26.037.393 50.776.816 - Currency translation differences 26.037.393 53.816.816 - Impairment of financial investments - (3.040.000)

Other Comprehensive Income 25.475.406 58.022.158

TOTAL COMPREHENSIVE INCOME 184.398.424 24.531.001

Total comprehensive income for the year attributable to: Non-controlling interests 28.788.025 17.119.241 Equity holders of the parent 155.610.399 7.411.760 Earnings /(Losses) per share (Kr) 25 0,21 (0,05)

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

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

3 KEREVİTAŞ Annual Report 2019 77 - - - - Total Equity 24.531.001 (2.537.662) 184.398.424 - - - - Non- interests 17.119.241 28.788.025 (2.537.662) controlling ------Equity 2018 7.411.760 holders of the parent 155.610.399 Audited 5.192.267 4.867.349 5.487.505 5.487.505 1.420.594 4.177.578 - - - 19.448.273 20.397.419 20.058.293 11.167.324 59.951.124 13.393.111 Prior Year 509.398.900 337.686.279 171.712.621 858.314.676 853.122.409 363.038.616 212.107.001 874.144.623 year 31 December 1.181.848.860 2.977.372.386 1.795.523.526 34.570.109 loss for the for loss Net / profit 137.831.653 (53.861.653) (34.570.109) - - - 2019 15.473 Retained Earnings earnings Retained 87.611.483 Audited (3.040.000) 248.058.830 (13.659.346) (34.570.109) 5.372.105 6.525.797 1.466.589 1.466.589 1.394.933 4.245.452 8.069.552 13.208.215 10.733.554 15.045.787 74.839.147 ------447.038.978 269.099.666 177.939.312 638.071.763 632.699.658 417.527.030 219.842.001 865.150.925 31 December Current Year under 1.190.054.386 2.723.175.196 1.533.120.810 control business common Effect of 13.659.346 (895.717.515) 433.864.245 (34.570.109) 600.591.187 181.390.258 781.981.445 181.390.258 600.591.187 (34.570.109) 433.864.245 (895.717.515) 781.981.445 181.390.258 600.591.187 (34.570.109) 433.864.245 (895.717.515) (895.717.515) 399.294.136 137.831.653 756.201.586 210.178.283 966.379.869 210.178.283 756.201.586 399.294.136 137.831.653 (895.717.515) (909.376.861) 114.893.278 (909.376.861) 759.988.106 166.808.679 593.179.427 53.861.653 combinations ------5 4 5 6 4 6 7 8 6 6 9 8 17 29 24 26 10 11 12 24 17 reserves 1.535.468 Restricted ------Notes Share 702.050 36.192.002 702.050 36.192.002 702.050 36.192.002 . AND ITS SUBSIDIARIES . AND premium Ş 1 (886.158.830) - - - - - 4 Currency other 37.653.304 18.226.311 84.400.388 84.400.388 46.747.084 886.860.880 34.656.534 translation differences 102.626.699 income or income profit or lose profit or Accumulated reclassified to expenses to be CARET A. CARET comprehensive İ ------of Gains on Gains VE T 9.201.224 9.201.224 9.201.224 properties investment İ revaluation (35.285.298) - - - - - . AND ITS SUBSIDIARIES . AND (941.555) (447.565) Losses on Losses of defined of Ş (9.892.689) (9.892.689) (8.951.134) 44.486.522 or lose or (10.340.254) benefit plans remeasurement ------and GIDA SANAY Ş of plant,of property Gains on Gains 8.310.120 CARET A. CARET or expenses not to expensesor not be reclassified to profit The accompanying notes form an integral part of these consolidated financial statements. financial consolidated these part of an integral form notes accompanying The equipment Accumulated comprehensive other income The accompanying notes form an integral part of these consolidated financial statements. financial consolidated these part of an integral form notes accompanying The revaluation İ TA İ ------VE T İ 23.900.000 306.101.471 662.000.000 314.411.591 662.000.000 314.411.591 662.000.000 314.411.591 662.000.000 638.100.000 Trade receivables parties from related - receivables Trade parties third from - receivables Trade receivables Other parties from related receivables - Other parties from third receivables - Other Inventories expenses Prepaid assets tax income Current assets current Other Assets Non-Current receivables Other parties from third receivables - Other investments Financial properties Investment and equipment plant Property, use assets of Right assets Intangible expenses Prepaid tax assets Deferred assets non-current Other ASSETS TOTAL Cash and cash equivalents cash Cash and ASSETS Current Assets Paid in capital CONVENIENCE TRANSLATION INTO ENGLISH OF THE CONSOLIDATED FINANCIAL THE CONSOLIDATED OF ENGLISH INTO TRANSLATION CONVENIENCE (NOTE 2.7) IN TURKISH ISSUED ORIGINALLY STATEMENTS KEREV stated.) otherwise unless (“TL” Lira Turkish in expressed (Amounts CONSOLIDATED STATEMENT OF FINANCIAL POSITION OF FINANCIAL STATEMENT CONSOLIDATED 2018 2019 AND 31 ENDED DECEMBER YEAR FOR THE AND AT AS GIDA SANAY Ş TA İ s paid common control common CONVENIENCE TRANSLATION INTO ENGLISH OF THE CONSOLIDATED FINANCIAL STATEMENTS ORIGINALLY ISSUED IN ORIGINALLY STATEMENTS FINANCIAL THE CONSOLIDATED OF ENGLISH INTO TRANSLATION CONVENIENCE 2.7) TURKISH (NOTE KEREV stated.) otherwise unless (“TL” Lira Turkish in expressed (Amounts CONSOLIDATED STATEMENT OF CHANGES IN EQUITY OF CHANGES STATEMENT CONSOLIDATED 2018 2019 AND 31 ENDED DECEMBER YEAR FOR THE AND AT AS Capital increase Transfers Effect of business combinations under Dividend Total comprehensive income 31Balances as of December 2018 1Balances as January of 2019 Transfers Total comprehensive income 31Balances as of December 2019 Balances 1Balances as January of 2018 CONVENIENCE TRANSLATION INTO ENGLISH OF THE CONSOLIDATED FINANCIAL STATEMENTS ORIGINALLY ISSUED IN TURKISH (NOTE 2.7) 78 Financial Statements and Footnotes KEREVİTAŞ GIDA SANAYİ VE TİCARET A.Ş. AND ITS SUBSIDIARIES

CONSOLIDATED STATEMENT OF FINANCIAL POSITION CONVENIENCEAS AT AND FOR TRANSLATION THE YEAR ENDED INTO ENGLISH 31 DECEMBER OF THE 2019 CONSOLIDATED AND 2018 FINANCIAL STATEMENTS (Amounts expressed ORIGINALLY in Turkish Lira (“TL” ISSUED unless INotherwise TURKISH stated.) (NOTE 2.7)

KEREVİTAŞ GIDA SANAYİ VE TİCARET A.Ş. AND ITS SUBSIDIARIES Audited Audited Current Year Prior Year CONSOLIDATED STATEMENT OF CASH FLOWS 31 December 31 December AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2019Notes AND 2018 2019 2018 (AmountsASSETS expressed in Turkish Lira (“TL” unless otherwise stated.)

Current Assets Audited 1.533.120.810 Audited 1.795.523.526 Cash and cash equivalents 29 Current Year 13.208.215Prior Year19.448.273 1 January- 1 January- Trade receivables Notes 315 December 2019447.038.97831 December 2018509.398.900 CASH - Trade FLOWS receivables FROM OPERATING from related ACTIVITIES parties 4 372.120.032269.099.666 319.367.934337.686.279 Net profit/loss for the year 158.923.018 (33.491.157) - Trade receivables from third parties 5 177.939.312 171.712.621 Adjustments to reconcile net profit/loss for the year 225.010.998 353.942.713 AdjustmentsOther receivables related to depreciation and amortization expenses 10, 11, 12 6 49.689.074638.071.763 44.703.930858.314.676 Adjustments - Other related receivables to provision from for/reversal related of partiesimpairment loss 4 2.569.547632.699.658 7.404.311853.122.409 - Adjustments related to impairment loss on receivables 5 2.581.000 4.446.232 - OtherAdjustments receivables related to impairment from third on inventories,parties net 7 6 (37.114) 5.372.105 (81.921)5.192.267 Inventories- Adjustments related to impairment of financial investments 26 25.661 3.040.000 Adjustments related to provisions 7 26.090.281417.527.03017.501.050363.038.616 Prepaid- Adjustments expenses related to provisions for employee benefits 16 8 23.719.629 10.733.554 17.448.31420.397.419 - Adjustments related to lawsuit provisions 14 2.370.652 52.736 AdjustmentsCurrent relatedincome to interest tax assetsincome and expenses 24 94.898.650 15.473118.670.3854.867.349 Other- Adjustments current related assets to interest and commission expenses 23 17 205.003.483 6.525.797 198.203.46720.058.293 - Adjustments related to interest income 22 (110.104.833) (79.533.082) ChangesNon-Current in unrealized Assetsforeign currency translation differences 23 18.039.315 1.190.054.386166.500.016 1.181.848.860 AdjustmentsOther receivables related to tax expense/(income) 24 46.593.957 (8.520.795) Adjustments related to (gain)/loss on fair value 9 6 (7.735.000) 1.466.589(11.322.568)5.487.505 Adjustments - Other related receivables to (gain)/loss from on thirddisposal parties of non-current assets 22 6 (5.134.826) 1.466.58919.006.3845.487.505 ChangesFinancial in working investments capital 26 58.822.615 1.394.933 21.707.4371.420.594 Changes in trade receivables 59.778.922 59.319.137 Investment- Increase/decrease properties in trade receivables from third parties 9 (8.807.691)219.842.001 42.508.624212.107.001 Property,- Increase/decrease plant and in trade equipment receivables from related parties 10 68.586.613865.150.92516.810.513874.144.623 Changes in inventories (54.451.300) (27.529.451) ChangesRight in of other use receivables assets related with operations 11 36.538.576 4.245.452 4.880.230 - ChangesIntangible in trade assetspayables 17.526.707 (17.896.349) - Increase / decrease in trade payables to third parties 12 12.991.309 15.045.787(62.668.552)11.167.324 Prepaid- Increase expenses / decrease in trade payables to related parties 8 4.535.398 8.069.552 44.772.2034.177.578 Changes in other payables (570.290) 2.933.870 CashDeferred generated tax from assets operations 24 442.756.631 74.839.147 342.158.99359.951.124 CashOther outflows non-current on payment ofassets provisions for employee benefits 16 17 (20.177.088) (15.150.156)- 13.393.111 Income taxes paid 24 (50.459.511) (7.640.903) TOTAL ASSETS CASH FLOWS FROM INVESTING ACTIVITIES 106.035.135 2.723.175.196 74.975.107 2.977.372.386 Payments for purchase of property, plant and equipment and intangible assets (17.169.796) (39.151.571) - Payments for purchases of property, plant and equipment 10 (13.873.905) (36.393.235) - Payments for purchases of intangible assets 12 (3.295.891) (2.758.336) Proceeds from sale of property, plant and equipment and intangible assets 10, 12 13.100.098 281.413 Proceeds from sale of investment properties - 34.312.183 Interest income from investing activities 110.104.833 79.533.082 CASH FLOWS FROM FINANCING ACTIVITIES (476.196.915) (812.150.981) Cash inflows from borrowings received 27 178.554.522 423.567.788 Cash outflows on repayment of borrowings 27 (439.287.687) (1.504.631.453) Cash outflows on repayment of obligations under financial leases - (1.119.525) Payments of lease liabilities 27 (2.124.187) - Interest paid (205.003.483) (359.071.856) Increase/(decrease) in other payables to related parties, net (8.336.080) 629.104.065

NET INCREASE/(DECREASE) IN CASH AND CASH EQUIVALENTS BEFORE THE EFFECT OF EXCHANGE RATE CHANGES 1.958.252 (417.807.940) Effects of foreign exchange rate changes on cash and cash equivalents (8.198.310) (2.100.165)

NET INCREASE/(DECREASE) IN CASH AND CASH EQUIVALENTS (6.240.058) (419.908.105) CASH AND CASH EQUIVALENTS AT THE BEGINNING OF THE YEAR 29 19.448.273 439.356.378 CASH AND CASH EQUIVALENTS AT THE END OF THE YEAR 29 13.208.215 19.448.273

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

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2019 AND 2018 (Amounts expressed in Turkish Lira (“TL” unless otherwise stated.)

NOTE 1 – GROUP’S ORGANISATION AND NATURE OF OPERATIONS

Main operations of Kerevitaş Gıda Sanayi ve Ticaret Anonim Şirketi (“Kerevitaş” or “the Company”) and its subsidiaries (“Group”) are production and trading of frozen and canned vegetables and fruits, frozen and canned sea food, frozen pastry products, croquettes, canned tuna fish, oil and margarine. The Group distributes frozen and canned products that are produced in Bursa and Afyon facilities throughout Turkey through its dealers and own direct distribution channels, as well as exports its products. Kerevitaş was initially established in 1978, to export its sea food and has been one of the pioneer food companies since 1990 with “Superfresh” brand. The Company’s registered office is in Kısıklı Mahallesi Yenişen Sokak Yıldız Holding B Blok Apt. No:8 B/1 Üsküdar İstanbul.

The Company has vegetables, fruits, seafood, tuna canned food, bakery products and pizza facilities in the its Bursa factory, and has potato, vegetables and fruit production facilities in its the Afyon factory. The Company also has cold storage warehouses in Bursa/Factory, Afyon/Factory, Kartal/Istanbul and Antalya.

Kerevitaş acquired Besler Gıda ve Kimya Sanayi ve Ticaret A.Ş. (“Besler”) which is operating in margarine and oil businesses on 24 November 2017 for an amount of TL904.500.000. Thus, the field of activities of the Group expanded to include the production and trading of oil and margarine. Besler has two production plants of oil and margarine in Pendik/İstanbul and in Adana. The third production plant of Besler was established by the end of 2017 in Sultanate of Brunei. The Company is registered to the Capital Markets Board (“CMB”) and its shares have been quoted on the Borsa İstanbul (“BIST”) since 1994.

The ultimate shareholder of the Group is Yıldız Holding A.Ş. and Yıldız Holding A.Ş. is managed by Ülker Family.

As of 31 December 2019 and 2018, the principal shareholders and their respective shareholding rates in the Company are as follows: 31 December 2019 31 December 2018 (%) (%) Yıldız Holding A.Ş. 54,27 46,14 Ufuk Yatırım Yönetim ve Gayrimenkul A.Ş. 10,34 10,34 Murat Ülker 9,98 9,98 Ahsen Özokur - 8,13 Trade Türk Gıda Yatırım A.Ş. 5,42 7,23 Other 20,00 18,19 100 100

As of 31 December 2019, the number of employees employed by the Group is 1.736 (31 December 2018: 2.224).

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2019 AND 2018 (Amounts expressed in Turkish Lira (“TL” unless otherwise stated.)

NOTE 1 - GROUP’S ORGANISATION AND NATURE OF OPERATIONS (Continued)

The subsidiaries included in the scope of consolidation of the Group as of 31 December 2019 and 2018 and respective effective ownership rates are as follows:

Direct and Indirect Effective Ownership %

31 December 31 December Countries of Subsidiaries 2019 2018 activity Nature of business Production and Trading of Besler Gıda ve Kimya San. Ve Tic. A.Ş. 100,00 100,00 Turkey Oil and Oil Products

Berk Enerji Üretimi A.Ş. (*) 88,07 88,07 Turkey Generation of Electricity Production and Trading of Marsa Yağ Sanayi ve Tic. A.Ş. (*) 70,00 70,00 Turkey Oil and Oil Products Production and Trading of Western Foods and Packaging SDN BHD (*) 70,00 70,00 Brunei Oil and Oil Products

(*) The Group has indirect ownership.

Operations of subsidiaries

Acquisition of Besler Shares

The Group acquired Besler on 24 November 2017 from its ultimate parent Yıldız Holding. Since both companies are controlled by the same parent before and after the acquisition, this transaction has been identified as business combinations under common control, and the transaction has been included in the accompany financial statements, in accordance with the principles issued by Public Oversight Accounting and Auditing Standards Authority on 21 July 2013.

Approval of the financial statements

The consolidated financial statements as of and for the year ended 31 December 2019 have been approved by the Board of Directors on 3 March 2020. General Assembly has authority to change the financial statements.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2019 AND 2018 (Amounts expressed in Turkish Lira (“TL” unless otherwise stated.)

NOTE 2 - BASIS OF PRESENTATION OF CONSOLIDATED FINANCIAL STATEMENTS 2.1 - Basis of Presentation

Statement of Compliance with TAS

The accompanying financial statements are prepared in accordance with the requirements of the Communiqué Serial II, no: 14.1 “Basis of Financial Reporting in Capital Markets” as issued by Capital Markets Board of Turkey (“CMB”) which was published in the Official Gazette No:28676 on 13 June 2013. The accompanying financial statements have been prepared in accordance with the Turkish Accounting Standards (“TAS”) and interpretations that have been put into effect by the Public Oversight Accounting and Auditing Standards Authority of Turkey (“POA”) under Article 5th of the Communiqué.

In addition, financial statements and disclosures have been presented in accordance with the resolution of POA dated 7 June 2019 on “2019 TAS Taxanomy”.

With the 11/367 numbered decision taken on 11 March 2005, CMB announced that, effective from 1 January 2005, the application of inflation accounting is no longer required for the listed companies operating in Turkey which are preparing their financial statements in accordance with Turkish Accounting Standards. Accordingly, the Group did not apply “Financial Reporting in High Inflation Economies” (“TAS 29”) since 1 January 2005.

The Company and its subsidiaries in Turkey maintain their books of accounts and prepare their statutory financial statements in accordance with the Turkish Commercial Code (“TCC”), tax legislation, the Uniform Chart of Accounts issued by the Ministry of Finance and principles issued by CMB. The foreign subsidiaries maintain their books of account in accordance with the laws and regulations in force in the countries in which they are registered.

The consolidated financial statements have been prepared on the historical cost basis except for land and building and financial assets and liabilities accounted with their fair values. Historical cost is generally based on the nominal or original cost of assets when acquired by the Company.

Functional Currency

The individual financial statements of each Group entity are prepared in the currency of the primary economic environment in which the entity operates (its functional currency). The results and financial position of each entity are expressed in TL, which is the functional currency of the Company, and the presentation currency for the consolidated financial statements.

As of 31 December 2019 and 2018, the exchange rates announced by Central Bank of Turkey are as below:

EUR 1 = TL 6,6506, USD 1 TL 5,9402 TL (31 December 2018: EUR 1 = TL 6,0280; USD 1 TL 5,2609)

As of 31 December 2019, and 2018, the average of the exchange rates announced by Central Bank of Turkey are as below:

EUR 1=TL 6,3481, USD 1=TL 5,6712 (1 January – 31 December 2018: EUR 1=TL 5,6789; USD 1=TL 4,8301)

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KEREVİTAŞ GIDA SANAYİ VE TİCARET A.Ş. AND ITS SUBSIDIARIES KEREVİTAŞ GIDA SANAYİ VE TİCARET A.Ş. AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTES TO CONSOLIDATED FINANCIAL STATEMENTS AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2019 AND 2018 AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2019 AND 2018 (Amounts expressed in Turkish Lira (“TL” unless otherwise stated.) (Amounts expressed in Turkish Lira (“TL” unless otherwise stated.)

NOTE 2 - BASIS OF PRESENTATION OF CONSOLIDATED FINANCIAL STATEMENTS NOTE 2 - BASIS OF PRESENTATION OF CONSOLIDATED FINANCIAL STATEMENTS (Continued) (Continued) 2.1 - Basis of Presentation (Continued) 2.1 - Basis of Presentation (Continued) Changes in the Group’s ownership interests in existing subsidiaries When the Group loses control of a subsidiary, a gain or loss is recategorized in profit or loss and is Going Concern calculated as the difference between (i) the aggregate of the fair value of the consideration received and the fair value of any retained interest and (ii) the previous carrying amount of the assets (including The consolidated financial statements of the Group are prepared on a going concern basis. goodwill), and liabilities of the subsidiary and any non-controlling interests. All amounts previously Basis of Consolidation recategorized in other comprehensive income in relation to that subsidiary are accounted for as if the Group had directly disposed of the related assets or liabilities of the subsidiary (i.e. reclassified to profit (a) Subsidiaries or loss or transferred to another category of equity as specified/permitted by applicable IFRSs). The fair value of any investment retained in the former subsidiary at the date when control is lost is regarded as the fair value on initial recognition for subsequent accounting under TFRS 9 Financial Instruments, Subsidiaries are entities over which the group has control. The group controls an entity when the group when applicable, the cost on initial recognition of an investment in an associate or a joint venture. is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability 2.2 - Changes in Accounting Policies to affect those returns through its power over the entity. Subsidiaries are fully consolidated from the date on which control is transferred to the Group. They are deconsolidated from the date that control Comparative Information and Restatement of Prior Period Consolidated Financial Statements ceases. In order to allow the determination of financial position and performance trends, the Group's Inter-company transactions, balances and unrealised gains and losses on transactions between group consolidated financial statements are prepared in comparison with the previous period. In order to companies are eliminated. comply with the presentation of consolidated financial statements the current period when deemed necessary, comparative information is reclassified, and material differences are presented. The Group (b) Changes in ownership interests in subsidiaries without change of control has made some reclassifications in prior year financial statements in order to conform presentation with current period financial statements for prior periods. Changes in the Group's ownership interests in subsidiaries that do not result in the loss of control over the subsidiaries are accounted for as equity transactions. The carrying amounts of the Group's interests Change in accounting policies is applied retrospectively and previous year financial statements are and the non-controlling interests are adjusted to reflect the changes in their relative interests in the restated accordingly. subsidiaries. Any difference between the amount by which the non-controlling interests are adjusted and the fair value of the consideration paid or received is recorded directly in equity and attributed to owners The Group has made following reclassifications in financial statements as of 31 December 2018 in order of the Company. to conform with the presentation of current year consolidated financial statements.

(c) Losses control of subsidiaries Trade payables to Yıldız Holding amounting to TL 62.461.695 classified under “Trade Payables to Related Parties” under short-term liabilities of the Group provided in the consolidated financial statements of the Group as of 31 December 2018, has been netted with the other receivables from Yıldız When the Group loses control of a subsidiary, a gain or loss is recognized in profit or loss and is Holding classified under “Other Receivables From Related Parties”. The reclassification has no effect calculated as the difference between (i) the aggregate of the fair value of the consideration received and on net profit for the period. the fair value of any retained interest and (ii) the previous carrying amount of the assets (including goodwill), and liabilities of the subsidiary and any non-controlling interests. All amounts previously Rent income from investment properties amounting to TL 6.287.415 recognised under “Other Income recognized in other comprehensive income in relation to that subsidiary are accounted for as if the Group from Operating Activities” in the consolidated statement of profit or loss and other comprehensive had directly disposed of the related assets or liabilities of the subsidiary (i.e. transfer to profit / loss or income for the period ended as of 31 December 2018, has been reclassified under the “Income from transfer to retained earnings in accordance with TFRSs). The fair value of any investment retained after Investment Activities”. the sales of a subsidiary at the date when control is lost, is regarded as the fair value on initial recognition accounting within the scope of TFRS 9 Financial Instruments: Recognition and Measurement, when The Group has adopted TFRS 16 “Leases” as at 1 January 2019 for the first time, the accounting policies applicable, the cost on initial recognition of an investment in an associate or a joint venture. related to adoption of TFRS 16 are provided below:

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2019 AND 2018 (Amounts expressed in Turkish Lira (“TL” unless otherwise stated.)

NOTE 2 - BASIS OF PRESENTATION OF CONSOLIDATED FINANCIAL STATEMENTS (Continued) 2.1 - Basis of Presentation (Continued) Changes in the Group’s ownership interests in existing subsidiaries When the Group loses control of a subsidiary, a gain or loss is recategorized in profit or loss and is calculated as the difference between (i) the aggregate of the fair value of the consideration received and the fair value of any retained interest and (ii) the previous carrying amount of the assets (including goodwill), and liabilities of the subsidiary and any non-controlling interests. All amounts previously recategorized in other comprehensive income in relation to that subsidiary are accounted for as if the Group had directly disposed of the related assets or liabilities of the subsidiary (i.e. reclassified to profit or loss or transferred to another category of equity as specified/permitted by applicable IFRSs). The fair value of any investment retained in the former subsidiary at the date when control is lost is regarded as the fair value on initial recognition for subsequent accounting under TFRS 9 Financial Instruments, when applicable, the cost on initial recognition of an investment in an associate or a joint venture. 2.2 - Changes in Accounting Policies

Comparative Information and Restatement of Prior Period Consolidated Financial Statements

In order to allow the determination of financial position and performance trends, the Group's consolidated financial statements are prepared in comparison with the previous period. In order to comply with the presentation of consolidated financial statements the current period when deemed necessary, comparative information is reclassified, and material differences are presented. The Group has made some reclassifications in prior year financial statements in order to conform presentation with current period financial statements for prior periods.

Change in accounting policies is applied retrospectively and previous year financial statements are restated accordingly.

The Group has made following reclassifications in financial statements as of 31 December 2018 in order to conform with the presentation of current year consolidated financial statements.

Trade payables to Yıldız Holding amounting to TL 62.461.695 classified under “Trade Payables to Related Parties” under short-term liabilities of the Group provided in the consolidated financial statements of the Group as of 31 December 2018, has been netted with the other receivables from Yıldız Holding classified under “Other Receivables From Related Parties”. The reclassification has no effect on net profit for the period.

Rent income from investment properties amounting to TL 6.287.415 recognised under “Other Income from Operating Activities” in the consolidated statement of profit or loss and other comprehensive income for the period ended as of 31 December 2018, has been reclassified under the “Income from Investment Activities”.

The Group has adopted TFRS 16 “Leases” as at 1 January 2019 for the first time, the accounting policies related to adoption of TFRS 16 are provided below:

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTES TO CONSOLIDATED FINANCIAL STATEMENTS AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2019 AND 2018 AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2019 AND 2018 (Amounts expressed in Turkish Lira (“TL” unless otherwise stated.) (Amounts expressed in Turkish Lira (“TL” unless otherwise stated.)

NOTE 2 - BASIS OF PRESENTATION OF CONSOLIDATED FINANCIAL STATEMENTS NOTE 2 - BASIS OF PRESENTATION OF CONSOLIDATED FINANCIAL STATEMENTS (Continued) (Continued) 2.2 - Changes in Accounting Policies (Continued) 2.2 - Changes in Accounting Policies (Continued) TFRS 16 Leases Lease liabilities (Continued) The accounting policies of the Group in relation to adoption of TFRS 16 are provided below: After initial recognition, the lease liability is measured as followings: Right of use assets The Group recognises right-of-use assets at the commencement date of the lease (i.e., the date the a) Increasing the carrying amount to reflect interest on lease liability, and underlying asset is available for use). Right-of-use assets are measured at cost, less any accumulated b) Reducing the carrying amount to reflect the lease payments made. depreciation and impairment losses, and adjusted for any remeasurement of lease liabilities. The amount is adjustes when the lease liability is revalued. The recognised right-of-use assets are depreciated on In addition, the carrying amount of lease liabilities is remeasured if there is a modification, a change in component basis when it is deemed as necessary. the lease term, a change in the in-substance fixed lease payments or a change in the assessment to purchase the underlying asset. The right of use asset is initially recognized at cost comprising of: a) amount of the initial measurement of the lease liability, Short-term leases and leases of low-value assets b) any lease payments made at or before the commencement date, less any lease incentives received, The Group applies the short-term lease recognition exemption to its short-term leases of machinery and c) any initial direct costs incurred by the Group equipment (i.e., those leases that have a lease term of 12 months or less from the commencement date and do not contain a purchase option). It also applies the lease of low-value assets recognition exemption Unless the Group is reasonably certain to obtain ownership of the leased asset at the end of the lease to leases of office equipment that are considered of low value. Lease payments on short-term leases and term, the recognised right-of-use assets are depreciated on a straight-line basis over the shorter of its leases of low-value assets are recognised as expense on a straight-line basis over the lease term. estimated useful life and the lease term. Lease assets are subject to impairment test. Transition to IFRS 16: Lease liabilities The Group has applied TFRS 16 “Leases”, which replaces TAS 17 “Leases”, for the effective period beginning on 1 January 2019. The cumulative impact of applying TFRS 16 is accounted in the At the commencement date of the lease, the Group recognises lease liabilities measured at the present consolidated financial statements retrospectively (“cumulative impact approach”) at the start of the value of lease payments to be made over the lease term. current accounting period. The simplified transition approach of the related standard does not require a Lease payments included in the measurement of the lease liability at the commencement date of the restatement in the comparative periods or in the retained earnings. lease includes the lease payments will be made during the term of the lease and the unpaid lease payments existing at the commencement date of the lease and comprised as followings: The Group elected to use the exemptions applicable to the standard on lease contracts for which the lease terms ends within 12 months as of the date of initial application and lease contracts for which the a) Fixed payments, underlying asset is of low value. The Group has leases of certain office equipment (i.e., personal b) Variable lease payments that depend on an index or a rate, initially measured using the index or computers, printing and photocopying machines and other office equipment) that are considered of low rate as the commencement date, value. c) Amounts expected to be paid by the Group within the scope of residual value commitments d) If the Group is reasonably sure that it will use the purchase option, the price of use of this option The impact of transition to TFRS 16 is as below: and 1 January 2019 e) If the Group is reasonably certain to exercise an extension option, and penalties for early termination of a lease unless the Group is reasonably certain to terminate early. Assets 6.298.281 The variable lease payments that do not depend on an index or a rate are recognised as expense in the Right-of-use assets 6.298.281 period on which the event or condition that triggers the payment occurs When determining the revised discount rate for the remainder of the group rental period, the Group uses Liabilities 6.298.281 the implicit interest rate if the implicit interest rate in the lease can be easily determined; In case it cannot Short-term Lease liabilities 3.673.286 be determined easily, it determines the alternative borrowing interest rate on the date of the Group's re- Long-term Lease liabilities 2.624.995 evaluation.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2019 AND 2018 (Amounts expressed in Turkish Lira (“TL” unless otherwise stated.)

NOTE 2 - BASIS OF PRESENTATION OF CONSOLIDATED FINANCIAL STATEMENTS (Continued)

2.2 - Changes in Accounting Policies (Continued)

Lease liabilities (Continued)

After initial recognition, the lease liability is measured as followings:

a) Increasing the carrying amount to reflect interest on lease liability, and b) Reducing the carrying amount to reflect the lease payments made.

In addition, the carrying amount of lease liabilities is remeasured if there is a modification, a change in the lease term, a change in the in-substance fixed lease payments or a change in the assessment to purchase the underlying asset.

Short-term leases and leases of low-value assets

The Group applies the short-term lease recognition exemption to its short-term leases of machinery and equipment (i.e., those leases that have a lease term of 12 months or less from the commencement date and do not contain a purchase option). It also applies the lease of low-value assets recognition exemption to leases of office equipment that are considered of low value. Lease payments on short-term leases and leases of low-value assets are recognised as expense on a straight-line basis over the lease term.

Transition to IFRS 16:

The Group has applied TFRS 16 “Leases”, which replaces TAS 17 “Leases”, for the effective period beginning on 1 January 2019. The cumulative impact of applying TFRS 16 is accounted in the consolidated financial statements retrospectively (“cumulative impact approach”) at the start of the current accounting period. The simplified transition approach of the related standard does not require a restatement in the comparative periods or in the retained earnings.

The Group elected to use the exemptions applicable to the standard on lease contracts for which the lease terms ends within 12 months as of the date of initial application and lease contracts for which the underlying asset is of low value. The Group has leases of certain office equipment (i.e., personal computers, printing and photocopying machines and other office equipment) that are considered of low value.

The impact of transition to TFRS 16 is as below: 1 January 2019

Assets 6.298.281

Right-of-use assets 6.298.281

Liabilities 6.298.281 Short-term Lease liabilities 3.673.286 Long-term Lease liabilities 2.624.995

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTES TO CONSOLIDATED FINANCIAL STATEMENTS AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2019 AND 2018 AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2019 AND 2018 (Amounts expressed in Turkish Lira (“TL” unless otherwise stated.) (Amounts expressed in Turkish Lira (“TL” unless otherwise stated.)

NOTE 2 - BASIS OF PRESENTATION OF CONSOLIDATED FINANCIAL STATEMENTS NOTE 2 - BASIS OF PRESENTATION OF CONSOLIDATED FINANCIAL STATEMENTS (Continued) (Continued)

2. 3 - Changes in Accounting Estimates and Errors 2.4 - New and Revised Turkish Accounting Standards (Continued)

If changes in accounting estimates and errors are related only for one period, changes are applied in the The new standards, amendments and interpretations (Continued) current year but if the changes in estimates affect following periods, changes are applied both in current and following years prospectively. In current year, there are no significant changes in the accounting Transition to TFRS 16: estimates of the Group. The Group adopted TFRS 16 using the modified retrospective approach. Transition effects to the The accounting errors identified are corrected retrospectively and prior year financial statements are mentioned standard and a summary of the relevant accounting policies are presented in "Note 2.2 restated. In current year, there are no changes in accounting estimates and no errors identified. Changes in Accounting Policies". 2.4 - New and Revised Turkish Accounting Standards Amendments to TAS 28 “Investments in Associates and Joint Ventures” (Amendments) The new standards, amendments and interpretations In December 2017, POA issued amendments to TAS 28 Investments in Associates and Joint Ventures. The accounting policies adopted in preparation of the consolidated financial statements as at The amendments clarify that a company applies TFRS 9 Financial Instruments to long-term interests in December 31, 2019 are consistent with those of the previous financial year, except for the adoption of an associate or joint venture that form part of the net investment in the associate or joint venture. new and amended TFRS and TFRIC interpretations effective as of January 1, 2019. The effects of these standards and interpretations on the Group’s financial position and performance have been disclosed in TFRS 9 Financial Instruments excludes interests in associates and joint ventures accounted for in the related paragraphs. accordance with TAS 28 Investments in Associates and Joint Ventures. In this amendment, POA clarified that the exclusion in TFRS 9 applies only to interests a company accounts for using the equity i) The new standards, amendments and interpretations which are effective as at January 1, method. A company applies TFRS 9 to other interests in associates and joint ventures, including long- 2019 are as follows: term interests to which the equity method is not applied and that, in substance, form part of the net investment in those associates and joint ventures. TFRS 16 Leases These amendments are applied for annual periods beginning on or after 1 January 2019. In April 2018, POA has published a new standard, TFRS 16 'Leases'. The new standard brings most leases on-balance sheet for lessees under a single model, eliminating the distinction between operating The interpretation did not have a significant impact on the financial position or performance of the and finance leases. Lessor accounting however remains largely unchanged and the distinction between Group. operating and finance leases is retained. TFRS 16 supersedes TAS 17 'Leases' and related interpretations and is effective for periods beginning on or after January 1, 2019, with earlier adoption permitted. TFRIC 23 Uncertainty over Income Tax Treatments

Lessees have recognition exemptions to applying this standard in case of short-term leases (i.e., leases The interpretation clarifies how to apply the recognition and measurement requirements in “TAS 12 with a lease term of 12 months or less) and leases of ’low-value’ assets (e.g., personal computers, office Income Taxes” when there is uncertainty over income tax treatments. equipment, etc.). At the commencement date of a lease, a lessee measures the lease liability at the present value of the lease payments that are not paid at that date (i.e., the lease liability), at the same date When there is uncertainty over income tax treatments, the interpretation addresses: recognises an asset representing the right to use the underlying asset (i.e., the right-of-use asset) and (a) whether an entity considers uncertain tax treatments separately; depreciates it during the lease term. The lease payments shall be discounted using the interest rate (b) the assumptions an entity makes about the examination of tax treatments by taxation authorities; implicit in the lease, if that rate can be readily determined. If that rate cannot be readily determined, the (c) how an entity determines taxable profit (tax loss), tax bases, unused tax losses, unused tax credits lessee shall use the lessee’s incremental borrowing rate. Lessees are required to recognise the interest and tax rates; and expense on the lease liability and the depreciation expense on the right-of-use asset separately. (d) how an entity considers changes in facts and circumstances.

Lessees are required to remeasure the lease liability upon the occurrence of certain events (e.g. a change The interpretation is effective for annual reporting periods beginning on or after 1 January 2019. in the lease term, a change in future lease payments resulting from a change in an index or rate used to determine those payments). Under these circumstances, the lessee recognises the amount of the The interpretation did not have a significant impact on the financial position or performance of the remeasurement of the lease liability as an adjustment to the right-of-use asset. Group.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2019 AND 2018 (Amounts expressed in Turkish Lira (“TL” unless otherwise stated.)

NOTE 2 - BASIS OF PRESENTATION OF CONSOLIDATED FINANCIAL STATEMENTS (Continued)

2.4 - New and Revised Turkish Accounting Standards (Continued)

The new standards, amendments and interpretations (Continued)

Transition to TFRS 16:

The Group adopted TFRS 16 using the modified retrospective approach. Transition effects to the mentioned standard and a summary of the relevant accounting policies are presented in "Note 2.2 Changes in Accounting Policies".

Amendments to TAS 28 “Investments in Associates and Joint Ventures” (Amendments)

In December 2017, POA issued amendments to TAS 28 Investments in Associates and Joint Ventures. The amendments clarify that a company applies TFRS 9 Financial Instruments to long-term interests in an associate or joint venture that form part of the net investment in the associate or joint venture.

TFRS 9 Financial Instruments excludes interests in associates and joint ventures accounted for in accordance with TAS 28 Investments in Associates and Joint Ventures. In this amendment, POA clarified that the exclusion in TFRS 9 applies only to interests a company accounts for using the equity method. A company applies TFRS 9 to other interests in associates and joint ventures, including long- term interests to which the equity method is not applied and that, in substance, form part of the net investment in those associates and joint ventures.

These amendments are applied for annual periods beginning on or after 1 January 2019.

The interpretation did not have a significant impact on the financial position or performance of the Group.

TFRIC 23 Uncertainty over Income Tax Treatments

The interpretation clarifies how to apply the recognition and measurement requirements in “TAS 12 Income Taxes” when there is uncertainty over income tax treatments.

When there is uncertainty over income tax treatments, the interpretation addresses: (a) whether an entity considers uncertain tax treatments separately; (b) the assumptions an entity makes about the examination of tax treatments by taxation authorities; (c) how an entity determines taxable profit (tax loss), tax bases, unused tax losses, unused tax credits and tax rates; and (d) how an entity considers changes in facts and circumstances.

The interpretation is effective for annual reporting periods beginning on or after 1 January 2019.

The interpretation did not have a significant impact on the financial position or performance of the Group.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2019 AND 2018 (Amounts expressed in Turkish Lira (“TL” unless otherwise stated.)

NOTE 2 - BASIS OF PRESENTATION OF CONSOLIDATED FINANCIAL STATEMENTS (Continued)

2.4 - New and Revised Turkish Accounting Standards (Continued)

The new standards, amendments and interpretations (Continued)

Annual Improvements – 2015–2017 Cycle

In January 2019, POA issued Annual Improvements to TFRS Standards 2015–2017 Cycle, amending the following standards: · TFRS 3 Business Combinations and TFRS 11 Joint Arrangements — The amendments to TFRS 3 clarify that when an entity obtains control of a business that is a joint operation, it remeasures previously held interests in that business. The amendments to TFRS 11 clarify that when an entity obtains joint control of a business that is a joint operation, the entity does not remeasure previously held interests in that business. · TAS 12 Income Taxes — The amendments clarify that all income tax consequences of dividends (i.e. distribution of profits) should be recognised in profit or loss, regardless of how the tax arises. · TAS 23 Borrowing Costs — The amendments clarify that if any specific borrowing remains outstanding after the related asset is ready for its intended use or sale, that borrowing becomes part of the funds that an entity borrows generally when calculating the capitalisation rate on general borrowings.

The amendments are effective from annual periods beginning on or after 1 January 2019

The amendments did not have a significant impact on the financial position or performance of the Group.

Plan Amendment, Curtailment or Settlement” (Amendments to TAS 19)

In January 2019, the POA published Amendments to TAS 19 “Plan Amendment, Curtailment or Settlement” The amendments require entities to use updated actuarial assumptions to determine current service cost and net interest for the remainder of the annual reporting period after a plan amendment, curtailment or settlement occurs.

These amendments are applied for annual periods beginning on or after 1 January 2019.

The amendments did not have a significant impact on the financial position or performance of the Group.

Prepayment Features with Negative Compensation (Amendments to TFRS 9)

The POA issued minor amendments to TFRS 9 Financial Instruments to enable companies to measure some prepayable financial assets at amortised cost.

Applying TFRS 9, a company would measure a financial asset with so-called negative compensation at fair value through profit or loss. Applying the amendments, if a specific condition is met, entities will be able to measure at amortised cost some prepayable financial assets with so-called negative compensation.

These amendments are applied for annual periods beginning on or after 1 January 2019.

The amendments did not have a significant impact on the financial position or performance of the Group.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2019 AND 2018 (Amounts expressed in Turkish Lira (“TL” unless otherwise stated.)

NOTE 2 - BASIS OF PRESENTATION OF CONSOLIDATED FINANCIAL STATEMENTS (Continued)

2.4 - New and Revised Turkish Accounting Standards (Continued)

The new standards, amendments and interpretations (Continued)

ii) Standards issued but not yet effective and not early adopted

Standards, interpretations and amendments to existing standards that are issued but not yet effective up to the date of issuance of the consolidated financial statements are as follows. the Group will make the necessary changes if not indicated otherwise, which will be affecting the consolidated financial statements and disclosures, when the new standards and interpretations become effective.

TFRS 10 and TAS 28: Sale or Contribution of Assets between an Investor and its Associate or Joint Venture (Amendments)

In December 2017, POA postponed the effective date of this amendment indefinitely pending the outcome of its research project on the equity method of accounting. Early application of the amendments is still permitted.

The Group will wait until the final amendment to assess the impacts of the changes.

TFRS 17 - The new Standard for insurance contracts

The PAO issued TFRS 17 in February 2019, a comprehensive new accounting standard for insurance contracts covering recognition and measurement, presentation and disclosure. TFRS 17 model combines a current balance sheet measurement of insurance contract liabilities with the recognition of profit over the period that services are provided. Certain changes in the estimates of future cash flows and the risk adjustment are also recognised over the period that services are provided. Entities will have an option to present the effect of changes in discount rates either in profit and loss or in OCI. The standard includes specific guidance on measurement and presentation for insurance contracts with participation features. TFRS 17 will become effective for annual reporting periods beginning on or after 1 January 2021; early application is permitted.

The standard is not applicable for the Group and will not have an impact on the financial position or performance of the Group.

16 90 Financial Statements and Footnotes

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KEREVİTAŞ GIDA SANAYİ VE TİCARET A.Ş. AND ITS SUBSIDIARIES KEREVİTAŞ GIDA SANAYİ VE TİCARET A.Ş. AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTES TO CONSOLIDATED FINANCIAL STATEMENTS AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2019 AND 2018 AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2019 AND 2018 (Amounts expressed in Turkish Lira (“TL” unless otherwise stated.) (Amounts expressed in Turkish Lira (“TL” unless otherwise stated.) NOTE 2 - BASIS OF PRESENTATION OF CONSOLIDATED FINANCIAL STATEMENTS NOTE 2 - BASIS OF PRESENTATION OF CONSOLIDATED FINANCIAL STATEMENTS (Continued) (Continued) 2.4 - New and Revised Turkish Accounting Standards (Continued) 2.4 - New and Revised Turkish Accounting Standards (Continued) The new standards, amendments and interpretations (Continued) The new standards, amendments and interpretations (Continued) Definition of Material (Amendments to TAS 1 and TAS 8) (Continued) Definition of a Business (Amendments to TFRS 3) The amendments to TAS 1 and TAS 8 are required to be applied for annual periods beginning on or In May 2019, the PAO issued amendments to the definition of a business in TFRS 3 Business after 1 January 2020. The amendments must be applied prospectively and earlier application is Combinations. The amendments are intended to assist entities to determine whether a transaction should permitted. be accounted for as a business combination or as an asset acquisition. The Group does not expect an impact on the financial position or performance of the Group. The amendments: - clarify the minimum requirements for a business; Amendments to TFRS 9, TAS 39 and TFRS 7- Interest Rate Benchmark Reform - remove the assessment of whether market participants are capable of replacing any missing elements; The amendments issued to TFRS 9 and TAS 39 which are effective for periods beginning on or after - add guidance to help entities assess whether an acquired process is substantive; January 1, 2020 provide certain reliefs for 4 fundamental matters in connection with interest rate - narrow the definitions of a business and of outputs; and benchmark reform. These reliefs are related to hedge accounting as follows: - introduce an optional fair value concentration test. - Highly probable requirement The amendments to TFRS 3 are effective for annual reporting periods beginning on or after 1 January - Prospective Assessments 2020 and apply prospectively. Earlier application is permitted. - Retrospective Assessments - Separately identifiable risk components The Group does not expect an impact on the financial position or performance of the Group. Reliefs used as a result of amendments in TFRS 9 and TAS 39 is aimed to be disclosed in financial statements based on the amendments made in TFRS 7. Definition of Material (Amendments to TAS 1 and TAS 8) iii) The new standards, amendments and interpretations that are issued by the International In June 2019, the PAO issued amendments to TAS 1 Presentation of Financial Statements and TAS 8 Accounting Standards Board (IASB) but not issued by Public Oversight Authority (POA) Accounting Policies, Changes in Accounting Estimates and Errors to align the definition of ‘material’ across the standards and to clarify certain aspects of the definition. The new definition states that, Changes in IAS 1 - Classification of liabilities as short and long term ’Information is material if omitting, misstating or obscuring it could reasonably be expected to influence decisions that the primary users of general purpose financial statements make on the basis of those On January 23, 2020, IASB made amendments to the “Presentation of IAS 1 Financial Statements” financial statements, which provide financial information about a specific reporting entity. The standard. These amendments, which are effective for annual reporting periods starting on or after 1 amendments clarify that materiality will depend on the nature or magnitude of information, or both. An January 2022, provide explanations to the criteria for the long and short term classification of liabilities. entity will need to assess whether the information, either individually or in combination with other The amendments should be applied retrospectively according to IAS 8 “Accounting Policies, Changes information, is material in the context of the financial statements. and Errors in Accounting Estimates”. Early application is allowed. The Group evaluates the effects of this change on the financial position and performance of the Group. The amendments to TFRS 3 are effective for annual reporting periods beginning on or after 1 January 2020 and apply prospectively. Earlier application is permitted.

The Group does not expect an impact on the financial position or performance of the Group.

18

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2019 AND 2018 (Amounts expressed in Turkish Lira (“TL” unless otherwise stated.)

NOTE 2 - BASIS OF PRESENTATION OF CONSOLIDATED FINANCIAL STATEMENTS (Continued)

2.4 - New and Revised Turkish Accounting Standards (Continued)

The new standards, amendments and interpretations (Continued)

Definition of Material (Amendments to TAS 1 and TAS 8) (Continued)

The amendments to TAS 1 and TAS 8 are required to be applied for annual periods beginning on or after 1 January 2020. The amendments must be applied prospectively and earlier application is permitted.

The Group does not expect an impact on the financial position or performance of the Group.

Amendments to TFRS 9, TAS 39 and TFRS 7- Interest Rate Benchmark Reform

The amendments issued to TFRS 9 and TAS 39 which are effective for periods beginning on or after January 1, 2020 provide certain reliefs for 4 fundamental matters in connection with interest rate benchmark reform. These reliefs are related to hedge accounting as follows:

- Highly probable requirement - Prospective Assessments - Retrospective Assessments - Separately identifiable risk components

Reliefs used as a result of amendments in TFRS 9 and TAS 39 is aimed to be disclosed in financial statements based on the amendments made in TFRS 7.

iii) The new standards, amendments and interpretations that are issued by the International Accounting Standards Board (IASB) but not issued by Public Oversight Authority (POA)

Changes in IAS 1 - Classification of liabilities as short and long term

On January 23, 2020, IASB made amendments to the “Presentation of IAS 1 Financial Statements” standard. These amendments, which are effective for annual reporting periods starting on or after 1 January 2022, provide explanations to the criteria for the long and short term classification of liabilities. The amendments should be applied retrospectively according to IAS 8 “Accounting Policies, Changes and Errors in Accounting Estimates”. Early application is allowed. The Group evaluates the effects of this change on the financial position and performance of the Group.

18 92 Financial Statements and Footnotes

CONVENIENCE TRANSLATION INTO ENGLISH OF THE CONSOLIDATED FINANCIAL CONVENIENCE TRANSLATION INTO ENGLISH OF THE CONSOLIDATED FINANCIAL STATEMENTS ORIGINALLY ISSUED IN TURKISH (NOTE 2.7) STATEMENTS ORIGINALLY ISSUED IN TURKISH (NOTE 2.7) KEREVİTAŞ GIDA SANAYİ VE TİCARET A.Ş. AND ITS SUBSIDIARIES KEREVİTAŞ GIDA SANAYİ VE TİCARET A.Ş. AND ITS SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2019 AND 2018 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Amounts expressed in Turkish Lira (“TL” unless otherwise stated.) AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2019 AND 2018 (Amounts expressed in Turkish Lira (“TL” unless otherwise stated.) NOTE 2 - BASIS OF PRESENTATION OF CONSOLIDATED FINANCIAL STATEMENTS (Continued) NOTE 2 - BASIS OF PRESENTATION OF CONSOLIDATED FINANCIAL STATEMENTS (Continued) 2.5 - Summary of Significant Accounting Policies 2.5 - Summary of Significant Accounting Policies (Continued) Related Parties Revenue recognition (Continued) A related party is a person or entity that is related to the entity that is preparing its financial statements.

a) A person or a close member of that person's family is related to a reporting entity if that person: The Group evaluates each contracted obligation separately and respective obligations, committed to deliver the distinct goods or perform services, are determined as separate performance obligations. (i) has control or joint control over the reporting entity; Group determines at contract inception whether the performance obligation is satisfied over time or at a (ii) has significant influence over the reporting entity; or point in time. When the Group transfers control of a good or service over time, and therefore satisfies a (iii) is a member of the key management personnel of the reporting entity or of a parent of performance obligation over time, then the revenue is recognised over time by measuring the progress the reporting entity. towards complete satisfaction of that performance obligation.

The income from the sale of the goods is recognized as soon as all the following conditions are met. When a performance obligation is satisfied by transferring promised goods or services to a customer, the Group recognises the revenue as the amount of the transaction price that is allocated to that b) An entity is related to a reporting entity if any of the following conditions applies: performance obligation. The goods or services are transferred when the control of the goods or services is delivered to the customers. (i) The entity and the reporting entity are members of the same group (which means that each parent, subsidiary and fellow subsidiary is related to the others). Following indicators are considered while evaluating the transfer of control of the goods and services: (ii) One entity is an associate or joint venture of the other entity (or an associate or joint venture of a member of a group of which the other entity is a member). a) presence of Group’s collection right of the consideration for the goods or services, b) customer’s (iii) Both entities are joint ventures of the same third party. ownership of the legal title on goods or services, c) physical transfer of the goods or services, d) (iv) One entity is a joint venture of a third entity and the other entity is an associate of the customer’s ownership of significant risks and rewards related to the goods or services, e) customer’s third entity. acceptance of goods or services. If Group expects, at contract inception, that the period between when (v) The entity is a post-employment benefit plan for the benefit of employees of either the the Group transfers a promised good or service to a customer and when the customer pays for that good reporting entity or an entity related to the reporting entity. If the reporting entity is itself or service will be one year or less, the promised amount of consideration for the effects of a significant such a plan, the sponsoring employers are also related to the reporting entity. financing component is not adjusted. On the other hand, when the contract effectively constitutes a (vi) The entity is controlled or jointly controlled by a person identified in (a). financing component, the fair value of the consideration is determined by discounting all future receipts (vii) A person identified in (a)(i) has significant influence over the entity or is a member of the using an imputed rate of interest. The difference between the fair value and the nominal amount of the key management personnel of the entity (or of a parent of the entity). consideration is recognised on an accrual basis as other operating income.

A related party transaction is a transfer of resources, services or obligations between a reporting entity Dividend and interest income: and a related party, regardless of whether a price is charged. Dividend income from investments is recognized when the shareholder's right to receive payment has Revenue recognition been established (provided that it is probable that the economic benefits will flow to the Group and the The revenue of the Group mainly consists of frozen food, canned food and oil sales. amount of income can be measured reliably).

The Group recognizes revenue based on the following five main principles: according to TFRS 15 Interest income from a financial asset is recognized when it is probable that the economic benefits will “Revenue from Contracts with Customers”: flow to the Group and the amount of income can be measured reliably. Interest income is accrued on a time basis, by reference to the principal outstanding and at the effective interest rate applicable, which - Identification of customer contracts is the rate that exactly discounts estimated future cash receipts through the expected life of the financial - Identification of performance obligations asset to that asset's net carrying amount on initial recognition. - Determination of transaction price in the contract - Allocation of price to performance obligations - Recognition of revenue when the performance obligations are fulfilled.

19

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NOTE 2 - BASIS OF PRESENTATION OF CONSOLIDATED FINANCIAL STATEMENTS (Continued)

2.5 - Summary of Significant Accounting Policies (Continued)

Revenue recognition (Continued)

The Group evaluates each contracted obligation separately and respective obligations, committed to deliver the distinct goods or perform services, are determined as separate performance obligations. Group determines at contract inception whether the performance obligation is satisfied over time or at a point in time. When the Group transfers control of a good or service over time, and therefore satisfies a performance obligation over time, then the revenue is recognised over time by measuring the progress towards complete satisfaction of that performance obligation.

When a performance obligation is satisfied by transferring promised goods or services to a customer, the Group recognises the revenue as the amount of the transaction price that is allocated to that performance obligation. The goods or services are transferred when the control of the goods or services is delivered to the customers.

Following indicators are considered while evaluating the transfer of control of the goods and services: a) presence of Group’s collection right of the consideration for the goods or services, b) customer’s ownership of the legal title on goods or services, c) physical transfer of the goods or services, d) customer’s ownership of significant risks and rewards related to the goods or services, e) customer’s acceptance of goods or services. If Group expects, at contract inception, that the period between when the Group transfers a promised good or service to a customer and when the customer pays for that good or service will be one year or less, the promised amount of consideration for the effects of a significant financing component is not adjusted. On the other hand, when the contract effectively constitutes a financing component, the fair value of the consideration is determined by discounting all future receipts using an imputed rate of interest. The difference between the fair value and the nominal amount of the consideration is recognised on an accrual basis as other operating income.

Dividend and interest income:

Dividend income from investments is recognized when the shareholder's right to receive payment has been established (provided that it is probable that the economic benefits will flow to the Group and the amount of income can be measured reliably).

Interest income from a financial asset is recognized when it is probable that the economic benefits will flow to the Group and the amount of income can be measured reliably. Interest income is accrued on a time basis, by reference to the principal outstanding and at the effective interest rate applicable, which is the rate that exactly discounts estimated future cash receipts through the expected life of the financial asset to that asset's net carrying amount on initial recognition.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTES TO CONSOLIDATED FINANCIAL STATEMENTS AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2019 AND 2018 AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2019 AND 2018 (Amounts expressed in Turkish Lira (“TL” unless otherwise stated.) (Amounts expressed in Turkish Lira (“TL” unless otherwise stated.)

NOTE 2 - BASIS OF PRESENTATION OF CONSOLIDATED FINANCIAL STATEMENTS NOTE 2 - BASIS OF PRESENTATION OF CONSOLIDATED FINANCIAL STATEMENTS (Continued) (Continued)

2.5 - Summary of Significant Accounting Policies (Continued) 2.5 - Summary of Significant Accounting Policies (Continued)

Inventories Depreciation on revalued buildings is charged to profit or loss. On the subsequent sale or retirement of a revalued property, the attributable revaluation surplus remaining in the properties revaluation reserve Inventories are stated at the lower of cost and net realizable value. Net realizable value represents the is transferred directly to retained earnings. Unless the subsequent sale or retirement of a revalued estimated selling price less all estimated costs of completion and costs necessary to make the sale. When property, the attributable revaluation surplus remaining in the properties revaluation reserve is not the net realizable value of inventory is less than cost, the inventory is written down to the net realizable transferred to retained earnings. Freehold land is not depreciated. value and the expense is included in statement of profit or loss in the period the write-down or loss occurred. When the circumstances that previously caused inventories to be written down below cost no Fixtures and equipment are stated at cost less accumulated depreciation and accumulated impairment longer exist or when there is clear evidence of an increase in net realizable value because of changed losses. economic circumstances, the amount of the write-down is reversed. The reversal amount is limited to the amount of the original write-down. Inventories have been valued with weighted average cost method. Depreciation is recognized so as to write off the cost or valuation of assets, other than freehold land and properties under construction, less their residual values over their useful lives, using the straight-line Property, Plant and Equipment method. The estimated useful lives, residual values and depreciation method are reviewed at the end of each reporting period, with the effect of any changes in estimate accounted for on a prospective basis. Land and buildings held for use in the production or supply of goods or services, or for administrative purposes, are stated in the consolidated statement of financial position at their revalued amounts, being An item of property, plant and equipment is derecognized upon disposal or when no future economic the fair value at the date of revaluation, less any subsequent accumulated depreciation and subsequent benefits are expected to arise from the continued use of the asset. Any gain or loss arising on the disposal accumulated impairment losses. Revaluations are performed with sufficient regularity such that the or retirement of an item of property, plant and equipment is determined as the difference between the carrying amounts do not differ materially from those that would be determined using fair values at the sales proceeds and the carrying amount of the asset and is recognized in profit or loss. end of each reporting period. Estimated useful life of property, plants and equipment’s are shown below: Any revaluation increase arising on the revaluation of such land and buildings is recognized in other comprehensive income and accumulated in equity, except to the extent that it reverses a revaluation Useful Life (Year) decrease for the same asset previously recognized in profit or loss, in which case the increase is credited to profit or loss to the extent of the decrease previously expensed. A decrease in the carrying amount Buildings 10-50 arising on the revaluation of such land and buildings is recognized in profit or loss to the extent that it Land improvements 8-50 exceeds the balance, if any, held in the properties’ revaluation reserve relating to a previous revaluation Machinery and equipment’s 3-25 of that asset. Furniture and fixtures 3-50 Motor vehicles 4-10 Properties in the course of construction for production, supply or administrative purposes are carried at Leasehold improvements 3-5 cost, less any recognized impairment loss. Cost includes professional fees and, for qualifying assets, Other tangible assets 10 borrowing costs capitalized in accordance with the Group’s accounting policy. Such properties are classified to the appropriate categories of property, plant and equipment when completed and ready for intended use. Depreciation of these assets, on the same basis as other property assets, commences when the assets are ready for their intended use.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2019 AND 2018 (Amounts expressed in Turkish Lira (“TL” unless otherwise stated.)

NOTE 2 - BASIS OF PRESENTATION OF CONSOLIDATED FINANCIAL STATEMENTS (Continued)

2.5 - Summary of Significant Accounting Policies (Continued)

Depreciation on revalued buildings is charged to profit or loss. On the subsequent sale or retirement of a revalued property, the attributable revaluation surplus remaining in the properties revaluation reserve is transferred directly to retained earnings. Unless the subsequent sale or retirement of a revalued property, the attributable revaluation surplus remaining in the properties revaluation reserve is not transferred to retained earnings. Freehold land is not depreciated.

Fixtures and equipment are stated at cost less accumulated depreciation and accumulated impairment losses.

Depreciation is recognized so as to write off the cost or valuation of assets, other than freehold land and properties under construction, less their residual values over their useful lives, using the straight-line method. The estimated useful lives, residual values and depreciation method are reviewed at the end of each reporting period, with the effect of any changes in estimate accounted for on a prospective basis.

An item of property, plant and equipment is derecognized upon disposal or when no future economic benefits are expected to arise from the continued use of the asset. Any gain or loss arising on the disposal or retirement of an item of property, plant and equipment is determined as the difference between the sales proceeds and the carrying amount of the asset and is recognized in profit or loss.

Estimated useful life of property, plants and equipment’s are shown below:

Useful Life (Year)

Buildings 10-50 Land improvements 8-50 Machinery and equipment’s 3-25 Furniture and fixtures 3-50 Motor vehicles 4-10 Leasehold improvements 3-5 Other tangible assets 10

22 96 Financial Statements and Footnotes

CONVENIENCE TRANSLATION INTO ENGLISH OF THE CONSOLIDATED FINANCIAL CONVENIENCE TRANSLATION INTO ENGLISH OF THE CONSOLIDATED FINANCIAL STATEMENTS ORIGINALLY ISSUED IN TURKISH (NOTE 2.7) STATEMENTS ORIGINALLY ISSUED IN TURKISH (NOTE 2.7)

KEREVİTAŞ GIDA SANAYİ VE TİCARET A.Ş. AND ITS SUBSIDIARIES KEREVİTAŞ GIDA SANAYİ VE TİCARET A.Ş. AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTES TO CONSOLIDATED FINANCIAL STATEMENTS AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2019 AND 2018 AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2019 AND 2018 (Amounts expressed in Turkish Lira (“TL” unless otherwise stated.) (Amounts expressed in Turkish Lira (“TL” unless otherwise stated.)

NOTE 2 - BASIS OF PRESENTATION OF CONSOLIDATED FINANCIAL STATEMENTS NOTE 2 - BASIS OF PRESENTATION OF CONSOLIDATED FINANCIAL STATEMENTS (Continued) (Continued)

2.5 - Summary of Significant Accounting Policies (Continued) 2.5 - Summary of Significant Accounting Policies (Continued) Intangible Assets (Continued) Intangible Assets Internally generated intangible assets – Research and Development (Continued) Intangible assets acquired separately The amount of intangible assets created within the enterprise is the total amount of expenditures incurred Intangible assets with finite useful lives that are acquired separately are carried at cost less accumulated from the moment the intangible asset meets the above-mentioned accounting requirements. When amortization and accumulated impairment losses. Amortization is recognized on a straight-line basis intangible assets created within the business fail to meet the above-mentioned conditions, development over their estimated useful lives. The estimated useful life and amortization method are reviewed at the expenses are recorded as expense in the period they occur. end of each reporting period, with the effect of any changes in estimate being accounted for on a prospective basis. Intangible assets with indefinite useful lives that are acquired separately are carried After initial accounting, intangible assets created within the business are also shown over the amount at cost less accumulated impairment losses. Estimated useful life of intangible assets are between 2 and after deducting accumulated amortization and accumulated depreciation from cost values such as 15 years. separately purchased intangible assets.

Internally generated intangible assets – Research and Development Derecognition of intangible assets

Expenditure on research activities is recognized as an expense in the period in which it is incurred. An intangible asset is derecognized from statement of financial position on disposal, or when no future economic benefits are expected from use or disposal. Gains or losses arising from derecognition of an An internally-generated intangible asset arising from development (or from the development phase of intangible asset, measured as the difference between the net disposal proceeds and the carrying amount an internal project) is recognized if, and only if, all of the following have been demonstrated: of the asset, are recognized in profit or loss when the asset is derecognized.

· The technical feasibility of completing the intangible asset so that it will be available for use or Impairment of Assets Other Than Goodwill sale, At the end of each reporting period, the Group reviews the carrying amounts of its property, plant and equipment and intangible assets to determine whether there is any indication that those assets have · The intention to complete the intangible asset and use or sell it, suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). When it is not possible to · The ability to use or sell the intangible asset, estimate the recoverable amount of an individual asset, the Group estimates the recoverable amount of the cash-generating unit to which the asset belongs. When a reasonable and consistent basis of allocation · How the intangible asset will generate probable future economic benefits can be identified, corporate assets are also allocated to individual cash-generating units, or otherwise they are allocated to the smallest group of cash-generating units for which a reasonable and consistent · The availability of adequate technical, financial and other resources to complete the development allocation basis can be identified. and to use or sell the intangible asset; and Intangible assets with indefinite useful lives and intangible assets not yet available for use are tested for · The ability to measure reliably the expenditure attributable to the intangible asset during its impairment at least annually, and whenever there is an indication that the asset may be impaired. development. Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted.

24

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2019 AND 2018 (Amounts expressed in Turkish Lira (“TL” unless otherwise stated.)

NOTE 2 - BASIS OF PRESENTATION OF CONSOLIDATED FINANCIAL STATEMENTS (Continued)

2.5 - Summary of Significant Accounting Policies (Continued)

Intangible Assets (Continued)

Internally generated intangible assets – Research and Development (Continued)

The amount of intangible assets created within the enterprise is the total amount of expenditures incurred from the moment the intangible asset meets the above-mentioned accounting requirements. When intangible assets created within the business fail to meet the above-mentioned conditions, development expenses are recorded as expense in the period they occur.

After initial accounting, intangible assets created within the business are also shown over the amount after deducting accumulated amortization and accumulated depreciation from cost values such as separately purchased intangible assets.

Derecognition of intangible assets

An intangible asset is derecognized from statement of financial position on disposal, or when no future economic benefits are expected from use or disposal. Gains or losses arising from derecognition of an intangible asset, measured as the difference between the net disposal proceeds and the carrying amount of the asset, are recognized in profit or loss when the asset is derecognized.

Impairment of Assets Other Than Goodwill

At the end of each reporting period, the Group reviews the carrying amounts of its property, plant and equipment and intangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). When it is not possible to estimate the recoverable amount of an individual asset, the Group estimates the recoverable amount of the cash-generating unit to which the asset belongs. When a reasonable and consistent basis of allocation can be identified, corporate assets are also allocated to individual cash-generating units, or otherwise they are allocated to the smallest group of cash-generating units for which a reasonable and consistent allocation basis can be identified.

Intangible assets with indefinite useful lives and intangible assets not yet available for use are tested for impairment at least annually, and whenever there is an indication that the asset may be impaired. Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted.

24 98 Financial Statements and Footnotes

CONVENIENCE TRANSLATION INTO ENGLISH OF THE CONSOLIDATED FINANCIAL STATEMENTS ORIGINALLY ISSUED IN TURKISH (NOTE 2.7)

KEREVİTAŞ GIDA SANAYİ VE TİCARET A.Ş. AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2019 AND 2018 (Amounts expressed in Turkish Lira (“TL” unless otherwise stated.)

NOTE 2 - BASIS OF PRESENTATION OF CONSOLIDATED FINANCIAL STATEMENTS (Continued)

2.5 - Summary of Significant Accounting Policies (Continued)

Impairment of Assets Other Than Goodwill (Continued)

If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (or cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognized immediately in profit or loss, unless the relevant asset is carried at a revalued amount, in which case the impairment loss is treated as a revaluation decrease.

When an impairment loss subsequently reverses, the carrying amount of the asset (or a cash-generating unit) is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognized for the asset (or cash-generating unit) in prior years. A reversal of an impairment loss is recognized immediately in profit or loss, unless the relevant asset is carried at a revalued amount, in which case the reversal of the impairment loss is treated as a revaluation increase.

Borrowing Costs

Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, which are assets that necessarily take a substantial period of time to get ready for their intended use or sale, are added to the cost of those assets, until such time as the assets are substantially ready for their intended use or sale.

All other borrowing costs are recognized in the statement of profit or loss in the period in which they are incurred.

Financial Assets

Classification and Measurement

The Group classifies its financial assets in three categories, as being financial assets measured at amortized cost, financial assets measured at fair value through other comprehensive income and financial assets measured at fair value through profit of loss. The classification of financial assets is determined considering the entity’s business model for managing the financial assets and the contractual cash flow characteristics of the financial assets. The appropriate classification of financial assets is determined at the time of the purchase.

(a) Financial assets measured at amortized cost

Financial assets measured at amortized cost, are non-derivative assets that are held within a business model whose objective is to hold assets in order to collect contractual cash flows and the contractual terms of the financial assets give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding. Financial assets with a maturity date shorter than 12 months are classified as current assets and with a maturity date longer than 12 months are classified as non-current assets. Financial assets of the Group measured at amortized cost comprise “cash and cash equivalents”, “trade receivables” and “other receivables”.

25 KEREVİTAŞ Annual Report 2019 99

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KEREVİTAŞ GIDA SANAYİ VE TİCARET A.Ş. AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2019 AND 2018 (Amounts expressed in Turkish Lira (“TL” unless otherwise stated.)

NOTE 2 - BASIS OF PRESENTATION OF CONSOLIDATED FINANCIAL STATEMENTS (Continued)

2.5 - Summary of Significant Accounting Policies (Continued)

(a) Financial assets measured at amortized cost (Continued)

The related assets which are initially measured at their fair values are in subsequent records recognized in the income statements at their discounted values using the effective interest rate method. Gains and losses resulting from valuation of non-derivative financial assets measured at amortized cost are recognized in the income statement.

Impairment

Impairment of the financial and contractual assets measured by using “Expected credit loss model”. The impairment model applies for amortized financial and contractual assets.

The Group has preferred to apply “simplified approach” for the recognition of impairment losses on trade receivables, carried at amortized cost and that do not comprise of any significant finance component. In accordance with the simplified approach, Group measures the loss allowances regarding its trade receivables at an amount equal to lifetime expected credit losses except incurred credit losses in which trade receivables are already impaired for a specific reason. In calculation of the expected credit losses, the future estimations of the Group are taken into account together with past credit loss experiences. In all other cases of impairment on financial assets, 12-month expected credit loss calculation is applied. 12-month expected credit loss is the expected credit loss due to defaults within 12 months after the reporting period. If the amount of the impairment subsequently decreases due to an event occurring after the write-down, the provision related to impairment is released and the release of the provision is credited to profit or loss. (b) Financial assets measured at fair value Assets that are held by the management for the collection of contractual cash flows and for selling the financial assets are measured at their fair value. If the management do not plan to dispose these assets in 12 months after the balance sheet date, they are classified as non-current assets. The Group make a choice for the equity instruments during the initial recognition and elect profit or loss or other comprehensive income for the presentation of fair value gain and loss: i) “Financial assets carried at fair value through profit or loss” are assets that are not measured at amortized cost or at fair value through other comprehensive income. Gains and losses on valuation of these financial assets are accounted for under the consolidated statement of income. ii) Financial assets carried at fair value through other comprehensive income comprise of “financial assets” in the statement of financial position. The Group measures these assets with their fair values. Gains or losses on a financial asset measured at fair value through other comprehensive income is recognized in other comprehensive income, except for impairment gains or losses and foreign exchange gains and losses until the financial asset is derecognized or reclassified. When the financial assets carried at fair value through other comprehensive income are sold, fair value gain or loss classified in other comprehensive income is classified to retained earnings.

26 100 Financial Statements and Footnotes

CONVENIENCE TRANSLATION INTO ENGLISH OF THE CONSOLIDATED FINANCIAL CONVENIENCE TRANSLATION INTO ENGLISH OF THE CONSOLIDATED FINANCIAL STATEMENTS ORIGINALLY ISSUED IN TURKISH (NOTE 2.7) STATEMENTS ORIGINALLY ISSUED IN TURKISH (NOTE 2.7) KEREVİTAŞ GIDA SANAYİ VE TİCARET A.Ş. AND ITS SUBSIDIARIES KEREVİTAŞ GIDA SANAYİ VE TİCARET A.Ş. AND ITS SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTES TO CONSOLIDATED FINANCIAL STATEMENTS AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2019 AND 2018 AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2019 AND 2018 (Amounts expressed in Turkish Lira (“TL” unless otherwise stated.) (Amounts expressed in Turkish Lira (“TL” unless otherwise stated.) NOTE 2 - BASIS OF PRESENTATION OF CONSOLIDATED FINANCIAL STATEMENTS NOTE 2 - BASIS OF PRESENTATION OF CONSOLIDATED FINANCIAL STATEMENTS (Continued) (Continued) 2.5 - Summary of Significant Accounting Policies (Continued) 2.5 - Summary of Significant Accounting Policies (Continued) Financial liabilities (Continued)

(b) Financial assets (Continued) Fair values, as much as possible, are derived from current market prices in active markets, if not available, are determined through the appropriate way of discounted cash flows and option pricing Trade Receivables models.

Trade receivables that are created by way of providing services directly to a debtor are measured at Financial liabilities at fair value through profit or loss amortized cost, using the effective interest rate method, Short-term trade receivables with no stated interest rate are measured at the original invoice amount unless the effect of imputing interest is Financial liabilities at fair value through profit or loss are stated at fair values at each reporting periods, significant. with any gains or losses arising on remeasurement recognized in profit or loss. Change in fair values are recognised in statement of profit or loss. The net gain or loss recognized in profit or loss incorporates Cash and cash equivalents any interest paid on the financial liability. Other Financial Liabilities Cash and cash equivalents comprise cash on hand and demand deposits and other short-term highly liquid investments which their maturities are three months or less from date of acquisition and that are Other financial liabilities, including borrowings, trade payables and other payables, are immediately readily convertible to a known amount of cash and are subject to an insignificant risk of changes in measured at fair value at intial recognition, net of transactions costs. value. Other financial liabilities are subsequently measured at amortized cost using the effective interest Recognition and derecognition of financial assets method, with interest expense recognised on an effective yield basis.

The Group recognises a financial asset or a financial liability in its statement of financial position when, The effective interest method is a method of calculating the amortized cost of a financial liability and of and only, the entity becomes a party to the contractual provisions of the instrument. The Group allocating interest expense over the relevant period. The effective interest rate is the rate that exactly derecognizes a financial asset only when the contractual rights to the cash flows from the asset expire, discounts estimated future cash payments through the expected life of the financial liability, or, where or when it transfers the financial asset and substantially all the risks and rewards of ownership of the appropriate, a shorter period. asset to another party. If the Group neither transfers nor retains substantially all the risks and rewards of In the event that the Group fulfills its contractual obligations, or the obligations specified are cancelled ownership and continues to control the transferred asset, the Group recognizes its retained interest in the oor expired, the Group derecognises the financial liability from its statement of financial position. The asset and an associated liability for amounts it may have to pay. If the Group retains substantially all the difference between the book value of the financial liability derecognised and the amount paid or the fair risks and rewards of ownership of a transferred financial asset, the Group continues to recognize the value of the new financial liability recognised is recognised in the statement of profit or loss. financial asset and also recognizes a collateralized borrowing for the proceeds received. An entity shall remove a financial liability from its statement of financial position when, and only, the obligation Effect of Exchange Differences specified in the contract is discharged or cancelled or expires. The individual financial statements of each Group entity are presented in the currency of the primary Financial liabilities economic environment in which the entity operates (its functional currency). The results and financial position of each entity are expressed in TL, which is the functional currency of the Company, and the The Group's financial liabilities and equity instruments are classified based on contractual arrangements presentation currency for the consolidated financial statements. and the definition of a financial liability and an equity instrument. A financial liability is measured at In preparing the financial statements of the individual entities, transactions in currencies other than TL fair value during its initial recognition. During the initial recognition of financial liabilities whose fair (foreign currencies) are recorded at the rates of exchange prevailing on the dates of the transactions. At value difference is not reflected in profit or loss, transaction costs that can be directly associated with the end of each reporting period, monetary items denominated in foreign currencies are retranslated at the undertaking of the relevant financial liability are added to the fair value in question. Financial the rates prevailing at that date. Non-monetary items carried at fair value that are denominated in foreign liabilities are accounted over the amortized cost value by using the effective interest method together currencies are retranslated at the rates prevailing at the date when the fair value was determined. Non- with the interest expense calculated over the effective interest rate in the following periods. monetary items that are measured in terms of historical cost in a foreign currency are not retranslated.

28

27 KEREVİTAŞ Annual Report 2019 101

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2019 AND 2018 (Amounts expressed in Turkish Lira (“TL” unless otherwise stated.)

NOTE 2 - BASIS OF PRESENTATION OF CONSOLIDATED FINANCIAL STATEMENTS (Continued)

2.5 - Summary of Significant Accounting Policies (Continued)

Financial liabilities (Continued)

Fair values, as much as possible, are derived from current market prices in active markets, if not available, are determined through the appropriate way of discounted cash flows and option pricing models.

Financial liabilities at fair value through profit or loss

Financial liabilities at fair value through profit or loss are stated at fair values at each reporting periods, with any gains or losses arising on remeasurement recognized in profit or loss. Change in fair values are recognised in statement of profit or loss. The net gain or loss recognized in profit or loss incorporates any interest paid on the financial liability.

Other Financial Liabilities

Other financial liabilities, including borrowings, trade payables and other payables, are immediately measured at fair value at intial recognition, net of transactions costs.

Other financial liabilities are subsequently measured at amortized cost using the effective interest method, with interest expense recognised on an effective yield basis.

The effective interest method is a method of calculating the amortized cost of a financial liability and of allocating interest expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash payments through the expected life of the financial liability, or, where appropriate, a shorter period.

In the event that the Group fulfills its contractual obligations, or the obligations specified are cancelled oor expired, the Group derecognises the financial liability from its statement of financial position. The difference between the book value of the financial liability derecognised and the amount paid or the fair value of the new financial liability recognised is recognised in the statement of profit or loss.

Effect of Exchange Differences

The individual financial statements of each Group entity are presented in the currency of the primary economic environment in which the entity operates (its functional currency). The results and financial position of each entity are expressed in TL, which is the functional currency of the Company, and the presentation currency for the consolidated financial statements.

In preparing the financial statements of the individual entities, transactions in currencies other than TL (foreign currencies) are recorded at the rates of exchange prevailing on the dates of the transactions. At the end of each reporting period, monetary items denominated in foreign currencies are retranslated at the rates prevailing at that date. Non-monetary items carried at fair value that are denominated in foreign currencies are retranslated at the rates prevailing at the date when the fair value was determined. Non- monetary items that are measured in terms of historical cost in a foreign currency are not retranslated.

28 102 Financial Statements and Footnotes

CONVENIENCE TRANSLATION INTO ENGLISH OF THE CONSOLIDATED FINANCIAL CONVENIENCE TRANSLATION INTO ENGLISH OF THE CONSOLIDATED FINANCIAL STATEMENTS ORIGINALLY ISSUED IN TURKISH (NOTE 2.7) STATEMENTS ORIGINALLY ISSUED IN TURKISH (NOTE 2.7)

KEREVİTAŞ GIDA SANAYİ VE TİCARET A.Ş. AND ITS SUBSIDIARIES KEREVİTAŞ GIDA SANAYİ VE TİCARET A.Ş. AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTES TO CONSOLIDATED FINANCIAL STATEMENTS AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2019 AND 2018 AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2019 AND 2018 (Amounts expressed in Turkish Lira (“TL” unless otherwise stated.) (Amounts expressed in Turkish Lira (“TL” unless otherwise stated.)

NOTE 2 - BASIS OF PRESENTATION OF CONSOLIDATED FINANCIAL STATEMENTS NOTE 2 - BASIS OF PRESENTATION OF CONSOLIDATED FINANCIAL STATEMENTS (Continued) (Continued)

2.5 - Summary of Significant Accounting Policies (Continued) 2.5 - Summary of Significant Accounting Policies (Continued)

Effect of Exchange Differences (Continued) Provisions, Contingent Assets and Liabilities

Exchange differences are recognized in profit or loss in the period in which they arise except for: Provisions are recognized when the Group has a present obligation (legal or constructive) as a result of a · Exchange differences on foreign currency borrowings relating to assets under construction for past event, it is probable that the Group will be required to settle the obligation, and a reliable estimate can future productive use, which are included in the cost of those assets where they are regarded as be made of the amount of the obligation. an adjustment to interest costs on those foreign currency borrowings; The amount recognized as a provision is the best estimate of the consideration required to settle the present · Exchange differences on transactions entered into in order to hedge certain foreign currency obligation at the end of the reporting period, taking into account the risks and uncertainties surrounding the risks (see below for hedging accounting policies); and obligation. When a provision is measured using the cash flows estimated to settle the present obligation, its carrying amount is the present value of those cash flows. · Exchange differences on monetary items receivable from or payable to a foreign operation for which settlement is neither planned nor likely to occur, which form part of the net investment When some or all of the economic benefits required to settle a provision are expected to be recovered from in a foreign operation, and which are recognized in the foreign currency translation reserve and a third party, the receivable is recognized as an asset if it is virtually certain that reimbursement will be recognized in profit or loss on disposal of the net investment. received, and the amount of the receivable can be measured reliably.

Assets and liabilities of the Group’s foreign operations are presented in TL considering exchange rates Reporting of Financial Information According to Department prevailing at the reporting date. Income and expenses are translated by using the average rates calculated for the year when the transaction occurred, unless significant fluctuation has happened in exchange rates. The Group’s main operations are producing and trading frozen and canned vegetables and fruits, frozen In case of any significant fluctuation in exchange rates, the transaction is translated by using the and canned sea food, frozen pastry products, croquettes, canned tuna fish, oil and margarine. The Group exchange rate at the transaction date. The translation difference is accounted under comprehensive management has determined the operating segments based on the reports reviewed by the Board of income as a component of equity. Directors that are used to make strategic decisions. Earnings Per Share The Group’s management has separated its operations two segments which are canned products and Earnings per share disclosed in the consolidated statement of comprehensive income are determined by margarine. Segment reporting is disclosed in Note 3. dividing net earnings by the weighted average number of shares that have been outstanding during the related period. Government Grants and Incentives

In Turkey, companies can increase their share capital by making a pro-rata distribution of shares (“bonus Government grants are not recognized until there is reasonable assurance that the Group will comply with shares”) to existing shareholders from retained earnings on equity items. Such kind of bonus shares are the conditions attaching to them and that the grants will be received. taken into consideration in the computation of earnings per share as issued share certificates. For the purpose of earnings per share computations, the weighted average number of shares outstanding during Government grants are recognized in profit or loss on a systematic basis over the periods in which the Group the period has been adjusted in respect of bonus shares issues without a corresponding change in resources, recognizes as expenses the related costs for which the grants are intended to compensate. Specifically, by giving them retroactive effect for the year in which they were issued and each earlier year. government grants whose primary condition is that the Group should purchase, construct or otherwise acquire non-current assets are recognized as deferred revenue in the consolidated statement of financial Events After the Reporting Period position (balance sheet) and transferred to profit or loss on a systematic and rational basis over the useful Events after the reporting period are those events that occur between the balance sheet date and the date lives of the related assets. when the financial statements are authorized for issue, even if they occur after an announcement related with the profit for the year or public disclosure of other selected financial information. Government grants that are receivable as compensation for expenses or losses already incurred or for the purpose of giving immediate financial support to the Group with no future related costs are recognized in The Group adjusts the amounts recognized in its financial statements if adjusting events occur after the profit or loss in the period in which they become receivable. balance sheet date. The events that do not require correction after the reporting period are disclosed in the footnotes of the consolidated financial statements, in case they are the issues affecting the economic The benefit of a government loan at a below-market rate of interest is treated as a government grant, decisions of the users of the financial statements. measured as the difference between proceeds received and the fair value of the loan based on prevailing market interest rates.

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KEREVİTAŞ GIDA SANAYİ VE TİCARET A.Ş. AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2019 AND 2018 (Amounts expressed in Turkish Lira (“TL” unless otherwise stated.)

NOTE 2 - BASIS OF PRESENTATION OF CONSOLIDATED FINANCIAL STATEMENTS (Continued)

2.5 - Summary of Significant Accounting Policies (Continued)

Provisions, Contingent Assets and Liabilities

Provisions are recognized when the Group has a present obligation (legal or constructive) as a result of a past event, it is probable that the Group will be required to settle the obligation, and a reliable estimate can be made of the amount of the obligation.

The amount recognized as a provision is the best estimate of the consideration required to settle the present obligation at the end of the reporting period, taking into account the risks and uncertainties surrounding the obligation. When a provision is measured using the cash flows estimated to settle the present obligation, its carrying amount is the present value of those cash flows.

When some or all of the economic benefits required to settle a provision are expected to be recovered from a third party, the receivable is recognized as an asset if it is virtually certain that reimbursement will be received, and the amount of the receivable can be measured reliably.

Reporting of Financial Information According to Department

The Group’s main operations are producing and trading frozen and canned vegetables and fruits, frozen and canned sea food, frozen pastry products, croquettes, canned tuna fish, oil and margarine. The Group management has determined the operating segments based on the reports reviewed by the Board of Directors that are used to make strategic decisions.

The Group’s management has separated its operations two segments which are canned products and margarine. Segment reporting is disclosed in Note 3.

Government Grants and Incentives

Government grants are not recognized until there is reasonable assurance that the Group will comply with the conditions attaching to them and that the grants will be received.

Government grants are recognized in profit or loss on a systematic basis over the periods in which the Group recognizes as expenses the related costs for which the grants are intended to compensate. Specifically, government grants whose primary condition is that the Group should purchase, construct or otherwise acquire non-current assets are recognized as deferred revenue in the consolidated statement of financial position (balance sheet) and transferred to profit or loss on a systematic and rational basis over the useful lives of the related assets.

Government grants that are receivable as compensation for expenses or losses already incurred or for the purpose of giving immediate financial support to the Group with no future related costs are recognized in profit or loss in the period in which they become receivable.

The benefit of a government loan at a below-market rate of interest is treated as a government grant, measured as the difference between proceeds received and the fair value of the loan based on prevailing market interest rates.

30 104 Financial Statements and Footnotes

CONVENIENCE TRANSLATION INTO ENGLISH OF THE CONSOLIDATED FINANCIAL CONVENIENCE TRANSLATION INTO ENGLISH OF THE CONSOLIDATED FINANCIAL STATEMENTS ORIGINALLY ISSUED IN TURKISH (NOTE 2.7) STATEMENTS ORIGINALLY ISSUED IN TURKISH (NOTE 2.7)

KEREVİTAŞ GIDA SANAYİ VE TİCARET A.Ş. AND ITS SUBSIDIARIES KEREVİTAŞ GIDA SANAYİ VE TİCARET A.Ş. AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTES TO CONSOLIDATED FINANCIAL STATEMENTS AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2019 AND 2018 AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2019 AND 2018 (Amounts expressed in Turkish Lira (“TL” unless otherwise stated.) (Amounts expressed in Turkish Lira (“TL” unless otherwise stated.)

NOTE 2 - BASIS OF PRESENTATION OF CONSOLIDATED FINANCIAL STATEMENTS NOTE 2 - BASIS OF PRESENTATION OF CONSOLIDATED FINANCIAL STATEMENTS (Continued) (Continued) 2.5 - Summary of Significant Accounting Policies (Continued) 2.5 - Summary of Significant Accounting Policies (Continued) Investment Properties Corporate taxes (Continued) Investment properties are properties held to earn rentals and/or for capital appreciation, including Deferred tax liabilities are recognized for taxable temporary differences associated with investments in property under construction for such purposes. Investment properties are measured initially at cost, subsidiaries and associates, and interests in joint ventures, except where the Group is able to control the including transaction costs. Subsequent to initial recognition, investment properties are stated at fair reversal of the temporary difference and it is probable that the temporary difference will not reverse in value. Gains or losses arising from changes in the fair values of investment properties are included in the foreseeable future. Deferred tax assets arising from deductible temporary differences associated with the profit or loss in the year in which they arise. such investments and interests are only recognized to the extent that it is probable that there will be sufficient taxable profits against which to utilize the benefits of the temporary differences and they are An investment property is derecognized upon disposal or when the investment property is permanently expected to reverse in the foreseeable future. withdrawn from use and no future economic benefits are expected from disposal. Any gain or loss arising on derecognition of the property is included in profit or loss in the period in which the property is Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the period derecognized. in which the liability is settled or the asset realized, based on tax rates (and tax laws) that have been enacted or substantively enacted by the end of the reporting period. The measurement of deferred tax Transfers are made to or from investment property only when there is a change in use. For a transfer liabilities and assets reflects the tax consequences that would follow from the manner in which the Group from investment property that is measured at fair value to owner occupied property, the deemed cost for expects, at the reporting date, to recover or settle the carrying amount of its assets and liabilities. subsequent accounting is the fair value at the date of change in use. If owner occupied property becomes an investment property that is measured at fair value, the Group accounts for such property in accordance Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current with the policy stated under “Property, Plant and Equipment” up to the date of change in use. tax assets against current tax liabilities and when they relate to income taxes levied by the same taxation Fair value of investment properties is determined by valuation companies which have enough experience authority and the Group intends to settle its current tax assets and liabilities on a net basis. in valuation of investment property and have CMB valuation certificate. Investment properties are classified in level 2 of the fair value hierarchy table. For the purposes of measuring deferred tax liabilities and deferred tax assets for investment properties that are measured using the fair value model, the carrying amounts of such properties are presumed to Corporate taxes be recovered entirely through sale, unless the presumption is rebutted. The presumption is rebutted when the investment property is depreciable and is held within a business model whose objective is to consume Turkish tax legislation does not permit a parent company and its subsidiary to file a consolidated tax substantially all of the economic benefits embodied in the investment property over time, rather than return. Therefore, provisions for taxes, as reflected in the accompanying consolidated financial through sale. The management reviewed the Group’s investment property portfolios and concluded that statements, have been calculated on a separate-entity basis. none of the Group’s investment properties are held under a business model whose objective is to consume substantially all of the economic benefits embodied in the investment properties over time, Income tax expense represents the sum of the current income tax and deferred tax. rather than through sale. Therefore, the management has determined that the ‘sale’ presumption set out Current income tax in the amendments to TAS 12 is not rebutted.

The tax currently payable is based on taxable profit for the year. Taxable profit differs from ‘profit Current and deferred tax for the period before tax’ as reported in the consolidated statement of profit or loss because of items of income or expense that are taxable or deductible in other years and it excludes items that are never taxable or Current and deferred tax are recognized as in profit or loss, except when they relate to items that are deductible. The Group’s current tax is calculated using tax rates that have been enacted or substantively recognized in other comprehensive income or directly in equity. enacted by the end of the reporting period. Deferred tax Deferred tax liability or asset is recognized on temporary differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases which are used in the computation of taxable profit. Deferred tax liabilities are generally recognized for all taxable temporary differences. Deferred tax assets are recognized for all deductible temporary differences to the extent that it is probable that taxable profits will be available against which those deductible temporary differences can be utilized. Such deferred tax assets and liabilities are not recognized if the temporary difference arises from goodwill or from the initial recognition (other than in a business combination) of other assets and liabilities in a transaction that affects neither the taxable profit nor the accounting profit. 32 31 KEREVİTAŞ Annual Report 2019 105

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2019 AND 2018 (Amounts expressed in Turkish Lira (“TL” unless otherwise stated.)

NOTE 2 - BASIS OF PRESENTATION OF CONSOLIDATED FINANCIAL STATEMENTS (Continued) 2.5 - Summary of Significant Accounting Policies (Continued)

Corporate taxes (Continued)

Deferred tax liabilities are recognized for taxable temporary differences associated with investments in subsidiaries and associates, and interests in joint ventures, except where the Group is able to control the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future. Deferred tax assets arising from deductible temporary differences associated with such investments and interests are only recognized to the extent that it is probable that there will be sufficient taxable profits against which to utilize the benefits of the temporary differences and they are expected to reverse in the foreseeable future.

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

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

For the purposes of measuring deferred tax liabilities and deferred tax assets for investment properties that are measured using the fair value model, the carrying amounts of such properties are presumed to be recovered entirely through sale, unless the presumption is rebutted. The presumption is rebutted when the investment property is depreciable and is held within a business model whose objective is to consume substantially all of the economic benefits embodied in the investment property over time, rather than through sale. The management reviewed the Group’s investment property portfolios and concluded that none of the Group’s investment properties are held under a business model whose objective is to consume substantially all of the economic benefits embodied in the investment properties over time, rather than through sale. Therefore, the management has determined that the ‘sale’ presumption set out in the amendments to TAS 12 is not rebutted.

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.

32 106 Financial Statements and Footnotes

CONVENIENCE TRANSLATION INTO ENGLISH OF THE CONSOLIDATED FINANCIAL CONVENIENCE TRANSLATION INTO ENGLISH OF THE CONSOLIDATED FINANCIAL STATEMENTS ORIGINALLY ISSUED IN TURKISH (NOTE 2.7) STATEMENTS ORIGINALLY ISSUED IN TURKISH (NOTE 2.7)

KEREVİTAŞ GIDA SANAYİ VE TİCARET A.Ş. AND ITS SUBSIDIARIES KEREVİTAŞ GIDA SANAYİ VE TİCARET A.Ş. AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTES TO CONSOLIDATED FINANCIAL STATEMENTS AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2019 AND 2018 AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2019 AND 2018 (Amounts expressed in Turkish Lira (“TL” unless otherwise stated.) (Amounts expressed in Turkish Lira (“TL” unless otherwise stated.)

NOTE 2 - BASIS OF PRESENTATION OF CONSOLIDATED FINANCIAL STATEMENTS NOTE 2 - BASIS OF PRESENTATION OF CONSOLIDATED FINANCIAL STATEMENTS (Continued) (Continued) 2.6 - Significant Accounting Judgements, Estimates and Assumptions (continued) 2.5 - Summary of Significant Accounting Policies (Continued) Deferred taxes Employee Benefits Deferred tax assets and liabilities are recorded using substantially enacted tax rates for the effect of temporary differences between book and tax bases of assets and liabilities. Currently, there are deferred Termination and retirement benefits: tax assets recognised on tax loss carry-forwards and deductible temporary differences, all of which could be utilized in the taxable income in the future. Partial or fully recoverable amount of deferred tax assets Under Turkish law and union agreements, lump sum payments are made to employees retiring or are evaluated under current conditions. During the evaluation, future projected income, current year involuntarily leaving the Group. Such payments are considered as being part of defined retirement losses, due date of tax loss carry forwards and other deductible temporary differences and tax-planning benefit plan as per TAS 19 (Revised) Employee Benefits (“TAS 19”). strategies that would, if necessary, be implemented are taken into consideration.

The retirement benefit obligation recognized in the consolidated statement of financial position Expected Credit Loss represents the present value of the defined benefit obligation. The actuarial gains and losses are The Group has preferred to apply “simplified approach” the recognition of expected credit losses on recognized in other comprehensive income. trade receivables. In accordance with this method, if any provision provided to the trade receivables as a result of a specific events, the Group measures expected credit loss from these receivables by the life- Statement of Cash Flows time expected credit loss by using an impairment matrix. The calculation of expected credit loss is performed based on the past experience of the Group and its expectation based on the macroeconomic In the statement of cash flows, cash flows during the period are classified under operating, investing or indications. financing activities. TFRS 5 Assessment of Assets Held for Sale and Discontinued Operations Cash flows from operating activities indicate cash flows due to the Group entities’ operations. As announced on the Public Disclosure Platform ('KAP') on 8 November 2019, ÜNLÜ Yatırım Holding A.Ş. ve Ünlü Menkul Değerler A.Ş. has been authorized to investigate the possibilities of selling the Cash flows due to investing activities indicate the Group cash flows that are used for and obtained from B2B business unit (out-of-home consumption unit) including Marsa Yağ Sanayi ve Tic. A.Ş., and its investments (investments in property, plant and equipment and financial investments). subsidiary Western Foods and Packaging SDN BHD and for this purpose, to negotiate with potential buyers, to provide information flow and coordination (Transaction). Also, as announced by the Group Cash flows due to financing activities indicate the cash obtained from financial arrangements and used on ('KAP') on 26 December 2019, a mutual confidentiality agreement was signed and negotiations in their repayment. started with some strategic investors on 26 December 2019, to evaluate the opportunities for cooperation in relation to frozen food and canned food business. In addition, Morgan Stanley & Co International plc Share Capital and Dividends ("Morgan Stanley") has been authorized to investigate possible collaborations.

Common shares are classified as equity. Dividends on common shares are recognized in equity in the In accordance with the above explanations, the Group has assessed its assets and liabilities subject to the related transactions in accordance with TFRS 5 'Assets Held for Sale and Discontinued Operations' period in which they are approved and declared. standard and decided that as of balance sheet date, related asset group did not meet the criteria in accorance paragraph 7, the asset is available for immediate sale and in accorance paragraph 8, the sale is 2.6 - Significant Accounting Judgements, Estimates and Assumptions highly probable. In making this assessment, the Group has considered that related assets are not being actively marketed due to the fact that their current fair value is not observable, it is unlikely that these During the implementation of accounting policies specified in note 2.5, the management made the following transaction decisions will be recognized as a completed sale within one year from decision date and comments (except for the estimates below), which have a significant impact on the amounts recognized in possibility of the approval of the sale transaction by the shareholders could not be evaluated as of the the financial statements: balance sheet date. Provisions Related to Employee Benefits 2.7 – Convenience Translation into English of Consolidated Financial Statements

Provisions related to defined benefit plans of the employees are determined by actuarial assumptions The accounting principles described in Note 2 (defined as Turkish Accounting Standards/Turkish including discount rates, future salary increases and employee turnover rates. As these plans are long Financial Reporting Standards) to the accompanying consolidated financial statements differ from International Financial Reporting Standards (“IFRS”) issued by the International Accounting Standards term, these assumptions contain significant uncertainties. Details on provisions for employee benefits Board with respect to the application of inflation accounting, classification of some income statement are provided in Note 16. items and also for certain disclosure requirements of the POA.

34

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2019 AND 2018 (Amounts expressed in Turkish Lira (“TL” unless otherwise stated.)

NOTE 2 - BASIS OF PRESENTATION OF CONSOLIDATED FINANCIAL STATEMENTS (Continued) 2.6 - Significant Accounting Judgements, Estimates and Assumptions (continued) Deferred taxes Deferred tax assets and liabilities are recorded using substantially enacted tax rates for the effect of temporary differences between book and tax bases of assets and liabilities. Currently, there are deferred tax assets recognised on tax loss carry-forwards and deductible temporary differences, all of which could be utilized in the taxable income in the future. Partial or fully recoverable amount of deferred tax assets are evaluated under current conditions. During the evaluation, future projected income, current year losses, due date of tax loss carry forwards and other deductible temporary differences and tax-planning strategies that would, if necessary, be implemented are taken into consideration. Expected Credit Loss The Group has preferred to apply “simplified approach” the recognition of expected credit losses on trade receivables. In accordance with this method, if any provision provided to the trade receivables as a result of a specific events, the Group measures expected credit loss from these receivables by the life- time expected credit loss by using an impairment matrix. The calculation of expected credit loss is performed based on the past experience of the Group and its expectation based on the macroeconomic indications. TFRS 5 Assessment of Assets Held for Sale and Discontinued Operations As announced on the Public Disclosure Platform ('KAP') on 8 November 2019, ÜNLÜ Yatırım Holding A.Ş. ve Ünlü Menkul Değerler A.Ş. has been authorized to investigate the possibilities of selling the B2B business unit (out-of-home consumption unit) including Marsa Yağ Sanayi ve Tic. A.Ş., and its subsidiary Western Foods and Packaging SDN BHD and for this purpose, to negotiate with potential buyers, to provide information flow and coordination (Transaction). Also, as announced by the Group on ('KAP') on 26 December 2019, a mutual confidentiality agreement was signed and negotiations started with some strategic investors on 26 December 2019, to evaluate the opportunities for cooperation in relation to frozen food and canned food business. In addition, Morgan Stanley & Co International plc ("Morgan Stanley") has been authorized to investigate possible collaborations. In accordance with the above explanations, the Group has assessed its assets and liabilities subject to the related transactions in accordance with TFRS 5 'Assets Held for Sale and Discontinued Operations' standard and decided that as of balance sheet date, related asset group did not meet the criteria in accorance paragraph 7, the asset is available for immediate sale and in accorance paragraph 8, the sale is highly probable. In making this assessment, the Group has considered that related assets are not being actively marketed due to the fact that their current fair value is not observable, it is unlikely that these transaction decisions will be recognized as a completed sale within one year from decision date and possibility of the approval of the sale transaction by the shareholders could not be evaluated as of the balance sheet date. 2.7 – Convenience Translation into English of Consolidated Financial Statements The accounting principles described in Note 2 (defined as Turkish Accounting Standards/Turkish Financial Reporting Standards) to the accompanying consolidated financial statements differ from International Financial Reporting Standards (“IFRS”) issued by the International Accounting Standards Board with respect to the application of inflation accounting, classification of some income statement items and also for certain disclosure requirements of the POA.

34 108 Financial Statements and Footnotes

CONVENIENCE TRANSLATION INTO ENGLISH OF THE CONSOLIDATED FINANCIAL CONVENIENCE TRANSLATION INTO ENGLISH OF THE CONSOLIDATED FINANCIAL STATEMENTS ORIGINALLY ISSUED IN TURKISH (NOTE 2.7) STATEMENTS ORIGINALLY ISSUED IN TURKISH (NOTE 2.7)

KEREVİTAŞ GIDA SANAYİ VE TİCARET A.Ş. AND ITS SUBSIDIARIES KEREVİTAŞ GIDA SANAYİ VE TİCARET A.Ş. AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTES TO CONSOLIDATED FINANCIAL STATEMENTS AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2019 AND 2018 AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2019 AND 2018 (Amounts expressed in Turkish Lira (“TL” unless otherwise stated.) (Amounts expressed in Turkish Lira (“TL” unless otherwise stated.)

NOTE 3 – SEGMENT REPORTING NOTE 3 – SEGMENT REPORTING (Continued)

The main operations of the Group are production and distributing frozen and canned vegetables and 31 December 2018 fruits, frozen and canned sea food, frozen pastry products, croquettes, canned tuna fish and edible oil. Frozen and Consolidation Canned Edible Oil Adjustment Total Operating segments are determined and reported in a manner consistent with the reporting provided to Revenue (Note 19) 708.234.188 1.713.800.894 - 2.422.035.082 the Board of Directors and their strategic decision-making processes. Intersegment revenue 474.500 28.206.648 (28.681.148) - Revenue 708.708.688 1.742.007.542 (28.681.148) 2.422.035.082 The Board of Directors and top management monitor the operations of the Group on the basis of the Operating Profit (*) 86.111.223 212.768.173 - 298.879.396 different business units, which are “frozen and canned food” and “edible oil”. Other income from operating activities 13.215.247 52.950.332 - 66.165.579 Other expenses from operating activities (-) (13.176.061) (101.266.024) - (114.442.085) Operating Profit 86.150.409 164.452.481 - 250.602.890 The segment information for the periods 1 January – 31 December 2019 and 2018 are as follows: Depreciation and amortization expense (Note 12) 23.619.168 21.084.762 - 44.703.930 EBITDA (**) 109.730.391 233.852.935 - 343.583.326 31 December 2019 Investment 7.299.182 31.852.391 - 39.151.571 Total Assets / Liabilities According Frozen and Consolidation to Consolidated Financial (*) Represents profit before other income / expense from operating activities. Canned Edible Oil Adjustment Statements Segment assets 1.552.663.889 2.103.400.286 (932.888.979) 2.723.175.196 Segment liabilities 942.916.664 842.267.642 (28.388.979) 1.756.795.327 (**) EBITDA has calculated by adding depreciation and amortization expenses to the operating profit before other income / expenses from operating activities. 31 December 2018 Total Assets / Liabilities According EBITDA is not a measurement instrument that is prescribed in TAS and it cannot be comparable other Frozen and Consolidation to Consolidated Financial entities calculations. Canned Edible Oil Adjustment Statements Segment assets 1.892.978.441 1.999.507.699 (915.113.754) 2.977.372.386 Segment liabilities 1.248.137.895 957.866.800 (10.613.754) 2.195.390.941

31 December 2019 Frozen and Consolidation Canned Edible Oil Adjustment Total Revenue (Note 19) 732.271.575 1.760.594.184 - 2.492.865.759 Intersegment revenue 190.416 20.530.865 (20.721.281) - Revenue 732.461.991 1.781.125.049 (20.721.281) 2.492.865.759 Operating Profit (*) 112.039.431 216.558.523 1.059.455 329.657.409 Other income from operating activities 6.164.300 41.609.610 (1.059.455) 46.714.455 Other expenses from operating activities (-) (15.674.132) (48.252.190) - (63.926.322) Operating Profit 102.529.599 209.915.943 - 312.445.542 Depreciation and amortization expense 26.281.219 23.407.855 - 49.689.074 EBITDA (**) 138.320.650 239.966.378 1.059.455 379.346.483 Investment 6.897.113 10.272.683 - 17.169.796

(*) Represents profit before other income / expense from operating activities.

(**) EBITDA has calculated by adding depreciation and amortization expenses to the operating profit before other income / expenses from operating activities.

35 36 KEREVİTAŞ Annual Report 2019 109

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KEREVİTAŞ GIDA SANAYİ VE TİCARET A.Ş. AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2019 AND 2018 (Amounts expressed in Turkish Lira (“TL” unless otherwise stated.)

NOTE 3 – SEGMENT REPORTING (Continued)

31 December 2018 Frozen and Consolidation Canned Edible Oil Adjustment Total Revenue (Note 19) 708.234.188 1.713.800.894 - 2.422.035.082 Intersegment revenue 474.500 28.206.648 (28.681.148) - Revenue 708.708.688 1.742.007.542 (28.681.148) 2.422.035.082 Operating Profit (*) 86.111.223 212.768.173 - 298.879.396 Other income from operating activities 13.215.247 52.950.332 - 66.165.579 Other expenses from operating activities (-) (13.176.061) (101.266.024) - (114.442.085) Operating Profit 86.150.409 164.452.481 - 250.602.890 Depreciation and amortization expense (Note 12) 23.619.168 21.084.762 - 44.703.930 EBITDA (**) 109.730.391 233.852.935 - 343.583.326 Investment 7.299.182 31.852.391 - 39.151.571

(*) Represents profit before other income / expense from operating activities.

(**) EBITDA has calculated by adding depreciation and amortization expenses to the operating profit before other income / expenses from operating activities.

EBITDA is not a measurement instrument that is prescribed in TAS and it cannot be comparable other entities calculations.

36 110 Financial Statements and Footnotes

CONVENIENCE TRANSLATION INTO ENGLISH OF THE CONSOLIDATED FINANCIAL CONVENIENCE TRANSLATION INTO ENGLISH OF THE CONSOLIDATED FINANCIAL STATEMENTS ORIGINALLY ISSUED IN TURKISH (NOTE 2.7) STATEMENTS ORIGINALLY ISSUED IN TURKISH (NOTE 2.7) KEREVİTAŞ GIDA SANAYİ VE TİCARET A.Ş. AND ITS SUBSIDIARIES KEREVİTAŞ GIDA SANAYİ VE TİCARET A.Ş. AND ITS SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2019 AND 2018 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Amounts expressed in Turkish Lira (“TL” unless otherwise stated.) AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2019 AND 2018 (Amounts expressed in Turkish Lira (“TL” unless otherwise stated.) NOTE 4 – RELATED PARTY DISCLOSURES NOTE 4 – RELATED PARTY DISCLOSURES (Continued) Due to related parties, due from related parties and summary of significant transactions with related parties as of 31 December 2019 and 2018 are as follows. Other payables to related parties 31 December 2019 31 December 2018 Yıldız Holding A.Ş. (*) 111.058.334 - The related parties listed below are composed of Yıldız Holding group companies. Other 22.973 2.351.507 111.081.307 2.351.507 31 December 31 December Trade receivables from related parties 2019 2018 Other non-current payables to related parties 31 December 2019 31 December 2018 Pasifik Tük.Ürün. San.ve Tic. A.Ş. 106.338.214 94.876.877 Yıldız Holding A.Ş. (**) 1.031.988.897 1.364.244.005 Yeni Teközel Markalı Ürünler Dağıtım Hizmetleri A.Ş. 50.246.363 64.651.298 Horizon Hızlı Tüketim Ürünleri Paz. ve Tic. A.Ş. 37.205.473 33.502.877 1.031.988.897 1.364.244.005 G2mEksper Satış ve Dağıtım Hizmetleri A.Ş. (*) 35.196.843 23.869.436 Önem Gıda San. ve Tic. A.Ş. 15.332.731 19.990.789 (*) The related amount comprised of balances from Yıldız Holding that are received as loans. Ülker Bisküvi San. A.Ş. 6.199.929 47.865.941 Bizim Toptan Satış Mağazaları A.Ş. 6.192.651 - (**) As of 12 April 2018, Yıldız Holding A.Ş and some Yıldız Holding Group entities including Group, Biskot Bisküvi Gıda San. Tic. A.Ş. 2.866.752 33.281.340 signed a syndicated loan agreement with creditors. Thus, the Group's borrowings to banks were PNS Pendik Nişasta San. A.Ş. 2.675.679 3.400.873 transferred to Yıldız Holding. TL 1.031.988.897 of the long-term payables of the Group to Yıldız Ülker Çikolata San. A.Ş. 1.767.027 9.261.519 Holding is composed of syndicated debts. Other 5.078.004 6.985.329 269.099.666 337.686.279 The amount of collateral received or given due to the transactions between the Group and related parties amounts to TL 2.195.408.179 (31 December 2018: TL 2.094.677.023). (*) G2m Dağıtım Paz. ve Tic. A.Ş. and Eksper Tüketim Mad. Sat. ve Paz. A.Ş. merged on 28 February 2019 and have been operating under the title of G2mEksper since 27 March 2019. Transactions with related parties comprised of purchasing and selling goods and services. Purchases are mainly comprised of purchases of raw materials. 31 December 31 December 1 January - 1 January - Trade payables to related parties 2019 2018 31 December 31 December Yıldız Holding A.Ş. 38.691.398 40.424.517 Sales of goods 2019 2018 Aytaç Gıda Yatırım A.Ş. 4.004.572 - Pasifik Tük. Ürün. San. ve Tic. A.Ş. 368.571.175 341.053.126 Most Teknoloji Çözümleri A.Ş. 2.908.364 - Yeni Teközel Markalı Ürünler Dağıtım Hizmetleri A.Ş. 249.597.516 221.262.581 Önem Gıda San. ve Tic. A.Ş. 213.896 2.409.791 Şok Marketler Ticaret A.Ş. 89.813 2.367.273 Horizon Hızlı Tüketim Ürünleri A.Ş. 178.101.609 231.243.789 Other 5.044.456 1.215.520 Ülker Bisküvi San. A.Ş. 173.255.479 178.415.239 50.952.499 46.417.101 G2mEksper Satış ve Dağıtım Hizmetleri A.Ş. 111.156.630 123.899.480 Biskot Bisküvi Gıda San. Tic. A.Ş. 99.847.266 103.208.906 Due from related parties and due to related parties balances comprised of purchasing and selling goods Önem Gıda San. ve Tic. A.Ş. 63.682.102 51.897.975 and services. Supply of goods comprise of mainly purchases of raw materials. Average days of Ülker Çikolata San. A.Ş. 43.219.200 31.841.791 maturities is 90 days. Bizim Toptan Satış Mağazaları A.Ş. 33.012.277 26.073.848 PNS Pendik Nişasta San. A.Ş. 16.057.213 7.260.937 Other receivables from related parties 31 December 2019 31 December 2018 Other 9.109.110 11.672.132 Yıldız Holding A.Ş. (*) 632.699.658 853.122.409 1.345.609.577 1.327.829.804 632.699.658 853.122.409

(*) The relevant amount comprised of loans granted to Yıldız Holding. The average interest rate is 20,00% for TL.

37

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2019 AND 2018 (Amounts expressed in Turkish Lira (“TL” unless otherwise stated.)

NOTE 4 – RELATED PARTY DISCLOSURES (Continued)

Other payables to related parties 31 December 2019 31 December 2018 Yıldız Holding A.Ş. (*) 111.058.334 - Other 22.973 2.351.507 111.081.307 2.351.507

Other non-current payables to related parties 31 December 2019 31 December 2018 Yıldız Holding A.Ş. (**) 1.031.988.897 1.364.244.005 1.031.988.897 1.364.244.005

(*) The related amount comprised of balances from Yıldız Holding that are received as loans.

(**) As of 12 April 2018, Yıldız Holding A.Ş and some Yıldız Holding Group entities including Group, signed a syndicated loan agreement with creditors. Thus, the Group's borrowings to banks were transferred to Yıldız Holding. TL 1.031.988.897 of the long-term payables of the Group to Yıldız Holding is composed of syndicated debts.

The amount of collateral received or given due to the transactions between the Group and related parties amounts to TL 2.195.408.179 (31 December 2018: TL 2.094.677.023).

Transactions with related parties comprised of purchasing and selling goods and services. Purchases are mainly comprised of purchases of raw materials. 1 January - 1 January - 31 December 31 December Sales of goods 2019 2018 Pasifik Tük. Ürün. San. ve Tic. A.Ş. 368.571.175 341.053.126 Yeni Teközel Markalı Ürünler Dağıtım Hizmetleri A.Ş. 249.597.516 221.262.581 Horizon Hızlı Tüketim Ürünleri A.Ş. 178.101.609 231.243.789 Ülker Bisküvi San. A.Ş. 173.255.479 178.415.239 G2mEksper Satış ve Dağıtım Hizmetleri A.Ş. 111.156.630 123.899.480 Biskot Bisküvi Gıda San. Tic. A.Ş. 99.847.266 103.208.906 Önem Gıda San. ve Tic. A.Ş. 63.682.102 51.897.975 Ülker Çikolata San. A.Ş. 43.219.200 31.841.791 Bizim Toptan Satış Mağazaları A.Ş. 33.012.277 26.073.848 PNS Pendik Nişasta San. A.Ş. 16.057.213 7.260.937 Other 9.109.110 11.672.132 1.345.609.577 1.327.829.804

38 112 Financial Statements and Footnotes

CONVENIENCE TRANSLATION INTO ENGLISH OF THE CONSOLIDATED FINANCIAL CONVENIENCE TRANSLATION INTO ENGLISH OF THE CONSOLIDATED FINANCIAL STATEMENTS ORIGINALLY ISSUED IN TURKISH (NOTE 2.7) STATEMENTS ORIGINALLY ISSUED IN TURKISH (NOTE 2.7)

KEREVİTAŞ GIDA SANAYİ VE TİCARET A.Ş. AND ITS SUBSIDIARIES KEREVİTAŞ GIDA SANAYİ VE TİCARET A.Ş. AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTES TO CONSOLIDATED FINANCIAL STATEMENTS AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2019 AND 2018 (Amounts expressed in Turkish Lira (“TL” unless otherwise stated.) AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2019 AND 2018 (Amounts expressed in Turkish Lira (“TL” unless otherwise stated.) NOTE 4 – RELATED PARTY DISCLOSURES (Continued) 1 January - 1 January - NOTE 5 – TRADE RECEIVABLES AND PAYABLES 31 December 31 December Purchase of goods and services 2019 2018 As of 31 December 2019 and 2018 trade receivables of the Group are as follows: Yıldız Holding A.Ş. 20.795.093 3.884.856 Şok Marketler Ticaret A.Ş. 18.919.142 4.917.796 Current trade receivables 31 December 2019 31 December 2018 Most Teknoloji Çözümleri A.Ş 6.630.189 - Aytaç Gıda Yatırım San. Tic. A.Ş. 5.314.467 689.265 Trade receivables 167.487.930 178.566.631 Önem Gıda San. ve Tic. A.Ş. 3.649.741 8.433.964 Notes receivable 35.536.453 15.650.061 Pasifik Tük. Ürün. San. ve Tic. A.Ş. 2.946.632 948.731 Provision for doubtful receivables (-) (25.085.071) (22.504.071) Sağlam İnşaat Taahhüt Tic. A.Ş. 1.654.929 - Trade receivables, net 177.939.312 171.712.621 İzsal Gayrimenkul Geliştirme A.Ş. 869.776 581.615 Trade receivables from related parties (Note 4) (*) 269.099.666 337.686.279 Bizim Toptan Satış Mağazaları A.Ş. 692.396 338.389 447.038.978 509.398.900 Other 2.091.455 1.412.461 63.563.820 21.207.077 (*) Trade receivables from related parties mainly comprised from sales of goods. 1 January - 1 January - Service, rent and other income 31 December 2019 31 December 2018 Movements of provision for doubtful receivables as of 1 January - 31 December 2019 and 2018 are as Sağlam İnşaat Taahhüt Tic. A.Ş. 229.858 181.126 Bizim Toptan Satış Mağazaları A.Ş. 213.704 - follows: PNS Pendik Nişasta San. A.Ş. 170.281 130.301 Pakyağ Endüstriyel 131.543 120.581 1 January - 31 1 January - 31 Kellog Med Gıda Tic. Ltd. Şti. - 644.536 Movement of Provision for Doubtful Receivables December 2019 December 2018 Other 19.999 18.505 Opening balance (22.504.071) (17.524.795) 765.385 1.095.049 Charge for the year (Note 21) (3.544.989) (5.148.022) 1 January - 1 January - Currency translation gain/loss - (533.044) Commission and financial expense 31 December 2019 31 December 2018 Collections (Note 21) 963.989 701.790 Yıldız Holding A.Ş. 195.542.668 123.907.331 End of the period (25.085.071) (22.504.071) Other 112.125 732.598 195.654.793 124.639.929 31 December 31 December 1 January - 1 January - Short-term trade payables 2019 2018 Investment income 31 December 2019 31 December 2018 Trade payables 334.179.848 320.826.521 Yıldız Holding A.Ş. (*) 64.450.709 67.412.688 Expense accruals - 362.018 Other 468.649 141.152 64.919.358 67.553.840 Trade payables, net 334.179.848 321.188.539 Trade payables to related parties (Note 4) (*) 50.952.499 46.417.101 (*) Income from investment activities comprised of interest and exchange differences. 385.132.347 367.605.640 Key management compensation: (*) Trade payables to related parties mainly comprised from purchases of goods and services. Key management personnel of the Company consist of the members of Board of Directors and members of Executive Board. The compensation of key management personnel comprises salaries, bonus, health insurance and transportation. The compensation of key management during the years are as follows: 1 January - 1 January - 31 December 2019 31 December 2018 Salaries and other benefits 13.285.307 10.066.323 13.285.307 10.066.323

39

40 KEREVİTAŞ Annual Report 2019 113

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KEREVİTAŞ GIDA SANAYİ VE TİCARET A.Ş. AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2019 AND 2018 (Amounts expressed in Turkish Lira (“TL” unless otherwise stated.)

NOTE 5 – TRADE RECEIVABLES AND PAYABLES

As of 31 December 2019 and 2018 trade receivables of the Group are as follows:

Current trade receivables 31 December 2019 31 December 2018 Trade receivables 167.487.930 178.566.631 Notes receivable 35.536.453 15.650.061 Provision for doubtful receivables (-) (25.085.071) (22.504.071) Trade receivables, net 177.939.312 171.712.621 Trade receivables from related parties (Note 4) (*) 269.099.666 337.686.279 447.038.978 509.398.900

(*) Trade receivables from related parties mainly comprised from sales of goods.

Movements of provision for doubtful receivables as of 1 January - 31 December 2019 and 2018 are as follows:

1 January - 31 1 January - 31 Movement of Provision for Doubtful Receivables December 2019 December 2018 Opening balance (22.504.071) (17.524.795) Charge for the year (Note 21) (3.544.989) (5.148.022) Currency translation gain/loss - (533.044) Collections (Note 21) 963.989 701.790 End of the period (25.085.071) (22.504.071)

31 December 31 December Short-term trade payables 2019 2018 Trade payables 334.179.848 320.826.521 Expense accruals - 362.018 Trade payables, net 334.179.848 321.188.539 Trade payables to related parties (Note 4) (*) 50.952.499 46.417.101 385.132.347 367.605.640

(*) Trade payables to related parties mainly comprised from purchases of goods and services.

40 114 Financial Statements and Footnotes

CONVENIENCE TRANSLATION INTO ENGLISH OF THE CONSOLIDATED FINANCIAL CONVENIENCE TRANSLATION INTO ENGLISH OF THE CONSOLIDATED FINANCIAL STATEMENTS ORIGINALLY ISSUED IN TURKISH (NOTE 2.7) STATEMENTS ORIGINALLY ISSUED IN TURKISH (NOTE 2.7)

KEREVİTAŞ GIDA SANAYİ VE TİCARET A.Ş. AND ITS SUBSIDIARIES KEREVİTAŞ GIDA SANAYİ VE TİCARET A.Ş. AND ITS SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2019 AND 2018 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Amounts expressed in Turkish Lira (“TL” unless otherwise stated.) AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2019 AND 2018 (Amounts expressed in Turkish Lira (“TL” unless otherwise stated.) NOTE 6 - OTHER RECEIVABLES AND PAYABLES NOTE 8 – PREPAID EXPENSES AND DEFERRED REVENUE Other Receivables 31 December 31 December 31 December 31 December Other Current Receivables 2019 2018 Other receivables from related parties (Note 4) 632.699.658 853.122.409 Short-Term Prepaid Expenses 2019 2018 Tax receivables 2.425.683 1.162.688 Advances given for inventory purchases 5.153.716 15.023.178 Export progress receivables 1.357.577 1.703.431 Prepaid expenses 5.579.838 5.374.241 Receivables from personnel 112.820 206.225 10.733.554 20.397.419 Other miscellaneous receivables 1.476.025 2.119.923 638.071.763 858.314.676 31 December 31 December 31 December 31 December Long-Term Prepaid Expenses 2019 2018 Other Non-Current Receivables 2019 2018 Advances given for fixed asset purchases 7.353.776 4.129.732 Deposits and guarantees given 1.466.589 5.487.505 Prepaid expenses 715.776 47.846 1.466.589 5.487.505 8.069.552 4.177.578

Other Payables 31 December 31 December 31 December 31 December Other Current Liabilities 2019 2018 Short-Term Deferred Income 2019 2018 Other payables to related parties (Note 4) 111.081.307 2.351.507 Advances received 3.678.382 1.801.805 Other miscellaneous liabilities - 347.814 Deferred income 814.492 1.126.845 111.081.307 2.699.321 4.492.874 2.928.650

31 December 31 December Other Non-Current Liabilities 2019 2018 NOTE 9 – INVESTMENT PROPERTIES Other non-current liabilities to related parties (Note 4) 1.031.988.897 1.364.244.005 1.031.988.897 1.364.244.005 Change in NOTE 7 – INVENTORIES Cost Value 1 January 2019 Disposals fair value 31 December 2019 31 December 31 December Land & building 212.107.001 - 7.735.000 219.842.001 2019 2018 212.107.001 - 7.735.000 219.842.001 Raw materials 180.438.575 159.508.188 Work in process 130.445.513 103.990.332 Finished goods 82.937.793 77.426.201 Trade goods 14.475.143 13.744.374 Change in 31 December Other inventory 9.646.710 8.823.339 Cost Value 1 January 2018 Disposals fair value 2018 Provision for impairment of inventory (-) (416.704) (453.818) Land & building 254.103.000 (53.318.567) 11.322.568 212.107.001 417.527.030 363.038.616 254.103.000 (53.318.567) 11.322.568 212.107.001

Movements of provision for impairment of inventories as of 1 January - 31 December 2019 and 2018 The Group has earned rent income from its investment properties amounting to TL 7.583.648 in the are as follows: current period. (31 December 2018: TL 6.287.415) 1 January - 31 1 January - 31 December 2019 December 2018 Opening balance (453.818) (535.739) Charge for the year (Note 21) (416.704) (338.640) Provisions no longer required (Note 21) 453.818 420.561 End of period (416.704) (453.818)

41

42 KEREVİTAŞ Annual Report 2019 115

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KEREVİTAŞ GIDA SANAYİ VE TİCARET A.Ş. AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2019 AND 2018 (Amounts expressed in Turkish Lira (“TL” unless otherwise stated.)

NOTE 8 – PREPAID EXPENSES AND DEFERRED REVENUE

31 December 31 December Short-Term Prepaid Expenses 2019 2018 Advances given for inventory purchases 5.153.716 15.023.178 Prepaid expenses 5.579.838 5.374.241 10.733.554 20.397.419

31 December 31 December Long-Term Prepaid Expenses 2019 2018 Advances given for fixed asset purchases 7.353.776 4.129.732 Prepaid expenses 715.776 47.846 8.069.552 4.177.578

31 December 31 December Short-Term Deferred Income 2019 2018 Advances received 3.678.382 1.801.805 Deferred income 814.492 1.126.845 4.492.874 2.928.650

NOTE 9 – INVESTMENT PROPERTIES

Change in Cost Value 1 January 2019 Disposals fair value 31 December 2019 Land & building 212.107.001 - 7.735.000 219.842.001 212.107.001 - 7.735.000 219.842.001

Change in 31 December Cost Value 1 January 2018 Disposals fair value 2018 Land & building 254.103.000 (53.318.567) 11.322.568 212.107.001 254.103.000 (53.318.567) 11.322.568 212.107.001

The Group has earned rent income from its investment properties amounting to TL 7.583.648 in the current period. (31 December 2018: TL 6.287.415)

42 116 Financial Statements and Footnotes

CONVENIENCE TRANSLATION INTO ENGLISH OF THE CONSOLIDATED FINANCIAL STATEMENTS ORIGINALLY ISSUED IN TURKISH (NOTE 2.7)

KEREVİTAŞ GIDA SANAYİ VE TİCARET A.Ş. AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2019 AND 2018 (Amounts expressed in Turkish Lira (“TL” unless otherwise stated.)

NOTE 9 – INVESTMENT PROPERTIES (Continued)

Fair value of investment properties

31 December 2019 Level 1 Level 2 Level 3 Investment properties - 219.842.001 - Total - 219.842.001 -

31 December 2018 Level 1 Level 2 Level 3 Investment properties - 212.107.001 - Total - 212.107.001 -

As of 31 December 2019, the fair value of the Group's investment properties has been determined by an independent valuation firm holding a CMB License. The change between the fair value and cost value of the investment properties at initial recognition is included under equity. Gains or losses arising from changes in fair value in subsequent measurement periods are included in the consolidated statement of profit or loss.

The table above present the fair value hierarchy of investment properties of the Group as of 31 December 2019 and 31 December 2018. The levels of hierarchies of fair values are detailed below.

Level 1: Quoted prices in active markets for identical assets or liabilities, Level 2: Inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly or indirectly, Level 3: Inputs for the asset or liability that are not based on observable market data

Valuation techniques used to derive level 2 fair values.

Level 2 fair values of investment properties have been derived using the sales comparison approach. Sales prices of comparable land and buildings in close proximity are adjusted for differences in key attributes such as property size. The most significant input into this valuation approach is price per square foot.

43 KEREVİTAŞ Annual Report 2019 117 2019 2019 5.890.850 3.430.115 3.016.486 15.721.432 48.854.491 37.553.031 (8.795.129) (5.890.547) (2.794.786) 865.150.925 402.515.109 319.266.764 476.334.923 (65.669.210) (30.116.505) (32.589.156) 31 December 31 December (301.576.943) (447.432.276) 1.312.583.201 ------(783) 9.076 478.272 (49.937) (44.214) (486.279) (330.557) (911.770) 4.754.033 5.799.623 Currency Currency 22.693.639 33.734.643 translation differences translation translation differences translation ------475.052 Transfers (6.301.470) (5.826.418) Transfers (**) Transfers - - (868) 52.869 (7.500) 280.958 (351.207) Disposals Disposals 2.311.051 7.456.394 1.357.612 3.121.862 14.580.746 (2.162.423) (3.502.439) (8.757.119) (1.521.413) (3.379.595) (19.682.564) 44 - - - - - 120.285 388.953 (641.972) (608.310) 5.347.154 8.017.513 Additions Additions 13.873.905 (6.632.644) (1.319.823) (3.129.501) (4.053.389) (28.376.601) (44.762.240) . AND ITS SUBSIDIARIES . AND Ş 3.781.322 1.307.942 15.721.432 14.169.698 44.187.328 40.932.626 (8.152.374) (2.467.434) 402.506.901 298.615.263 469.261.123 874.144.623 (58.603.156) (11.977.181) (28.300.402) (31.657.629) (275.180.836) (416.339.012) 1.290.483.635 1 January 2019 1 January 1 January 2019 1 January CARET A. CARET İ VE T İ (*) GIDA SANAY Ş TA İ tangibles tangibles Land Improvements Land Buildings and Equipment Machinery Vehicles Motor and Fixtures Furniture Improvements Leasehold Other Progress in Construction Improvements Land Buildings and Equipment Machinery Vehicles Motor and Fixtures Furniture Improvements Leasehold Other Value Book Net Accumulated Depreciation Accumulated Cost Value CONVENIENCE TRANSLATION INTO ENGLISH OF THE CONSOLIDATED FINANCIAL THE CONSOLIDATED OF ENGLISH INTO TRANSLATION CONVENIENCE (NOTE 2.7) IN TURKISH ISSUED ORIGINALLY STATEMENTS KEREV stated.) otherwise unless (“TL” Lira Turkish in expressed (Amounts refrigerators. comprised of Other tangibles (*) assets. intangible to transfers of made comprised Transfers are (**) NOTE 10 – PROPERTY, PLANT AND EQUIPMENT PLANT AND NOTE 10 – PROPERTY, NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTES TO FINANCIAL CONSOLIDATED 2018 2019 AND 31 ENDED DECEMBER YEAR FOR THE AND AT AS 118 Financial Statements and Footnotes

CONVENIENCE TRANSLATION INTO ENGLISH OF THE CONSOLIDATED FINANCIAL STATEMENTS ORIGINALLY ISSUED IN TURKISH (NOTE 2.7) 2018 2018

3.781.322 1.307.942 KEREVİTAŞ GIDA SANAYİ VE TİCARET A.Ş. AND ITS SUBSIDIARIES 15.721.432 14.169.698 44.187.328 40.932.626 (8.152.374) (2.467.434) 402.506.901 298.615.263 469.261.123 874.144.623 (58.603.156) (11.977.181) (28.300.402) (31.657.629) 31 December 31 December (275.180.836) 1.290.483.635 (416.339.012) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - - - - - AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2019 AND 2018 (291) 4.762 (Amounts expressed in Turkish Lira (“TL” unless otherwise stated.) 77.058 298.708 (82.491) (39.787) (298.232) (247.458) 8.086.744 (668.259) 38.338.335 10.028.533 differences differences NOTE 10 – PROPERTY, PLANT AND EQUIPMENT (Continued) 56.834.140 The Group decided to apply “Fair Value Model” to land, land improvements and buildings in accordance with “TAS 16 Property, Plant and Equipment”, and performed revaluation through obtaining a valuation Currency translation Currency Currency translation Currency report from a CMB licenced valuation firm as of 31 December 2018. ------The determined fair values of land, land improvements and buildings were based on market comparable approach and cost approach. 6.984.612 3.834.246 fair value fair fair value fair (1.304.280) Changes in Changes Changes in Changes 10.818.858 (1.304.280) Gains on revaluation of plant, property and equipment after deferred tax amounting to TL314.411.591 ------

- is recognised under equity as of 31 December 2019 (31 December 2018: TL314.411.591).

246.304 164.076 408.810 The fair values of land, land improvements and buldings of the Group as of 31 December 2019 and 2018 2.232.438 Transfers 15.202.168 25.124.958 are provided below. The levels of hierarchies of fair values are detailed below: (48.657.255) (5.278.501) Transfers (**) Transfers

------Level 1: Quoted prices in active markets for identical assets or liabilities, Level 2: Inputs other than quoted prices included within level 1 that are observable for the asset

32.983 or liability, either directly or indirectly, 116.986 409.777 45 (54.592) (238.150) (440.149) 1.229.946 3.849.813 Disposals Disposals Level 3: Inputs for the asset or liability that are not based on observable market data. 5.639.505 (1.229.946) (3.958.082) (5.920.919)

- Valuation techniques used to derive level 2 fair values 58.807 36.282 59.400

927.067 279.310 Level 2 fair values of investment properties have been derived using the sales comparison approach. (163.954) (613.690) 3.244.826 Additions Additions

14.691.757 17.095.786 Sales prices of comparable land and buildings in close proximity are adjusted for differences in key (5.790.972) (1.488.300) (2.898.523) (4.368.310) 36.393.235 (26.198.455)

(41.522.204) attributes such as property size. The most significant input into this valuation approach is price per square foot. . AND ITS SUBSIDIARIES . AND Ş 31 December 2019

4.566.176 Level 1 Level 2 Level 3 15.475.128 13.703.846 38.851.505 44.831.308 24.782.668 (7.988.129) (3.083.690) 395.458.720 226.548.756 433.418.714 819.153.047 (51.209.672) (10.439.373) (25.771.869) (31.139.132)

(248.851.909) Land - 402.515.109 - CARET A. CARET (378.483.774) 1.197.636.821 1 January 2018 1 January 1 January 2018 1 January İ Land improvement - 6.926.303 - Buildings - 253.597.554 - VE T

İ Total - 663.038.966 - (*) 31 December 2018 Level 1 Level 2 Level 3 Land - 402.506.901 - Land improvement - 7.569.058 -

GIDA SANAY Buildings - 240.012.107 - Ş Total - 650.088.066 - TA İ The total mortgage and pledge on the property, plant and equipments is TL 573.420.000 (31 December

Land Improvements Land Buildings and Equipment Machinery Vehicles Motor and Fixtures Furniture Improvements Leasehold Fixed Assets Tangible Other Progress in Construction Improvements Land Buildings and Equipment Machinery Vehicles Motor and Fixtures Furniture Improvements Leasehold Fixed Assets Tangible Other Value Book Net 2018: TL 643.433.495). Accumulated Depreciation Accumulated Cost Value CONVENIENCE TRANSLATION INTO ENGLISH OF THE CONSOLIDATED FINANCIAL THE CONSOLIDATED OF ENGLISH INTO TRANSLATION CONVENIENCE (NOTE 2.7) IN TURKISH ISSUED ORIGINALLY STATEMENTS KEREV stated.) otherwise unless (“TL” Lira Turkish in expressed (Amounts cabinets. refrigerated assets of consist Other tangible (*) assets. Transfers intangible to (**) NOTE 10 – PROPERTY, PLANT AND EQUIPMENT (Continued) EQUIPMENT PLANT AND NOTE 10 – PROPERTY, NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTES TO FINANCIAL CONSOLIDATED 2018 2019 AND 31 ENDED DECEMBER YEAR FOR THE AND AT AS

46 KEREVİTAŞ Annual Report 2019 119

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KEREVİTAŞ GIDA SANAYİ VE TİCARET A.Ş. AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2019 AND 2018 (Amounts expressed in Turkish Lira (“TL” unless otherwise stated.)

NOTE 10 – PROPERTY, PLANT AND EQUIPMENT (Continued) The Group decided to apply “Fair Value Model” to land, land improvements and buildings in accordance with “TAS 16 Property, Plant and Equipment”, and performed revaluation through obtaining a valuation report from a CMB licenced valuation firm as of 31 December 2018.

The determined fair values of land, land improvements and buildings were based on market comparable approach and cost approach.

Gains on revaluation of plant, property and equipment after deferred tax amounting to TL314.411.591 is recognised under equity as of 31 December 2019 (31 December 2018: TL314.411.591).

The fair values of land, land improvements and buldings of the Group as of 31 December 2019 and 2018 are provided below. The levels of hierarchies of fair values are detailed below:

Level 1: Quoted prices in active markets for identical assets or liabilities, Level 2: Inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly or indirectly, Level 3: Inputs for the asset or liability that are not based on observable market data.

Valuation techniques used to derive level 2 fair values

Level 2 fair values of investment properties have been derived using the sales comparison approach. Sales prices of comparable land and buildings in close proximity are adjusted for differences in key attributes such as property size. The most significant input into this valuation approach is price per square foot.

31 December 2019 Level 1 Level 2 Level 3 Land - 402.515.109 - Land improvement - 6.926.303 - Buildings - 253.597.554 - Total - 663.038.966 - 31 December 2018 Level 1 Level 2 Level 3 Land - 402.506.901 - Land improvement - 7.569.058 - Buildings - 240.012.107 - Total - 650.088.066 -

The total mortgage and pledge on the property, plant and equipments is TL 573.420.000 (31 December 2018: TL 643.433.495).

46 120 Financial Statements and Footnotes

CONVENIENCE TRANSLATION INTO ENGLISH OF THE CONSOLIDATED FINANCIAL CONVENIENCE TRANSLATION INTO ENGLISH OF THE CONSOLIDATED FINANCIAL STATEMENTS ORIGINALLY ISSUED IN TURKISH (NOTE 2.7) STATEMENTS ORIGINALLY ISSUED IN TURKISH (NOTE 2.7)

KEREVİTAŞ GIDA SANAYİ VE TİCARET A.Ş. AND ITS SUBSIDIARIES KEREVİTAŞ GIDA SANAYİ VE TİCARET A.Ş. AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTES TO CONSOLIDATED FINANCIAL STATEMENTS AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2019 AND 2018 AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2019 AND 2018 (Amounts expressed in Turkish Lira (“TL” unless otherwise stated.) (Amounts expressed in Turkish Lira (“TL” unless otherwise stated.)

NOTE 11 – RIGHT OF USE ASSETS NOTE 12 – INTANGIBLE ASSETS (Continued) Cost Value- Effect of Change Current Effect of 1 January in Accounting Year 31 December Allocation of depreciation and amortization expenses as of 1 January - 31 December 2019 and 2018 are IFRS 16 2019 Policy (Note 2.4) Additions Disposals Depreciation 2019 as follows: Buildings - 3.673.285 - (430.259) 3.243.026 1 January- 1January- Motor Vehicles - 2.624.996 - (1.622.570) 1.002.426 31 December 31 December - 6.298.281 - (2.052.829) 4.245.452 2019 2018 Interest expenses on lease liabilities are TL 588.967 (31 December 2018: None). Cost of sales (Note 19) (37.063.586) (34.412.784) Marketing expense (Note 20) (8.583.171) (6.700.079) The effective interest rate and foreign currency position of lease liabilities arising from the lease General administration expenses (Note 20) (2.029.277) (1.901.430) transactions within the scope of the right of use assets are presented in Note 27. Research and development expenses (Note 20) (2.013.040) (1.689.637) (49.689.074) (44.703.930) NOTE 12 – INTANGIBLE ASSETS Currency NOTE 13 - GOVERNMENT GRANTS AND INCENTIVES 1 January translation 31 December Cost Value 2019 Additions Disposals Transfers(*) differences 2019 Rights 12.123.329 146.573 (458.678) - 484.775 12.295.999 On 31 August 2016, the Company received Investment Incentive Certificate no. 125488 from the Development expenses 10.887.057 3.149.318 (2.404.776) 5.826.418 - 17.458.017 General Directorate of Incentives and Foreign Investment. The certificate is valid for a three years period Other intangible assets 694.962 - - - - 694.962 until 26 December 2020. The support elements stipulated by the Investment Incentive Certificate were 23.705.348 3.295.891 (2.863.454) 5.826.418 484.775 30.448.978 as follows: 100% customs exemption, value added tax exemption, 7 years support of employer's share Currency of social security premium, 80% Investment Contribution Rate and 40% tax deduction. The total amount translation 31 December Accumulated Amortization 1 January 2019 Additions Disposals Transfers differences 2019 of investment stipulated in the Investment Incentive Certificate was TL 15.600.000. As of 31 December Rights (10.603.310) (819.331) - - 8.838 (11.413.803) 2019, the investment amount realized under the incentive certificate was TL 5.793.736. (31 December Development expenses (1.425.880) (1.881.758) - - - (3.307.638) 2018: TL 5.043.736) Other intangible assets (508.834) (172.916) - - - (681.750) (12.538.024) (2.874.005) - - 8.838 (15.403.191) Net Book Value 11.167.324 15.045.787 On 1 November 2017, the Company received Investment Incentive Certificate no. 133479 from General Directorate of Incentive Implementation and Foreign Investments. The certificate is valid for a three (*) Transfers comprised of transfers from property, plant and equipment years period until 21 July 2020. The support elements stipulated by the Investment Incentive Certificate were as follows: 100% customs exemption, value added tax exemption, 2 years support of employer's Currency translation share of social security premium, 50% tax deduction. The total amount of investment stipulated in the Cost Value 1 January 2018 Additions Disposals Transfers (*) differences 31 December 2018 Investment Incentive Certificate was TL 10.500.000. As of 31 December 2019, the investment amount Rights 11.537.077 462.163 - 86.972 37.117 12.123.329 realized under the incentive certificate was TL 3.944.563. (31 December 2018: TL 3.592.108) Development expenses 3.399.355 2.296.173 - 5.191.529 - 10.887.057 Other intangible assets 743.284 - (48.322) - - 694.962 15.679.716 2.758.336 (48.322) 5.278.501 37.117 23.705.348 The rights that the Group has available to all companies meeting the criteria required by the legislation Currency without sector separation: Incentives covered by the research and development law (100% corporate tax translation exemption etc.), inward processing permit documents, social security institution incentives and Accumulated Amortization 1 January 2018 Additions Disposals Transfers differences 31 December 2018 insurance premium employer's share support. Rights (8.956.709) (1.645.366) - - (1.235) (10.603.310) Development expenses (85.865) (1.340.015) - - - (1.425.880) Other intangible assets (360.811) (196.345) 48.322 - - (508.834) (9.403.385) (3.181.726) 48.322 - (1.235) (12.538.024) Net Book Value 6.276.331 11.167.324 (*) Transfers comprised of transfers from property, plant and equipment

47

48 KEREVİTAŞ Annual Report 2019 121

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KEREVİTAŞ GIDA SANAYİ VE TİCARET A.Ş. AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2019 AND 2018 (Amounts expressed in Turkish Lira (“TL” unless otherwise stated.)

NOTE 12 – INTANGIBLE ASSETS (Continued)

Allocation of depreciation and amortization expenses as of 1 January - 31 December 2019 and 2018 are as follows: 1 January- 1January- 31 December 31 December 2019 2018 Cost of sales (Note 19) (37.063.586) (34.412.784) Marketing expense (Note 20) (8.583.171) (6.700.079) General administration expenses (Note 20) (2.029.277) (1.901.430) Research and development expenses (Note 20) (2.013.040) (1.689.637) (49.689.074) (44.703.930)

NOTE 13 - GOVERNMENT GRANTS AND INCENTIVES

On 31 August 2016, the Company received Investment Incentive Certificate no. 125488 from the General Directorate of Incentives and Foreign Investment. The certificate is valid for a three years period until 26 December 2020. The support elements stipulated by the Investment Incentive Certificate were as follows: 100% customs exemption, value added tax exemption, 7 years support of employer's share of social security premium, 80% Investment Contribution Rate and 40% tax deduction. The total amount of investment stipulated in the Investment Incentive Certificate was TL 15.600.000. As of 31 December 2019, the investment amount realized under the incentive certificate was TL 5.793.736. (31 December 2018: TL 5.043.736)

On 1 November 2017, the Company received Investment Incentive Certificate no. 133479 from General Directorate of Incentive Implementation and Foreign Investments. The certificate is valid for a three years period until 21 July 2020. The support elements stipulated by the Investment Incentive Certificate were as follows: 100% customs exemption, value added tax exemption, 2 years support of employer's share of social security premium, 50% tax deduction. The total amount of investment stipulated in the Investment Incentive Certificate was TL 10.500.000. As of 31 December 2019, the investment amount realized under the incentive certificate was TL 3.944.563. (31 December 2018: TL 3.592.108)

The rights that the Group has available to all companies meeting the criteria required by the legislation without sector separation: Incentives covered by the research and development law (100% corporate tax exemption etc.), inward processing permit documents, social security institution incentives and insurance premium employer's share support.

48 122 Financial Statements and Footnotes

CONVENIENCE TRANSLATION INTO ENGLISH OF THE CONSOLIDATED FINANCIAL STATEMENTS ORIGINALLY ISSUED IN TURKISH (NOTE 2.7)

KEREVİTAŞ GIDA SANAYİ VE TİCARET A.Ş. AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2019 AND 2018 (Amounts expressed in Turkish Lira (“TL” unless otherwise stated.)

NOTE 14 – PROVISIONS, CONTINGENT ASSETS AND LIABILITIES

Contingent Assets and Liabilities

Contingent assets and liabilities as of 31 December 2019 and 2018 are as follows:

31 December 31 December Contingent assets 2019 2018 Letters of guarantees received 155.800.917 140.063.027 Pledges and mortgages received 8.558.670 6.875.670 164.359.587 146.938.697

Letter of guarantees received and pledged and mortgages received are comprised of the guarantees received from customers within the scope of credit risk.

31 December 31 December Contingent liabilities 2019 2018 Guarantees given 1.621.988.179 1.553.603.663 Mortgages given 573.420.000 643.433.495 Letters of guarantees given 92.350.801 100.627.377 2.287.758.980 2.297.664.535

Mortgages and guarantees given are given as Yıldız Holding syndication loan guarantees. Letter of guarantees given comprised of guarantees given to public institutions for various reasons.

31 December 31 December Other short-term provisions 2019 2018 Provisions for lawsuits 3.556.885 1.186.233 Other provisions 12.309 57.572 3.569.194 1.243.805

The movements of provisions for lawsuits as of 1 January - 31 December 2019 and 2018 are as follows:

1 January - 31 1 January - 31 Movement of provision for lawsuits December 2019 December 2018 Opening 1.186.233 1.133.497 Charge for the period (Note 21) 2.370.652 52.736 End of the period 3.556.885 1.186.233

49 KEREVİTAŞ Annual Report 2019 123 z - - - - - ı ld ı 211.200 z Holding z ı ld ı 676.458.112 1.620.995.223 2.297.664.535 TL equivalent - - - - - 211.200 Amount 128.582.203 1.620.995.223 . within the framework of a single of framework the . within Ş - - - - - 31 December 2018 31 December z Holding A. Holding z ı TL TL ld ı US Dollar US Original Currency Original ------698.167.382 1.589.591.598 TL Equivalent 2.287.758.980 ------50 . within the scope and limited to cash and non-cash loans belonging to the Group that are that to the Group loans belonging non-cash and to cash and limited the scope . within Amount Ş 117.532.639 1.589.591.598 31 December 2019 31 December TL TL z Holding A. ı ld US Dollar US ı Original Currency z Holding group entities in connection with the miscellaneous loan agreements the Holding company entered company Holding the agreements loan miscellaneous the with connection in entities group Holding z ı ld ı . AND ITS SUBSIDIARIES . AND Ş . started negotiations with the creditors in order to refinance the loan payables for which no guarantee was provided and the and provided was no guarantee for which payables loan the refinance to order in creditors the with negotiations started . Ş CARET A. CARET İ . level. Some real estates of the Group which have a market value of 573.4 million TL have been provided as a mortgage and financial as a mortgage provided been have 573.4 TL million of value a have market which Group the of real estates Some level. . Ş VE T İ z Holding A. ı ld ı CPMs z Holding A. Holding z ı ld . through syndication. The Company’s total debt has not increased as a result of the syndicated loan but cash and non-cash loans are moved to Y to moved are loans non-cash and cash but loan syndicated the of result a as increased not has debt total Company’s The syndication. through . ı Ş GIDA SANAY Ş . level. In addition the Group provided guarantee to Y to guarantee provided Group the addition In level. . TA İ Ş companies which are not in scope of B and C of B in scope are not which companies investments with a fair value of TL 2.7 million were pledged to banks. to pledged were TL 2.7 million of value a fair with investments moved to Y to moved A. Holding A. Holding balances which are used by the itself and by various Y various by and itself the by used are which balances Y of level the to balances payable loan all move to is negotiations these of purpose The banks. Turkish with into plan. payment and rate interest maturity, Y of level the to moved were contingencies non-cash million 202 TL and in cash million 745 TL total in which subsidiaries it’s and the Company of loans bank The i. Total amount of CPMs given on behalf of the parent of behalf on CPMs given of amount i. Total other Group of on behalf to CPMs given of amount Total ii. third parties of on behalf CPMs given of amount Total iii. A. CPMs given for Company’s own legal personality (*) personality legal own Company’s for given A. CPMs companies consolidated fully of on behalf given CPMs B. on activities business of normal course in the given C. CPMs third parties of behalf other amount of D. Total of C not in scope are which (Amounts expressed in Turkish Lira (“TL” unless otherwise stated.) otherwise unless (“TL” Lira Turkish in expressed (Amounts CONVENIENCE TRANSLATION INTO ENGLISH OF THE CONSOLIDATED FINANCIAL THE CONSOLIDATED OF ENGLISH INTO TRANSLATION CONVENIENCE (NOTE 2.7) IN TURKISH ISSUED ORIGINALLY STATEMENTS KEREV AND CONTINGENCIES NOTE 15 – COMMITMENTS by the Group given and mortgages pledge Guarantee, 31 years ended the for given business of course ordinary the in realized contingencies and of commitment respect in (“GPM”) mortgages and pledge Guarantee, as2018 are follows: 31 December 2019 and December fulfillment The 3.500.000). EUR 56.282.289 USD: 2018: December (31 9.685.820 EUR and 950.000 USD of commitments has export Group the 2019, 31 December of As two years. is export commitments of period (*) On February 2018, Y NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTES TO FINANCIAL CONSOLIDATED 2018 2019 AND 31 ENDED DECEMBER YEAR FOR THE AND AT AS 124 Financial Statements and Footnotes

CONVENIENCE TRANSLATION INTO ENGLISH OF THE CONSOLIDATED FINANCIAL CONVENIENCE TRANSLATION INTO ENGLISH OF THE CONSOLIDATED FINANCIAL STATEMENTS ORIGINALLY ISSUED IN TURKISH (NOTE 2.7) STATEMENTS ORIGINALLY ISSUED IN TURKISH (NOTE 2.7)

KEREVİTAŞ GIDA SANAYİ VE TİCARET A.Ş. AND ITS SUBSIDIARIES KEREVİTAŞ GIDA SANAYİ VE TİCARET A.Ş. AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTES TO CONSOLIDATED FINANCIAL STATEMENTS AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2019 AND 2018 AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2019 AND 2018 (Amounts expressed in Turkish Lira (“TL” unless otherwise stated.) (Amounts expressed in Turkish Lira (“TL” unless otherwise stated.)

NOTE 16 – PAYABLES RELATED TO EMPLOYEE BENEFITS NOTE 16 – PAYABLES RELATED TO EMPLOYEE BENEFITS (Continued)

31 December 31 December Provision for Employee Termination Benefit Payables related to employee benefits 2019 2018 Due to personnel 8.670.608 8.320.214 In accordance with the existing labour law in Turkey, the Group is required to make up lump-sum payments to employees who have completed one year of service and whose employment is terminated without cause Social security premiums payable 3.349.522 3.239.555 or who retire (age of 58 for women, age of 60 for men) or completed service years of 20 for women or 25 12.020.130 11.559.769 for men, are called up for military service or die.

31 December 31 December Such payments are calculated on the basis of 30 days' pay maximum TL 6,379,86 as at 31 December 2019 Short-term provisions for employee benefits 2019 2018 (31 December 2018: TL 5.434,42) per year of employment at the of pay applicable at the date of retirement Provisions for performance premium 6.973.630 6.278.726 or termination. Provisions for unused vacations 4.485.132 3.832.751 11.458.762 10.111.477 Employee termination benefit is not funded and does not require any legal funding requimrent. The reserve employee termination benefit has been calculated by estimating the present value of future probable The movements of provisions for performance premium as of 1 January - 31 December 2019 and 2018 obligation of Group from the retirement of the employees. The calculation was based upon the retirement are as follows: pay ceiling announced by the Government. TAS 19 “Employee Benefits” requires actuarial valuation methods to be developed to estimate the enterprise’s obligation under defined benefit plans. Accordingly, 1 January - 31 1 January - 31 the following actuarial assumptions are used in the calculation of the total liability: December 2019 December 2018 Opening balance 6.278.726 6.664.769 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 Charge for the year 6.973.630 6.278.726 effects of future inflation. Consequently, in the accompanying consolidated financial statements as at 31 Cash payments during the year (6.278.726) (6.664.769) December 2019, the provision has been calculated by estimating the present value of the future probable End of the period 6.973.630 6.278.726 obligation of the Group arising from the retirement of the employees. The provision at 31 December 2019 has been calculated assuming an annual inflation rate of 7,56% and a discount rate of 11,86% resulting in a The movement of provisions for unused vacations as of 1 January - 31 December 2019 and 2018 are as real discount rate of approximately 4,00% (31 December 2018: 4,67%). Estimated amount of retirement follows: pay not paid due to voluntary leaves is also taken into consideration as 5,24% for employees with 0-15 years of service, and 0% for those with 16 or more years of service. Ceiling amount of TL 6.730,15 1 January - 31 1 January - 31 which is in effect since 1 January 2020 is used in the calculation of Groups’ provision for retirement December 2019 December 2018 pay liability (1 January 2019: TL 6.017,60). Opening balance 3.832.751 4.649.817 Charge for the year 2.213.823 1.722.745 The movement of provisions of employee termination benefit as of 1 January - 31 December 2019 and Used (1.561.442) (2.539.811) 2018 are as follows: End of the period 4.485.132 3.832.751 1 January - 31 1 January - 31 December 2019 December 2018 31 December 31 December Opening balance 30.305.487 25.473.247 Non-current provisions for employee benefits 2019 2018 Service cost 13.320.632 8.510.885 Provisions for employee termination benefits 33.225.074 30.305.487 Interest cost 1.211.544 935.958 33.225.074 30.305.487 Actuarial loss 724.331 1.330.973 Payments during the year (12.336.920) (5.945.576) End of the period 33.225.074 30.305.487

52

51 KEREVİTAŞ Annual Report 2019 125

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2019 AND 2018 (Amounts expressed in Turkish Lira (“TL” unless otherwise stated.)

NOTE 16 – PAYABLES RELATED TO EMPLOYEE BENEFITS (Continued)

Provision for Employee Termination Benefit

In accordance with the existing labour law in Turkey, the Group is required to make up lump-sum payments to employees who have completed one year of service and whose employment is terminated without cause or who retire (age of 58 for women, age of 60 for men) or completed service years of 20 for women or 25 for men, are called up for military service or die.

Such payments are calculated on the basis of 30 days' pay maximum TL 6,379,86 as at 31 December 2019 (31 December 2018: TL 5.434,42) per year of employment at the of pay applicable at the date of retirement or termination.

Employee termination benefit is not funded and does not require any legal funding requimrent. The reserve employee termination benefit has been calculated by estimating the present value of future probable obligation of Group from the retirement of the employees. The calculation was based upon the retirement pay ceiling announced by the Government. TAS 19 “Employee Benefits” requires actuarial valuation methods to be developed to estimate the enterprise’s obligation under defined benefit plans. Accordingly, the following actuarial assumptions are used in the calculation of the total liability:

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. Consequently, in the accompanying consolidated financial statements as at 31 December 2019, the provision has been calculated by estimating the present value of the future probable obligation of the Group arising from the retirement of the employees. The provision at 31 December 2019 has been calculated assuming an annual inflation rate of 7,56% and a discount rate of 11,86% resulting in a real discount rate of approximately 4,00% (31 December 2018: 4,67%). Estimated amount of retirement pay not paid due to voluntary leaves is also taken into consideration as 5,24% for employees with 0-15 years of service, and 0% for those with 16 or more years of service. Ceiling amount of TL 6.730,15 which is in effect since 1 January 2020 is used in the calculation of Groups’ provision for retirement pay liability (1 January 2019: TL 6.017,60).

The movement of provisions of employee termination benefit as of 1 January - 31 December 2019 and 2018 are as follows:

1 January - 31 1 January - 31 December 2019 December 2018 Opening balance 30.305.487 25.473.247 Service cost 13.320.632 8.510.885 Interest cost 1.211.544 935.958 Actuarial loss 724.331 1.330.973 Payments during the year (12.336.920) (5.945.576) End of the period 33.225.074 30.305.487

52 126 Financial Statements and Footnotes

CONVENIENCE TRANSLATION INTO ENGLISH OF THE CONSOLIDATED FINANCIAL CONVENIENCE TRANSLATION INTO ENGLISH OF THE CONSOLIDATED FINANCIAL STATEMENTS ORIGINALLY ISSUED IN TURKISH (NOTE 2.7) STATEMENTS ORIGINALLY ISSUED IN TURKISH (NOTE 2.7)

KEREVİTAŞ GIDA SANAYİ VE TİCARET A.Ş. AND ITS SUBSIDIARIES KEREVİTAŞ GIDA SANAYİ VE TİCARET A.Ş. AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTES TO CONSOLIDATED FINANCIAL STATEMENTS AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2019 AND 2018 AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2019 AND 2018 (Amounts expressed in Turkish Lira (“TL” unless otherwise stated.) (Amounts expressed in Turkish Lira (“TL” unless otherwise stated.)

NOTE 17 – OTHER ASSETS AND LIABILITIES NOTE 18 – CAPITAL, RESERVES AND OTHER EQUITY ITEMS

31 December 31 December As of 31 December 2019, the Company's capital was issued and consisted of 66.200.000.000 shares, Other Current Assets 2019 2018 each with a nominal value of TL 0.01. (31 December 2018: TL 66.200.000.000). Deferred VAT 6.296.097 19.841.830 Other VAT 229.700 216.463 The Group’s shareholders and their share in the capital as of 31 December 2019 and 2018 are as follows: 6.525.797 20.058.293 31 December 2019 31 December 2018 31 December 31 December Shareholders Share % Amount Share % Amount Other Non-Current Assets 2019 2018 Yıldız Holding A.Ş. 54,27 359.245.941 46,14 305.450.547 Deferred VAT - 13.393.111 Ufuk Yatırım Yönetim ve Gayr. A.Ş. 10,34 68.429.804 10,34 68.429.804 - 13.393.111 Murat Ülker 9,98 66.079.898 9,98 66.079.898 Ahsen Özokur (*) - - 8,13 53.795.394 31 December 31 December Trade Türk Gıda Yatırım A.Ş. 5,42 35.845.529 7,23 47.834.418 Other Current Liabilities 2019 2018 Other 20,00 132.398.828 18,19 120.409.939 Other current liabilities 3.075.555 50.636 Total 100 662.000.000 100 662.000.000 Taxes and funds payables 1.918.259 7.144.976 4.993.814 7.195.612 (*) On 9 April 2019, Ashen Özokur, one of the shareholders of the Company, sold a shares with nominal amount of TL 53.795.394 at a price of TL 2,67 to Yıldız Holding A.Ş.

As a result of this transaction, Ahsen Özokur has no shares in the Company's capital, and the share ratio of Yıldız Holding A.Ş. increased to 54.27%.

Restricted Reserves and Retained Earnings

The legal reserves consist of first and second legal reserves, appropriated in accordance with the Turkish Commercial Code. The first legal reserves is appropriated out of historical statutory profits at the rate of 5% per annum, until the total reserve reaches 20% of the historical paid-in share capital. The second legal reserves is appropriated after the first legal reserves and dividends, at the rate of 10% per annum of all cash dividend distributions. These reserves can only be used to cover losses, to maintain the company in times when things are not going well, or to prevent unemployment and to mitigate the effects of such losses, unless they exceed half of the paid-in capital of the company.

As of 31 December 2019, restricted reverses are amounting to TL 36.192.002 (31 December 2018: TL 36.192.002). There are no remaining period profit and other sources subject to profit distribution after deducting previous year’s losses recorded in statutory records of the Company.

31 December 31 December Restricted reserves 2019 2018 Legal reserves 36.192.002 36.192.002 36.192.002 36.192.002

53 54 KEREVİTAŞ Annual Report 2019 127

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2019 AND 2018 (Amounts expressed in Turkish Lira (“TL” unless otherwise stated.)

NOTE 18 – CAPITAL, RESERVES AND OTHER EQUITY ITEMS

As of 31 December 2019, the Company's capital was issued and consisted of 66.200.000.000 shares, each with a nominal value of TL 0.01. (31 December 2018: TL 66.200.000.000).

The Group’s shareholders and their share in the capital as of 31 December 2019 and 2018 are as follows:

31 December 2019 31 December 2018 Shareholders Share % Amount Share % Amount Yıldız Holding A.Ş. 54,27 359.245.941 46,14 305.450.547 Ufuk Yatırım Yönetim ve Gayr. A.Ş. 10,34 68.429.804 10,34 68.429.804 Murat Ülker 9,98 66.079.898 9,98 66.079.898 Ahsen Özokur (*) - - 8,13 53.795.394 Trade Türk Gıda Yatırım A.Ş. 5,42 35.845.529 7,23 47.834.418 Other 20,00 132.398.828 18,19 120.409.939 Total 100 662.000.000 100 662.000.000

(*) On 9 April 2019, Ashen Özokur, one of the shareholders of the Company, sold a shares with nominal amount of TL 53.795.394 at a price of TL 2,67 to Yıldız Holding A.Ş.

As a result of this transaction, Ahsen Özokur has no shares in the Company's capital, and the share ratio of Yıldız Holding A.Ş. increased to 54.27%.

Restricted Reserves and Retained Earnings

The legal reserves consist of first and second legal reserves, appropriated in accordance with the Turkish Commercial Code. The first legal reserves is appropriated out of historical statutory profits at the rate of 5% per annum, until the total reserve reaches 20% of the historical paid-in share capital. The second legal reserves is appropriated after the first legal reserves and dividends, at the rate of 10% per annum of all cash dividend distributions. These reserves can only be used to cover losses, to maintain the company in times when things are not going well, or to prevent unemployment and to mitigate the effects of such losses, unless they exceed half of the paid-in capital of the company.

As of 31 December 2019, restricted reverses are amounting to TL 36.192.002 (31 December 2018: TL 36.192.002). There are no remaining period profit and other sources subject to profit distribution after deducting previous year’s losses recorded in statutory records of the Company.

31 December 31 December Restricted reserves 2019 2018 Legal reserves 36.192.002 36.192.002 36.192.002 36.192.002

54 128 Financial Statements and Footnotes

CONVENIENCE TRANSLATION INTO ENGLISH OF THE CONSOLIDATED FINANCIAL CONVENIENCE TRANSLATION INTO ENGLISH OF THE CONSOLIDATED FINANCIAL STATEMENTS ORIGINALLY ISSUED IN TURKISH (NOTE 2.7) STATEMENTS ORIGINALLY ISSUED IN TURKISH (NOTE 2.7)

KEREVİTAŞ GIDA SANAYİ VE TİCARET A.Ş. AND ITS SUBSIDIARIES KEREVİTAŞ GIDA SANAYİ VE TİCARET A.Ş. AND ITS SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTES TO CONSOLIDATED FINANCIAL STATEMENTS AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2019 AND 2018 AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2019 AND 2018 (Amounts expressed in Turkish Lira (“TL” unless otherwise stated.) (Amounts expressed in Turkish Lira (“TL” unless otherwise stated.) NOTE 20 – GENERAL ADMINISTRATIVE EXPENSES, MARKETING EXPENSES, NOTE 19 – REVENUE AND COST OF SALES RESEARCH AND DEVELOPMENT EXPENSES (Continued) 1 January - 1 January - 1 January - 1 January - General administrative expense 31 December 2019 31 December 2018 31 December 2019 31 December 2018 Personnel expenses (23.185.468) (21.772.999) Outsourced benefits and services expenses (14.965.395) (13.850.064) Domestic sales 2.582.722.172 2.418.693.782 Consultancy expenses (6.607.376) (7.813.607) Export sales 353.104.091 386.994.158 Depreciation and amortization expense (Note 10-11-12) (2.029.277) (1.901.430) Other income (1.246.512) 13.875.352 Rent expenses (1.646.794) (1.688.372) Gross sales 2.934.579.751 2.819.563.292 Communication expenses (590.631) (642.039) Sales returns and discounts (-) (441.713.992) (397.528.210) Energy expenses (435.357) (1.894.510) Net sales 2.492.865.759 2.422.035.082 Other (9.835.505) (3.241.330) Cost of sales (-) (59.295.803) (52.804.351) - Raw materials (1.379.854.706) (1.507.010.276) - Labour costs (81.182.263) (73.600.279) 1 January - 1 January - Research and development expenses 31 December 2019 31 December 2018 - Depreciation and Amortization Expense Depreciation and amortization expense (Note 10-11-12) (2.013.040) (1.689.637) (Note 10-11-12) (37.063.586) (34.412.784) Personnel expenses (1.699.483) (1.211.457) - Manufacturing overhead costs (381.335.318) (244.065.963) Outsourced benefits and services expenses (57.627) (40.874) Cost of sales (-) (1.879.435.873) (1.859.089.302) Materials and consultancy expenses (28.801) (117.447) Gross profit 613.429.886 562.945.780 Analysis expenses (1.225) (13.326) Other (130.064) (64.801) (3.930.240) (3.137.542) NOTE 20 – GENERAL ADMINISTRATIVE EXPENSES, MARKETING EXPENSES, RESEARCH AND DEVELOPMENT EXPENSES NOTE 21 – OTHER INCOME AND EXPENSE FROM OPERATING ACTIVITIES

1 January - 1 January - 1 January - 1 January - Selling and marketing expenses 31 December 2019 31 December 2018 Other Income from Operating Activities 31 December 2019 31 December 2018 Personnel expenses (63.975.534) (49.787.626) Foreign exchange gains from operating activities 14.275.211 54.647.475 Transportation expenses (57.782.929) (59.376.787) Commission income 9.452.180 - Advertisement expenses (35.030.693) (37.136.466) Service income 11.001.625 2.688.542 Outsourced benefits and services expenses (13.234.041) (17.198.170) Provisions no longer required of doubtful receivables Energy expenses (11.757.806) (9.591.568) (Note 5) 963.989 701.790 Rent expenses (10.121.615) (9.838.857) Provisions no longer required for impairment of inventory Depreciation and amortization expense (Note 10-11-12) (8.583.171) (6.700.079) (Note 7) 453.818 420.561 Other 10.567.632 7.707.211 Maintenance and repair expenses (4.447.614) (3.852.905) 46.714.455 66.165.579 Export expenses (2.387.575) (2.221.550) Consultancy expenses (1.116.093) (536.301) Other (12.109.363) (11.884.182) (220.546.434) (208.124.491)

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2019 AND 2018 (Amounts expressed in Turkish Lira (“TL” unless otherwise stated.)

NOTE 20 – GENERAL ADMINISTRATIVE EXPENSES, MARKETING EXPENSES, RESEARCH AND DEVELOPMENT EXPENSES (Continued) 1 January - 1 January - General administrative expense 31 December 2019 31 December 2018 Personnel expenses (23.185.468) (21.772.999) Outsourced benefits and services expenses (14.965.395) (13.850.064) Consultancy expenses (6.607.376) (7.813.607) Depreciation and amortization expense (Note 10-11-12) (2.029.277) (1.901.430) Rent expenses (1.646.794) (1.688.372) Communication expenses (590.631) (642.039) Energy expenses (435.357) (1.894.510) Other (9.835.505) (3.241.330) (59.295.803) (52.804.351)

1 January - 1 January - Research and development expenses 31 December 2019 31 December 2018 Depreciation and amortization expense (Note 10-11-12) (2.013.040) (1.689.637) Personnel expenses (1.699.483) (1.211.457) Outsourced benefits and services expenses (57.627) (40.874) Materials and consultancy expenses (28.801) (117.447) Analysis expenses (1.225) (13.326) Other (130.064) (64.801) (3.930.240) (3.137.542)

NOTE 21 – OTHER INCOME AND EXPENSE FROM OPERATING ACTIVITIES

1 January - 1 January - Other Income from Operating Activities 31 December 2019 31 December 2018 Foreign exchange gains from operating activities 14.275.211 54.647.475 Commission income 9.452.180 - Service income 11.001.625 2.688.542 Provisions no longer required of doubtful receivables (Note 5) 963.989 701.790 Provisions no longer required for impairment of inventory (Note 7) 453.818 420.561 Other 10.567.632 7.707.211 46.714.455 66.165.579

56 130 Financial Statements and Footnotes

CONVENIENCE TRANSLATION INTO ENGLISH OF THE CONSOLIDATED FINANCIAL CONVENIENCE TRANSLATION INTO ENGLISH OF THE CONSOLIDATED FINANCIAL STATEMENTS ORIGINALLY ISSUED IN TURKISH (NOTE 2.7) STATEMENTS ORIGINALLY ISSUED IN TURKISH (NOTE 2.7)

KEREVİTAŞ GIDA SANAYİ VE TİCARET A.Ş. AND ITS SUBSIDIARIES KEREVİTAŞ GIDA SANAYİ VE TİCARET A.Ş. AND ITS SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTES TO CONSOLIDATED FINANCIAL STATEMENTS AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2019 AND 2018 AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2019 AND 2018 (Amounts expressed in Turkish Lira (“TL” unless otherwise stated.) (Amounts expressed in Turkish Lira (“TL” unless otherwise stated.) NOTE 24 - INCOME TAXES (INCLUDING DEFERRED TAX ASSETS AND LIABILITIES) NOTE 21 – OTHER INCOME AND EXPENSE FROM OPERATING ACTIVITIES (Continued) 31 December 31 December 1 January - 1 January - Currrent income tax liabilities 2019 2018 Other Expense from Operating Activities 31 December 2019 31 December 2018 Current income tax expense 57.388.020 14.384.165 Foreign exchange losses from operating activities (30.219.269) (84.169.183) Less: prepaid taxes (40.942.695) (4.867.349) Restructuring and one-off expenses (8.006.104) - 16.445.325 9.516.816 Finance charges on term sales (5.244.769) (4.786.348) As of 31 December 2019 and 2018, the breakdown of the accumulated temporary differences related to Provision expenses of lawsuits (Note 14) (2.370.652) (52.736) the Group and the deferred tax assets and liabilities using the applicable tax rates are as follows: Provision expenses for doubtful receivables (Note 5) (3.544.989) (5.148.022) Provision expenses for impairment of inventories (Note 7) (416.704) (338.640) Total temporary differences Deferred tax assets / (liabilities) Official board fees for capital increase - (3.547.902) 31 December 31 December 31 December 31 December Other (14.123.835) (16.399.254) 2019 2018 2019 2018 (63.926.322) (114.442.085) Provisions for employee termination benefits 33.225.074 30.305.487 6.849.485 6.061.098 Provisions for doubtful receivables 9.958.309 8.557.408 2.190.828 1.882.630 Provisions for lawsuits 3.556.885 1.186.233 782.515 260.971 NOTE 22 – INCOME AND EXPENSES FROM INVESTMENT ACTIVITIES Provision for unused vacations 4.485.132 3.832.751 963.678 806.922 Provision for ımpairment on 1 January - 1 January - inventories 416.704 453.818 91.675 90.763 Income from Investment Activities 31 December 2019 31 December 2018 Carry-forward tax losses (*) 315.971.611 248.462.700 63.012.505 50.518.674 Interest income 110.104.833 79.533.082 Deferred income - 1.126.845 - 247.906 Provision of performance premium 6.973.630 6.278.726 1.534.199 1.381.319 Gain on fair value of investment property (Note 9) 7.735.000 11.322.568 Foundation and organization Rent income 7.583.648 6.287.415 expenses 927.144 927.144 185.429 185.429 Gain on sale of fixed assets 5.402.118 220.936 Net differences between the 130.825.599 97.364.001 carrying values and tax bases of investment properties (200.760.120) (172.049.654) (17.462.658) (15.043.714) 1 January - 1 January - Revaluation differences on property, plant and equipment (455.777.944) (462.560.453) (48.575.679) (52.845.239) Expense from Investment Activities 31 December 2019 31 December 2018 Other (14.819.872) 6.389.390 (2.873.366) 1.276.229 Foreign exchange loss on investing activities (13.232.532) (19.227.320) Deferred tax assets, net (295.843.447) (327.089.605) 6.698.611 (5.177.012) Losses on sale of fixed assets (267.292) (5.835.853) (*) As of 31 December 2019, based on the projections and future estimations, deferred tax asset is not (13.499.824) (25.063.173) recognized on unused carry-forward tax losses amounting to TL 73.496.855. (31 December 2018: TL 85.132.753). TL 60.752.097 of the amount on which deferred tax asset is not calculated, belongs to 2015 and the term of use is 2020. NOTE 23 – FINANCIAL INCOME AND EXPENSES Details of carry-forward tax losses are as below: 1 January - 1 January - Financial expense 31 December 2019 31 December 2018 31 December 31 December Interest expense (142.925.349) (141.876.391) 2019 2018 2020 20.554.830 20.554.830 Commission expenses (62.078.134) (56.327.076) 2021 72.117.625 72.117.625 Foreign exchange losses (18.039.315) (166.500.016) 2022 74.179.085 74.179.085 Financial expense on employee termination benefit (1.211.544) (212.187) 2023 73.812.657 73.812.657 (224.254.342) (364.915.670) 2024 43.578.317 7.798.503 2025 31.729.097 - 315.971.611 248.462.700

58

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2019 AND 2018 (Amounts expressed in Turkish Lira (“TL” unless otherwise stated.)

NOTE 24 - INCOME TAXES (INCLUDING DEFERRED TAX ASSETS AND LIABILITIES)

31 December 31 December Currrent income tax liabilities 2019 2018 Current income tax expense 57.388.020 14.384.165 Less: prepaid taxes (40.942.695) (4.867.349) 16.445.325 9.516.816

As of 31 December 2019 and 2018, the breakdown of the accumulated temporary differences related to the Group and the deferred tax assets and liabilities using the applicable tax rates are as follows:

Total temporary differences Deferred tax assets / (liabilities) 31 December 31 December 31 December 31 December 2019 2018 2019 2018 Provisions for employee termination benefits 33.225.074 30.305.487 6.849.485 6.061.098 Provisions for doubtful receivables 9.958.309 8.557.408 2.190.828 1.882.630 Provisions for lawsuits 3.556.885 1.186.233 782.515 260.971 Provision for unused vacations 4.485.132 3.832.751 963.678 806.922 Provision for ımpairment on inventories 416.704 453.818 91.675 90.763 Carry-forward tax losses (*) 315.971.611 248.462.700 63.012.505 50.518.674 Deferred income - 1.126.845 - 247.906 Provision of performance premium 6.973.630 6.278.726 1.534.199 1.381.319 Foundation and organization expenses 927.144 927.144 185.429 185.429 Net differences between the carrying values and tax bases of investment properties (200.760.120) (172.049.654) (17.462.658) (15.043.714) Revaluation differences on property, plant and equipment (455.777.944) (462.560.453) (48.575.679) (52.845.239) Other (14.819.872) 6.389.390 (2.873.366) 1.276.229 Deferred tax assets, net (295.843.447) (327.089.605) 6.698.611 (5.177.012) (*) As of 31 December 2019, based on the projections and future estimations, deferred tax asset is not recognized on unused carry-forward tax losses amounting to TL 73.496.855. (31 December 2018: TL 85.132.753). TL 60.752.097 of the amount on which deferred tax asset is not calculated, belongs to 2015 and the term of use is 2020.

Details of carry-forward tax losses are as below:

31 December 31 December 2019 2018 2020 20.554.830 20.554.830 2021 72.117.625 72.117.625 2022 74.179.085 74.179.085 2023 73.812.657 73.812.657 2024 43.578.317 7.798.503 2025 31.729.097 - 315.971.611 248.462.700

58 132 Financial Statements and Footnotes

CONVENIENCE TRANSLATION INTO ENGLISH OF THE CONSOLIDATED FINANCIAL CONVENIENCE TRANSLATION INTO ENGLISH OF THE CONSOLIDATED FINANCIAL STATEMENTS ORIGINALLY ISSUED IN TURKISH (NOTE 2.7) STATEMENTS ORIGINALLY ISSUED IN TURKISH (NOTE 2.7)

KEREVİTAŞ GIDA SANAYİ VE TİCARET A.Ş. AND ITS SUBSIDIARIES KEREVİTAŞ GIDA SANAYİ VE TİCARET A.Ş. AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTES TO CONSOLIDATED FINANCIAL STATEMENTS AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2019 AND 2018 AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2019 AND 2018 (Amounts expressed in Turkish Lira (“TL” unless otherwise stated.) (Amounts expressed in Turkish Lira (“TL” unless otherwise stated.) NOTE 24 - INCOME TAXES (INCLUDING DEFERRED TAX ASSETS AND LIABILITIES) NOTE 24 - INCOME TAXES (INCLUDING DEFERRED TAX ASSETS AND LIABILITIES) (Continued) (Continued) Corporate Tax Movements in deferred tax assets as of 1 January - 31 December 2019 and 2018 are as follows: The Group is subject to Turkish corporate taxes. Provision is made in the accompanying financial 1 January - 31 1 January - 31 statements for the estimated charge based on the Group’s results for the years and periods. Turkish tax December 2019 December 2018 legislation does not permit a parent company and its subsidiary to file a consolidated tax return. Opening (5.177.012) (27.380.221) Therefore, current income taxes recognised in the accompanying consolidated financial statements, have Charged to profit or loss 10.794.063 22.904.960 been calculated on a separate-entity basis. Actuarial gain charged to equity 162.344 266.195 Revaluation differences charged to equity - (1.204.457) Corporate tax is applied on taxable corporate income, which is calculated from the statutory accounting Currency translation differences 919.216 236.511 profit by adding back non-deductible expenses, and by deducting dividends received from resident End of the period 6.698.611 (5.177.012) companies, other exempt income and investment incentives utilized.

Income tax expense for the years ended 31 December 2019 and 31 December 2018 comprised of the Corporate tax rate in Turkey is 20%. The Corporate tax rate is applied to the corporate income of the following items: corporations, which is the result of the addition of expenses that are not allowed to be deducted in accordance with the tax laws and the exemptions and discounts included in the tax laws. The 7061 numbered law on the Amendment of Some Tax Laws was approved by the Turkish Grand National 31 December 31 December Assembly on 28 November 2017 and entered into force by being published in the Official Gazette dated 2019 2018 5 December 2017. In accordance with the article 91 of the mentioned Law and the provisional article 10 Current income tax expense (57.388.020) (14.384.165) added to the Corporate Tax Law, the corporate tax rate was increased from 20% to 22% for 2018, 2019 Deferred tax income 10.794.063 22.904.960 and 2020. Unless there is a new regulation as from 2021, it is foreseen that the corporate tax rate will Total tax income (46.593.957) 8.520.795 continue to be applied as 20%.

The reconciliation of the current tax income and current profit before tax are as follows: The 7061 numbered law on the Amendment of Some Tax Laws was entered into force by being published in the Official Gazette dated 5 December 2017 and numbered 30261. With the 89th article of Total charge for the year can be reconciled 1 January - 1 January - this Law, amendments are made in the 5th article titled “Exceptions” of the Corporate Tax Law. The to the accounting profit as follows: 31 December 2019 31 December 2018 first paragraph of the article; With paragraph (a), the 75% exemption applied to the earnings arising from the sale of real estates which were stated in the assets of the institutions for two full years has been Profit / (loss) from before tax 205.516.975 (42.011.952) reduced to 50%. This amendment was entered into force on 5 December 2017. Domestic income tax rate 22% 22% Tax income / (expense) at the domestic income tax rate (45.213.735) 9.242.629 Deferred Tax Expenses that are not deductible in determining taxable profit (2.636.384) (7.331.443) The Group recognizes deferred tax assets and liabilities based upon temporary differences arising Deferred tax provision - 3.015.759 between its financial statements as reported for TFRS purposes and its statutory financial statements for Revenue that is exempt from taxation 2.134.966 2.755.970 tax purposes. These differences usually resulted from the recognition of revenue and expenses in Other tax expenses (878.804) 837.880 different reporting periods for TFRS and tax purposes. Income tax expense recognised in profit or loss (46.593.957) 8.520.795 Tax rate used in the calculation of deferred tax assets and liabilities was %22 over temporary timing differences expected to be reversed in 2018, 2019 and 2020, and %20 over temporary timing differences expected to be reversed in 2021 and the following years (2018: 22%).

In Turkey, the companies cannot declare a consolidated tax return, therefore subsidiaries that have deferred tax assets position were not netted off against subsidiaries that have deferred tax liabilities position and disclosed separately.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2019 AND 2018 (Amounts expressed in Turkish Lira (“TL” unless otherwise stated.)

NOTE 24 - INCOME TAXES (INCLUDING DEFERRED TAX ASSETS AND LIABILITIES) (Continued)

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, current income taxes recognised 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 the statutory accounting profit by adding back non-deductible expenses, and by deducting dividends received from resident companies, other exempt income and investment incentives utilized.

Corporate tax rate in Turkey is 20%. The Corporate tax rate is applied to the corporate income of the corporations, which is the result of the addition of expenses that are not allowed to be deducted in accordance with the tax laws and the exemptions and discounts included in the tax laws. The 7061 numbered law on the Amendment of Some Tax Laws was approved by the Turkish Grand National Assembly on 28 November 2017 and entered into force by being published in the Official Gazette dated 5 December 2017. In accordance with the article 91 of the mentioned Law and the provisional article 10 added to the Corporate Tax Law, the corporate tax rate was increased from 20% to 22% for 2018, 2019 and 2020. Unless there is a new regulation as from 2021, it is foreseen that the corporate tax rate will continue to be applied as 20%.

The 7061 numbered law on the Amendment of Some Tax Laws was entered into force by being published in the Official Gazette dated 5 December 2017 and numbered 30261. With the 89th article of this Law, amendments are made in the 5th article titled “Exceptions” of the Corporate Tax Law. The first paragraph of the article; With paragraph (a), the 75% exemption applied to the earnings arising from the sale of real estates which were stated in the assets of the institutions for two full years has been reduced to 50%. This amendment was entered into force on 5 December 2017.

Deferred Tax

The Group recognizes deferred tax assets and liabilities based upon temporary differences arising between its financial statements as reported for TFRS purposes and its statutory financial statements for tax purposes. These differences usually resulted from the recognition of revenue and expenses in different reporting periods for TFRS and tax purposes.

Tax rate used in the calculation of deferred tax assets and liabilities was %22 over temporary timing differences expected to be reversed in 2018, 2019 and 2020, and %20 over temporary timing differences expected to be reversed in 2021 and the following years (2018: 22%).

In Turkey, the companies cannot declare a consolidated tax return, therefore subsidiaries that have deferred tax assets position were not netted off against subsidiaries that have deferred tax liabilities position and disclosed separately.

60 134 Financial Statements and Footnotes

CONVENIENCE TRANSLATION INTO ENGLISH OF THE CONSOLIDATED FINANCIAL CONVENIENCE TRANSLATION INTO ENGLISH OF THE CONSOLIDATED FINANCIAL STATEMENTS ORIGINALLY ISSUED IN TURKISH (NOTE 2.7) STATEMENTS ORIGINALLY ISSUED IN TURKISH (NOTE 2.7)

KEREVİTAŞ GIDA SANAYİ VE TİCARET A.Ş. AND ITS SUBSIDIARIES KEREVİTAŞ GIDA SANAYİ VE TİCARET A.Ş. AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTES TO CONSOLIDATED FINANCIAL STATEMENTS AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2019 AND 2018 AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2019 AND 2018 (Amounts expressed in Turkish Lira (“TL” unless otherwise stated.) (Amounts expressed in Turkish Lira (“TL” unless otherwise stated.)

NOTE 25 – EARNING PER SHARE / (LOSS) NOTE 27 – BORROWINGS (Continued) 1 January - 1 January - As of 31 December 2019 and 2018 details of short-term borrowings are as follows: 31 December 2019 31 December 2018 Net gain / (loss) for the year attributable to equity 31 December 2019 holders of the parent 137.831.653 (34.570.109) Original Currency Maturity (%) Original Amount TL Equivalent Weighted average number of shares 662.000.000 638.765.556 Earning per share / (loss) 0,21 (0,05) EUR September 2020 1,50 – 2,00 9.685.820 64.416.514 USD September 2020 1,50 – 2,00 949.629 5.640.988 70.057.502

NOTE 26 – FINANCIAL INVESTMENTS 31 December 2018 Original Currency Maturity (%) Original Amount TL Equivalent 31 December 31 December EUR January 2019 3,75 3.602.261 296.111.277 2019 2018 January 20019- Associates 4.460.594 4.460.594 USD October 2019 3,17 56.285.289 21.714.428 Impairment on associate shares (-) (3.065.661) (3.040.000) TL January 2019 19,01 57.002 159.169 1.394.933 1.420.594 317.984.874

The Group has been accounting financial investments of Pakyağ Endüstriyel Ürünler Sanayi ve Ticaret Re-payment schedule of short term and long-term loans payment schedule are as follows: A.Ş., PNS Pendik Nişasta Sanayi A.Ş. and Baytom Makine Sanayi ve Ticaret A.Ş. with their cost values 31 December 2019 31 December 2018 less impairment. The Group is in the opinion that the fair values of the shares converge to the cost less 2019 - 317.984.874 impairment values. 2020 70.057.502 - 70.057.502 317.984.874 As of 1 January - 31 December 2019 and 31 December 2018 movements of provisions for impairment of financial investment are as follows: 1 January - 31 1 January - 31 Movement of borrowings December 2019 December 2018 1 January - 31 1 January - 31 Opening 317.984.874 1.393.314.745 December 2019 December 2018 Foreign exchange differences 12.805.793 166.500.016 Opening balance (3.040.000) (2.500.000) Increase in interest accrual - (160.766.222) Addition (25.661) (3.040.000) Borrowing received in current year 178.554.522 423.567.788 Reversals - 2.500.000 Payments in current year (439.287.687) (1.504.631.453) End of the period (3.065.661) (3.040.000) End of the period 70.057.502 317.984.874

Re-payment schedule of short term and long term lease liabilities are as follows: NOTE – 27 BORROWINGS 31 December 2019 31 December 31 December Currency Maturity (%) Amount TL Short term borrowings 2019 2018 TL June 2024 19,00 3.938.779 3.938.779 Short term foreign currency loans 70.057.502 317.825.705 EUR June 2021 4,00 35.382 235.313 Short term ("TL") loans - 159.169 4.174.092 Short term lease labilities 1.295.669 - 71.353.171 317.984.874 1 January – Lease liability 31 December 2019 31 December 31 December Balances as of 1 January 2019 - Long term borrowings 2019 2018 Transition ot IFRS 16 (Note 2) 6.298.281 Effect of cash flows (2.770.110) Long term lease labilities 2.878.423 - Accrual of interest 588.965 2.878.423 - Foreign exchange differences 56.956 Balances as of 31 December 2019 4.174.092

61 62 KEREVİTAŞ Annual Report 2019 135

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2019 AND 2018 (Amounts expressed in Turkish Lira (“TL” unless otherwise stated.)

NOTE 27 – BORROWINGS (Continued) As of 31 December 2019 and 2018 details of short-term borrowings are as follows:

31 December 2019 Original Currency Maturity (%) Original Amount TL Equivalent

EUR September 2020 1,50 – 2,00 9.685.820 64.416.514 USD September 2020 1,50 – 2,00 949.629 5.640.988 70.057.502

31 December 2018 Original Currency Maturity (%) Original Amount TL Equivalent EUR January 2019 3,75 3.602.261 296.111.277 January 20019- USD October 2019 3,17 56.285.289 21.714.428 TL January 2019 19,01 57.002 159.169 317.984.874

Re-payment schedule of short term and long-term loans payment schedule are as follows:

31 December 2019 31 December 2018 2019 - 317.984.874 2020 70.057.502 - 70.057.502 317.984.874

1 January - 31 1 January - 31 Movement of borrowings December 2019 December 2018 Opening 317.984.874 1.393.314.745 Foreign exchange differences 12.805.793 166.500.016 Increase in interest accrual - (160.766.222) Borrowing received in current year 178.554.522 423.567.788 Payments in current year (439.287.687) (1.504.631.453) End of the period 70.057.502 317.984.874

Re-payment schedule of short term and long term lease liabilities are as follows:

31 December 2019 Currency Maturity (%) Amount TL TL June 2024 19,00 3.938.779 3.938.779 EUR June 2021 4,00 35.382 235.313 4.174.092

1 January – Lease liability 31 December 2019 Balances as of 1 January 2019 - Transition ot IFRS 16 (Note 2) 6.298.281 Effect of cash flows (2.770.110) Accrual of interest 588.965 Foreign exchange differences 56.956 Balances as of 31 December 2019 4.174.092

62 136 Financial Statements and Footnotes

CONVENIENCE TRANSLATION INTO ENGLISH OF THE CONSOLIDATED FINANCIAL STATEMENTS ORIGINALLY ISSUED IN TURKISH (NOTE 2.7)

KEREVİTAŞ GIDA SANAYİ VE TİCARET A.Ş. AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2019 AND 2018 (Amounts expressed in Turkish Lira (“TL” unless otherwise stated.)

NOTE 28 – NATURE AND LEVEL OF RISKS DERIVED FROM FINANCIAL INSTRUMENTS

a) Capital Risk Management

The Group’s objectives when managing capital are to safeguard the Group’s ability to continue as a going concern in order to provide returns for shareholders and benefits for other stakeholders and maintain an optimal capital structure to reduce the cost of capital.

The Group monitors capital using net financial debt / capital ratio, which calculated by dividing net debt to total capital. Net debt is calculated by deducting cash and cash equivalents and other receivables from related parties from total financial liabilities which is calculated by summing total short-term and total long-term liabilities, total short-term and total long-term other payables to related parties. Total capital (in other words total equity) is the difference between total assets and total liabilities.

Net financial debt / total capital ratios as of 31 December 2019 and 2018, are as follows:

31 December 31 December 2019 2018 Total financial liabilities 1.217.301.798 1.684.580.386 Other receivables from related parties 632.699.658 853.122.409 Less: Cash and cash equivalents (Note 29) 13.208.215 19.448.273 Net financial debt 571.393.925 812.009.704 Total equity 966.379.869 781.981.445 Total capital 1.537.773.794 1.593.991.149 Net debt / total capital ratio 0,37 0,51

b) Financial Risk Factors

The Group has exposure to the market risk, credit risk, liquidity risk arising from its operations. Risk management activities of the Group are focused minimizing the negative effects of uncertainities in market conditions on the Group’s financial performance.

Risk management is conducted by a centralized finance department in accordance with the policies approved by Board of Directors. The risks are identified, evaulated by the finance department of the Group and instruments to reduce the impacts of the risk are utilized with the cooperation with operation units of the Group.

63 KEREVİTAŞ Annual Report 2019 137 ------Banks 13.206.731 13.206.731 Deposits at Deposits ------6.838.694 6.838.694 Third Parties ------Other Receivables Other Parties Related 632.699.658 632.699.658 ------Receivables Third Parties 24.069.090 12.055.518 21.072.903 25.085.071 177.939.312 165.883.794 (25.085.071) ------Trade Receivables Trade 16.910.429 Parties Related 269.099.666 252.189.237 64 . AND ITS SUBSIDIARIES . AND Ş CARET A. CARET İ letter of guarantees, mortgages and cheques of cheques received from customers. from received cheques of cheques and mortgages guarantees, of letter VE T İ t book value by guarantees t book value by guarantees t book value GIDA SANAY Ş TA İ balance sheet items include credit include risk sheet items balance - Impairment the ne portion of Secured Impairment the ne portion of Secured Net book value of financial assets that are neither impaired pastnor assets neither that are due of financial book value Net Past due (gross (gross amount) due Past (gross amount) past due Not (gross amount) past due Not - - - - Secured portion of the maximum credit risk by guarantees (**) credit by guarantees risk portion the maximum of Secured byetc. guarantees, value book portion the net of Secured - - - 31 December 2019 31 December (*) sheet date as balance of risk credit exposed Maximum - A. impaired but past not assets that are financial due value of book B. Net - assets the impaired value of book C. Net D. Off CONVENIENCE TRANSLATION INTO ENGLISH OF THE CONSOLIDATED FINANCIAL THE CONSOLIDATED OF ENGLISH INTO TRANSLATION CONVENIENCE (NOTE 2.7) IN TURKISH ISSUED ORIGINALLY STATEMENTS KEREV stated.) otherwise unless (“TL” Lira Turkish in expressed (Amounts (Continued) INSTRUMENTS FINANCIAL FROM RISKS OF DERIVED LEVEL AND NOTE 28 – NATURE Risk b.1) Credit Financial Types of Instruments to Exposed According Risks Credit not considered. are received, as credit collaterals reliability, such amount, factors increase that of the the On deterimination (*) of comprised are Guarantees (**) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTES TO FINANCIAL CONSOLIDATED 2018 2019 AND 31 ENDED DECEMBER YEAR FOR THE AND AT AS 138 Financial Statements and Footnotes

------CONVENIENCE TRANSLATION INTO ENGLISH OF THE CONSOLIDATED FINANCIAL STATEMENTS ORIGINALLY ISSUED IN TURKISH (NOTE 2.7)

KEREVİTAŞ GIDA SANAYİ VE TİCARET A.Ş. AND ITS SUBSIDIARIES Banks 19.372.795 19.372.795 Deposits at Deposits NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ------AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2019 AND 2018 (Amounts expressed in Turkish Lira (“TL” unless otherwise stated.) Third

Parties NOTE 28 – NATURE AND LEVEL OF RISKS DERIVED FROM FINANCIAL 10.679.772 10.679.772 INSTRUMENTS (Continued) ------b.1) Credit Risk (Continued)

Other Receivables Other As of 31 December 2019 and 2018, the aging of trade receivables that are past due but not impaired are Parties Related

853.122.409 853.122.409 as below: 31 December 31 December

------2019 2018 Past due up to 30 days 23.468.097 19.517.390 Receivables Past due 1 - 3 months 4.150.103 2.498.276 6.932.658 Third

Parties Past due 3 - 12 months 1.332.340 1.912.715 79.977.636 15.799.432 22.504.071 171.712.621 155.913.189 (22.504.071) Past due 1 - 5 year 15.407 20.372

------Total past due receivables 28.965.947 23.948.753 Secured portion of receivables by guarantees 21.072.903 6.932.658 Trade Receivables Trade 8.149.321 b.2) Liquidity Risk Parties Related 337.686.279 329.536.958

65 Prudent liquidity risk management includes maintaining sufficient cash and marketable securities, the availability of funding from an adequate amount of committed credit facilities and the ability to close out market positions. Funding risk of current and future requirement of liquidity is managed by maintaining adequate reserves, banking facilities and reserve borrowing facilities.

The followings presents, contractual maturities of non-derivative financial liabilities of the Group.

Contractual Maturities Non-Derivative Financial Liabilities . AND ITS SUBSIDIARIES . AND

Ş Total Contractual Carrying Cash Outflows Less than 3 3 to 12 1 to 5 years 31 December 2019 value (I+II+III) months (I) months (II) (III) CARET A. CARET

İ Borrowings 70.057.502 70.057.502 - 70.057.502 - Lease Liabilities 4.174.092 4.174.092 323.917 971.752 2.878.423

letter of guarantees, mortgages and cheques of cheques received from customers. from received cheques of cheques and mortgages guarantees, of letter Trade payables to third VE T İ parties 334.179.848 334.179.848 326.337.875 7.841.973 - Trade payables to related parties 50.952.499 50.952.499 50.952.499 - - Other payables to related parties 1.143.070.204 1.143.070.204 111.081.307 - 1.031.988.897 Payables to employees 12.020.130 12.020.130 12.020.130 - - GIDA SANAY Ş 1.614.454.275 1.614.454.275 500.715.728 78.871.227 1.034.867.320 TA İ balance sheet items include credit include risk sheet items balance - The maturities that the Group estimated is the same with the contractual maturities. Impairment by guarantees book the value net portion of Secured Impairment by guarantees book the value net portion of Secured Past due (gross (gross amount) due Past (gross amount) past due Not (gross amount) past due Not - - - - Secured portion of the maximum credit risk by guarantees (**) credit by guarantees risk portion the maximum of Secured byetc. guarantees, value book portion the net of Secured - - - 31 December 2018 31 December (*) sheet date as balance of risk credit exposed Maximum - impaired pastnor assets neither that are due of financial book value Net A. impaired but past not assets that are financial due value of book B. Net - assets the impaired value of book C. Net D. Off CONVENIENCE TRANSLATION INTO ENGLISH OF THE CONSOLIDATED FINANCIAL STATEMENTS ORIGINALLY ISSUED IN ORIGINALLY STATEMENTS FINANCIAL THE CONSOLIDATED OF ENGLISH INTO TRANSLATION CONVENIENCE 2.7) TURKISH (NOTE KEREV stated.) otherwise unless (“TL” Lira Turkish in expressed (Amounts (Continued) INSTRUMENTS FINANCIAL FROM RISKS OF DERIVED LEVEL AND NOTE 28 – NATURE (Continued) Risk b.1) Credit not considered. are received, as credit collaterals reliability, such amount, factors increase that of the the On deterimination (*) of comprised are Guarantees (**) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTES TO FINANCIAL CONSOLIDATED 2018 2019 AND 31 ENDED DECEMBER YEAR FOR THE AND AT AS

66 KEREVİTAŞ Annual Report 2019 139

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2019 AND 2018 (Amounts expressed in Turkish Lira (“TL” unless otherwise stated.)

NOTE 28 – NATURE AND LEVEL OF RISKS DERIVED FROM FINANCIAL INSTRUMENTS (Continued)

b.1) Credit Risk (Continued)

As of 31 December 2019 and 2018, the aging of trade receivables that are past due but not impaired are as below: 31 December 31 December 2019 2018 Past due up to 30 days 23.468.097 19.517.390 Past due 1 - 3 months 4.150.103 2.498.276 Past due 3 - 12 months 1.332.340 1.912.715 Past due 1 - 5 year 15.407 20.372 Total past due receivables 28.965.947 23.948.753 Secured portion of receivables by guarantees 21.072.903 6.932.658

b.2) Liquidity Risk

Prudent liquidity risk management includes maintaining sufficient cash and marketable securities, the availability of funding from an adequate amount of committed credit facilities and the ability to close out market positions. Funding risk of current and future requirement of liquidity is managed by maintaining adequate reserves, banking facilities and reserve borrowing facilities.

The followings presents, contractual maturities of non-derivative financial liabilities of the Group.

Contractual Maturities Non-Derivative Financial Liabilities Total Contractual Carrying Cash Outflows Less than 3 3 to 12 1 to 5 years 31 December 2019 value (I+II+III) months (I) months (II) (III) Borrowings 70.057.502 70.057.502 - 70.057.502 - Lease Liabilities 4.174.092 4.174.092 323.917 971.752 2.878.423 Trade payables to third parties 334.179.848 334.179.848 326.337.875 7.841.973 - Trade payables to related parties 50.952.499 50.952.499 50.952.499 - - Other payables to related parties 1.143.070.204 1.143.070.204 111.081.307 - 1.031.988.897 Payables to employees 12.020.130 12.020.130 12.020.130 - - 1.614.454.275 1.614.454.275 500.715.728 78.871.227 1.034.867.320

The maturities that the Group estimated is the same with the contractual maturities.

66 140 Financial Statements and Footnotes

CONVENIENCE TRANSLATION INTO ENGLISH OF THE CONSOLIDATED FINANCIAL CONVENIENCE TRANSLATION INTO ENGLISH OF THE CONSOLIDATED FINANCIAL STATEMENTS ORIGINALLY ISSUED IN TURKISH (NOTE 2.7) STATEMENTS ORIGINALLY ISSUED IN TURKISH (NOTE 2.7)

KEREVİTAŞ GIDA SANAYİ VE TİCARET A.Ş. AND ITS SUBSIDIARIES KEREVİTAŞ GIDA SANAYİ VE TİCARET A.Ş. AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTES TO CONSOLIDATED FINANCIAL STATEMENTS AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2019 AND 2018 AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2019 AND 2018 (Amounts expressed in Turkish Lira (“TL” unless otherwise stated.) (Amounts expressed in Turkish Lira (“TL” unless otherwise stated.)

NOTE 28 – NATURE AND LEVEL OF RISKS DERIVED FROM FINANCIAL NOTE 28 – NATURE AND LEVEL OF RISKS DERIVED FROM FINANCIAL INSTRUMENTS (Continued) INSTRUMENTS (Continued)

b.2) Liquidity Risk (Continued) b.3) Market Risk (Continued)

Contractual Maturities 31 December 2019 TL Amount US Dollar Euro Other Non-Derivative Financial Liabilities 1. Trade Receivables 46.080.327 5.287.553 2.120.167 73.403 2a. Monetary Financial Assets 4.814.838 738.418 62.024 2.110 Total 2b. Non-monetary Financial Assets - - - - Contractual 3. Other 1.340.486 82.805 127.637 - Carrying Cash Outflows Less than 3 3 to 12 1 to 5 years 4.CURRENT ASSETS (1+2+3) 52.235.651 6.108.776 2.309.828 75.513 31 December 2018 value (I+II+III) months (I) months (II) (III) 5. Trade Receivables - - - - Borrowings 317.984.874 317.984.874 184.757.548 133.227.326 - 6a. Monetary Financial Assets - - - - 6b. Non-monetary Financial Assets - - - - Trade payables to 7. Other 4.166.709 - 626.516 - third parties 321.188.539 321.188.539 270.994.858 50.193.681 - 8. NON-CURRENT ASSETS (5+6+7) 4.166.709 - 626.516 - Trade payables to 9. TOTAL ASSETS (4+8) 56.402.360 6.108.776 2.936.344 75.513 related parties 46.417.101 46.417.101 46.417.101 - - 10. Trade Payable 135.962.717 2.931.841 17.697.280 126.662 Other payables to 11. Financial Liabilities 70.057.502 949.629 9.685.821 - 12a. Monetary Other Liabilities 391.360 - 58.846 - third parties 347.814 347.814 347.814 - - 12b. Non-Monetary Other Liabilities - - - - Other payables to 13. CURRENT LIABILITIES (10+11+12) 206.411.579 3.881.470 27.441.947 126.662 related parties 1.366.595.512 1.366.595.512 2.351.507 - 1.364.244.005 14. Trade Payable - - - - Payables to employees 11.559.769 11.559.769 11.559.769 - - 15. Financial Liabilities - - - - 2.064.093.609 2.064.093.609 516.428.597 183.421.007 1.364.244.005 16a. Monetary Other Liabilities 166.457.472 28.022.200 - - 16b. Non-Monetary Other Liabilities - - - - 17. NON-CURRENT LIABILITIES (14+15+16) 166.457.472 28.022.200 - - The maturities that the Group estimated is the same with the contractual maturities. 18. TOTAL LIABILITIES (13+17) 372.869.051 31.903.670 27.441.947 126.662 19 Off-balance Sheet Derivative Instruments b.3) Market Risk Management Net Asset/Liability Position (19a - 19b) - - - - 19.a Amount of active foreign derivative currency off-balance sheet - - - - Due to its operations, the Group exposed to financial risks related to changes in foreign exchange rates 19.b. Amount of passive foreign derivative currency and interest rates off-balance sheet - - - - 20.Net Foreign Currency Assets/(Liabilities) Position (9-18+19) (316.466.691) (25.794.894) (24.505.603) (51.149) The Group evaluates market risk with sensitivity analysis. 21.Monetary Items Net Foreign Currency Assets / (Liabilities)(1+2a+3+5+6a-10-11-12a-14-15-16a) (316.466.691) (25.794.894) (24.505.603) (51.149) 22. Fair value of financial instruments used for currency hedge - - - - The Group’s market risk management policies have not changed during the period compared to previous 23. Hedged foreign currency assets - - - - period. 24. Export 320.206.484 47.795.053 7.380.683 318.010 24. Import 524.612.156 66.763.528 22.966.948 32.736 b.3.1) Currency Risk Management

The Group is exposed to currency risk on its operations that are denominated in other currencies.

The distribution of the Group's foreign currency denominated monetary and non-monetary assets and monetary and non-monetary liabilities as of the balance sheet date is as follows:

67 68 KEREVİTAŞ Annual Report 2019 141

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KEREVİTAŞ GIDA SANAYİ VE TİCARET A.Ş. AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2019 AND 2018 (Amounts expressed in Turkish Lira (“TL” unless otherwise stated.)

NOTE 28 – NATURE AND LEVEL OF RISKS DERIVED FROM FINANCIAL INSTRUMENTS (Continued)

b.3) Market Risk (Continued)

31 December 2019 TL Amount US Dollar Euro Other 1. Trade Receivables 46.080.327 5.287.553 2.120.167 73.403 2a. Monetary Financial Assets 4.814.838 738.418 62.024 2.110 2b. Non-monetary Financial Assets - - - - 3. Other 1.340.486 82.805 127.637 - 4.CURRENT ASSETS (1+2+3) 52.235.651 6.108.776 2.309.828 75.513 5. Trade Receivables - - - - 6a. Monetary Financial Assets - - - - 6b. Non-monetary Financial Assets - - - - 7. Other 4.166.709 - 626.516 - 8. NON-CURRENT ASSETS (5+6+7) 4.166.709 - 626.516 - 9. TOTAL ASSETS (4+8) 56.402.360 6.108.776 2.936.344 75.513 10. Trade Payable 135.962.717 2.931.841 17.697.280 126.662 11. Financial Liabilities 70.057.502 949.629 9.685.821 - 12a. Monetary Other Liabilities 391.360 - 58.846 - 12b. Non-Monetary Other Liabilities - - - - 13. CURRENT LIABILITIES (10+11+12) 206.411.579 3.881.470 27.441.947 126.662 14. Trade Payable - - - - 15. Financial Liabilities - - - - 16a. Monetary Other Liabilities 166.457.472 28.022.200 - - 16b. Non-Monetary Other Liabilities - - - - 17. NON-CURRENT LIABILITIES (14+15+16) 166.457.472 28.022.200 - - 18. TOTAL LIABILITIES (13+17) 372.869.051 31.903.670 27.441.947 126.662 19 Off-balance Sheet Derivative Instruments Net Asset/Liability Position (19a - 19b) - - - - 19.a Amount of active foreign derivative currency off-balance sheet - - - - 19.b. Amount of passive foreign derivative currency off-balance sheet - - - - 20.Net Foreign Currency Assets/(Liabilities) Position (9-18+19) (316.466.691) (25.794.894) (24.505.603) (51.149) 21.Monetary Items Net Foreign Currency Assets / (Liabilities)(1+2a+3+5+6a-10-11-12a-14-15-16a) (316.466.691) (25.794.894) (24.505.603) (51.149) 22. Fair value of financial instruments used for currency hedge - - - - 23. Hedged foreign currency assets - - - - 24. Export 320.206.484 47.795.053 7.380.683 318.010 24. Import 524.612.156 66.763.528 22.966.948 32.736

68 142 Financial Statements and Footnotes

CONVENIENCE TRANSLATION INTO ENGLISH OF THE CONSOLIDATED FINANCIAL CONVENIENCE TRANSLATION INTO ENGLISH OF THE CONSOLIDATED FINANCIAL STATEMENTS ORIGINALLY ISSUED IN TURKISH (NOTE 2.7) STATEMENTS ORIGINALLY ISSUED IN TURKISH (NOTE 2.7)

KEREVİTAŞ GIDA SANAYİ VE TİCARET A.Ş. AND ITS SUBSIDIARIES KEREVİTAŞ GIDA SANAYİ VE TİCARET A.Ş. AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTES TO CONSOLIDATED FINANCIAL STATEMENTS AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2019 AND 2018 AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2019 AND 2018 (Amounts expressed in Turkish Lira (“TL” unless otherwise stated.) (Amounts expressed in Turkish Lira (“TL” unless otherwise stated.)

NOTE 28 – NATURE AND LEVEL OF RISKS DERIVED FROM FINANCIAL NOTE 28 – NATURE AND LEVEL OF RISKS DERIVED FROM FINANCIAL INSTRUMENTS (Continued) INSTRUMENTS (Continued)

b.3) Market Risk (Continued) Sensitivity Analysis to Currency Risk

31 December 2018 TL Amount US Dollar Euro Other The Group is mainly exposed to foreign currency risks in US Dollars and Euro. The following table 1. Trade Receivables 70.840.960 10.637.608 2.392.750 68.309 shows the Group’s sensitivity to a 10% increase and decrease in USD and Euro. 10% is the sensitivity 2a. Monetary Financial Assets 11.607.897 2.020.094 162.264 420 rate used when reporting foreign currency risk internally to key management personnel and represents 2b. Non-monetary Financial Assets - - - - management’s assessment of the possible change in foreign exchange rates. The sensitivity analysis only 3. Other 16.507.576 2.762.519 306.207 24.071 includes outstanding foreign currency denominated monetary items and adjusts their translation at the 4.CURRENT ASSETS (1+2+3) 98.956.433 15.420.221 2.861.221 92.800 5. Trade Receivables - - - - period end for a 10% change in foreign currency rates. This analysis comprises the borrowings used for 6a. Monetary Financial Assets - - - - foreign operations within the Group outside the functional currency. A positive number indicates an 6b. Non-monetary Financial Assets - - - - increase in profit / loss and other equity. 7. Other - - - - Profit/Loss 8. NON-CURRENT ASSETS (5+6+7) - - - - 9. TOTAL ASSETS (4+8) 98.956.433 15.420.221 2.861.221 92.800 Appreciation foreign Depreciation foreign 10. Trade Payable 290.077.586 35.616.281 16.859.559 171.808 31 December 2019 currency currency 11. Financial Liabilities 317.849.858 56.285.289 3.606.269 - In case of US Dolar increases in 10% against TL 12a. Monetary Other Liabilities 170.592 30.286 1.868 - 1- US Dollar net asset/liability (15.322.683) 15.322.683 12b. Non-Monetary Other Liabilities - - - - 2- US Dollar hedged portion (-) - - 13. CURRENT LIABILITIES (10+11+12) 608.098.036 91.931.856 20.467.696 171.808 3- Net effect of US Dollar (1 +2) (15.322.683) 15.322.683 14. Trade Payable - - - - 15. Financial Liabilities - - - - In case of Euro increases in 10% against TL 16a. Monetary Other Liabilities - - - - 4- Euro net asset/liability (16.297.696) 16.297.696 16b. Non-Monetary Other Liabilities - - - - 5- Euro hedged portion (-) - - 17. NON-CURRENT LIABILITIES (14+15+16) - - - - 6- Net effect of Euro (4+5) (16.297.696) 16.297.696 18. TOTAL LIABILITIES (13+17) 608.098.036 91.931.856 20.467.696 171.808 TOTAL (3+6) (31.620.379) 31.620.379 19 Off-balance Sheet Derivative Instruments Net Asset/Liability Position (19a - 19b) - - - - 19.a Amount of active foreign derivative currency Profit/Loss off-balance sheet - - - - Appreciation foreign Depreciation foreign 19.b. Amount of passive foreign derivative currency off-balance sheet - - - - 31 December 2018 currency currency 20.Net Foreign Currency Assets/(Liabilities) Position (9- In case of US Dollar increases in 10% against TL 18+19) (509.141.603) (76.511.635) (17.606.475) (79.008) 1- US Dollar net asset/liability (40.252.006) 40.252.006 21.Monetary Items Net Foreign Currency Assets / 2- US Dollar hedged portion (-) - - (Liabilities)(1+2a+3+5+6a-10-11-12a-14-15-16a) (509.141.603) (76.511.635) (17.606.475) (79.008) 22. Fair value of financial instruments used for currency hedge - - - - 3- Net effect of US Dollar (1 +2) (40.252.006) 40.252.006 23. Hedged foreign currency assets - - - - In case of Euro increases in 10% against TL 24. Export 358.094.717 72.029.557 5.870.123 151.012 4- Euro net asset/liability (10.613.183) 10.613.183 24. Import 522.898.402 77.471.656 18.869.472 296.633 5- Euro hedged portion (-) - - 6- Net effect of Euro (4+5) (10.613.183) 10.613.183 TOTAL (3+6) (50.865.189) 50.865.189

70

69 KEREVİTAŞ Annual Report 2019 143

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2019 AND 2018 (Amounts expressed in Turkish Lira (“TL” unless otherwise stated.)

NOTE 28 – NATURE AND LEVEL OF RISKS DERIVED FROM FINANCIAL INSTRUMENTS (Continued)

Sensitivity Analysis to Currency Risk

The Group is mainly exposed to foreign currency risks in US Dollars and Euro. The following table shows the Group’s sensitivity to a 10% increase and decrease in USD and Euro. 10% is the sensitivity rate used when reporting foreign currency risk internally to key management personnel and represents management’s assessment of the possible change in foreign exchange rates. The sensitivity analysis only includes outstanding foreign currency denominated monetary items and adjusts their translation at the period end for a 10% change in foreign currency rates. This analysis comprises the borrowings used for foreign operations within the Group outside the functional currency. A positive number indicates an increase in profit / loss and other equity. Profit/Loss Appreciation foreign Depreciation foreign 31 December 2019 currency currency In case of US Dolar increases in 10% against TL 1- US Dollar net asset/liability (15.322.683) 15.322.683 2- US Dollar hedged portion (-) - - 3- Net effect of US Dollar (1 +2) (15.322.683) 15.322.683 In case of Euro increases in 10% against TL 4- Euro net asset/liability (16.297.696) 16.297.696 5- Euro hedged portion (-) - - 6- Net effect of Euro (4+5) (16.297.696) 16.297.696 TOTAL (3+6) (31.620.379) 31.620.379

Profit/Loss Appreciation foreign Depreciation foreign 31 December 2018 currency currency In case of US Dollar increases in 10% against TL 1- US Dollar net asset/liability (40.252.006) 40.252.006 2- US Dollar hedged portion (-) - - 3- Net effect of US Dollar (1 +2) (40.252.006) 40.252.006 In case of Euro increases in 10% against TL 4- Euro net asset/liability (10.613.183) 10.613.183 5- Euro hedged portion (-) - - 6- Net effect of Euro (4+5) (10.613.183) 10.613.183 TOTAL (3+6) (50.865.189) 50.865.189

70 144 Financial Statements and Footnotes

CONVENIENCE TRANSLATION INTO ENGLISH OF THE CONSOLIDATED FINANCIAL CONVENIENCE TRANSLATION INTO ENGLISH OF THE CONSOLIDATED FINANCIAL STATEMENTS ORIGINALLY ISSUED IN TURKISH (NOTE 2.7) STATEMENTS ORIGINALLY ISSUED IN TURKISH (NOTE 2.7)

KEREVİTAŞ GIDA SANAYİ VE TİCARET A.Ş. AND ITS SUBSIDIARIES KEREVİTAŞ GIDA SANAYİ VE TİCARET A.Ş. AND ITS SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2019 AND 2018 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Amounts expressed in Turkish Lira (“TL” unless otherwise stated.) AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2019 AND 2018 (Amounts expressed in Turkish Lira (“TL” unless otherwise stated.) NOTE 28 – NATURE AND LEVEL OF RISKS DERIVED FROM FINANCIAL INSTRUMENTS (Continued) NOTE 28 – NATURE AND LEVEL OF RISKS DERIVED FROM FINANCIAL INSTRUMENTS (Continued) b.3.1) Interest Rate Risk Management b.4) Categories of financial instruments and fair values (Continued) The Group’s borrowings with fixed and variable interest rates exposes the Group to interest rate risk. As at 31 December, the interest rate profile of the Group’s interest-bearing financial instruments are as Financial follows: liabilities at 31 December 2018 amortized cost Carrying value Fair value Note 31 December 31 December Financial assets Interest Position 2019 2018 Cash and cash equivalents 19.448.273 19.448.273 19.448.273 29 Fixed interest rate instruments Trade receivables from third parties 171.712.621 171.712.621 171.712.621 5 Borrowings 74.231.594 317.984.874 Trade receivables from related parties 337.686.279 337.686.279 337.686.279 4 Cash and cash equivalents 5.025.617 4.208.720 Other receivables from third parties 10.679.772 10.679.772 10.679.772 6 Trade receivables 447.038.978 509.398.900 Other receivables from related parties 853.122.409 853.122.409 853.122.409 4 Other receivables 638.071.763 858.314.676 Other financial assets 1.420.594 1.420.594 1.420.594 2 Trade payables 385.132.347 367.605.640 Financial liabilities Other payables 111.081.307 2.699.321 Borrowings 317.984.874 317.984.874 317.984.874 27 Lease liabilities 4.174.092 - Trade payables to third parties 321.188.539 321.188.539 321.188.539 5 Trade payables to related parties 46.417.101 46.417.101 46.417.101 4 The sensitivity analyses below have been determined based on the exposure to interest rates for both Other payables to third parties 347.814 347.814 347.814 6 derivatives and non-derivative instruments at the balance sheet date. For floating rate liabilities, the Other payables to related parties 1.366.595.512 1.366.595.512 1.366.595.512 4 analysis is prepared assuming the amount of liability outstanding at the balance sheet date was outstanding for the whole year. A 100-basis point increase or decrease is used when reporting interest rate risk internally to key management personnel and represents management’s assessment of the The Group management is in the opinion that, carrying values of financial assets reflects their fair values. reasonably possible change in interest rates. If interest rates had been 50 basis points higher/lower and all other variables were held constant, there would be no impact on Group’s net profit for the year ended 31 December 2019 (31 December 2018: None). NOTE 29 – CASH AND CASH EQUIVALENTS b.4) Categories of financial instruments and fair values 31 December 31 December 2019 2018 Financial liabilities at Cash on hand 1.484 75.478 31 December 2019 amortized cost Carrying value Fair value Note Cash at banks 10.637.633 17.701.180 Financial assets - Demand deposits 5.612.016 13.492.460 Cash and cash equivalents 13.208.215 13.208.215 13.208.215 29 - Time deposits (*) 5.025.617 4.208.720 Trade receivables from third parties 177.939.312 177.939.312 177.939.312 5 Trade receivables from related parties 269.099.666 269.099.666 269.099.666 4 Other cash equivalents 2.569.098 1.671.615 Other receivables from third parties 6.838.694 6.838.694 6.838.694 6 13.208.215 19.448.273 Other receivables from related parties 632.699.658 632.699.658 632.699.658 4 Other financial assets 1.394.933 1.394.933 1.394.933 26 The maturity of time deposit balances at banks is 1 January 2020 and the average interest rates are 1,10% Financial liabilities for USD and 0,05% for EUR time deposits (31 December 2018: 3,10% for USD). Borrowings 74.231.594 74.231.594 74.231.594 27 Trade payables to third parties 334.179.848 334.179.848 334.179.848 5 Trade payables to related parties 50.952.499 50.952.499 50.952.499 4 Trade payables to third parties 1.143.070.204 1.143.070.204 1.143.070.204 4

The Group management is in the opinion that, carrying values of financial assets reflects their fair values.

71

72 KEREVİTAŞ Annual Report 2019 145

CONVENIENCE TRANSLATION INTO ENGLISH OF THE CONSOLIDATED FINANCIAL STATEMENTS ORIGINALLY ISSUED IN TURKISH (NOTE 2.7)

KEREVİTAŞ GIDA SANAYİ VE TİCARET A.Ş. AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2019 AND 2018 (Amounts expressed in Turkish Lira (“TL” unless otherwise stated.)

NOTE 28 – NATURE AND LEVEL OF RISKS DERIVED FROM FINANCIAL INSTRUMENTS (Continued)

b.4) Categories of financial instruments and fair values (Continued)

Financial liabilities at 31 December 2018 amortized cost Carrying value Fair value Note Financial assets Cash and cash equivalents 19.448.273 19.448.273 19.448.273 29 Trade receivables from third parties 171.712.621 171.712.621 171.712.621 5 Trade receivables from related parties 337.686.279 337.686.279 337.686.279 4 Other receivables from third parties 10.679.772 10.679.772 10.679.772 6 Other receivables from related parties 853.122.409 853.122.409 853.122.409 4 Other financial assets 1.420.594 1.420.594 1.420.594 2 Financial liabilities Borrowings 317.984.874 317.984.874 317.984.874 27 Trade payables to third parties 321.188.539 321.188.539 321.188.539 5 Trade payables to related parties 46.417.101 46.417.101 46.417.101 4 Other payables to third parties 347.814 347.814 347.814 6 Other payables to related parties 1.366.595.512 1.366.595.512 1.366.595.512 4

The Group management is in the opinion that, carrying values of financial assets reflects their fair values.

NOTE 29 – CASH AND CASH EQUIVALENTS

31 December 31 December 2019 2018 Cash on hand 1.484 75.478 Cash at banks 10.637.633 17.701.180 - Demand deposits 5.612.016 13.492.460 - Time deposits (*) 5.025.617 4.208.720 Other cash equivalents 2.569.098 1.671.615 13.208.215 19.448.273

The maturity of time deposit balances at banks is 1 January 2020 and the average interest rates are 1,10% for USD and 0,05% for EUR time deposits (31 December 2018: 3,10% for USD).

72 146 Financial Statements and Footnotes

CONVENIENCE TRANSLATION INTO ENGLISH OF THE CONSOLIDATED FINANCIAL STATEMENTS ORIGINALLY ISSUED IN TURKISH (NOTE 2.7)

KEREVİTAŞ GIDA SANAYİ VE TİCARET A.Ş. AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2019 AND 2018 (Amounts expressed in Turkish Lira (“TL” unless otherwise stated.)

NOTE 30 – DISCLOSURE OF INTERESTS IN OTHER ENTITIES

Condensed financial information of the subsidiaries that the Company does not has significant effective interest rate as of 31 December 2019 and 2018 are as follows:

Marsa Yağ Sanayi ve Tic. A.Ş. 31 December 2019 31 December 2018 Total assets 956.317.858 1.144.793.602 Total liabilities 257.180.287 541.085.370 Net assets 699.137.571 603.708.232

1 January - 1 January - 31 December 2019 31 December 2018 Revenue 820.091.274 851.819.793 Profit for the year 69.753.623 3.730.444 Cash flows from operating activities 127.011.908 18.666.667 Cash flows from investing activities 2.582.513 (18.770.229) Cash flows from financing activities (128.143.886) 13.074.927 Effects of foreign currency translation (6.686.520) (2.375.855)

31 December 2019 Non- controlling Non-controlling Accumulated non- share income / (expense) controlling interest Marsa Yağ Sanayi ve Tic. A.Ş. 30,00% 28.146.002 209.606.946

31 December 2018 Non- controlling Non-controlling Accumulated non- share income / (expense) controlling interest Marsa Yağ Sanayi ve Tic. A.Ş. 30,00% 8.119.991 181.109.294

NOTE 31 – SUBSEQUENT EVENTS

Registeration and establishment procedures of Kerpe Gıda San. A.Ş., with a capital of TL 50.000, which will be engaged in the production, trading, marketing and export activities of all kinds of agricultural and animal products, and that is wholly owned by Kerevitaş Gıda Sanayi ve Ticaret A.Ş, is completed on 5 February 2020.

73 KEREVİTAŞ Annual Report 2019 147 148 Financial Statements and Footnotes Proudly produced by FİNAR. www.finarkurumsal.com Kerevitaş Gıda Sanayi ve Ticaret A.Ş. Kısık Mah. Yenişen Sok. Yıldız Holding B Blok Apt. No: 8 B/1 Üsküdar/Istanbul-Turkey Tel: 0850 209 16 16 Fax: +90 (212) 421 2674 E-mail: [email protected]